KOLLMORGEN CORPORATION
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
April 4, 1997
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of
Shareholders on Wednesday, May 14, 1997, at 10:00 a.m. at the Auditorium,
The First National Bank of Boston, 100 Federal Street, Boston,
Massachusetts. This will be Kollmorgen's 81st 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 4, 1997
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 14, 1997, at 10:00 a.m.,
local time, for the following purposes:
1. To elect five Class I directors;
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on March 27,
1997, 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 14, 1997, and at any adjournments or postponements thereof (the
"Annual Meeting"). The close of business on March 27, 1997, is the
record date for shareholders entitled to notice of and to vote at the
Annual Meeting. At such record date, there were outstanding 9,773,231
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 1996 Annual Report to
Shareholders are being first sent to shareholders on or about April 7,
1997.
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. Any other matters that may be
submitted to shareholders at the Annual Meeting will require the
affirmative vote of a majority of the votes cast at the Annual Meeting by
shareholders entitled to vote on such matters.
<PAGE>
<PAGE>4
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. 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 particular responsibilities.
The Board of Directors held a total of seven regular and special
meetings during 1996. Each director attended at least 75% of the
aggregate number of meetings of the Board and Board committees on which
<PAGE>
<PAGE>5
such director served except Messrs. Geoffrey S. Rehnert and Jerald G.
Fishman, who attended less than 75% of the aggregate number of meetings
of the Board and Board committees on which they 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
three times during 1996.
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 two times in 1996.
The Retirement Plans Committee advises the Board with respect to the
Corporation's retirement plans and trusts, reviews the selection of
trustees, recommends investment managers, and recommends action regarding
the establishment and amendment of the retirement plans and trusts. This
Committee held three meetings in 1996.
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 1996.
The Corporation does not have a standing nominating committee.
The Executive Committee may exercise, with certain exceptions, all
of the authority of the Board in the management of the business of the
Corporation between regular meetings of the entire Board. The Executive
Committee did not meet in 1996.
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 I are
scheduled to expire at this Annual Meeting. At a regular meeting held on
February 20, 1997, the Board nominated Mr. Herbert L. Henkel, President
of Textron Industrial Products, Textron, Inc. for election as a Class I
Director at this Annual Meeting.
<PAGE>
<PAGE>6
Accordingly, the five Class I nominees standing for election at this
Annual Meeting are Jerald G. Fishman, Herbert L. Henkel, James H.
Kasschau, J. Douglas Maxwell Jr. and Robert N. Parker. If elected, their
terms will expire in 1999. 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 I Directors, whose terms expire in 1999:
JERALD G. FISHMAN, 51, is the President, Chief Executive Officer and a
director of Analog Devices, Inc., Norwood, Massachusetts. Prior to
November 1996 he was the President and Chief Operating Officer of that
company for five years. He served as the Executive Vice President of
that company from 1988 to November 1991 and was the Group Vice President-
Components from 1981 to 1988. He is a member of the Corporation's
Executive and Personnel and Compensation Committees. Mr. Fishman is also
a director of Aware, Inc.
HERBERT L. HENKEL, 48, is the President of Textron Industrial Products,
Textron, Inc., Providence, Rhode Island, a position he has held since
December 1995. Prior to that date, he was for two years the Group Vice
President responsible for Textron's industrial segment and was the
President of Greenlee Textron from August 1987 to October 1995. Prior to
joining Textron, Mr. Henkel was the President and Chief Executive Officer
of Southern Fastening Systems for two years.
JAMES H. KASSCHAU, 45, 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.
J. DOUGLAS MAXWELL, JR., 55, is Chairman of the Board and Chief Executive
Officer of Swissray 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.
<PAGE>
<PAGE>7
ROBERT N. PARKER, 68, 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 Audit Committee. He is also a
director of Perceptronics, Inc., Woodland Hills, California.
CONTINUING DIRECTORS
Class II Directors, whose terms expire in 1998:
GIDEON ARGOV, 40, 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, 55, 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. He was elected a Director of the Corporation in 1996 and
is a member of the Retirement Plans Committee.
GEOFFREY S. REHNERT, 39, is a Managing Director and a General Partner of
Bain Capital, Inc., a private equity firm located in Boston,
Massachusetts. Mr. Rehnert has been associated with Bain Capital, which
he helped to found, since 1984. Previously, Mr. Rehnert was a consultant
with Bain & Company and a commercial banker with the Morgan Guaranty
Trust Company. He is also Chairman of the Board of GT Bicycles, and a
director of ICON Health & Fitness, Inc., FTD Holdings, Inc. and WorldCorp
Inc., as well as a director of several privately held companies. He was
elected a director of the Corporation in 1996.
GEORGE P. STEPHAN, 63, 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
<PAGE>
<PAGE>8
of the Corporation from 1991 until 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 Chairman of its Retirement Plans
Committee and has been a director of the Corporation since July 1982. He
is also a director of Barr Laboratories, Inc., a trustee of Hartwick
College, and a member of the Board of Advisors of the Hartwick Humanities
in Management Institute.
DIRECTORS COMPENSATION
Pursuant to the By-Laws of the Corporation, directors who are not
employees of the Corporation receive an annual retainer of $12,000. In
addition, outside directors receive (a) $800 for attendance at each
meeting of the Board, and for attendance at each meeting of a Committee
on which they serve, and (b) $800 per day for attendance at the
Corporation's annual planning meeting and for participating in any
special assignments requested by the Corporation. Outside directors also
are reimbursed for their reasonable expenses incurred in connection with
Board and committee meetings and special assignments.
At the 1992 Annual Meeting, 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, at the 1996 Annual Meeting, the Shareholders adopted certain
amendments to the Director Stock Ownership Plan which 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, and provided 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 (90) days. Three hundred and twenty five thousand
(325,000) shares of Common Stock are currently reserved for issuance
under the Plan.
In March 1996, the Board terminated all future rights to participate
in the non-employee director retirement program (the "Former Program")
that had been maintained by the Corporation since 1985. The termination
of the Former Program did not affect the vested rights of any
participant. Current non-employee directors who are vested in the Former
Program are entitled to receive their vested benefit upon retirement from
the Board, but no further benefits will accrue under the Former Program.
<PAGE>
<PAGE>9
Under the Former 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
agreement is 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 agrees 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. Messrs. Parker, Maxwell and Stephan
are currently eligible to participate in the Former Plan.
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 1996 was approximately $222,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 27,
1997, 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 2,435,267 (1) 24.92%
Gamco Investors, Inc.
Gabelli Funds, Inc.
Gabelli Performance Partnership
Gabelli International Limited
Gabelli Securities, Inc.
Gabelli & Company, Inc.
Mario J. Gabelli
c/o The Gabelli Group, Inc.
One Corporate Center
Rye, NY 10580
Alpine Associates Common Stock 501,100 (2) 5.13%
100 Union Avenue
Cresskill, NJ 07626
<PAGE>
<PAGE>10
<FN>
(1) According to a Schedule 13D (Amendment No. 21) dated March 19, 1997, the Gabelli Group
reported that the number of shares of Common Stock beneficially owned by the Gabelli
Group includes 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. 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 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 as
specifically set forth on such Schedule 13D.
(2) According to a Schedule 13D dated May 22, 1996, Alpine Associates, a limited
partnership, reported that it beneficially owns 501,100 shares of the Corporation's
Common Stock. It is also reported that it has the sole power to vote and dispose of
the Common Stock.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 27, 1997, 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:
<TABLE>
<CAPTION>
Share Percent
Name of Beneficial Owner Title of Class Ownership of Class
- ------------------------ -------------- --------- --------
<S> <C> <C> <C>
Gideon Argov (1) Common Stock 226,000 2.31%
Robert J. Cobuzzi (1) Common Stock 112,500 1.15%
James A. Eder (1) Common Stock 70,633 *
Jerald G. Fishman (2) Common Stock 11,432 *
Herbert L. Henkel Common Stock 100 *
Keith D. Jones (1) Common Stock 1,700 *
James H. Kasschau (2) Common Stock 37,493 *
J. Douglas Maxwell, Jr. (2) Common Stock 66,533 *
Robert N. Parker (2) Common Stock 14,892 *
Mark E. Petty (1) Common Stock 38,000 *
Geoffrey S. Rehnert (2) Common Stock 17,892 *
George P. Stephan (2) Common Stock 61,463 *
All directors and
executive officers of
the Corporation, as a
group Common Stock 658,638(1)(2) 6.74%
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<PAGE>11
<FN>
* less than 1%.
(1) Reflects the number of shares that could be purchased by the exercise of options
available as of March 26, 1997, or within 60 days thereafter under the Corporation's
stock option plans. Accordingly, these numbers are inclusive of (i) 205,000 shares of
Common Stock which Mr. Argov has the right to acquire under the Kollmorgen 1991 Long Term
Incentive Plan ("LTIP"), (ii) 107,500 shares of Common Stock which Mr. Cobuzzi has the
right to acquire under the LTIP and Kollmorgen 1982 Stock Option Plan ("1982 Plan"),
(iii) 70,200 shares of Common Stock which Mr. Eder has the right to acquire under the
1982 Plan and the LTIP, (iv) 600 shares of Common Stock which Mr. Jones has the right to
acquire under the LTIP; and (v) 38,000 shares of Common Stock which Mr. Petty has the
right to acquire under the LTIP.
(2) Inclusive of 9,500, 11,500, 11,500, 11,500, 7,500, 11,500 shares of Common Stock which
respectively, Messrs. Fishman, Kasschau, Maxwell, Parker, Rehnert and Stephan have the
present right to acquire upon the exercise of non-qualified stock options granted under
the Director Stock Ownership Plan.
</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.
<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 1996 $299,000 $227,000 50,000
Chairman of the Board, 1995 275,000 68,750 50,000
President and Chief 1994 269,710 - 0 - - 0 -
Executive Officer
Robert J. Cobuzzi 1996 $207,000 $125,000 30,000
Senior Vice President, 1995 190,000 47,500 25,000
Treasurer and Chief 1994 186,340 - 0 - - 0 -
Financial Officer
<PAGE>
<PAGE>12
James A. Eder 1996 $165,000 $ 75,000 20,000
Vice President, Secretary 1995 155,000 39,250 - 0 -
and General Counsel 1994 155,000 - 0 - - 0 -
Keith D. Jones(1) 1996 $105,000 $ 46,000 17,000
Controller and 1995 -- -- --
Chief Accounting Officer 1994 -- -- --
Mark E. Petty(1) 1996 $190,000 $ 63,000 20,000
Vice President and 1995 -- -- --
President of the U.S. 1994 -- -- --
Motion Technologies Group
<FN>
(1) Messrs. Petty and Jones were elected corporate officers in January and May, 1996,
respectively.
<PAGE>
<PAGE>13
OPTION GRANTS DURING 1996
<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 22.2% $10.375 12/16/2006 $326,239 $826,754
Robert J. Cobuzzi 30,000 13.3% $10.375 12/16/2006 $195,743 $496,052
James A. Eder 20,000 8.9% $10.375 12/16/2006 $130,496 $330,702
Keith D. Jones 17,000 7.5% $11.750 7/24/2006 $125,622 $318,350
Mark E. Petty 20,000 8.9% $10.375 12/16/2006 $130,496 $330,702
<FN>
(1) 10% of the options granted in 1996 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.
(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.
<CAPTION>
Option Values at December 31, 1996 (1)
Number of
Securities Underlying Value of Unexercised
Unexercised Options at "In-the-money" Options at
December 31, 1996 December 31, 1996 (2)
-------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gideon Argov 205,000 95,000 $558,125 $104,375
Robert J. Cobuzzi 107,500 72,500 $298,438 $120,313
James A. Eder 70,200 20,000 $138,750 $ 12,500
Keith D. Jones 300 19,700 $ 375 $ 3,375
Mark E. Petty 33,000 67,000 $ 90,750 $104,250
<PAGE>
<PAGE>14
<FN>
(1) No stock options were exercised by any named executive officer during 1996.
(2) Based upon the December 31, 1996 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. The term "annual base salary," as used in the preceding
sentence, makes reference to the "Salary" column in the Summary Compensation
Table. For the year ended December 31, 1996 the credited years of service
of Messrs. Argov, Cobuzzi, Eder, Petty and Jones under the Plan are 6, 5,
20, 5 and 1 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 1997
--------------------------------------
Final Average
Earnings at
Retirement 15 20 25 30 or more
------------- ------- ------- ------- ----------
$100,000 $24,795 $33,060 $41,325 $49,590
125,000 31,545 42,060 52,575 63,090
150,000 38,295 51,060 63,825 76,590
175,000 40,995 54,660 68,325 81,990
200,000 40,995 54,660 68,325 81,990
250,000 40,995 54,660 68,325 81,990
300,000 40,995 54,660 68,325 81,990
350,000 40,995 54,660 68,325 81,990
400,000 40,995 54,660 68,325 81,990
<PAGE>
<PAGE>15
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 $160,000 per annum and limits annual benefit
payments under such plans to $125,500. These limits and prohibitions are
indexed for inflation.
Employment Contracts, Termination of Employment and Change in Control
Arrangements
The Corporation entered into employment agreements with three current
executive officers at the time each person joined the Corporation. 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
Chairman of the Board, President and Chief Executive Officer, provides for
an initial 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 Senior Vice President,
provides for an initial annual base salary of $190,000 and otherwise is
substantially identical to Mr. Argov's agreement. The agreement with
Mr. Petty, a Vice President and the President of the Corporation's U.S.
Motion Technologies Group, provides that he will be entitled to one year's
base salary if he is terminated other than for "Cause" (as defined in the
agreement).
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
ensure 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.
<PAGE>
<PAGE>16
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 1997 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.
In 1996 and 1997, Mr. Argov, Chairman of the Board, President and Chief
Executive Officer received salary increases of 8.7% and 5.4%, the first
salary increases awarded since joining the Corporation in 1991. Having met
and surpassed the Corporation's 1996 operating plan in terms of primary
earnings per share and revenue growth, Mr. Argov received a bonus of
$227,000 in 1997 for the Corporation's 1996 operating performance. The
Committee exercised its judgment in determining the amount of Mr. Argov's
salary increase and bonus after reviewing the overall performance of the
Corporation and after reviewing comparative executive compensation data
provided by independent compensation consultants.
Pursuant to the terms of the LTIP, Mr. Argov was granted 100,000 stock
options in two grants of 50,000 each in 1995 and 1996, the first such grants
since the original grant of 200,000 non-qualified stock options when
Mr. Argov joined the Corporation in May, 1991. The Committee's decision to
award the grants reflects the views of the Committee and the purpose of the
Corporation's stock option plans, namely to reward executives for delivering
long term value to the Corporations's shareholders.
The Committee believes that Mr. Argov's total compensation package is
equitable in comparison to the median of the total compensation awarded to
chief executives of industries with similar product lines and of similar
size, based on information regarding compensation trends which has been
obtained via survey, outside consultants, and historical data.
<PAGE>
<PAGE>17
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Internal Revenue Code of 1986, as amended. Section 162(m) generally
denies a publicly held corporation, such as the Corporation, a federal
income tax deduction for compensation in excess of $1 million per year paid
or accrued for each of its chief executive officers and four other most
highly compensated executive officers. Certain "performance based"
compensation is not subject to the limitation on deductibility provided that
certain shareholder approval and independent director requirements are met.
Because of the fact that the compensation paid to each of the
Corporation's executive officer has not exceeded $1 million per year, the
Committee does not believe that the limitation on deductibility of executive
compensation is currently material to the Corporation. The Committee will
continue to review the situation in light of the final regulations and
future events with the objective of achieving deductibility to the extent
appropriate.
Members of the Personnel and Compensation Committee:
Jerald G. Fishman Robert N. Parker J. Douglas Maxwell, Jr.
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative total
shareholder return, assuming reinvestment of dividends, on $100 invested on
December 31, 1991, in each of Kollmorgen Corporation Common Stock, Standard
& Poors 500 Stock Index, and the Standard & Poors Electrical Equipment
Index.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
KOLLMORGEN CORPORATION COMMON STOCK, S&P 500 INDEX
AND S&P ELECTRICAL EQUIPMENT
Measurement Period Kollmorgen S&P Electrical
(Fiscal Year Covered) Corporation S&P 500 Index Equipment Index
- --------------------- ----------- ------------- ---------------
Measurement Pt.
12/31/91 $100.00 $100.00 $100.00
FYE 12/31/92 $108.00 $108.00 $110.00
FYE 12/31/93 $137.00 $118.00 $132.00
FYE 12/31/94 $106.00 $120.00 $134.00
FYE 12/31/95 $205.00 $165.00 $188.00
FYE 12/31/96 $206.00 $203.00 $254.00
<PAGE>
<PAGE>18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Directors, executive officers and persons who beneficially own
more than 10 percent of the Corporation's stock to file certain reports with
the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange concerning their beneficial ownership of the Corporation's equity
securities. Applicable SEC regulations also require such persons to furnish
the Corporation with copies of all such reports. Based solely on a review
of the copies of such reports furnished to the Corporation as of the date of
this proxy statement, or written representations that no reports were
required, the Corporation believes that, during 1996, all filing
requirements applicable to its directors, officers and greater than 10
percent shareholders were satisfied, except that Mr. Argov was untimely in
the filing of one Form 4 disclosing an acquisition of non-qualified stock
options in the Corporation's Common Stock.
ACCOUNTANTS
Coopers & Lybrand L.L.P. serves as the independent accountants for the
Corporation. Representatives of Coopers & Lybrand L.L.P. will be present at
the Annual Meeting and will be given an opportunity to make a statement if
they desire to do so. They will be available to respond to questions of
shareholders.
PROPOSALS FOR THE 1998 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 1998 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 8, 1997.
OTHER MATTERS
The Board of Directors does not intend to present any other matters
before the meeting and is not informed of any other business which others
may bring before the meeting. However, if any other matters should properly
come before the meeting, or any adjournments or postponements thereof, it is
the intention of the persons named in the accompanying Proxy Card to vote on
each such matter as they, in their sole discretion, may determine.
<PAGE>
<PAGE>19
KOLLMORGEN CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
Kollmorgen Corporation for the Annual Meeting, May 14, 1997
The undersigned hereby constitutes and 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 14, 1997, 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>20
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.
1. ELECTION OF FIVE DIRECTORS.
Class I Nominees are Jerald G. Fishman, Herbert L. Henkel, James H.
Kasschau, J. Douglas Maxwell, Jr. and Robert N. Parker.
FOR ALL WITHHELD
NOMINEES* /__/ FROM ALL /__/
NOMINEES
/__/ ________________________________________________________________
(* INSTRUCTION: To withhold authority to vote for any nominee, write
such nominee's name(s) above.)
2. In their discretion, upon the transaction of other business as may
properly come before the meeting.
/__/ MARK HERE FOR ADDRESS
CHANGE AND NOTE AT 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 ...................
