<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File No. 1-5562
KOLLMORGEN CORPORATION
(Exact name of registrant as specified in its charter)
New York 04-2151861
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 Trapelo Road, Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 890-5655
NONE
(Former name, former address and former fiscal year, if changed since
last report.)
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 August 12, 1996
Common Stock, $2.50 par value 9,740,873 shares
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<PAGE>2
KOLLMORGEN CORPORATION
INDEX
Page No.
PART I - Financial Information
Consolidated Statements of Operations for 3
the Three Months and Six Months Ended
June 30, 1996 and 1995 (unaudited)
Consolidated Balance Sheets as of 4
June 30, 1996 (unaudited) and
December 31, 1995
Consolidated Statements of Cash Flows for 5-6
the Six Months Ended June 30, 1996
and 1995 (unaudited)
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial 8-10
Condition and Results of Operations
PART II - Other Information 10
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<PAGE>3
<TABLE>
PART I - FINANCIAL INFORMATION
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 59,788 $ 58,887 $116,828 $112,303
Cost of sales 39,630 39,036 77,444 74,729
--------- --------- --------- ---------
Gross profit 20,158 19,851 39,384 37,574
--------- --------- --------- ---------
Selling and marketing expense 6,726 7,717 14,025 14,862
General and administrative expense 6,743 5,696 12,548 10,973
Research and development expense 3,051 3,327 6,354 6,491
--------- --------- --------- ---------
Income before interest and taxes 3,638 3,111 6,457 5,248
--------- --------- --------- ---------
Interest and other (income) expense:
Interest expense 1,486 1,233 2,803 2,480
Interest (income) (102) (166) (291) (369)
Other 283 206 326 127
--------- --------- --------- ---------
Income before minority interest
and income taxes 1,971 1,838 3,619 3,010
Minority interest 258 0 258 0
--------- --------- --------- ---------
Income before taxes 2,229 1,838 3,877 3,010
Provision for income taxes 0 0 0 0
--------- --------- --------- ---------
Net income $ 2,229 $ 1,838 $ 3,877 $ 3,010
========= ========= ========= =========
Earnings per common share:
Primary $ 0.22 $ 0.13 $ 0.36 $ 0.19
========= ========= ========= =========
Fully diluted $ 0.22 $ 0.13 $ 0.35 $ 0.19
========= ========= ========= =========
Number of shares used in calculating
earnings per common share:
Primary 10,092 9,658 10,042 9,651
Fully diluted 10,063 9,658 10,162 9,651
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
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<PAGE>4
<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
ASSETS
June 30,
1996 December 31,
(unaudited) 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,095 $ 17,789
Accounts receivable (net of reserve of
$624 in 1996 and $697 in 1995) 39,392 40,831
Recoverable amounts on long-term contracts 11,198 12,116
Inventories 29,733 26,210
Prepaid expenses and other current assets 1,580 1,557
--------- ---------
Total current assets 96,998 98,503
--------- ---------
Property, plant and equipment, net 28,775 28,803
Goodwill 4,818 5,631
Other assets 14,181 14,537
--------- ---------
$ 144,772 $ 147,474
========= =========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 9,930 $ 9,019
Current portion of long-term debt 6,889 3,901
Redeemable preferred stock -0- 2,756
Accounts payable 21,573 24,969
Accrued liabilities 29,712 30,393
--------- ---------
Total current liabilities 68,104 71,038
--------- ---------
Long-term debt 56,325 36,888
Other liabilities 5,384 5,501
Minority interest 536 0
Redeemable preferred stock 0 22,750
Common shareholders' equity:
Common stock 26,909 26,904
Additional paid-in capital 13,578 14,343
Accumulated deficit (15,081) (18,958)
Cumulative translation adjustments (1,831) (1,454)
Less common stock in treasury, at cost (9,152) (9,538)
--------- ---------
Total common shareholders' equity 14,423 11,297
--------- ---------
$ 144,772 $ 147,474
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>5
<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the
Six Months Ended
June 30,
------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income from operations $ 3,877 $ 3,010
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 3,103 3,118
Amortization 509 641
Loss on sale of assets 17 537
Minority interest (258) 0
Other non-cash expenses 23 23
Changes in assets and liabilities:
Restricted cash 0 5,000
Accounts and notes receivable 521 2,356
Recoverable amounts on long-term contracts 918 (3,334)
Inventories (2,947) (3,248)
Prepaid expenses (42) (249)
Accounts payable and accrued liabilities (4,145) (2,553)
Deferred income taxes and other expenses (282) (123)
Other (111) 140
--------- ---------
Net cash provided by operations 1,183 5,318
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,131) (2,333)
Proceeds from sale of assets 2,374 2,605
Equity investments (1,404) 0
Cash of subsidiary acquired 97 0
Long term notes receivable (net of repayments) 396 0
--------- ---------
Net cash provided by (used in) investing activities (668) 272
--------- ---------
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<PAGE>6
Cash flows from financing activities:
Net borrowings (repayments) under credit lines 876 (1,909)
Principal repayment on other notes (416) (477)
Common stock issued from treasury 258 21
Redemption of preferred stock (25,506) 0
Principal payments on capital lease obligations (56) (48)
Net borrowings (repayments) of long-term debt 22,507 (1,098)
Dividends paid on common and preferred stock (679) (1,486)
--------- ---------
Net cash (used in) financing activities (3,016) (4,997)
--------- ---------
Effect of exchange rate changes on cash (193) (122)
--------- ---------
Net increase (decrease) in cash and equivalents (2,694) 471
Cash and cash equivalents at beginning of period 17,789 7,165
--------- ---------
Cash and cash equivalents at end of period $ 15,095 $ 7,636
========= =========
Supplemental cash flow information
Cash paid during the period for:
Interest $ 2,241 $ 1,844
Income taxes (net of refunds) 177 (46)
--------- ---------
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>7
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996
1. The accompanying unaudited consolidated financial statements include
the accounts of Kollmorgen Corporation and all of its majority owned
subsidiaries. Certain reclassifications have been made to 1995
financial statements to conform with 1996 classifications.
2. In the opinion of management, the unaudited consolidated financial
statements included herein contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
Company s and its consolidated subsidiaries financial condition at
June 30, 1996, the results of operations for the three-month and six-
month periods ended June 30, 1996 and 1995, and the cash flows for
the six-month periods ended June 30, 1996 and 1995. The results of
operations for interim periods are not necessarily indicative of the
results to be expected for the full year. See Management s
Discussion and Analysis of Financial Condition and Results of
Operations for additional information. These interim financial
statements should be read in conjunction with the Company s Annual
Report on Form 10-K for the year ended December 31, 1995.
3. Earnings per common share is based on net income less the dividends
and interest accretion on redeemable preferred stock divided by the
weighted average number of common shares outstanding and common
equivalent shares outstanding. Fully diluted net income assumes full
conversion of all convertible securities into common stock which
include the convertible subordinated debentures and redeemable
preferred stock.
4. Inventories consist of the following:
June 30, December 31,
1996 1995
--------- ---------
Raw materials $ 15,754 $ 15,110
Work in process 9,251 7,653
Finished goods 4,728 3,447
--------- ---------
$ 29,733 $ 26,210
========= =========
5. Effective March 1, 1996, the Company sold a significant portion of
its French instrumentation business for 12 million French francs
(approximately $2.4 million).
6. Effective June 30, 1996, the Company concluded the acquisition of 51%
of the stock of Kollmorgen Tandon India (KTI). Consequently, KTI is
included in the results of operations for the three and six months
ended June 30, 1996 and its balance sheet has been consolidated at
June 30, 1996. The impact of the effect of the consolidation on the
changes in assets and liabilities has been eliminated from the
Statement of Cash Flows.
<PAGE>
<PAGE>8
Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Company s cash and cash equivalents decreased $2.7 million during
the first six months of 1996. Net income from operations after adding
back non-cash charges generated $7.3 million in cash. Inventories grew in
the first half, using $2.9 million in cash. The increase in inventories
was a result of a greater than anticipated change in the mix of products
sold at the Company s U.S. motion technology group, inventory purchases
for a large color control customer with product shipments to occur in the
second half of 1996, and an increase in stock inventory to take advantage
of volume discounts by the Company s Electro-Optical division. Accounts
receivable generated $0.5 million in cash. Accounts payable and accrued
liabilities used $4.1 million as a result of payments in connection with
long term contracts, payments of costs associated with the sale of a
portion of the Company s instrumentation business in France, and scheduled
payments made during the first quarter of 1996.
Investing activities used $0.7 million in cash during the first half
of 1996. The Company received $2.4 million in the first half for the sale
of certain assets of the Company s French instrumentation business. The
Company made an additional equity investment in Servotronix Ltd. of $1.4
million. The Company made capital expenditures of $2.1 million.
Financing activities used $3.0 million in the first half of 1996. On
February 19, 1996 the Company redeemed all of its Series D Convertible
Preferred Stock ( Preferred Stock ) for its redemption value plus a 10%
premium and all unpaid dividends which totaled $25.8 million. The Company
financed the redemption through a $25 million five year amortizing term
loan with the Company s lead bank. The Company made repayments of its long
term debt of $2.5 million.
In late April 1996, the Company entered into a lease financing
arrangement with a leasing company to provide for the financing of up to
$5 million in equipment purchases for the Company s U.S. operations. To
date, approximately $2 million of equipment has been funded under the
agreement.
The Company believes that it can generate sufficient cash from
operations and its current credit and lease facilities to finance its cash
requirements for capital expenditures, sinking fund payments, and working
capital requirements for the next twelve months. The preceding forward-
looking statements are subject to significant risks and uncertainties,
which may cause the Company s actual experience to differ from its
expectations. These risks and uncertainties include, among other things,
the possibility that the Company s capital needs will be greater than
expected, due to, for example, lower than expected revenues, operating
losses, increased working capital needs, unanticipated capital expenditure
requirements and acquisitions, and the possibility that external
borrowings, financing arrangements, or other capital sources will not be
available as anticipated or will not be available on terms that are
favorable to the Company.
<PAGE>
<PAGE>9
RESULTS OF OPERATIONS
Sales for the quarter ended June 30, 1996 were $59.8 million, and net
income was $2.2 million or $0.22 per common share. This compares with
second quarter 1995 sales of $58.9 million and net income of $1.8 million
or $0.13 per common share. Included in the 1995 amounts were sales for
Photo Research, a division which was sold by the Company in October 1995,
and a significant portion of the Company s French instrumentation business
which was sold in the first quarter of 1996. Excluding the sales of the
businesses sold, sales for the second quarter would have been $59.8
million and $53.4 million in 1996 and 1995, respectively, an increase of
12%. Earnings per share are computed after payment of preferred
dividends. Due to the redemption of the Company s Preferred Stock on
February 19, 1996, no preferred dividends were paid in the second quarter
of 1996 versus $581 thousand in the second quarter of 1995.
Gross profit as a percentage of sales has remained unchanged for the
three months ended June 30, 1996 and 1995 at 33.7%, and has improved
slightly to 33.7% from 33.5% in the six month period ended June 30, 1996
and June 30, 1995, respectively.
Selling and marketing expenses declined 12.8% to $6.7 million from
$7.7 million for the three months ended June 30, 1996 and 1995,
respectively. For the six months ended June 30, 1996 and 1995, selling
and marketing expenses declined 5.6% to $14.0 million from $14.9 million,
respectively. The decline in selling and marketing expenses for the three
and six month periods reflects the impact of the businesses sold while
being somewhat offset by increased selling and marketing spending at the
Company s U.S. motion technology group.
Administrative expenses increased 18.4% and 14.4% for the three and
six month periods ending June 30, 1996 as compared to the corresponding
period of the prior year. The increase reflects increased spending to
support the implementation of new information systems at the Company s
U.S. motion technology group, the consolidation of the Company s Indian
subsidiary offsetting the expenses of the businesses sold, and increased
spending necessary to support the higher levels of business.
Research and development expenses declined 8.3% and 2.1% for the
three and six month periods ended June 30, 1996, as compared to the same
period of the prior year. Spending on research and development by the
Company's motion technology segment increased in 1996 over 1995, but this
increase was more than offset by the impact of the businesses sold.
Backlog at June 30, 1996 was $113 million versus $137 million at June
30, 1995, and $108 million at December 31, 1995. The decline versus the
second quarter 1995 reflects the elimination of the backlogs of the
businesses sold and a decline in the balance on certain long-term military
contracts. The increase in the backlog since year end reflects increases
in the Company s motion technology business, more than offsetting the
backlog associated with the Company s French instrumentation business
which was sold during the first half of the year.
<PAGE>
<PAGE>10
Segments of Business Information
(dollars in thousands)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------
1996 1995 1996 1995
------------------ ------------------
Motion Technologies Group:
Net sales $ 36,349 $ 33,383 $ 71,602 $ 63,372
Operating income $ 3,162 $ 2,570 $ 5,778 $ 4,577
Electro-Optical Instruments:
Net sales 23,439 25,504 45,226 48,931
Operating income 1,716 1,615 3,154 2,957
General Corporate:
Operating expenses (2,649) (2,347) (5,055) (4,524)
Consolidated:
Net sales $ 59,788 $ 58,887 $116,828 $112,303
Operating income $ 2,229 $ 1,838 $ 3,877 $ 3,010
In the Motion Technologies Group, second quarter 1996 sales were
$36.3 million, an increase of 9% over the same period a year ago. Sales
at the Company s U.S. motion technology group increased approximately $2
million or 7%, principally in the industrial and commercial products
group. Sales at the Company s French motion technology division increased
$1 million or 14% reflecting an increase in revenues on research and
development contracts for the aerospace industry.
Operating income was $3.2 million for this segment, an increase of
23% over the same period of 1995. The increase in operating income was a
result of increased sales volume which was partially offset by increased
operating expenses associated with the higher levels of business.
Backlog for this segment at the end of the second quarter of 1996 was
$62 million an increase of $6 million or 12% over year end 1995.
In the Electro-Optical Instruments segment, sales were $23.4 million
for the second quarter of 1996, a decrease of 8% from the same period a
year ago. Excluding the sales of the businesses sold by the Company in
1995 and 1996, sales in the remaining businesses increased 17% in the
second quarter of 1996 as compared to the same period a year ago. The
increase in sales was attributable to revenue increases at the Company s
consulting engineering business, and the Company s Electro-Optical
Division on long term defense contracts.
<PAGE>
<PAGE>11
Operating income in this segment for the second quarter of 1996 was
$1.7 million versus $1.6 million for the second quarter of 1995.
Excluding the results of the businesses sold for both 1995 and 1996,
operating income was $2.1 million in the second quarter of 1996 as
compared to $2.0 million in the same period in 1995. The slight increase
in operating income was a result of the increased operating income of the
Company s consulting engineering business offsetting lower operating
income at the Company s color instrumentation and defense businesses.
Backlog for this segment at the end of the second quarter of 1996 was
$51 million, down 4% from year-end 1995. Excluding the French
instrumentation business sold by the Company, the backlog remained
unchanged from year-end 1995.
General corporate expenses includes interest expense, interest
income, and general corporate administrative expenses. Interest expense
increased for the second quarter of 1996 as compared to the second quarter
of 1995 reflecting higher debt levels due to the term loan used to finance
the redemption of the Preferred Stock.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Listed below are the exhibits filed with this report.
10(c) Kollmorgen 1991 Long Term Incentive Plan as
amended by shareholders at the Annual Meeting of
Shareholders held on May 8, 1996.
10(h) Kollmorgen 1992 Stock Ownership Plan for Non-
Employee Directors as amended by shareholders at
the Annual Meeting of Shareholders held on
May 8, 1996.
11 Statement re computation of per share earnings.
27 Financial Data Schedules
(b) Reports on Form 8-K -- None.
<PAGE>
<PAGE>12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KOLLMORGEN CORPORATION
By: /s/ Robert J. Cobuzzi
Robert J. Cobuzzi, Senior Vice
President, Treasurer and
Chief Financial Officer
Date: August 14, 1996
<PAGE>
Exhibit 10(c)
KOLLMORGEN 1991 LONG-TERM INCENTIVE PLAN
1. Definitions. As used herein:
(a) "Award" means Options, Restricted Shares, Stock
Appreciation Rights and Phantom Shares.
(b) "Beneficiary" or "Beneficiaries" means the person or person
designated by the Participant pursuant to the provisions of the Agreement (as
defined in Section 6) to the receive payments or rights pursuant to such
Agreement upon the Participant's death. If no Beneficiary is so designated
by the Participant or if no Beneficiary is living at the time a payment is
due pursuant to such Agreement, payments shall be made to the estate of the
Participant. The Agreement shall provide the Participant with the right to
change the designated Beneficiaries from time to time by written instrument
executed by the Participant and filed with the Committee in accordance with
such rules as may be specified by the Committee.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the committee of the Board described in
Section 4.
(f) "Common Stock" means the common stock of the Company, par
value $2.50 per share, or such other class or kind of shares or other
securities as may be applicable under Section 12.
(g) "Company" means Kollmorgen Corporation, a New York
corporation.
(h) "Effective Date" shall be the date of the adjournment of
the annual meeting of shareholders of the Company at which the Plan is
approved by a majority of the shareholders of the Company entitled to vote
thereon.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
(j) "Fair Market Value" means the fair market value of a share of
Common Stock, as determined in good faith by the Committee, using such
methodology as it may deem appropriate.
(k) "Free-Standing Stock Appreciation Right" means a Stock
Appreciation Right not granted in tandem with an Option.
<PAGE>
(l) "Grant Date" means, with respect to any Award, the date on
which such Award was granted.
(m) "Incentive Stock Option" means an Option which is intended to
qualify as an incentive stock option under Section 422(b) of the Code.
(n) "Initial Value" means the initial value, if any, of a
Phantom Share or Free-Standing Stock Appreciation Right as determined at the
time of grant by the Committee in its discretion and as set forth in the
applicable Agreement.
(o) "Non-Qualified Stock Option" means an Option which is not
intended to qualify as an Incentive Stock Option.
(p) "Option" means an option to purchase shares of Common Stock,
subject to the terms and conditions provided for in Section 7.
(q) "Option Price" means the exercise price of an Option, as
determined at the time of grant by the Committee in its discretion and as set
forth in the applicable Agreement; provided, however, that the Option Price
for an Incentive Stock Option shall be no less than 100 percent of the Fair
Market Value of a share of Common Stock as of the Grant Date.
(r) "Participant" means a key employee of the Company, or one of
its subsidiaries or affiliates, who is designated by the Committee to receive
an Award under the Plan.
(s) "Phantom Share" means a right whose value is determined
with reference to the value of Common Stock or such other measure as may be
approved by the Committee subject to the terms and conditions provided for in
Section 10.
(t) "Plan" means the Company's 1991 Long Term Incentive Plan
as set forth herein.
(u) "Restricted Shares" means restricted shares of Common Stock,
subject to the terms and conditions provided for in Section 9.
(v) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
(w) "Stock Appreciation Right" means a right to receive the
appreciation, if any, in the Fair Market Value of shares of Common Stock,
subject to the terms and conditions provided for in Section 8.
(x) "Tandem Stock Appreciation Right" means a Stock Appreciation
Right granted in tandem with an Option.
(y) "Window Period" means the ten business day period in each
fiscal quarter of the Company commencing on the third business day following the
release for publication of the Company's quarterly or annual sales and
<PAGE>
earnings for the next preceding fiscal quarter or year, as the case may be,
and ending on the twelfth business day following such date of release.
2. Purpose. The purpose of the Plan is to help in attracting
and retaining qualified persons as key employees of the Company, its affiliates
or subsidiaries, by giving them an opportunity to obtain a proprietary
interest in the Company.
3. Shares Available for Grant. The aggregate number of shares
of Common Stock that may be sold or awarded pursuant to Options and Restricted
Shares and for which Stock Appreciation Rights may be exercised shall not
exceed 1,159,291 shares of Common Stock, inclusive of any shares of Common
Stock sold or awarded under the Plan on or before May 8, 1996, subject to
adjustment as provided for below in this Section 3 and in Section 12(a) and
Section 12(b). If any Awards which are payable in Common Stock are
surrendered, forfeited or expire without being exercised in full, then the
shares of Common Stock that were issuable pursuant to such Awards shall be
available for Options and Stock Appreciation Rights thereafter granted and
for Restricted Shares thereafter awarded under the Plan; provided, however,
that if an Option, or any portion thereof, shall be canceled as a result of
the exercise of a related Tandem Stock Appreciation Right, the shares with
respect to which such Option has not been exercised shall not be available
for Options and Stock Appreciation Rights thereafter granted and for
Restricted Shares thereafter awarded under the Plan, and if a Tandem Stock
Appreciation Right, or any portion thereof, shall be canceled in connection
with the exercise of a related Option, the shares with respect to which such
Tandem Stock Appreciation Right has not been exercised shall not be available
for Options and Stock Appreciation Rights thereafter granted and for
Restricted Shares thereafter awarded under the Plan. For purposes of
applying the limitations of this Section 3, the number of shares of Common
Stock that are issuable with respect to a Free-Standing Stock Appreciation
Right or a Phantom Share shall be determined by the Committee at the time of
grant and set forth in the applicable Agreement. Awards that are not payable
in shares shall be irrelevant for purposes of applying the limitations of
this Section 3. Notwithstanding any other provision of this Section 3, any
shares issued by the Company by virtue of the assumption or substitution of
outstanding grants from an acquired entity or business shall not reduce the
shares available for grants or offerings under the Plan and will not count in
applying the limitations of this Section 3.
Shares of Common Stock issued under the Plan may be authorized
and unissued shares or issued and reacquired shares, as the Committee may from
time to time determine.
4. Administration. The Plan shall be administered by the
Committee, which shall be appointed by the Board and which shall consist of
two or more members of the Board who, during the time of their service as
members of the Committee, qualify with respect to the Plan as "disinterested
directors," within the meaning of Rule 16b-3 under the Exchange Act. The
Committee shall have the authority to interpret and construe the provisions of
the Plan and of any agreements under the Plan
<PAGE>
and make determinations pursuant to any Plan provision or agreement. Each
interpretation, determination or other action made or taken pursuant to the
Plan by the Committee shall be final, conclusive and binding on all persons.
5. Grant or Offer of Awards. The Committee shall, from time
to time, select and make grants of Awards or offers for the sale of Awards to
Participants.
6. Agreement. The terms and conditions of each grant of
Awards shall be embodied in a written agreement (the "Agreement") in a form
approved by the Committee which shall contain terms and conditions not
inconsistent with the Plan and which shall incorporate the Plan by reference.
Each Agreement shall: (a) state the Grant Date of the Award, the number of
shares issuable in connection with the Award or the number of Phantom Shares,
Free-Standing Stock Appreciation Rights or Restricted Shares related to the
Award, as the case may be, and (i) in the case of Options (and any related
Tandem Stock Appreciation Rights), the Option Price, (ii) in the case of
Restricted Shares, the purchase price, if any, for such Restricted Shares,
or (iii) in the case of Phantom Shares and Free-Standing Stock Appreciation
Rights, the Initial Value thereof and the maximum number of shares of Common
Stock that may be issued in connection therewith; (b) specify any applicable
vesting schedule; (c) in the case of Options, state whether the Option is
intended to qualify as an Incentive Stock Option; (d) provide, at the
Committee's discretion, that such Award shall not be transferable by the
Participant otherwise than by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as such term is defined
in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder, and shall be exercisable during
the Participant's lifetime only by the Participant; (e) provide, in the
Committee's discretion, that shares of Common Stock acquired pursuant to
such Award shall not be transferred for six months following the Grant Date
of such Award; (f) provide for the treatment of Awards in the event of the
termination of the Participant's employment; (g) in the case of a Stock
Appreciation Right provide, in the Committee's discretion, that such Stock
Appreciation Right may be exercised only during a Window Period and may only
be exercised six months or more after its Grant Date; (h) provide such other
additional or alternative terms as may, in the Committee's discretion, be
advisable to comply with the exemptive relief provided by Rule 16b-3 under
the Exchange Act; (i) provide, at the Committee's discretion, for the
accelerated vesting and payment of Awards in the event of extraordinary
corporate events, including a substantial change in the ownership or control
of the Company; (j) provide such other terms and conditions, not inconsistent
with the Plan, as the Committee may deem advisable; (k) be signed by the
recipient of the Award and a person designated by the Committee; and (l) be
delivered to the recipient of the Award.
<PAGE>
7. Terms of Options.
(a) Terms of Options Generally. Options may be granted to any
Participant to purchase such number of shares of Common Stock as the
committee shall determine in exchange for payment of the Option Price in
cash, or, in the discretion of the Committee and to the extent provided in
the applicable agreement, in shares of Common Stock already owned by the
Participant, in other property acceptable to the Committee or in any
combination of cash, shares of Common Stock or such other property. Options
granted under the Plan shall comply with the terms and conditions set forth
in this Section 7.
(i) Vesting. Each Option shall vest and become
exercisable as determined by the Committee and as set forth in the
applicable Agreement.
(ii) Duration of Options. Each Option shall be
effective for such term as shall be determined by the Committee and set
forth in the Agreement; provided, however, that no Option shall be
exercisable beyond the tenth anniversary of the Grant Date of such Option.
(iii) Incentive Stock Options Granted to Certain
Shareholders. No Incentive Stock Option may be issued pursuant to the
terms of the Plan to any individual who, at the time the Option is granted,
owns stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or any of its subsidiaries,
unless (A) the Option Price determined as of the Grant Date is at least 110
percent of the Fair Market Value on the Grant Date of the shares of Common
Stock subject to such Option, and (B) the Incentive Stock Option is not
exercisable more than five years from the Grant Date thereof.
(b) Effect of Exercise on Related Tandem Stock Appreciation
Rights. The exercise of an Option shall result in the cancellation of any
related Tandem Stock Appreciation Rights on a share-for-share basis.
(c) Limitation on Exercise. The Option shall not be
exercisable unless the offer and sale of the Common Stock subject to the
Option has been registered under the Securities Act, or the Company has
determined that an exemption from registration under the Securities Act is
available and applicable to the offer and sale of the Common Stock subject
to the Option.
(d) Delivery of Certificate. As soon as practicable
following the exercise of an Option, a certificate in the Participant's name
evidencing the appropriate number of shares of Common Stock issued in
connection with such exercise shall be delivered to the Participant.
<PAGE>
8. Terms of Stock Appreciation Rights.
(a) Terms of Stock Appreciation Rights Generally. Each Stock
Appreciation Right granted under the Plan shall comply with the terms and
conditions set forth in this Section 8.
(i) Grants of Stock Appreciation Rights. Each
Tandem Stock Appreciation Right shall relate to a specific Option granted
under the Plan and in the case of Incentive Stock Options may be granted
only concurrently with the Option to which it relates. In the case of
Non-Qualified Stock Options, Tandem Stock Appreciation Rights may be granted
at any time prior to the exercise, termination or expiration of such Option.
Free-Standing Stock Appreciation Rights may be granted by the Committee at
any time to any Participant.
(ii) Vesting, Exercise and Duration of Stock
Appreciation Rights. A Tandem Stock Appreciation Right shall be exercisable
by a Participant only at such times as the Option to which it relates may be
exercised, shall be forfeited when the related Option is forfeited and may
expire no later than the expiration of the related Option. Each Free-
Standing Stock Appreciation Right shall vest and become exercisable as
determined by the Committee and as set forth in the applicable Agreement.
(iii) Value of Stock Appreciation Rights. A Stock
Appreciation Right shall entitle a Participant to receive from the Company,
upon exercise of the Right, an amount (payable in the manner described in
Section 8(c) below) equal to the Fair Market Value on the exercise date of
the Stock Appreciation Right of the total number of shares of Common Stock
for which the Stock Appreciation Right is exercised, less (A) in the case of
Tandem Stock Appreciation Rights, the Option Price that the Participant would
have otherwise been required to pay to purchase such shares had the Option
been exercised with respect to such shares, or (B) in the case of a Free-
Standing Stock Appreciation Right, the Initial Value.
(iv) Number of Shares Covered by a Tandem Stock
Appreciation Right. In no case may the number of shares of Common Stock
covered by a Tandem Stock Appreciation Right exceed the number of shares of
Common Stock covered by the related Option.
<PAGE>
(b) Effect of exercise of Tandem Stock Appreciation Right on
Related Option. The exercise of a Tandem Stock Appreciation right shall
automatically result in the cancellation of the related Option on a share-
for-share basis, and the shares of Common Stock which were related to such
Option shall not again be available for future grants or sales of Awards.
(c) Payment. Payment to a Participant upon the exercise of
a Stock Appreciation Right shall be made as soon as practicable following
such exercise and, in the discretion of the Committee, may be made in cash, in
shares of Common Stock or a combination of cash and shares of Common Stock;
provided, however, that payment shall not be made in Common Stock unless
Common Stock has been registered under the Securities Act, or the Company has
determined that an exemption under such Act is available and applicable to
such exercise and payment in Common Stock.
(d) Delivery of Certificate. As soon as practicable following
the exercise of a Stock Appreciation Right that is paid in whole or part in
Common Stock, a certificate evidencing the appropriate number of shares of
Common Stock issued in connection with such exercise shall be delivered to
the Participant.
9. Terms of Restricted Shares.
(a) Terms of Restricted Shares Generally. Restricted Shares
may be granted or offered for sale to any Participant, may be granted solely
in consideration for services rendered or to be rendered to the Company, or
its subsidiaries or affiliates, and may also be granted in substitution and
exchange for "restricted property" (within the meaning of Section 83 of the
Code) held by any Participant. If Restricted Shares are offered for sale
hereunder, the purchase price shall be payable in cash, or, in the discretion
of the Committee and to the extent provided in the applicable Agreement, in
shares of Common Stock already owned by the Participant, in other property or
in any combination of cash, shares of Common Stock or such other property.
The Restricted Shares granted or offered for sale under the Plan shall comply
with the terms and conditions set forth in this Section 9.
(b) Purchase Price; Offering Period. Restricted Shares
offered for sale shall be sold at a purchase price determined at the time of
offering by the Committee in its discretion and as set forth in the
applicable Agreement.
(c) Delivery of Certificate. At the time of grant or sale of
Restricted Shares to a Participant, a certificate evidencing the appropriate
number of shares of Common Stock granted or sold to the Participant as
Restricted Shares shall be issued in the Participant's name but shall be held
by the Company for the account of the Participant until such time as such
Restricted Shares vest hereunder. Upon such vesting, the certificate
evidencing such shares shall be delivered to the Participant.
<PAGE>
(d) Vesting. Each Restricted Shares shall vest as determined
by the Committee and as set forth in the applicable Agreement.
10. Terms of Phantom Shares.
(a) Terms of Phantom Shares Generally. Phantom Shares may be
granted to any Participant. The Phantom Shares granted hereunder shall
comply with the term and conditions set forth in this Section 10.
(i) Measurement of Value of Phantom Shares. A
Phantom Share shall entitle the Participant to receive from the Company, on
such date as the Committee may determine in its discretion and as set forth
in the applicable Agreement, an amount equal to the Fair Market Value of a
share of Common Stock (or such other measurement of value as may have been
established by the Committee in its discretion and set forth in the
applicable Agreement) as of such payment date or earlier event, less the
Initial Value of such Phantom Share. Notwithstanding anything in this
Section 10(a)(i), the measure of value selected with respect to a Phantom
Share may not produce a payment that would be greater than the Fair Market
Value of a share of Common Stock at the time of such payment.
(ii) Vesting. Each Phantom Share shall vest as
determined by the Committee and as set forth in the applicable Agreement.
(b) Payment. Payment to a Participant with respect to a
Phantom Share shall be made in the discretion of the Committee, in cash, in
shares of Common Stock or a combination of cash and shares of Common Stock;
provided, however, that payment shall not be made in Common Stock unless
Common Stock has been registered under the Securities Act, or the Company
has determined that an exemption under such Act is available and applicable
to such exercise and payment in Common Stock.
(c) Delivery of Certificate. Upon payment of a Phantom Share
that is paid in whole or part in Common Stock, a certificate evidencing the
appropriate number of shares of Common Stock issued in connection with such
exercise shall be delivered to the Participant.
11. Effectiveness of the Plan. The Plan shall become effective
on, and shall have no force and effect until, the Effective Date.
12. Certain Adjustments.
(a) Effect of Reorganization. In the event that (i) the
Company is merged or consolidated with another corporation, (ii) all or
substantially all of the assets of the Company are acquired by another
corporation, person or entity, (iii) the Company is reorganized, dissolved
or liquidated, or (iv) the division or subsidiary for which a Participant
<PAGE>
performs services is sold, merged, consolidated, reorganized or liquidated
(each such event in (i), (ii), (iii) or (iv) being hereinafter referred to as
a "Reorganization Event") or (v) the Board shall propose that the Company
enter into a Reorganization Event, then the Committee shall make such
adjustments as it deems necessary or advisable in its discretion to provide
each Participant with a benefit equivalent to that which he would have been
entitled to had such event not occurred.
(b) Dilution and Other Adjustments. In the event of a stock
dividend or split, the Committee shall make any or all of the following
adjustments that in its discretion it deems necessary or advisable to
provide each Participant with a benefit equivalent to that which he would
have been entitled to had such event not occurred: (i) adjust the number of
Awards granted or offered to each Participant and the number of Awards that
may be granted or offered generally pursuant to the Plan, (ii) adjust the
Option Price of any Options and the Initial Value of any Phantom Shares and
Free-Standing Stock Appreciation Rights, and (iii) make any other
adjustments, or take such action, as the Committee, in its discretion, deems
appropriate. Such adjustments shall be conclusive and binding for all
purposes. In the event of a change in the Common Stock which is limited to
a change in the designation thereof to "Capital Stock" or other similar
designation, or to a change in the par value thereof, or from the number of
issued shares, the shares resulting from any such change shall be deemed to
be Common Stock within the meaning of the Plan.
13. Amendment of the Plan. The Board may at any time and from
time to time alter, amend, suspend or terminate the Plan in whole or n part;
provided, however, that any amendment which must be approved by the
shareholders of the Company in order to maintain the continued qualification
of the Plan under Rule 16b-3 under the Exchange Act or the approval of which
is otherwise required by law or by the rules of any stock exchange upon which
shares of Common Stock are traded, shall not be effective unless and until
such shareholder approval has been obtained in compliance with such rule or
law. No termination or amendment of the Plan may, without the consent of the
Participant to whom an Award has been granted, adversely affect the rights of
such Participant under such Award.
14. Termination. Unless previously terminated pursuant to
Section 13, the Plan shall terminate on the tenth anniversary of the
Effective Date, and no further Awards may be granted hereunder after such
date. Awards then outstanding may continue to be exercised, vest or be paid
in accordance with their terms.
15. Use of Proceeds. The proceeds received by the Company
from the sale of Common Stock pursuant to the sale or exercise of Awards
under the Plan shall be added to the Company's general funds and used for
general corporate purposes.
<PAGE>
16. Miscellaneous.
(a) No Rights to Grants or Continued Service. Except as
expressly provided for in the Plan, no Participant shall have any claim or
right to be granted an Award under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Participant any right
to be retained in the employ or service of the Company.
(b) No Restriction on Right of Company to Effect Corporate
Changes. Nothing in the Plan shall affect the right or power of the Company
or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of stock or of options, warrants or rights to purchase stock or
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding, whether of
a similar character of otherwise.
(c) Governing Law. The Plan and all agreements entered into
under the Plan shall be construed in accordance with and governed by the laws
of the State of New York.
(d) Withholding. As a condition to the making of any Award, the
vesting of any Award or the lapse of the restrictions pertaining thereto, the
Company may, in the discretion of the Committee, require the Participant to
pay such sum to the Company as may be necessary to discharge the Company's
obligations with respect to any taxes, assessment or other governmental
charge imposed on property or income received by a Participant pursuant to
the Plan. In the discretion of the Committee, such payment may be in the
form of cash or other property. In the discretion of the Committee, the
Company may make available for delivery a lesser number of shares, in
satisfaction of such taxes, assessments or other governmental charges. At
the discretion of the Committee, the Company may deduct or withhold from any
payment or distribution to a Participant whether or not pursuant to the Plan.
In the discretion of the Committee, the Company may offer loans to
Participants to satisfy withholding requirements on such terms as the
Committee may determine, which terms may be non-interest bearing.
(e) Shareholder Rights. A Participant shall have no rights as a
shareholder with respect to any shares issued or issuable with respect to an
Award until a certificate or certificates evidencing such shares shall have
been issued to or for the benefit of such Participant, and no adjustment
shall be made for dividends or distributions or other rights in respect of
any share for which the record date is prior to the date upon which the
Participant shall become the holder of record thereof; provided, however,
that a Participant shall have all rights of a shareholder as to any
Restricted Shares sold or granted to him, including the right to receive
dividends and the right to vote for directors and upon other matters in
accordance with the Company's Certificate of Incorporation; and provided,
however, that the Participant shall not have the right to transfer, sell,
hypothecate, pledge or otherwise alienate any unvested Restricted Share.
<PAGE>
Exhibit 10(h)
KOLLMORGEN
1992 STOCK OWNERSHIP PLAN FOR NON-EMPLOYEE DIRECTORS
(as amended 5/8/96)
ARTICLE I: PURPOSE AND DEFINITIONS
1. Purpose
The purpose of the Kollmorgen 1992 Stock Ownership Plan for
Non-Employee Directors (the "Plan") is to help in attracting and retaining
as members of the Board of Directors (the "Board") of Kollmorgen Corporation,
a New York corporation (the "Corporation"), qualified persons who are not
employees of the Corporation or its subsidiaries ("Non-Employee Directors"),
and to secure for the Corporation the benefits of the incentive inherent in
increased Common Stock ownership by Non-Employee Directors. As used herein,
the term "Corporation" shall also mean any successor to substantially all of
the business of the Corporation.
2. Definitions
As used herein:
"Common Stock" means the common stock of the Corporation, par
value $2.50 per share, or such other class or kind of shares or other
securities as may be applicable under Article V, Section 4.
"Corporate Termination" shall mean the dissolution or
liquidation of the Corporation.
"Directors' Fees" means the total quarterly retainer fees to be
paid to Non-Employee Directors of the Corporation for service on the Board or
Committees thereof, as set forth in the By-Laws of the Corporation.
"Directors' Fee Shares" means shares of Common Stock granted
pursuant to Article IV, Section 1 of the Plan.
"Effective Date" shall be the date of the adjournment of the
annual meeting of shareholders of the Corporation at which the Plan is approved
by a majority of the shareholders of the Corporation entitled to vote thereon.
"Election Percentage" has the meaning prescribed in Article IV,
Section 1(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
<PAGE>
"Fair Market Value" means, as of any day, (i) if shares of
Common Stock are listed on the New York Stock Exchange, the per share closing
price of the shares of Common Stock as reported on the New York Stock Exchange
composite tape on the day on which such determination is being made, or, if
there was no sale of shares of Common Stock so reported, then on the most recent
preceding trading day on which there was such a sale, (ii) if shares of
Common Stock are not listed on the New York Stock Exchange, but are listed on
another national securities exchange or exchanges, the per share closing
price of the shares of Common Stock as reported for such exchange (or if more
than one such exchange, then the principal stock exchange for trading of the
shares of Common Stock) on the day on which such determination is being made,
or, if there was no sale of shares of Common Stock so reported, then on the
most recent preceding trading day on which there was such a sale, (iii) if
the shares of Common Stock are not listed on any national securities
exchange, then the last price for the shares of Common Stock as reported on
the National Association of Securities Dealers, Inc. Automated Quotation
System on the day on which such determination is being made, or, if there was
no sale of shares of Common Stock so reported, then on the most recent
preceding trading day on which there was such a sale, or (iv) if the shares
of Common Stock are not listed on any national securities exchange and sales
of shares of Common Stock are not reported as specified in clause (iii) of
this definition, then the last price for the shares of Common Stock reported
for the over-the-counter market on the day on which such determination is
being made, or, if there was no sale of the shares of Common Stock so
reported, then on the most recent preceding trading day on which there was
such a sale.
"Grant Date" means, with respect to any Option or Directors' Fee
Share, the date on which such Option or Directors' Fee Share was granted.
"Option" means a non-qualified stock option, issued under the
Plan, to purchase shares of Common Stock.
"Optioned Shares" means the shares of Common Stock subject to an
Option granted under the Plan.
"Optionee" means a recipient of an Option under the Plan or,
where appropriate, such person's estate, beneficiary or legal representative.
"Quarter" means any quarter of the Corporation's fiscal year
that ends after the Effective Date.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
ARTICLE II: ELIGIBILITY;
SHARES AVAILABLE; AND ADMINISTRATION
1. Eligibility; Shares Available for Grant
(a) Eligibility. Options and Directors' Fee Shares shall be
granted only to Non-Employee Directors.
<PAGE>
(b) Shares Available. The total number of shares of Common
Stock which may be issued under the Plan shall be 325,000, inclusive of any
shares of Common Stock issued under the Plan or reserved for issuance upon
the exercising outstanding stock options on or before May 8, 1996, and may be
authorized and unissued shares or issued and reacquired shares, as the Board
of Directors may from time to time determine. If an unexercised Option or a
Directors' Fee Share shall expire, terminate, be forfeited or be cancelled
for any reason, the share of Common Stock relating thereto shall again be
available for grant under the Plan, in the form of either an option or a
Directors' Fee Share.
2. Administration. The Plan is designed to operate automatically
and not require administration. However, to the extent that administration is
necessary, the Plan shall be administered by the Personnel and Compensation
Committee (the "Committee") of the Board of Directors of the Company. The
Committee shall have full authority to administer and interpret the Plan, and
to promulgate such rules and regulations with respect to the Plan as it deems
necessary, and to make all other decisions and determinations necessary or
appropriate for the administration of the Plan. Decisions and determinations
of the Personnel and Compensation committee shall be final and binding upon
all persons having an interest in the Plan.
ARTICLE III: OPTIONS
1. Grant of Options
(a) Grants Effective as of 1996 Annual Meeting. Effective as of
the date of the adjournment of the 1996 Annual Meeting of Shareholders, each
Non-Employee Director shall automatically be granted an Option to purchase
15,000 shares of Common Stock on the terms herein provided.
(b) Grants to Subsequently Elected Non-Employee Directors. Each
Non-Employee Director who is first elected to the Board on a date subsequent to
the 1996 Annual Meeting of Shareholders shall automatically be granted,
effective as of the date of such election to the Board, an Option to purchase
15,000 shares of Common Stock on the terms herein provided.
(c) One-Time Matching Grants Following Initial Grants. Each Non-
Employee Director who is granted an Option under paragraphs (a) or (b) above
shall be granted an additional Option to purchase that number of shares of
Common Stock (not to exceed 10,000) that such Non-Employee Director purchases
on the open market during the ninety (90) day period immediately following
the Grant Date of the Option granted under paragraph (a) or (b), as the case
may be. The Grant Date of the Options hereby granted shall be deemed to be
the ninety-first (91st) day immediately following the Grant Date of the
Options granted under paragraph (a) or (b), as the case may be, and the
Exercise Price of the Options hereby granted shall be the Fair Market Value
of a share of Common Stock on the Grant Date.
<PAGE>
(d) Option Agreement. The terms of each Option shall be
embodied in an agreement which shall contain terms not inconsistent with the
Plan and which shall incorporate the Plan by reference. Each Agreement shall:
(i) state the Grant Date of such Option, (ii) state the number of shares of
Common Stock issuable in connection with the Option, (iii) state the exercise
price of the Option, (iv) be signed by the Optionee and, on behalf of the
Corporation, by a person designated by the Committee, and (v) be delivered to
the Optionee. Notwithstanding anything contained herein, each grant of an
Option shall be conditioned upon the recipient signing such agreement.
2. Terms and Conditions of Options
(a) Vesting; Termination. Each Option granted hereunder shall
become exercisable (i) for up to one-half of the Optioned Shares on or after
twelve months following the Grant Date; and (ii) for all of the Optioned Shares
on or after twenty-four months following the Grant Date. No Option or any
part of an Option shall be exercisable after the expiration of ten years from
the Grant Date of the Option or after earlier termination in accordance with
the terms of the Plan.
(b) Exercise Price. The per share exercise price of any Option
granted hereunder shall be the Fair Market Value of a share of Common Stock on
the Grant Date; Section 2(a)(ii), the Fair Market Value of a share of Common
Stock on the Grant Date.
(c) Notice of Exercise. Subject to the terms of the Plan, a
Non-Employee Director may exercise all or any portion of an Option by giving
written notice to the Committee. The date of exercise of the Option with
respect to the number of shares of Common Stock specified in the notice shall
be the later of (i) the date on which the Secretary of the Corporation
receives such written notice or (ii) the date on which the conditions
provided in Article III, Section 2(d) and Article V, Section 2 are satisfied.
(d) Payment. Prior to the issuance of a certificate pursuant to
Article III, Section 2(f) hereof evidencing shares of Common Stock in respect
of which all or a portion of an Option shall have been exercised, a Non-
Employee Director shall have paid to the Corporation the exercise price in
respect of all such shares (i) in cash or (ii) in shares of Common Stock
already owned by such Non-Employee Director having a Fair Market Value, on
the date of such payment, equal to such exercise price, or (iii) a
combination of (i) and (ii).
(e) Shareholder Rights. A Non-Employee Director shall have no
rights as a shareholder with respect to any shares of Common Stock issuable upon
exercise of an Option until a certificate or certificates evidencing such
shares shall have been issued to such Non-Employee Director, and no
adjustment shall be made for dividends or distributions or other rights in
respect of any share of Common Stock for which the record date is prior to
the date upon which the Non-Employee Director shall become the holder of
record thereof.
<PAGE>
(f) Delivery of Certificate. As soon as practicable following
the date of exercise of an Option, a certificate evidencing the appropriate
number of shares of Common Stock issued in connection with such exercise
shall be issued to the Non-Employee Director in his or her name.
3. Exercise of Options Following Termination of Service
(a) Termination not for Cause. Upon termination of a
Non-Employee Director's service as a director of the Corporation for any
reason (including death, disability or retirement) other than as set forth in
Article III, Section 3(b), such Non-Employee Director may exercise any Option
that was exercisable at the time of such termination at any time during the
period equal to the greater of (i) one month for each year of service as a
non-employee director up to a maximum of twelve (12) months, or (ii) ninety
(90) days, following the date of such termination of service for any reason
other than death and, in the case of death, until one year following the date of
death. Upon the expiration of the applicable post-termination exercise
period, any such Option, to the extent not exercised, shall be cancelled
without payment therefor.
(b) Termination for Cause and Voluntary Resignation Without
Consent. In the event that a Non-Employee Director voluntarily resigns from
the Board without the consent of the Board or is removed from the Board for
Cause (as defined below), any Option granted to such Non-Employee Director,
whether then vested and exercisable or not, shall terminate, as of the date
of such removal. For purposes of this Article III, Section 3(b), removal for
"Cause" shall mean a removal as a director by reason of (i) any act or
omission which constitutes a material breach by the Non-Employee Director of
an obligation to the Corporation, (ii) the conviction by the Non-Employee
Director of a felony, or the perpetration by the Non-Employee Director of a
dishonest act or common law fraud against the Corporation, or (iii) any other
willful act or omission which is materially injurious to the financial
condition or business reputation of the Corporation.
ARTICLE IV: DIRECTORS' FEE SHARES
1. Directors' Fee Shares
(a) Grants. On the last day of each Quarter, each Non-Employee
Director shall be granted an award of Directors' Fee Shares having a Fair
Market Value equal to the amount of the Directors' Fee Shares due to such
Non-Employee Director for the just concluded Quarter multiplied by his
applicable Election Percentage. No fractional shares shall be issued.
(b) Election Percentage. As of the Effective Date, each Non-
Employee Director shall be deemed to have elected an Election Percentage
equal to 50%. Thereafter, any Non-Employee Director may change his Election
Percentage to any amount between 50% and 100%, by giving the Secretary of the
Corporation six months and one day's prior written notice. Any notice of any
change of an Election Percentage shall not be effective until six months and
one day after such notice is given.
<PAGE>
(c) Grant of Directors' Fee Shares in Lieu of Cash Payment of
Directors' Fees. As consideration for the grant of Directors' Fee shares for
any Quarter, each Non-Employee Director discharges the Corporation from any
obligation to pay him Directors' Fee Shares in cash for that Quarter in an
amount equal to the amount of his Directors' Fee Shares that would have been
paid in cash but for the grant of Directors' Fee Shares, multiplied by the
applicable Election Percentage.
2. Terms and Conditions of Directors' Fee Shares
(a) Share Certificates; Rights and Privileges. At the time
Directors' Fee Shares are granted to a Non-Employee Director, share certificates
representing the appropriate number of shares of Common Stock shall be
registered in the name of the Non-Employee Director but shall be held by the
Corporation in custody for the account of such person. The certificates
shall bear a legend restricting their transferability as provided in
Article V, Section 3(b). The Non-Employee Director shall have all the rights
and privileges of a shareholder as to such shares, including the right to
receive dividends and the right to vote such shares, subject to the
restrictions set forth in Article V, Section 3(b). The Directors' Fee Shares
shall be immediately vested upon grant, and shall not be forfeitable to the
Corporation.
(b) Delivery of Shares. As soon as practicable following the
lapse of the restrictions as provided in Article V, Section 3(b), a share
certificate for such shares shall be delivered, free of all such restrictions,
to the Non-Employee Director.
ARTICLE V: GENERAL PROVISIONS
1. Effectiveness of the Plan.
This Plan shall become effective on, and shall have no force and
effect until, the Effective Date.
2. Limitation on Issuance and Delivery of Shares of Common Stock.
Notwithstanding anything to the contrary contained herein, no
Option shall be exercisable and no Directors' Fee Share shall be granted unless
the shares of Common Stock subject to the Option, or the Directors' Fee Share,
as the case may be, have been registered under the Securities Act, and
qualified under applicable state "blue sky" laws in connection with the offer
and sale thereof, or the Corporation has determined that an exemption from
registration under the Securities Act and from qualification under such state
"blue sky" laws is available and is applicable to the issuance of shares of
Common Stock in connection with the exercise of an Option or the grant of a
Directors' Fee Share. In the event that a Directors' Fee Share cannot be
granted by reason of this Section, the Corporation shall pay the Non-Employee
Director, in cash, the value of such Directors' Fee Share, on the date, that
such Directors' Fee Share would have been paid, but for this Section.
<PAGE>
3. Non-Transferability of Options or Shares of Common Stock.
(a) Options. Options granted hereunder shall not be transferable
otherwise than (i) by will or the laws of descent and distribution, or (ii)
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or the rules thereunder. An Option shall
be exercisable during the Optionee's lifetime only by such Optionee or by the
Optionee's legal representative.
(b) Common Stock. Shares of Common Stock acquired pursuant to
the exercise of an Option or the grant of Directors' Fee Shares shall not be
transferred for six months following the Grant Date of such Option or
Directors' Fee Shares.
4. Certain Adjustments
(a) Generally. In the event of any consolidation,
recapitalization, reclassification, stock dividend, distribution of property,
special cash dividend or other change in corporate structure affecting the
Common Stock, (other than as set forth in Article V, Section 4(b) or (c),
below), adjustments may be made by the Committee in order to preserve to the
holders of outstanding Options rights thereunder substantially equivalent to
the rights held by them immediately prior to such event under such outstanding
Options, including adjustments to the number, class and exercise price of
shares subject to outstanding Options granted under the Plan, or such
adjustments or other actions as the Committee may deem appropriate.
(b) Cash Out of Options in the Event of a Corporate Termination.
Anything herein contained notwithstanding, immediately prior to a Corporate
Termination, each Optionee shall receive from the Corporation an amount in
cash, in a lump sum, for each share of Common Stock subject to an Option
(whether or not vested) held by such Optionee equal to the difference between
the exercise price of the Option and the last Fair Market Value of a share of
Common Stock prior to the Corporate Termination; provided, however, that each
Option granted within the six months prior to the Corporate Termination shall
not be subject to a Cash Out, but instead shall become fully vested and
exercisable immediately prior to the Corporate Termination.
(c) Merger. In the event of any merger of the Corporation,
(i) the terms of each Option and Directors' Fee Share, including, without
limitation, the terms regarding vesting, exercisability, transfer,
forfeitability and delivery of shares of Common Stock, shall continue to be
governed by the terms of the Plan; (ii) each Non-Employee Director shall be
entitled to receive upon the exercise of each Option, the same per-share
consideration received by each of the Corporations' shareholders in
connection with such merger, multiplied by the number of Optioned Shares
covered by such Option; and (iii) each Non-Employee Director shall be
entitled to receive for each Directors' Fee Share the same per-share
consideration received by each of the Corporation's shareholders in
connection with such merger.
<PAGE>
5. Amendment of the Plan
The Board may at any time and from time to time alter, amend,
suspend or terminate the Plan in whole or in part; provided, however, that
(i) any amendment which must be approved by the shareholders of the
Corporation in order to maintain the continued qualification of the Plan
under Rule 16b-3 under the Exchange Act or any successor provision, or the
approval of which is otherwise required by law or by the rules of any stock
exchange upon which shares of Common Stock are traded, shall not be effective
unless and until such shareholder approval has been obtained in compliance
with such rule or law and (ii) provisions of the Plan which govern the amount,
price or timing of the award of an Option shall not be amended more than
once every six months, other than to comply with changes in the Internal
Revenue Code of 1986, as amended, or the rules thereunder. No termination or
amendment of the Plan may, without the consent of an Optionee, adversely
affect the rights of such Optionee.
6. Termination of the Plan
Unless previously terminated pursuant to Article V, Section 5,
the Plan shall terminate immediately prior to the tenth annual meeting of
shareholders of the Corporation occurring after the Effective Date, and no
further Options or Directors' Fee Shares may be granted hereunder after such
date. Options then outstanding may continue to be exercised in accordance
with their terms and Directors' Fee Shares still held by the Corporation under
Article IV, Section 2(a) shall be delivered as provided in Article IV,
Section 2(b).
7. Withholding of Taxes
The Corporation shall have the right, prior to the delivery of
any certificates evidencing shares of Common Stock or upon the grant of any
Directors' Fee Shares, to require the relevant Non-Employee Director to remit
to the Corporation an amount in cash or Common Stock sufficient to satisfy
any federal, state or local tax withholding requirements.
8. Use of Proceeds
The proceeds received by the Corporation from the sale of Common
Stock pursuant to the exercise of Options granted under the Plan shall be
added to the Corporation's general funds and used for general corporate
purposes.
9. Miscellaneous
(a) No Rights to Grants or Continued Service. Except as
expressly provided for in the Plan, no Non-Employee Director shall have any
claim or right to be granted an Option or Directors' Fee Shares under the Plan.
Neither the Plan nor any action taken hereunder shall be construed as giving
any Non-Employee Director any right to be retained in the service of the
Corporation as a director.
<PAGE>
(b) No Restriction on Right of the Corporation to Effect
Corporate Changes. Nothing in the Plan shall affect the right or power of the
Corporation or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's
capital structure or its business, or any merger or consolidation of the
Corporation, or any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior preference stocks
whose rights are superior to or affect the Common Stock or the rights thereof
or which are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
(c) Exchange Act. Notwithstanding anything contained in the
Plan or any agreement to the contrary, if the consummation of any transaction
under the Plan would result in the possible imposition of liability on a Non-
Employee Director pursuant to Section 16(b) of the Exchange Act, the
Committee shall have the right, in its sole discretion, but shall not be
obligated, to defer such transaction to the extent necessary to avoid such
liability, but in no event for a period in excess of 180 days.
(d) Governing Law. The Plan and all agreements entered into
under the Plan shall be construed in accordance with and governed by the laws
of the State of New York applicable to contracts executed in and to be
performed in that State.
<PAGE>
<TABLE>
Exhibit 11
KOLLMORGEN CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share amounts)
(unaudited)
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------ --------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
-------- -------- -------- --------
Net income $ 2,229 $ 1,838 $ 3,877 $ 3,010
Less preferred stock dividends
and accretion of discount 0 (581) (285) (1,162)
-------- -------- -------- --------
Earnings applicable to common shares2,229 1,257 3,592 1,848
Number of shares:
Weighted average number of
shares outstanding:
Primary 10,092 9,658 10,042 9,651
Fully diluted 10,163 9,658 10,162 9,651
-------- -------- -------- --------
Earnings per common share:
Primary $ 0.22 $ 0.13 $ 0.36 $ 0.19
======== ======== ======== ========
Fully diluted $ 0.22 $ 0.13 $ 0.35 $ 0.19
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE>5
<LEGEND>
KOLLMORGEN CORPORATION AND SUBSIDIARIES EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,095
<SECURITIES> 0
<RECEIVABLES> 39,392
<ALLOWANCES> 624
<INVENTORY> 29,733
<CURRENT-ASSETS> 96,998
<PP&E> 112,161
<DEPRECIATION> (83,386)
<TOTAL-ASSETS> 144,772
<CURRENT-LIABILITIES> 68,104
<BONDS> 38,590
<COMMON> 26,909
0
0
<OTHER-SE> (12,486)
<TOTAL-LIABILITY-AND-EQUITY>144,772
<SALES> 108,895
<TOTAL-REVENUES> 116,828
<CGS> 72,822
<TOTAL-COSTS> 77,444
<OTHER-EXPENSES> 32,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,803
<INCOME-PRETAX> 3,877
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,877
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
</TABLE>
