KOLLMORGEN CORPORATION
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
April 3, 1998
Dear Shareholder:
You are cordially invited to attend our Annual Meeting of
Shareholders on Wednesday, May 13, 1998, at 10:00 a.m. at the Auditorium,
BankBoston, N.A., 100 Federal Street, Boston, Massachusetts.
At the Annual Meeting you will be asked to elect four directors and
approve the 1998 Management Stock Incentive Plan. These matters are
fully discussed in this Notice of Annual Meeting and Proxy Statement. 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 3, 1998
To the Shareholders of
Kollmorgen Corporation:
The Annual Meeting of Shareholders of Kollmorgen Corporation will be
held at the Auditorium, BankBoston, N.A., 100 Federal Street, Boston,
Massachusetts, on Wednesday, May 13, 1998, at 10:00 a.m., local time, for
the following purposes:
1. To elect four Class II directors;
2. To approve the 1998 Management Stock Incentive Plan;
3. 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 25,
1998, 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 13, 1998, and at any adjournments or postponements thereof (the
"Annual Meeting"). The close of business on March 25, 1998, is the
record date for shareholders entitled to notice of and to vote at the
Annual Meeting. At such record date, there were outstanding 10,054,474
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 1997 Annual Report to
Shareholders are being first sent to shareholders on or about
April 3, 1998.
VOTING
Shares may be voted by shareholders of record in person or by proxy,
and shares represented by a properly executed proxy will be voted with
respect to all shares represented by it in accordance with the
instructions, if any, given therein. If no instructions are given, the
proxy will be voted as recommended by the Board of Directors and, in the
discretion of the persons designated on the proxy card, the proxy will be
voted with respect to any other matter which may properly come before the
meeting or any adjournments or postponements thereof.
If a shareholder participates in the Corporation's Dividend
Reinvestment Plan, any shares of Common Stock held in his/her account
will be voted in accordance with the proxy returned by that person unless
other instructions are received.
Any proxy received by the Board of Directors may be revoked by the
shareholder at any time prior to its use at the meeting by a subsequent
written instrument signed in the same manner as the proxy and received by
the Corporation either at the Annual Meeting or before the Annual Meeting
at Kollmorgen Corporation, Reservoir Place, 1601 Trapelo Road, Waltham,
MA 02154, Attention: Secretary.
Under New York law and the governing instruments of the Corporation,
the presence, either in person or by proxy, of the holders of a majority
of the shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum for the transaction of business.
Assuming the presence of a quorum, directors will be elected by a
plurality of the votes cast at the Annual Meeting by shareholders
entitled to vote in the election. Approval of the proposed 1998
Management Stock Incentive Plan will require the affirmative vote of the
holders of a majority of the shares of the Common Stock present in person
or proxy and entitled to vote on this matter at the Annual Meeting. Any
other matters that may be submitted to shareholders at the Annual Meeting
will require the affirmative vote of a majority of the 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 but they will have the
same effect as a vote against the proposed 1998 Management Stock
Incentive Plan. 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.
<PAGE>
<PAGE>5
The Board of Directors held a total of nine regular and special
meetings during 1997. Each director attended at least 75% of the
aggregate number of meetings of the Board and Board committees on which
such director served.
The Audit Committee is responsible for overseeing and reviewing the
audit of the Corporation's books and accounts, for reviewing the audited
financial statements of the Corporation, for reviewing the Corporation's
internal control procedures and for reviewing and approving the
Corporation's independent public accountants. No member of this
Committee is an employee of the Corporation. The Audit Committee met two
times during 1997.
The Personnel and Compensation Committee generally is responsible
for reviewing the Corporation's compensation policies and practices, and
specifically for (i) reviewing and recommending to the Board of Directors
the total compensation and benefit programs applicable to the
Corporation's key employees, including corporate officers, and (ii)
administering the Corporation's stock option plans. Also, this Committee
reviews and makes recommendations on the policies and programs for the
development of management personnel throughout the Corporation. This
Committee met three times in 1997.
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 1997.
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 met once in 1997.
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 nine directors, five of whom are members of Class I and four of whom
are members of Class II. The current terms of the members of Class II
are scheduled to expire at this Annual Meeting.
<PAGE>
<PAGE>6
Accordingly, the four Class II nominees standing for election at
this Annual Meeting are Gideon Argov, Robert J. Cobuzzi, Geoffrey S.
Rehnert and George P. Stephan. If elected, their terms will expire in
2000. Biographical summaries of each nominee and of the continuing
directors appear on the following pages.
All nominees have consented to be so named and to serve if elected.
If a nominee becomes unavailable for election, it is the intention of the
persons named in the accompanying proxy card to vote for such other
person, if any, as the Board of Directors may designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE FOLLOWING NOMINEES:
NOMINEES
For Class II Directors, whose terms expire in 2000:
GIDEON ARGOV, 41, 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. Mr. Argov is a member
of the Executive Committee. He is also a director of TransTechnology
Corporation and WorldCorp Inc.
ROBERT J. COBUZZI, 56, 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. He was elected a Director of the Corporation in 1996 and is a
member of the Retirement Plans Committee.
GEOFFREY S. REHNERT, 40, 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. 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, 64, is a Managing Director and a member of Stonington
Group, LLC., 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.
<PAGE>
<PAGE>7
For over 21 years, Mr. Stephan held various executive management
positions with the Corporation and served as the Chairman of the Board of
the Corporation from 1991 until March 26, 1996. 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., and a member of
the Board of Advisors of the Hartwick Humanities in Management Institute.
CONTINUING DIRECTORS
Class I Directors, whose terms expire in 1999:
JERALD G. FISHMAN, 52, 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, 49, 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, 46, 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., 56, 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.
ROBERT N. PARKER, 69, 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
<PAGE>
<PAGE>8
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.
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.
All non-employee directors participate in the 1992 Stock Ownership
Plan for Non-Employee Directors (the "Director Plan"). The purpose of
the Director Plan is to attract, and retain as directors, qualified
persons who are not employees of the Corporation. The Director Plan
provides that at least 50% of the yearly retainer of each non-employee
director will be paid in shares of Common Stock in lieu of cash on a
quarterly basis. In addition, the Director Plan provides for (i) a one-
time grant to each non-employee director 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. 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. There are
131,308 shares of Common Stock currently available for issuance under the
Director 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 those non-
employee directors who vested in the Former Program as of May, 1996, but
no further benefits will accrue under this program.
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 in effect in May, 1996,
($12,000) The term of each agreement is equal to the number of years of
<PAGE>
<PAGE>9
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 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 1997 was approximately $256,250.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 25
1998 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 2,131,272 (1) 21.0%
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) 5.0%
100 Union Avenue
Cresskill, NJ 07626
Schroder Capital Management, Inc. Common Stock 554,300 (3) 5.54%
787 Seventh Avenue
New York, NY 10019
<PAGE>
<PAGE>10
<FN>
(1) According to a Schedule 13D (Amendment No. 25) dated September 2, 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.
(3) According to a Schedule 13G dated February 6, 1998, Schroder Capital Management, Inc.
reported that it has sole voting power with respect to 512,000 shares and sole
dispositive power over all of the shares reported.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 25, 1998, the shares of
each class of stock of the Corporation beneficially owned by nominees,
directors, and named executive officers, 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 231,000 2.30%
Robert J. Cobuzzi (1) Common Stock 133,000 1.32%
Daniel F. Desmond (1) Common Stock 29,131 *
James A. Eder (1) Common Stock 52,435 *
Jerald G. Fishman (2) Common Stock 19,298 *
Herbert L. Henkel Common Stock 11,311 *
James H. Kasschau (2) Common Stock 50,298 *
J. Douglas Maxwell, Jr. (2) Common Stock 68,673 *
Robert N. Parker (2) Common Stock 22,757 *
Mark E. Petty (1) Common Stock 55,000 *
Geoffrey S. Rehnert (2) Common Stock 31,360 *
George P. Stephan (2) Common Stock 71,828 *
All directors and
executive officers of
the Corporation, as a
group Common Stock 781,791(1)(2) 7.78%
<PAGE>
<PAGE>11
<FN>
* less than 1%.
(1) Includes the number of shares that could be acquired within 60 days under the
Corporation's stock option plans: (i) Mr. Argov 210,000; (ii) Mr. Cobuzzi 128,000; (iii)
Mr. Desmond 29,000; (iv) Mr. Eder 52,000; and (v) Mr. Petty 55,000.
(2) Inclusive of 17,000, 7,500, 24,000, 24,000, 19,000, 20,000, 21,500 shares of Common Stock
which, respectively, Messrs. Fishman, Henkel, Kasschau, Maxwell, Parker, Rehnert and
Stephan have the present right to acquire upon the exercise of non-qualified stock
options granted under the Director 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 four other
most highly compensated executive officers during the last three fiscal
years, where applicable.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- -----------------------
Number of
Stock
Name and Principal Options All Other
Position Year Salary ($) Bonus ($) Awarded Compensation(2)
- ---------------------- ----- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Gideon Argov 1997 $315,000 $295,000 -0- $ 3,200
Chairman of the Board, 1996 299,000 227,000 50,000
President and Chief 1995 275,000 68,750 50,000
Executive Officer
Robert J. Cobuzzi 1997 $217,000 $163,000 -0- $ 3,200
Senior Vice President, 1996 207,000 125,000 30,000
Treasurer and Chief 1995 190,000 47,500 25,000
Financial Officer
Daniel F. Desmond(1) 1997 $171,756 $ -0- -0- -0-
Vice President
James A. Eder 1997 $173,000 $100,000 -0- $ 3,200
Vice President, Secretary 1996 165,000 75,000 20,000
and General Counsel 1995 155,000 30,250 -0-
<PAGE>
<PAGE>12
Mark E. Petty(1) 1997 $200,000 $ -0- -0- $ 3,200
Vice President and 1996 190,000 63,000 20,000
President of Industrial
and Commercial Products
Group
<FN>
(1) Messrs. Desmond and Petty were elected corporate officers in November, 1997, and
January, 1996, respectively.
(2) Includes contributions by the Corporation to its 401(k) Savings and Investment
Plan on behalf of the named executive officers.
<CAPTION>
Option Values at December 31, 1997
Shares Number of
Acquired Value Securities Underlying Value of Unexercised
On Realized Unexercised Options "In-the-money" Options
Name Exercise (1) December 31, 1997 December 31, 1997 (2)
- ----------------- -------- -------- ------------------------- ------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Argov 15,000 $106,875 210,000 75,000 $2,080,105 $625,350
Robert J. Cobuzzi 128,000 52,000 $1,281,064 $454.026
Daniel F. Desmond 25,000 12,000 $ 268,025 $148,756
James A. Eder 20,200 $129,125 52,000 18,000 $ 512,776 $142,884
Mark E. Petty 55,000 45,000 $ 537,215 $389,085
<FN>
(1) Value represents the differences between the closing price of the Common Stock on the
date of exercise and the exercise price, multiplied by the number of shares acquired
on exercise.
(2) Based upon the December 31, 1997, fair market value share price of $18.313, 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
<PAGE>
<PAGE>13
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, 1997 the credited years of service of Messrs. Argov,
Cobuzzi, Desmond, Eder, and Petty under the Plan are 7, 6, 24, 21, and 6,
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 1998
--------------------------------------
Final Average
Earnings at
Retirement 15 20 25 30 or more
------------- ------- ------- ------- ----------
$100,000 $24,660 $32,880 $41,100 $49,320
125,000 31,410 41,880 52,350 62,820
150,000 38,160 50,880 63,600 76,320
175,000 40,860 54,480 68,100 81,720
200,000 40,860 54,480 68,100 81,720
250,000 40,860 54,480 68,100 81,720
300,000 40,860 54,480 68,100 81,720
350,000 40,860 54,480 68,100 81,720
400,000 40,860 54,480 68,100 81,720
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
$130,000. These limits and prohibitions are indexed for inflation.
Employment Contracts, Termination of Employment and Change of Control
Arrangements
The Corporation entered into employment agreements with Mr. Argov
and three other 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 the initial annual base salary, 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
<PAGE>
<PAGE>14
with Mr. Cobuzzi, the Corporation's Chief Financial Officer, Treasurer
and Senior Vice President, provides for the initial annual base salary
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 Industrial and Commercial Products 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). The agreement with
Mr. Desmond, a Vice President and President of the Corporation's
Aerospace and Defense Group, provides that he will be entitled to two (2)
years base salary and have his group insurance benefits extended for 18
months if he is terminated other than for "Cause" (as defined in the
agreement).
The Corporation has entered into employment agreements with each of
the individuals named in the Summary Compensation Table that will trigger
a term of employment of two years upon a Change of Control. During the
term of the employment period the executive, among other things, is
entitled to (a) receive an annual base salary at his current rate, and
(b) participate in all incentive and benefit plans at the same levels in
effect immediately prior to the Change of Control. If the executive's
employment is terminated without cause or for good reason (as defined in
the Agreements) during the two year term following a Change of Control,
the executive shall be entitled to a lump sum payment, equal to two and
one-half times (a) the current annual salary, and (b) the average of the
two most recent annual incentive bonuses. In addition, the executive
shall be entitled to a continuation of welfare benefits for a period of
thirty months following the date of termination. If any payment or
distribution by the Corporation to the executive is determined to be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code, he is entitled to receive from the Corporation a payment on an
after-tax basis equal to the excise tax imposed. A "Change of Control"
is generally defined for purposes of the agreements as (i) the
acquisition of 30% or more of the outstanding shares of Common Stock,
(ii) a change in a majority of the Board of Directors, unless approved by
the incumbent directors (other than as a result of a contested election),
and (iii) certain reorganizations, mergers, consolidations, liquidations
or dissolutions.
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 or officers of the Corporation. The Committee's
decisions on compensation with respect to executive officers are reviewed
with and approved by all of the non-employee directors, who constitute a
majority of the Board. 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
<PAGE>
<PAGE>15
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, and
periodically reviews the annual salaries of all key employees, including
executive officers.
The Committee also administers and approves the grant of awards
under the Kollmorgen 1991 Long Term Incentive Plan ("LTIP"), the proposed
1998 Management Stock Incentive Plan, 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 1998 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. For discussion on the
proposed 1998 Management Stock Incentive Plan see Item 2. below.
In 1997 and 1998, Mr. Argov, Chairman of the Board, President and
Chief Executive Officer received salary increases of 5.4% and 5.1%.
Having met and surpassed the Corporation's 1997 operating plan in terms
of primary earnings per share and revenue growth, Mr. Argov received a
bonus of $295,000 in 1998 for the Corporation's 1997 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.
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>16
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.
ITEM 2. APPROVAL OF THE 1998 MANAGEMENT STOCK INCENTIVE PLAN
The Board will present to this Annual Meeting of Shareholders a
proposal to approve the adoption of a new long-term incentive plan, to be
known as the 1998 Management Stock Incentive Plan (the "Plan"), under
which awards of shares of the Corporation's Common Stock, options to
purchase such shares and various other rights with respect to such shares
(collectively, the "Awards") may be granted to officers and certain other
key employees of the Corporation and its subsidiaries as designated and
selected by a committee appointed by the Board of Directors. The
Personnel and Compensation Committee (the "Committee") administers the
Corporation's stock option plan and approves grants of stock-based
incentives to the Corporation's executive officers. The Plan was adopted
by the Board of Directors on February 10, 1998.
In recent years the Committee has decided that it is in the best
interest of the Corporation and its shareholders to award options to a
broad group of employees who are important to the continued long-term
success of the Corporation. In 1997 and 1998 a total of 74 employees who
were not corporate officers were recipients of stock option grants. In
the future the Committee intends to continue the practice of making
awards of stock options to such broad group of key employees.
For purposes of attracting and retaining key employees, the
Corporation has had some form of stock option plan in effect since 1960.
The Corporation's current 1991 Long Term Incentive Plan (the "LTIP") was
originally adopted in 1991. Under the LTIP, as of March 25, 1998, there
were only 1,941 shares of Common Stock available for issuance in the
future. The Board believes that it is important that a portion of key
<PAGE>
<PAGE>17
employees' total compensation continue to be directly tied to the
Corporation's long-term objectives and thus more closely to the longer-
term interests of the shareholders. The Board also believes that the
Plan will encourage key employees to remain in the employ of the
Corporation and will increase their interest in the Corporation's
success.
The new Plan reserves 500,000 shares for issuance in the future
which represents less than 5% of the outstanding shares. It is expected
that this reserve should meet the Corporation's requirements for the next
three years. The variety of Awards authorized under the Plan provides
the Committee with flexibility to adopt the Corporation's compensation
structure to changes in the business and regulatory environment.
The Board has adopted the Plan and recommends that the shareholders
approve it. However, by its terms, the Plan will not go into effect
unless it is approved by the shareholders at this Annual Meeting.
DESCRIPTION OF PROPOSED PLAN
The following description is subject to the detailed provisions of
the Plan, the full text of which is set forth in Exhibit A to this Proxy
Statement.
AVAILABLE SHARES
Subject to adjustment as provided in Section 13 of the Plan, the
maximum number of shares reserved for Awards is 500,000 of which 150,000
are reserved for restricted stock units and stock awards as described
below. Shares issued under the Plan may be either authorized but
unissued shares or authorized shares previously issued and reacquired by
the Corporation.
On February 10, 1998, the Committee granted a total of 168,000
incentive stock options under the Plan to key employees, subject to the
approval of the Plan by the shareholders at this Annual Meeting.
PLAN ADMINISTRATION
The Plan will be administered by the Committee which is appointed by
the Board of Directors and is composed of two or more "disinterested"
persons as defined by Rule 16b-3 of the Securities Exchange Act of 1934
(the "Exchange Act"), as amended, and the Internal Revenue Code (the
"Code"). The Board may also appoint one or more committees who are
composed of directors who need not be "disinterested" and who may grant
Awards and administer the Plan to employees who are not considered
officers or directors of the Corporation under Section 16 of the Exchange
Act.
<PAGE>
<PAGE>18
STOCK OPTIONS
The Plan provides for the grant of incentive stock options (intended
to qualify under Section 422 of the Code) and non-statutory options at
specified option exercise prices. The exercise price of each option
shall not be less than 100% (110% in the case of incentive stock options
granted to 10% or greater shareholders) of the fair market value of the
Common Stock at the time the option is granted.
Options shall vest and be exercisable in such installments and
during such periods as may be fixed by the Committee at the time of
grant. Generally, the vesting of options will be subject to continued
employment by the Corporation; however, the Committee has the authority
to accelerate vesting under certain specified circumstances described
below. Incentive stock options may not be exercisable after the
expiration of ten years from the date of grant and are limited by the
Code to specified exercise amounts in any year (currently $100,000).
Payment of the exercise price shall be made upon exercise of all or
a portion of any option. The Plan permits the Board to determine the
manner of payment of the exercise price of options, including payment by
cash, check or in connection with a "cashless exercise" through a broker,
by surrender to the Corporation of shares of Common Stock, or by any
other lawful means.
Termination of employment with the Corporation shall terminate
remaining rights under options then held, provided, that vested options
will generally be exercisable for a specified period of time after
termination, and the length of such period will vary depending on the
reason for termination, e.g. termination with or without cause, or by
reason of death or disability. The Committee may extend the post-
termination period of exercisability of an option provided that the
extension does not extend the original maximum term of the option.
Options shall not be transferable other than by will or the laws of
descent and distribution. Options are exercisable during the optionee's
lifetime only by the optionee, or by the optionee's authorized
representative in case of the optionee's disability or incapacity.
RESTRICTED STOCK UNITS
The purpose of restricted stock units ("RSU") is to provide equity
incentive compensation to certain key managers in lieu of cash
compensation that they may be eligible to receive under the annual
incentive bonus. Commencing in 1999, 20% of a participant's annual
incentive bonus will be paid in RSUs. Each RSU represents the right to
receive one share of Common Stock at a price equal to no less than 75% of
the fair market value of Common Stock on the date the bonus would
otherwise have been paid. These units will be credited to an account for
the benefit of the participant. It is anticipated that approximately 17
employees will be eligible to receive RSUs.
<PAGE>
<PAGE>19
Each grant of restricted stock units will be 100% vested after three
years from the date of grant and will be payable in the form of shares of
the Corporation's Common Stock at (i) three years from the Award Date,
(ii) the end of a deferral period specified by the employee (which is
beyond the three year holding period), or (iii) the employee's
termination of employment whichever is applicable. The restricted stock
units will be restricted from sale, transfer or pledge and the employee
will not be entitled to any voting rights.
In the event the Corporation declares any cash dividends, dividend
equivalent amounts will be credited to each employee's account and will
be paid out in cash upon vesting or when the employee receives payment of
the non-vested units.
If the employee voluntarily terminates employment or is terminated
for cause prior to vesting of the restricted stock units, the employee
will become entitled to receive in cash the lesser of the original
purchase price of the non-vested units, or the fair market value on the
date of termination of an equal number of shares of the Corporation's
Common Stock. If the employee is terminated by the Corporation other
than for cause or if the employee's employment terminates as a result of
death, retirement or permanent disability, the employee will be credited
to receive in cash the greater of the original purchase price of the
restricted stock units or the fair market value of the shares of the
Corporation's Common Stock on the date of termination.
STOCK AWARDS
In order to afford the Committee flexibility under certain
circumstances, the Plan provides that the Committee may grant awards of
Common Stock ("Stock Awards"). The Committee will determine on the date
of grant the conditions which must be satisfied prior to the vesting of
an installment or portion of a Stock Award. Unless otherwise determined
by the Committee, all unvested Stock Awards will be forfeited upon an
employee's termination of employment, except in the case of death or
disability in which event all unvested Stock Awards shall vest.
Recipients of Stock Awards shall be entitled to receive cash and other
dividends paid to the Corporation's shareholders and vote such Awards in
accordance with rules adopted by the Committee.
GENERAL
The Committee will have full authority to administer the Plan,
interpret its provisions and perform such other functions as are assigned
to it under the Plan.
Each Award will be evidenced by an agreement between the participant
and the Corporation. Such agreement will set forth the option price, the
value of the restricted stock unit or stock awards, if applicable, the
vesting schedule of the Award, the treatment of the Award in the event of
the termination of the participant's employment, provisions for the
forfeiture of the Award, such other provisions, not inconsistent with the
<PAGE>
<PAGE>20
Plan, as the Committee may determine, and, in the case of officers and
directors, such other restrictions as the Committee deems advisable in
order to preserve the exemptive relief afforded by Rule 16b-3 of the
Exchange Act. The agreements will also include provisions for the
accelerated vesting or payment of Awards in the event of extraordinary
corporate events, including a substantial change in the ownership or
control of the Corporation.
In the event of a merger, reorganization, stock split, stock
dividend or any other event affecting the Corporation's Common Stock, the
Committee may make such adjustments as it deems equitable to preserve for
participants the benefits of Awards, including, but not limited to,
adjusting the total number of shares available for Awards and the number
of shares covered by outstanding Awards.
NEW PLAN BENEFITS
As described above, the selection of the officers and other key
employees of the Corporation who will receive Awards under the Plan will
be determined by the Committee in its discretion on a case-by-case basis.
Therefore, it is not possible to predict the Awards that will be received
by or allocated to particular individuals or groups of employees nor to
determine the Awards that would have been received or allocated during
1997 if the Plan had been in effect during that year. In connection with
the approval and adoption of the Plan by the Board of Directors, however,
the Committee conditionally approved the initial grant of an aggregate of
168,000 incentive stock options to certain designated officers of the
Corporation, in each case subject to the receipt of shareholder approval
of the Plan at the Annual Meeting. These initial grants were made on
February 10, 1998, on which date the fair market value of the Common
Stock was $18.125. Accordingly, the exercise price of all of these
initial stock options is $18.125. The following table sets forth the
number of incentive stock options conditionally granted to (i) the
individuals named in the table, (ii) all current executive officers, as a
group (the "Executive Group"), (iii) all current directors who are not
executive officers, as a group (the "Non-Executive Director Group"), and
(iv) all employees, including all current officers who are not executive
officers, as a group (the "Non-Executive Officer Employee Group"):
NEW PLAN BENEFITS
Number of
Name and Position Stock Options
----------------- -------------
Gideon Argov, President and 50,000
Chief Executive Officer
Robert J. Cobuzzi, Senior Vice 36,000
President, Treasurer and Chief
Financial Officer
Daniel F. Desmond, Vice President 30,000
James A. Eder, Vice President, 36,000
Secretary and General Counsel
Executive Group 162,000
Non-Executive Director Group -0-
Non-Executive Officer Employee Group 6,000
<PAGE>
<PAGE>21
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States Federal income tax
consequences that generally will arise with respect to options granted
under the Plan and with respect to the sale of Common Stock acquired
under the Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the
grant or exercise of an incentive stock, but instead will recognize
taxable income only upon the sale of Common Stock acquired through the
exercise of such option. The exercise of an incentive stock option,
however, may subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling Common Stock acquired
upon exercise of an incentive stock option will vary with the length of
time that the participant has owned the ISO Stock prior to the time it is
sold. If the participant sells the stock at least two years after the
date the option was granted and one year after the date the option was
exercised, then the participant will recognize a long-term capital gain
in an amount equal to the excess of the sale price of the stock over the
exercise price.
If the participant sells the stock for more than the exercise price
and less than two years after the grant date or one year after the
exercise date, then all or a portion of the gain recognized by the
participant will be ordinary compensation income and the remaining gain,
if any, will be a capital gain. This capital gain will be a long-term
capital gain if the participant has held the stock for more than one year
prior to the date of sale.
If a participant sells the stock for less than the exercise price,
then the participant will recognize a capital loss equal to the excess of
the exercise price over the sale price of the stock. This capital loss
will be a long-term capital loss if the participant has held the stock
for more than one year prior to the date of sale.
Non-Statutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a non-statutory stock option.
Unlike the case of an incentive stock option, however, a participant who
exercises a non-qualified stock option generally will recognize ordinary
compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired upon exercise of the stock over the
exercise price.
With respect to any stock acquired upon the exercise of a non-
qualified stock option, a participant will have a tax basis equal to the
exercise price plus any income recognized upon the exercise of the
option. Upon selling non-qualified stock, a participant generally will
<PAGE>
<PAGE>22
recognize a capital gain or loss in an amount equal to the excess of the
sale price of the non-qualified stock over the participant's tax basis in
the non-qualified stock. The capital gain or loss will be a long-term
gain or loss if the participant has held the non-qualified stock for more
than one year prior to the date of the sale.
Restricted Stock Units
If an RSU is granted, the cash paid to the participant holding the
RSU is taxable as wages subject to income tax withholding requirements,
and Common Stock issued to the participant holding the RSU will be
taxable under Section 83 of the Internal Revenue Code of 1986, as amended
(the "Code"). Under Section 83, payments in Common Stock to participants
holding RSUs are taxable as wages in an amount equal to the fair market
value of the Common Stock and are subject to income tax withholding.
Stock Awards
When Stock Awards are vested, if at all, the participant will
recognize ordinary income in an amount equal to the fair market value of
the Common Stock on the date of vesting over the amount paid for such
Common Stock. The participant may make an election under Section 83(b)
of the Code to recognize such excess amount of ordinary income at the
time of grant. Dividends paid to a participant on a Stock Award prior to
vesting are treated as ordinary income to the participant in the year
received. All such ordinary income will be wages subject to income tax
withholding.
Maximum Income Tax Rates on Capital Gain and Ordinary Income
Long-term capital gains will be taxable at a maximum rate of 20% if
attributable to Common Stock held for more than eighteen months and at a
maximum rate of 28% if attributable to Common Stock held for more than
one year but not more than eighteen months. Short-term capital gains and
ordinary income will be taxable at a maxiumum rate of 39.6%. Phaseouts
of personal exemptions and reductions of allowable itemized deductions at
higher levels of income may result in slightly higher marginal tax rates.
Ordinary compensation income will also be subject to a medicare tax and,
under certain circumstances, a social security tax.
Tax Consequences to the Corporation
The grant of an option under the Plan will have no tax consequences
to the Corporation. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under
the Plan will have any tax consequences to the Corporation. The
Corporation generally will be entitled to a business-expense deduction,
however, with respect to any ordinary compensation income recognized by a
participant under the Plan or as a result of the exercise of a non-
qualified stock option or a disqualifying disposition. In the case of
RSUs and Stock Awards, the Corporation, in general, receives a deduction
for federal income tax purposes equal to the ordinary income recognized
<PAGE>
<PAGE>23
by the participant at such time as the participant recognizes income.
Any such deduction will be subject to the limitations of Section 162(m)
of the Code. The Corporation will have a withholding obligation with
respect to any ordinary compensation income recognized by participants
under the Plan who are employees or otherwise subject to withholding in
connection with the exercise of an non-qualified stock option.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO APPROVE THE ADOPTION OF THE 1998 MANAGEMENT STOCK
INCENTIVE PLAN.
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative
total shareholder return, assuming reinvestment of dividends, on $100
invested on December 31, 1992, 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.
12/31/92 $100.00 $100.00 $100.00
FYE 12/31/93 $127.00 $110.00 $121.00
FYE 12/31/94 $ 98.00 $112.00 $122.00
FYE 12/31/95 $189.00 $153.00 $171.00
FYE 12/31/96 $191.00 $189.00 $232.00
FYE 12/31/97 $319.00 $252.00 $325.00
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 1997, all filing requirements applicable to its directors,
<PAGE>
<PAGE>24
officers and greater than 10 percent shareholders were satisfied, except
that Mr. Henkel was untimely in the filing of one Form 4 disclosing an
acquisition of 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 1999 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 1999 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 14, 1998.
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>25
EXHIBIT A
KOLLMORGEN CORPORATION
1998 MANAGEMENT STOCK INCENTIVE PLAN
I. DEFINITIONS
(a) Affiliate means any subsidiary corporation of the Company,
as such term is defined in Section 424(f) of the Code.
(b) Award means, individually or collectively, a grant under the
Plan of Non-statutory Stock Options, Incentive Stock Options, Stock
Awards and Restricted Stock Units.
(c) Award Agreement means an agreement evidencing and setting
forth the terms of an Award granted under the Plan, in such form as the
Committee may, from time to time, approve.
(d) Board of Directors means the board of directors of the
Company.
(e) Cause means a Participant s engagement in (i) any dishonest
act or common law fraud, in connection with the Participant s duties or
in the course of the Participant s employment with the Company, (ii)
intentional wrongful damage to property of the Company, (iii) intentional
wrongful disclosure of confidential information of the Company, (iv) the
use or possession of weapons or illegal substances on Company property,
(v) failure or refusal to perform any duties reasonably required in the
course of the Participant s employment, but only after notice from the
Company followed by a repetition of such failure or refusal, (vi)
violation by Participant of any material Company policy, (vii)
absenteeism not related to illness, sick leave or vacation but only after
notice from the Company followed by a repetitioon of such absenteeism.
(f) Change in Control means 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 Plan 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;
<PAGE>
<PAGE>26
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Plan)
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, liquidation 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
thereunder.
(g) 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
have this Plan assumed by an successor to the Company. 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 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
employment with the Company terminates prior to the Change in Control
Date
<PAGE>
<PAGE>27
and it is reasonably demonstrated that such 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 such
termination of employment.
(h) Code means the Internal Revenue Code of 1986, as amended.
(i) Committee means the Personnel and Compensation Committee
designated by the Board of Directors to administer the Plan pursuant to
Section 2 of the Plan.
(j) Common Stock means the Common Stock of the Company, par
value, $2.50 per share.
(k) Company means Kollmorgen Corporation.
(l) Date of Grant means the effective date of an Award.
(m) Effective Date means the date approved by the shareholders.
(n) Employee means any person employed by the Company or an
Affiliate who is designated by the Board as a key contributor.
(o) Exchange Act means the Securities Exchange Act of 1934, as
amended.
(p) Exercise Price means the price at which a share of Common
Stock may be purchased by a Participant pursuant to an Option.
(q) Fair Market Value means the market price of Common Stock,
determined by the Committee as follows:
(i) If the Common Stock was traded on the date in question on
The NASDAQ Stock Market then the Fair Market Value shall
be equal to the last transaction price quoted for such
date by The NASDAQ Stock Market;
(ii) If the Common Stock was traded on a stock exchange on the
date in question, then the Fair Market Value shall be
equal to the closing price reported by the applicable
composite transactions report for such date; and
(iii) If neither of the foregoing provisions is applicable, then
the Committee in good faith on such basis shall determine
the Fair Market Value as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street
Journal. Such determination shall be conclusive and binding on all
persons.
<PAGE>
<PAGE>28
(r) Incentive Stock Option means an Option granted to a
Participant pursuant to Section 7 of the Plan that is intended to meet
the requirements of Section 422 of the Code.
(s) Restricted Stock Unit means an Award granted to a Participant
pursuant to Section 8 of the Plan.
(t) Non-statutory Stock Option means a stock option granted to a
Participant pursuant to the terms of the Plan but which is not intended
to be and is not identified as an Incentive Stock Option or a stock
option granted under the Plan which is intended to be and is identified
as an Incentive Stock Option but which does not meet the requirements of
Section 422 of the Code.
(u) Option means an Incentive Stock Option or Non-statutory Stock
Option.
(v) Participant means any person who holds an outstanding Award
pursuant to the Plan.
(w) Plan means the Kollmorgen Corporation 1998 Management Stock
Incentive Plan.
(x) Stock Award means an Award granted to a Participant pursuant
to Section 9 of the Plan.
2. ADMINISTRATION
(a) The Plan shall be administered by the Committee. The Committee
shall consist of two or more disinterested directors of the Company, who
shall be appointed by the Board of Directors. A member of the Board of
Directors shall be deemed to be disinterested only if he satisfies (i)
such requirements as the Securities and Exchange Commission may establish
for non-employee directors administering plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act and
(ii) such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption
under Section 162(m)(4)(C) of the Code. The Board of Directors may also
appoint one or more separate committees of the Board of Directors, each
composed of one or more directors of the Company or an Affiliate who need
not be disinterested and who may grant Awards and administer the Plan
with respect to Employees who are not considered officers or directors of
the Company under Section 16 of the Exchange Act.
(b) The Committee shall (i) select the Employees who are to receive
Awards under the Plan, (ii) determine the type, number, vesting
requirements and other features and conditions of such Awards, (iii)
interpret the Plan and (iv) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines,
as it deems appropriate to implement the Plan. The Committee s
determinations under the Plan shall be final and binding on all persons.
<PAGE>
<PAGE>29
(c) Each Award shall be evidenced by a written agreement ( Award
Agreement ) containing such provisions as may be approved by the
Committee. Each Award Agreement shall constitute a binding contract
between the Company or an Affiliate and the Participant, and the terms
and restrictions of the Plan and the Award Agreement shall bind every
Participant, upon acceptance of the Award Agreement. The terms of each
Award Agreement shall be in accordance with the Plan, but each Award
Agreement may include such additional provisions and restrictions
determined by the Committee in its discretion provided that such
additional provisions and restrictions are not inconsistent with the
terms of the Plan. In particular, the Committee shall set forth in each
Award Agreement (i) the type of Award granted (ii) the Exercise Price of
an Option, (iii) the number of shares subject to the Award; (iv) the
expiration date of the Award, (v) the manner, time, and rate (cumulative
or otherwise) of exercise or vesting of such Award, (vi) the acceleration
of the vesting schedule in the event of a Change in Control, and (vii)
the restrictions, if any, placed upon such Award, or open shares which
may be issued upon exercise of such Award. The Chairman of the Committee
and such other directors and officers as shall be designated by the
Committee are hereby authorized to execute Award Agreements on behalf of
the Company or an Affiliate and to cause them to be delivered to the
recipients of Awards.
(d) The Committee may delegate all authority for: (i) the
determination of forms of payment to be made by or received by the Plan
and (ii) the execution of any Award Agreement. The Committee may rely on
the descriptions, representations, reports and estimate provided to it by
the management of the Company or an Affiliate for determinations to be
made pursuant to the Plan.
3. TYPES OF AWARDS AND RELATED RIGHTS
The following Awards may be granted under the Plan:
(a) Non-statutory Stock Options
(b) Incentive Stock Options
(c) Stock Awards
(d) Restricted Stock Units
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 13 hereof, the maximum
number of shares reserved for Awards under the Plan is 500,000. Subject
to adjustment as provided in Section 13 hereof, the maximum number of
shares reserved hereby for purchase pursuant to the exercise of Options
granted under the Plan is 500,000 minus the number of Stock Awards or
Restricted Stock Units issued. The maximum number of shares reserved for
Stock Awards and Restricted Stock Units is 150,000. The shares of Common
Stock issued under the Plan may be either authorized but unissued shares
or authorized shares previously issued and acquired or reacquired the
Company, respectively. To the extent that Options and Stock Awards are
<PAGE>
<PAGE>30
granted under the Plan, the shares underlying such Awards will be
unavailable for any other use including future grants under the Plan
except that, to the extent that Stock Awards or Options terminate,
expire, or are forfeited without having vested or without having been
exercised, new Awards may be made with respect to these shares.
5. ELIGIBILITY
Subject to the terms of the Plan, all Employees shall be eligible to
receive Awards under the Plan.
6. NON-STATUTORY STOCK OPTIONS
The Committee may, subject to the limitations of this Plan and the
availability of shares of Common Stock reserved but unawarded under this
Plan, grant Non-statutory Stock Options upon such terms and conditions as
it may determine. Non-statutory Stock Options granted under this Plan
are subject to the following terms and conditions.
(a) Exercise Price. The Exercise Price of each Non-statutory Stock
Option shall be determined by the Committee on the Date of Grant. Such
Exercise Price shall not be less than 100% of the Fair Market Value of
the Common Stock on the Date of Grant. Shares of Common Stock underlying
a Non-statutory Stock Option may be purchased only upon full payment of
the Exercise Price in a manner provided for in Section 10 of the Plan.
(b) Terms of Non-statutory Stock Options. The term during which
each Non-statutory Stock Option may be exercised shall be determined by
the Committee, but in no event shall a Non-statutory Stock Option be
exercisable in whole or in part more than ten (10) years from the Date of
Grant. The Committee shall determine the date on which each Non-
statutory Stock Option shall become exercisable and any terms or
conditions which must be satisfied prior to each Non-statutory Stock
Option becoming exercisable. Any such terms or conditions shall be
determined by the Committee as of the Date of Grant. The shares of
Common Stock underlying each Non-statutory Stock Option installment may
be purchased in whole or in part by the Participant at any time during
the term of such Non-statutory Stock Option after such installment
becomes exercisable.
(c) Non-Transferability. Unless otherwise determined by the
Committee in accordance with this Section 6(c), Non-statutory Stock
Options shall not be transferred, assigned, hypothecated, or disposed of
in any manner by a Participant other than by will or the laws of
intestate succession. The Committee may, however, in its sole discretion,
permit transferability or assignment of a Non-statutory Stock Option if
such transfer or assignment is, in its sole determination, for valid
estate planning purposes and such transfer or assignment is permitted
under the Code and Rule 16b-3 under the Exchange Act. For purposes of
this Section 6(c), a transfer for valid estate planning purposes
includes, but is not limited to: (a) a transfer to a revocable intervivos
trust as to which the Participant is both the settlor and trustee, or (b)
a transfer for no
<PAGE>
<PAGE>31
consideration to: (i) any member of the Participant s Immediate Family,
(ii) any trust solely for the benefit of members of the Participant s
Immediate Family, (iii) any partnership whose only partners are members
of the Participant s Immediate Family, and (iv) any limited liability
corporation or corporate entity whose only members or equity owners are
members of the Participant s Immediate Family. For purposes of this
Section 6(c), Immediate Family includes, but is not necessarily limited
to, a Participant s parents, spouse, children, grandchildren and great-
grandchildren. Nothing contained in this Section 6(c) shall be construed
to require the Committee to give its approval to any transfer or
assignment of any Non-statutory Stock Option or portion thereof, and
approval to any transfer or assignment of any Non-statutory Stock Option
or portion thereof does not mean that such approval will be given with
respect to any other Non-statutory Stock Option or portion thereof. The
transferee or assignee of any Non-statutory Stock Option shall be subject
to all of the terms and conditions applicable to such Non-statutory Stock
Option immediately prior to the transfer or assignment and shall be
subject to any conditions prescribed by the Committee with respect to
such Non-statutory Stock Option.
(d) Termination of Employment or Service. Unless otherwise
determined by the Committee, upon the termination of a Participant s
employment or service for any reason other than death or termination for
Cause, the Participant s Non-statutory Stock Options shall be exercisable
only as to those shares that were immediately exercisable by the
Participant at the date of termination and only for a period of three (3)
months following termination. Unless otherwise determined by the
Committee, in the event of the termination of a Participant s employment
or service due to death, all Non-statutory Stock Options that were
immediately exercisable by the Participant at the date of death shall
remain exercisable for a period of one (1) year following such death.
Unless otherwise determined by the Committee, in the event of a
Participant s termination for Cause, all rights under the Participant s
Non-statutory Stock Options shall expire immediately upon the effective
date of such termination for Cause.
7. INCENTIVE STOCK OPTIONS
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this
Plan, grant Incentive Stock Options to an Employee. Incentive Stock
Options granted pursuant to the Plan shall be subject to the following
terms and conditions:
(a) Exercise Price. The Exercise Price of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of the Common
Stock on the Date of Grant. However, if at the time an Incentive Stock
Option is granted, the Employee owns or is treated as owning, for
purposes of Section 422 of the Code, Common Stock representing more than
10% of the total combined voting stock of the Company or an Affiliate
( 10% owner ), the Exercise Price shall not be less than 110% of the Fair
Market Value of
<PAGE>
<PAGE>32
the Common Stock on the Date of Grant. Shares of Common Stock may be
purchased only upon payment of the full Exercise Price in a manner
provided for in Section 10 of the Plan.
(b) Amounts of Incentive Stock Options. To the extent the
aggregate Fair Market Value of shares of Common Stock with respect to
which Incentive Stock Options that are exercisable for the first time by
an Employee during any calendar year under the Plan and any other stock
option plan of the Company or an Affiliate exceeds $100,000, or such
higher value as may be permitted under Section 422d of the Code, such
other Incentive Stock Options in excess of such limit shall be treated as
Non-statutory Stock Options. Fair Market Value shall be determined as of
the Date of Grant with respect to each such Incentive Stock Option.
(c) Terms of Incentive Stock Options. The term during which each
Incentive Stock Option may be exercised shall be determined by the
Committee, but in no event shall an Incentive Stock Option be exercisable
in whole or in part more than ten (10) years from the Date of Grant. If
at the time an Incentive Stock Option is granted to an Employee who is a
10% Owner, the Incentive Stock Option granted to such Employee shall not
be exercisable after the expiration of five (5) years from the Date of
Grant. The Committee shall determine the date on which each Incentive
Stock Option shall become exercisable and any terms or conditions which
must be satisfied prior to the Incentive Stock Option becoming
exercisable. Any such terms or conditions shall be determined by the
Committee as of the Date of Grant. The shares of Common Stock underlying
each Incentive Stock Option installment may be purchased in whole or in
part at any time during the term of such Incentive Stock Option after
such installment becomes exercisable.
(d) Transferability. An Incentive Stock Option shall not be
transferable except by an Employee's will or the laws of descent and
distribution and shall be exercisable, during an Employee's lifetime,
only by the Employee to whom it is granted. The designation of a
beneficiary does not constitute a transfer.
(e) Termination of Employment. Unless otherwise determined by the
Committee, upon the termination of an Employee s employment for any
reason other than death or termination for Cause, the Employee s
Incentive Stock Options shall be exercisable only as to those Incentive
Stock Options that were immediately exercisable by the Employee at the
date of termination and only for a period of three (3) months following
such termination. Unless otherwise determined by the Committee, in the
event of the termination of an Employee s employment for death, all
Incentive Stock Options that were immediately exercisable by the
Participant at the date of death shall remain exercisable for one (1)
year following such death. Unless otherwise determined by the Committee,
in the event of an Employee s termination for Cause, all rights under
such Employee s Incentive Stock Options shall expire immediately upon the
effective date of such termination for Cause. Any Option, which, by
operation of this provision, does not meet the requirements of Section
422 of the Code, shall be considered a Non-statutory Stock Option.
<PAGE>
<PAGE>33
8. RESTRICTED STOCK UNITS
Each year, the Committee shall, subject to the limitations of
Section 4, establish fixed limitations as to the percentage of the
Participant s annual incentive bonus that shall be paid in Restricted
Stock Units ( RSU ) and as to the portion of the Participant s annual
incentive bonus such Participant may elect to defer and receive in the
form of RSUs in lieu of such annual incentive bonus. Each RSU represents
the right to receive one share of Common Stock upon the terms and
conditions stated herein. Each RSU awarded to a Participant shall be
credited to a bookkeeping account established and maintained for that
Participant.
(a) Valuation of RSUs. The value of each RSU, as designated by the
Committee, shall be equal to no less than 75% of the Fair Market Value of
each share of the Common Stock on the date of the award.
(b) Participation. Each year, subject to the percent limitations
established by the Committee above the Participant shall be issued a RSU
Subscription Agreement ( Subsequent Agreement) representing the
percentage of the Participant s annual incentive bonus required be paid
in RSUs. Each Subscription Agreement issued under this paragraph shall
specify a deferral period for the RSUs to which it pertains. The
deferral period shall be expressed as a number of whole years, not less
than three, beginning on the award date.
Each year, subject to the percentage limitation established by the
Committee each Participant may elect to receive an award for RSUs under
the Plan during the calendar year by completing a Bonus Deferral and RSU
Subscription Agreement ( Subscription Agreement ). The Subscription
Agreement shall provide that the Participant elects to receive RSUs in
lieu of a specified portion of any annual incentive bonus. Such portion
shall be expressed as a specified percentage of the Participant s actual
bonus amount up to the limitation established by the Committee. Any
percentage specified must be in 5% increments and not more than the limit
established by the Committee and is entirely contingent on the amount of
bonus actually awarded. Each Subscription Agreement, in addition, shall
specify a deferral period for the RSUs to which it pertains. The
deferral period shall be expressed as a number of whole years, not less
than three, beginning on the award date. Subscription Agreements under
this paragraph must be received by the Company no later than September
30th of the fiscal year for which such bonus amount will be determined.
(c) Award of RSUs. Once each year, on the date that annual
incentive bonuses are paid or would otherwise be paid, the Company shall
award RSUs to each Participant as follows: Each Participant s account
shall be credited with a whole number of RSUs determined by dividing the
amount (expressed in dollars) that is determined under his Subscription
Agreement(s) by the value of each RSU awarded on such date. No
fractional RSU will be credited and the amount equivalent in value to the
fractional RSU will be paid out to the Participant currently in cash.
<PAGE>
<PAGE>34
(d) Vesting. A Participant shall be fully vested in each RSU three
years after the date such RSU was awarded.
(e) Settlement After Vesting. With respect to each vested RSU, the
Company shall issue to the Participant one share of Common Stock at the
end of the deferral period specified in the Participant s Subscription
Agreement pertaining to such RSU(s), or upon the Participant s
termination of employment or the termination of the Plan, if sooner.
(f) Voluntary Termination and Termination for Cause. If a
Participant voluntarily terminates his employment with the Company for
reasons other than death or permanent disability, or if the Participant
is terminated for Cause, the Participant s nonvested RSUs shall be
canceled and he shall receive a cash payment equal to the lesser of (a)
the Fair Market Value of such RSUs at the time of grant or (b) an amount
equal to the number of such RSUs multiplied by the Fair Market Value of
the Common Stock on the date of the Participant s termination of
employment.
(g) Involuntary Termination other than for Cause. If a
Participant s employment is terminated by the Company other than for
Cause, or if the Participant s employment terminates as a result of death
or permanent disability, the Participant s nonvested RSUs shall be
canceled. The Participant shall receive cash in an amount equal to the
greater of (a) the Fair Market Value of such RSUs at the time of grant or
(b) an amount equal to the number of such RSUs multiplied by the Fair
Market Value of the Common Stock on the date of the Participant s
termination of employment.
(h) Committee s Discretion. The Committee shall have complete
discretion to determine the circumstances of a Participant s termination
of employment, including whether the same results from voluntary
termination, permanent disability or involuntary termination by the
Company, and the Committee s determination shall be final and binding on
all parties and not subject to review or challenge by any Participant or
other person.
(i) Treatment of Dividends. Whenever dividends (other than
dividends payable only in shares of Stock) are paid with respect to
Stock, each Participant shall be paid an amount in cash equal to the
number of his vested RSUs multiplied by the dividend value per share. In
addition, each Participant s account shall be credited with an amount
equal to the number of such Participant s nonvested RSUs multiplied by
the dividend value per share. Amounts credited with respect to each
nonvested RSU shall be paid, without interest, on the date the
Participant becomes vested in such RSU, or when the Participant receives
payment of his nonvested RSUs.
9. STOCK AWARDS
The Committee may, subject to the limitations of the Plan, make
Stock Awards, which shall consist of the grant of some number of shares
of Common Stock to a Participant. Stock Awards shall be made subject to
the following terms and conditions.
<PAGE>
<PAGE>35
(a) Payment of the Stock Award. Stock Awards may only be made in
whole shares of Common Stock. Stock Awards may only be granted from
shares reserved under the Plan and available for award at the time the
Stock Award is made to the Participant.
(b) Terms of the Stock Award. The Committee shall determine the
dates on which Stock Awards granted to a Participant shall vest and any
terms or conditions which must be satisfied prior to the vesting of any
installment or portion of the Stock Award. Any such terms, or conditions
shall be determined by the Committee as of the Date of Grant.
(c) Termination of Employment or Service. Unless otherwise
determined by the Committee, upon the termination of a Participant s
employment or service for any reason other than termination for Cause,
the Participant s unvested Stock Awards as of the date of termination
shall be forfeited and any rights the Participant had to such unvested
Stock Awards shall become null and void. Unless otherwise determined by
the Committee, or in the event of the Participant s termination for
Cause, all unvested Stock Awards held by such Participant as of the
effective date of such termination for Cause shall be forfeited and any
rights such Participant had to such unvested Stock Awards shall become
null and void.
(d) Non-Transferability.
(i) The recipient of a Stock Award shall not sell,
transfer, assign, pledge, or otherwise encumber
shares subject to Stock Award until full vesting of
such shares has occurred. For purposes of this
section, the separation of beneficial ownership and
legal title through the use of any swap transaction
is deemed to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and
except in the event of the Participant s death or
pursuant to a domestic relations order, a Stock Award
is not transferable and may be earned in his lifetime
only by the Participant to whom it is granted. Upon
the death of a Participant, a Stock Award is
transferable by will or the laws of descent and
distribution. The designation of a beneficiary shall
not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares
of Common Stock subject to such Stock Award may not,
without the written consent of the Committee (which
consent may be given in the Award Agreement), be sold
or otherwise disposed of within six (6) months
following the date of grant of the Stock Award.
<PAGE>
<PAGE>36
(e) Accrual of Dividends. Whenever shares of Common Stock
underlying a Stock Award are distributed to a Participant or beneficiary
thereof under the Plan, such Participant or beneficiary shall also be
entitled to receive, with respect to each such share distributed, a
payment equal to any cash dividends and the number of shares of Common
Stock equal to any stock dividends, declared and paid with respect to a
share of the Common Stock if the record date for determining shareholders
entitled to receive such dividends falls between the date the relevant
Stock Award was granted and the date the relevant Stock Award or
installment thereof is issued.
(f) Voting of Stock Awards. After a Stock Award has been granted
but for which the shares covered by such Stock Award have not yet been
vested, earned and distributed to the Participant pursuant to the Plan,
the Participant shall be entitled to vote such shares of Common Stock
which the Stock Award covers pursuant to the rules and procedures adopted
by the Committee for this purpose.
10. METHOD OF EXERCISE
Subject to any applicable Award Agreement, any Option may be
exercised by the Participant in whole or in part at such time or times,
and the Participant may make payment of the Exercise Price in such form
or forms, including, without limitation, payment by delivery of cash,
Common Stock or other consideration (including, where permitted by law
and the Committee, Awards) having a Fair Market Value on the exercise
date equal to the total Exercise Price, or by any combination of cash,
shares of Common Stock and other consideration, including exercises by
means of a cashless exercise arrangement with a qualifying broker-dealer,
as the Committee may specify in the applicable Award Agreement.
11. RIGHTS OF PARTICIPANTS
No Participant shall have any rights as a shareholder with respect
to any shares of Common Stock covered by an Option until the date of
issuance of a stock certificate for such Common Stock. Nothing contained
herein or in any Award Agreement confers on any person any right to
continue in the employ or service of the Company or an Affiliate or
interferes in any way with the right of the Company or an Affiliate to
terminate a Participant s services.
12. DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any Award to which
the Participant would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Company and may be revoked in
writing. If a Participant fails effectively to designate a beneficiary,
then the Participant s estate will be deemed to be the beneficiary.
<PAGE>
<PAGE>37
13. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock
by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease
in such shares without receipt or payment of consideration by the
Company, or in the event an extraordinary capital distribution is made,
the Committee may make such adjustments to previously granted Awards, to
prevent dilution, diminution, or enlargement of the rights of the
Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common
Stock or other securities that may underlie future Awards under
the Plan;
(b) adjustments in the aggregate number or kind of shares of Common
Stock or other securities underlying Awards already made under
the Plan;
(c) adjustments in the Exercise Price of outstanding Incentive
and/or Non-statutory Stock Options, or any Limited Rights
attached to such Options.
No such adjustments may, however, materially change the value of
benefits available to a Participant under a previously granted Award.
All Awards under this Plan shall be binding upon any successors or
assigns of the Company.
14. TAX WITHHOLDING
Notwithstanding any other provision of the Plan, Awards under this
Plan shall be subject to tax withholding to the extent required by any
governmental authority. Any withholding shall comply with Rule 16b-3 or
any amendment or successive rule. Shares of Common Stock withheld to pay
for tax withholding amounts shall be valued at their Fair Market Value on
the date the Award is deemed taxable to the Participant. Participants
shall be responsible for paying any required tax withholding applicable
under the exercise of an Option.
15. AMENDMENT OF THE PLAN AND AWARDS
The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, provided however, that
provisions governing grants of Incentive Stock Options, unless permitted
by the rules and regulations or staff pronouncements promulgated under
the Code shall be submitted for shareholder approval to the extent
required by such law, regulation or interpretation.
<PAGE>
<PAGE>38
Failure to ratify or approve amendments or modifications by
shareholders shall be effective only as to the specific amendment or
modification requiring such ratification. Other provisions of this Plan
will remain in full force and effect.
No such termination, modification or amendment may adversely affect
the rights of a Participant under an outstanding Award without the
written permission of such Participant.
16. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the Company's
shareholders. The failure to obtain shareholder approval for such
purposes will not effect the validity of the Plan and any Awards made
under the Plan; provided, however, that if the Plan is not approved by
shareholders the Plan shall remain in full force and effect, and any
Incentive Stock Options granted under the Plan shall be deemed to be Non-
statutory Stock Options and any Award intended to comply with Section
162(m) of the Code shall not comply with Section 162(m) of the Code.
17. TERMINATON OF THE PLAN
The right to grant Awards under the Plan will terminate ten (10)
years after the Effective Date. The Board of Directors has the right to
suspend or terminate the Plan at any time, provided that no such action
will, without the consent of a Participant, adversely affect a
Participant s vested rights under a previously granted Award.
18. APPLICABLE LAW
The Plan and all Award Agreements entered into under the Plan shall
be construed in accordance with and governed by the laws of the State of
New York.
<PAGE>
<PAGE>39
KOLLMORGEN CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
Kollmorgen Corporation for the Annual Meeting, May 13, 1998
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
BankBoston, N.A., 100 Federal Street, Boston, Massachusetts, at 10:00 a.m.
on Wednesday, May 13, 1998, 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>40
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 FOUR DIRECTORS.
Class II Nominees are Gideon Argov, Robert J. Cobuzzi, Geoffrey S.
Rehnert, and George P. Stephan.
FOR ALL WITHHELD
NOMINEES* /__/ FROM ALL /__/
NOMINEES
/__/ ________________________________________________________________
(* INSTRUCTION: To withhold authority to vote for any nominee, write
such nominee's name(s) above.)
2. APPROVAL OF THE 1998 MANAGEMENT FOR AGAINST ABSTAIN
STOCK INCENTIVE PLAN. /__/ /__/ /__/
3. 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 ...................
