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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(D)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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KOLLMORGEN CORPORATION
(NAME OF SUBJECT COMPANY)
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KOLLMORGEN CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $2.50 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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500440102
(CUSIP NUMBER OF CLASS OF SECURITIES)
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JAMES EDER
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
KOLLMORGEN CORPORATION
1601 TRAPELO ROAD
WALTHAM, MASSACHUSETTS 02451
(781) 890-5655
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE
PERSONS FILING STATEMENT)
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COPY TO:
CREIGHTON O'M. CONDON
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is Kollmorgen
Corporation, a New York corporation (the "Company"). The address of the
principal executive offices of the Company is 1601 Trapelo Road, Waltham,
Massachusetts 02451, and the telephone number of the Company's principal
executive offices is (781) 890-5655.
The title of the class of equity securities to which this Schedule 14D-9
relates is the common stock, par value $2.50 per share, of the Company (the
"Common Stock"), including the related rights to purchase preferred stock (the
"Rights" and, together with the Common Stock, the "Shares"). As of May 2, 2000,
there were 10,357,822 shares of the Common Stock outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The name, business address and business telephone number of the Company,
which is the subject company and the entity filing this Schedule 14D-9, are set
forth in Item 1 above.
This Schedule 14D-9 relates to the cash tender offer disclosed in the Tender
Offer Statement on Schedule TO, dated May 12, 2000 (the "Schedule TO"), the
Offer to Purchase filed as Exhibit (a)(1) thereto (the "Offer to Purchase") and
the related Letter of Transmittal filed as Exhibit (a)(2) thereto, filed by
Danaher Corporation, a Delaware Corporation ("Danaher"), and King DC
Acquisition Corp., a New York corporation ("Purchaser") and a wholly owned
subsidiary of Danaher. The cash tender offer by Purchaser is for all
outstanding Shares at a purchase price of $23.00 per Share, net to the seller
in cash, without interest (the "Per Share Amount"), on the terms and subject to
the conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal and any amendments or supplements thereto (which collectively
constitute the "Offer"). The Offer is being made by Purchaser pursuant to the
Agreement and Plan of Merger, dated as of May 4, 2000 (the "Merger Agreement"),
by and among the Company, Danaher and Purchaser, a copy of which is filed as
Exhibit (e)(1) hereto and incorporated herein by reference.
The Schedule TO states that the address of the principal executive offices
of Purchaser is 1250 24th Street, N.W., Suite 800, Washington, D.C. 20037. A
copy of the press release issued by Danaher on May 4, 2000 is filed as Exhibit
(a)(5) hereto and incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTION, NEGOTIATIONS AND AGREEMENTS.
Except as described or referred to below, there exists on the date hereof no
material agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (i) the Company,
its executive officers, directors or affiliates or (ii) Purchaser, its
executive officers, directors or affiliates.
THE MERGER AGREEMENT
The following summary description of the Merger Agreement is qualified in
its entirety by reference to the Merger Agreement itself, which we have filed
as Exhibit (e)(1) to this Schedule 14D-9.
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to prior satisfaction or waiver of
the conditions of the Offer, Purchaser will purchase all Shares validly
tendered and not withdrawn pursuant to the Offer. The Merger Agreement provides
that, without the prior written consent of the Company, Purchaser will not (a)
decrease the Offer price or change the form of consideration payable in the
Offer, (b) decrease the number of Shares sought to be purchased in the Offer,
(c) impose additional conditions to the Offer, (d) waive the Minimum
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Condition (as hereinafter defined) or (e) amend any other term of the Offer in
a manner adverse to the holders of Shares. Purchaser may extend the Offer, from
time to time, if, at the then-scheduled Expiration Date of the Offer, any of
the conditions to Purchaser's obligation to accept for payment and pay for all
Shares shall not have been satisfied or waived; provided, however, that in the
event that (a) the required waiting periods under U.S. federal antitrust laws
or under certain applicable foreign statutes or regulations have not expired or
terminated, Purchaser is required to extend the Offer, or (b) the consummation
of the Offer is prohibited or is materially limited pursuant to applicable laws
or pending legal actions (as set forth in paragraphs (a) and (b) of Annex I to
the Merger Agreement), Purchaser is required to extend the Expiration Time (as
defined in the Merger Agreement) for additional periods until the earlier of
five business days after the time such limitations no longer exist or such time
at which such limitations have become final. In addition, if all conditions to
the Offer are satisfied and the number of Shares tendered and not withdrawn is
more than 70%, but less than 90%, of the outstanding number of Shares on a
fully diluted basis, Purchaser shall have the right, in its sole discretion, to
extend the Offer from time to time for up to a maximum of seven additional
business days in the aggregate beyond the latest Expiration Date.
Recommendation. The Company has represented to Danaher in the Merger
Agreement that the Board of Directors of the Company (the "Board") , at a
meeting duly called and held, has (a) determined by unanimous vote that the
Offer and the Merger are fair to and in the best interest of the Company's
shareholders, (b) approved the Offer and the Merger Agreement in accordance
with the NYBCL (as hereinafter defined), (c) recommended acceptance of the
Offer and adoption of the Merger Agreement by the Company's shareholders (if
such adoption is required by applicable law) and (d) taken all other action
necessary to render the rights under the Rights Agreement (as hereinafter
defined) inapplicable to the Offer and the Merger; provided, however, that such
recommendation and approval may be withdrawn, modified or amended prior to the
acceptance of payment of Shares only to the extent that the Board determines in
good faith, after consultation with its outside legal counsel, that failure to
take such action would constitute a breach of the Board's fiduciary obligations
under applicable law. The Company further represented that Salomon Smith Barney
Inc. ("Salomon Smith Barney") delivered to the Board a written opinion dated
May 4, 2000, as to the fairness, from a financial point of view, to the holders
of Shares (other than Danaher and its affiliates) of the cash consideration to
be received by such holders pursuant to the Offer and the Merger.
Directors. The Merger Agreement provides that, subject to compliance with
applicable law, Danaher, promptly upon the payment by Purchaser for Shares
pursuant to the Offer, and from time to time thereafter, is entitled to
designate that number of directors, rounded up to the next whole number, on the
Board as is equal to the product of the total number of directors on the Board
(determined after giving effect to the directors so elected pursuant to such
provisions) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Danaher or its affiliates bears to the total number of
Shares then outstanding. The Company shall, upon request of Danaher, promptly
take all actions necessary to cause designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors;
provided, however, that, prior to the time the Merger becomes effective (the
"Effective Time"), the Board shall always have at least two members who are not
officers, directors, employees or designees of Purchaser or any of its
affiliates, including the Company ("Purchaser Insiders"). If the number of
directors who are not Purchaser Insiders is reduced below two prior to the
Effective Time, the remaining director who is not a Purchaser Insider will be
entitled to designate a person who is not a Purchaser Insider to fill such
vacancy. Following the election or appointment of Danaher's designees and prior
to the Effective Time, any amendment or termination of the Merger Agreement by
the Company, any extension by the Company of the time for performance of any of
the obligations or other acts of Danaher or Purchaser, any waiver of any of the
Company's rights under the Merger Agreement or any other actions taken by the
Company will require the concurrence of a majority of the directors of the
Company then in office who are not Purchaser Insiders (or, in the case where
there are two or fewer directors who are not Purchaser Insiders, the
concurrence of one director who is not a Purchaser Insider) if that amendment,
termination, extension, or waiver, could be reasonably likely to have an
adverse effect on the minority shareholders of the Company.
The Merger. The Merger Agreement provides that, at the Effective Time,
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of Purchaser will cease
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and the Company will continue as the surviving corporation (the "Surviving
Corporation") and a wholly-owned subsidiary of Danaher.
The Company has agreed pursuant to the Merger Agreement that, if required by
applicable law in order to consummate the Merger, it will (a) duly call, give
notice of, convene and hold a special meeting of the Company's shareholders as
soon as practicable following the acceptance for payment of and payment for
Shares by Purchaser pursuant to the Offer for the purpose of adopting the
Merger Agreement; (b) prepare and file with the SEC a preliminary proxy
statement relating to the Merger Agreement, and use its reasonable best efforts
(1) to obtain and furnish the information required to be included by the SEC in
the Proxy Statement (as defined herein) and, after consultation with Danaher,
to respond promptly to any comments made by the Securities and Exchange
Commission ("SEC") with respect to the preliminary proxy statement and to cause
a definitive proxy statement (the "Proxy Statement") to be mailed to its
shareholders and (2) to obtain the necessary approvals of the Merger and
adoption of the Merger Agreement by the Company's shareholders; and (c) (1)
subject to the provisions described under "Recommendation" above, include in
the Proxy Statement the recommendation of the Board that the Company's
shareholders vote in favor of the approval of the Merger Agreement and (2)
include in the Proxy Statement the opinion of Salomon Smith Barney. Danaher has
agreed in the Merger Agreement that it will vote, or cause to be voted, all of
the Shares then owned by it, Purchaser or any of Danaher's other subsidiaries
in favor of the approval of the Merger and the Merger Agreement.
The Merger Agreement further provides that, notwithstanding the foregoing,
if Danaher, Purchaser or any other of Danaher's subsidiaries acquires at least
90% of the outstanding Shares pursuant to the Offer or otherwise, the parties
to the Merger Agreement will take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the acceptance for
payment of and payment for the Shares by the Purchaser pursuant to the Offer
without a meeting of the Company's shareholders in accordance with Section 905
of the NYBCL.
Charter, By-Laws, Directors and Officers. The Certificate of Incorporation
of Purchaser, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation, until amended
afterward in accordance with the provisions of the Certificate of Incorporation
of the Surviving Corporation and applicable law; provided, however, that such
amendments are consistent with the rights of directors and officers to
indemnification and insurance as described below under "Indemnification;
Directors' and Officers' Insurance." The By-Laws of Purchaser in effect at the
Effective Time will be the By-Laws of the Surviving Corporation, until amended
afterward in accordance with the provisions of the By-Laws of the Surviving
Corporation and applicable law. Subject to applicable law, (a) the directors of
Purchaser immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation and will hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal, and (b) the officers of Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation.
Conversion of Securities. By virtue of the Merger and without any action on
the part of the holders of the Shares, at the Effective Time, each Share issued
and outstanding immediately prior to the Effective Time (other than (a) any
Shares held by Danaher, Purchaser, any wholly-owned subsidiary of Danaher or
Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on
the part of the holder of those Shares, will be canceled and retired and will
cease to exist with no payment being made with respect thereto and (b) shares
held by a holder who has not voted in favor of the Merger and who has demanded
appraisal for those shares in accordance with the NYBCL ("Dissenting Shares"))
will be canceled and retired and will be converted into the right to receive
the Merger Consideration (as defined in the Merger Agreement), upon surrender
of the Share Certificate formerly representing that Share. At the Effective
Time, each share of common stock of Purchaser, issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one validly issued, fully paid and non-assessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
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The Merger Agreement provides that, prior to the Effective Time, the Board
(or, if appropriate, any committee of the Board) will adopt appropriate
resolutions and use its reasonable best efforts to provide for the cancellation
or exercise, effective at the Effective Time, of all the outstanding options
granted under any stock option or similar plan of the Company (the "Stock
Plans"), or under any agreement, without any payment therefor except as
otherwise discussed in this section. Immediately prior to the Effective Time,
all options (whether vested or unvested) will be canceled (and to the extent
exercisable shall no longer be exercisable) and will entitle each holder of an
option, in cancellation and settlement therefor, to a payment, if any, in cash
by the Company (less any applicable withholding taxes), at the Effective Time,
equal to the product of (a) the total number of Shares subject to that option
and (b) the excess, if any, of the Merger Consideration (or such greater price
as provided in an applicable option agreement) over the exercise price per
Share subject to that option.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Danaher and
Purchaser with respect to, among other matters, its organization and
qualification, capitalization, subsidiaries, authority, required filings,
consents and approvals, financial statements, public filings, litigation,
compliance with law, employee benefit plans, environmental matters, material
contracts (including government contracts and bids), opinion of financial
advisor, information to be included in this Schedule 14D-9, the Proxy Statement
or the other documents required to be filed with the SEC or any other
governmental authority relating to the Offer and the Merger, intellectual
property, tax status, condition of assets, relationships with customers and
employees and the absence of any material adverse effects on the Company.
Danaher and Purchaser have made customary representations and warranties to the
Company with respect to, among other matters, its organization, qualifications,
authority, required filings, consents and approvals, information to be included
in this Schedule 14D-9, the Proxy Statement or the other documents required to
be filed with the SEC or any other governmental authority relating to the Offer
and the Merger, availability of funds and ownership and lack of prior
activities of Purchaser.
Covenants. The Merger Agreement obligates the Company and its subsidiaries,
from the date of the Merger Agreement until the Effective Time, to conduct
their operations only in the ordinary and usual course of business consistent
with past practice, and obligates the Company and its subsidiaries to use their
reasonable best efforts to preserve intact their business organizations, to
keep available the services of their present officers and key employees and to
preserve the good will of those having business relationships with them. The
Merger Agreement also contains specific restrictive covenants as to certain
impermissible activities of the Company prior to the Effective Time, which
provide that the Company will not (and will not permit any of its subsidiaries
to) take certain actions without the prior written consent of Danaher,
including, among other things, actions related to amendments to the Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation") or
the By-Laws of the Company, issuances or sales of its securities, changes in
capital structure, dividends and other distributions, repurchases or
redemptions of securities, material acquisitions or dispositions, increases in
compensation or adoption of new benefit plans and certain other material events
or transactions, subject to specified exceptions.
Access to Information. The Merger Agreement provides that, subject to
applicable law, until the Effective Time, the Company will give Danaher and
Purchaser and their representatives full access, during normal business hours,
to the offices and other facilities and to the books and records of the Company
and its subsidiaries, and will provide Danaher and Purchaser copies of
documents filed pursuant to U.S. federal or state securities laws during this
period, and, upon reasonable request, other information with respect to the
business and operations of the Company and its subsidiaries.
Efforts. Subject to the terms and conditions provided in the Merger
Agreement, each of the Company, Danaher and Purchaser will cooperate and use
all reasonable efforts to make or cause to be made all filings necessary or
proper under applicable laws and regulations to consummate and make effective
the transactions contemplated by the Merger Agreement.
Each of the parties to the Merger Agreement also has agreed to use its
reasonable best efforts to obtain, as promptly as practicable, all consents of
any governmental authorities or any other person required in connection
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with, and waivers of any violations that may be caused by, the consummation of
the transactions contemplated by the Merger Agreement; provided, however, that
neither Danaher nor the Company would be required to divest, hold separate or
otherwise materially restrict the operations of any of their businesses or
assets, in order to consummate the transactions contemplated by the Offer and
the Merger Agreement.
Public Announcements. The Merger Agreement provides that the Company, on the
one hand, and Danaher and the Purchaser, on the other hand, agree to consult
promptly with each other prior to issuing any press release or otherwise making
any public statement with respect to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, agree to provide to the
other party for review a copy of any such press release or statement, and shall
not issue any such press release or make any such public statement prior to
such consultation and review, unless required by applicable law or any listing
agreement with a securities exchange.
Employee Benefit Arrangements. With respect to employee benefit matters, the
Merger Agreement provides that, from and after the Effective Time, Danaher will
honor, or Danaher will cause to have honored, obligations under certain
specified employee benefit plans of the Company. The Merger Agreement also
provides that for the period ending December 31, 2000, the Surviving
Corporation will continue the employee benefit plans of the Company (other than
those providing equity-based compensation) and thereafter the Surviving
Corporation will provide its employees (and those of its subsidiaries) with
compensation programs and employee benefits which are substantially the same as
or not less favorable in the aggregate than those in effect with respect to
similarly situated employees of Danaher. The Merger Agreement also provides
that through the period ending on the first anniversary of the Effective Time,
severance benefits available to employees of the Company will be no less
favorable than those severance benefits as in effect on the date of the Merger
Agreement. The Merger Agreement also provides that, from and after the
Effective Time, Danaher will provide, or Danaher will cause to provide, to
persons who are retired salaried employees of the Company, as of the Effective
Time, retiree medical benefits that are substantially comparable to those
provided to those retired salaried employees of the Company as of the Effective
Time.
Indemnification; Directors' and Officers' Insurance. Pursuant to the Merger
Agreement, Danaher has agreed that from and after the Effective Time all rights
to indemnification, defense and advancement of funds existing at the date of
the Merger Agreement in favor of individuals who were directors, officers,
employees or agents of the Company or any of its subsidiaries at or prior to
the Effective Time as set forth in the Certificate of Incorporation or By-Laws
of the Company shall survive the Merger and shall continue in full force and
effect, and will not be amended by the Surviving Corporation for a period of
six years from the Effective Time in any manner that would adversely affect the
rights of those individuals, unless such modification is required by law. The
Company, and following the purchase of any Shares by Purchaser, Danaher will,
regardless of whether the Merger becomes effective, indemnify, and after the
Effective Time, will cause the Surviving Corporation, to indemnify those
individuals against all claims or liabilities arising out of actions or
omissions occurring on or prior to the Effective Time. Danaher also has agreed
that it will maintain the directors' and officers' liability insurance policy
in effect as of the date of the Merger Agreement until the fourth anniversary
of the Effective Time, subject to limitations in the Merger Agreement. In the
event that Danaher or the Surviving Corporation consolidates or merges with
another person or transfers its assets to another person, it shall make proper
provisions to assure that these obligations are assumed.
Notification of Certain Matters. Danaher and the Company have agreed to
promptly notify each other of (a) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (1) to cause any representation or
warranty contained in the Merger Agreement to be untrue or inaccurate in any
material respect at any time prior to the Effective Time or (2) to cause any
covenant, condition or agreement under the Merger Agreement not to be complied
with or satisfied and (b) any failure of the Company, Danaher or Purchaser, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under the Merger Agreement. Each of the
Company, Danaher and Purchaser is also required to give prompt notice to the
other parties of any notice or communication from any third party
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alleging that the consent of that third party is or may be required in
connection with the transactions contemplated by the Merger Agreement.
Rights Agreement. The Company has agreed in the Merger Agreement that it
will not (a) redeem the preferred share purchase rights, (b) amend the Rights
Agreement or (c) take any action which would allow any Person (as defined in
the Rights Agreement) other than Danaher or Purchaser to acquire beneficial
ownership of 20% or more of the Shares without causing a Distribution Date or a
Triggering Event (as each such term is defined in the Rights Agreement) to
occur.
State Takeover Laws. The Merger Agreement provides that each party will,
upon the request of the other party, take all reasonable steps to assist in any
challenge by that other party to the validity or applicability to the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger, of any state takeover law.
No Solicitation. The Merger Agreement requires the Company to, and to direct
its affiliates and their respective officers, directors (in their capacity as
such), employees, representatives and agents to, immediately cease any existing
discussions or negotiations with any parties with respect to any Acquisition
Transaction (as defined below). The Merger Agreement further provides that,
prior to the Effective Time, the Company will not authorize or permit any of
its subsidiaries or any of its or its subsidiaries' directors (in their
capacity as such), officers, employees, agents or representatives, directly or
indirectly, to solicit, initiate, encourage or facilitate, or furnish or
disclose non-public information in furtherance of, any inquiries or the making
of any proposal with respect to any merger, liquidation, recapitalization,
consolidation or other business combination involving the Company or its
subsidiaries or acquisition of more than 5% of the capital stock or any
material portion of the assets of the Company or of its subsidiaries, or any
combination of the foregoing (an "Acquisition Transaction"), or negotiate or
engage in substantive discussions with any person with respect to any
Acquisition Transaction, or enter into or resolve to enter into any agreement,
arrangement or understanding with respect to any Acquisition Transaction or
requiring it to abandon, terminate or fail to consummate the Merger or any
other transaction contemplated by the Merger Agreement; provided, however, that
the Company may, prior to the purchase of shares of common stock pursuant to
the Offer, furnish information to, and negotiate or otherwise engage in
substantive discussions with, any person who has delivered a bona fide written
proposal for an Acquisition Transaction if the Board determines in good faith
following consultation with outside counsel and financial advisors, that such a
transaction is reasonably likely to result in a transaction that is superior in
comparison to the Offer and the Merger and the terms of the Merger Agreement to
the Company's shareholders from a financial point of view and to the Company,
taking into account the terms and conditions thereof, the likelihood of
consummation and the time required to complete such transaction (a "Superior
Proposal"), under applicable law, provided that prior to furnishing non-public
information to any such party, (a) the Company shall have entered into a
confidentiality agreement containing confidentiality terms at least as
favorable to the Company as those of the letter agreement dated September 13,
1999 between Danaher and the Company and (b) shall provide Danaher or Purchaser
copies of all proposed written arrangements or understandings, including the
forms of any agreements supplied by third parties, and all applicable financial
statements and evidence of any planned financing with respect to such Superior
Proposal (and a description of all material oral agreements with respect to
such Superior Proposal).
The Merger Agreement further provides that, from and after the execution of
the Merger Agreement, the Company will promptly advise Danaher of any
discussions, negotiations or proposals relating to an Acquisition Transaction,
identify the offeror and furnish to Danaher a copy of any such proposal if it
is in writing or a written summary of any such proposal relating to an
Acquisition Transaction if it is not in writing, and that the Company will
promptly advise Danaher of any significant development relating to any such
proposal, including results of any discussions or negotiations with respect to
that proposal.
Convertible Debentures. The Merger Agreement provides that Danaher will
enter, as of the Effective Time, into such supplemental indentures as may be
required under the terms of the indenture for the 8.75% Convertible Debentures
due 2009.
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Conditions to Consummation of the Merger. Pursuant to the Merger Agreement,
the respective obligations of Danaher, Purchaser and the Company to consummate
the Merger are subject to the satisfaction or waiver, at or before the
Effective Time, of each of the following conditions: (a) the Company's
shareholders will have duly adopted the Merger Agreement if required by
applicable law; (b) Purchaser will have accepted for payment and paid for
Shares in an amount sufficient to meet the Minimum Condition and otherwise
pursuant to the Offer in accordance with the terms of the Merger Agreement;
provided, however, that this condition shall be deemed to be satisfied with
respect to the obligation of Danaher and Purchaser to effect the Merger if
Purchaser's failure to accept for payment or pay for Shares constitutes a
violation of the terms of the Offer or of the Merger Agreement; (c)
consummation of the Merger will not have been restrained, enjoined or
prohibited by any order, judgment, decree, injunction or ruling of a court of
competent jurisdiction or any governmental authority and there will not be any
statute, rule or regulation enacted, promulgated or deemed applicable to the
Merger by any governmental authority which prevents the consummation of the
Merger or has the effect of making the acquisition of Shares in the Merger
illegal; and (d) any applicable waiting period will have expired under the HSR
Act or under any material applicable foreign laws.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding approval
thereof by the Company's shareholders (with any termination by Danaher also
being an effective termination by Purchaser):
(a) by the mutual written consent of Danaher and the Company, by action
of their respective Boards of Directors;
(b) by Danaher or the Company if (1) Purchaser fails to commence the
Offer on or prior to May 15, 2000, or (2) Purchaser will not have accepted
for payment and paid for the Shares pursuant to the Offer in accordance
with the terms of the Offer on or before September 30, 2000, provided,
however, that neither Danaher nor the Company may terminate the Merger
Agreement pursuant to this paragraph if such failure to accept for payment
and pay for the Shares is due to a material breach of the Merger Agreement
by that terminating party;
(c) by Danaher or the Company if the Offer expires pursuant to its terms
and the terms of the Merger Agreement without any Shares being purchased
under the Offer other than due to a breach by the terminating party of the
Merger Agreement;
(d) by Danaher or the Company if any court of competent jurisdiction or
other governmental authority will have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger or the acceptance for payment of, or payment for,
Shares pursuant to the Offer and that order, decree or ruling or other
action will have become final and nonappealable, provided that the party
seeking to terminate the Merger Agreement will have used its reasonable
best efforts to remove or lift such order, decree or ruling;
(e) by the Company if, prior to the acceptance for payment of Shares
pursuant to the Offer, the Board will have determined to recommend a
Superior Proposal to its shareholders and to enter into a binding written
agreement concerning that Superior Proposal after making the determination
described under "No Solicitation" above; provided that the termination
described in this paragraph shall not be permissible unless and until (1)
the Company shall have provided Purchaser and Danaher prior written notice
at least five business days prior to such termination that the Board has
authorized and intends to effect the termination of the Merger Agreement
pursuant to this paragraph, including copies of all proposed written
agreements, arrangements, or understandings, including the forms of any
agreements supplied by third parties and all applicable financial
statements and evidence of any planned financing, with respect to such
Superior Proposal (and a description of all material oral agreements with
respect thereto), (2) the Board shall have determined, in good faith and
after consultation with its legal and financial advisors, that the
foregoing Acquisition Transaction constituted, at the time of such
determination to terminate the Merger Agreement, and still constitutes a
Superior Proposal and (3) prior to such termination the Company shall have
paid to Danaher the Termination Fee (as defined below) and the Expense Fee
(as defined below);
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(f) by Danaher, prior to the purchase of the Shares, if the Board (1)
will have withdrawn or modified (including by amendment of the Schedule
14D-9) in a manner adverse to Purchaser its approval or recommendation of
the Offer, the Merger Agreement or the Merger, (2) will have approved or
recommended any Acquisition Transaction, (3) the Company will have breached
Section 6.8(a) of the Merger Agreement, or (4) will have resolved to effect
any of the foregoing; and
(g) by Danaher, prior to the purchase of the Shares, if the Minimum
Condition will not have been satisfied by the close of business on the
business day immediately preceding September 30, 2000, and an Acquisition
Transaction will have been publicly announced or disclosed.
In the event of the termination of the Merger Agreement in accordance with
its terms, the Merger Agreement will become void and have no effect, without
any liability on the part of any party or its directors, officers or
shareholders, other than certain specified provisions, which shall survive any
such termination; provided, that no party would be relieved from liability for
any willful breach of the Merger Agreement.
Fees and Expenses. Except as provided below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement and the transactions contemplated by the Merger Agreement will
be paid by the party incurring those expenses. In the event that the Merger
Agreement is terminated pursuant to paragraph (e) or (f) under "Termination"
above (other than termination pursuant to paragraph (f)(1) under "Termination"
if no Acquisition Proposal shall have been publicly announced) then the Company
will, within one business day after that termination, pay Danaher a termination
fee of $10,000,000 (the "Termination Fee") plus Danaher's aggregate expenses
not to exceed $1,000,000 (the "Expense Fee"). In the event that the Merger
Agreement is terminated pursuant to such paragraph (f)(1) (if no Acquisition
Proposal shall have been publicly announced) or paragraph (g) under
"Termination" and within such 12 months of the date of that termination of the
Merger Agreement an Acquisition Transaction is consummated, then the Company
will, prior to or simultaneously with the consummation of that transaction, pay
Danaher the Termination Fee and the Expense Fee.
Amendment. The Merger Agreement may be amended by the Company, Danaher and
Purchaser at any time before or after any approval of the Merger Agreement by
the Company's shareholders but, after any such approval, no amendment will be
made which decreases the price to be paid in the Merger or which adversely
affects the rights of the Company's shareholders thereunder without the
approval of the Company's shareholders.
Extension; Waiver. Subject to the Merger Agreement, at any time prior to the
Effective Time, the parties to the Merger Agreement may (a) extend the time for
the performance of any of the obligations or other acts of the other, (b) waive
any inaccuracies in the representations and warranties contained therein of any
other party thereto or in any document, certificate or writing delivered
pursuant to the Merger Agreement by any other party to the Merger Agreement, or
(c) waive compliance by any other party with any of the agreements or
conditions therein.
Effects of Inability to Consummate the Merger. Pursuant to the Merger
Agreement, following the consummation of the Offer and subject to certain other
conditions, Purchaser will be merged with and into the Company. If, following
the Offer, approval of the Company's shareholders is required by applicable law
in order to consummate the Merger of Purchaser with the Company, the Company
will submit the Merger to the Company's shareholders for approval. If the
Merger is submitted to the Company's shareholders for approval, the Merger will
require the approval of the holders of not less than two-thirds majority of the
outstanding Shares, including the Shares owned by Purchaser. Provided that the
Minimum Condition is satisfied without being reduced or waived, Danaher will
own sufficient Shares to ensure that the required vote of the Company's
shareholders will be obtained and that the Merger will be consummated.
If the Merger is consummated, the Company's shareholders who elected not to
tender their the Shares in the Offer will receive the same amount of
consideration in exchange for each Share as they would have received in the
Offer.
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If, following the consummation of the Offer, the Merger is not consummated,
Danaher, which owns 100% of Purchaser's common stock, indirectly will control
the number of Shares acquired by Purchaser pursuant to the Offer. Under the
Merger Agreement, promptly following payment by Purchaser for Shares purchased
pursuant to the Offer, and from time to time thereafter, subject to applicable
law, the Company has agreed to take all actions necessary to cause a majority
of the directors of the Company to consist of persons designated by Danaher
(whether, at the election of the Company, by means of increasing the size of
the Board or seeking the resignation of directors and causing Danaher designees
to be elected). As a result of its ownership of such Shares and right to
designate nominees for election to the Board, Danaher, indirectly, will be able
to influence decisions of the Board and the decisions of Purchaser as a
shareholder of the Company. This concentration of influence in one shareholder
may adversely affect the market value of the Shares.
If Danaher controls more than 50% of the outstanding Shares following the
consummation of the Offer but the Merger is not consummated, shareholders of
the Company, other than those affiliated with Danaher, will lack sufficient
voting power to elect directors or to cause other actions to be taken which
require majority approval. If, for any reason following completion of the
Offer, the Merger is not consummated, Danaher and Purchaser reserve the right
to acquire additional Shares through private purchases, market transactions,
tender or exchange offers or otherwise on terms and at prices that may be more
or less favorable than those of the Offer, or, subject to any applicable legal
restrictions, to dispose of any or all Shares acquired by them.
EMPLOYMENT AGREEMENTS AND OTHER EMPLOYMENT MATTERS
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Rule 14f-1 under the Securities Exchange Act of 1934, as amended (the
"Information Statement") that is attached as Annex II to this Schedule 14D-9
and is incorporated herein by reference.
Employment Contracts, Termination Of Employment And Change Of Control
Arrangements. The Company entered into employment agreements with Messrs.
Gideon Argov, Robert J. Cobuzzi and Willy L. Verbrugghe at the time each of
them joined the Company. Each agreement protects the Company from disclosure of
confidential information by the executive and contains the executive's covenant
not to compete with the Company following termination of employment under
certain circumstances. The agreement with Mr. Argov, the Company'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 Company 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 agreements with Messrs. Cobuzzi and Verbrugghe, respectively, the Company's
Chief Financial Officer, Treasurer and Senior Vice President, and Vice
President and President of the Industrial & Commercial Products Group, provide
for the initial annual base salary on the date of hire, describe the employee
benefit plans under which each is entitled to participate and provide that in
the event of termination, other than for "Cause", each individual is entitled
to his current base salary, in lump sum. In addition, pursuant to his
agreement, Mr. Verbrugghe received a bonus of $75,000 upon joining the Company.
The Company has entered into employment agreements with each of Messrs.
Argov, Cobuzzi, Verbrugghe, Daniel F. Desmond and James A. Eder that will
trigger a term of employment of two years upon a Change of Control (as
hereinafter defined). 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
Company to the executive is determined to be subject
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to the excise tax imposed by Section 4999 of the Internal Revenue Code, he is
entitled to receive from the Company 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, unless
approved by the incumbent directors (other than as a result of a contested
election), and (iii) certain reorganizations, mergers, consolidations,
liquidations or dissolutions.
Pension Plan. All salaried employees with one year of service, including
executive officers of the Company, are participants in the Kollmorgen
Corporation Salaried Employees Retirement Plan (the "Plan"). The Plan is a
defined benefit plan, and the benefits are not reduced by Social Security
benefits or by payments from other sources. In the event of a termination of
the Plan following a Change in Control (as defined in the Plan), any assets of
the Plan remaining after provision is made for all benefits thereunder will be
used to supplement such benefits. This provision may not be amended or
terminated following a Change in Control. Benefits under the Plan are based
upon years of service and the highest consecutive five year average annual base
salaries. For the year ended December 31, 1999, the credited years of service
of Messrs. Argov, Cobuzzi, Desmond, Eder and Verbrugghe under the Plan are 9,
8, 26, 23, and 0 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 2000
<TABLE>
<CAPTION>
FINAL AVERAGE
EARNINGS AT 30 OR
RETIREMENT 15 20 25 MORE
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$100,000 $24,345 $32,460 $40,575 $48,690
125,000 31,095 41,460 51,825 62,190
150,000 37,845 50,480 63,075 75,690
175,000 40,545 54,060 67,575 81,090
200,000 40,545 54,060 67,575 81,090
250,000 40,545 54,060 67,575 81,090
300,000 40,545 54,060 67,575 81,090
350,000 40,545 54,060 67,575 81,090
400,000 40,545 54,060 67,575 81,090
</TABLE>
Annual benefits provided by the Company 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
$170,000 ($160,000 for years 1999, 1998, 1997; $150,000 for 1996) per annum and
limits annual benefit payments under such plans to $130,000. These limits and
prohibitions are indexed for inflation.
CONSULTING AGREEMENTS
At the time Danaher entered into the Merger Agreement, Danaher also entered
into a consulting agreement with Gideon Argov, which consulting agreement would
become effective on the date of the consummation of the Merger.
Mr. Argov's consulting agreement provides that he will serve as a consultant
for a period of six years beginning with the consummation of the Merger. Mr.
Argov's primary responsibilities are likely to be assisting in the transition
of the Company to Danaher management and assisting with intellectual property
claims and a
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pending acquisition. The consulting agreement also provides for a non-
competition period during the consulting period and for two years thereafter.
Mr. Argov's consulting agreement is not terminable by Danaher for any reason
other than the death or permanent disability of Mr. Argov, or a continued
material breach by Mr. Argov of the provisions of the consulting agreement,
which breach is (if curable) not cured by Mr. Argov within 10 days after
Danaher has delivered to him a written notice setting forth the nature of that
breach in reasonable detail. Pursuant to the consulting agreement, Mr. Argov
will be paid a consulting fee of $1,000,000 at the Effective Time and
$78,991.34 per month thereafter for the duration of the consulting period. Mr.
Argov will also be paid 2% of the value of each settlement or judgment reached
by or awarded to the Surviving Corporation or any of its affiliates at any time
prior to the sixth anniversary of the Effective Time in respect of certain
legal actions initiated by the Company, as well as a finder's fee of 2% of the
aggregate value of the consideration paid by the Company in connection with the
consummation of a pending acquisition.
The Company understands that Danaher has communicated its intent to enter
into consulting agreements with certain executives of the Company following
consummation of the Merger.
AMENDMENT TO THE RIGHTS AGREEMENT
The Company and Fleet National Bank f/k/a BankBoston, N.A., parties to the
Amended and Restated Rights Agreement, dated as of October 22, 1998, as amended
by Amendment No. 1 to the Amended and Restated Rights Agreement, dated as of
December 13, 1999 (the "Rights Agreement"), further amended the Rights
Agreement by the terms and conditions set forth in Amendment No. 2 to the
Amended and Restated Rights Agreement, dated as of May 4, 2000 ("Amendment No.
2"), a copy of which amendment is included as Exhibit (e)(10) hereto as is
incorporated herein by reference. Pursuant to Amendment No. 2, neither Danaher,
Purchaser, nor any of their Affiliates or associates shall be deemed to be an
Acquiring Person (as such terms are defined in the Rights Agreement) solely by
virtue of (a) the approval, execution, delivery or performance of the Merger
Agreement, (b) the making or consummation of the Offer or the Merger in
accordance with the provisions of the Merger Agreement or any public
announcement relating thereto, (c) the acquisition of the Shares in accordance
with the provisions of the Merger Agreement pursuant to the Offer or the Merger
or (d) the consummation of any other transaction to be effected pursuant to the
Merger Agreement in accordance with the provisions thereof. A copy of the
Rights Agreement is included as Exhibits (e)(8) and (e)(9) hereto and is
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
RECOMMENDATION
On May 4, 2000, the Board unanimously determined that the Offer and the
Merger are fair to and in the best interests of the shareholders of the
Company, approved and adopted the Merger Agreement and recommends that the
Company's shareholders accept the Offer and tender their shares.
BACKGROUND
In August 1999, representatives of Lehman Brothers Inc. ("Lehman"), as
financial advisor to Danaher, contacted Salomon Smith Barney, financial advisor
to the Company, to indicate an interest in the Company. Lehman indicated to
Salomon Smith Barney that a representative of Danaher would be interested in
meeting with a representative of the Company to discuss a possible business
combination.
On September 10, 1999, Mr. George M. Sherman, the President and Chief
Executive Officer of Danaher, met with Mr. Gideon Argov, the Chairman of the
Board, President and Chief Executive Officer of the Company. At that meeting,
Mr. Sherman indicated that Danaher would be interested in considering a
possible acquisition of the Company, subject to the satisfactory completion of
due diligence investigations and the negotiation of a definitive merger
agreement. Danaher subsequently signed a confidentiality and standstill
agreement with the Company on September 13, 1999.
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Representatives of Danaher and the Company met again on September 23, 1999.
The September 23, 1999 meeting was attended by Mr. Argov, other members of the
Company's senior management and representatives of Salomon Smith Barney, and
Mr. Sherman, other members of Danaher's senior management and representatives
of Lehman. The Company made a presentation concerning its business at this
meeting.
Over the period between September 23, 1999 and March 1, 2000,
representatives of the Company provided information to Danaher regarding its
business.
On March 1, 2000, Mr. Sherman and Mr. Argov met to discuss further the
extent and nature of Danaher's interest in acquiring the Company. At that
meeting, Mr. Sherman and Mr. Argov agreed to schedule another meeting between
representatives of Danaher and the Company at which an additional presentation
of the business of the Company would be made.
On March 8, 2000, Mr. Argov, Mr. Robert J. Cobuzzi, Vice President and Chief
Financial Officer of the Company, Mr. Keith Jones, Corporate Controller and
Chief Accounting Officer of the Company and Mr. James A. Eder, Vice President,
Secretary and General Counsel of the Company and representatives of Salomon
Smith Barney met with Mr. Sherman and other members of Danaher's senior
management and representatives of Lehman for an in-depth presentation on the
business of the Company.
On March 30, 2000, Mr. Argov and Mr. Sherman met to discuss a possible
business combination of the two companies.
On April 7, 2000, Mr. Sherman and Mr. Argov again discussed the possible
business combination of the two companies. Mr. Sherman indicated that Danaher
would be willing to consider making an offer for all outstanding Shares for a
price in the low $20s, subject to satisfactory completion of due diligence and
agreement between Danaher and the Company on other aspects of the proposed
transaction.
Over the two weeks following the April 7, 2000 meeting, representatives of
Danaher and the Company spoke periodically, continued discussions regarding the
proposed purchase price and agreed to the overall structure of the transaction,
subject to completion of due diligence and negotiation of other terms and
conditions of the transaction. The companies also agreed on a due diligence
schedule. It was during this period that the possibility of a Consulting
Agreement between Mr. Argov and Danaher was raised.
On April 18, 2000, the Board held a meeting at which the management of the
Company and representatives of Salomon Smith Barney updated the Board
concerning the discussions with Danaher. At this meeting, the Board indicated
the Company's officers and other representatives should continue to pursue
discussions with Danaher concerning a possible business combination, provided
that the purchase price would be no less than $23 per Share and satisfactory
agreement was reached on other terms and conditions relating to the
transaction, which would be submitted to the Board for final approval.
On April 21, 2000, the Board held a meeting at which the management of the
Company updated the Board concerning the discussions with Danaher.
On April 24, 2000, representatives of the Company made another presentation
to representatives of Danaher on the business of the Company.
Between April 24, 2000 and May 4, 2000, Danaher conducted its due diligence
investigations of the Company. During that period, the Company's
representatives and Danaher's representatives negotiated the terms of the
Merger Agreement. In addition, the terms of the Consulting Agreement were also
negotiated during this period.
On May 3, 2000, the Board of Directors of Danaher were presented with a
discussion of the results of due diligence and the terms of the proposed
transaction by Mr. Sherman and other members of Danaher's
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<PAGE>
management. At this meeting, the Board of Directors of Danaher unanimously
approved the Merger Agreement and Consulting Agreement, subject to satisfactory
negotiation of the final terms of each.
On May 3, 2000 and again on May 4, 2000, the Board met to discuss the status
of negotiations with Danaher and the terms of the proposed business
combination. At the May 3, 2000 meeting, a form of the Merger Agreement was
presented to and reviewed with the Board by the Company's attorneys. Also at
this meeting, Salomon Smith Barney reviewed with the Board its financial
analysis of the Per Share Amount. At the May 4, 2000 meeting, the Board
received an update with respect to the proposed transaction from the Company's
attorneys, and Salomon Smith Barney reviewed and delivered to the Board its
opinion as to the fairness, from a financial point of view, of the Per Share
Amount to the holders of Shares (other than Danaher and its affiliates). After
full discussion, the Board determined that the Offer and the Merger were in the
best interests of the Company's shareholders and unanimously approved the Per
Share Amount, Merger Agreement and related transactions.
The Merger Agreement was finalized and executed, and a press release
announcing the proposed Offer and the Merger was issued, on May 4, 2000.
REASONS FOR THE BOARD'S RECOMMENDATION
In adopting the Merger Agreement and approving the transactions contemplated
thereby, and recommending that shareholders accept the Offer and tender their
Shares pursuant to the Offer, and approve the Merger and adopt the Merger
Agreement, the Board considered a number of factors, including, in addition to
the factors mentioned in "Background of the Offer" above in this Item 4, the
following:
1. The financial and other terms of the Offer and the Merger Agreement.
2. The current and historical financial condition and results of
operations of the Company, as well as the prospects and strategic
objectives of the Company, including the risks involved in achieving those
prospects and objectives, and the current and expected conditions in the
industry in which the Company's business operates.
3. That the Per Share Amount to be received in the Offer and the Merger
represents a premium of 42.64% over the closing price of the Company's
Common Stock ($16 1/8) on the NYSE on May 3, 2000 (the last full trading
day prior to the execution of the Merger Agreement), a 75.53% premium over
the average closing sales price for Shares for the 20 trading days ended
May 3, 2000 and a 36.30% premium over the highest closing price per share
of the Company's Common Stock over the last 15 months. The Board also
considered the form of consideration to be paid to the holders of the
Shares in the Offer and the Merger, and the certainty of value of such cash
consideration compared to stock. The Board was aware that the consideration
received by holders of Shares in the Offer and the Merger would be taxable
to such holders for federal income tax purposes.
4. The Board's review with respect to the Company's future prospects,
including trends in the industry in which the Company's business operates
and the strategic alternatives available to the Company, including the
Company's alternative to remain an independent public company and the
possibility of acquisitions or mergers with other companies in such
industries and other extraordinary corporate transactions, as well as the
risks and uncertainties associated with such alternatives.
5. The opinion of Salomon Smith Barney dated May 4, 2000 to the Board to
the effect that, as of such date and based upon and subject to certain
matters stated in such opinion, the Per Share Amount to be received in the
Offer and the Merger by holders of Shares (other than Danaher and its
affiliates) was fair, from a financial point of view, to such holders. The
full text of Salomon Smith Barney's written opinion dated May 4, 2000,
which sets forth the assumptions made, matters considered and limitations
on the review undertaken by Salomon Smith Barney, is attached hereto as
Annex I and is incorporated herein by reference. SALOMON SMITH BARNEY'S
OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW,
OF THE PER SHARE AMOUNT TO BE RECEIVED IN THE OFFER AND THE MERGER BY
HOLDERS OF SHARES
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(OTHER THAN DANAHER AND ITS AFFILIATES) AND IS NOT INTENDED TO CONSTITUTE,
AND DOES NOT CONSTITUTE, A RECOMMENDATION AS TO WHETHER ANY STOCKHOLDER
SHOULD TENDER SHARES PURSUANT TO THE OFFER OR AS TO ANY OTHER MATTER
RELATING TO THE OFFER OR THE MERGER. HOLDERS OF SHARES ARE URGED TO READ
SUCH OPINION CAREFULLY IN ITS ENTIRETY.
6. The limited number and nature of the conditions to Danaher's and
Purchaser's obligation to consummate the Offer and the Merger and the
limited risk of non-satisfaction thereof.
7. The absence of a financing condition to the Offer and the perceived
ability of Danaher and Purchaser to consummate the Offer, the Merger and
the transactions contemplated by the Merger Agreement.
8. The provisions of the Merger Agreement which permit the Board, in the
exercise of its fiduciary duties, to consider an unsolicited superior
proposal if one were to be made. The Board considered that the terms of the
Merger Agreement permit the Company to terminate the Merger Agreement to
enter into such superior transaction involving the Company if the Company
pays Danaher a $10,000,000 termination fee and expenses of up to
$1,000,000, and gives Danaher five business days prior to terminating the
Merger Agreement.
9. The strong likelihood of obtaining the necessary regulatory approvals
required to consummate the Merger, including antitrust approvals.
10. The availability of appraisal rights under Section 910 of the New
York Business Corporation Law for dissenting shareholders.
11. The other terms and conditions of the Offer and the Merger.
12. The interest of certain Company executives in the Offer and the
Merger (see Item 3).
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation and approval of the Offer,
the Merger, the Merger Agreement and the transactions contemplated thereby, the
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors.
INTENT TO TENDER
To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to tender all shares of
the Common Stock which are held of record or beneficially owned by such persons
pursuant to the Offer, other than the Common Stock, if any, held by such
persons which, if tendered, could cause such person to incur liability under
the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
The Company has retained Salomon Smith Barney to act as its financial
advisor in connection with the Offer and the Merger. Pursuant to the terms of
Salomon Smith Barney's engagement, the Company has agreed to pay Salomon Smith
Barney an aggregate financial advisory fee equal to 1.5% of the total
consideration, including liabilities assumed, payable in the Offer and the
Merger. The Company also has agreed to reimburse Salomon Smith Barney for
reasonable travel and other expenses, including the reasonable fees and
expenses of its legal counsel, and to indemnify Salomon Smith Barney and
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of Salomon Smith Barney's engagement. In
the ordinary course of business, Salomon Smith Barney and its affiliates
(including Citigroup Inc. and its affiliates) may actively trade or hold the
securities of the Company and Danaher for their own account or for the account
of customers and, accordingly, may at any time hold a long or short position in
such securities.
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Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to shareholders on its behalf concerning the Offer or the
Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Except as set forth below, during the past sixty days, no transactions in
the Common Stock have been effected by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
On March 31, 2000, 219, 218, 218, 218, 436, and 218 shares of Common Stock
were issued by the Company to Jerald G. Fishman, Herbert L. Henkel, James H.
Kasschauss, J. Douglas Maxwell Jr., Robert N. Parker, Geoffrey S. Rehnert and
George P. Stephan, respectively, as director fee shares.
ITEM 7. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS.
SUBJECT COMPANY NEGOTIATIONS
Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in (i) a tender offer for or other acquisition of securities
by or of the Company; (ii) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Company or any subsidiary thereof;
(iii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary thereof; or (iv) any material change in the present
capitalization, indebtedness or dividend rate or policy of the Company.
TRANSACTIONS AND OTHER MATTERS
Except as set forth in this Schedule 14D-9, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to
in Item 7 above.
ITEM 8. ADDITIONAL INFORMATION.
SECTION 14(F) INFORMATION STATEMENT
The Information Statement attached as Annex II hereto is being furnished in
connection with the possible designation by Purchaser pursuant to the Merger
Agreement of certain persons to be appointed to the Board other than at a
meeting of the Company's shareholders.
NEW YORK BUSINESS CORPORATION LAW
Section 912. As a New York corporation, the Company is subject to Section
912 of the New York Business Corporation Law (the "NYBCL"). In general, Section
912 of the NYBCL would prevent an "interested shareholder" (generally defined
as a person beneficially owning 20% or more of a corporation's voting stock)
from engaging in a business combination with a New York corporation for five
years following the date such person became an interested shareholder unless
before the person became an interested shareholder, the board of directors of
the corporation approved the transaction in which the interested shareholder
became an interested shareholder or approved the business combination.
Following such five year period, the corporation may engage in a business
combination with an interested shareholder if (a) the business combination is
approved by the affirmative vote of the holders of the outstanding voting stock
not beneficially owned by the interested shareholder or (b) in addition to
certain other requirements, the consideration to be received by the holders of
common stock and preferred stock is equal to or greater than the higher of (i)
the highest price paid the interested shareholder for the common stock or the
preferred stock, as the case may be, during the five-year period prior to the
announcement of the business combination or the date the interested
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shareholder became an interested shareholder, whichever is higher or (ii) the
market value per share of common stock or preferred stock, as the case may be,
on the date of announcement of the business combination or the date the
interested shareholder became an interested shareholder, whichever is higher,
plus interest from such date until the date of consummation.
Prior to the execution of the Merger Agreement, the Board approved the
Merger Agreement and the transactions contemplated thereunder, including the
Offer and the Merger, and, therefore, the restrictions of Section 912 of the
NYBCL are inapplicable to the Offer, the Merger and the related transactions.
Section 905. Under Section 905 of the NYBCL, if Purchaser acquires, pursuant
to the Offer or otherwise, at least 90% of the outstanding shares of Common
Stock, Purchaser will be able to effect the Merger after consummation of the
Offer without a vote of the Company's shareholders. However, if Purchaser does
not acquire at least 90% of the Shares pursuant to the Offer or otherwise and a
vote of the Company's shareholders is required under New York law, a
significantly longer period of time will be required to effect the Merger.
REGULATORY APPROVALS
United States Antitrust Compliance. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the rules that have
been promulgated by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the offer is subject to such
requirements.
On May 11, 2000, each of Danaher and the Company filed with the FTC and the
Antitrust Division a Notification and Report Form with respect to the Offer and
the Merger. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares pursuant to the Offer may not be consummated until the
expiration of a 15-calendar day waiting period, unless both the FTC and the
Antitrust Division terminate the waiting period prior thereto. However, prior
to such time, the Antitrust Division or the FTC may extend the waiting period
by requesting additional information or documentary material relevant to the
Offer from Purchaser. If such a request is made, the waiting period will be
extended until the tenth day after substantial compliance by Purchaser with
such request. Thereafter, the waiting period may be extended only by court
order or by agreement of the parties. Any extension of the waiting period will
not give rise to any withdrawal rights not otherwise provided for by applicable
law.
The FTC and the Antitrust Division scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares by Purchaser
pursuant to the Offer. At any time before or after the consummation of any such
transactions, the Antitrust Division or the FTC could take such action under
the antitrust laws of the United States as it deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or seeking divestiture of the Shares so acquired or
seeking divestitures of substantial assets of Danaher or the Company. Private
parties (including individual States) may also bring legal actions under the
antitrust laws of the United States. The Company does not, and Purchaser has
advised the Company that it does not, believe that the consummation of the
Offer will result in a violation of any applicable antitrust laws. However,
there can be no assurance that a challenge to the Offer on antitrust grounds
will not be made, or if such a challenge is made, what the result will be.
Foreign Antitrust Approvals. The Company owns property and conducts business
in a number of other foreign countries and jurisdictions. In connection with
the acquisition of the Shares in the Offer or the Merger, a notification is
required by German competition law which Danaher will make shortly to the
Federal Cartel Office. The purchase of Shares in the Offer may not be completed
until the expiration of at least a thirty day waiting period following the
German notification, unless that waiting period is earlier terminated. The laws
of certain of those foreign countries and jurisdictions may require the filing
of information with, or the obtaining of the approval or consent of,
governmental authorities in such countries and jurisdictions. The governments
in
16
<PAGE>
those countries and jurisdictions might attempt to impose additional conditions
on the Surviving Corporation's operations conducted in those countries and
jurisdictions as a result of the acquisition of the Shares in the Offer or the
Merger. If such approvals or consents are found to be required the parties
intend to make the appropriate filings and applications. In the event such a
filing or application is made for the requisite foreign approvals or consents,
we cannot be certain that such approvals or consents will be granted, and, if
such approvals or consents are received, we cannot be certain as to the date of
those approvals or consents. In addition, we cannot be certain that compliance
or noncompliance will not have adverse consequences for the Company or any
subsidiary after purchase of the Shares pursuant to the Offer or the Merger.
ITEM 9. EXHIBITS.
<TABLE>
<C> <S>
Exhibit (a)(1) Offer to Purchase, dated May 12, 2000 (incorporated by
reference to Exhibit (a)(1) to the Schedule TO of Purchaser
filed on May 12, 2000)
Exhibit (a)(2) Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the Schedule TO of Purchaser filed on May 12, 2000)
Exhibit (a)(3)* Letter to shareholders of the Company, dated May 12, 2000
Exhibit (a)(4)* Opinion of Salomon Smith Barney Inc., dated May 4, 2000
(included as Annex I to this Schedule 14D-9)
Exhibit (a)(5) Press Release issued by Danaher on May 4, 2000 (incorporated
by reference to Exhibit (a)(6) to the Schedule TO of Purchaser
filed on May 4, 2000)
Exhibit (e)(1) Agreement and Plan of Merger, dated as of May 4, 2000, by and
among Danaher, Purchaser and the Company (incorporated by
reference to Exhibit (d)(1) to the Schedule TO of Purchaser
filed on May 12, 2000)
Exhibit (e)(2) Confidentiality Agreement, dated as of September 13, 1999 by
and between Danaher and the Company (incorporated by reference
to Exhibit (d)(2) to the Schedule TO of Purchaser filed on May
12, 2000)
Exhibit (e)(3) Letter employment agreement, dated as of May 21, 1991, for
Gideon Argov (incorporated by reference to Exhibit 10(c) to
the Annual Report on Form 10-K of the Company for the year
ended December 31, 1991)
Exhibit (e)(4) Letter employment agreement, dated as of July 1, 1991, for
Robert J. Cobuzzi (incorporated by reference to Exhibit 10(c)
to the Annual Report on Form 10-K of the Company for the year
ended December 31, 1991)
Exhibit (e)(5) Letter employment agreement, dated as of July 27, 1999, for
Willy L. Verbrugghe (incorporated by reference to Exhibit
10(v) to the Annual Report on Form 10-K of the Company for the
year ended December 31, 1999)
Exhibit (e)(6) Form of Retention Agreement, as amended, entered into between
the Company and Messrs. Argov, Cobuzzi, Desmond, Eder, Jones
and Verbrugghe (incorporated by reference to Exhibit 10(f) to
the Annual Report on Form 10-K of the Company for the year
ended December 31, 1998)
Exhibit (e)(7) Consulting Agreement, dated as of May 4, 2000, between Gideon
Argov and Danaher (incorporated by reference to Exhibit (d)(3)
to the Schedule TO of Purchaser filed on May 12, 2000)
Exhibit (e)(8) Amended and Restated Rights Agreement, dated as of October 22,
1998, between the Company and BankBoston, N.A., as Rights
Agent (incorporated by reference to Exhibit 4 to Form 8-K of
the Company filed on November 4, 1998)
Exhibit (e)(9) Amendment No. 1 to the Amended and Restated Rights Agreement,
dated as of December 13, 1999, between the Company and
BankBoston, N.A., as Rights Agent (incorporated by reference
to Exhibit 1 to Form 8-K of the Company filed on January 3,
2000)
</TABLE>
17
<PAGE>
<TABLE>
<C> <S>
Exhibit (e)(10) Amendment No. 2 to the Amended and Restated Rights Agreement,
dated as of May 4, 2000 between the Company and Fleet National
Bank f/k/a BankBoston, N.A., as Rights Agent (incorporated by
reference to Exhibit 4.1 to Form 8-K of the Company filed on
May 9, 2000)
Exhibit (e)(11) Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934, as amended and Rule 14f-1
thereunder (included as Annex II to this Schedule 14D-9)
</TABLE>
* Included in copy mailed to shareholders.
18
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: May 12, 2000
Kollmorgen Corporation
/s/ James A. Eder
By: _________________________________
Name: James A. Eder
Title: Vice President, General
Counsel and Secretary
19
<PAGE>
ANNEX I
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
May 4, 2000
The Board of Directors
Kollmorgen Corporation
1601 Trapelo Road
Waltham, Massachusetts 02154
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Kollmorgen Corporation
("Kollmorgen") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of May 4, 2000 (the "Merger Agreement"), among Danaher
Corporation ("Danaher"), King DC Acquisition Corp., a wholly owned subsidiary
of Danaher ("Sub"), and Kollmorgen. As more fully described in the Merger
Agreement, (i) Danaher will cause Sub to commence a tender offer to purchase
all outstanding shares of the common stock, par value $2.50 per share, of
Kollmorgen (the "Kollmorgen Common Stock") at a purchase price of $23.00 per
share, net to the seller in cash (the "Cash Consideration" and, such tender
offer, the "Tender Offer") and (ii) subsequent to the Tender Offer, Sub will be
merged with and into Kollmorgen (the "Merger" and, together with the Tender
Offer, the "Transaction") and each outstanding share of Kollmorgen Common Stock
not previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Kollmorgen and certain senior officers and other
representatives and advisors of Danaher concerning the business, operations and
prospects of Kollmorgen. We examined certain publicly available business and
financial information relating to Kollmorgen as well as certain financial
forecasts and other information and data for Kollmorgen which were provided to
or otherwise discussed with us by the management of Kollmorgen. We reviewed the
financial terms of the Transaction as set forth in the Merger Agreement in
relation to, among other things: current and historical market prices and
trading volumes of Kollmorgen Common Stock; the historical and projected
earnings and other operating data of Kollmorgen; and the capitalization and
financial condition of Kollmorgen. We considered, to the extent publicly
available, the financial terms of certain other similar transactions recently
effected which we considered relevant in evaluating the Transaction and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Kollmorgen. In addition to the
foregoing, we conducted such other analyses and examinations and considered
such other information and financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have been advised by the management of Kollmorgen that such forecasts and
other information and data were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of
Kollmorgen as to the future financial performance of Kollmorgen. We have not
made or been provided with an independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of Kollmorgen nor have we made any
physical inspection of the properties
I-1
<PAGE>
The Board of Directors
Kollmorgen Corporation
May 4, 2000
Page2
or assets of Kollmorgen. In connection with our engagement, we were not
requested to, and we did not, solicit third party indications of interest in
the possible acquisition of all or a part of Kollmorgen. We express no view as
to, and our opinion does not address, the relative merits of the Transaction as
compared to any alternative business strategies that might exist for Kollmorgen
or the effect of any other transaction in which Kollmorgen might engage. Our
opinion is necessarily based upon information available to us, and financial,
stock market and other conditions and circumstances existing and disclosed to
us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to Kollmorgen in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We and our affiliates have in the past provided services to
Kollmorgen and Danaher unrelated to the proposed Merger, for which services we
have received compensation. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of Kollmorgen and Danaher
for our own account or for the account of our customers and, accordingly, may
at any time hold a long or short position in such securities. In addition, we
and our affiliates (including Citigroup Inc. and its affiliates) may maintain
relationships with Kollmorgen, Danaher and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Kollmorgen in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender shares of Kollmorgen Common Stock in the Tender Offer or how such
stockholder should vote on any matters relating to the proposed Transaction.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Cash Consideration to be
received in the Transaction by the holders of Kollmorgen Common Stock (other
than Danaher and its affiliates) is fair, from a financial point of view, to
such holders.
Very truly yours,
/s/ Salomon Smith Barney Inc.
SALOMON SMITH BARNEY INC.
I-2
<PAGE>
ANNEX II
KOLLMORGEN CORPORATION
1601 TRAPELO ROAD
WALTHAM, MASSACHUSETTS 02451
----------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
----------------
NO VOTE OR OTHER ACTION OF KOLLMORGEN CORPORATION
SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION
STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED
NOT TO SEND A PROXY TO KOLLMORGEN CORPORATION
----------------
This Information Statement is being mailed on or about May 12, 2000 as part
of a Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Kollmorgen Corporation, a New York corporation (the "Company") to
the holders of shares of the common stock of the Company, par value $2.50 per
share (the "Common Stock"). Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Schedule 14D-9. This
Information Statement is being furnished in connection with the possible
designation by Danaher Corporation, a Delaware corporation ("Danaher"), and
King DC Acquisition Corp., a New York corporation and a wholly owned subsidiary
of Danaher ("Purchaser"), of persons to the Board of Directors of the Company
(the "Board"). Such designation is to be made pursuant to an Agreement and Plan
of Merger, dated May 4, 2000 (the "Merger Agreement"), among the Company,
Danaher and Purchaser.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, and from time to time thereafter, Danaher is entitled to
designate such number of directors, rounded up to the next whole number, as
will give Danaher representation on the Board (including committees of the
Board) that is proportionate to its ownership interest in the Company (the
"Danaher Designees"). Notwithstanding the foregoing, after the appointment of
the Danaher Designees to the Board, at all times prior to the time and date on
which the Merger becomes effective, the Board will include at least two
directors who are not officers, directors, employees or designees of Danaher or
any of its affiliates, including the Company (the Purchaser Insiders), and any
amendment or termination of the Merger Agreement by the Company, any extension
by the Company of the time for performance of the obligations of Danaher or
Purchaser or waiver of any of the Company's rights under the Merger Agreement
will require approval of a majority of directors who are not Purchaser Insiders
if such amendment, termination, extension or waiver could be reasonably likely
to have an adverse effect on the minority shareholders of the Company. The
Merger Agreement provides that, at the request of Danaher, the Company will
promptly take all actions necessary to cause the Danaher Designees to be
elected, including seeking the resignations of such number of directors as is
necessary to enable the Danaher Designees to be elected by the Board. This
Information Statement is required by Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated
thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement. The information contained in the Information Statement concerning
Danaher and Purchaser has been furnished to the Company by Danaher. The Company
assumes no responsibility for the accuracy or completeness of such information.
II-1
<PAGE>
The outstanding voting securities of the Company as of May 2, 2000,
consisted of 10,357,822 shares of Common Stock, with 1,538,545 shares reserved
for issuance pursuant to outstanding stock options. The holders of Common Stock
are entitled to one vote for each share held of record by them.
DANAHER DESIGNEES
The Danaher Designees will be selected by Danaher from and among the
individuals listed below. Each of the following individuals has consented to
serve as a director of the Company if appointed or elected. Except as set forth
below and in the Offer to Purchase, none of the following individuals
beneficially owns any equity securities or rights to acquire securities of the
Company, nor has any such person been involved in any transaction with the
Company or any of its directors, executive officers or affiliates that is
required to be disclosed pursuant to the rules and regulations of the of the
Securities Exchange Commission.
Set forth below is certain information about each of the Danaher Designees:
Patrick W. Allender, 53, has served as Chief Financial Officer of Danaher
since March 1987.
Daniel L. Comas, 35, was appointed Vice President, Corporate Development of
Danaher in 1996. He has served Danaher in an executive capacity in the
corporate development area for more than the past five years.
James H. Ditkoff, 53, was appointed Vice President-Finance and Tax in
January 1991.
Christopher C. McMahon, 37, was appointed Vice President and Controller of
Danaher in 1999. From 1997 until 1999 he was a Group Vice President for
Danaher, and prior to this, he served as Vice President, Finance and
Administration.
Mitchell P. Rales, 43, has served as a director of Danaher since January
1984. In addition, during the past five years he has been a principal in a
number of private business entities with interests in manufacturing companies,
media operations and publicly traded securities. He is also a director of Imo
Industries Inc.
Steven M. Rales, 48, has served as Chairman of the Board of Danaher since
January 1984. In addition, during the past five years he has been a principal
in a number of private business entities with interests in manufacturing
companies, media operations and publicly traded securities. He is also a
director of Imo Industries Inc.
George M. Sherman, 58, has served as President and Chief Executive Officer
and a director of Danaher since February 1990. He is also a director of
Campbell Soup Company.
CURRENT DIRECTORS OF THE COMPANY
The following sets forth the name, age as of the date hereof, term and
current principal occupation or employment and five-year employment history for
the nine members currently serving on the Board. The Company'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 four nor more than five directors. The Board is
presently composed of nine directors, four of whom are members of Class I and
five of whom are members of Class II. The terms of the persons currently
serving on the Board expire at the annual meetings for the years indicated:
Messrs. Argov, Cobuzzi, Rehnert and Stephen, 2000; Messrs. Fishman, Henkel,
Kasschau, Maxwell and Parker, 2001.
GIDEON ARGOV, 43, is the Chairman of the Board, President and Chief
Executive Officer of the Company. He was elected Chairman of the Board on March
26, 1996. He has been a director of the Company since May 23, 1991, and served
as the Vice Chairman of the Board from that date until November 1991, when
II-2
<PAGE>
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 Tech/Ops Sevcon, Inc.
ROBERT J. COBUZZI, 58, is the Senior Vice President, Treasurer and Chief
Financial Officer of the Company. He joined the Company 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 Company in 1996 and is a member of the Retirement Plans
Committee.
JERALD G. FISHMAN, 54, 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.
Mr. Fishman has been a director of the Company since 1994 and he is a member of
the Company's Executive and Personnel and Compensation Committees.
HERBERT L. HENKEL, 51, is the President, Chief Executive Officer and a
director of Ingersoll-Rand Company, Woodcliff Lake, New Jersey. From 1987 until
March 1999 he held several executive positions with Textron, Inc. (a multi-
industry company with operations in aircraft, automotive, industrial and
finance), including serving as Vice President of Textron, Inc. responsible for
the Textron Industrial Products segment from 1993 to 1998, and as President and
Chief Operating Officer of Textron, Inc. from July 1998 to March 1999. Mr.
Henkel was elected a director of the Company in 1997 and is a member of the
Audit Committee.
JAMES H. KASSCHAU, 48, is the President of International Contract
Furnishings, Inc., Valley Cottage, New York, 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 Company since March 1990. He is the chairman of the
Audit Committee and a member of the Retirement Plans Committee.
J. DOUGLAS MAXWELL, JR., 58, is the Chief Executive Officer of NIRX Medical
Technologies, Glen Head, New York. Prior to January 1, 1999 he was for ten
years the 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. He has been a director of the Company
since April 1983. He is a member of the Audit Committee and Personnel and
Compensation Committee. Mr. Maxwell is also a director of the First National
Bank of Long Island.
ROBERT N. PARKER, 71, is a business consultant. From February 1991 to
January 1992, he was the Executive Vice President of LTV Aerospace and Defense
Corporation. From November 1986 to January 1991 he was President of the LTV
Missiles and Electronics Group of The LTV Corporation. From 1983 until November
1986, he was President of the Missiles Division of The LTV Corporation. Mr.
Parker has been a director of the Company since April 2, 1990. He is the
chairman of the Personnel and Compensation Committee. He is also a director of
Perceptronics, Inc., Woodland Hills, California.
GEOFFREY S. REHNERT, 42, 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
Company in 1996.
GEORGE P. STEPHAN, 66, is a business consultant. From 1994 until 1999, he
was 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. For over 22 years, Mr. Stephan held various executive
management positions with the Company and served as the Chairman of the Board
of the Company from 1991
II-3
<PAGE>
until March 26, 1996. Mr. Stephan is a member of the Company's Executive
Committee and Chairman of its Retirement Plans Committee and has been a
director of the Company since July 1982. He is also a director of Barr
Laboratories, Inc., a pharmaceutical manufacturer (NYSE), and a member of the
Board of Advisors of the Hartwick Humanities in Management Institute.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
current executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
---- --- ---------------------------------------
<C> <C> <S>
Gideon Argov..................... 43 Chairman of the Board, President and
Chief Executive Officer
Robert J. Cobuzzi................ 58 Senior Vice President, Treasurer and
Chief Financial Officer
Daniel F. Desmond................ 50 Vice President and President, Aerospace
& Defense Products Group
James A. Eder.................... 54 Vice President, Secretary and General
Counsel
Willy L. Verbrugghe.............. 48 Vice President and President,
Industrial & Commercial Products Group
</TABLE>
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The business and affairs of the Company are managed under the direction of
the Board. Members of the Board serve on one or more committees to carry out
particular responsibilities.
The Board held a total of seven regular and special meetings during 1999.
Each director attended at least 75% of the aggregate number of meetings of the
Board and Board committees on which such director served.
AUDIT COMMITTEE
The Audit Committee is responsible for overseeing and reviewing the audit of
the Company's books and accounts, for reviewing the audited financial
statements of the Company, for reviewing the Company's internal control
procedures and for reviewing and approving the Company's independent public
accountants. No member of this Committee is an employee of the Company. The
Audit Committee met three times during 1999.
PERSONNEL AND COMPENSATION COMMITTEE
The Personnel and Compensation Committee generally is responsible for
reviewing the Company's compensation policies and practices, and specifically
for (i) reviewing and recommending to the Board the total compensation and
benefit programs applicable to the Company's key employees, including corporate
officers, and (ii) administering the Company's stock option plans. Also, this
Committee reviews and makes recommendations on the policies and programs for
the development of management personnel throughout the Company. This Committee
met two times in 1999.
RETIREMENT PLANS COMMITTEE
The Retirement Plans Committee advises the Board with respect to the
Company'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 four meetings in 1999.
II-4
<PAGE>
EXECUTIVE COMMITTEE
The Executive Committee may exercise, with certain exceptions, all of the
authority of the Board in the management of the business of the Company between
regular meetings of the entire Board. The Executive Committee met one time in
1999.
NOMINATING COMMITTEE
The Company does not have a standing nominating committee.
II-5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of March 24, 2000
with respect to all persons known to the Company to be the beneficial owners of
more than 5% of any class of shares of the capital stock of the Company:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
TITLE OF BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER CLASS OWNERSHIP OF CLASS
------------------------------------ ------------ ---------- ----------
<S> <C> <C> <C>
The "Gabelli Group" consisting of: Common Stock 2,772,795(1) 26.5%
Gabelli & Company, Inc.
Gabelli Asset Management, Inc.
Gabelli Funds, LLC
Gabelli Group Capital Partners, Inc.
Gabelli International Limited
Gabelli Performance Partnership
Gabelli Securities, Inc.
Gamco Investors, Inc.
Gemini Capital Management Ltd.
Mario J. Gabelli
Mark J. Gabelli
c/o The Gabelli Group, Inc.
One Corporate Center
Rye, NY 10580
Lord, Abbett & Co.
90 Hudson Street
Jersey City, NJ 07302 Common Stock 1,052,527(2) 10.18%
U. S. Trust Company of New York
114 West 47th Street
New York, NY 10036-1532 Common Stock 646,585(3) 6.26%
</TABLE>
- --------
(1) According to a Schedule 13D (Amendment No. 29) dated December 3, 1999, 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
Company'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 13G (Amendment No. 2) dated March 8, 2000, Lord,
Abbett & Co. represented that it has sole voting and dispositive power with
respect to all the shares reported.
(3) According to a Schedule 13G (Amendment No. 1) dated February 4, 2000, U.S.
Trust Company of New York reported that it has shared voting and
dispositive power with respect to all of the shares reported, which include
43,085 shares that could be acquired upon conversion of outstanding
Debentures.
II-6
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 24, 2000, the shares of each
class of stock of the Company beneficially owned by all nominees, all
directors, and all executive officers named in the Summary Compensation table,
and all nominees, directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
TITLE OF SHARE PERCENTAGE
NAME OF BENEFICIAL OWNER CLASS OWNERSHIP OF CLASS
------------------------ ------------ --------- ----------
<S> <C> <C> <C>
Gideon Argov (1).......................... Common Stock 296,000 2.86%
Robert J. Cobuzzi (1)..................... Common Stock 190,400 1.84%
Daniel F. Desmond (1)..................... Common Stock 41,700 *
James A. Eder (1)......................... Common Stock 72,840 *
Jerald G. Fishman (2)..................... Common Stock 20,804 *
Herbert L. Henkel (2)..................... Common Stock 19,430 *
James H. Kasschau (2)..................... Common Stock 56,805 *
Douglas Maxwell, Jr. (2).................. Common Stock 81,912 *
J. Robert N. Parker (2)................... Common Stock 24,264 *
Geoffrey S. Rehnert (2)................... Common Stock 39,258 *
George P. Stephan (2)..................... Common Stock 75,835 *
Willy L. Verbrugghe (1)................... Common Stock -0- *
All directors and executive officers of
the
Corporation, as a group (1)(2)........... Common Stock 919,248 8.3%
</TABLE>
- -------------------------
*less than 1%.
(1) Includes the number of shares that could be acquired within 60 days under
the Company's stock option plans:
(i) Mr. Argov 275,000; (ii) Mr. Cobuzzi 185,400; (iii) Mr. Desmond 41,700;
(iv) Mr. Eder 72,400; and
(v) Mr. Verbrugghe .
(2) Inclusive of 17,000, 18,500, 29,000, 29,000, 19,000, 25,000, 24,000 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.
II-7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers during the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
--------------------------------- --------------------------
RESTRICTED NUMBER OF
STOCK STOCK ALL
NAME AND PRINCIPAL SALARY UNITS OPTIONS OTHER
POSITION YEAR ($) BONUS VALUE$ (3) AWARDED COMPENSATION (4)
------------------ ---- -------- -------- ---------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Argov ........... 1999 $344,000 $ 0 $ 0 0 $ 3,200
Chairman of the Board,
President 1998 331,000 156,000 39,000 125,000 3,200
and Chief Executive Of-
ficer 1997 315,000 295,000 0 0 3,200
Robert J. Cobuzzi....... 1999 $237,000 $ 0 $ 00000 0 $ 3,200
Senior Vice President,
Treasurer 1998 228,000 91,000 22,000 76,000 3,200
and Chief Financial Of-
ficer 1997 217,000 163,000 0 0 3,200
Daniel F. Desmond....... 1999 $204,000 $ 20,000 $ 0 0 3,200
Vice President; Presi-
dent, Aerospace & 1998 196,040 77,200 19,300 60,000 0
Defense Products Group 1997 171,756 0 0 0 0
James A. Eder........... 1999 $189,000 $ 0 0 0 $ 3,200
Vice President, Secre-
tary 1998 182,000 133,000 33,000 66,000 3,200
and General Counsel 1997 173,000 100,000 0 0 3,200
Willy L. Verbrugghe
(2).................... 1999 $109,000 $ 75,000 0 70,000 $72,713
Vice President; Presi-
dent, Industrial
& Commercial Products
Group
</TABLE>
- -------------------------
(1) The dollar value of perquisites and other personal benefits for each of the
named executive officers was less than the applicable reporting thresholds.
(2) Mr. Verbrugghe was elected a corporate officer in August, 1999. The amount
in the column titled "All other Compensation" includes reimbursed
relocation expenses of $70,880.
(3) Pursuant to the 1998 Corporate Incentive Plan for corporate officers, 20%
of an individual's bonus is paid in restricted stock units in accordance
with the terms of 1998 Management Stock Incentive Plan (the "Plan"). These
values are based upon the closing price of a share of the Company's Common
Stock on the date of grant. Pursuant to the Plan, the units (i) vest on the
third anniversary of the date of grant, except that they vest immediately
upon "a change of control", (ii) are not entitled to any voting rights, and
(iii) receive a quarterly payment equal to the dividend paid on the
Company's Common Stock.
(4) Represents contributions by the Company to its 401(k) Savings and
Investment Plan on behalf of the named executive officers.
II-8
<PAGE>
AGGREGATED OPTION EXERCISES AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXPECTED
UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS
SHARES VALUE OPTIONS DECEMBER 31, 1999 DECEMBER 31, 1999(2)
ACQUIRED REALIZED ------------------------- -------------------------
ON EXERCISE (1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME ----------- -------- EXERCISABLE ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gideon Argov............ 0 $0 265,000 130,000 $866,370 $68,140
Robert Cobuzzi.......... 0 0 178,200 77,800 617,144 37,946
Daniel Desmond.......... 0 0 35,750 48,000 148,340 0
James Eder.............. 0 0 65,200 60,800 180,776 15,504
Willy Verbrugghe........ 0 0 0 70,000 0 74,410
</TABLE>
- --------
(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, 1999, fair market value share price of
$12.313, less the share price to be paid upon exercise.
OPTION GRANTS DURING 1999
<TABLE>
<CAPTION>
POTENTIAL
% OF TOTAL REALIZABLE
SECURITIES OPTIONS EXERCISE OR VALUE AT ASSUMED
UNDERLYING GRANTED TO BASE PRICE ANNUAL RATES OF
OPTIONS EMPLOYEES IN (2) EXPIRATION STOCK APPRECIATION
GRANTED (1) FISCAL YEAR ($/SHARE) DATE FOR OPTION TERM
NAME ----------- ------------ ----------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Willy Verbrugghe........ 70,000 48% $11.250 8/14/09 $495,255 $1,255,072
</TABLE>
- --------
(1) 10% of the options granted are exercisable starting 12 months after the
grant date, an additional 10% of the options are exercisable after 18
months, and an additional 20% of the options are exercisable on the
second, third, fourth and fifth anniversary dates thereafter. All options
were granted at the fair market value on the date of grant.
(2) The option exercise price is equal to the fair market value of the
underlying shares of Common Stock on the date of the grant.
(3) In accordance with SEC rules, these columns show gains that might exist
for the respective options over a period of ten years. If the stock price
does not increase above the exercise price, compensation to the named
executives will be zero.
PENSION PLAN
All salaried employees with one year of service, including executive
officers of the Company, are participants in the Kollmorgen Corporation
Salaried Employees Retirement Plan (the "Plan"). The Plan is a defined benefit
plan, and the benefits are not reduced by Social Security benefits or by
payments from other sources. In the event of a termination of the Plan
following a Change in Control (as defined in the Plan), any assets of the Plan
remaining after provision is made for all benefits thereunder will be used to
supplement such benefits. This provision may not be amended or terminated
following a Change in Control. Benefits under the Plan are based upon years of
service and the highest consecutive five year average annual base salaries. The
term "annual base salary," as used in the preceding sentence, makes reference
to the "Salary" column in the Summary Compensation Table. For the year ended
December 31, 1999 the credited years of service of Messrs. Argov, Cobuzzi,
Desmond, Eder and Willy Verbrugghe under the Plan are 9, 8, 26, 23, and 0
respectively.
II-9
<PAGE>
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 2000
<TABLE>
<S> <C> <C> <C> <C>
FINAL AVERAGE
EARNINGS AT
RETIREMENT 15 20 25 30 OR MORE
------------- ------- ------- ------- ----------
$100,000 $24,345 $32,460 $40,575 $ 48,690
125,000 31,095 41,460 51,825 62,190
150,000 37,845 50,480 63,075 75,690
175,000 40,545 54,060 67,575 81,090
200,000 40,545 54,060 67,575 81,090
250,000 40,545 54,060 67,575 81,090
300,000 40,545 54,060 67,575 81,090
350,000 40,545 54,060 67,575 81,090
400,000 40,545 54,060 67,575 81,090
</TABLE>
Annual benefits provided by the Company 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
$170,000 ($160,000 for years 1999, 1998, 1997; $150,000 for 1996) per annum and
limits annual benefit payments under such plans to $130,000. These limits and
prohibitions are indexed for inflation.
II-10
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
The Company entered into employment agreements with Messrs. Argov, Cobuzzi
and Verbrugghe at the time each of them joined the Company. Each agreement
protects the Company from disclosure of confidential information by the
executive and contains the executive's covenant not to compete with the Company
following termination of employment under certain circumstances. The agreement
with Mr. Argov, the Company'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 Company 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 agreements with Messrs. Cobuzzi and
Verbrugghe, respectively, the Company's Chief Financial Officer, Treasurer and
Senior Vice President, and Vice President and President of the Industrial &
Commercial Products Group, provide for the initial annual base salary on the
date of hire, describe the employee benefit plans under which each is entitled
to participate and provide that in the event of termination, other than for
"Cause", each individual is entitled to his current base salary, in lump sum.
In addition, pursuant to his agreement, Mr. Verbrugghe received a bonus of
$75,000 upon joining the Company.
The Company 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
Company 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 Company 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, 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 Company's
Board is composed of independent directors who are not employees or officers of
the Company. 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 establish the
pay levels of the Company'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 Company's key decision
makers to ensure the Company's ability to attract and retain high caliber
executives by providing appropriate incentives to deliver the maximum short-
term and long-term financial results for the benefit of shareholders. The
Committee also approves compensation matters involving other key employees of
the Company, 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 1998 Management Stock
Incentive Plan ("MSIP"), and other incentive compensation plans of the Company
for executive officers and certain other key employees of the Company.
II-11
<PAGE>
From time to time, the Company, on the recommendation of the Committee, has
retained the services of independent compensation consultants to evaluate the
Company's executive compensation programs.
In order to meet its objectives, the Committee has chosen three components
of its compensation program to meet the Company'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 Company, is designed to provide
additional cash and stock compensation when specific financial performance
goals are achieved or exceeded. The 1999 annual incentive bonus plan for
executive officers provides for a combination of cash and restricted stock
units (pursuant to the MSIP) when the Company meets its operating plan in terms
of primary earnings per share, cash flows, revenues and critical objectives.
Finally, the LTIP and MSIP plans reward executive officers and key employees
for delivering long-term value to the Company's shareholders. The plans are
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 Company has used the grant of stock options that vest over specified
periods, currently five years, to accomplish this objective. In determining a
grant of stock options, the Committee considers the amount and terms of
outstanding options previously granted to executive officers.
In 1999, Mr. Argov, Chairman of the Board, President and Chief Executive
Officer received a salary increase of 4%. 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.
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 Company, 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 Company's
executive officers 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 Company. 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
J. Douglas Maxwell, Jr.
Robert N. Parker
II-12
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative total
shareholder return, assuming reinvestment of dividends, on $100 invested on
December 31, 1994, in each of Kollmorgen Corporation Common Stock, Standard &
Poor's 500 Stock Index, and the Standard & Poor's Electrical Equipment Index.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
KOLLMORGEN CORPORATION COMMON STOCK, S&P 500 INDEX
AND S&P ELECTRICAL EQUIPMENT
<TABLE>
<CAPTION>
S&P ELECTRICAL
KOLLMORGEN CORP. S&P 500 EQUIPMENT INDEX
---------------- ------- ---------------
<S> <C> <C> <C>
Dec-94........................... 100 100 100
Dec-95........................... 193 138 140
Dec-96........................... 194 169 190
Dec-97........................... 326 226 268
Dec-98........................... 272 290 359
Dec-99........................... 221 351 538
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who beneficially own more than 10
percent of the Company'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 Company's equity securities. Applicable SEC
regulations also require such persons to furnish the Company with copies of all
such reports. Based solely on a review of the copies of such reports furnished
to the Company as of the date of this proxy statement, or written
representations that no reports were required, the Company believes that,
during 1999, all filing requirements applicable to its directors, officers and
greater than 10 percent shareholders were satisfied.
II-13
<PAGE>
EXHIBIT (a)(3)
[KOLLMORGEN LETTERHEAD]
May 12, 2000
Dear Shareholder:
I am pleased to inform you that on May 4, 2000, Kollmorgen Corporation (the
"Company") entered into a merger agreement with Danaher Corporation ("Danaher")
and one of its wholly owned subsidiaries, King DC Acquisition Corp.
("Purchaser"), that provides for the acquisition of the Company by Danaher.
Under the terms of the merger agreement, Purchaser has commenced a tender offer
for all outstanding shares of the Company's common stock at $23 per share.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, APPROVED
AND ADOPTED THE MERGER AGREEMENT AND RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors more fully discussed in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 attached to this
letter. Included as an annex to the attached Schedule 14D-9 is the written
opinion dated May 4, 2000 of Salomon Smith Barney Inc., the Company's financial
advisor, to the effect that, as of such date and based upon and subject to
certain matters described in such opinion, the $23 per share cash consideration
to be received in the Offer and the Merger by the holders of shares of the
Company's common stock (other than Danaher and its affiliates) was fair, from a
financial point of view, to such holders. Information with respect to the Board
of Directors' decision and the transaction is contained in the attached
Schedule 14D-9, and we urge you to consider this information carefully.
Also enclosed is the Offer to Purchase of Danaher, together with related
materials to be used for tendering your shares. These documents provide
instructions on how to tender your shares and set forth the terms and
conditions of the offer and other important information. We encourage you to
read the enclosed materials carefully.
Thank you for the support you have given to the Company over the years.
On behalf of the Board of Directors,
Gideon Argov, Chairman of
the Board, President and
Chief Executive Officer
