<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, 1997
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, 1997
Common Stock, $2.50 par value 9,957,831 shares
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KOLLMORGEN CORPORATION
INDEX
Page No.
PART I - Financial Information
Consolidated Statements of Operations for 3-4
the Three Months and Six Months Ended
June 30, 1997 and 1996 (unaudited)
Consolidated Balance Sheets as of 5
June 30, 1997 (unaudited) and
December 31, 1996
Consolidated Statements of Cash Flows for 6-7
the Six Months Ended June 30, 1997
and 1996 (unaudited)
Notes to unaudited Consolidated Financial Statements 8-10
Management's Discussion and Analysis of Financial 11-14
Condition and Results of Operations
PART II - Other Information 14
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<TABLE>
PART I - FINANCIAL INFORMATION
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1997 1996 1997 1996
------------------ --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 55,757 $ 59,788 $106,344 $116,828
Cost of sales 38,414 39,630 73,720 77,444
------------------ --------- ---------
Gross profit 17,343 20,158 32,624 39,384
------------------ --------- ---------
Selling and marketing expenses 5,293 6,726 10,021 14,025
General and administrative expenses 5,801 6,743 11,567 12,548
Research and development expenses 2,307 3,051 4,286 6,354
Acquired research and development 11,391 - 11,391 -
------------------ --------- ---------
Income (loss) from operations (7,449) 3,638 (4,641) 6,457
------------------ --------- ---------
Interest expense (1,776) (1,486) (3,059) (2,803)
Interest income 31 102 228 291
Other income (expense) 224 (283) 244 (326)
------------------ --------- ---------
Income (loss) before income taxes,
equity in earnings of joint venture,
minority interest, and gain on sale
of investment in joint venture (8,970) 1,971 (7,228) 3,619
Provision for income taxes 700 - 1,178 -
------------------ --------- ---------
Income (loss) before equity in earnings
of joint venture, minority interest,
and gain on sale of investment in
joint venture (9,670) 1,971 (8,406) 3,619
Minority interest 48 258 124 258
Joint venture:
Equity in earnings 760 - 1,430 -
Gain on sale of investment,
net of income taxes 24,321 - 24,321 -
------------------ --------- ---------
Net income $ 15,459 $ 2,229 $ 17,469 $ 3,877
================== ========= =========
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Earnings per common share:
Primary $ 1.52 $ 0.22 $ 1,71 $ 0.36
================== ========= =========
Fully diluted $ 1.50 $ 0.22 $ 1.70 $ 0.35
================== ========= =========
Number of shares used in calculating
earnings per common share:
Primary 10,190 10,092 10,193 10,042
================== ========= =========
Fully diluted 10,311 10,063 10,309 10,162
================== ========= =========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<CAPTION>
ASSETS
June 30,
1997 December 31,
(unaudited) 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 26,101 $ 13,445
Accounts receivable (net of reserve of
$768 in 1997 and $772 in 1996) 40,867 43,189
Recoverable amounts on long-term contracts 5,433 4,973
Inventories 25,550 22,450
Prepaid expenses and other current assets 1,399 1,645
--------- ---------
Total current assets 99,350 85,702
--------- ---------
Property, plant and equipment, net 25,707 25,147
Goodwill and other intangible assets 14,773 4,502
Investment in joint venture 4,260 12,720
Other assets 10,393 13,259
--------- ---------
$ 154,483 $ 141,330
========= =========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 9,136 $ 5,545
Current portion of long-term debt 4,071 6,942
Accounts payable 20,366 21,765
Accrued liabilities 45,416 26,756
--------- ---------
Total current liabilities 78,989 61,008
--------- ---------
Long-term debt 31,652 53,054
Other liabilities 5,400 5,202
Minority interest 162 287
Common shareholders' equity:
Common stock 26,917 26,914
Additional paid-in capital 12,664 13,166
Retained earnings (accumulated deficit) 7,412 (10,054)
Cumulative translation adjustments (308) 791
Less common stock in treasury, at cost (8,405) (9,038)
--------- ---------
Total common shareholders' equity 38,280 21,779
--------- ---------
$ 154,483 $ 141,330
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
For the
Six Months Ended
June 30,
------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income from operations $ 17,469 $ 3,877
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,247 3,103
Amortization 568 509
Acquired R&D 11,391 -
Gain on sale of investment in joint venture (24,321) -
Equity in income of joint venture (1,430) -
Minority interest (124) (258)
Other non-cash expenses 51 40
Changes in assets and liabilities:
Accounts and notes receivable 4,114 521
Recoverable amounts on long-term contracts (460) 918
Inventories (1,049) (2,947)
Prepaid expenses 235 (42)
Accounts payable and accrued liabilities (3,915) (4,145)
Deferred income taxes and other expenses 401 (282)
Other 9 (111)
--------- ---------
Net cash provided by operations 5,186 1,183
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,781) (2,131)
Proceeds from sale of assets - 2,374
Proceeds from sale of investment in joint venture 36,977 -
Acquisitions of Servotronix and Seidel (6,557) -
Cash of subsidiaries acquired 626 97
Equity investments (75) (1,404)
Long-term notes receivable (net of repayments) 262 396
--------- ---------
Net cash provided by (used in) investing activities 28,452 (668)
--------- ---------
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<PAGE>7
Cash flows from financing activities:
Net borrowings under credit lines 3,373 876
Principal repayment on other notes - (416)
Common stock issued from treasury 508 258
Redemption of preferred stock - (25,506)
Principal payments on capital lease obligations (39) (56)
Net borrowings (repayments) of long-term debt (24,507) 22,507
Dividends paid on common and preferred stock (391)(679)
--------- ---------
Net cash used in financing activities (21,056) (3,016)
--------- ---------
Effect of exchange rate changes on cash 74 (193)
--------- ---------
Net increase (decrease) in cash and equivalents 12,656 (2,694)
Cash and cash equivalents at beginning of period 13,445 17,789
--------- ---------
Cash and cash equivalents at end of period $ 26,101 $ 15,095
========= =========
Supplemental cash flow information
Cash paid during the period for:
Interest $ 2,398 $ 2,241
Income taxes (net of refunds) 362 177
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>8
KOLLMORGEN CORPORATION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
June 30, 1997
1. The accompanying unaudited consolidated financial statements include
the accounts of Kollmorgen Corporation (the "Company") and all of its
majority owned subsidiaries.
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, 1997, the results of operations for the three-month and six-
month periods ended June 30, 1997 and 1996 and the cash flows for the
six-month periods ended June 30, 1997 and 1996. 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, 1996.
3. Effective December 31, 1996, the Company combined its Macbeth
division with the Color Control Systems business of Gretag AG and
received 48% of the shares in the Swiss holding company which
controls the two businesses (the Joint Venture ). Accordingly, at
December 31, 1996, and June 30, 1997, the Macbeth division is not
consolidated in the accompanying financial statements, but instead
the Company is accounting for its interest in the Joint Venture using
the equity method.
Effective June 17, 1997, the Company agreed, pursuant to a firm
underwriting agreement, to sell approximately 88% of its interest in
the Joint Venture as part of an initial public offering on the Swiss
stock exchange. On June 25, 1997 the Company sold approximately 88%
of its interest in the Joint Venture, receiving approximately $38
million. The remaining shares may be called by the underwriter at
the intial offering price plus a 15% premium on or before August 25,
1997 or the Company may require the underwriter to purchase the
shares at the initial offering price. The remaining shares held by
the Company in the Joint Venture are stated at market value of the
initial offering price (net of underwriting fees). The accompanying
financial statements reflect a gain of approximately $24 million on
the sale of its shares in the Joint Venture and the mark up of the
shares held by the Company at June 30, 1997 to market value. The
gain is net of $2 million in income taxes and utilization of net
operating loss and other tax credit carryforwards.
Refer to Note 2 of the 1996 financial statements contained in the
Company s Annual Report on Form 10-K for the year ended December 31,
1996 for additional information.
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<PAGE>9
4. Inventories (in thousands) consist of the following:
June 30, December 31,
1997 1996
--------- ---------
Raw materials $ 13,424 $ 11,816
Work in process 7,957 8,118
Finished goods 4,169 2,516
--------- ---------
$ 25,550 $ 22,450
========= =========
5. The Financial Accounting Standards Board issued Statement No. 128
( SFAS 128 ), Earnings per Share, which requires the presentation
of basic and diluted earnings per share (EPS). Basic EPS excludes
the dilutive effect of common equivalent securities and is computed
by dividing income available to common shareholders by the weighted-
average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Basic EPS replaces
primary EPS. Diluted EPS is computed similarly to fully diluted EPS
under the existing rules found in APB Opinion No. 15, Earnings per
Share. The Company will adopt SFAS 128 as of December 31, 1997, and
upon adoption, will restate all prior period EPS data presented.
Basic EPS calculted under the provisions of SFAS 128 would have been
as follows:
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
------ ------ ------ ------
Earnings per common share:
Basic $ 1.58 $ 0.23 $ 1.79 $ 0.37
6. Effective April 2, 1997, the Company purchased additional shares of
Servotronix Ltd. ("Servotronix") for cash of $6.4 million to increase
its ownership of Servotronix from 25% to 81%, and has agreed to
purchase the balance of the shares through the issuance of 257,522
shares of the Company s common stock. Accordingly, the Company has
accounted for the purchase of Servotronix as if 100% of the shares
were purchased on April 2, 1997, and with the shares not yet
purchased being shown as a liability of the Company.
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<PAGE>10
7. Effective June 10, 1997, the Company entered into a binding agreement
to purchase all of the shares of Fritz A. Seidel Elektro-Automatik
GmbH ( Seidel ). Accordingly, the Company has consolidated the
balance sheet of Seidel as of June 30, 1997. The Company funded the
purchase in August, 1997, and accordingly the purchase price,
including fees and transaction costs of $1.8 million, was accrued as
a liability of the Company on the accompanying balance sheet.
8. In connection with the acquisitions of Servotronix and Seidel, the
Company has allocated the purchase price to the assets acquired, both
tangible and intangible, and any excess of the purchase price over
the assets acquired has been classified as goodwill. A portion of
the purchase price has been allocated to in-process research and
development for products which are not yet feasible. The value of
the in-process research and development of $10.5 million has been
expensed as Acquired research and development in the accompanying
financial statements. Also included in acquired research and
development is a charge of approximately $0.9 million for technology
acquired unrelated to the Servotronix and Seidel acquisitions.
<PAGE>
<PAGE>11
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
In the first quarter of 1996 the Company sold a significant portion
of its instrumentation business located in France. Effective December 31,
1996 the Company combined its Macbeth division with the Color Control
Systems business of Gretag AG and received 48% of the shares in the Swiss
holding company which controls the two businesses (the Joint Venture ).
Accordingly, for the period ended June 30, 1997, the Company accounted for
its interest in the Joint Venture using the equity method. On June 25,
1997, the Company sold approximately 88% of its interest in the Joint
Venture as part of the Joint Venture s initial public offering on the
Swiss Stock Exchange. For comparative purposes, both the French
instrumentation business and the Joint Venture will be referred to as the
Businesses Divested . The Businesses Divested represented a significant
portion of the Company s Electro-Optical Instruments segment which had
been discussed separately from the Company s motion technology segment in
the prior year. Since meaningful comparative information cannot be
presented for the Electro-Optical Instruments segment, the Company has
discontinued segment discussion.
Revenues declined $4.0 million for the three months ended June 30,
1997 as compared to the same period a year ago. Excluding the Businesses
Divested, second quarter revenues increased $4.1 million or 8.0% as
compared to the second quarter of 1996. Revenues declined $10.5 million
for the first six months of 1997 as compared to the same period a year
ago. Excluding the Businesses Divested, revenues increased $5.8 million
or 5.8% as compared to the first six months of 1996. The increase
reflects the Company s high volume business, which manufactures fractional
horsepower motors, which had a significant increase in its first half
revenues as compared to 1996 as a result of increased production under
volume commitments from its customers. Additionally, the Company s
engineering consulting business, Proto-Power, has seen strong demand for
its compliance services to the utility industry. These increases more
than offset a decline in revenues at the Company s aerospace and defense
businesses which was principally a result of a weakening in the value of
the dollar to the French franc, and a decrease in revenues recognized on
long term military contracts.
Gross margin as a percent of sales declined in the second quarter of
1997 as compared to the same period in 1996 from 33.7% to 31.1%.
Excluding the Businesses Divested, gross margin was approximately 31.1%
for the second quarter of each year. For the six months ended, gross
margin as a percent of sales declined in 1997 compared to 1996 from 33.7%
to 30.7%. Excluding the Businesses Divested, gross margin declined
slightly from 31.1% to 30.7%.
Sales and marketing expenses declined $1.4 million in the second
quarter of 1997 as compared to the second quarter of 1996. As a
percentage of sales, sales and marketing expenses declined from 11.2% to
9.5% as a result of the Businesses Divested. When the Businesses Divested
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<PAGE>12
are excluded, the result is an increase of $0.6 million and an increase as
a percentage of sales from 9.1% in the second quarter of 1996 to 9.5% in
the second quarter of 1997. Sales and marketing expenses declined $4.0
million in the six months of 1997 as compared to the same period in the
prior year. As a percentage of sales, sales and marketing expenses for
this period declined from 12.0% to 9.4% as a result of the Businesses
Divested. When the Businesses Divested are excluded, the result is an
increase of $0.3 million and a decline as a percentage of sales from 9.7%
for the first six months of 1996 to 9.4% for the first six months of 1997.
This decline reflects decreased expenses due to the reorganization at the
Company's domestic commercial motion technology sales channels.
General and administrative expenses declined $0.9 million in the
second quarter of 1997 as compared to the second quarter of 1996. As a
percentage of sales, general and administrative expenses declined from
11.3% in 1996 to 10.4% in 1997. Excluding the Businesses Divested,
general and administrative expenses as a percentage of sales for the
second quarter decreased from 12.1% in 1996 to 10.4% in 1997. For the six
months ended June 30, 1997, general and administrative expenses declined
by $1.0 million compared to the prior year. When the Businesses Divested
are excluded, general and administrative expense increased $0.3 million,
or 3%, but declined as a percentage of sales for the first six months of
1996 from 11.2% to 10.9% for the same period in 1997.
Research and development expenses declined in the second quarter by
$0.7 million. Excluding the Businesses Divested, research and development
expense remained unchanged for the second quarter, but decreased as a
percentage of sales from 4.5% in 1996 to 4.2% in 1997. For the six months
ended June 30, 1997, research and development expense decreased $2.1
million compared to 1996. Excluding the Businesses Divested for the six
months, research and development expense declined slightly, and declined
as a percentage of sales from 4.5% in 1996 to 4.0% in 1997.
As described in Note 8 to the Financial Statements, the Company
incurred a charge of $11.4 million in connection with acquired research
and development, principally relating to the two acquisitions completed in
the second quarter.
As a result of the charge for acquired research and development, the
Company reported a loss from operations of $7.4 million and $4.6 million
for the three and six month periods ended June 30, 1997, respectively.
This compares with income from operations of $3.6 million and $6.5 million
for the three and six month periods ended June 30, 1996, respectively.
Excluding the impact of the charge for acquired research and development,
income from operations increased 8.4% to $3.9 million for the quarter and
4.5% to $6.8 million for the first half as compared with the same periods
of 1996.
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<PAGE>13
Interest expense increased 19.5% and 9.1% for the three and six month
periods ended June 30, 1997, as compared to the same periods in 1996 due
to the increase in the overall debt level of the Company. On June 30,
1997, the Company repaid the remaining balance of approximately $21.1
million of its term loan used to finance the redemption of the Company s
preferred stock in February 1996. Accordingly, the Company expects
interest expense will be lower for the balance of the year compared to
both the comparable periods in 1996 and the first half of 1997.
In 1996 the Company had a zero tax rate which reflected the
utilization of net operating loss carryforwards and other tax credits.
Primarily as a result of the divestiture of the Macbeth division, the
Company s tax credit carryforwards have been utilized. Therefore, the
Company has used a blended tax rate on its worldwide income of
approximately 28% for 1997. This tax rate was applied to the Company s
income before the impact of the charge for acquired research and
development as this charge is not deductible for tax purposes.
Additionally, the rate does not include the gain on the sale of its
interest in the Joint Venture which is shown net of taxes.
The Company s 48% share of the after-tax profits of the Joint Venture
was $0.8 million for the first quarter of 1997, and $1.4 million for the
first half of 1997. The results of the Company s Macbeth division were
consolidated in the Company s results in 1996.
Bookings increased $4.5 million or 4.3% during the first half of 1997
as compared to the same period in the prior year (excluding the Businesses
Divested). The increase reflects improved bookings for the Company s
engineering consulting services offsetting declines in the bookings for
domestic military products.
LIQUIDITY AND CAPITAL RESOURCES
The Company s cash and cash equivalents increased $12.7 million
during the first six months of 1997. Net cash provided by operating
activities generated $5.2 million. Accounts receivable generated $4.1
million in cash during the first half of 1997 reflecting strong
collections and a reduction in days sales outstanding. Inventories,
recoverable amounts under long term contracts, and prepaid expenses used
$1.3 million in cash during the first half of 1997. Accounts payable and
accrued liabilities used $3.9 million in cash excluding the impact of the
acquisitions of Servotronix and Seidel and the sale of the shares of the
Joint Venture. The use of cash was due to a $1.5 million payment for the
refinancing of a building lease on more favorable terms to the Company,
and scheduled payments made in early 1997.
Investing activities provided $28.5 million in cash during the first
half of 1997. The Company received proceeds of approximately $37.0
million from the sale of the majority of its interest in the Joint
Venture. In connection with the acquisition of Servotronix, the Company
paid $6.4 million. The Company funded the acquisition of Seidel during
the third quarter through a combination of debt and cash of approximately
$9.0 million.
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<PAGE>14
Financing activities used $21.1 million in cash principally to repay
the remaining balance of its term loan using the proceeds of the sale of a
portion of its interest in the Joint Venture.
The Company believes that it can generate sufficient cash from
operations and its current borrowing line of credit to finance its cash
requirements for capital expenditures, sinking fund payments, and working
capital needs for the next twelve months.
This filing contains forward-looking statements which involve risks
and uncertainties. The Company s actual results may differ significantly
from the results discussed in the forward-looking statements. Factors
that might cause such a difference are set forth in the Company s Form 8-K
dated January 27, 1997.
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 Form of Retention Agreement for Messrs. Argov,
Cobuzzi, Eder, Jones and Petty.
11 Statement re computation of per share earnings.
27 Financial Data Schedules.
(b) Reports on Form 8-K.
NONE
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<PAGE>15
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, 1997
<PAGE>
Exhibit 10
[DATE]
[NAME]
[ADDRESS]
[CITY, STATE]
R E T E N T I O N A G R E E M E N T
Dear [NAME]:
Kollmorgen Corporation, a New York corporation (the "Company"),
considers it essential to the best interests of its shareholders to take
reasonable steps to retain key management personnel. Further, the Board
of Directors of the Company (the "Board") recognizes that the uncertainty
and questions which might arise among management in the context of a
change in control of the Company could result in the departure or
distraction of management personnel to the detriment of the Company and
its shareholders.
The Board has determined, therefore, that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the management of the Company and its
subsidiaries, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising
from any possible change in control of the Company.
In order to induce you to remain in the employ of the Company,
the Company has determined to enter into this letter agreement (this
"Agreement") which addresses the terms and conditions of your employment
in the event of a change in control of the Company. Capitalized words
which are not otherwise defined herein shall have the meanings assigned to
such words in Section 8 of this Agreement.
1. Term of Employment Under the Agreement. The term of your
employment under this Agreement shall commence on the Change in Control
Date and shall continue until the second anniversary of the Change in
Control Date (the "Term").
2. Employment During the Term. During the Term, the following
terms and conditions shall apply to your employment with the Company:
(a) Titles; Reporting and Duties. Your position, titles,
nature and status of responsibilities and reporting obligations shall be
no less favorable to you than those that you enjoyed immediately prior to
the Change in Control Date.
(b) Salary and Bonus. Your base salary and annual bonus
opportunity may not be reduced, and your base salary shall be periodically
reviewed and increased in the manner commensurate with increases awarded
to other similarly situated executives of the Company.
(c) Incentive Compensation. You shall be eligible to
participate in each long-term incentive plan or arrangement established by
the Company for its executive employees, in accordance with the terms and
provisions of such plan or arrangement and at a level consistent with the
Company's practices applicable to you prior to the Change in Control Date.
(d) Benefits. You shall be eligible to participate in all
pension, welfare and fringe benefit plans and arrangements that the
Company provides to its executive employees in accordance with the terms
of such plans and arrangements, which shall be no less favorable to you,
in the aggregate, than the terms and provisions available to other
executive employees of the Company.
(e) Location. You will continue to be employed at the business
location at which you were employed prior to the Change in Control Date
and the amount of time that you are required to travel for business
purposes will not be increased in any significant respect from the amount
of business travel required of you prior to the Change in Control Date.
3. Involuntary Termination During the Term.
(a) Severance Payment. In the event of your Involuntary
Termination during the Term, the Company shall pay you within 5 days of
the date of such Involuntary Termination the full amount of any earned but
unpaid base salary through the Date of Termination at the rate in effect
at the time of the Notice of Termination, plus a cash payment (calculated
on the basis of your Reference Salary) for all unused vacation time which
you may have accrued as of the Date of Termination. The Company shall
also pay you within 5 days of the Date of Termination a pro rata portion
of the annual bonus for the year in which your Involuntary Termination
occurs, calculated on the basis of your target bonus for that year and on
the assumption that all performance targets have been or will be achieved.
In addition, the Company shall pay you in a cash lump sum, within 8 days
following the date of your execution of the release described in the last
sentence of this Section 3(a) (or on the Date of Termination, if later),
an amount (the "Severance Payment") equal to two and one half times the
sum of your Reference Salary and your Reference Bonus. The Severance
Payment shall be in lieu of any other severance payments which you are
entitled to receive under any other severance pay plan or arrangement
sponsored by the Company and its subsidiaries. Your right to the
Severance Payment shall be conditioned upon your execution of a release in
favor of the Company in substantially the form attached hereto as Exhibit
A.
(b) Benefit Payment. In the event of your Involuntary
Termination during the Term, you and your eligible dependents shall
continue to be eligible to participate during the Benefit Continuation
Period (as hereinafter defined) in the medical, dental, health, life and
other fringe benefit plans and arrangements applicable to you immediately
prior to your Involuntary Termination on the same terms and conditions in
effect for you and your dependents immediately prior to such Involuntary
Termination. For purposes of the previous sentence, "Benefit Continuation
Period" means the period beginning on the Date of Termination and ending
on the earlier to occur of (i) the date 30 months following the Date of
Termination and (ii) the date that you and your dependents are eligible
and elect coverage under the plans of a subsequent employer which provide
substantially equivalent or greater benefits to you and your dependents.
(c) Date and Notice of Termination. Any termination of your
employment by the Company or by you during the Term shall be communicated
by a notice of termination to the other party hereto (the "Notice of
Termination"). The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of your employment under the provision so indicated. The
date of your termination of employment with the Company and its
subsidiaries (the "Date of Termination") shall be determined as follows:
(i) if your employment is terminated for Disability, thirty (30) days
after a Notice of Termination is given (provided that you shall not have
returned to the full-time performance of your duties during such thirty
(30) day period), (ii) if your employment is terminated by the Company in
an Involuntary Termination, five (5) days after the date the Notice of
Termination is received by you and (iii) if your employment is terminated
by the Company for Cause, the later of the date specified in the Notice of
Termination or ten (10) days following the date such notice is received by
you. If the basis for your Involuntary Termination is your resignation
for Good Reason, the Date of Termination shall be ten (10) days after the
date your Notice of Termination is received by the Company. The Date of
Termination for a resignation of employment other than for Good Reason
shall be the date set forth in the applicable notice, which shall be no
earlier than ten (10) days after the date such notice is received by the
Company.
(d) No Mitigation or Offset. You shall not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by
pension benefits paid by the Company or another employer after the Date of
Termination or otherwise except as specifically provided in clause (ii) of
the last sentence of Section 3(b).
4. Limitation on Payments
(a) Basic Rule. In the event that any payment would, but for
this Section 4(a), be subject to this excise tax imposed by Section 4999
of the Code or any similar or successor provision to Section 4999 (the
"Excise Tax"), then, subject to the provisions of Section 4(b) hereof,
such Payments being shall be reduced to the largest amount which would
result in no portion of the Payments being subject to the Excise Tax. The
determination of any required reduction pursuant to this Section 4(a)
(including the determination as to which specific Payments shall be
reduced) shall be made initially by you in consultation with the Company.
If you and the Company shall disagree upon the amount of such reduction,
then the Company shall, at its expense, promptly call upon the Accounting
Firm to make such determination, and such determination shall be
conclusive and binding upon you and the Company or any related corporation
for all purposes. The Company and its related corporations waive all
claims and rights against you with respect to such determination except as
specifically set forth in the next sentence. If the Internal Revenue
Service (the "IRS") determines that Payments are subject to the Excise
Tax, then the Company or any related corporation, as their exclusive
remedy, shall seek to enforce the provisions of Section 4(b) hereof. Such
enforcement of Section 4(b) hereof shall be the only remedy against you,
under any and all applicable state and federal laws or otherwise, for the
failure to reduce the Payments so that no portion thereof is subject to
the Excise Tax. The Company or related corporation shall reduce Payments
in accordance with Section 4(a) only upon written notice to you indicating
the amount of such reduction, if any, and your agreement to the amount of
such reduction (subject, in the event of disagreement, to a determination
by the Accounting Firm on the basis provided above).
(b) Remedy. If, notwithstanding the reduction described in
Section 4(a) hereof, the IRS determines that you are liable for the Excise
Tax as a result of the receipt of Payments, then you shall, subject to the
provisions of this Agreement, be obligated to pay to the Company (the
"Repayment Obligation") an amount of money equal to the "Repayment
Amount." The Repayment Amount with respect to Payments shall be the
smallest such amount, if any, as shall be required to be paid to the
Company so that your net proceeds with respect to Payments (after taking
into account the payment of the Excise Tax imposed on Payments) shall be
maximized. Notwithstanding the foregoing, if the Excise Tax is not
eliminated through the performance of the Repayment Obligation, you shall
pay the Excise Tax. The Repayment Obligation shall be performed within 30
days of either (i) your entering into a binding agreement with the IRS as
to the amount of your Excise Tax liability or (ii) a final determination
by the IRS or a court decision requiring you to pay the Excise Tax with
respect to Payments from which no appeal is available or is timely taken.
5. Other Provisions.
(a) Vesting and Exercise. Notwithstanding the terms of the
Equity Plan, and of any agreement thereunder, Equity Awards granted to you
under the Equity Plan shall vest and become exercisable in the event of
your Involuntary Termination on or following the Change in Control Date.
(b) General. Anything in this Agreement to the contrary
notwithstanding, in no event shall the vesting and exercisability
provisions applicable to you under the terms of your Equity Awards be less
favorable to you then the terms and provisions of such awards in effect on
the date hereof.
6. Legal Fees and Expenses. The Company shall pay or
reimburse you on an after-tax basis for all costs and expenses (including,
without limitation, court costs and reasonable legal fees and expenses
which reflect common practice with respect to the matters involved)
incurred by you as a result of any claim, action or proceeding (i) arising
out of your termination of employment during the Term, (ii) contesting,
disputing or enforcing any right, benefits or obligations under this
Agreement or (iii) arising out of or challenging the validity,
advisability or enforceability of this Agreement or any provision thereof.
7. Successors; Binding Agreement.
(a) Assumption by Successor. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business or assets of the
Company expressly to assume and to agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place; provided, however, that
no such assumption shall relieve the Company of its obligations hereunder.
As used in this Agreement, the "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law or otherwise.
(b) Enforceability; Beneficiaries. This Agreement shall be
binding upon and inure to the benefit of you (and your personal
representatives and heirs) and the Company and any organization which
succeeds to substantially all of the business or assets of the Company,
whether by means of merger, consolidation, acquisition of all or
substantially all of the assets of the Company or otherwise, including,
without limitation, as a result of a Change in Control or by operation of
law. This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die
while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there is no such designee, to
your estate.
8. Definitions. For purposes of this Agreement, the following
capitalized words shall have the meanings set forth below:
"Accounting Firm" shall mean Coopers & Lybrand L.L.P. or, if
such firm is unable or unwilling to perform such calculations, such other
national accounting firm as shall be designated by agreement between you
and the Company. To the extent reasonably practicable, one such
accounting firm shall be designated to perform the calculations in respect
of the Combined Arrangements.
"Cause" shall mean a termination of your employment during the
Term which is a result of (i) your felony conviction, (ii) your willful
disclosure of material trade secrets or other material confidential
information related to the business of the Company and its subsidiaries or
(iii) your willful and continued failure substantially to perform your
duties with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or
anticipated failure resulting from a resignation by you for Good Reason)
after a written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties, and
which performance is not substantially corrected by you within 10 days of
receipt of such demand. For purposes of the previous sentence, no act or
failure to act on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief
that your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not
less than three-fourths (3/4ths) of the entire membership of the Board at
a meeting of the Board called and held for such purpose (after reasonable
notice to you and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct set forth above in clause (i), (ii) or
(iii) of the first sentence of this section and specifying the particulars
thereof in detail.
"Change in Control" shall mean a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, whether or not the Company is then subject to such reporting
requirement; provided, however, that, anything in this Agreement to the
contrary notwithstanding, a Change in Control shall be deemed to have
occurred if:
(i) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity or
person, or any syndicate or group deemed to be a person under Section
14(d)(2) of the Exchange Act, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities entitled to vote in the
election of directors of the Company;
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement)
individuals who at the beginning of such period constituted the Board
and any new directors, whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least three-fourths (3/4ths) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (the
"Incumbent Directors"), cease for any reason to constitute a majority
thereof;
(iii) there occurs a reorganization, merger, consolidation or
other corporate transaction involving the Company (a "Transaction"),
in each case, with respect to which the shareholders of the Company
immediately prior to such Transaction do not, immediately after the
Transaction, own more than 50 percent of the combined voting power of
the Company or other corporation resulting from such Transaction;
(iv) all or substantially all of the assets of the Company are
sold, liquidated or distributed; or
(v) there is a "change in control" of the Company within the
meaning of Section 280G of the Code and the Regulations.
"Change in Control Date" shall mean the earliest of (i) the date
on which the Change in Control occurs, (ii) the date on which the Company
executes an agreement, the consummation of which would result in the
occurrence of a Change in Control, (iii) the date the Board approves a
transaction or series of transactions, the consummation of which would
result in a Change in Control and (iv) the date the Company fails to
satisfy its obligations to have this agreement assumed by any successor to
the Company in accordance with Section 7(a) of this Agreement. If the
Change in Control Date occurs as a result of an agreement described in
clause (ii) of the previous sentence or as a result of the approval of the
Board described in clause (iii) of the previous sentence and the Change in
Control to which such agreement or approval relates (the "Contemplated
Change in Control") subsequently does not occur, then the Term shall
expire on the sixtieth day (the "Reset Date") following the date the Board
certifies by resolution duly adopted by three-fourths (3/4ths) of the
Incumbent Directors then in office that the Contemplated Change in Control
is not reasonably likely to occur; provided, however, that this sentence
shall not apply if (A) an Involuntary Termination of your employment with
the Company has occurred on and after the Change in Control Date and on or
prior to the Reset Date or (B) the Contemplated Change in Control
subsequently occurs within three months of the Reset Date. Following the
Reset Date, the provisions of this Agreement shall remain in effect and a
new Term shall commence upon the occurrence of a subsequent Change in
Control Date. Notwithstanding the first sentence of this section, if your
employment with the Company terminates prior to the Change in Control Date
and it is reasonably demonstrated that your termination of employment (i)
was at the request of the third party who has taken steps reasonably
calculated to effect the Change in Control or (ii) otherwise arose in
connection with or in anticipation of the Change in Control, then Change
in Control Date shall mean the date immediately prior to the date of your
termination of employment.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor provisions thereto.
"Common Stock" shall mean the common stock of the Company.
"Disability" shall mean (i) your incapacity due to physical or
mental illness which causes you to be absent from the full-time
performance of your duties with the Company for six (6) consecutive
months, and (ii) your failure to return to full-time performance of your
duties for the Company within thirty (30) days after written Notice of
Termination due to Disability is given to you. Any question as to the
existence of your Disability upon which you and the Company cannot agree
shall be determined by a qualified independent physician selected by you
(or, if you are unable to make such selection, such selection shall be
made by any adult member of your immediate family), and approved by the
Company. The determination of such physician made in writing to the
Company and to you shall be final and conclusive for all purposes of this
Agreement.
"Equity Awards" shall mean options, restricted stock, bonus
stock or other grants or awards which consist of, or relate to, equity
securities of the Company and which have been granted to you under the
Equity Plan. For purposes of this Agreement, Equity Awards shall also
include any securities acquired upon the exercise of an option, warrant or
similar right that constitutes an Equity Award.
"Equity Plan" shall mean the Kollmorgen Corporation 1991 Long
Term Incentive Plan, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any successor provisions thereto.
"Good Reason" shall mean a resignation of your employment during
the Term as a result of any of the following:
(i) A meaningful and detrimental alteration in your position,
your titles, or the nature or status of your responsibilities
(including your reporting responsibilities) from those in effect
immediately prior to the Change in Control Date;
(ii) A reduction by the Company in your annual base salary as
in effect immediately prior to the Change in Control Date or as the
same may be increased from time to time thereafter; a failure by the
Company to increase your salary at a rate commensurate with that of
other key executives of the Company; or a reduction in your target
annual bonus (expressed as a percentage of base salary) below the
target in effect for you prior to the Change in Control Date;
(iii) The relocation of the office of the Company where you are
employed immediately prior to the Change in Control Date (the "CIC
Location") to a location which is more than fifty (50) miles away
from the CIC Location or the Company's requiring you to be based more
than fifty (50) miles away from the CIC Location (except for required
travel on the Company's business to an extent substantially
consistent with your customary business travel obligations in the
ordinary course of business prior to the Change in Control Date);
(iv) The failure by the Company to continue in effect any
compensation plan in which you participated prior to the Change in
Control Date or made available to you after the Change in Control
Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan in connection with the Change in Control, or the failure by the
Company to continue your participation therein on at least as
favorable a basis, both in terms of the amount of benefits provided
and the level of your participation relative to other participants,
as existed on the Change in Control Date;
(v) The failure by the Company to continue to provide you with
benefits at least as favorable in the aggregate to those enjoyed by
you under the Company's pension, savings, life insurance, medical,
health and accident, disability, and fringe benefit plans and
programs in which you were participating immediately prior to the
Change in Control Date; or the failure by the Company to provide you
with the number of paid vacation days to which you are entitled on
the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect immediately prior to the
Change in Control;
(vi) The failure of the Company to obtain an agreement
reasonably satisfactory to you from any successor to assume and agree
to perform this Agreement, as contemplated in Section 7(a) hereof or,
if the business of the Company for which your services are
principally performed is sold at any time after a Change in Control,
the failure of the Company to obtain such an agreement from the
purchaser of such business;
(vii) Any termination of your employment which is not effected
pursuant to the terms of this Agreement; or
(viii) A material breach by the Company of the provisions of
this Agreement;
provided, however, that an event described above in clause (i), (ii),
(iv), (v) or (viii) shall not constitute Good Reason unless it is
communicated by you to the Company in writing and is not corrected by the
Company in a manner which is reasonably satisfactory to you (including
full retroactive correction with respect to any monetary matter) within 10
days of the Company's receipt of such written notice from you.
"Involuntary Termination" shall mean (i) your termination of
employment by the Company and its subsidiaries during the Term other than
for Cause or Disability or (ii) your resignation of employment with the
Company and its subsidiaries during the Term for Good Reason.
"Payment" means (i) any amount due or paid to you under this
Agreement, (ii) any amount that is due or paid to you under any plan,
program or arrangement of the Company and its subsidiaries (including,
without limitation, the Equity Plans), and (iii) any amount or benefit
that is due or payable to you under this Agreement or under any plan,
program or arrangement of the Company and its subsidiaries not otherwise
covered under clause (i) or (ii) hereof which must reasonably be taken
into account under Section 280G of the Code and the Regulations in
determining the amount of the "parachute payments" received by you,
including, without limitation, any amounts which must be taken into
account under the Code and Regulations as a result of (A) the acceleration
of the vesting of any option, restricted stock or other equity award
granted under the Equity Plans or otherwise, (B) the acceleration of the
time at which any payment or benefit is receivable by you or (C) any
contingent severance or other amounts that are payable to you.
"Reference Bonus" shall mean the average of the two most recent
annual bonuses paid to you prior to your Involuntary Termination
(disregarding any bonus in an amount that results in a breach of this
Agreement).
"Reference Salary" shall mean the annual rate of your base
salary from the Company and its subsidiaries in effect immediately prior
to the date of your Involuntary Termination (disregarding any reduction of
such base salary in breach of this Agreement).
"Regulations" shall mean the proposed, temporary and final
regulations under Section 280G of the Code or any successor provision
thereto.
"Taxes" shall mean the federal, state and local income taxes to
which you are subject at the time of determination, calculated on the
basis of the highest marginal rates then in effect, plus any additional
payroll or withholding taxes to which you are then subject.
"Transaction Date" shall mean the date described in clause (i)
of the definition of Change in Control Date.
9. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Board of Directors, Kollmorgen Corporation, [Address],
with a copy to the General Counsel of the Company, or to you at the
address set forth on the first page of this Agreement or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement and this Agreement shall supersede
all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, with respect to the
subject matter hereof; provided, however, that, except as expressly set
forth herein, this Agreement shall not supersede the terms of Equity
Awards previously granted to you.
(b) Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall
be construed as giving you any right to be retained in the employ of the
Company or shall affect the terms and conditions of your employment with
the Company prior to the commencement of the Term hereof.
(e) Withholding. Amounts paid to you hereunder shall be
subject to all applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this
Agreement, other than payments made pursuant to a plan which provides
otherwise, shall be paid in cash from the general funds of the Company,
and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. You will have no right,
title or interest whatsoever in or to any investments which the Company
may make to aid it in meeting its obligations hereunder. To the extent
that any person acquires a right to receive payments from the Company
hereunder, such right shall be no greater than the right of an unsecured
creditor of the Company.
(g) Headings. The headings contained in this Agreement are
intended solely for convenience of reference and shall not affect the
rights of the parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction,
and performance of this Agreement shall be governed by the laws of the
State of New York applicable to contracts entered into and performed in
such State.
<PAGE>
* * * *
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
KOLLMORGEN CORPORATION
By______________________
Vice President
Agreed to as of this day
of , 1997.
____________________________
<PAGE>
EXHIBIT A
RELEASE
1. I have signed a Retention Agreement with Kollmorgen Corporation
(the "Company"), dated , 1997 (the "Agreement"), wherein I
agreed to the terms applicable to certain terminations of employment with
the Company. Pursuant to the terms of the Agreement, I am entitled to
certain severance payments and benefits, described in the Agreement,
provided that I sign this Release.
2. In consideration of the severance payments described in the
Agreement, I, on behalf of myself, my heirs, agents, representatives,
predecessors, successors and assigns, hereby irrevocably release, acquit
and forever discharge the Company and each of its respective agents,
employees, representatives, parents, subsidiaries, divisions, affiliates,
officers, directors, shareholders, investors, employees, attorneys,
transferors, transferees, predecessors, successors and assigns, jointly
and severally of and from any and all debts, suits, claims, actions,
causes of action, controversies, demands, rights, damages, losses,
expenses, costs, attorneys' fees, compensation, liabilities and
obligations whatsoever, suspected or unsuspected, known or unknown,
foreseen or unforeseen, arising at any time up to and including the date
of this Release, save and except for the parties' obligations and rights
under the Agreement. In recognition of the consideration set forth in the
Agreement, I hereby release and forever discharge the Company from any and
all claims, actions and causes of action, I have or may have as of the
date of this Release arising under any state or federal civil rights or
human rights law, or under the Federal Age Discrimination in Employment
Act of 1967, as amended, and the applicable rules and regulations
promulgated thereunder ("ADEA"). By signing this Release, I hereby
acknowledge and confirm the following: (a) I was advised in writing by
the Company in connection with my termination to consult with an attorney
of my choice prior to signing this Agreement, including, without
limitation, the terms relating to my release of claims arising under ADEA
and any other law, rule or regulation referred to above; (b) I was given a
period of not fewer than 21 days to consider the terms of this Agreement
and to consult with an attorney of my choosing with respect hereto; and
(c) I am providing the release and discharge set forth in this paragraph
only in exchange for consideration in addition to anything of value to
which I was already entitled.
3. The Agreement and this Release may be revoked by me within the 7-
day period commencing on the date I sign this Release (the "Revocation
Period"). In the event of any such revocation, all obligations of the
Company under the Agreement will terminate and be of no further force and
effect as of the date of such revocation and both the Company and I will
have and be entitled to exercise all rights that would have existed had
the Agreement and Release not been entered into. No such revocation will
be effective unless it is in writing and signed by me and received by the
Company prior to the expiration of the Revocation Period.
__________________________ __________
NAME Date
__________________________ __________
WITNESS Date
<PAGE>
<TABLE>
Exhibit 11
KOLLMORGEN CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(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>
1997 1996 1997 1996
-------- -------- -------- --------
Net income $15,459 $ 2,229 $17,469 $ 3,877
Less preferred stock dividends
and accretion of discount 0 0 0 (285)
-------- -------- -------- --------
Earnings applicable to common shares 15,459 2,229 17,469 3,592
Number of shares:
Weighted average number of
shares outstanding:
Primary 10,190 10,092 10,193 10,042
Fully diluted 10,311 10,063 10,309 10,162
-------- -------- -------- --------
Earnings per common share:
Primary $ 1.52 $ 0.22 $ 1.71 $ 0.36
======== ======== ======== ========
Fully diluted $ 1.50 $ 0.22 $ 1.70 $ 0.35
======== ======== ======== ========
<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-31-1997
<PERIOD START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 26,101
<SECURITIES> 0
<RECEIVABLES> 40,867
<ALLOWANCES> 768
<INVENTORY> 25,550
<CURRENT-ASSETS> 99,350
<PP&E> 98,976
<DEPRECIATION> 73,269
<TOTAL-ASSETS> 154,483
<CURRENT-LIABILITIES> 78,989
<BONDS> 34,840
<COMMON> 26,917
0
0
<OTHER-SE> 11,366
<TOTAL-LIABILITY-AND-EQUITY>154,483
<SALES> 91,533
<TOTAL-REVENUES> 106,344
<CGS> 23,197
<TOTAL-COSTS> 32,624
<OTHER-EXPENSES> 37,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,059
<INCOME-PRETAX> (5,674)
<INCOME-TAX> 1,178
<INCOME-CONTINUING> (6,852)
<DISCONTINUED> 0
<EXTRAORDINARY> 24,321
<CHANGES> 0
<NET-INCOME> 17,469
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.70
</TABLE>
