<PAGE>
KOLLMORGEN CORPORATION
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
March 30, 1995
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders
on Wednesday, May 10, 1995, at 10:00 a.m. at the Bank of Boston, 100 Federal
Street, 35th Floor, Boston, Massachusetts. The proposal to be acted upon is
the election of directors.
As part of this year's Annual Meeting, you will have an opportunity to
hear a report on the operations of the Corporation, as well as ask questions
that you might have about Kollmorgen.
Your vote is important, regardless of the number of shares that you
hold. Accordingly, we would appreciate it if you would promptly execute and
return the proxy card enclosed with this material.
Sincerely,
George P. Stephan
Chairman of the Board
<PAGE>
<PAGE>2
KOLLMORGEN CORPORATION
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 30, 1995
To the Shareholders of
Kollmorgen Corporation:
The Annual Meeting of Shareholders of Kollmorgen Corporation will be
held at the Bank of Boston, 100 Federal Street, 35th Floor, Boston,
Massachusetts, on Wednesday, May 10, 1995, at 10:00 a.m. local time, for the
following purposes:
1. To elect four Class I directors;
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on March 23, 1995,
will be entitled to vote at the Annual Meeting or any adjournments or
postponements thereof. Shareholders may vote in person or by proxy. The
stock transfer books of the Corporation will not be closed.
By order of the Board of Directors
James A. Eder
Secretary
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* IMPORTANT *
* *
* It is important that your shares be represented at the *
* Annual Meeting. Please sign, date and return the enclosed *
* proxy card promptly in order that your shares will be *
* voted at the Annual Meeting. A return envelope which *
* requires no postage if mailed in the United States is *
* enclosed for your convenience. *
* *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
<PAGE>3
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Kollmorgen Corporation (the
"Corporation") to be used in voting at the Annual Meeting of Shareholders of
the Corporation to be held on Wednesday, May 10, 1995, and at any
adjournments or postponements thereof. The close of business on March 23,
1995, is the record date for shareholders entitled to notice of and to vote
at the Annual Meeting of Shareholders of the Corporation. At such record
date, there were outstanding 9,649,905 shares of the Corporation's Common
Stock, par value $2.50 per share ("Common Stock"), each of which is entitled
to one vote on each matter to be presented before the shareholders of the
Corporation. In addition, at the record date there were outstanding 23,187.5
shares of Series D Convertible Preferred Stock ("Preferred Stock"), each of
which is entitled to 74.074 votes on each matter to be presented before the
shareholders of the Corporation, for an aggregate of 1,717,591 votes for the
holders of the Preferred Stock as a class. The shares of Common Stock and
the shares of Preferred Stock will vote together as one class at the Annual
Meeting and are hereinafter collectively referred to as the "Shares." This
Proxy Statement, the accompanying form of proxy and the 1994 Annual Report to
Shareholders are being first sent to shareholders on or about April 5, 1995.
VOTING
Shares may be voted by shareholders of record in person or by proxy, and
Shares represented by a properly executed proxy will be voted with respect to
all Shares represented by it in accordance with the instructions, if any,
given therein. If no instructions are given, the proxy will be voted in
favor of the election of the nominees named in the proxy statement, and, in
the discretion of the persons designated on the proxy card, the proxy will be
voted with respect to any other matter which may properly come before the
meeting or any adjournments or postponements thereof.
The inspector of election will count shares represented by proxies that
withhold authority to vote for a nominee for election as a director or that
reflect abstentions and "broker non-votes" (i.e., shares represented at the
meeting held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or persons entitled to vote, and
(ii) the broker or nominee does not have the discretionary voting power on a
particular matter) only as shares that are present and entitled to vote on
the matters for purposes of determining the presence of a quorum, but neither
proxies that withhold authority (without naming an alternative nominee),
abstentions nor broker non-votes will be counted as votes cast at the Annual
Meeting and therefore such proxies will not have any effect on the outcome of
voting on the election of directors at the meeting.
If a shareholder participates in the Corporation's Dividend Reinvestment
Plan, any shares of Common Stock held in his/her account will be voted in
accordance with the proxy returned by that person unless other instructions
are received.
<PAGE>
<PAGE>4
Any proxy received by the Board of Directors may be revoked by the
shareholder at any time prior to its use at the meeting by a subsequent
written instrument signed in the same manner as the proxy and received by the
Corporation either at the Annual Meeting or before the Annual Meeting at
Kollmorgen Corporation, Reservoir Place, 1601 Trapelo Road, Waltham, MA
02154, Attention: Secretary.
The vote of a plurality of votes cast at the Annual Meeting is required
for the election of directors.
SOLICITATION
The cost of this solicitation will be borne by the Corporation.
Solicitation will be made by use of the mails, except that, if necessary,
directors, officers and regular employees of the Corporation (none of whom
will receive any additional compensation therefor) may make solicitations of
proxies by telephone, telecopy, telegram or personal interview. The
Corporation has retained the firm of Georgeson & Company, Inc. to aid in the
solicitation of proxies, for which the Corporation has agreed to pay a
maximum fee of $6,000 plus out-of-pocket expenses. The Corporation will
reimburse brokers and other persons holding shares of Common Stock in their
names, or in the names of nominees, for their expenses incurred in sending
proxy materials to beneficial owners and obtaining their proxies.
ITEM 1. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS AND COMMITTEES
The business and affairs of the Corporation are managed under the
direction of the Board of Directors. Members of the Board serve on one or
more committees to carry out certain particular responsibilities. The
Chairman of the Board is a member ex officio of all Committees of the Board
of Directors.
The Board of Directors held a total of five regular and special meetings
during 1994. Each director attended at least 75% of the aggregate number of
meetings of the Board and Board committees on which such director served.
The Audit Committee is responsible for overseeing and reviewing the
audit of the Corporation's books and accounts, for reviewing the audited
financial statements of the Corporation, for reviewing the Corporation's
internal control procedures and for reviewing and approving the independence
of the Corporation's independent public accountants. No member of this
Committee is an employee of the Corporation. The Audit Committee met twice
during 1994.
The Personnel and Compensation Committee generally is responsible for
reviewing the Corporation's compensation policies and practices, and
specifically for (i) reviewing and recommending to the Board of Directors the
total compensation and benefit programs applicable to the Corporation's key
employees, including corporate officers, and (ii) administering the
Corporation's stock option plans. Also, this Committee reviews and makes
<PAGE>
<PAGE>5
recommendations on the policies and programs for the development of
management personnel throughout the Corporation. This Committee met five
times in 1994.
The Retirement Plans Committee advises the Board with respect to the
Corporation's retirement plans and trusts, reviews the selection of trustees,
recommends investment managers, and recommends action regarding the
establishment and amendment of the retirement plans and trusts. This
Committee held three meetings in 1994.
In addition to the regular meetings of the Audit, Personnel and
Compensation and Retirement Plans Committees, members of these Committees, as
part of their Committee responsibility, met periodically with the management
of the Corporation during 1994.
The Corporation does not have a standing nominating committee.
The Executive Committee directs the management of the business of the
Corporation on behalf of the Board of Directors between meetings of the
entire Board. The Executive Committee met ten times in 1994.
INFORMATION ON NOMINEES
The Corporation's By-Laws provide for two classes of directors, with
each class to serve a term of two years and to be composed of not less than
three nor more than four directors. The Board is presently composed of eight
directors. There are four nominees standing for election at this meeting.
The four Class I nominees standing for election at this Annual Meeting are
Jerald G. Fishman, James H. Kasschau, J. Douglas Maxwell and Robert N. Parker
whose terms will expire in 1997. Biographical summaries of each nominee and
of the continuing directors appear on the following pages.
All nominees have consented to be so named and to serve if elected. If
a nominee becomes unavailable for election, it is the intention of the
persons named in the accompanying proxy card to vote for such other person,
if any, as the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH OF THE FOLLOWING NOMINEES:
NOMINEES
Class I Directors, whose terms expire in 1997:
JERALD G. FISHMAN, 49, is the President, Chief Operating Officer and a
director of Analog Devices, Inc., Norwood, Massachusetts. He has held these
positions since November 1991, and served as the Executive Vice President
from 1988 to November 1991. He served as the Group Vice President-Components
of that company from 1981 to 1988. Mr. Fishman is a director of Chipcom
Corporation and Augat, Inc.
<PAGE>
<PAGE>6
JAMES H. KASSCHAU, 43, is the President of Tinicum Incorporated, New York
City, an investment management company. He is also President of Tinicum
Enterprises, Inc., Garden City, New York. Mr. Kasschau has been a director
of the Corporation since March, 1990, and is chairman of the Audit Committee
and a member of the Retirement Plans Committee. The Board of Directors
nominated Mr. Kasschau for election as a director in accordance with the
terms of a Preferred Stock Agreement dated March 27, 1990, among the
Corporation and the purchaser parties thereto ("Preferred Stock Agreement").
J. DOUGLAS MAXWELL, JR., 53, is Chairman of the Board and Chief Executive
Officer of Empower, Inc., a distributor of medical products. From 1984 to
1988, he was President of Chemco Technologies, Inc., a manufacturer of
graphic art film, paper, chemicals and related equipment, located in Glen
Cove, New York. He has been a director of the Corporation since April, 1983,
and is a member of the Audit Committee and Personnel and Compensation
Committee of the Board. Mr. Maxwell is a director of the First National Bank
of Long Island.
ROBERT N. PARKER, 66, is a business consultant. From February 1991 to
January 1992, he was the Executive Vice President of LTV Aerospace and
Defense Corporation. From November, 1986, to January, 1991, he was President
of the LTV Missiles and Electronics Group of The LTV Corporation. From 1983
until November, 1986, he was President of the Missiles Division of The LTV
Corporation. Mr. Parker has been a director of the Corporation since
April 2, 1990, and is chairman of the Personnel and Compensation Committee
and a member of the Retirement Plans Committee. He is a director of
Perceptronics, Inc., Woodland Hills, California.
CONTINUING DIRECTORS
Class II Directors, whose terms expire in 1996:
GIDEON ARGOV, 38, is the President and Chief Executive Officer of the
Corporation. He has been a director of the Corporation since May 23, 1991,
and served as the Vice Chairman of the Board from that date until November
1991, when he was elected President and Chief Executive Officer. From 1988
to May, 1991 he was the President and Chief Executive Officer of High Voltage
Engineering Corporation. Previously he had been for five years a manager and
senior consultant with Bain and Company, San Francisco, California.
Mr. Argov is a member of the Executive Committee. He is a director of
TransTechnology Corporation, Union, New Jersey.
ALLAN M. DOYLE, JR., 65, is a business consultant. He was an associate
professor at the Graduate Management Institute, Union College, Schenectady,
New York, from 1990 through 1993. He was a Vice Chairman of the Corporation
from July, 1982, until March, 1990. Mr. Doyle has been a director of the
Corporation since 1964 and is chairman of the Retirement Plans Committee and
a member of the Audit and Executive Committees of the Board. He is a
director of Millitech Corporation.
<PAGE>
<PAGE>7
ERIC M. RUTTENBERG, 39, is the Managing Partner of Tinicum Investors, a
private investment partnership located in New York City. Mr. Ruttenberg has
been a director of the Corporation since March, 1990, and is Chairman of the
Executive Committee and a member of the Personnel and Compensation Committee
of the Board. The Board of Directors nominated Mr. Ruttenberg for election
as a director in accordance with the terms of the Preferred Stock Purchase
Agreement dated March 27, 1990, among the Corporation and the purchaser
parties thereto ("Preferred Stock Agreement"). Mr. Ruttenberg is a director
of SPS Technologies, Inc.
GEORGE P. STEPHAN, 61, Chairman of the Board, is a Managing Director of
Stonington Group, Inc., a management consulting and venture capital firm
located in East Hartford, Connecticut. From February 1992 through 1993, he
also acted in an of-counsel capacity to Murtha, Cullina, Richter and Pinney
of Hartford, Connecticut. Mr. Stephan was elected Chairman of the Board on
January 24, 1991, and performed various duties as an employee of the
Corporation during 1991, including leading the search for a new president of
the Corporation. From April 15, 1990, to January 24, 1991, Mr. Stephan was
an independent business consultant. Prior to April 15, 1990, Mr. Stephan
held various executive management positions with the Corporation for 21
years. Mr. Stephan has been a director of the Corporation since July 1982.
He is a director of Barr Laboratories, Inc. and Cambric Graphics, Inc., a
trustee of Hartwick College, and a member of the Board of Advisors of the
Hartwick Humanities in Management Institute.
DIRECTORS COMPENSATION
Pursuant to the By-Laws of the Corporation, directors who are not
employees of the Corporation receive an annual retainer of $12,000. In
addition, outside directors receive (a) $800 for attendance at each meeting
of the Board, and for attendance at each meeting of a Committee on which they
serve, and (b) $800 per day for attendance at the Corporation's annual
planning meeting and for participating in any special assignments requested
by the Corporation. Outside directors also are reimbursed for their
reasonable expenses incurred in connection with Board and committee meetings
and special assignments.
At the Annual Meeting held on May 13, 1992, the shareholders approved
the 1992 Stock Ownership Plan for Non-Employee Directors. The purpose of the
Plan is to attract, and retain as directors, qualified persons who are not
employees of the Corporation. The Plan provides that at least 50% of the
yearly retainer of each non-employee director will be paid in shares of
Common Stock in lieu of cash on a quarterly basis. In addition, the Plan
provides for the automatic grant of an option to purchase 2,000 shares of
Common Stock every other year at an exercise price equal to the fair market
value of the Common Stock on the date of grant. 150,000 shares of Common
Stock have been reserved for issuance under this Plan.
All non-employee directors participate in a post-retirement arrangement.
Under this arrangement, any non-employee director who retires after reaching
the age of 55 and has at least three years of continuous service may enter
into a consulting agreement with the Corporation to provide such consulting
<PAGE>
<PAGE>8
services to the Corporation as the Board of Directors may request from time
to time, at a yearly compensation level equal to the amount of the annual
retainer (currently $12,000) in effect on the date of a non-employee
director's retirement. The term of each such agreement would be for a period
equal to the number of years of his Board service, up to a maximum of ten
years. Under this arrangement, each retired director would have to agree not
to engage in any competitive activity with the Corporation during the period
that payments are made and not to disclose to others any trade secrets or
confidential information relating to the Corporation or its business.
The Corporation, as permitted by the Corporation's By-Laws and New York
law, has purchased directors and officers liability insurance from Federal
Insurance Company and Home Insurance Company covering all of the
Corporation's directors and officers during 1994. The aggregate premium for
these policies was approximately $335,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 30,
1995, with respect to all persons known to the Corporation to be the
beneficial owners of more than 5% of any class of shares of the capital stock
of the Corporation:
<PAGE>
<PAGE>9
<TABLE>
<CAPTION>
Amount and
Nature
Name and Address of Beneficial Percentage
of Beneficial Owner Title of Class Ownership of Class
- -------------------------------- -------------- ------------- ----------
<S> <C> <C> <C>
The "Gabelli Group" consisting of: Common Stock 2,727,733 (1) 27.5%
Gamco Investors, Inc.("GAMCO")
Gabelli Funds, Inc.("GFI")
Gabelli Performance Partnership("GPP")
Gabelli International Limited("GIL")
Gabelli Securities, Inc.("GSI")
Gabelli & Company, Inc.
Mario J. Gabelli
c/o The Gabelli Group, Inc.
655 Third Avenue
New York, NY 10017
Tinicum Investors Common Stock 722,291 (2) 7.50%
James H. Kasschau Preferred Stock 23,187.5 100.00%
Putnam L. Crafts, Jr.
RIT Capital Partners plc
J. Rothschild Holdings plc
J. Rothschild Capital Mgmt Ltd.
St. James Place Capital plc
c/o Tinicum Enterprises, Inc.
990 Stewart Avenue
Garden City, NY 11530
<FN>
(1) According to a Schedule 13D filed on December 1, 1989, as amended, the Gabelli Group
reported that the number of shares of Common Stock beneficially owned by the Gabelli
Group includes 246,038 shares of Common Stock receivable by the Gabelli Group if they
were to convert all of the Corporation's 8-3/4% Convertible Subordinated Debentures Due
2009 (the "Debentures") beneficially owned by them.
The Gabelli Group beneficially owns shares of Common Stock as follows:
<PAGE>
<PAGE>10
<CAPTION>
Percent
Shares of of Shares of
Percent Common Stock, Common Stock,
Shares of (Assuming (Assuming
of Common Class of Conversion of Conversion of
Name Stock Common Debentures) Debentures)
-------------- --------- -------- ------------- -------------
<S> <C> <C> <C> <C>
GAMCO 2,046,395 21.21% 2,225,189 22.49%
Gabelli & Co.
-- Principal 0 .00% 0 0.00%
-- Agency 19,300 .20% 24,540 0.25%
GFI
-- Principal 0 .00% 0 0.00%
-- Agency 226,000 2.34% 286,985 2.90%
GIL 23,000 .24% 23,000 0.23%
GPP 155,000 1.61% 155,000 1.57%
GSI 500 .05% 500 0.00%
Mario Gabelli 11,500 .12% 12,519 0.13%
According to the Gabelli Group's Schedule 13D, as amended, each member of the Gabelli
Group has the sole power to vote or direct the vote and sole power to dispose or to
direct the disposition of the Common Stock or Convertible Debentures reported for it,
either for its own benefit or for the benefit of its investment clients or its
partners, as the case may be, except that GAMCO Investors, Inc. does not have authority
to vote 140,500 of the shares of Common Stock beneficially owned by it, and except that
GFI shares with the Board of Directors of each of The Gabelli Asset Fund, The Gabelli
Growth Fund, The Gabelli Convertible Securities Fund, The Gabelli Value Fund Inc., The
Gabelli Small Cap Growth Fund and/or The Gabelli Equity Income Fund voting power with
respect to the 286,985 shares of Common Stock held by such funds, and except that
Gabelli & Company shares with the clients for whose accounts such Common Stock or
Debentures were purchased the voting and dispositive power with respect to the 24,840
shares of Common Stock purchased for such accounts. Mr. Gabelli is deemed to have
beneficial ownership of the Common Stock and Debentures owned by each of the above
persons and GFI is deemed to have beneficial ownership of the securities owned
beneficially by each of the above persons other than Mr. Gabelli.
(2) As reported to the Corporation by Tinicum Investors ("Investors") (successor to Tinicum
Enterprises, Inc. and RUTCO Incorporated by transfer of shares formerly held by such
entities), Mr. James H. Kasschau, Mr. Putnam L. Crafts, Jr., RIT Capital Partners plc
("RIT" and, collectively with Investors, Mr. Kasschau, and Mr. Crafts, the "Investor
Group"), J. Rothschild Holdings plc ("JRH") a wholly owned subsidiary of St. James
Place Capital plc ("SJPC"), and J. Rothschild Capital Management Limited ("JRCML"), the
Investor Group owns in the aggregate 23,187.5 shares of Preferred Stock, which
constitutes 100% of the outstanding shares of Preferred Stock. Subject to antidilution
provisions, each share of Preferred Stock is convertible at any time into 74.074 shares
of Common Stock or a total of 1,717,591 shares of Common Stock.
<PAGE>
<PAGE>11
The Investor Group beneficially owns Preferred Stock and Common Stock as shown in the
table which follows. The attribution of beneficial ownership of some of the outstanding
shares of capital stock is duplicative because the term "beneficial ownership" includes
both the power to vote and the power to dispose of such shares, which, with respect to
certain of such shares, are not held by the same person. See the explanation following
the table below.
<CAPTION>
Total % of
Shares of Shares of
Common Common
Stock, Stock,
(Assuming (Assuming
% of % of Conversion Conversion
Shares of Class of Shares of Class of of of
Preferred Preferred Common Common Preferred Preferred
Name Stock Stock Stock Stock Stock) Stock)
------------ --------- -------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investors 23,187.5 100.0% 707,100 7.32% 2,424,691 21.33%
Mr. Kasschau 414.5 1.8% 14,758 0.15% 45,461 0.39%
Mr. Crafts 2,484 10.7% 75,749 0.78% 259,749 2.29%
RIT 7,867 33.9% 239,901 2.48% 822,641 7.24%
Mr. Ruttenberg 0 0.0% 2,686 0.00% 2,686 0.00%
Investors has sole power to vote with respect to the 12,422 shares of Preferred Stock and
378,807 shares of Common Stock it owns. In addition, pursuant to the terms of a
shareholders agreement among Investors, Mr. Kasschau, Mr. Crafts and RIT, Investors has
the power to vote, except in certain limited circumstances, the 10,765.5 shares of
Preferred Stock and 328,293 shares of Common Stock owned by Mr. Kasschau, Mr. Crafts and
RIT.
The shares of Common Stock attributable to Messrs. Kasschau and Ruttenberg exclude 3,000
shares which each individual has the present right to acquire pursuant to the
Corporation's Stock Ownership Plan for Non-Employee Directors. Messrs. Kasschau and
Ruttenberg have informed the Corporation that they disclaim beneficial ownership of the
shares of Preferred Stock and Common Stock owned by other members of the Investor Group.
For further information concerning the Preferred Stock Agreement, see page 18.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 30, 1995, the shares of each
class of stock of the Corporation beneficially owned by each nominee,
director, and executive officer, and all nominees, directors and executive
officers of the Corporation as a group:
<PAGE>
<PAGE>12
<TABLE>
<CAPTION>
Share Percent
Name of Beneficial Owner Title of Class Ownership of Class
- ------------------------ -------------- --------- --------
<S> <C> <C> <C>
Gideon Argov (1) Common Stock 181,000 1.9%
Robert J. Cobuzzi (1) Common Stock 60,000 *
Allan M. Doyle, Jr. (3) Common Stock 26,115 *
James A. Eder (1) Common Stock 55,626 *
Jerald G. Fishman (3) Common Stock 1,758 *
James H. Kasschau (3) Common Stock 17,758 *
Preferred Stock 414.5 (2) 1.8% (2)
J. Douglas Maxwell, Jr. (3) Common Stock 38,133 *
Robert N. Parker (3) Common Stock 5,271 *
Eric M. Ruttenberg (3) Common Stock 5,686 *
Preferred Stock -- (2) -- (2)
George P. Stephan (3) Common Stock 46,788 *
Robert W. Woodbury, Jr. (1) Common Stock 11,000 *
All directors and
executive officers of
the Corporation, as a
group Common Stock 449,135 (3)(1) 4.6%
Preferred Stock 414.5 (2) 1.8% (2)
<FN>
* less than 1%.
(1) Reflects the number of shares that could be purchased by the exercise of options available
as of March 30, 1995, or within 60 days thereafter under the Corporation's stock option
plans. Accordingly, these numbers are inclusive of (i) 160,000 shares of Common Stock
which Mr. Argov has the right to acquire under the Kollmorgen 1991 Long Term Incentive
Plan ("LTIP"), (ii) 55,000 shares of Common Stock which Mr. Cobuzzi has the right to
acquire under the LTIP and Kollmorgen 1982 Stock Option Plan ("1982 Plan"), (iii) 52,000
shares of Common Stock which Mr. Eder has the right to acquire under the 1982 Plan and the
LTIP, and (iv) 11,000 shares which Mr. Woodbury has the right to acquire under the LTIP.
(2) Each share of Preferred Stock is convertible into 74.074 shares of Common Stock. See
footnote (2) to "Security Ownership of Certain Beneficial Owners" concerning the ownership
of shares of Preferred Stock by Messrs. Kasschau and Ruttenberg.
(3) Inclusive of 3,000 shares of Common Stock which each named non-employee director has the
present right to acquire upon the exercise of non-qualified stock option grants made in
1992 and 1994 under the Non-Employee Director Stock Ownership Plan except that Mr. Fishman
has the present right to acquire 1,000 shares of Common Stock under a non-qualified stock
option granted to him in March, 1994.
</TABLE>
<PAGE>
<PAGE>13
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning compensation of
the Corporation's Chief Executive Officer and the Corporation's three other
executive officers during the last three fiscal years, where applicable.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------------- ------------
Number of
Stock
Name and Principal Options
Position Year Salary ($) Bonus ($) Awarded
--------------------- ---- ------------ --------- ------------
<S> <C> <C> <C> <C>
Gideon Argov 1994 $269,710 $ - 0 -
President and 1993 275,000 - 0 -
Chief Executive Officer 1992 275,000 - 0 -
Robert J. Cobuzzi 1994 $186,340 $ - 0 -
Senior Vice President, 1993 190,000 - 0 - 50,000
Treasurer and Chief 1992 190,000 - 0 -
Financial Officer
James A. Eder 1994 $155,000 $ - 0 -
Vice President, Secretary 1993 155,000 - 0 -
and General Counsel 1992 155,000 - 0 -
Robert W. Woodbury, Jr. 1994 $118,660 $ - 0 -
Vice President, Controller 1993 109,000 - 0 - 25,000
and Chief Accounting 1992 99,917(1) - 0 - 10,000
Officer
<FN>
(1) Mr. Woodbury joined the Corporation in February 1992.
</TABLE>
<PAGE>
<PAGE>14
<TABLE>
<CAPTION>
Option Values at December 31, 1994 (1)
Number of
Securities Underlying Value of Unexercised
Unexercised Options at "In-the-money" Options at
December 31, 1994 December 31, 1994 (2)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gideon Argov 120,000 80,000 $ 0 $ 0
Robert J. Cobuzzi 50,000 75,000 $ 0 $ 0
James A. Eder 55,200 20,000 $ 0 $ 0
Robert W. Woodbury, Jr. 6,500 28,500 $ 0 $ 0
<FN>
(1) No stock options were exercised by any named executive officer during 1994.
(2) Based upon the December 30, 1994, Fair Market Value share price of $5.75 less the
share price to be paid upon exercise.
</TABLE>
Pension Plan
All salaried employees with one year of service, including executive
officers of the Corporation, are participants in the Kollmorgen Corporation
Salaried Employees Retirement Plan (the "Plan"). The Plan is a defined
benefit plan, and the benefits are not reduced by Social Security benefits or
by payments from other sources. In the event of a termination of the Plan
following a Change in Control (as defined in the Plan), any assets of the
Plan remaining after provision is made for all benefits thereunder will be
used to supplement such benefits. This provision may not be amended or
terminated following a Change in Control. Benefits under the Plan are based
upon years of service and the highest consecutive five year average annual
base salaries during the final ten calendar years of service up to age 65.
For the year ended December 31, 1994, the credited years of service of
Messrs. Argov, Cobuzzi, Eder and Woodbury under the plan are 4, 3, 18, and 2
respectively.
The following table sets forth the annual benefits which would become
payable at age 65 under the Plan based upon a straight life annuity form of
benefit and various levels of covered compensation and years of service:
<PAGE>
<PAGE>15
Years of Service at Retirement in 1995
Final Average
Earnings at
Retirement 15 20 25 30 or more
------------- ------- ------- ------- ----------
$100,000 $25,065 $33,420 $41,775 $50,130
125,000 31,815 42,420 53,025 83,630
150,000 38,565 51,420 64,275 77,130
175,000 38,565 51,420 64,275 77,130
200,000 38,565 51,420 64,275 77,130
250,000 38,565 51,420 64,275 77,130
300,000 38,565 51,420 64,275 77,130
Annual benefits provided by the Corporation under this Plan are subject
to certain restrictions and limitations under the Internal Revenue Code of
1986, as amended (the "Code"), and applicable regulations, as in effect from
time to time. Currently the Code prohibits tax-qualified defined benefit
pension plans from taking into account for benefit calculation any
compensation in excess of $150,000 per annum and limits annual benefit
payments under such plans to $120,800. These limits and prohibitions are
indexed for inflation.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Corporation has entered into employment agreements with three
current executive officers. Each agreement protects the Corporation from
disclosure of confidential information by the executive and contains the
executive's covenant not to compete with the Corporation following
termination of employment under certain circumstances.
The agreement with Mr. Argov, the Corporation's President and Chief
Executive Officer, provides for an annual base salary of $275,000, describes
the employee benefit plans under which he is entitled to participate, and
provides that if the Corporation terminates his employment other than for
"Cause" (as defined in the agreement) he will be entitled to receive an
amount equal to his current base salary, in a lump sum. The agreement with
Mr. Cobuzzi, the Corporation's Chief Financial Officer, Treasurer and a Vice
President, provides for an annual base salary of $190,000 and otherwise is
substantially identical to Mr. Argov's agreement.
The agreement with Mr. Eder provides for an annual base salary of
$155,000. In the event of a termination by the Corporation without Cause (as
defined in the agreement), by the executive with Good Reason (as defined in
the agreement) or by the executive under certain limited circumstances, the
executive will receive a lump sum cash payment equal to two times his highest
annual base salary (the "High Base Salary"), will receive life and medical
benefits until the earlier of acceptance of other employment or two years
from termination, and his options under the Corporation's stock option plans
will continue to become exercisable for two years (unless the agreement is
terminated by the executive under certain limited circumstances, in which
event, the options granted to the executive in July, 1991 shall terminate
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<PAGE>16
immediately). In the event of a termination of the executive for certain
reasons after a change in control, the executive will receive the value of
his life and medical benefit continuation in a cash lump sum and an
additional cash payment equal to the difference between (i) 2.99 times his
current salary and (ii) the sum of twice his High Base Salary and the amount
of the cash lump sum payment for his life and medical benefit continuation.
Pursuant to the terms of the Corporation's stock option plans, in the
event of extraordinary corporate events, including a substantial change in
the ownership or control of the Corporation, the Committee may, in its
discretion, accelerate the vesting and exercise period for all or some of the
outstanding options.
Board Compensation Report on Executive Compensation
The Personnel and Compensation Committee (the "Committee") of the
Corporation's Board of Directors is composed of independent directors who are
not employees of the Corporation and who qualify as disinterested persons for
purposes of Rule 16b-3 adopted under the Securities Exchange Act of 1934.
The Committee is responsible for developing and implementing the compensation
programs which relate the pay levels of the Corporation's executive officers
and certain other key employees. The Committee strives to establish
performance criteria, evaluate performance and determine base salary and
incentive payments for the Corporation's key decision makers to insure the
Corporation's ability to attract and retain high caliber executives by
providing appropriate incentives to deliver the maximum short-term and long-
term financial results for the benefit of shareholders. The Committee also
approves compensation matters involving other key employees of the
Corporation, periodically reviews the annual salaries of all key employees,
including executive officers, and establishes the Corporation's policy with
respect to merit salary increases.
The Committee also administers and approves the grant of awards under
the Kollmorgen 1991 Long Term Incentive Plan ("LTIP") and other incentive
compensation plans of the Corporation for executive officers and certain
other key employees of the Corporation. From time to time, the Corporation,
on the recommendation of the Committee, has retained the services of
independent compensation consultants to evaluate the Corporation's executive
compensation programs.
In order to meet its objectives, the Committee has chosen three
components of its compensation program to meet the Corporation's pay
philosophy. Base salaries, the fixed regular periodic component of pay, are
based on the average level of base salaries among a competitive peer group of
companies of comparable size. The bonus plan for executive officers, which
is directly linked to the financial performance of the Corporation, is
designed to provide additional cash compensation when specific financial
performances are achieved or exceeded. The 1995 bonus plan for executive
officers provides cash awards when the Corporation meets its operating plan
in terms of primary earnings per share. Finally, the LTIP plan rewards
<PAGE>
<PAGE>17
executive officers and key employees for delivering long-term value to the
Corporation's shareholders. This plan is structured in such a way as to
reward executives only to the extent that shareholders have benefited over
some measurable period of time. Historically, the Corporation has used the
grant of stock options that vest over specified periods, currently five
years, to accomplish this objective. In determining a grant of stock
options, the Committee considers the amount and terms of outstanding options
previously granted to executive officers.
Mr. Argov joined the Corporation in May 1991 as Vice Chairman of the
Board and was elected President and Chief Executive Officer in November 1991.
His May 1991 compensation package, consisting of a base salary of $275,000,
participation in the corporate bonus plan, and the grant of 200,000 non-
qualified stock options issued under the LTIP and vesting over five years, is
designed to encourage short-term and long-term performance consistent with
the interests of the shareholders. His annual salaries in 1992 and 1993
continued at the same level as in 1991. In 1994, Mr. Argov voluntarily
reduced his salary by 5% for a period of three months. He has not received
any form of incentive compensation during the year.
Members of the Personnel and Compensation Committee:
Robert N. Parker J. Douglas Maxwell, Jr. Eric M. Ruttenberg
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative total
shareholder return, assuming reinvestment of dividends, on $100 invested on
December 31, 1989, in each of Kollmorgen Corporation Common Stock, Standard &
Poors 500 Stock Index, and the Standard & Poors Electrical Equipment Index.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
KOLLMORGEN CORPORATION COMMON STOCK, S&P 500 INDEX
AND S&P ELECTRICAL EQUIPMENT
Measurement Period Kollmorgen S&P Electrical
(Fiscal Year Covered) Corporation S&P 500 Index Equipment Index
- --------------------- ----------- ------------- ---------------
Measurement Pt.
12/31/89 $100.00 $100.00 $100.00
FYE 12/31/90 $ 65.00 $ 97.00 $ 92.00
FYE 12/31/91 $ 49.00 $126.00 $122.00
FYE 12/31/92 $ 53.00 $136.00 $133.00
FYE 12/31/93 $ 67.00 $150.00 $161.00
FYE 12/31/94 $ 52.00 $152.00 $163.00
<PAGE>
<PAGE>18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Preferred Stock Agreement, on March 27, 1990, the
Corporation sold 23,187.5 shares of Preferred Stock for $1,000 per share, or
an aggregate purchase price of approximately $23.2 million, to the Investor
Group. The Preferred Stock has a dividend rate of 9.5% per year and is
convertible into an aggregate of 1,717,591 shares of Common Stock, subject to
antidilution provisions, which would constitute approximately 15.1% of the
outstanding shares of Common Stock (after giving effect to the conversion of
all the shares of Preferred Stock).
Subject to certain conditions contained in the Preferred Stock
Agreement, the Investor Group is entitled to propose to the Board of
Directors two Purchaser Nominees (as defined in the Preferred Stock
Agreement) and the Corporation has agreed to exercise all authority under
applicable law to cause such Purchaser Nominees to be represented on the
Board of Directors (in separate classes of the Board of Directors). If any
Purchaser Nominee elected to the Corporation's Board of Directors shall cease
to serve as a director for any reason, the vacancy resulting therefrom will
be filled by the Board of Directors with a substitute Purchaser Nominee. The
Investor Group has agreed that the Purchaser Nominees on the Corporation's
Board of Directors shall not participate in any action taken by the Board of
Directors relating to the Preferred Stock Agreement.
The Investor Group has also agreed that so long as it or any of its
affiliates beneficially own any Shares, such persons will be present, in
person or represented by proxy, at all shareholder meetings of the
Corporation so that all Shares beneficially owned by the Investor Group and
its affiliates may be counted for the purpose of determining the presence of
a quorum at such meetings.
The Preferred Stock is entitled to vote together with the Common Stock
based on the number of shares of the Common Stock into which the Preferred
Stock is convertible. In addition, in certain circumstances, the holders of
shares of Preferred Stock are entitled to vote as a single class. Without
the consent of the holders of at least a majority of the shares of the
Preferred Stock then outstanding, the Corporation has agreed, among other
things, not to issue any capital stock of the Corporation other than Common
Stock and securities issuable on exercise of the preferred stock purchase
rights issued pursuant to the Corporation's Shareholders' Rights Plan.
The Corporation may elect to redeem the Preferred Stock on or after
April 1, 1995, at $1,100 per share, and is required to redeem all outstanding
Preferred Stock on April 1, 2000, at $1,000 per share, in each case plus
accrued and unpaid dividends. On the occurrence of certain events, including
the acquisition by any third party of 50% or more of the outstanding voting
securities of the Corporation, or certain events relating to the composition
<PAGE>
<PAGE>19
of the Board of Directors of the Corporation, the holders of the Preferred
Stock may require the Corporation to redeem the Preferred Stock at $1,000 per
share, plus accrued and unpaid dividends. The Preferred Stock Agreement also
includes certain financial and other covenants applicable to the Corporation,
and certain restrictions applicable to the Investor Group on the disposition,
acquisition or the taking of other specified actions with respect to the
voting securities of the Corporation.
AUDITORS
Coopers & Lybrand L.L.P. serves as the independent auditors for the
Corporation. Representatives of Coopers & Lybrand L.L.P. will be present at
the Annual Meeting and will be given an opportunity to make a statement if
they desire to do so. They will be available to respond to questions of
shareholders.
PROPOSALS FOR THE 1996 ANNUAL MEETING
In accordance with the rules of the Securities and Exchange Commission,
shareholder proposals for inclusion in the Corporation's proxy statement for
the 1995 Annual Meeting must be received at the Office of the Secretary,
Kollmorgen Corporation, Reservoir Place, 1601 Trapelo Road, Waltham, MA
02154, no later than November 30, 1995.
OTHER MATTERS
The Board of Directors does not intend to present any other matters
before the meeting and is not informed of any other business which others may
bring before the meeting. However, if any other matters should properly come
before the meeting, or any adjournments or postponements thereof, it is the
intention of the persons named in the accompanying Proxy Card to vote on each
such matter as they, in their sole discretion, may determine.
<PAGE>
<PAGE>20
KOLLMORGEN CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints GIDEON ARGOV, GEORGE P. STEPHAN,
JAMES A. EDER, and each or any of them, with full power to act without the
other and with full power of substitution, proxies to represent the
undersigned at the Annual Meeting of Shareholders of Kollmorgen Corporation
to be held at the Bank of Boston, 100 Federal Street, Boston, Massachusetts,
at 10:00 a.m. on Wednesday, May 10, 1995, and at any adjournments or
postponements thereof, to vote all shares of the Corporation shown on the
other side of this card (whether Common Stock or Series D Convertible
Preferred Stock) with all the powers the undersigned would possess if
personally present, in the following manner.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
Please mark votes
/ X / as in this example.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
1. ELECTION OF FOUR DIRECTORS - Class I Nominees are Jerald G. Fishman,
James H. Kasschau, J. Douglas Maxwell,
Jr., and Robert N. Parker
FOR ALL NOMINEES /__/ WITHHELD FROM /__/
ALL NOMINEES
/__/ ______________________________________________________________
(INSTRUCTION: To withhold authority to vote for any nominee, write
such nominee's name(s) above.)
(Continued, and to be signed, on other side.)
<PAGE>
<PAGE>21
2. In their discretion, upon the transaction of other business as may
properly come before the meeting.
/__/ MARK HERE FOR ADDRESS
CHANGE AND NOTE AT RIGHT.
/__/ MARK HERE IF YOU PLAN
TO ATTEND THE MEETING.
Please sign exactly as imprinted herein. When
signing as attorney, administrator, executor,
guardian or trustee, please give your full
title as such. If a corporation, please sign
by president or other authorized officer and
indicate title. If shares are registered in
the names of joint tenants or trustees, each
tenant or trustee is required to sign. Please
complete, sign and return in the enclosed
envelope.
..............................................
Signature of Shareholder Date
..............................................
Signature of Shareholder Date
