<PAGE>
KOLLMORGEN CORPORATION
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
April 5, 1996
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders
on Wednesday, May 8, 1996, at 10:00 a.m. at the Auditorium, the First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts. This
will be Kollmorgen's 80th Annual Meeting of Shareholders.
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,
Gideon Argov
Chairman of the Board,
President and
Chief Executive Officer
<PAGE>
<PAGE>2
KOLLMORGEN CORPORATION
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 5, 1996
To the Shareholders of
Kollmorgen Corporation:
The Annual Meeting of Shareholders of Kollmorgen Corporation will be
held at the Auditorium, the First National Bank of Boston, 100 Federal
Street, Boston, Massachusetts, on Wednesday, May 8, 1996, at 10:00 a.m.,
local time, for the following purposes:
1. To elect four Class II directors;
2. To approve an amendment to the 1991 Kollmorgen Corporation Long
Term Incentive Plan;
3. To approve amendments to the 1992 Stock Ownership Plan for Non-
Employee Directors; and
4. 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 21, 1996,
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 8, 1996, and at any adjournments
or postponements thereof (the "Annual Meeting"). The close of business on
March 21, 1996, is the record date for shareholders entitled to notice of and
to vote at the Annual Meeting. At such record date, there were outstanding
9,723,466 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. This Proxy Statement,
the accompanying form of proxy and the 1995 Annual Report to Shareholders are
being first sent to shareholders on or about April 5, 1996.
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 as
recommended by the Board of Directors 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.
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.
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.
Under New York law and the governing instruments of the Corporation, the
presence, either in person or by proxy, of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting is necessary to
constitute a quorum for the transaction of business. Assuming the presence
of a quorum, directors will be elected by a plurality of the votes cast at
the Annual Meeting by shareholders entitled to vote in the election.
Approval of the proposed amendments to the 1991 Long Term Incentive Plan and
the 1992 Stock Ownership Plan for Non-Employee Directors will require the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote on these matters at the
Annual Meeting. Any other matters that may be submitted to shareholders at
the Annual Meeting, will require the affirmative vote of a majority of the
<PAGE>
<PAGE>4
votes cast at the Annual Meeting by shareholders entitled to vote on such
matters.
An independent inspector of election will tabulate all votes cast at the
Annual Meeting. For purposes of the foregoing voting requirements, the
inspector of election will treat shares represented by proxies that withhold
authority to vote for a nominee for election as a director or that reflect
abstentions 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) nor
abstentions will be counted as votes cast at the Annual Meeting.
Accordingly, such proxies will not have any effect on the outcome of the
voting on the election of directors, but they will have the same effect as a
vote against the proposed amendments to the 1991 Long Term Incentive Plan and
the 1992 Stock Ownership Plan for Non-Employee Directors. In the event that
any other matters are submitted to shareholders at the Annual Meeting,
abstentions will have no impact on the voting with respect to those matters.
Shares represented at the Annual Meeting that are held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote and over which the broker or nominee does
not have discretionary voting power on a particular matter (so-called,
"broker non-votes") will be treated as present for purposes of determining
the presence of a quorum. However, such shares will not be treated as shares
that are entitled to vote on the particular matter as to which the broker or
nominee does not have discretionary authority, nor will they be treated as
votes cast at the Annual Meeting. Accordingly, broker non-votes will have no
impact on the voting with respect to any matter to come before the Annual
Meeting.
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.
<PAGE>
<PAGE>5
The Board of Directors held a total of seven regular and special
meetings during 1995. 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 Corporation's
independent public accountants. No member of this Committee is an employee
of the Corporation. The Audit Committee met once during 1995.
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
recommendations on the policies and programs for the development of
management personnel throughout the Corporation. This Committee met three
times in 1995.
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 two meetings in 1995.
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 1995.
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 two times in 1995.
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 five directors. The Board is presently composed of eight
directors, four of whom are members of Class I and four of whom are members
of Class II. The current terms of the members of Class II are scheduled to
expire at this Annual Meeting. Two of the current members of Class II,
Messrs. Ruttenberg and Doyle, have advised the Corporation that they are not
standing for re-election. As a result, the Board has nominated for election
as Class II directors two persons who are not now serving as directors of the
Corporation.
<PAGE>
<PAGE>6
The four Class II nominees standing for election at this Annual Meeting
are Gideon Argov, Robert J. Cobuzzi, Geoffrey S. Rehnert and George P.
Stephan. If elected, their terms will expire in 1998. 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
For Class II Directors, whose terms expire in 1998:
GIDEON ARGOV, 39, is the Chairman of the Board, President and Chief Executive
Officer of the Corporation. He was elected Chairman of the Board on March
26, 1996. 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 also a director of
TransTechnology Corporation and WorldCorp Inc.
ROBERT J. COBUZZI, 54, is the Senior Vice President, Treasurer and Chief
Financial Officer of the Corporation. He joined the Corporation in July 1991
as the Treasurer, Chief Financial Officer and a Vice President. He was
elected to his current position as Senior Vice President in February 1993.
Prior to joining the Corporation, Mr. Cobuzzi was the Treasurer and a Vice
President of High Voltage Engineering Company for two years. Previously, he
was a Vice President and the Chief Financial Officer of Ausimont N.V.
GEOFFREY S. REHNERT, 38, is a Managing Director and a General Partner of Bain
Capital, Inc., a private equity firm located in Boston, Massachusetts. Mr.
Rehnert has held his current positions since 1986 and has been associated
with Bain Capital since 1984. Prior to helping found Bain Capital, Mr.
Rehnert was a consultant with Bain & Company and a commercial banker with the
Morgan Guaranty Trust Company. He is also a director of several other
corporations, including ICON Health & Fitness, Inc., FTD Holdings, Inc., GT
Bicycles, Inc., U.S. Order and WorldCorp Inc.
GEORGE P. STEPHAN, 62, is a Managing Director of Stonington Group, Inc., a
financial and management consulting firm located in East Hartford,
Connecticut, a position he has held since 1994. From February 1992 through
1993, he acted in an of-counsel capacity to the law firm of Murtha, Cullina,
Richter and Pinney located in Hartford, Connecticut. For over 21 years, Mr.
Stephan held various executive management positions with the Corporation. He
served as the Chairman of the Board of the Corporation from 1991 until
<PAGE>
<PAGE>7
March 26, 1996, on which date Mr. Argov was elected to that position.
Mr. Stephan is a member of the Corporation's Executive Committee and has been
a director of the Corporation since July 1982. He is also 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.
CONTINUING DIRECTORS
Class I Directors, whose terms expire in 1997:
JERALD G. FISHMAN, 50, 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 of
that company from 1988 to November 1991. He served as the Group Vice
President-Components of that company from 1981 to 1988. Mr. Fishman is a
also a director of Augat, Inc. and SQA, Inc.
JAMES H. KASSCHAU, 44, is the President of International Contract
Furnishings, Inc., Norwood, New Jersey, a position he has held since October,
1995. Prior to that date, he was the President of Tinicum Incorporated, an
investment management company located in New York, New York, and the
President of Tinicum Enterprises, Inc., Garden City, New York. Mr. Kasschau
has been a director of the Corporation since March 1990. He is the chairman
of the Audit Committee and a member of the Retirement Plans Committee. The
Board of Directors first nominated Mr. Kasschau for election as a director in
1990 in accordance with the terms of a Preferred Stock Agreement, dated
March 27, 1990, among the Corporation and the purchaser parties thereto. See
"Certain Relationships and Related Transactions" below.
J. DOUGLAS MAXWELL, JR., 54, 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.
He is a member of the Audit Committee and Personnel and Compensation
Committee of the Board. Mr. Maxwell is also a director of the First National
Bank of Long Island.
ROBERT N. PARKER, 67, 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. He is the chairman of the Personnel and Compensation
Committee and a member of the Retirement Plans Committee. He is also a
director of Perceptronics, Inc., Woodland Hills, California.
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
<PAGE>
<PAGE>8
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 "Director Stock
Ownership Plan"). The purpose of the Director Stock Ownership Plan is to
attract, and retain as directors, qualified persons who are not employees of
the Corporation. The Director Stock Ownership 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 Director Stock Ownership Plan currently 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 are currently reserved for issuance
under the Plan. Please refer to Item 3 below for a discussion of certain
proposed amendments to the Director Stock Ownership Plan that are being
submitted to shareholders for approval at the Annual Meeting.
In March 1996, the Board terminated all future rights to participate in
the non-employee director retirement program (the "Retirement Program") that
had been maintained by the Corporation since 1985. The termination of the
Retirement Program does not affect the vested rights of any participants.
Current non-employee directors who are vested in the Retirement Program are
entitled to receive their vested benefit upon retirement from the Board, but
no further benefits will accrue under the Retirement Program.
Under the Retirement Program, 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 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 such director's 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 Executive Re Indemnity Inc. covering all of the
Corporation's directors and officers. The aggregate premium for these
policies paid or accrued during 1995 was approximately $277,000.
<PAGE>
<PAGE>9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 26,
1996, 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:
<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) 27.4%
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 712,904 (2) 7.3%
James H. Kasschau
Putnam L. Crafts, Jr.
RIT Capital Partners 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 21.05% 2,225,189 22.30%
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 2.30% 286,985 2.90%
GIL 23,000 .20% 23,000 0.23%
GPP 155,000 1.60% 155,000 1.56%
GSI 500 .00% 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) According to a Schedule 13D, as amended, 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"), St. James Place Capital plc ("SJPC"), and J. Rothschild Capital
Management Limited ("JRCML"), the Investor Group owns the 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.
<PAGE>
<PAGE>11
<CAPTION>
% of
Shares of Class of
Common Common
Stock Stock
-------- ------
<S> <C> <C>
Investors 712,904 7.30%
Mr. Kasschau 19,447 0.20%
Mr. Crafts 75,749 0.78%
RIT 239,901 2.47%
Mr. Ruttenberg 7,164 0.07%
Investors has sole power to vote with respect to 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, 334,097 shares of Common Stock owned by Mr. Kasschau, Mr. Crafts
and RIT.
The shares of Common Stock attributable to Messrs. Kasschau and Ruttenberg includes, as
of March 28, 1996, 4,000 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 Common Stock owned by other members of the Investor Group.
On February 16, 1996, the Corporation redeemed the 12,422, 7,867, and 414.5 shares of
its Series D Convertible Preferred Stock (the "Preferred Stock") held by Investors, RIT
and Mr. Kasschau, respectively, at a redemption price of $1,100 per share in cash plus
all accrued and unpaid dividends. On February 20, 1996, the Corporation redeemed the
2,484 shares of Preferred Stock held by Mr. Crafts at a redemption price of $1,100 per
share in cash plus all accrued and unpaid dividends. The 23,187.5 shares of Preferred
Stock was sold for $1,000 per share on March 27, 1990, pursuant to the Preferred Stock
Agreement, had a dividend rate of 9.5% per year and was convertible into an aggregate
of 1,717,590 shares of Common Stock.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 28, 1996, 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 221,000 2.3%
Robert J. Cobuzzi (1) Common Stock 85,000 *
Allan M. Doyle, Jr. (2) Common Stock 27,804 *
James A. Eder (1) Common Stock 60,630 *
Jerald G. Fishman (2) Common Stock 3,446 *
James H. Kasschau (2) Common Stock 19,447 *
J. Douglas Maxwell, Jr. (2) Common Stock 39,822 *
Robert N. Parker (2) Common Stock 6,906 *
Geoffrey S. Rehnert Common Stock 0 *
Eric M. Ruttenberg (2) Common Stock 8,064 *
George P. Stephan (2) Common Stock 48,477 *
Robert W. Woodbury, Jr. Common Stock 0 *
All directors and
executive officers of
the Corporation, as a
group Common Stock 520,596 (2)(1) 5.35%
<FN>
* less than 1%.
(1) Reflects the number of shares that could be purchased by the exercise of options available
as of March 29, 1996, or within 60 days thereafter under the Corporation's stock option
plans. Accordingly, these numbers are inclusive of (i) 200,000 shares of Common Stock
which Mr. Argov has the right to acquire under the Kollmorgen 1991 Long Term Incentive
Plan ("LTIP"), (ii) 80,000 shares of Common Stock which Mr. Cobuzzi has the right to
acquire under the LTIP and Kollmorgen 1982 Stock Option Plan ("1982 Plan"), and (iii)
60,200 shares of Common Stock which Mr. Eder has the right to acquire under the 1982 Plan
and the LTIP.
(2) Inclusive of 4,000 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 2,000 shares of Common Stock under a non-qualified stock
option granted to him in March, 1994.
</TABLE>
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.
<PAGE>
<PAGE>13
<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 1995 $275,000 $68,750 50,000
Chairman of the Board, 1994 269,710 - 0 - - 0 -
President and Chief 1993 275,000 - 0 - - 0 -
Executive Officer
Robert J. Cobuzzi 1995 $190,000 $47,500 25,000
Senior Vice President, 1994 186,340 - 0 - - 0 -
Treasurer and Chief 1993 190,000 - 0 - 50,000
Financial Officer
James A. Eder 1995 $155,000 $39,250 - 0 -
Vice President, Secretary 1994 155,000 - 0 - - 0 -
and General Counsel 1993 155,000 - 0 - - 0 -
Robert W. Woodbury, Jr. (1) 1995$118,660 $32,500 - 0 -
Vice President, Controller 1994 109,000 - 0 - 25,000
and Chief Accounting 1993 99,917 - 0 - 10,000
Officer
<FN>
(1) Mr. Woodbury left the employ of the Corporation in January 1996.
<PAGE>
<PAGE>14
OPTION GRANTS DURING 1995
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Appreciation for
Individual Grants Option Term
-------------------------------------------------- -----------------
% of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price (2) Expiration
Name (1) Year ($/Share) Date 5% (3) 10% (3)
- ------------------------- ---------- ---------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gideon Argov 50,000 36.8% $ 9.375 12/13/2005 $294,794 $747,067
Robert J. Cobuzzi 25,000 18.4% $ 9.375 12/13/2005 $147,397 $373,533
James A. Eder - 0 - - 0 -_ - 0 - - 0 - - 0 - - 0 -
Robert W. Woodbury, Jr. - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
(1) 10% of the options granted in 1995 are exercisable starting 12 months after the grant
date, an additional 10% of the options are exercisable after 18 months, and an additional
20% of the options are exercisable on the second, third, fourth and fifth anniversary
dates thereafter. All options were granted at the fair market value on the date of grant.
(2) The option exercise price is equal to the fair market value of the underlying shares of
Common Stock on the date of the grant. All of these options were granted on December 14,
1995.
(3) In accordance with SEC rules, these columns show gains that might exist for the respective
options over a period of ten years. If the stock price does not increase above the
exercise price, compensation to the named executives will be zero.
<PAGE>
<PAGE>15
<CAPTION>
Option Values at December 31, 1995 (1)
Number of
Securities Underlying Value of Unexercised
Unexercised Options at "In-the-money" Options at
December 31, 1995 December 31, 1995 (2)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gideon Argov 160,000 90,000 $ 440,000 $ 192,250
Robert J. Cobuzzi 80,000 70,000 $ 222,500 $ 177,500
James A. Eder 60,200 10,000 $ 112,500 $ 26,250
Robert W. Woodbury, Jr. 16,000 19,000 $ 71,250 $ 76,625
<FN>
(1) No stock options were exercised by any named executive officer during 1995.
(2) Based upon the December 29, 1995, fair market value share price of $11.00, 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, 1995, the credited years of service of
Messrs. Argov, Cobuzzi, Eder and Woodbury under the plan are 5, 4, 19, and 3
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:
Years of Service at Retirement in 1996
Final Average
Earnings at
Retirement 15 20 25 30 or more
------------- ------- ------- ------- ----------
$100,000 $24,930 $33,240 $41,550 $49,860
125,000 31,680 42,240 52,800 63,360
150,000 38,430 51,240 64,050 76,860
175,000 38,430 51,240 64,050 76,860
200,000 38,430 51,240 64,050 76,860
250,000 38,430 51,240 64,050 76,860
300,000 38,430 51,240 64,050 76,860
<PAGE>
<PAGE>16
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
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.
<PAGE>
<PAGE>17
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 1996 bonus plan for executive
officers provides cash awards when the Corporation meets its operating plan
in terms of primary earnings per share and revenues. Finally, the LTIP plan
rewards 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
<PAGE>
<PAGE>18
the interests of the shareholders. His annual salaries in 1992, 1993 and
1995 continued at the same level as in 1991. In 1994, Mr. Argov voluntarily
reduced his salary by 5% for a period of three months. Pursuant to the terms
of the Corporation's incentive bonus plan for corporate officers, Mr. Argov
received a bonus of $68,750 in 1996 as a result of the operating performance
of Corporation during 1995.
The Committee has not yet developed a policy with respect to amending
pay policies or asking shareholders to vote on "pay for performance" plans in
order to qualify compensation in excess of $1 million a year which may be
paid to the five highest-paid executives for federal tax deductibility.
Under current compensation plans and deferral elections, no executive
officer's compensation subject to the deductibility limit will exceed $1
million in 1995, even if all performance goals are attained under the
Company's short-term incentive plans. The Compensation Committee intends to
consider the matter again later this year. At that time, the Committee will
balance the interests of the Company in maintaining flexible incentive plans
against the possible loss of a tax deduction should taxable compensation for
any of the five highest-paid executives exceed $1 million in future years.
Members of the Personnel and Compensation Committee:
Robert N. Parker J. Douglas Maxwell, Jr. Eric M. Ruttenberg
Certain Relationships and Related Transactions
Pursuant to a Preferred Stock Purchase Agreement, dated March 27, 1990
(the "Preferred Stock Agreement"), the Corporation issued and sold an
aggregate of 23,187.5 shares of a newly created class of preferred stock,
designated Series D Convertible Preferred Stock ("Preferred Stock"), for
$1,000 per share, or an aggregate purchase price of approximately $23.2
million, to a group of investors including Tinicum Investors, Mr. James H.
Kasschau, Mr. Putnam L. Crafts, Jr., RIT Capital Partners plc, J. Rothschild
Holdings plc and J. Rothschild Capital Management Limited (the "Investors").
Mr. Eric Ruttenberg is the managing partner of Tinicum Investors. Both
Messrs. Ruttenberg and Kasschau are members of the Board of Directors of the
Corporation, and Mr. Ruttenberg is a member of the Personnel and Compensation
Committee.
Among other things, the Preferred Stock Agreement entitled certain of
the Investors to propose two nominees for election to the Board of Directors,
and the Corporation was required to exercise all authority under applicable
law to cause such nominees to be elected to the Board. Messrs. Kasschau and
Ruttenberg were first elected to the Board in 1990 pursuant to these
provisions. Mr. Kasschau is a continuing Class I director. Mr. Ruttenberg
is currently a Class II director, but he is not standing for re-election at
the Annual Meeting.
<PAGE>
<PAGE>19
On February 16, 1996 and February 20, 1996, the Corporation redeemed all
of the then outstanding shares of Preferred Stock at a redemption price of
$1,100 per share in cash, plus all accrued and unpaid dividends, resulting in
an aggregate redemption price of approximately $25.8 million. The terms of
the redemption were prescribed by the Preferred Stock Agreement. As a
result, no shares of Preferred Stock are issued and outstanding as of the
date of this Proxy Statement.
ITEM 2. APPROVAL OF AN AMENDMENT TO THE 1991 KOLLMORGEN CORPORATION
LONG TERM INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE THEREUNDER
BACKGROUND
For the purpose of aiding the Corporation and its subsidiaries in
attracting, retaining and motivating personnel of exceptional ability and
encouraging stock ownership by key employees, the Corporation has had some
form of stock option plan since 1960.
The 1991 Kollmorgen Corporation Long Term Incentive Plan (the "Plan")
was approved by the shareholders of the Corporation at the Annual Meeting
held on May 23, 1991. The Plan provides for the granting of several
different types of "Awards" of shares of the Corporation's Common Stock,
including incentive and non-qualified stock options, restricted shares, stock
appreciation rights and phantom shares. To date, the only types of Awards
that have been granted under the Plan have been "incentive stock options," as
defined in Section 422(A)(b) of the Internal Revenue Code, and options that
do not so qualify (i.e., non-qualified stock options). Under the current
provisions of the Plan, the number of Awards available for grant that are
payable in Common Stock is based upon the total number of issued shares of
the Corporation's Common Stock as of December 31 of each year. Under this
formula, the total number of shares which may be issued under this Plan is
859,291, as of December 31, 1995.
As of March 5, 1996, an aggregate of 68,050 shares of Common Stock had
already been issued pursuant to the exercise of stock options that were
previously granted under the Plan and an additional 788,750 shares of Common
Stock were reserved for issuance pursuant to the exercise of outstanding
stock options. Thus, only 2,491 shares are presently available for the grant
of future Awards under the Plan.
AMENDMENT INCREASING THE NUMBER OF SHARES RESERVED UNDER THE PLAN.
The Committee has concluded that additional shares should be available
for the grant of future Awards to meet the needs of the Corporation to
attract and retain key employees. Consequently, it recommended to the Board
of Directors, and at its regular meeting on March 5, 1996 the Board
unanimously adopted, an amendment to the Plan increasing the number of shares
<PAGE>
<PAGE>20
of Common Stock which may be issued under the Plan from 859,291 to 1,159,291
shares, inclusive of 68,050 shares previously issued pursuant to the Plan and
788,750 shares reserved for issuance pursuant to outstanding awards. The
amendment would increase the existing reserve by 300,000 shares. The Board's
action was taken subject to the approval of shareholders at this Annual
Meeting.
If adopted, the proposed amendment would completely amend and restate
Section 3 of the Plan to read as set forth in Exhibit A attached to this
Proxy Statement. Shareholders are urged to read the complete text of the
proposed amendment set forth in Exhibit A. If the proposed amendment is not
adopted, the Plan will be retained in its current form.
The Board of Directors believes strongly that the proposed amendment to
the Plan will increase the value of the Plan to the Corporation by enabling
the Corporation to retain the services of its existing management team and
assisting the Corporation in the recruitment of new personnel of outstanding
ability.
In order to be adopted, the proposed amendment to the Plan requires the
affirmative vote of a majority of the shares of Common Stock represented and
entitled to vote at the Annual Meeting. The Board of Directors
recommends that shareholders vote "FOR" the proposed increase in
the number of shares reserved for issuance under the 1991
Kollmorgen Corporation Long Term Incentive Plan.
A summary of the principal features of the Plan, as proposed to be
amended, follows in the succeeding paragraphs.
AVAILABLE SHARES
Under the Plan, the number of Awards available for grant that are
payable in Common Stock is limited to 1,159,291. The closing price of a
share of Common Stock on the New York Stock Exchange was $11.50 on March 26,
1996.
STOCK OPTION AND STOCK APPRECIATION RIGHTS
The Plan permits the granting of stock options ("Options") and stock
appreciation rights ("Stock Appreciation Rights") in tandem with the grant of
Options ("Tandem Stock Appreciation Rights") and Stock Appreciation Rights
that are not granted in tandem with Options ("Free-Standing Stock
Appreciation Rights"). Options granted under the Plan will be designated at
the time of grant as either incentive stock options ("ISOs") or Options which
do not qualify as ISOs ("NQOs"). Tandem Stock Appreciation Rights generally
may be granted with the related Option or after the grant of such Option.
However, Tandem Stock Appreciation Rights that are related to ISOs must be
granted at the same time as such ISOs.
At the time of grant of an Option or Stock Appreciation Right, the
Committee will determine when such Award will vest and become exercisable and
when such Award will expire. However, the expiration date may be no later
than ten years from the date of grant.
<PAGE>
<PAGE>21
When an Option is granted, the Committee will designate a purchase price
with respect to shares purchased when the Option is exercised (the "Option
Price"). However, the Option Price with respect to an ISO may be no less
than 100% of the fair market value of the shares covered by the ISO on the
date that the ISO is granted. The Option Price will also serve as the base
value to be used in calculating the value upon exercise of any Tandem Stock
Appreciation Right issued in connection with such Option. Similarly, when a
Free-Standing Stock Appreciation Right is granted, the Committee will
designate an initial value (the "Initial Value") to be used in calculating
the value upon exercise of any Free-Standing Stock Appreciation Right.
The participant may pay the Option Price in cash, shares of Common
Stock, other property or a combination thereof, in the discretion of the
Committee.
A Stock Appreciation Right will entitle the participant to receive cash
from the Corporation in an amount equal to the total number of shares covered
by the Stock Appreciation Right multiplied by the amount by which the fair
market value of a share of Common Stock on the exercise date exceeds, in the
case of a Tandem Stock Appreciation Right, the Option Price or, in the case
of a Free-Standing Stock Appreciation Right, the Initial Value.
Alternatively, the Committee may elect to pay the participant in Common
Stock having a fair market value equal to the cash amount determined above,
or in a combination of Common Stock and cash.
The grant of an Option or Stock Appreciation Right generally will not
have any tax consequences for the participant or the Corporation under
present federal tax laws. In general, upon the exercise of an NQO, the
participant will realize ordinary taxable income measured by the difference
between the Option Price and the fair market value of the stock received at
the time of exercise, and the Corporation will be entitled to a tax deduction
in the same amount.
The participant does not incur any taxable income at the time of
exercise of an ISO. If the participant holds the shares acquired upon
exercise of the ISO for more than one year after exercise and two years after
grant, the difference between the Option Price and the amount realized upon
disposition of the shares is treated as long-term capital gain or loss by the
participant and the Corporation is not allowed a tax deduction. The excess
of the fair market value of the shares received at the time of exercise of an
ISO over the Option Price will constitute an "item of tax preference" which
may result in the imposition on the participant of the "alternative minimum
tax" under the Code.
Generally, upon the exercise of a Stock Appreciation Right, the
participant will realize ordinary taxable income measured by the fair market
value of the stock, or the amount of cash, received at the time of exercise,
and the Corporation will be entitled to a tax deduction in the same amount.
The availability of Stock Appreciation Rights will require a charge or
credit to income each year with respect to the rights which have been
<PAGE>
<PAGE>22
granted, based upon the amount, if any, by which the fair market value of the
Common Stock has increased or decreased that year compared with the Option
Price or Initial Value.
RESTRICTED SHARES
The Plan permits the Committee to grant or offer for sale, at a price
designated by the Committee, restricted shares of Common Stock ("Restricted
Shares"). Payment of the purchase price, if applicable, may be made in cash,
shares of Common Stock, other property or a combination thereof, in the
discretion of the Committee. At the time of grant or sale, the Committee
will designate when the Restricted Shares will vest and become unforfeitable.
Upon the grant or sale of Restricted Shares, a certificate evidencing the
appropriate number of shares of Common Stock will be issued in the
participant's name. The Corporation will hold such shares on behalf of the
participant until they vest. Once such shares have vested, the Corporation
will deliver the certificate to the participant.
The participant will be entitled to all rights of a shareholder with
respect to such shares, including voting rights, except that the participant
may not transfer or alienate such shares until they vest. Once such shares
have vested, the participant may transfer them.
PHANTOM SHARES
The Plan permits the Committee to grant phantom shares ("Phantom
Shares"). At the time of grant, the Committee will designate an Initial
Value with respect to each Phantom Share. Each Phantom Share will entitle
the participant to receive, on such date as the Committee may determine, an
amount equal to the fair market value of a share of Common Stock as of such
payment date (or such other measurement of value as may have been established
by the Committee), less the Initial Value of such Phantom Share. However,
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. Payment by the Corporation with
respect to Phantom Shares may be made in cash, Common Stock or a combination
thereof, in the Committee's discretion.
GENERAL
The Committee will have full authority to administer the Plan, interpret
its provisions and perform such other functions as are assigned to it under
the Plan. No person, while a member of the Committee, will be eligible to
receive an Award.
Each Award will be evidenced by an agreement between the participant and
the Corporation. Such agreement will set forth the Option Price or Initial
Value of the Award, if applicable, the vesting schedule of the Award, the
treatment of the Award in the event of the termination of the participant's
employment, provisions for the forfeiture of the Award, such other
provisions, not inconsistent with the Plan, as the Committee may determine,
and, in the case of officers and directors, such other restrictions as the
<PAGE>
<PAGE>23
Committee deems advisable in order to preserve the exemptive relief afforded
by Rule 16b-3 of the Securities Exchange Act of 1934, as amended. It is also
anticipated that the agreements may provide for the accelerated vesting or
payment of Awards in the event of extraordinary corporate events, including a
substantial change in the ownership or control of the Corporation.
In the event of a merger, reorganization, stock split, stock dividend or
any other event affecting the Corporation's Common Stock, the Committee may
make such adjustments as it deems equitable to preserve for participants the
benefits of Awards, including, but not limited to, adjusting the total number
of shares available for Awards and the number of shares covered by
outstanding Awards.
The Plan will terminate on the tenth anniversary of its adoption, except
that Options and Stock Appreciation Rights then outstanding may continue to
be exercised, Restricted Shares then outstanding will continue to vest, and
Phantom Shares then outstanding will continue to be paid on the designated
date.
The Plan provides that the Board of Directors, at any time, may
terminate, amend or modify the Plan in any respect, except that the Board may
not take certain actions specified in the Plan without shareholder approval
and no amendment may adversely affect the rights of a participant in an
already granted Award without such participant's consent.
ITEM 3. APPROVAL OF AMENDMENTS TO THE 1992 STOCK OWNERSHIP PLAN
FOR NON-EMPLOYEE DIRECTORS
BACKGROUND
In 1992, the shareholders of the Corporation adopted the 1992 Stock
Ownership Plan for Non-Employee Directors (the "Director Stock Ownership
Plan"). Under the current provisions of the Director Stock Ownership Plan,
stock options to purchase 2,000 shares of the Corporation's Common Stock are
granted to non-employee directors every two years and at least 50% of the
yearly retainer (currently $12,000) payable to each such director is paid in
shares of Common Stock in lieu of cash on a quarterly basis. The purpose of
the Director Stock Ownership Plan is to encourage and enable non-employee
directors of the Corporation to acquire a meaningful proprietary interest in
the ownership of the Common Stock in order to establish a closer
identification with the interests of shareholders.
An aggregate of 150,000 shares of Common Stock were originally reserved
for issuance under the Director Stock Ownership Plan. As of March 5, 1996,
20,877 shares have been issued in lieu of retainer fees and 26,000 shares
were reserved for future issuance pursuant to the exercise of outstanding
options. Thus, an aggregate of 103,123 shares of Common Stock are presently
available for future grants under the Director Stock Ownership Plan.
Including the nominees for election at this Annual Meeting, there will be
seven non-employee directors of the Corporation participating in the Director
Stock Ownership Plan.
<PAGE>
<PAGE>24
AMENDMENTS TO PLAN
At a regular meeting of the Board of Directors held on March 5, 1996,
the Board of Directors unanimously approved and, subject to the approval of
shareholders at the Annual Meeting, adopted certain amendments to the Plan
which would, among other things, (a) provide for (i) a one-time grant to each
non-employee director of the Corporation of a non-qualified stock option to
purchase 15,000 shares of Common Stock and (ii) an additional one-time grant
to each such non-employee director of a non-qualified stock option to
purchase a number of shares of Common Stock (not to exceed 10,000) equal to
the number of shares each such director purchases on the open market during a
ninety (90) day period commencing as of the first trading day following the
date of grant of the initial stock option, (b) delete the provisions
providing for the automatic grant every two years of a non-qualified stock
option covering 2,000 shares of Common Stock, (c) provide that upon
termination of a non-employee director's services, the option will be
exercisable for a period equal to the greater of (i) one month for each year
of service up to twelve months, or (ii) ninety days, and (d) increase the
number of shares reserved for issuance under the Plan by 175,000 from 150,000
to 325,000. The closing price of a share of Common Stock on the New York
Stock Exchange was $11.50 on March 26, 1996.
The complete text of the proposed amendments are set forth in Exhibit B
attached to this Proxy Statement. Shareholders are urged to read the
complete text of the proposed amendments set forth in Exhibit B. If the
proposed amendments are not adopted, the Director Stock Ownership Plan will
be retained in its current form.
The Board of Directors believes strongly that the proposed amendments to
the Director Stock Ownership Plan will increase the value of the Plan to the
Corporation by providing an more effective means by which non-employee
directors of the Corporation may acquire a meaningful proprietary interest in
the ownership of the Common Stock of the Corporation. As noted above, the
Board believes that this will help to establish a closer identification with
the interests of shareholders.
In order to be adopted, the proposed amendments to the Director Stock
Purchase Plan requires the affirmative vote of a majority of the shares of
Common Stock represented and entitled to vote at the Annual Meeting. The
Board of Directors recommends a vote "FOR" the approval of the
proposed amendments to the 1992 Stock Ownership Plan for Non-
Employee Directors.
A summary of the principal features of the Director Stock Ownership
Plan, as proposed to be amended, follows in the succeeding paragraphs.
PURPOSE
The purpose of the Director Stock Ownership Plan is to assist the
Corporation in attracting and retaining as members of the Board of Directors
qualified persons who are not employees of the Corporation and to increase
their proprietary interest in the Corporation through additional ownership in
the Corporation's Common Stock.
<PAGE>
<PAGE>25
AVAILABLE SHARES
The aggregate number of shares of Common Stock reserved for the plan is
325,000, inclusive of 20,877 shares previously issued in lieu of retainer
fees and 26,000 shares currently reserved for issuance pursuant to
outstanding stock options. Such shares may be authorized and unissued shares
or shares that have been reacquired by the Corporation, as the Board may
determine.
GRANT OF OPTIONS
Each non-employee director of the Corporation will be awarded a non-
qualified stock option to purchase 15,000 shares of Common Stock immediately
upon the adjournment of this Annual Meeting. Thereafter, each person who is
who is first elected a non-employee director after this Annual Meeting will
automatically be granted a non-qualified stock option to purchase 15,000
shares of Common Stock. Each non-employee director who receives such a stock
option will be entitled to receive an additional non-qualified stock option
equal to the number of shares (up to 10,000) the director purchases on the
open market during a ninety (90) day period commencing as of the first
trading day following the date of the initial grant. The terms of each
option shall be contained in an agreement not inconsistent with the Director
Stock Ownership Plan.
ADMINISTRATION
The Director Stock Ownership Plan is designed to operate automatically
and not require administration since stock option grants are determined on a
non-discretionary basis according to a fixed formula. However, to the extent
administration is necessary, the Director Stock Ownership Plan will be
administered by the Personnel and Compensation Committee (the "Committee") of
the Board of Directors. The Director Stock Ownership Plan will permit non-
employee directors to be "disinterested" as defined in the regulations of the
Securities and Exchange Commission under Section 16 of the Securities
Exchange Act of 1934, as amended, thus allowing these directors to administer
the Director Stock Ownership Plan in compliance with the exemptions from the
short-swing liability provisions contained in Section 16.
TERMS AND CONDITIONS OF OPTIONS
Each stock option granted pursuant to the Director Stock Ownership Plan
shall become exercisable for one-half of the optioned shares on each
successive year from the date of grant. No option is exercisable after the
expiration of ten years from the date of grant. The exercise price of the
Common Stock under each option shall be the fair market value of the Common
Stock on the date of grant. Fair market value is defined to mean the closing
price of the Common Stock on the New York Stock Exchange, Composite Tape, on
the date of grant, or, if no sale of Common Stock has been made on such date,
on the next preceding date on which there is a sale of Common Stock.
Payment for the exercise price may be made in cash, shares of Common
Stock, or a combination thereof.
<PAGE>
<PAGE>26
In the event of termination of a non-employee director's service other
than for Cause (as defined in the Director Stock Ownership Plan) or a
voluntary resignation without the consent of the Board (in which events the
option terminates immediately) the option may be exercised for a period equal
to the greater of (i) one month for each year of service as a non-employee
director up to twelve months, or (ii) 90 days after the date of termination
of service, or for up to one year by his estate in the case of a death of a
non-employee director.
DIRECTORS' FEE SHARES
Under the Director Stock Ownership Plan, each non-employee director has
elected to take 50% of his quarterly retainer (currently $3,000) in shares of
Common Stock ("Directors' Fee Shares"), based upon the fair market value at
the end of each calendar quarter. Non-employee directors may, upon six (6)
months and one (1) day notice, increase their percentage of Directors' Fee
Shares up to 100% of their quarterly retainer fee. Certificates for shares
of Common Stock purchased under this provision of the Director Stock
Ownership Plan shall be delivered to each non-employee director six months
after each calendar quarter; provided, however, the non-employee director
shall have the right to receive dividends and to vote such shares immediately
upon issuance.
GENERAL PROVISIONS
In the event of any consolidation, recapitalization, reconfirmation,
stock dividend, distribution of property, special dividend or other change in
corporate structure, adjustments may be made by the Committee in order to
preserve to the holders of options substantially equivalent rights. In the
event of a Corporate Termination (as defined in the Director Stock Ownership
Plan), each optionee shall receive from the Corporation an amount in cash, in
a lump sum, for each share of Common Stock subject to option (whether vested
or not vested) equal to the difference between the exercise price of the
option and the fair market value of a share of Common Stock prior to the
Corporate Termination.
The Board may at any time alter, amend, suspend or terminate the
Director Stock Ownership Plan, 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 Director Stock Ownership Plan
under Rule 16b-3 under the Securities Exchange Act of 1934 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
Director Stock Ownership 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.
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TAX CONSEQUENCES
In general, the grant of an option to purchase shares of Common Stock to
a non-employee director will not have any tax consequences to either the non-
employee director or the Corporation. Upon exercise of the option, the non-
employee director will be required to report, on his federal income tax
return for the year in which the exercise occurs, additional compensation
income equal to the difference between the fair market value of the stock at
the time of exercise and the exercise price at which the stock was acquired.
At the same time, the Corporation will generally be entitled to a tax
deduction equal to the amount included in income by the non-employee
director.
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative total
shareholder return, assuming reinvestment of dividends, on $100 invested on
December 31, 1990, in each of Kollmorgen Corporation Common Stock, Standard &
Poors 500 Stock Index, and the Standard & Poors Electrical Equipment Index.
[INSERT GRAPH]
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.
12/31/90 $100.00 $100.00 $100.00
FYE 12/31/91 $ 75.00 $130.00 $133.00
FYE 12/31/92 $ 81.00 $140.00 $145.00
FYE 12/31/93 $103.00 $155.00 $175.00
FYE 12/31/94 $ 79.00 $157.00 $177.00
FYE 12/31/95 $154.00 $215.00 $249.00
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.
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<PAGE>28
PROPOSALS FOR THE 1997 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 1997 Annual Meeting must be received at the Office of the Secretary,
Kollmorgen Corporation, Reservoir Place, 1601 Trapelo Road, Waltham, MA
02154, no later than December 1, 1996.
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.
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<PAGE>29
EXHIBIT A
PROPOSED AMENDMENT TO THE
1991 KOLLMORGEN CORPORATION LONG TERM INCENTIVE PLAN
Section 3 of the 1991 Kollmorgen Corporation Long Term Incentive Plan is
proposed to be amended and restated in its entirety, as follows:
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.
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<PAGE>30
EXHIBIT B
PROPOSED AMENDMENTS TO THE
1992 STOCK OWNERSHIP PLAN FOR NON-EMPLOYEE DIRECTORS
1. Section 1(b) of Article II of the 1992 Stock Ownership Plan for
Non-Employee Directors is proposed to be amended and restated in its
entirety, as follows:
(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. Section 1 of Article III of the 1992 Stock Ownership Plan for Non-
Employee Directors is proposed to be amended and restated in its entirety, as
follows:
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.
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<PAGE>31
(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.
3. Section 3 of Article III of the 1992 Stock Ownership Plan for Non-
Employee Directors is proposed to be amended and restated in its entirety, as
follows:
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.
<PAGE>
<PAGE>32
KOLLMORGEN CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
Kollmorgen Corporation for the Annual Meeting, May 8, 1996
The undersigned hereby constitutes appoints GIDEON ARGOV, GEORGE P.
STEPHAN, JAMES A. EDER, and each or any of them, with full power to act with
or without the others and with full power of substitution, his or her true
and lawful agents and proxies to represent the undersigned at the Annual
Meeting of Shareholders of Kollmorgen Corporation to be held at The First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts, at 10:00
a.m. on Wednesday, May 8, 1996, and at any adjournments or postponements
thereof, and authorizes said Proxies to vote all shares of the Corporation
shown on the other side of this card with all the powers the undersigned
would possess if personally present thereat.
You are encouraged to specify your choice by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
<PAGE>33
Please mark votes
/ X / as in this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
AND AUTHORIZES THE PROXIES TO TAKE ACTION IN THEIR DISCRETION UPON OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSALS
2 AND 3.
1. ELECTION OF FOUR DIRECTORS.
Class II Nominees are Gideon Argov, Robert J. Cobuzzi, Geoffrey S.
Rehnert and George P. Stephan.
FOR ALL WITHHELD
NOMINEES* /__/ FROM ALL /__/
NOMINEES
/__/ ________________________________________________________________
(* INSTRUCTION: To withhold authority to vote for any nominee, write
such nominee's name(s) above.)
2. PROPOSED AMENDMENT TO THE 1991 KOLLMORGEN CORPORATION LONG TERM
INCENTIVE PLAN.
FOR /___/ AGAINST /___/ ABSTAIN /___/
3. PROPOSED AMENDMENTS TO THE 1992 STOCK OWNERSHIP PLAN FOR NON-EMPLOYEE
DIRECTORS.
FOR /___/ AGAINST /___/ ABSTAIN /___/
4. In their discretion, upon the transaction of other business as may
properly come before the meeting.
/__/ MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT.
/__/ MARK HERE IF YOU PLAN
TO ATTEND THE MEETING.
Please sign exactly as your name appears 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.
Signature: ..................................... Date ...................
Signature: ..................................... Date ...................
