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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PACIFIC SCIENTIFIC COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
KOLLMORGEN CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
SUBJECT TO COMPLETION DATED DECEMBER 15, 1997
PRELIMINARY COPY
CONSENT SOLICITATION STATEMENT/PRELIMINARY PROSPECTUS
OF
KOLLMORGEN CORPORATION
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
<PAGE>
This consent solicitation statement/preliminary prospectus (this "Consent
Solicitation Statement/ Prospectus") is being furnished to shareholders of
Pacific Scientific Company, a California corporation ("Pacific Scientific"), by
Kollmorgen Corporation, a New York corporation ("Kollmorgen"), in connection
with the solicitation of consents from Pacific Scientific's shareholders (the
"Solicitation"). Kollmorgen has proposed to enter into a business combination
with Pacific Scientific (the "Proposed Combination") which Kollmorgen believes
would offer exceptional benefits to the shareholders of both Kollmorgen and
Pacific Scientific. See "Reasons for the Proposed Combination". To date, the
Pacific Scientific Board of Directors (the "Pacific Scientific Board") has
refused to enter into negotiations regarding the Proposed Combination. As a
result, Kollmorgen is making the Solicitation to urge Pacific Scientific's
shareholders to act by written consent to call a special meeting of Pacific
Scientific shareholders in order to remove the entire Pacific Scientific Board
and elect Kollmorgen's nominees to the Pacific Scientific Board. Kollmorgen
expects that if they are elected, and subject to their fiduciary duties under
applicable law, Kollmorgen's nominees would act to facilitate the consummation
of the Offer and the Proposed Merger described below. Under applicable law,
holders of 10% of the outstanding shares of Pacific Scientific common stock must
give their consent in order to call a special meeting of shareholders. See
"Consent Procedures--Action by Written Consent Requirements."
AT THIS TIME KOLLMORGEN IS SOLICITING YOUR CONSENT TO CALL A SPECIAL MEETING
OF PACIFIC SCIENTIFIC SHAREHOLDERS.
KOLLMORGEN IS NOT CURRENTLY SEEKING YOUR PROXY FOR THE REMOVAL OF THE ENTIRE
PACIFIC SCIENTIFIC BOARD OR THE ELECTION OF THE KOLLMORGEN NOMINEES TO THE
PACIFIC SCIENTIFIC BOARD. AFTER THE SPECIAL MEETING OF PACIFIC SCIENTIFIC
SHAREHOLDERS HAS BEEN CALLED, KOLLMORGEN WILL SEND YOU PROXY MATERIALS URGING
YOU TO TAKE SUCH ACTIONS. KOLLMORGEN IS NOT CURRENTLY SOLICITING PROXIES FOR A
VOTE ON THE PROPOSED MERGER. YOU MAY BE ASKED TO VOTE ON THE PROPOSED MERGER IN
THE FUTURE.
This Consent Solicitation Statement/Prospectus is first being furnished to
Pacific Scientific's shareholders on or about December 15, 1997. This Consent
Solicitation Statement/Prospectus also constitutes a preliminary prospectus with
respect to the common stock, par value $2.50 per share, of Kollmorgen (the
"Kollmorgen Common Stock") that will ultimately be issued in connection with the
Proposed Combination.
In furtherance of the Proposed Combination, on December 15, 1997, Kollmorgen
delivered a letter to the Pacific Scientific Board in which Kollmorgen proposed
the Proposed Combination and announced its intention to commence a tender offer
for shares of common stock, par value $1.00 per share, of Pacific Scientific
(the "Pacific Scientific Common Stock"), including the associated preferred
stock purchase rights (the "Rights" and, together with the Pacific Scientific
Common Stock, the "Pacific Scientific Common Shares").
(COVER CONTINUED ON NEXT PAGE)
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Consent Solicitation Statement/Prospectus is December 15, 1997.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Also on December 15, 1997, Torque Corporation, a Delaware corporation and a
wholly owned subsidiary of Kollmorgen ("Purchaser"), commenced a tender offer
(the "Offer") and, in connection therewith, filed a Tender Offer Statement on
Schedule 14D-1 (the "Tender Offer Statement") with the Securities and Exchange
Commission (the "Commission"). The tender offer is being made for 6,347,241
Pacific Scientific Common Shares, or such greater or lesser number of Pacific
Scientific Common Shares that, when added to the number of Pacific Scientific
Common Shares owned by Kollmorgen and Purchaser, will constitute a majority of
the Pacific Scientific Common Shares outstanding on a fully diluted basis (such
number of Pacific Scientific Common Shares being the "Minimum Number"), at a
price of $20.50 per Pacific Scientific Common Share, net to the seller in cash
(the "Offer Price"). The tender offer is subject to the terms and conditions set
forth in the Offer to Purchase dated December 15, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (the "Letter of Transmittal") which, as
amended from time to time, together constitute the "Offer". The Offer is
currently scheduled to expire at 12:00 midnight, New York City time, on
Wednesday, January 14, 1998, unless extended (as such date may be extended, the
"Expiration Date"). If more than the Minimum Number of Pacific Scientific Common
Shares is tendered into the Offer, tendered shares will be purchased on a pro
rata basis, resulting in all tendering shareholders receiving a mix of cash and
Kollmorgen Common Stock in the Proposed Combination. Pacific Scientific
shareholders may tender all, part or none of the Pacific Scientific Common
Shares held by them. To the extent a shareholder's Pacific Scientific Common
Shares are purchased in the Offer, such shareholder would not receive Kollmorgen
Common Stock for such purchased shares) in the Proposed Merger (as described
below) and consequently such shareholder would not have the opportunity to
participate in the future growth of the combined company.
Kollmorgen is seeking to negotiate with Pacific Scientific a definitive
merger agreement providing for the Proposed Combination pursuant to which
Pacific Scientific would, as soon as practicable following consummation of the
Offer, consummate a merger or similar business combination with Kollmorgen,
Purchaser or another direct or indirect subsidiary of Kollmorgen (the "Proposed
Merger"). At the effective time of the Proposed Merger (the "Effective Time"),
each Pacific Scientific Common Share then outstanding (other than Pacific
Scientific Common Shares held by Pacific Scientific or any wholly owned
subsidiary of Pacific Scientific and Pacific Scientific Common Shares owned by
Kollmorgen, Purchaser or any other direct or indirect wholly owned subsidiary of
Kollmorgen) would be converted into the right to receive $20.50 of Kollmorgen
Common Stock. The exact number of shares of Kollmorgen Common Stock into which
each Pacific Scientific Common Share will be converted will be determined by
dividing $20.50 by the average, over the 20 consecutive trading days ending five
days prior to the meeting of Pacific Scientific shareholders called for the
purpose of voting on the Proposed Merger, of the daily average of the high and
low per share sales prices of Kollmorgen Common Stock (weighted by sales
volume). See "The Offer and the Proposed Merger". In the event that such average
during such period is less than $15.19 or greater than $18.56, the exchange
ratio would be fixed at 1.350 shares of Kollmorgen Common Stock or 1.104 shares
of Kollmorgen Common Stock, respectively, per Pacific Scientific Common Share.
In such event, Pacific Scientific shareholders could receive Kollmorgen Common
Stock in the Proposed Merger with a value greater or less than $20.50.
The Solicitation is being made to urge Pacific Scientific's shareholders to
act by written consent to call a special meeting of Pacific Scientific
shareholders (the "Special Meeting"), to be held on February 4, 1998 or, if
later, on the thirty-sixth day following the date on which the requisite number
of consents to call the Special Meeting are delivered to Pacific Scientific. At
the Special Meeting, Kollmorgen will ask the Pacific Scientific shareholders to:
(i) remove from office the entire Pacific Scientific Board; (ii) fill the newly
created vacancies on the Pacific Scientific Board by electing six persons
nominated by Kollmorgen (the "Kollmorgen Nominees") to the Pacific Scientific
Board, who are expected to take such actions, subject to their fiduciary duties
under applicable law, as may be necessary to consummate the Offer and the
Proposed Merger; and (iii) repeal any and all provisions of the Pacific
Scientific bylaws (the "Pacific Scientific Bylaws") that have not been duly
filed by
(COVER CONTINUED ON NEXT PAGE)
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Pacific Scientific with the Commission prior to August 11, 1997, including any
and all amendments to the Pacific Scientific Bylaws adopted on or after December
15, 1997 (the "Bylaw Repeal Proposal"). Under applicable law, the record date
(the "Record Date") for determining shareholders entitled to give consent to
such actions is the date on which the first such consent is given. Kollmorgen
intends to cause Purchaser, which is a shareholder of Pacific Scientific, to
deliver its written consent to Pacific Scientific on December 15, 1997, thereby
establishing December 15, 1997 as the Record Date.
KOLLMORGEN URGES YOU TO COMPLETE AND RETURN THE ENCLOSED FORM OF CONSENT AS
SOON AS POSSIBLE.
CALLING A SPECIAL MEETING IS AN IMPORTANT STEP IN ENSURING THE CONSUMMATION
OF THE PROPOSED COMBINATION. HOWEVER, YOU MUST SEPARATELY TENDER YOUR PACIFIC
SCIENTIFIC COMMON SHARES PURSUANT TO THE OFFER IF YOU WISH TO PARTICIPATE IN THE
OFFER. CALLING A SPECIAL MEETING WILL NOT CONSTITUTE A TENDER OF YOUR PACIFIC
SCIENTIFIC COMMON SHARES PURSUANT TO THE OFFER OR OBLIGATE YOU TO TENDER YOUR
PACIFIC SCIENTIFIC COMMON SHARES PURSUANT TO THE OFFER.
THE SOLICITATION IS BEING MADE BY KOLLMORGEN AND NOT ON BEHALF OF THE BOARD
OF DIRECTORS OF PACIFIC SCIENTIFIC.
THE INFORMATION CONCERNING PACIFIC SCIENTIFIC CONTAINED IN THIS CONSENT
SOLICITATION STATEMENT/PROSPECTUS HAS BEEN TAKEN FROM OR IS BASED UPON DOCUMENTS
AND RECORDS ON FILE WITH THE COMMISSION AND OTHER PUBLICLY AVAILABLE
INFORMATION. KOLLMORGEN HAS NO KNOWLEDGE THAT WOULD INDICATE THAT STATEMENTS
RELATING TO PACIFIC SCIENTIFIC CONTAINED IN THIS CONSENT SOLICITATION STATEMENT/
PROSPECTUS IN RELIANCE UPON PUBLICLY AVAILABLE INFORMATION ARE INACCURATE OR
INCOMPLETE. KOLLMORGEN, HOWEVER, WAS NOT INVOLVED IN THE PREPARATION OF SUCH
INFORMATION AND STATEMENTS, AND IS NOT IN A POSITION TO VERIFY, OR MAKE ANY
REPRESENTATION WITH RESPECT TO THE ACCURACY OF, ANY SUCH INFORMATION OR
STATEMENTS.
If you have any questions, please call:
[LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT
(212) 440-9800
OR
CALL TOLL FREE (800) 223-2064
FAX (212) 440-9009
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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SUMMARY................................................................................................... 1
THE PROPOSED COMBINATION................................................................................ 1
The Proposed Combination of Kollmorgen and Pacific Scientific......................................... 1
The Offer and the Proposed Merger..................................................................... 3
The Pacific Scientific Board's Unwillingness to Proceed with the Proposed Combination................. 4
Kollmorgen's Consent Solicitation..................................................................... 5
Consents Needed to Take Action........................................................................ 5
CERTAIN LITIGATION...................................................................................... 5
OTHER ITEMS TO CONSIDER WITH RESPECT TO THE OFFER AND PROPOSED MERGER................................... 5
Material Federal Income Tax Consequences.............................................................. 5
Dissenters' Rights.................................................................................... 6
Accounting Treatment.................................................................................. 5
Interest of Certain Persons in the Proposed Combination............................................... 5
Regulatory Approvals.................................................................................. 6
Subsequent Votes Relating to the Proposed Merger...................................................... 6
RISK FACTORS............................................................................................ 6
Integration of Kollmorgen and Pacific Scientific...................................................... 6
Operational Issues; Ability to Manage Growth.......................................................... 7
Increased Level of Indebtedness....................................................................... 7
Certain Federal Income Tax Consequences............................................................... 7
THE COMPANIES........................................................................................... 8
Kollmorgen and Purchaser.............................................................................. 8
Pacific Scientific.................................................................................... 8
Market Prices......................................................................................... 8
Comparative Per Share Data............................................................................ 9
FORWARD-LOOKING STATEMENTS.............................................................................. 10
SUMMARY SELECTED FINANCIAL DATA......................................................................... 11
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION......................................................... 14
THE PROPOSED COMBINATION.................................................................................. 23
REASONS FOR THE PROPOSED COMBINATION...................................................................... 23
BACKGROUND OF THE OFFER AND THE PROPOSED MERGER........................................................... 25
THE SPECIAL MEETING....................................................................................... 29
Why You Should Consent to Call the Special Meeting...................................................... 30
CONSENT PROCEDURES........................................................................................ 30
Action by Consent....................................................................................... 30
Action by Written Consent Requirements.................................................................. 30
THE OFFER AND THE PROPOSED MERGER......................................................................... 30
Terms of the Offer and the Proposed Merger.............................................................. 30
Certain Litigation...................................................................................... 32
THE COMPANIES............................................................................................. 33
Kollmorgen.............................................................................................. 33
Purchaser............................................................................................... 33
Pacific Scientific...................................................................................... 33
FORWARD-LOOKING STATEMENTS................................................................................ 33
</TABLE>
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<TABLE>
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UNAUDITED PRO FORMA FINANCIAL INFORMATION................................................................. 35
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................................................................. 44
Tax Consequences if the Offer and the Proposed Merger Do Not Qualify as a Reorganization or if the
Proposed Merger is treated as a Taxable Transaction................................................... 45
Tax Consequences if the Offer and the Proposed Merger Qualify as a Reorganization....................... 45
Taxation of Cash Received in Lieu of Fractional Shares.................................................. 46
Taxation of Capital Gains............................................................................... 46
Dividend Treatment -- Constructive Ownership Rules...................................................... 46
Transfer Taxes.......................................................................................... 48
Withholding............................................................................................. 48
COMPARISON OF THE RIGHTS OF HOLDERS OF KOLLMORGEN COMMON STOCK AND HOLDERS OF PACIFIC SCIENTIFIC COMMON
STOCK................................................................................................... 48
Dividends............................................................................................... 49
Special Meetings of Shareholders; Quorum; Shareholder Action by Written Consent......................... 49
Certain Voting Rights................................................................................... 50
Size and Classification of the Board of Directors....................................................... 51
Election of Directors................................................................................... 51
Removal of Directors; Filling Vacancies on the Board of Directors....................................... 51
Amendment of Charter and Bylaws......................................................................... 52
Certain Business Combinations and Reorganizations....................................................... 52
Limitation on Directors' Liability...................................................................... 53
Indemnification of Officers and Directors; Insurance.................................................... 54
Rights Plans............................................................................................ 54
DISSENTERS' RIGHTS OF PACIFIC SCIENTIFIC SHAREHOLDERS..................................................... 55
SUBSEQUENT VOTES RELATING TO THE PROPOSED MERGER.......................................................... 56
Pacific Scientific Shareholder Votes Required........................................................... 56
Kollmorgen Shareholder Vote Required.................................................................... 56
Information Concerning the Special Meetings............................................................. 56
ACCOUNTING TREATMENT...................................................................................... 57
REGULATORY MATTERS........................................................................................ 57
MARKET PRICES AND DIVIDENDS............................................................................... 58
Market Price Data....................................................................................... 59
LEGAL MATTERS............................................................................................. 59
EXPERTS................................................................................................... 59
AVAILABLE INFORMATION..................................................................................... 60
MANAGEMENT AND ADDITIONAL INFORMATION..................................................................... 61
SOLICITATION OF CONSENTS.................................................................................. 61
SOURCES OF FUNDS.......................................................................................... 62
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................... 62
</TABLE>
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<TABLE>
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SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND OFFICERS OF KOLLMORGEN AND CERTAIN REPRESENTATIVES OF KOLLMORGEN WHO
MAY ALSO ASSIST IN THE SOLICITATION..................................................................... I-1
SCHEDULE II
PACIFIC SCIENTIFIC COMMON SHARES HELD BY KOLLMORGEN, ITS DIRECTORS AND OFFICERS........................... II-1
SCHEDULE III
CHAPTER 13 OF THE GENERAL CORPORATION LAW OF THE STATE OF CALIFORNIA...................................... III-1
</TABLE>
<PAGE>
SUMMARY
The information below is qualified in its entirety by the more detailed
information appearing elsewhere in this Consent Solicitation
Statement/Prospectus, including the documents incorporated in this Consent
Solicitation Statement/Prospectus by reference. The information below also
includes forward-looking statements, including all statements about the
operations and expected benefits of the companies combined and is subject to
risks, uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. See "Summary--Forward-Looking Statements" and
"Forward-Looking Statements". See "Risk Factors" in this Summary, for a
discussion of certain factors, including integration, operational, leverage and
tax matters, that should be considered in conjunction with the Proposed
Combination.
THE PROPOSED COMBINATION
THE PROPOSED COMBINATION OF KOLLMORGEN AND PACIFIC SCIENTIFIC
Kollmorgen believes that the Proposed Combination of Kollmorgen and Pacific
Scientific is a unique opportunity for you and other Pacific Scientific
shareholders to realize a premium for your shares and to participate in the
future of one of the world's leading suppliers of electronic motion control
solutions. The Pacific Scientific Board, however, has been unwilling to
negotiate a business combination between Kollmorgen and Pacific Scientific and
despite Kollmorgen's repeated attempts, refuses to allow you to consider sharing
in Kollmorgen's vision. See "Background of the Offer and the Proposed Merger".
Because the Pacific Scientific Board has denied you the opportunity to share in
the rewards of the combined company, Kollmorgen is presenting this opportunity
directly to you through the Offer and the Solicitation. In order to guarantee
you the opportunity to express your own view on the future of Pacific
Scientific, Kollmorgen is seeking your consent to call the Special Meeting. At
the Special Meeting, Kollmorgen will ask you to remove the entire Pacific
Scientific Board and replace it with new directors who will be committed to
allowing you, the owners of Pacific Scientific, to make this important decision.
In addition, Kollmorgen will propose a binding shareholder resolution to
preclude or rescind any attempt that the Pacific Scientific Board may make to
amend the Pacific Scientific Bylaws as part of the Pacific Scientific Board's
continuing effort to prevent you from enjoying the benefits of the Proposed
Combination. See "The Special Meeting".
The financial benefits of the Proposed Combination, if consummated, will
include:
- A PREMIUM OF 33%. The purchase price of $20.50 per common share
represents approximately a 33% premium over Pacific Scientific's closing
share price of $15.44 on the New York Stock Exchange on Friday, December
12, 1997, and approximately a 37% premium over the average of the
company's closing share price for the preceding 30 trading days.
- IMMEDIATE CASH PAYMENT FOR HALF OF PACIFIC SCIENTIFIC'S CAPITAL STOCK.
Half of Pacific Scientific's outstanding shares will be purchased for a
cash payment of $20.50 per share if the Offer is successfully
consummated.
- CONTINUED PARTICIPATION IN THE FUTURE GROWTH OF THE COMBINED COMPANY.
Because Pacific Scientific's shareholders have the ability to receive
Kollmorgen Common Stock in the Proposed Merger, they will have the
opportunity to participate in the future growth and success of the
combined enterprise. Upon consummation of the Proposed Merger, Pacific
Scientific shareholders will hold an equity stake of approximately 43% in
the combined company, based upon an assumed market value for Kollmorgen
Common Stock of $16.88 per share (the closing price of Kollmorgen Common
Stock on December 12, 1997).
- OPERATING AND REVENUE SYNERGIES. Based on public information, Kollmorgen
management believes that the combined company can achieve more than $15
million of annual operating
1
<PAGE>
synergies in 1999, rising to more than $20 million in 2000 and increasing
thereafter. Management believes these synergies can be achieved
principally from cost savings in selling and marketing expenses and
consolidation of research and development, and expects to realize
additional synergies from cross-selling opportunities, joint purchasing
savings and reduction in corporate expenses.
- AN ACCRETIVE TRANSACTION. Kollmorgen is confident that the Proposed
Combination will be accretive to earnings per share in 1999, the first
full year of operations of the combined company, and increasingly so
thereafter, based upon the anticipated synergies described above.
Kollmorgen expects that, due to the substantial non-recurring charges
associated with the Proposed Combination (which are not currently
quantifiable), consisting of restructuring charges and a charge for
acquired in-process research and development, the Proposed Combination
will be substantially dilutive in fiscal 1998.
- COMMITTED FINANCING. Kollmorgen has entered into a binding commitment
letter with Salomon Smith Barney and its affiliate Salomon Brothers
Holding Company Inc in which Salomon Brothers Holding Company Inc has
committed to provide, subject to certain conditions, what Kollmorgen
believes is a conservatively financed secured bank facility to fully
finance the transaction, including the refinancing of existing
indebtedness and the provision of a working capital facility for the
combined company.
Kollmorgen believes that the combined company will achieve financial results
superior to that which either company could achieve on a stand-alone basis and
will offer customers superior products and services. Among the many advantages
contributing to the combined company's ability to achieve these benefits are:
- CREATION OF AN INDUSTRY LEADER. A merger of Kollmorgen and Pacific
Scientific will establish the combined enterprise as a leader in high
performance electronic motion control--one of the fastest-growing
segments of the motors and controls business. In a fragmented industry,
the combined enterprise will be better-positioned to comprehensively
serve the needs of customers and take advantage of consolidation
opportunities.
- STRATEGIC AND OPERATIONAL FIT. Highly complementary motion control
product lines will enable the combined company to become a full-service
provider. The combined company will be well-positioned to capitalize on
the complementary product lines and differing strengths of Kollmorgen and
Pacific Scientific, enabling it to offer a broader array of products and
support services to an expanded customer base. In addition, the combined
company would take advantage of cost savings and efficiencies resulting
from economies of scale in research and development, marketing,
production and sourcing.
- ENHANCED CAPABILITY TO TAP FOREIGN MARKETS. The increased size and global
scope of the combined company will enable it to more effectively market
its products to customers around the world. Kollmorgen has already
established a local presence in Germany, France, Israel, India, China and
elsewhere. The combined enterprise will be well-positioned to build on
this foundation, particularly in Europe and the Pacific Rim. Kollmorgen
believes that the combined company will be able to expand its customer
base and offer international on-site product support to customers, while
conducting more effective and cost-efficient research and development,
marketing, production and sourcing.
- MANAGEMENT TEAM WITH PROVEN TRACK RECORD. Kollmorgen's management has
delivered year over year growth in sales and operating income from
continuing operations from 1994 through 1996, and will do so again in
1997. During that same period, sales from continuing operations increased
by 12% over the comparable prior period. Kollmorgen has achieved this
2
<PAGE>
by focusing on its core operations. Kollmorgen also believes that its
management has maximized its returns from non-strategic operations. In
addition, Kollmorgen's management has considerable expertise in managing
debt, having reduced Kollmorgen's debt and preferred stock obligations by
more than 40% during the past three fiscal years and transitioned from
fully-secured to unsecured credit arrangements.
- ENHANCED GROWTH OPPORTUNITIES. Kollmorgen believes that the combined
enterprise will be well-positioned, strategically, operationally and
financially, to aggressively pursue attractive opportunities for external
and internal growth. Kollmorgen is confident that the combined company's
increased size and scope will enable it to be a leader in the
accelerating consolidation of the motion control industry and raise its
visibility in the business and financial communities.
THE OFFER AND THE PROPOSED MERGER
On December 9, 1997, Kollmorgen delivered a letter to the Chief Executive
Officer of Pacific Scientific outlining the Proposed Combination. To date,
Pacific Scientific has declined to enter into negotiations concerning a business
combination with Kollmorgen. Consequently, on December 15, 1997, Kollmorgen
delivered a letter to the Pacific Scientific Board again proposing the Proposed
Combination and simultaneously commenced the Offer and the Solicitation. The
Offer is being made for 6,347,241 Pacific Scientific Common Shares, or such
greater or lesser number of Pacific Scientific Common Shares that, when added to
the number of Pacific Scientific Common Shares owned by Kollmorgen and
Purchaser, will constitute the Minimum Number of Pacific Scientific Common
Shares, at a price of $20.50 per Pacific Scientific Common Share, net to the
seller in cash. The Offer is subject to the terms and conditions set forth in
the Offer to Purchase and in the Letter of Transmittal.
Kollmorgen is seeking to negotiate with Pacific Scientific a definitive
merger agreement providing for the Proposed Combination pursuant to which
Pacific Scientific would, as soon as practicable following consummation of the
Offer, consummate the Proposed Merger. At the Effective Time, each Pacific
Scientific Common Share then outstanding (other than Pacific Scientific Common
Shares held by Pacific Scientific or any subsidiary of Pacific Scientific and
Pacific Scientific Common Shares owned by Kollmorgen, Purchaser or any other
direct or indirect wholly owned subsidiary of Kollmorgen) will be converted into
the right to receive $20.50 of Kollmorgen Common Stock. The exact number of
shares of Kollmorgen Common Stock into which each Pacific Scientific Common
Share will be converted will be determined by dividing $20.50 by the average,
over the 20 consecutive trading days ending five days prior to the meeting of
Pacific Scientific shareholders called for the purpose of voting on the Proposed
Merger, of the daily average of the high and low per share sales prices of
Kollmorgen Common Stock (weighted by sales volume) (the "Average Kollmorgen
Share Price"). In the event that the Average Kollmorgen Share Price during such
period is less than $15.19 or greater than $18.56, the exchange ratio would be
fixed at 1.350 shares of Kollmorgen Common Stock or 1.104 shares of Kollmorgen
Common Stock, respectively, per Pacific Scientific Common Share. In such event,
Pacific Scientific shareholders could receive Kollmorgen Common Stock in the
Proposed Merger with a value of greater or less than $20.50. The following table
illustrates the calculation of the number of shares of Kollmorgen Common Stock
to be issued in the Proposed Merger at various assumed values for the Average
Kollmorgen Share Price.
3
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FOR ILLUSTRATIVE PURPOSES ONLY
<TABLE>
<CAPTION>
VALUE OF KOLLMORGEN
STOCK ISSUED PER
PACIFIC SCIENTIFIC
HYPOTHETICAL KOLLMORGEN STOCK PRICE EXCHANGE RATIO SHARE
- ------------------------------------- ----------------- -----------------------
<S> <C> <C>
$ 20.25 1.104 x $ 22.36
19.41 1.104 21.43
18.56 1.104 20.50
17.72 1.157 20.50
16.88(1) 1.215 20.50
16.03 1.279 20.50
15.19 1.350 20.50
14.34 1.350 19.36
13.50 1.350 18.23
</TABLE>
- ------------------------
1. Represents the closing price of shares of Kollmorgen Common Stock on the
NYSE on December 12, 1997.
In the event that the Proposed Merger is consummated, shares of Pacific
Scientific Common Stock will cease to be listed on the New York Stock Exchange
(the "NYSE").
As of December 9, 1997, directors and officers of Kollmorgen and their
affiliates were beneficial owners of an aggregate of approximately 801,007
shares of Kollmorgen Common Stock (representing 8% of the total then
outstanding). Based upon publicly filed information with the Commission, there
is no indication that directors and officers of Pacific Scientific and their
affiliates were beneficial owners of more than five percent of the Kollmorgen
Common Stock.
See "--Consents Needed to Take Action" for beneficial ownership of Pacific
Scientific Common Stock by Kollmorgen and by directors and officers of
Kollmorgen and Pacific Scientific and their respective affiliates.
THE PACIFIC SCIENTIFIC BOARD'S UNWILLINGNESS TO PROCEED WITH THE PROPOSED
COMBINATION
To date, the Pacific Scientific Board has been unwilling to negotiate a
business combination between Kollmorgen and Pacific Scientific despite repeated
attempts by Kollmorgen to do so. Pacific Scientific maintains certain barriers
intended to make it difficult for Pacific Scientific shareholders to approve a
business combination not endorsed by the Pacific Scientific Board. Nevertheless,
the Pacific Scientific shareholders have the power to determine Pacific
Scientific's future by acting by written consent to call the Special Meeting in
order to remove the current Pacific Scientific directors. Because Kollmorgen
believes the business rationale for the Proposed Combination is so compelling,
Kollmorgen has decided to approach Pacific Scientific shareholders directly with
the Proposed Combination through the Offer and the Solicitation. To support the
Proposed Combination, Pacific Scientific shareholders must give their consent to
call the Special Meeting in order for shareholders to have an opportunity to
vote to remove the entire Pacific Scientific Board and elect the Kollmorgen
Nominees in its place. Kollmorgen expects that if they are elected and subject
to their fiduciary duties under applicable law, Kollmorgen's nominees would take
certain actions to facilitate the consummation of the Proposed Combination,
including redeeming the Rights or otherwise rendering them inapplicable to the
Proposed Combination and approving the Proposed Combination (if required)
pursuant to Article Fifth of the Pacific Scientific Charter (as defined below).
For additional information concerning the discussions between Kollmorgen and
Pacific Scientific relating to the Proposed Combination, see "Background of the
Offer and the Proposed Merger".
4
<PAGE>
KOLLMORGEN'S CONSENT SOLICITATION
Because of the Pacific Scientific Board's unwillingness to undertake the
Proposed Combination, Kollmorgen is soliciting consents from Pacific
Scientific's shareholders to act by written consent to call the Special Meeting.
At the Special Meeting, Kollmorgen will ask the Pacific Scientific shareholders
to:
(i) remove from office the entire Pacific Scientific Board;
(ii) fill the newly created vacancies by electing to the Pacific
Scientific Board the Kollmorgen Nominees, who are expected to take such
actions as may be necessary, subject to their fiduciary duties under
applicable law, to undertake the Proposed Combination by means of the Offer
and the Proposed Merger; and
(iii) approve a shareholder resolution to repeal any and all provisions
of the Pacific Scientific Bylaws that have not been duly filed with the
Commission by Pacific Scientific prior to August 11, 1997, including any and
all amendments to the Pacific Scientific Bylaws adopted on or after December
15, 1997, in order to rescind any actions taken by the Pacific Scientific
Board to amend the Pacific Scientific Bylaws to create new obstacles to the
consummation of the Proposed Combination.
See "The Proposed Combination", "The Special Meeting--Why You Should Consent
to Call the Special Meeting".
CONSENTS NEEDED TO TAKE ACTION
Under California law and the Pacific Scientific Bylaws, the consent of the
holders of 10% of the Pacific Scientific Common Stock outstanding and entitled
to vote is necessary to call the Special Meeting. For additional information
concerning the consent process, see "Consent Procedures".
As of December 15, 1997, directors and officers of Kollmorgen and their
affiliates were beneficial owners of an aggregate of approximately 210 Pacific
Scientific Common Shares (less than one percent of the total then outstanding).
According to Pacific Scientific's Proxy Statement dated March 14, 1997 (the
"Pacific Scientific 1997 Proxy Statement"), as of February 28, 1997, directors
and officers of Pacific Scientific and their affiliates were beneficial owners
of an aggregate of approximately 687,812 Pacific Scientific Common Shares
(approximately 5.4% of the total then outstanding).
CERTAIN LITIGATION
On December 15, 1997, Kollmorgen commenced litigation against Pacific
Scientific and the Pacific Scientific Board in the United States District Court
for the Central District of California seeking, among other things, an order (i)
declaring that failure to redeem the Rights or render the Rights inapplicable to
the Offer and the Proposed Merger or to approve the Offer and the Proposed
Merger for purposes of Article Fifth of Pacific Scientific's Articles of
Incorporation ("Article Fifth") would constitute a breach of the Pacific
Scientific Board's fiduciary duties to Pacific Scientific shareholders under
California law, (ii) invalidating the Rights or compelling the Pacific
Scientific Board to redeem the Rights or render the Rights inapplicable to the
Offer and the Proposed Merger, (iii) compelling the Pacific Scientific Board to
approve the Offer and the Proposed Merger for purposes of Article Fifth and (iv)
enjoining the Pacific Scientific Board from taking any actions to interfere with
the Offer, the Solicitation or the Proposed Merger.
OTHER ITEMS TO CONSIDER WITH RESPECT TO THE OFFER AND PROPOSED MERGER
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
For a discussion of the material tax consequences of the Offer and the
Proposed Merger, see "Material Federal Income Tax Consequences".
5
<PAGE>
DISSENTERS' RIGHTS
California law provides for rights of dissenting shareholders in certain
business combinations to receive fair value for their shares. Pacific Scientific
shareholders will not have dissenters' rights as a result of the Offer. However,
they may have certain dissenters' rights in connection with the Proposed Merger.
See "Dissenters' Rights of Pacific Scientific Shareholders".
ACCOUNTING TREATMENT
The Offer and the Proposed Merger will be accounted for under the purchase
method of accounting. See "Accounting Treatment".
INTEREST OF CERTAIN PERSONS IN THE PROPOSED COMBINATION
Kollmorgen is not aware of any interests in the Proposed Combination that
its directors and executive officers have, other than their interests as
Kollmorgen shareholders.
REGULATORY APPROVALS
Consummation of the Offer will be subject to several conditions, including
the expiration or termination of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the receipt, on terms satisfactory to Kollmorgen, of any consent,
approval, permit or authorization of any other governmental authority. See "The
Offer and the Proposed Merger--Terms of the Offer and the Proposed Merger--HSR
Condition" and "Regulatory Matters".
SUBSEQUENT VOTES RELATING TO THE PROPOSED MERGER
At the Special Meeting, Pacific Scientific shareholders will be asked to
remove the entire Pacific Scientific Board, elect the Kollmorgen Nominees to
fill the vacancies created thereby and approve the Bylaw Repeal Proposal. If a
definitive merger agreement relating to the Proposed Merger is approved by the
Pacific Scientific Board (either before or after the incumbent Pacific
Scientific Board has been replaced at the Special Meeting) and the Board of
Directors of Purchaser, the merger agreement must be approved by the Pacific
Scientific shareholders at another meeting of Pacific Scientific shareholders.
The Solicitation is not seeking a vote on the Proposed Merger. In addition, the
issuance of the Kollmorgen Common Stock to be issued in the Proposed Merger will
require the approval of the Kollmorgen shareholders. See "Subsequent Votes
Relating to the Proposed Merger".
RISK FACTORS
INTEGRATION OF KOLLMORGEN AND PACIFIC SCIENTIFIC
The success of the combined company in achieving anticipated synergies and
achieving attractive operating results will depend upon the ability of
Kollmorgen and Pacific Scientific to integrate successfully the operations of
the two companies, which have previously operated independently. There can be no
assurance that the operations will be integrated without encountering
difficulties or that the benefits expected from such integration will be
realized at the anticipated levels or within the anticipated time periods; such
benefits may be higher or lower and may be realized within a shorter or longer
period of time.
The anticipated synergies are expected to result principally from cost
savings in selling and marketing expenses and consolidation of research and
development, as well as from cross-selling opportunities, joint purchasing
savings and reduction in corporate expenses. The anticipated cost savings and
increased revenues have been developed solely by the management of Kollmorgen
and are based on Kollmorgen's best judgments and knowledge of Pacific
Scientific's operations derived from publicly available information together
with Kollmorgen's knowledge and experience in the motor and motion
6
<PAGE>
control industry and awareness of industry trends. These anticipated synergies
are necessarily based upon several estimates and assumptions that are inherently
subject to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the control of either Kollmorgen or
Pacific Scientific, and upon assumptions with respect to future business
decisions that are subject to change. Accordingly, after Kollmorgen is permitted
access to Pacific Scientific's non-public current business plans and operations,
Kollmorgen's expectations for cost savings and potential revenue enhancement
might be higher or lower.
OPERATIONAL ISSUES; ABILITY TO MANAGE GROWTH
Kollmorgen's past acquisitions have consisted primarily of selected
operations acquisitions. While Kollmorgen believes that the integration of
Pacific Scientific's operations into Kollmorgen upon consummation of the
Proposed Combination will not present any significant difficulty and will
proceed efficiently and on a timely basis, the challenges of combining two
businesses the size of Kollmorgen and Pacific Scientific may result in some
unanticipated difficulties that could result in the diversion of management's
attention and other resources for an extended period of time and could have an
adverse effect on the results of operations of the combined company. In
addition, the combined company's ability to manage future growth will depend
upon its ability to monitor operations, control costs, maintain effective
quality controls and combine the respective company's technical and accounting
systems, the failure of which may result in higher operating expenses.
INCREASED LEVEL OF INDEBTEDNESS
Kollmorgen anticipates that the Proposed Combination will be financed
through the use of a secured bank credit facility. The financing of the Proposed
Combination will substantially increase Kollmorgen's current level of
indebtedness. In the event of a downturn in the combined company's industry or
the economy generally, or in the event of a lower than expected performance in
the combined company's operations, this level of indebtedness may interfere with
the successful implementation of the combined company's strategy, including the
successful integration and expansion of its operations. Kollmorgen expects that
if the combined company were to seek to raise additional debt after the
consummation of the Proposed Combination, any such debt would not receive an
investment grade rating.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is possible, although the determination cannot be made with certainty at
this time, that the Offer and the Proposed Merger, if consummated as currently
anticipated and assuming certain requirements are satisfied, will be treated as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended. In the event of reorganization treatment, then, in
general, the receipt of cash by a Pacific Scientific shareholder in exchange for
Pacific Scientific Common Shares pursuant to the Offer would be a taxable
transaction, but the receipt of Kollmorgen Common Stock in exchange for Pacific
Scientific Common Shares in the Proposed Merger would not be taxable to the
exchanging Pacific Scientific shareholder. If, however, the Proposed Merger does
not qualify as a reorganization, the exchange of Pacific Scientific Common
Shares for Kollmorgen Common Stock would be a taxable exchange.
There can be no assurance that the requirements for reorganization treatment
will be satisfied and neither Kollmorgen nor Purchaser is obligated to undertake
to qualify the Offer and the Proposed Merger as a reorganization. Further, if as
matters develop reorganization treatment is not certain, Kollmorgen may change
the form of effecting the Proposed Merger to ensure that the Proposed Merger
will not be taxable to Pacific Scientific. In the event of such a change,
however, the exchange of Pacific Scientific Common Shares for Kollmorgen Common
Stock in the Proposed Merger will be taxable to exchanging Pacific Scientific
shareholders. See "Material Federal Income Tax Consequences".
7
<PAGE>
EACH SHAREHOLDER OF PACIFIC SCIENTIFIC IS URGED TO CONSIDER THAT THE OFFER
AND THE PROPOSED MERGER CONSIDERATION WILL BE FULLY OR PARTIALLY TAXABLE TO SUCH
SHAREHOLDER IN EVALUATING THE VALUE OF THAT CONSIDERATION.
THE COMPANIES
KOLLMORGEN AND PURCHASER
Kollmorgen believes it is one of the major worldwide manufacturers of high
performance electronic motion control components and systems. Kollmorgen's
products include brushless, permanent magnet motors and associated electronic
servo amplifiers and controllers. Kollmorgen also manufacturers integrated
electromechanical actuators, periscopes, as well as stabilized weapons control
systems for ground vehicles and naval vessels. These products and systems are
manufactured by Kollmorgen in the United States, France, Germany, Israel, India,
Vietnam and the People's Republic of China, and are sold around the world to the
commercial and industrial and aerospace and defense markets. Kollmorgen is a New
York corporation. Its executive offices are located at Reservoir Place, 1601
Trapelo Road, Waltham, Massachusetts 02154, and its telephone number is (781)
890-5655.
Purchaser, a wholly owned subsidiary of Kollmorgen, was formed in December
1997 solely for the purpose of effecting the Offer and the Proposed Merger.
Purchaser's executive offices are located at Reservoir Place, 1601 Trapelo Road,
Waltham, Massachusetts 02154, and its telephone number is (781) 890-5655.
PACIFIC SCIENTIFIC
According to the Pacific Scientific Annual Report on Form 10-K for the
fiscal year ended December 27, 1996 (the "Pacific Scientific 1996 Form 10-K"),
Pacific Scientific manufactures and sells electrical equipment and safety
equipment. The electrical equipment segment produces: electric motors and
generators and related motion control devices such as controllers and drivers,
electronic instruments for particle measurement, electromechanical and
electronic controls for use mainly by electric utilities, including the controls
for street and highway lighting and electronic ballasts for fluorescent lights.
The safety equipment segment produces: fire detection and suppression equipment,
personnel safety restraints, mechanical and electromechanical flight control
components and pyrotechnics. This segment also provides service for products
already delivered to customers. These products are used mainly in commercial and
military aircraft and vehicles, but are also used in a variety of other
commercial and industrial applications. Pacific Scientific is a California
corporation. Its principal executive offices are located at 620 Newport Center
Drive, Suite 700, Newport Beach, California 92660, and its telephone number is
(714) 720-1714.
MARKET PRICES
The Kollmorgen Common Stock is listed on the NYSE under the symbol "KOL",
and the Pacific Scientific Common Stock is listed on the NYSE under the symbol
"PSX". The following table sets forth the closing price per share of the
Kollmorgen Common Stock and the Pacific Scientific Common Stock, as reported on
the Dow Jones News Service as of December 12, 1997, the last trading day before
Kollmorgen publicly announced its intention to make the offer and the last
trading day prior to the date of this Consent Solicitation Statement/Prospectus.
<TABLE>
<CAPTION>
MARKET PRICES PER SHARE
-----------------------------
<S> <C> <C>
PACIFIC
KOLLMORGEN SCIENTIFIC
COMMON COMMON
STOCK STOCK
----------- ----------------
December 12, 1997................................................................. $ 16.88 $ 15.44
</TABLE>
8
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are income applicable to common shares and book value
applicable to common shares of Kollmorgen and Pacific Scientific on both an
historical and a pro forma combined basis. The pro forma data presented below is
not necessarily indicative of actual results that would have occurred or of
future expected results. Kollmorgen management expects to achieve operating cost
savings and synergies as a result of the Proposed Combination. However, no
adjustment has been included in the unaudited pro forma data for expected
operating cost savings and synergies.
Pro forma combined income applicable to common shares is derived from the
unaudited pro forma combined information, which gives effect to the Proposed
Combination as if the Proposed Combination had occurred at January 1, 1996,
combining the results of Kollmorgen and Pacific Scientific for the periods
presented. Book values applicable to common shares for Pacific Scientific and
for the pro forma combined presentation are based upon outstanding common shares
at the end of the periods presented, adjusted in the case of the pro forma
combined presentation to include the shares of Kollmorgen Common Stock to be
issued in the Proposed Merger. Pro forma book value data is presented as though
the Proposed Combination had occurred at September 30, 1997. The information set
forth below should be read in conjunction with the respective audited and
unaudited historical consolidated financial statements of Kollmorgen and Pacific
Scientific incorporated by reference elsewhere herein and the "Unaudited Pro
Forma Financial Information" appearing elsewhere herein. Because the number of
Pacific Scientific Common Shares to be converted in the Proposed Merger will not
be known until five days prior to the completion of the Proposed Merger, actual
Pacific Scientific equivalent per share data cannot be computed at this time.
Hypothetical Pacific Scientific equivalent per share data is presented below
using the closing sale price of a share of Kollmorgen Common Stock on December
10, 1997 and a resulting hypothetical exchange ratio of 1.2.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED PACIFIC SCIENTIFIC
SEPTEMBER 30, 1997 KOLLMORGEN/ EQUIVALENTS
------------------------------------ PACIFIC ------------------------
PACIFIC SCIENTIFIC EXCHANGE EXCHANGE
KOLLMORGEN SCIENTIFIC PRO FORMA RATIO OF RATIO OF
COMMON STOCK COMMON STOCK COMBINED .6(B) 1.2(C)
----------------- ----------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings per share................... $ 1.87(a) $ 0.73 $ 0.02 $ 0.01 $ 0.02
Dividends per share, net............. $ 0.06 $ 0.09 $ 0.10 $ 0.06 $ 0.12
Book value per share at end of
period............................. $ 4.19 $ 8.31 $ 9.79 $ 5.87 $ 11.75
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PACIFIC SCIENTIFIC
DECEMBER 31, 1996 KOLLMORGEN/ EQUIVALENTS
------------------------------------ PACIFIC ------------------------
PACIFIC SCIENTIFIC EXCHANGE EXCHANGE
KOLLMORGEN SCIENTIFIC PRO FORMA RATIO OF RATIO OF
COMMON STOCK COMMON STOCK COMBINED .6(B) 1.2(C)
----------------- ----------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings (loss) per share............ $ 0.86 $ 0.01 $ (0.74) $ (0.44) $ (0.89)
Dividends per share, net............. $ 0.08 $ 0.12 $ 0.13 $ 0.08 $ 0.16
Book value per share at end of
period............................. $ 2.23 $ 8.76
</TABLE>
(a) The earnings per share includes a non-recurring charge for acquired
in-process research and development and non-recurring income related to the
disposition of Kollmorgen's equity interest in a joint venture. Those
amounts have been eliminated from the pro forma presentation.
9
<PAGE>
(b) The hypothetical Pacific Scientific equivalent per share data was calculated
by multiplying the pro forma combined per share data by .6, or half of the
hypothetical exchange ratio of 1.2, to reflect the assumption that half of
the outstanding Pacific Scientific Common Shares will be exchanged for stock
in the Proposed Combination.
(c) The hypothetical Pacific Scientific equivalent per share data was calculated
by multiplying the pro forma combined per share data by the hypothetical
exchange ratio of 1.2, to illustrate the case in which a Pacific Scientific
Shareholder does not tender shares pursuant to the Offer and, accordingly,
receives all stock in the Proposed Combination.
FORWARD-LOOKING STATEMENTS
Kollmorgen has made forward-looking statements in this document and in
documents to which it has referred you. These statements are subject to risks
and uncertainties, and there can be no assurance that such statements will prove
to be correct. Actual results may differ materially. Forward-looking statements
include assumptions as to how Kollmorgen and Pacific Scientific may perform in
the future. Among other matters, the forward-looking statements include, without
limitation, the information about the business, strategy, plans and objectives,
operations, planned capital expenditures, management, forecasted operating
results and operating statistics and potential financial condition, revenue
enhancements, cost savings and accretion to earnings and pro forma financial
information, with respect to the combined company, and the information
concerning the Proposed Combination. You will find many of these statements in,
among others, the following sections:
- "The Proposed Combination"
- "Reasons for the Proposed Combination"
- "Pro Forma Combined Financial Data"
All discussions of the operations of the combined companies include
forward-looking statements. Also, words like "believes", "expects",
"anticipates" or similar expressions introduce forward-looking statements. You
should understand that the following important factors, in addition to those
discussed elsewhere in this Consent Solicitation Statement/Prospectus and in the
documents which Kollmorgen incorporates by reference, could affect the future
results of Kollmorgen and Pacific Scientific and could cause those results to
differ materially from those expressed in such forward-looking statements. Such
factors include those discussed under "Risk Factors" as well as: materially
adverse changes in U.S. and international economic conditions, in Kollmorgen's
industry and in the markets served by Kollmorgen and Pacific Scientific; lower
than expected revenues from the sale of its existing products and services
because of changes in product demand and market acceptance; the effect of
competitive products, development of new technologies and pricing from large,
multi-national motion technology competitors (both current and emerging), many
of which have greater financial, technical, marketing and other resources;
unanticipated increases in cost of raw materials and product development costs;
moderating growth rates in commercial lines of business; lack of market
acceptance of new products because of lower than expected levels of customer
demand, technological difficulties in these newly introduced products, or the
timeliness of these product introductions; unanticipated reduction in existing
utility customers' requirements for engineering services; increased working
capital needs; unexpected capital expenditure requirements; difficulty in
obtaining favorable financing arrangements either due to an unfavorable
institutional lending environment or the inability to obtain financing because
of leverage; the inability to achieve expected synergies; fluctuations in
foreign currency exchange rates; and a significant delay in the expected
completion of the Proposed Merger. See "Forward Looking Statements".
10
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The following table represents the selected historical statement of
operations and balance sheet data of Kollmorgen. The financial data presented
below as of and for each of the years in the period 1992 to 1996 have been
audited by Coopers & Lybrand L.L.P., independent accountants and have been
derived from Kollmorgen's Annual Reports on Form 10-K for the years ended
December 31, 1996 and 1993. The financial data as of and for the nine months
ended September 30, 1996 and 1997 have been derived from the unaudited financial
statements of Kollmorgen in Kollmorgen's Quarterly Reports for each of the nine
months ended September 30, 1996 and 1997. In the opinion of management, the
unaudited financial statements have been prepared on a basis consistent with the
audited financial statements and contain all adjustments, consisting only of
normal recurring adjustments (except for the charge for acquired research and
development, and the gain on sale of joint venture interest), necessary to
present fairly the information set forth therein. The operating results for the
nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. Kollmorgen's
selected historical financial data should be read in conjunction with, and are
qualified in their entirety by reference to, the historical financial statements
(and related notes) of Kollmorgen which are incorporated by reference herein.
See "Available Information" and "Incorporation of Certain Documents by
Reference".
Kollmorgen reports quarterly and annual earnings results using methods
required by generally accepted accounting principles. Kollmorgen prepares its
financial statements on the basis of a fiscal year beginning on January 1 and
ending on December 31.
SELECTED HISTORICAL FINANCIAL DATA OF KOLLMORGEN
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, SEPTEMBER 30,
(AUDITED) (UNAUDITED)
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales.................................. $ 194,859 $ 185,538 $ 191,771 $ 228,655 $ 230,424 $ 169,658 $ 163,054
Cost of Sales.............................. 129,151 121,286 124,627 152,614 152,928 112,749 113,590
--------- --------- --------- --------- --------- --------- ---------
Gross Profit............................... 65,708 64,252 67,144 76,041 77,496 56,909 49,464
--------- --------- --------- --------- --------- --------- ---------
Selling and Marketing Expense.............. 25,471 24,708 27,753 29,412 27,570 20,601 15,003
General and Administrative Expense......... 23,425 21,973 21,491 22,435 24,348 18,256 17,412
Research and Development Expense........... 10,645 9,338 10,843 13,178 12,143 9,024 7,249
Restructuring and other costs.............. 10,000 -- -- -- -- -- --
Acquired Research and Development.......... -- -- -- -- -- -- 11,391
--------- --------- --------- --------- --------- --------- ---------
Income (loss) Before interest, minority
interest and taxes....................... (3,833) 8,233 7,057 11,016 13,435 9,028 (1,591)
Other (income) expense..................... 5,664 4,329 3,821 3,859 5,045 3,765 2,868
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before minority interest and
income taxes............................. (9,497) 3,904 3,236 7,157 8,390 5,263 (4,459)
Minority interest.......................... -- -- -- -- 514 418 222
Income tax benefit (provision)............. 772 848 815 -- -- -- (1,978)
Joint Venture:
Equity in Earnings....................... -- -- -- -- -- -- 1,430
Gain on Sale of Investment,
Net of Income Taxes.................... -- -- -- -- -- -- 24,321
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).......................... $ (8,725) $ 4,752 $ 4,051 $ 7,157 $ 8,904 $ 5,681 $ 19,536
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income available to common
shareholders............................. $ (11,055) $ 2,428 $ 1,727 $ 2,509 $ 8,619 $ 5,396 $ 19,536
Earnings (loss) per common share--fully
diluted.................................. $ (1.14) $ 0.25 $ 0.18 $ 0.26 $ 0.86 $ 0.54 $ 1.87
Number of shares used in calculating
earnings per share....................... 9,627 9,632 9,642 9,670 10,042 10,082 10,444
BALANCE SHEET DATA:
Total Assets............................... $ 149,568 $ 134,008 $ 138,201 $ 147,474 $ 141,330 $ 138,965 $ 142,144
Total Debt................................. $ 56,170 $ 53,524 $ 53,991 $ 49,808 $ 65,541 $ 69,194 $ 44,775
Redeemable Preferred Stock(a).............. $ 22,282 $ 22,407 $ 22,532 $ 25,506 $ -- $ -- $ --
Cash Dividends............................. $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.06
Common Stock Outstanding at Par Value...... $ 26,861 $ 26,875 $ 26,891 $ 26,904 $ 26,914 $ 26,912 $ 26,919
Total Shareholders' Equity................. $ 8,074 $ 7,585 $ 9,880 $ 11,297 $ 21,779 $ 16,321 $ 41,911
</TABLE>
- --------------------------
(a) The Preferred Stock at December 31, 1995 is presented at its liquidation
value of $22,750 plus the 10% premium of $2,756. (Refer to Kollmorgen's
Annual Report on Form 10-K)
See accompanying notes
11
<PAGE>
KOLLMORGEN CORPORATION
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(1) Effective December 31, 1996, Kollmorgen combined its Macbeth division with
the Color Control Systems business of Gretag AG and received 48% of the
shares in the Swiss holding company which controls the two businesses (the
"Joint Venture"). Accordingly, at December 31, 1996, and through the second
quarter of 1997, the Macbeth division was not consolidated in Kollmorgen's
financial statements, but instead Kollmorgen accounted for its interest in
the Joint Venture using the equity method.
Effective June 17, 1997, Kollmorgen agreed, pursuant to a firm underwriting
agreement, to sell approximately 88% of its interest in the Joint Venture as
part of an initial public offering on the Swiss stock exchange. On June 25,
1997 Kollmorgen sold approximately 88% of its interest in the Joint Venture,
receiving approximately $38 million. Subsequently in August, 1997,
Kollmorgen sold the remaining shares to the underwriter, receiving
approximately $4.0 million in cash. Kollmorgen's financial statements
reflect a gain in the second quarter of 1997 of approximately $24 million on
the sale of its shares in the Joint Venture. The gain is net of $2 million
in income taxes and utilization of net operating loss and other tax credit
carryforwards.
Refer to Note 2 of the 1996 financial statements contained in Kollmorgen's
Annual Report on Form 10-K for the year ended December 31, 1996 for
additional information.
(2) Effective April 2, 1997, Kollmorgen agreed to purchase all of the remaining
shares of Servotronix Ltd. ("Servotronix") for cash of $6.4 million and
through the issuance of 257,522 shares of Kollmorgen Common Stock. The
shares not yet purchased are a liability of Kollmorgen in the amount of $1.8
million at September 30, 1997. Accordingly, Kollmorgen has accounted for the
purchase of Servotronix as if 100% of the shares were purchased on April 2,
1997.
(3) Effective June 10, 1997, Kollmorgen entered into a binding agreement to
purchase all of the shares of Fritz A. Seidel Elektro-Automatik GmbH
("Seidel"). Accordingly, Kollmorgen consolidated the balance sheet of Seidel
as of June 30, 1997. Effective in the third quarter of 1997, the results of
operations for Seidel are consolidated in Kollmorgen's financial statements.
(4) In connection with the acquisitions of Servotronix and Seidel, Kollmorgen
has allocated the purchase price to the assets acquired, both tangible and
intangible, and any excess of the purchase price over the assets acquired
has been classified as goodwill. A portion of the purchase price has been
allocated to in-process research and development for products which are not
yet feasible and the value of the in-process research and development of
$10.5 million was expensed as acquired research and development in the
second quarter of 1997. Also included in acquired research and development
was a charge of approximately $0.9 million for technology acquired unrelated
to the Servotronix and Seidel acquisitions.
12
<PAGE>
The following table represents the selected historical statement of
operations and balance sheet data of Pacific Scientific. The financial data
presented below as of and for the fiscal year ended December 25, 1992, have been
derived from the condensed consolidated statements of income, condensed
consolidated balance sheets and other financial data of Pacific Scientific in
Pacific Scientific's 1996 Annual Report to Shareholders. The Financial Data
presented below as of and for the fiscal year ended December 31, 1993 have been
derived from the audited consolidated financial statements of Pacific Scientific
in Pacific Scientific's Annual Report on Form 10-K for the fiscal year ended
December 29, 1995. The financial data presented below as of and for each of the
fiscal years ended December 30, 1994, December 29, 1995 and December 27, 1996
have been derived from the audited consolidated financial statements of Pacific
Scientific in Pacific Scientific's Annual Report on Form 10-K for the fiscal
year ended December 27, 1996. The balance sheet data as of September 27, 1996
have been derived from the unaudited financial statements of Pacific Scientific
in Pacific Scientific's Quarterly Report on Form 10-Q for the nine months ended
September 27, 1996. The statement of operations data for the nine months ended
September 27, 1996 and the financial data as of and for the nine months ended
September 26, 1997 have been derived from the unaudited financial statements of
Pacific Scientific in Pacific Scientific's Quarterly Report on Form 10-Q for the
nine months ended September 26, 1997. The operating results for the nine months
ended September 26, 1997 are not necessarily indicative of the results that may
be expected for the year ending December 26, 1997. Pacific Scientific's selected
historical financial data should be read in conjunction with, and are qualified
in their entirety by reference to, the historical financial statements (and
related notes) of Pacific Scientific which are incorporated by reference herein.
See "Available Information" and "Incorporation of Certain Documents by
Reference".
Pacific Scientific reports quarterly and annual earnings results using
methods required by generally accepted accounting principles. Pacific Scientific
prepares its financial statements on the basis of a fiscal year beginning the
day following the end of the prior fiscal year and ending on the last Friday in
December.
SELECTED HISTORICAL FINANCIAL DATA OF PACIFIC SCIENTIFIC
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED(1) ENDED
(AUDITED) (UNAUDITED)
----------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DEC. 25, DEC. 31, DEC. 30, DEC. 29, DEC. 27, SEPT. 27, SEPT. 26,
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- ----------- -----------
STATEMENT OF OPERATIONS DATA:
Net Sales.......................... $ 183,308 $ 206,609 $ 247,683 $ 284,812 $ 294,779 $ 217,114 $ 227,744
Costs and Expenses:
Cost of Sales.................. 124,462 140,463 164,941 186,224 203,074 146,349 154,428
Selling, Marketing, General and
Administrative............... 40,072 44,569 51,967 59,519 63,569 45,018 47,397
Research and Development....... 9,487 9,911 11,793 15,750 15,974 10,955 9,880
Cost of Solium Restructuring
and Other Charges............ -- -- -- -- 7,500 -- --
--------- --------- --------- --------- --------- ----------- -----------
Operating Income................... 9,287 11,666 18,982 23,319 4,662 14,792 16,039
Other Income (Expense), Net........ (887) (525) (2,240) (3,229) (4,362) (2,068) (1,630)
--------- --------- --------- --------- --------- ----------- -----------
Income Before Income Taxes......... 8,400 11,141 16,742 20,090 300 12,724 14,409
Income Taxes....................... (3,069) (3,858) (6,481) (7,340) (131) (4,975) (5,384)
Loss from Discontinued
Operations....................... -- -- -- -- -- (8,725) (13,563)
Cumulative Effect of Change in
Accounting Principle............. -- 1,060 -- -- -- -- --
--------- --------- --------- --------- --------- ----------- -----------
Net Income (Loss).................. $ 5,331 $ 8,343 $ 10,261 $ 12,750 $ 169 $ (976) $ (4,538)
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Net Income (Loss) Per Share (fully
diluted)......................... $ 0.45 $ 0.70 $ 0.83 $ 1.01 $ 0.01 $ (0.08) $ (0.36)
BALANCE SHEET DATA(2)
Total Assets....................... $ 141,614 $ 168,588 $ 180,635 $ 225,018 $ 229,490 $ 227,459 $ 220,800
Long-Term Debt..................... $ 29,206 $ 44,840 $ 42,936 $ 63,719 $ 83,108 $ 83,379 $ 70,187
Common Stock Outstanding at Par
Value............................ $ 11,664 $ 11,780 $ 11,922 $ 12,071 $ 12,195 $ 12,171 $ 12,382
Total Stockholders' Equity......... $ 73,332 $ 81,977 $ 92,773 $ 106,486 $ 106,810 $ 105,707 $ 102,865
</TABLE>
- --------------------------
(1) Statements of Operations for the fiscal years presented do not include the
operating results of Solium as a Discontinued Operation as this information
was not publicly available (refer to Pacific Scientific Current Report on
Form 8-K dated April 21, 1997).
(2) Balance sheet data at September 27, 1996 and for the fiscal years presented
do not include the Solium business as a Discontinued Operation as this
information was not publicly available.
13
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
KOLLMORGEN
PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEIDEL SERVOTRONIX KOLLMORGEN
JANUARY 1, 1997 JANUARY 1, 1997 PRO FORMA
KOLLMORGEN TO JUNE 9, 1997 TO APRIL 1, 1997 PRO FORMA ADJUSTED
HISTORICAL HISTORICAL(A) HISTORICAL(A) ADJUSTMENTS HISTORICAL
----------- ---------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $ 163,054 $ 9,591 $ 543 $ 173,188
Cost of Revenues.......................... 113,590 6,622 329 120,541
----------- ------- ----- -----------
Gross Margin.............................. 49,464 2,969 214 52,647
Operating Expenses:
Sales, Marketing, General and
Administrative........................ 32,131 1,734 95 33,960
Research and Development................ 7,249 334 125 7,708
Acquired Research and Development....... 11,391 -- -- $ (11,391)(b) --
Amortization of Goodwill................ 284 -- -- 242(c) 526
----------- ------- ----- ------------ -----------
Operating Income (Loss)................... (1,591) 901 (6) 11,149 10,453
Other Income (Expense), Net............... (2,646) (32) 6 816(d) (1,856)
----------- ------- ----- ------------ -----------
Income (Loss) Before Taxes................ (4,237) 869 -- 11,965 8,597
Provision for Income Taxes................ (1,978) -- -- (335)(e) (3,095)
(782)(e)
----------- ------- ----- ------------ -----------
Net Income (Loss) from Continuing
Operations before Investment in Joint
Venture................................. (6,215) 869 -- 10,848 5,502
Joint Venture:
Equity in Earnings...................... 1,430 -- -- (1,430)(d) --
Gain on Sale of Investment, Net of
Taxes................................. 24,321 -- -- (24,321)(d) --
----------- ------- ----- ------------ -----------
Net Income................................ $ 19,536 $ 869 $ -- $ (14,903) $ 5,502
----------- ------- ----- ------------ -----------
----------- ------- ----- ------------ -----------
Net Income per Share--
Fully Diluted........................... $ 1.87 -- -- $ 0.53
Weighted Average Number of Common Shares
Outstanding............................. 10,444 -- -- 10,444
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma adjusted
historical consolidated financial statements.
14
<PAGE>
KOLLMORGEN
PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KOLLMORGEN'S KOLLMORGEN
MACBETH FRENCH PRO FORMA
KOLLMORGEN SEIDEL SERVOTRONIX DIVISION INSTRUMENT PRO FORMA ADJUSTED
HISTORICAL HISTORICAL(A) HISTORICAL(A) HISTORICAL(F) GROUP(G) ADJUSTMENTS HISTORICAL
---------- ------------- -------------- --------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $230,424 $ 19,179 $ 2,566 $(32,104) $ (932) $219,133
Cost of Revenues....... 152,928 13,346 1,307 (15,819) (848) 150,914
---------- ------------- -------------- --------------- ------------- ----------
Gross Margin........... 77,496 5,833 1,259 (16,285) (84) 68,219
Operating Expenses:
Sales, Marketing,
General and
Administrative..... 51,918 4,107 365 (10,027) (822) 45,541
Research and
Development........ 12,143 822 813 (2,744) (364) 10,670
Amortization of
Goodwill........... -- -- -- -- -- $ 701(c) 701
---------- ------------- -------------- --------------- ------------- ----------- ----------
Operating Income
(Loss)............... 13,435 904 81 (3,514) 1,102 (701) 11,307
Other Income (Expense),
Net.................. (4,531) (133) (81) 120 -- 1,593(d) (3,032)
---------- ------------- -------------- --------------- ------------- ----------- ----------
Income (Loss) Before
Taxes................ 8,904 771 -- (3,394) 1,102 892 8,275
Provision for Income
Taxes................ -- -- -- -- -- (478)(e) (2,317)
(1,839)(e)
---------- ------------- -------------- --------------- ------------- ----------- ----------
Net Income (Loss)...... 8,904 771 -- (3,394) 1,102 (1,425) 5,958
Preferred Dividends.... (285) -- -- -- -- (285)
---------- ------------- -------------- --------------- ------------- ----------- ----------
Income Available to
Common
Shareholders......... $ 8,619 $ 771 $-- $ (3,394) $ 1,102 $ (1,425) $ 5,673
---------- ------------- -------------- --------------- ------------- ----------- ----------
---------- ------------- -------------- --------------- ------------- ----------- ----------
Net Income per Share--
Fully Diluted........ $ 0.86 -- -- -- -- -- $ 0.56
Weighted Average Number
of Common Shares
Outstanding.......... 10,042 -- -- -- -- -- 10,042
</TABLE>
- ----------------------------------
Note: The accompanying notes are an integral part of these pro forma adjusted
historical consolidated financial statements.
15
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
A. PRO FORMA BASIS OF PRESENTATION AND ADJUSTMENTS
On April 2, 1997, Kollmorgen acquired Servotronix Ltd. ("Servotronix"), a
developer and manufacturer of motion control technology that is headquartered in
Israel. On June 10, 1997, Kollmorgen acquired Fritz A. Seidel Elektro-Automatik
GmbH ("Seidel"), a developer and manufacturer of motion control technology that
is headquartered in Germany. Both acquisitions were accounted for as purchases
and together, resulted in an in-process research and development charge of
$11,391 in 1997.
The pro forma adjusted historical consolidated statements of operations set
forth the results of operations for the nine month period ended September 30,
1997 and the year ended December 31, 1996, as if the acquisitions by Kollmorgen
of Seidel and Servotronix, and the disposal of Kollmorgen's Macbeth division
("Macbeth") had occurred at January 1, 1996.
The pro forma adjusted historical consolidated statements of operations are
intended for information purposes and are not necessarily indicative of actual
results had the transactions occurred as of the date indicated above, nor do
they purport to indicate the future results of operations.
These pro forma adjusted historical consolidated statements of operations
should be read in conjunction with the financial statements and notes thereto
included in Kollmorgen's Annual Report on Form 10-K for the year ended December
31, 1996, Kollmorgen's Current Report on Form 8-K filed January 31, 1997 and
Kollmorgen's Form 10-Q for the nine month period ended September 30, 1997. The
pro forma adjusted historical consolidated statements of operations do not give
effect to any potential cost savings and synergies that could result from the
Servotronix and Seidel acquisitions.
B. PRO FORMA ADJUSTMENTS TO PRO FORMA ADJUSTED HISTORICAL
CONSOLIDATED STATEMENTS OF OPERATIONS
(a) These columns represent the unaudited historical results of operations
of Seidel and Servotronix for the period prior to Kollmorgen's acquisition. Upon
acquisition these operations became part of Kollmorgen's historical financial
statements.
(b) This adjustment eliminates the charge for acquired in-process research
and development costs recognized principally upon the acquisition of Seidel and
Servotronix. Since these amounts are not continuing expenditures of Kollmorgen,
they are deducted from the historical consolidated statement of operations to
arrive at the Kollmorgen pro forma adjusted historical financial statements.
(c) These adjustments reflect the goodwill amortization for the periods,
assuming both acquisitions occurred at January 1, 1996. The goodwill resulting
from the acquisitions of Seidel and Servotronix totaled $10,509 which reflects
the aggregate excess purchase price over the fair value of net assets acquired
and in-process research and development. Goodwill attributable to these
acquisitions is being amortized over 15 years. For purposes of allocating the
acquisition costs among the various assets acquired, the carrying value of the
acquired assets approximated their fair value, with all the excess of such
acquisition costs being attributed to in-process acquired research and
development and goodwill. It is Kollmorgen's intention to continue to evaluate
the acquired assets and, as a result, the allocation of the acquisition costs
among the tangible and intangible assets acquired may change. All material
intercorporate transactions were eliminated.
16
<PAGE>
(d) Effective December 31, 1996, Kollmorgen contributed its Macbeth business
to a joint venture for a 48% interest. The investment was accounted for under
the equity method. In the second quarter of 1997, Kollmorgen sold its interest
in the joint venture for a gain of $24,321 which has been eliminated as a pro
forma adjustment. The $1,430 adjustment represents the elimination of
Kollmorgen's proportionate earnings of the joint venture from the beginning of
the period through the time of the sale. Kollmorgen used a portion of the
proceeds from the sale of its interest in the joint venture to repay the
outstanding balance of a $25 million term loan. Accordingly, interest expense
related to this debt of $816 and $1,593, has been excluded from these pro forma
statements of operations for the nine months ended September 30, 1997 and the
year ended December 31, 1996, respectively.
(e) These adjustments represent (i) the estimated income tax effect of the
pro forma adjustments at the blended statutory rates of 36% and 28% for 1997 and
1996, respectively, and (ii) an increase in income tax provision that would have
resulted from the full utilization of net operating loss carryforwards had the
gain on sale of investment in Macbeth occurred at January 1, 1996.
(f) This column represents the historical results of operations of Macbeth
for the period prior to December 31, 1996, the effective date of Kollmorgen's
contribution of that business to a joint venture, at which point those
operations were accounted for on the equity method in Kollmorgen's historical
financial statements.
(g) In March 1996, Kollmorgen sold a portion of its instrumentation business
located in France for its book value. This column represents the elimination of
the results of this business for 1996.
17
<PAGE>
KOLLMORGEN
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KOLLMORGEN
PRO FORMA PACIFIC
ADJUSTED SCIENTIFIC PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS PRO FORMA
----------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues.......................................... $ 173,188 $ 227,744 $ 400,932
Cost of Revenues.................................. 120,541 154,428 274,969
----------- ---------------- -----------
Gross Margin...................................... 52,647 73,316 125,963
Operating Expenses:
Sales, Marketing,
General and Administrative.................... 33,960 47,397 81,357
Research and Development...................... 7,708 9,880 17,588
Amortization of Goodwill...................... 526 -- $ 8,537(b) 9,063
----------- ---------------- ------------ -----------
Operating Income.................................. 10,453 16,039 (8,537) 17,955
Other Income (Expense), Net....................... (1,856) (1,630) (8,838)(c) (12,967)
(643)(c)
----------- ---------------- ------------ -----------
Income Before Taxes............................... 8,597 14,409 (18,018) 4,988
Provision for Income Taxes........................ (3,095) (5,384) 3,792(d) (4,686)
----------- ---------------- ------------ -----------
Net Income from Continuing Operations............. $ 5,502 $ 9,025 $ (14,226) $ 302
----------- ---------------- ------------ -----------
----------- ---------------- ------------ -----------
Net Income per Share from Continuing Operations --
Fully Diluted................................... $ 0.53 $ 0.73 $ 0.02
Weighted Average Number of Common Shares
Outstanding..................................... 10,444 12,443 (12,443)(e) 18,226
7,782(e)
</TABLE>
- ------------------------
Note:The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
18
<PAGE>
KOLLMORGEN
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KOLLMORGEN
PRO FORMA PACIFIC
ADJUSTED SCIENTIFIC PRO FORMA
HISTORICAL HISTORICAL(F) ADJUSTMENTS PRO FORMA
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenues............................................... $ 219,133 $ 294,779 $ 513,912
Cost of Revenues....................................... 150,914 203,074 353,988
----------- ------------ -----------
Gross Margin........................................... 68,219 91,705 159,924
Operating Expenses:
Sales, Marketing, General and
Administrative................................... 45,541 63,569 109,110
Research and Development........................... 10,670 15,974 26,644
Cost of Solium Restructuring and Other............. -- 7,500 7,500
Amortization of Goodwill........................... 701 -- $ 11,383(b) 12,084
----------- ------------ ------------ -----------
Operating Income....................................... 11,307 4,662 (11,383) 4,586
Other Income (Expense), Net............................ (3,032) (4,362) (11,785)(c) (20,036)
(857)(c)
----------- ------------ ------------ -----------
Income (Loss) Before Taxes............................. 8,275 300 (24,025) (15,450)
Benefit (Provision) for Income Taxes................... (2,317) (131) 5,057(d) 2,609
----------- ------------ ------------ -----------
Net Income (Loss)...................................... 5,958 169 (18,968) (12,841)
Preferred Dividends.................................... (285) -- -- (285)
----------- ------------ ------------ -----------
Income Available to Common
Shareholders......................................... $ 5,673 $ 169 $ (18,968) $ (13,126)
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Net Income (Loss) per Share -- Fully
Diluted.............................................. $ 0.56 $ 0.01 $ (0.74)
Weighted Average Number of Common Shares Outstanding... 10,042 12,457 (12,457)(e) 17,824
7,782(e)
</TABLE>
- ------------------------
Note:The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
19
<PAGE>
KOLLMORGEN
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PACIFIC PRO FORMA
KOLLMORGEN SCIENTIFIC ADJUSTMENTS PRO FORMA
----------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents....................... $ 17,881 $ 3,174 $ 21,055
Accounts Receivable, Net........................ 41,367 51,078 92,445
Inventories..................................... 25,486 54,611 80,097
Deferred Income Taxes........................... -- 9,986 9,986
Other Current Assets............................ 6,385 6,946 13,331
----------- ---------------- -----------
Total Current Assets............................ 91,119 125,795 216,914
Property and Equipment, Net......................... 26,006 49,411 75,417
Note Receivable..................................... -- 8,700 8,700
Investment in Joint Venture......................... 14,483 -- 14,483
Other Assets, Net................................... 10,536 36,894 $ 6,000(c) 53,430
Goodwill, Net....................................... -- -- 170,744(g) 170,744
----------- ---------------- ------------ -----------
Total Assets........................................ $ 142,144 $ 220,800 $ 176,744 $ 539,688
----------- ---------------- ------------ -----------
----------- ---------------- ------------ -----------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable and Accrued Liabilities........ $ 49,759 $ 22,874 $ 72,633
Other Current Liabilities....................... 13,153 13,908 27,061
Reserve for Discontinued Solium Operation....... -- 4,593 4,593
----------- ---------------- -----------
Total Current Liabilities....................... 62,912 41,375 104,287
Long-Term Obligations............................... 37,249 76,560 $ 147,309(c) 261,118
Minority Interest................................... 72 -- -- 72
----------- ---------------- ------------ -----------
Total Liabilities................................... 100,233 117,935 147,309 365,477
Stockholders' Equity................................ 41,911 102,865 132,300(h) 174,211
(102,865)(h)
----------- ---------------- ------------ -----------
Total Liabilities and Stockholders' Equity.......... $ 142,144 $ 220,800 $ 176,744 $ 539,688
----------- ---------------- ------------ -----------
----------- ---------------- ------------ -----------
</TABLE>
- ------------------------
Note:The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
20
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A. PRO FORMA BASIS OF PRESENTATION AND ADJUSTMENTS
The pro forma combined condensed consolidated financial statements are
prepared assuming that Kollmorgen has merged with Pacific Scientific, a
manufacturer of high-performance rotating electrical equipment, including
motors, generators and alternators. The Proposed Combination will be effected
through the exchange of approximately 7,782,000 shares of common stock of
Kollmorgen and cash of $132,309, resulting in a total estimated purchase price,
including other costs of approximately $15,000, of approximately $279,609. The
shares of Kollmorgen common stock are assumed to be issued at a value of $17.00
per share which reflects the closing price of the Company's common stock as of
December 10, 1997. This share price differs from the December 12, 1997 share
price of $16.88 referred to elsewhere in the Consent Solicitation
Statement/Prospectus. Application in these pro forma statements of the $16.88
per share value would not materially impact the pro forma values presented
herein. The ultimate number of shares issued to acquire Pacific Scientific will
be in the range of approximately 7,007,880 to 8,569,043 shares, dependent upon
the 20-day average closing price of Kollmorgen Common Stock five days prior to
closing. Kollmorgen has ascribed no value to Pacific Scientific's preferred
stock purchase rights which will be acquired in the Proposed Combination. A
change in the number of shares issued upon final consumation of the proposed
transaction from the amounts assumed above would effect the pro forma net income
per share for the periods presented. The transaction will be accounted for as a
purchase.
The pro forma combined condensed consolidated balance sheet includes the
financial statements of Kollmorgen and Pacific Scientific at September 30, 1997,
as if the Proposed Combination had occurred on that date.
The pro forma combined condensed consolidated statements of operations set
forth the results of operations for the nine month period ended September 30,
1997 and the year ended December 31, 1996 as if the Proposed Combination had
occurred at January 1, 1996.
The pro forma combined condensed consolidated financial statements are
intended for information purposes and are not necessarily indicative of actual
results had the Proposed Combination occurred as of the dates indicated above,
nor do they purport to indicate the future consolidated financial position or
future results of operations of the combined entity. Pacific Scientific's
historical financial data was derived from Pacific Scientific's Annual Report on
Form 10-K for the year ended December 27, 1996, and Pacific Scientific's Form
10-Q for the nine month period ended September 26, 1997. For Kollmorgen's pro
forma adjusted historical financial data, see "Pro Forma Adjusted Historical
Consolidated Statement of Operations" for the nine months ended September 30,
1997 and the year ended December 31, 1996 presented elsewhere herein. These
combined condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in
Kollmorgen's Annual Report on Form 10-K for the year ended December 31, 1996,
Kollmorgen's Form 10-Q for the nine month period ended September 30, 1997,
Pacific Scientific's Annual Report on Form 10-K for the year ended December 27,
1997 and Pacific Scientific's Form 10-Q for the nine month period ended
September 26, 1997.
B. PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(a) Pacific Scientific's statement of operations as presented on Form 10-Q
for the nine months ended September 26, 1997, reflects a Loss from Discontinued
Operations of $13,563, Net Loss of
21
<PAGE>
$4,358, Loss per share on Discontinued Operations of $1.09 and Net Loss per
share of $0.36. This pro forma statement reflects only results from continuing
operations.
(b) These pro forma adjustments reflect the amortization of goodwill assumed
to be generated in the Proposed Combination over the estimated useful life of
fifteen years on a straight-line basis. The ultimate allocation of the purchase
price to the net assets acquired, goodwill, other intangible assets, liabilities
assumed and incomplete technology is subject to final determination of their
respective fair values. A determination of the fair value of incomplete
technology, if any, is subject to a detailed analysis of the tangible and
intangible assets related to in-process research and development on new products
of Pacific Scientific. The value assigned to in-process research and development
could result in a material charge to operations at consummation of the
transaction and a corresponding reduction in the amounts to be amortized. There
were no intercorporate transactions that required elimination.
(c) The pro forma combined condensed consolidated balance sheet reflects
Kollmorgen's securing a credit facility consisting of a $175,000 term loan and a
$125,000 revolving credit facility (the "Loan") as if the issuance occurred on
September 30, 1997. The term loan is payable over seven years. The Loan accrues
interest at a rate of Libor plus 2%. At the date of the Proposed Combination,
this interest rate is assumed to be 8%. The pro forma combined condensed
consolidated statements of operations include the interest expense associated
with the Loan, as if the issuance occurred at January 1, 1996, of $8,838 and
$11,785, for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively. Under applicable pro forma rules, interest
income associated with the proceeds from the Loan, which may partially offset
the interest expense, is not included in the pro forma statements of operations.
Estimated debt issuance costs of $6,000 for credit facility commitment fees have
been included in other long-term assets and are being amortized over the term of
the Loan. Amortization of debt issuance costs on the Loan for the nine months
ended September 30, 1997 and the year ended December 31, 1996 are estimated to
be $643 and $857, respectively.
(d) This adjustment represents the estimated income tax effect of the pro
forma adjustments using a combined U.S. federal and state statutory rate of 40%
for both 1996 and the first nine months in 1997.
(e) The pro forma adjustments reflect the exchange of Pacific Scientific's
weighted average number of common shares outstanding of 12,443,000 and
12,457,000, for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively, and the issuance of Kollmorgen's common shares
to be exchanged in the Proposed Combination of 7,782,000 assuming an exchange
ratio of 1.2 shares of Kollmorgen Common Stock for one share of Pacific
Scientific Common Stock for those shares outstanding as of September 26, 1997
not exchanged for cash.
(f) The Pacific Scientific historical financial statements for 1996 included
in these pro forma combined condensed consolidated financial statements include
the results of operations of Pacific Scientific's Solium business which was
discontinued in 1997. Had the pro forma financial statements been adjusted to
exclude the Solium business, net sales would have decreased by $2,416, and
pre-tax income would have increased by $14,541.
(g) The pro forma adjustment reflects the excess purchase price over the
fair value of net assets assumed to be acquired of $170,744. Estimated
transaction related costs of $9,000 for investment banker fees, accounting and
legal fees, and other various deal costs have been included in the determination
of goodwill. For purposes of these pro forma financial statements, the fair
value of the assets acquired is estimated to be equivalent to the historical
financial statement balance as of the date of acquisition. The ultimate
allocation of the purchase price to the net assets acquired, goodwill, other
intangible assets, liabilities assumed and a charge for incomplete technology is
subject to final determination of their respective fair values.
(h) The pro forma combined condensed consolidated balance sheet reflects an
increase for the value of 7,782 common shares at $17.00 per share assumed to be
issued by Kollmorgen in the Proposed Merger to Pacific Scientific shareholders
of $132,300, and an elimination of the net equity of Pacific Scientific of
$102,865.
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THE PROPOSED COMBINATION
Kollmorgen believes that the Proposed Combination of Kollmorgen and Pacific
Scientific is a unique opportunity for you and other Pacific Scientific
shareholders to realize a premium for your shares and to participate in the
future of one of the world's leading suppliers of electronic motion control
solutions. The Proposed Combination, structured as the Offer and the Proposed
Merger, would give you and other Pacific Scientific shareholders an up-front
cash payment, together with a valuable, continuing equity stake in the combined
company. Kollmorgen believes the Proposed Combination would be an excellent
strategic and operational fit for Kollmorgen and Pacific Scientific, would
increase combined pre-tax annual operating profits and create a leader in the
motors and motion control industry, with a full range of products offered on a
global basis, a management team with a proven record and a dedicated employee
base. See "Reasons for the Proposed Combination". The Pacific Scientific Board,
however, has been unwilling to negotiate a business combination between
Kollmorgen and Pacific Scientific, and despite Kollmorgen's repeated attempts,
refuses to allow you to consider sharing in Kollmorgen's vision. See "Background
of the Offer and the Proposed Merger". Pacific Scientific instead maintains
legal obstacles to the Proposed Combination which have the effect of repressing
your voice in the future of your company. Because the Pacific Scientific Board
has denied you the opportunity to share in the rewards of the combined company,
Kollmorgen is presenting this opportunity directly to you through the Offer and
the Solicitation. In order to guarantee you the opportunity to express your own
view on the future of Pacific Scientific, Kollmorgen is seeking your consent to
call the Special Meeting. At the Special Meeting, Kollmorgen will ask you to
remove the entire Pacific Scientific Board and replace it with new directors who
Kollmorgen expects will be committed, subject to their fiduciary duties under
applicable law, to allowing you, the owners of Pacific Scientific, to make this
important decision. In addition, Kollmorgen will propose a binding shareholder
resolution to rescind any attempt that the Pacific Scientific Board has made or
may make to amend the Pacific Scientific Bylaws as part of the Pacific
Scientific Board's continuing effort to prevent you from enjoying the benefits
of the Proposed Combination. See "The Special Meeting".
REASONS FOR THE PROPOSED COMBINATION
Kollmorgen believes that the combined company will offer customers superior
products and services. Among the many advantages contributing to the combined
company's ability to achieve these benefits are the following:
- CREATION OF AN INDUSTRY LEADER. A merger of Kollmorgen and Pacific
Scientific will establish the combined enterprise as a leader in high
performance electronic motion control--one of the fastest-growing segments
of the motors and controls business. In a fragmented industry, the
combined enterprise will be better-positioned to comprehensively serve the
needs of customers and take advantage of consolidation opportunities.
- STRATEGIC AND OPERATIONAL FIT. Highly complementary motion control product
lines will enable the combined company to become a full-service provider.
The combined company will be well-positioned to capitalize on the
complementary product lines and differing strengths of Kollmorgen and
Pacific Scientific, enabling it to offer a broader array of products and
support services to an expanded customer base. In addition, the combined
company would take advantage of cost savings and efficiencies resulting
from economies of scale in research and development, marketing, production
and sourcing.
- ENHANCED CAPABILITY TO TAP FOREIGN MARKETS. The increased size and global
scope of the combined company will enable it to more effectively market
its products to customers around the world. Kollmorgen has already
established a local presence in Germany, France, Israel, India, China and
elsewhere. The combined enterprise will be well-positioned to build on
this foundation, particularly in Europe and the Pacific Rim. Kollmorgen
believes that the combined company will
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be able to expand its customer base and offer international on-site
product support to customers, while conducting more effective and
cost-efficient research and development, marketing, production and
sourcing.
- OPERATING AND REVENUE SYNERGIES. Based on public information, Kollmorgen
management believes that the combined company can achieve more than $15
million of annual operating synergies in 1999, rising to more than $20
million in 2000 and increasing thereafter. Management believes these
synergies can be achieved principally from cost savings in selling and
marketing expenses and consolidation of research and development, and
expects to realize additional synergies from cross-selling opportunities,
joint purchasing savings and reduction in corporate expenses.
- AN ACCRETIVE TRANSACTION. Kollmorgen believes that the Proposed
Combination will be accretive to earnings per share in 1999, the first
full year of operations of the combined company, and increasingly so
thereafter, based upon the anticipated synergies described above.
Kollmorgen expects that, due to the substantial non-recurring charges
associated with the Proposed Combination (which are not currently
quantifiable) consisting of restructuring charges and a charge for
acquired in-process research and development, the Proposed Combination
will be substantially dilutive in fiscal 1998.
- MANAGEMENT TEAM WITH PROVEN TRACK RECORD. Kollmorgen's management has
delivered year over year growth in sales and operating income from
continuing operations from 1994 through 1996, and will do so again in
1997. Kollmorgen has achieved this by focusing on its core operations.
Kollmorgen also believes that its management has maximized its returns
from non-strategic operations. In addition, Kollmorgen's management has
considerable expertise in managing debt, having reduced Kollmorgen's debt
and preferred stock obligations by more than 40% during the past three
fiscal years and transitioned from fully-secured to unsecured credit
arrangements.
- ENHANCED GROWTH OPPORTUNITIES. Kollmorgen believes that the combined
enterprise will be well-positioned, strategically, operationally and
financially, to aggressively pursue attractive opportunities for external
and internal growth. Kollmorgen is confident that the combined company's
increased size and scope will enable it to be a leader in the accelerating
consolidation of the motion control industry and raise its visibility in
the business and financial communities.
See "Summary--Forward-Looking Statements" and "Unaudited Pro Forma Financial
Information".
It is Kollmorgen's current intention to integrate each company's motion
control business and to conduct the businesses of each of Kollmorgen and Pacific
Scientific on a combined basis following consummation of the Proposed
Combination. In connection with the Proposed Combination, Kollmorgen has
reviewed, and will continue to review, on the basis of publicly available
information, various possible business strategies that it might consider in the
event that Kollmorgen acquires control of Pacific Scientific. In addition, if
and to the extent that Kollmorgen acquires control of Pacific Scientific or
otherwise obtains access to the books and records of the Company, Parent and
Purchaser intend to conduct a detailed review of Pacific Scientific and its
assets, financial projections, corporate structure, dividend policy,
capitalization, operations, properties, policies, management and personnel and
consider and determine what, if any, changes would be desirable in light of the
circumstances which then exist, with a view to optimizing Pacific Scientific's
potential in conjunction with Kollmorgen's business. Such strategies could
include, among other things, changes in the Pacific Scientific's business,
corporate structure, marketing strategies, capitalization, management or
dividend policy and changes to the Pacific Scientific Charter or the Pacific
Scientific Bylaws.
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BACKGROUND OF THE OFFER AND THE PROPOSED MERGER
In the ordinary course of business, Kollmorgen analyzes a broad range of
strategic alternatives, including possible business combinations with other
companies in the motion control business. On August 21, 1996, Mr. Robert J.
Cobuzzi, Kollmorgen's Senior Vice President and Chief Financial Officer,
telephoned Mr. Richard V. Plat, who was at the time Pacific Scientific's
Executive Vice President, Chief Financial Officer and Secretary, to engage in
discussions regarding a possible transaction involving Kollmorgen and Pacific
Scientific. Mr. Plat reacted negatively, suggesting that Pacific Scientific's
common stock was undervalued by the market. Thereafter, as a matter of course,
Kollmorgen continued to evaluate a wide array of strategic options. In the
second quarter of 1997, Kollmorgen intensified its review of a possible business
combination with Pacific Scientific.
After several months of detailed review of the implications of a possible
Kollmorgen-Pacific Scientific combination, on or about July 18, 1997, Mr. Gideon
Argov, Kollmorgen's Chairman, President and Chief Executive Officer, telephoned
Mr. Lester Hill, Pacific Scientific's Chairman, President and Chief Executive
Officer, to suggest that they meet to discuss ways in which the companies might
cooperate and the possibility of combining Kollmorgen and Pacific Scientific.
Mr. Hill agreed and a meeting was arranged for the first week in August 1997.
On August 1, 1997, Mr. Argov met with Mr. Hill in Newport Beach, California.
Mr. Argov discussed the two companies and the motion control industry with Mr.
Hill and proposed a merger of Kollmorgen and Pacific Scientific. The merger
proposed by Mr. Argov would have been structured as a merger of equals
transaction, and Mr. Argov indicated that the key executives of Kollmorgen and
Pacific Scientific would become the senior executives of the combined company.
Mr. Hill indicated that he needed more time to consider Mr. Argov's proposal.
Mr. Argov and Mr. Hill agreed to speak again within the next few weeks.
On or about August 13, 1997, Mr. Argov telephoned Mr. Hill to ask whether
Mr. Hill had considered Mr. Argov's proposal. Mr. Hill responded that he had but
that he needed more time to do so since Pacific Scientific was in the midst of a
strategic planning process that was expected to last into September. Mr. Argov
agreed to call Mr. Hill in early September.
On or about September 15, 1997, Mr. Argov again telephoned Mr. Hill to ask
whether Mr. Hill was ready to discuss a possible business combination. Mr. Hill
again responded that he was not ready to discuss a possible business combination
because of Pacific Scientific's ongoing strategic planning process. Mr. Argov
and Mr. Hill agreed to speak again on October 15 or 16.
On or about October 15, 1997, Mr. Argov attempted to telephone Mr. Hill, but
Mr. Hill did not return Mr. Argov's calls.
On October 21, 1997, Mr. Argov telephoned Mr. Hill and again proposed that
Kollmorgen and Pacific Scientific commence discussions regarding a possible
merger. Mr. Hill responded that he had thought about Mr. Argov's suggestion and
discussed it with the Pacific Scientific Board and had concluded that it would
not be in the best interests of Pacific Scientific.
On October 22, 1997, Mr. Hill telephoned Mr. Argov to offer to sell Pacific
Scientific's Automation Intelligence, Inc. business to Kollmorgen. Mr. Argov
indicated that Kollmorgen would not be interested in acquiring only a small
piece of the Pacific Scientific business.
On December 9, 1997, Mr. Argov telephoned Mr. Hill to inform Mr. Hill that
Mr. Argov was authorized by the Board of Directors of Kollmorgen (the
"Kollmorgen Board") to make a proposal to acquire Pacific Scientific for $20.50
per share in cash and stock, and that Mr. Hill should expect to receive a letter
from Mr. Argov making such a proposal. Mr. Argov reiterated Kollmorgen's belief
that a combination of Pacific Scientific and Kollmorgen offered significant
benefits to both companies' shareholders and expressed his hope that Mr. Hill
and the Pacific Scientific Board would, once they had undertaken an informed
review of Kollmorgen's proposal, support the proposed combination and open
substantive discussions
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with Kollmorgen. Mr. Hill promised to telephone Mr. Argov with a response to the
proposal letter on Friday morning, December 12, 1997. Following that telephone
call, Mr. Argov sent to Mr. Hill a letter outlining the contemplated terms of
the Proposed Combination.
On December 12, 1997, Mr. Hill failed to telephone Mr. Argov as previously
agreed. Mr. Argov attempted to reach Mr. Hill by telephone without sucess. After
the close of business on December 12, 1997, Mr. Argov received the following
letter by telecopy:
DEAR MR. ARGOV:
I HAVE RECEIVED YOUR LETTER OF THE 9TH.
I HAVE SHARED IT WITH THE BOARD OF DIRECTORS. WE WILL BE BACK TO YOU
ONCE WE HAVE HAD THE CHANCE TO FULLY CONSIDER THE MATTER.
BEST REGARDS,
LESTER HILL
On December 15, Mr. Argov sent to Mr. Hill the following letter:
DEAR BUCK:
IN AUGUST, YOU AND I MET TO DISCUSS WHAT WE AT KOLLMORGEN BELIEVE ARE
THE COMPELLING MERITS OF A STRATEGIC BUSINESS COMBINATION OF KOLLMORGEN
CORPORATION AND PACIFIC SCIENTIFIC COMPANY. WE EXPLORED A BROAD RANGE OF
TOPICS RELATED TO SUCH A COMBINATION, ALL OF WHICH, MY COLLEAGUES ON THE
KOLLMORGEN BOARD AND SENIOR MANAGEMENT TEAM FIRMLY BELIEVE, LEAD TO THE
CONCLUSION THAT A STRATEGIC MERGER OF OUR TWO COMPANIES OFFERS
SIGNIFICANT BENEFITS TO OUR RESPECTIVE SHAREHOLDERS, CUSTOMERS AND
EMPLOYEES. ON DECEMBER 9, I AGAIN DESCRIBED FOR YOU, BOTH OVER THE PHONE
AND IN MY LETTER OF THAT DATE, WHAT WE AT KOLLMORGEN BELIEVE ARE SOME OF
THE COMPELLING STRATEGIC, OPERATIONAL AND FINANCIAL BENEFITS OF A
BUSINESS COMBINATION OF OUR TWO COMPANIES AND THE EXTRAORDINARY VALUE
THAT COMBINATION COULD REPRESENT FOR OUR RESPECTIVE SHAREHOLDERS.
WE AT KOLLMORGEN WERE THUS QUITE DISAPPOINTED THAT IN AUGUST AND
AGAIN IN DECEMBER YOU REFUSED TO NEGOTIATE OUR PROPOSAL FOR THIS BUSINESS
COMBINATION. ACCORDINGLY, WE HAVE DECIDED TO PRESENT OUR OFFER DIRECTLY
TO THE SHAREHOLDERS OF PACIFIC SCIENTIFIC, AND ARE TODAY PUBLICLY
ANNOUNCING THAT WE ARE COMMENCING A TENDER OFFER TO ACQUIRE HALF OF
PACIFIC SCIENTIFIC'S OUTSTANDING SHARES FOR $20.50 PER SHARE IN CASH.
PURSUANT TO OUR PROPOSAL, FOLLOWING COMPLETION OF THE TENDER OFFER,
KOLLMORGEN AND PACIFIC SCIENTIFIC WILL MERGE, AND EACH REMAINING SHARE OF
PACIFIC SCIENTIFIC STOCK WILL BE EXCHANGED FOR KOLLMORGEN COMMON STOCK
WITH A VALUE OF $20.50 PER SHARE, BASED ON THE AVERAGE PRICE OF
KOLLMORGEN STOCK DURING THE TWENTY TRADING DAYS ENDING FIVE DAYS PRIOR TO
THE MEETING OF PACIFIC SCIENTIFIC SHAREHOLDERS CALLED TO VOTE ON THE
MERGER. THE VALUE OF THE STOCK CONSIDERATION WILL BE PROTECTED BY A
COLLAR.
AMONG THE KEY ASPECTS OF THE TRANSACTION WE PROPOSE ARE THE
FOLLOWING:
- A PREMIUM OF 33%. THE PURCHASE PRICE OF $20.50 PER COMMON SHARE
REPRESENTS APPROXIMATELY A 33% PREMIUM OVER PACIFIC SCIENTIFIC'S
CLOSING SHARE PRICE OF $15.44 ON THE NEW YORK STOCK EXCHANGE ON
FRIDAY, DECEMBER 12, 1997, AND APPROXIMATELY A 37% PREMIUM OVER THE
COMPANY'S CLOSING SHARE PRICE FOR THE PRECEDING 30 TRADING DAYS.
- IMMEDIATE CASH PAYMENT FOR HALF OF PACIFIC SCIENTIFIC'S CAPITAL STOCK.
HALF OF PACIFIC SCIENTIFIC'S OUTSTANDING SHARES WILL BE PURCHASED FOR
A CASH PAYMENT OF $20.50 PER SHARE IF THE TENDER OFFER IS SUCCESSFULLY
CONSUMMATED.
- CONTINUED PARTICIPATION IN THE FUTURE GROWTH OF THE COMBINED COMPANY.
BECAUSE PACIFIC SCIENTIFIC'S SHAREHOLDERS HAVE THE ABILITY TO RECEIVE
KOLLMORGEN COMMON STOCK IN THE
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PROPOSED MERGER, THEY WILL HAVE THE OPPORTUNITY TO PARTICIPATE IN THE
FUTURE GROWTH AND SUCCESS OF THE COMBINED ENTERPRISE. UPON
CONSUMMATION OF THE PROPOSED MERGER, PACIFIC SCIENTIFIC SHAREHOLDERS
WILL HOLD AN EQUITY STAKE OF APPROXIMATELY 43% IN THE COMBINED
COMPANY, BASED UPON AN ASSUMED MARKET VALUE FOR KOLLMORGEN COMMON
STOCK OF $16.88 PER SHARE (THE CLOSING PRICE OF KOLLMORGEN COMMON
STOCK ON DECEMBER 12, 1997).
- OPERATING AND REVENUE SYNERGIES. BASED ON PUBLIC INFORMATION,
KOLLMORGEN MANAGEMENT BELIEVES THAT THE COMBINED COMPANY CAN ACHIEVE
MORE THAN $15 MILLION OF ANNUAL OPERATING SYNERGIES IN 1999, RISING TO
MORE THAN $20 MILLION IN 2000 AND INCREASING THEREAFTER. MANAGEMENT
BELIEVES THESE SYNERGIES CAN BE ACHIEVED PRINCIPALLY FROM COST SAVINGS
IN SELLING AND MARKETING EXPENSES AND CONSOLIDATION OF RESEARCH AND
DEVELOPMENT, AND EXPECTS TO REALIZE ADDITIONAL SYNERGIES FROM
CROSS-SELLING OPPORTUNITIES, JOINT PURCHASING SAVINGS, AND REDUCTION
IN CORPORATE EXPENSES.
- AN ACCRETIVE TRANSACTION. KOLLMORGEN IS CONFIDENT THAT THE PROPOSED
COMBINATION WILL BE ACCRETIVE TO EARNINGS PER SHARE IN 1999, THE FIRST
FULL YEAR OF OPERATIONS OF THE COMBINED COMPANY, AND INCREASINGLY SO
THEREAFTER, BASED UPON THE ANTICIPATED SYNERGIES DESCRIBED ABOVE.
- COMMITTED FINANCING. KOLLMORGEN HAS ENTERED INTO A BINDING COMMITMENT
LETTER WITH SALOMON SMITH BARNEY AND ITS AFFILIATE SALOMON BROTHERS
HOLDING COMPANY INC IN WHICH SALOMON BROTHERS HOLDING COMPANY INC HAS
COMMITTED TO PROVIDE, SUBJECT TO CERTAIN CONDITIONS, WHAT KOLLMORGEN
BELIEVES IS A CONSERVATIVELY FINANCED SECURED BANK FACILITY TO FULLY
FINANCE THE TRANSACTION, INCLUDING THE REFINANCING OF EXISTING
INDEBTEDNESS AND THE PROVISION OF A WORKING CAPITAL FACILITY FOR THE
COMBINED COMPANY.
WE CONTINUE TO FIRMLY BELIEVE THAT CONSOLIDATION IN OUR INDUSTRY IS
INEVITABLE, AND THAT NEITHER PACIFIC SCIENTIFIC NOR KOLLMORGEN CAN SIT BY
IDLY WHILE COMPETITORS, MANY OF WHICH ARE MUCH LARGER THAN PACIFIC
SCIENTIFIC AND KOLLMORGEN, CREATE THE INTERNATIONAL NETWORK AND BROAD
PRODUCT OFFERINGS THAT OUR CUSTOMERS DEMAND AND DESERVE. KOLLMORGEN
BELIEVES THAT THIS REALITY, COUPLED WITH THE NATURAL FIT OF OUR TWO
COMPANIES, MAKES A KOLLMORGEN/PACIFIC SCIENTIFIC COMBINATION COMPELLING.
KOLLMORGEN BELIEVES THAT THE COMBINED COMPANY WILL OFFER CUSTOMERS
SUPERIOR PRODUCTS AND SERVICES. AMONG THE MANY ADVANTAGES CONTRIBUTING TO
THE COMBINED COMPANY'S ABILITY TO ACHIEVE THESE GOALS WOULD BE:
- CREATION OF AN INDUSTRY LEADER. A MERGER OF KOLLMORGEN AND PACIFIC
SCIENTIFIC WILL ESTABLISH THE COMBINED ENTERPRISE AS A LEADER IN HIGH
PERFORMANCE ELECTRONIC MOTION CONTROL--ONE OF THE FASTEST-GROWING
SEGMENTS OF THE MOTORS AND CONTROLS BUSINESS. IN A FRAGMENTED
INDUSTRY, THE COMBINED ENTERPRISE WILL BE BETTER POSITIONED TO
COMPREHENSIVELY SERVE THE NEEDS OF CUSTOMERS AND TAKE ADVANTAGE OF
CONSOLIDATION OPPORTUNITIES.
- STRATEGIC AND OPERATIONAL FIT. HIGHLY COMPLEMENTARY MOTION CONTROL
PRODUCT LINES WILL ENABLE THE COMBINED COMPANY TO BECOME A
FULL-SERVICE PROVIDER. THE COMBINED COMPANY WILL BE WELL-POSITIONED TO
CAPITALIZE ON THE COMPLEMENTARY PRODUCT LINES AND DIFFERING STRENGTHS
OF KOLLMORGEN AND PACIFIC SCIENTIFIC ENABLING IT TO OFFER A BROADER
ARRAY OF PRODUCTS AND SUPPORT SERVICES TO AN EXPANDED CUSTOMER BASE.
IN ADDITION, THE COMBINED COMPANY WOULD TAKE ADVANTAGE OF COST SAVINGS
AND EFFICIENCIES RESULTING FROM ECONOMIES OF SCALE IN RESEARCH AND
DEVELOPMENT, MARKETING, PRODUCTION AND SOURCING.
- ENHANCED CAPABILITY TO TAP FOREIGN MARKETS. THE INCREASED SIZE AND
GLOBAL SCOPE OF THE COMBINED COMPANY WILL ENABLE IT TO MORE
EFFECTIVELY MARKET ITS PRODUCTS TO CUSTOMERS AROUND THE WORLD.
KOLLMORGEN HAS ALREADY ESTABLISHED A LOCAL PRESENCE IN GERMANY,
FRANCE, ISRAEL, INDIA, CHINA AND ELSEWHERE. THE COMBINED ENTERPRISE
WILL BE WELL-POSITIONED TO BUILD ON THIS FOUNDATION, PARTICULARLY IN
EUROPE AND THE PACIFIC RIM. KOLLMORGEN BELIEVES THAT THE COMBINED
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COMPANY WILL BE ABLE TO EXPAND ITS CUSTOMER BASE AND OFFER
INTERNATIONAL ON-SITE PRODUCT SUPPORT TO CUSTOMERS, WHILE CONDUCTING
MORE EFFECTIVE AND COST-EFFICIENT RESEARCH AND DEVELOPMENT, MARKETING,
PRODUCTION AND SOURCING.
- MANAGEMENT TEAM WITH PROVEN TRACK RECORD. KOLLMORGEN'S MANAGEMENT HAS
DELIVERED YEAR OVER YEAR GROWTH IN SALES AND OPERATING INCOME FROM
CONTINUING OPERATIONS FROM 1994 THROUGH 1996, AND WILL DO SO AGAIN IN
1997. KOLLMORGEN HAS ACHIEVED THIS BY FOCUSING ON ITS CORE OPERATIONS.
KOLLMORGEN ALSO BELIEVES THAT ITS MANAGEMENT HAS MAXIMIZED ITS RETURNS
FROM NON-STRATEGIC OPERATIONS. IN ADDITION, KOLLMORGEN'S MANAGEMENT
HAS CONSIDERABLE EXPERTISE IN MANAGING DEBT, HAVING REDUCED
KOLLMORGEN'S DEBT AND PREFERRED STOCK OBLIGATIONS BY MORE THAN 40%
DURING THE PAST THREE FISCAL YEARS AND TRANSITIONED FROM FULLY-SECURED
TO UNSECURED CREDIT ARRANGEMENTS.
- ENHANCED GROWTH OPPORTUNITIES. KOLLMORGEN BELIEVES THAT THE COMBINED
ENTERPRISE WILL BE WELL-POSITIONED, STRATEGICALLY, OPERATIONALLY AND
FINANCIALLY, TO AGGRESSIVELY PURSUE ATTRACTIVE OPPORTUNITIES FOR
EXTERNAL AND INTERNAL GROWTH. KOLLMORGEN IS CONFIDENT THAT THE
COMBINED COMPANY'S INCREASED SIZE AND SCOPE WILL ENABLE IT TO BE A
LEADER IN THE ACCELERATING CONSOLIDATION OF THE MOTION CONTROL
INDUSTRY, AND RAISE ITS VISIBILITY IN THE BUSINESS AND FINANCIAL
COMMUNITIES.
WE BELIEVE THAT THE PROPOSED COMBINATION IS A BOLD, EXCITING
INITIATIVE FOR PACIFIC SCIENTIFIC, KOLLMORGEN, AND THE SHAREHOLDERS,
CUSTOMERS AND EMPLOYEES OF BOTH COMPANIES. WE ARE FIRMLY COMMITTED TO
PURSUING THIS MATTER AND ARE CONVINCED THAT YOUR SHAREHOLDERS WILL
STRONGLY SUPPORT OUR PROPOSAL. ALTHOUGH IT IS CLEAR TO US THAT YOU HAVE
NOT UP TO NOW GIVEN ADEQUATE CONSIDERATION TO A KOLLMORGEN/PACIFIC
SCIENTIFIC COMBINATION, IT IS OUR SINCERE HOPE THAT YOU WILL TAKE THIS
OPPORTUNITY TO DO SO. YOUR SHAREHOLDERS DESERVE NO LESS THAN YOUR PROMPT
AND FULL CONSIDERATION OF OUR PROPOSAL AND THE OPPORTUNITY TO REALIZE THE
FULL BENEFITS OF THIS PROPOSED COMBINATION. WE ARE CERTAIN THAT ONCE YOU
HAVE UNDERTAKEN AN INFORMED REVIEW OF OUR PROPOSAL, YOU WILL SHARE IN OUR
VISION AND WILL SUPPORT A COMBINATION OF OUR TWO COMPANIES. WE CONTINUE
TO BE INTERESTED IN PROCEEDING WITH THIS TRANSACTION ON A FRIENDLY AND
EXPEDITIOUS BASIS SO THAT YOUR SHAREHOLDERS, AS WELL AS OURS, CAN BEGIN
TO RECEIVE PROMPTLY THE BENEFITS OF OUR OFFER.
IN ORDER TO ENSURE THAT YOUR SHAREHOLDERS ARE PERMITTED TO CHOOSE
FREELY TO ACCEPT OUR OFFER, WE ARE ALSO ANNOUNCING TODAY OUR INTENTION TO
SOLICIT CONSENTS TO CALL A SPECIAL MEETING OF PACIFIC SCIENTIFIC'S
SHAREHOLDERS TO REMOVE THE INCUMBENT MEMBERS OF PACIFIC SCIENTIFIC'S
BOARD OF DIRECTORS AND ELECT OUR NOMINEES TO THE BOARD. SUBJECT TO THEIR
FIDUCIARY DUTIES, IF ELECTED WE EXPECT OUR NOMINEES WOULD AMEND THE
PACIFIC SCIENTIFIC RIGHTS PLAN OR REDEEM THE RIGHTS TO ENABLE THE
CONSUMMATION OF THE PROPOSED TRANSACTION, APPROVE THE PROPOSED
TRANSACTION IF REQUIRED UNDER PACIFIC SCIENTIFIC'S CHARTER, AND TAKE ALL
OTHER ACTIONS NECESSARY TO REMOVE ANY IMPEDIMENTS TO YOUR SHAREHOLDERS'
ABILITY TO ACCEPT OUR OFFER. WE ALSO INTEND TO SUBMIT A PROPOSAL DESIGNED
TO PREVENT THE CURRENT BOARD FROM TAKING ANY ACTIONS TO FRUSTRATE THE
ABILITY OF PACIFIC SCIENTIFIC'S SHAREHOLDERS TO DETERMINE THE FUTURE OF
THEIR COMPANY.
WE ARE ALSO TODAY COMMENCING LITIGATION AGAINST PACIFIC SCIENTIFIC
AND THE PACIFIC SCIENTIFIC BOARD IN THE UNITED STATES DISTRICT COURT FOR
THE CENTRAL DISTRICT OF CALIFORNIA SEEKING TO ASSURE PACIFIC SCIENTIFIC'S
SHAREHOLDERS THE RIGHT TO REPLACE THE PACIFIC SCIENTIFIC BOARD AND AN
OPPORTUNITY TO ACCEPT OUR OFFER AND PROPOSED MERGER.
WE URGE THE PACIFIC SCIENTIFIC BOARD OF DIRECTORS TO FACILITATE THE
PROPOSED TRANSACTION AND REMOVE ALL OBSTACLES TO THE REALIZATION OF
EXCEPTIONAL VALUE BY YOUR SHAREHOLDERS. AS INDICATED ABOVE, OUR
PREFERENCE IS TO PROCEED WITH THE PROPOSED TRANSACTION ON A FRIENDLY
BASIS AND WITH THE SUPPORT OF PACIFIC SCIENTIFIC'S MANAGEMENT AND BOARD
OF DIRECTORS. ACCORDINGLY, WE AND OUR
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ADVISORS REMAIN READY AND WILLING TO MEET WITH YOU AND YOUR ADVISORS AT
ANY TIME TO DISCUSS OUR PROPOSAL AND COMMENCE THE NEGOTIATION OF
DEFINITIVE DOCUMENTATION FOR THE TRANSACTION.
WE LOOK FORWARD TO HEARING FROM YOU.
VERY TRULY YOURS,
GIDEON ARGOV
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
CC: MEMBERS OF THE BOARD OF DIRECTORS
OF PACIFIC SCIENTIFIC COMPANY
Later that same day, Kollmorgen commenced the Offer and the Solicitation and
filed definitive consent solicitation materials and a related registration
statement with the Commission.
Also on December 15, 1997, Kollmorgen commenced litigation against Pacific
Scientific and the Pacific Scientific Board in the United States District Court
for the Central District of California seeking, among other things, an order (i)
declaring that failure to redeem the Rights or render the Rights inapplicable to
the Offer and the Proposed Merger or to approve the Offer and the Proposed
Merger for purposes of Article Fifth would constitute a breach of the Pacific
Scientific Board's fiduciary duties to Pacific Scientific shareholders under
California law, (ii) invalidating the Rights or compelling the Pacific
Scientific Board to redeem the Rights or render the Rights inapplicable to the
Offer and the Proposed Merger, (iii) compelling the Pacific Scientific Board to
approve the Offer and the Proposed Merger for purposes of Article Fifth and (iv)
enjoining the Pacific Scientific Board from taking any actions to interfere with
the Offer, the Solicitation or the Proposed Merger.
THE SPECIAL MEETING
In order to facilitate the Proposed Combination, Kollmorgen will be
soliciting consents to call the Special Meeting in order to remove the entire
Pacific Scientific Board, fill the vacancies created thereby with the Kollmorgen
Nominees and approve the Bylaw Repeal Proposal. The Kollmorgen Nominees are
expected to take all actions as may be necessary, subject to their fiduciary
duties under applicable law, to facilitate the Proposed Combination by means of
the Offer and the Proposed Merger. The Bylaw Repeal Proposal would repeal any
and all provisions of the Pacific Scientific Bylaws, that have not been duly
filed by Pacific Scientific with the Commission prior to August 11, 1997,
including any and all amendments to the Pacific Scientific Bylaws adopted on or
after December 15, 1997. The Bylaw Repeal Proposal is intended to rescind any
actions taken by the Pacific Scientific Board as part of its efforts to create
obstacles to the Proposed Combination, including the Offer and the Proposed
Merger. Kollmorgen is furnishing to Pacific Scientific shareholders along with
this Consent Solicitation Statement/ Prospectus a Form of Consent (pursuant to
Article III, Sections 3 and 10 of the Pacific Scientific Bylaws and Chapter 13
of the California General Corporation Law (the "CGCL")) for use in giving your
consent to call the Special Meeting. The Special Meeting will be held on
February 4, 1998 or, if later, on the thirty-sixth day following the date on
which the requisite number of consents to call the Special Meeting are delivered
to Pacific Scientific. After the Special Meeting has been called, Kollmorgen
will solicit proxies from you in support of its proposals by sending you a proxy
statement and a proxy card for use therewith.
WHY YOU SHOULD CONSENT TO CALL THE SPECIAL MEETING
Kollmorgen believes that the Proposed Combination would offer benefits to
the shareholders of both Pacific Scientific and Kollmorgen, but to date, the
Pacific Scientific Board has been unwilling to
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negotiate a business combination between the two companies. Nevertheless,
Pacific Scientific shareholders have the power to determine Pacific Scientific's
future by removing the current Pacific Scientific directors at the Special
Meeting. By delivering a consent in favor of calling the Special Meeting,
Pacific Scientific shareholders can choose a new direction for their company and
take the first step towards the creation of a new board of directors which is
expected, subject to its fiduciary duties, to be committed to creating immediate
and long-term value for the Pacific Scientific shareholders through the
realization of the Proposed Combination.
CONSENT PROCEDURES
ACTION BY CONSENT
Pursuant to Section 701 of the CGCL, the Record Date for the determination
of shareholders entitled to give consent to the proposed actions is the date on
which the first such consent is given. Each outstanding share of Pacific
Scientific Common Stock as of the Record Date will entitle the holder thereof to
one vote by written consent.
The consent of Pacific Scientific Common Shares represented by a Form of
Consent that is returned properly signed will be given in accordance with the
instructions indicated on that Form of Consent. If a Form of Consent is signed
and returned without instructions, the consent of such Pacific Scientific Common
Shares will be given "FOR" calling the Special Meeting.
Shareholders of Pacific Scientific may revoke their consents by delivering a
written notice of revocation to Kollmorgen in care of Georgeson & Company Inc.
("Georgeson") at the address set forth on the back cover of this Consent
Solicitation Statement/Prospectus. Although a revocation is effective if
delivered to the Secretary of Pacific Scientific, Kollmorgen requests that
either the original or photostatic copies of all revocations be mailed or faxed
to Kollmorgen in care of Georgeson at the address of facsimile number set forth
on the back of this Consent Solicitation Statement/Prospectus so that Kollmorgen
will be aware of all revocations and can more accurately determine if and when
consents have been received from enough holders of Pacific Scientific Common
Stock to call the Special Meeting.
ACTION BY WRITTEN CONSENT REQUIREMENTS
Pursuant to Section 600 of the CGCL and the Pacific Scientific Bylaws, the
consent of the holders of not less than 10% of the votes entitled to be cast by
the holders of shares of Pacific Scientific Common Stock outstanding and
entitled to vote will be necessary to call the Special Meeting.
THE OFFER AND THE PROPOSED MERGER
TERMS OF THE OFFER AND THE PROPOSED MERGER
On December 9, 1997, Kollmorgen delivered a letter to the Chief Executive
Officer of Pacific Scientific outlining the Proposed Combination. To date
Pacific Scientific has declined to enter into negotiations concerning a business
combination with Kollmorgen. Consequently, on December 15, 1997, Kollmorgen
delivered a letter to the Pacific Scientific Board again proposing the Proposed
Combination and commenced the Offer and the Solicitation. The Offer is being
made for 6,347,241 Pacific Scientific Common Shares, or such greater or lesser
number of Pacific Scientific Common Shares that, when added to the number of
Pacific Scientific Common Shares owned by Kollmorgen and Purchaser, would
constitute the Minimum Number of Pacific Scientific Common Shares, at a price of
$20.50 per Pacific Scientific Common Share, net to the seller in cash. The Offer
is subject to the terms and conditions set forth in the Offer to Purchase and in
the Letter of Transmittal, copies of which can be obtained by contacting from
Georgeson at the address set forth on the back cover hereof.
30
<PAGE>
Kollmorgen is seeking to negotiate with Pacific Scientific a definitive
merger agreement providing for the Proposed Combination pursuant to which
Pacific Scientific would, as soon as practicable following consummation of the
Offer, consummate the Proposed Merger. At the Effective Time, each Pacific
Scientific Common Share then outstanding (other than Pacific Scientific Common
Shares held by Pacific Scientific or any wholly owned subsidiary of Pacific
Scientific and Pacific Scientific Common Shares owned by Kollmorgen, Purchaser
or any other direct or indirect wholly owned subsidiary of Kollmorgen) will be
converted into the right to receive $20.50 of Kollmorgen Common Stock. The exact
number of shares of Kollmorgen Common Stock into which each Pacific Scientific
Common Share will be converted will be determined by dividing $20.50 by the
Average Kollmorgen Share Price. In the event that the Average Kollmorgen Share
Price during such period is less than $15.19 or greater than $18.56, the
exchange ratio would be fixed at 1.350 shares of Kollmorgen Common Stock or
1.104 shares of Kollmorgen Common Stock, respectively, per Pacific Scientific
Common Share. In such event, Pacific Scientific shareholders could receive
Kollmorgen Common Stock in the Proposed Merger with a value of greater or less
than $20.50.
In the event that the Proposed Merger is consummated, shares of Pacific
Scientific Common Stock will cease to be listed on the NYSE.
Subject to the terms and conditions of the Proposed Merger and in accordance
with the CGCL and the Delaware General Corporation Law, Pacific Scientific will
be merged with and into Purchaser. Purchaser will be the surviving corporation
in the Proposed Merger, and will continue its corporate existence under Delaware
law. Kollmorgen reserves the right to cause Purchaser to amend the Offer and/or
the Proposed Merger (including amending the number of Pacific Scientific Common
Shares to be purchased, the purchase price therefor, the proposed merger
consideration and the surviving entity in the Proposed Merger) at any time,
including upon entering into a merger agreement with Pacific Scientific, or to
negotiate a merger agreement with Pacific Scientific in connection with a merger
not involving a tender offer pursuant to which Purchaser would terminate the
Offer and the Pacific Scientific Common Shares would, upon consummation of such
merger, be converted into cash and Kollmorgen Common Stock in such amounts as
are negotiated by Kollmorgen and Pacific Scientific; provided, however, that
Kollmorgen has no intention of reducing the consideration paid to Pacific
Scientific shareholders below that being offered in the Offer and the Proposed
Merger.
Consummation of the Offer is subject to the fulfillment of a number of
conditions, including, without limitation, the following:
MINIMUM CONDITION. Consummation of the Offer is conditioned upon there
being validly tendered and not withdrawn prior to the expiration of the Offer at
least the Minimum Number of Pacific Scientific Common Shares (the "Minimum
Condition"). Purchaser reserves the right (subject to the applicable rules and
regulations of the Commission), which it currently has no intention of
exercising, to waive or reduce the Minimum Condition and to elect to purchase,
pursuant to the Offer, fewer than the Minimum Number of Pacific Scientific
Common Shares.
HSR CONDITION. Consummation of the Offer is conditioned upon the expiration
or termination of any applicable waiting periods under the HSR Act (the "HSR
Condition"). On December 15, 1997, Kollmorgen filed with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") Premerger Notification and Report Forms under the HSR
Act with respect to the Offer. Accordingly, Kollmorgen anticipates that the
waiting period under the HSR Act applicable to the Offer will expire at 11:59
p.m., New York City time, on December 30, 1997, unless such waiting period is
earlier terminated by the FTC and the Antitrust Division or extended by a
request from the FTC or the Antitrust Division for additional information or
documentary material prior to the expiration of the waiting periods.
FINANCING CONDITION. Consummation of the Offer is conditioned upon
Kollmorgen and Purchaser obtaining, prior to the expiration of the Offer, on
terms satisfactory to Kollmorgen, in its sole discretion,
31
<PAGE>
sufficient financing to enable consummation of the Offer and the Proposed Merger
(the "Financing Condition"). Kollmorgen has entered into a binding commitment
letter, dated December 9, 1997, with Salomon Smith Barney and its affiliate
Salomon Brothers Holding Company Inc in which Salomon Brothers Holding Company
Inc has committed, subject to the conditions set forth therein, to provide such
financing, consisting of a fully secured financing in the syndicated loan market
in the principal amount of $300 million.
RIGHTS CONDITION. Consummation of the Offer is conditioned upon Purchaser
being satisfied, in its sole discretion, that the Rights have been redeemed or
invalidated or are otherwise inapplicable to the Offer and the Proposed Merger
(the "Rights Condition"). The Rights are described in the Pacific Scientific
Current Report on Form 8-K filed on February 16, 1996, and a brief summary of
the Rights is provided below.
Kollmorgen expects that, if elected, and subject to their fiduciary duties
under applicable law, the Kollmorgen Nominees would cause the Pacific Scientific
Board to amend the Rights Agreement or redeem the Rights, or otherwise act to
ensure that the Rights Condition is satisfied.
ARTICLE FIFTH CONDITION. Consummation of the Offer is conditioned upon
Purchaser being satisfied, in its sole discretion, that the Offer and the
Proposed Merger have been approved (if necessary) for purposes of Article Fifth
or Article Fifth, has been invalidated or is otherwise satisfied with respect to
the Offer and the Proposed Merger (the "Article Fifth Condition").
Kollmorgen expects that, if elected, and subject to their fiduciary duties
under applicable law, the Kollmorgen Nominees would cause the Pacific Scientific
Board to approve the Offer and the Proposed Merger for purposes of Article
Fifth.
KOLLMORGEN SHAREHOLDER APPROVAL CONDITION. Consummation of the Offer is
conditioned upon the approval of shareholders of Kollmorgen of the issuance of
the Kollmorgen Common Stock to be issued in the Proposed Merger. Kollmorgen
intends to hold a special meeting of its shareholders on or about January 28,
1998 for the purpose of approving the issuance of Kollmorgen Common Stock in the
Proposed Merger. See "Subsequent Votes Relating to the Proposed
Merger--Kollmorgen Shareholder Vote Required".
The foregoing is only a summary of certain principal terms and conditions of
the Offer and is qualified in its entirety by reference to the Offer to
Purchase, which can be obtained by contacting Georgeson at the address set forth
on the back cover hereof.
CERTAIN LITIGATION
On December 15, 1997, Kollmorgen commenced litigation against Pacific
Scientific and the Pacific Scientific Board in the United States District Court
for the Central District of California seeking, among other things, an order (i)
declaring that failure to redeem the Rights or render the Rights inapplicable to
the Offer and the Proposed Merger or to approve the Offer and the Proposed
Merger for purposes of Article Fifth would constitute a breach of the Pacific
Scientific Board's fiduciary duties to Pacific Scientific shareholders under
California law, (ii) invalidating the Rights or compelling the Pacific
Scientific Board to redeem the Rights or render the Rights inapplicable to the
Offer and the Proposed Merger, (iii) compelling the Pacific Scientific Board to
approve the Offer and the Proposed Merger for purposes of Article Fifth, and
(iv) enjoining the Pacific Scientific Board from taking any actions to interfere
with the Offer, the Solicitation or the Proposed Merger.
32
<PAGE>
THE COMPANIES
KOLLMORGEN
Kollmorgen believes it is one of the major worldwide manufacturers of high
performance electronic motion control components and systems. Kollmorgen's
products include brushless, permanent magnet motors and associated electronic
servo amplifiers and controllers. Kollmorgen also manufacturers integrated
electromechanical actuators and periscopes, as well as stabilized weapons
control systems for ground vehicles and naval vessels. These products and
systems are manufactured by Kollmorgen in the United States, France, Germany,
Israel, India, Vietnam and the People's Republic of China, and are sold around
the world by Kollmorgen's separate sales and marketing organizations for each of
the commercial and industrial and aerospace and defense markets.
Kollmorgen's commercial and industrial products are sold to original
equipment manufacturers of machine tools, robotics, electronic, semi-conductor
and automation equipment, packaging and textile machinery, medical instruments
and equipment, office automation and computer peripherals.
Kollmorgen's aerospace and defense products include components and systems
for secondary flight controls, utility actuators, airborne power conversion
equipment, radar pedestals, weapons directors, periscopes and missiles. A wholly
owned subsidiary of Kollmorgen, Proto-Power Corporation, provides engineering
services to domestic fossil and nuclear electric companies and independent power
producers.
PURCHASER
Purchaser, a wholly owned subsidiary of Kollmorgen, was formed in December
1997 by Kollmorgen solely for the purpose of effecting the Offer and the
Proposed Merger and has not carried on any activities other than in connection
with the Offer and the Proposed Merger.
PACIFIC SCIENTIFIC
According to the Pacific Scientific 1996 Form 10-K, Pacific Scientific
manufactures and sells the products of two segments -- electrical equipment and
safety equipment. The electrical equipment segment produces: electric motors and
generators and related motion control devices such as controllers and drivers;
electronic instruments for particle measurement; electromechanical and
electronic controls for use mainly by electric utilities, including the controls
for street and highway lighting and electronic ballasts for fluorescent lights.
The safety equipment segment produces: fire detection and suppression equipment;
personnel safety restraints; mechanical and electromechanical flight control
components; and pyrotechnics. This segment also provides service for products
already delivered to customers. These products are used mainly in commercial and
military aircraft and vehicles, but are also used in a variety of other
commercial and industrial applications.
FORWARD-LOOKING STATEMENTS
This Consent Solicitation Statement/Prospectus, the Registration Statement
on Form S-4 of which the Consent Solicitation Statement/Prospectus forms a part
(the "Registration Statement"), exhibits thereto and the information
incorporated by reference therein contain forward-looking statements which
involve risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Among other matters,
the forward-looking statements include, without limitation, the information
about the business, strategy, plans and objectives, operations, planned capital
expenditures, management, forecasted operating results and operating statistics
and potential financial condition, revenue enhancements, cost savings and
accretion to earnings and pro forma financial information, with respect to the
combined company, and the information concerning the Proposed Combination.
All discussions of the operations of the combined companies include
forward-looking statements. Forward-looking statements also include, without
limitation, those preceded or followed by or that
33
<PAGE>
include the words "may", "believes", "expects", "anticipates" or the negation
thereof, or similar expressions. All forward-looking statements included in this
Consent Solicitation Statement/Prospectus and, the Registration Statement,
exhibits and information incorporated by reference, are based on the information
available to Kollmorgen on the date of this Consent Solicitation
Statement/Prospectus and in the case of the information incorporated by
reference on the basis of information available to Kollmorgen on the date of the
documents in which such forward-looking statements are contained. Kollmorgen
undertakes no obligation publicly to update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
The forward-looking statements are subject to a number of factors that could
cause actual results to differ materially from Kollmorgen's current expectation,
all of which are difficult to predict accurately and many of which are beyond
the control of Kollmorgen. Certain factors, in addition to other factors not
listed herein or discussed in the information incorporated by reference herein,
could cause the actual results to differ materially from those expressed or
implied in the forward-looking statements made herein. Such factors include
those discussed under "Risk Factors" as well as: materially adverse changes in
U.S. and international economic conditions, in Kollmorgen's industry and in the
markets served by Kollmorgen and Pacific Scientific; lower than expected
revenues from the sale of its existing products and services because of changes
in product demand and market acceptance; the effect of competitive products,
development of new technologies and pricing from large, multinational motion
technology competitors (both current and emerging), many of which have greater
financial, technical, marketing and other resources; unanticipated product
development costs; moderating growth rates in commercial lines of business; lack
of market acceptance of new products because of lower than expected levels of
customer demand, technological difficulties in these newly introduced products,
or the timeliness of these product introductions; unanticipated reduction in
existing utility customers' requirements for engineering services; increased
working capital needs; unexpected capital expenditure requirements; difficulty
in obtaining favorable financing arrangements either due to an unfavorable
institutional lending environment or the inability to obtain financing because
of leverage; the inability to achieve expected synergies; fluctuations in
foreign currency exchange rates; and a significant delay in the expected
completion of the Proposed Merger. All subsequent written or oral
forward-looking statements attributable to Kollmorgen or to persons acting on
its behalf are qualified in their entirety by the preceding cautionary
statements.
34
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
KOLLMORGEN
PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Seidel Servotronix
January 1, 1997 January 1, 1997 Kollmorgen
to to Pro Forma
Kollmorgen June 9, 1997 April 1, 1997 Pro Forma Adjusted
Historical Historical(a) Historical(a) Adjustments Historical
----------- --------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.................. $ 163,054 $ 9,591 $ 543 $ 173,188
Cost of Revenues.......... 113,590 6,622 329 120,541
----------- ------- ----- -----------
Gross Margin.............. 49,464 2,969 214 52,647
Operating Expenses:
Sales, Marketing,
General and
Administrative........ 32,131 1,734 95 33,960
Research and
Development........... 7,249 334 125 7,708
Acquired Research and
Development........... 11,391 -- -- $ (11,391)(b) --
Amortization of
Goodwill.............. 284 -- -- 242(c) 526
----------- ------- ----- ----------- -----------
Operating Income (Loss)... (1,591) 901 (6) 11,149 10,453
Other Income (Expense),
Net..................... (2,646) (32) 6 816(d) (1,856)
----------- ------- ----- ----------- -----------
Income (Loss) Before
Taxes................... (4,237) 869 -- 11,965 8,597
Provision for Income
Taxes................... (1,978) -- -- (335)(e) (3,095)
(782)(e)
----------- ------- ----- ----------- -----------
Net Income (Loss) from
Continuing Operations
before Investment in
Joint Venture........... (6,215) 869 -- 10,848 5,502
Joint Venture:
Equity in Earnings...... 1,430 -- -- (1,430)(d) --
Gain on Sale of
Investment, Net of
Taxes................. 24,321 -- -- (24,321)(d) --
----------- ------- ----- ----------- -----------
Net Income................ $ 19,536 $ 869 $ -- $ (14,903) $ 5,502
----------- ------- ----- ----------- -----------
----------- ------- ----- ----------- -----------
Net Income per Share--
Fully Diluted........... $ 1.87 -- -- $ 0.53
Weighted Average Number of
Common Shares
Outstanding............. 10,444 -- -- 10,444
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma adjusted
historical consolidated financial statements.
35
<PAGE>
KOLLMORGEN
PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KOLLMORGEN'S KOLLMORGEN
MACBETH FRENCH PRO FORMA
KOLLMORGEN SEIDEL SERVOTRONIX DIVISION INSTRUMENT PRO FORMA ADJUSTED
HISTORICAL HISTORICAL(A) HISTORICAL(A) HISTORICAL(F) GROUP(G) ADJUSTMENTS HISTORICAL
------------ ----------- ------------- -------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $ 230,424 $ 19,179 $ 2,566 $ (32,104) $ (932) $ 219,133
Cost of Revenues......... 152,928 13,346 1,307 (15,819) (848) 150,914
------------ ----------- ------------- -------------- ----------- ------------
Gross Margin............. 77,496 5,833 1,259 (16,285) (84) 68,219
Operating Expenses:
Sales, Marketing,
General and
Administrative....... 51,918 4,107 365 (10,027) (822) 45,541
Research and
Development.......... 12,143 822 813 (2,744) (364) 10,670
Amortization of
Goodwill............. -- -- -- -- -- $ 701(c) 701
------------ ----------- ------------- -------------- ----------- ------------- ------------
Operating Income
(Loss)................. 13,435 904 81 (3,514) 1,102 (701) 11,307
Other Income (Expense),
Net.................... (4,531) (133) (81) 120 -- 1,593(d) (3,032)
------------ ----------- ------------- -------------- ----------- ------------- ------------
Income (Loss) Before
Taxes.................. 8,904 771 -- (3,394) 1,102 892 8,275
Provision for Income
Taxes.................. -- -- -- -- -- (478)(e) (2,317)
(1,839)(e)
------------ ----------- ------------- -------------- ----------- ------------- ------------
Net Income (Loss)........ 8,904 771 -- (3,394) 1,102 (1,425) 5,958
Preferred Dividends...... (285) -- -- -- -- (285)
------------ ----------- ------------- -------------- ----------- ------------- ------------
Income Available to
Common Shareholders.... $ 8,619 $ 771 $ -- $ (3,394) $ 1,102 $ (1,425) $ 5,673
------------ ----------- ------------- -------------- ----------- ------------- ------------
------------ ----------- ------------- -------------- ----------- ------------- ------------
Net Income per Share -
Fully Diluted.......... $ 0.86 -- -- -- -- -- $ 0.56
Weighted Average Number
of Common Shares
Outstanding............ 10,042 -- -- -- -- -- 10,042
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma adjusted
historical consolidated financial statements.
36
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
A. PRO FORMA BASIS OF PRESENTATION AND ADJUSTMENTS
On April 2, 1997, Kollmorgen acquired Servotronix, a developer and
manufacturer of motion control technology that is headquartered in Israel. On
June 10, 1997, Kollmorgen acquired Seidel, a developer and manufacturer of
motion control technology that is headquartered in Germany. Both acquisitions
were accounted for as purchases and together, resulted in an in-process research
and development charge of $11,391 in 1997.
The pro forma adjusted historical consolidated statements of operations set
forth the results of operations for the nine-month period ended September 30,
1997 and the year ended December 31, 1996, as if the acquisitions by Kollmorgen
of Seidel and Servotronix, and the disposal of Macbeth had occurred at January
1, 1996.
The pro forma adjusted historical consolidated statements of operations are
intended for information purposes and are not necessarily indicative of actual
results had the transactions occurred as of the date indicated above, nor do
they purport to indicate the future results of operations.
These pro forma adjusted historical consolidated statements of operations
should be read in conjunction with the financial statements and notes thereto
included in Kollmorgen's Annual Report on Form 10-K for the year ended December
31, 1996, Kollmorgen's Current Report on Form 8-K filed January 31, 1997 and
Kollmorgen's Form 10-Q for the nine-month period ended September 30, 1997. The
pro forma adjusted historical consolidated statements of operations do not give
effect to any potential cost savings and synergies that could result from the
Servotronix and Seidel acquisitions.
B. PRO FORMA ADJUSTMENTS TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS
(a) These columns represent the unaudited historical results of operations
of Seidel and Servotronix for the period prior to Kollmorgen's acquisition. Upon
acquisition these operations became part of Kollmorgen's historical financial
statements.
(b) This adjustment eliminates the charge for acquired in-process research
and development costs recognized principally upon the acquisition of Seidel and
Servotronix. Since these amounts are not continuing expenditures of Kollmorgen,
they are deducted from the historical consolidated statement of operations to
arrive at the Kollmorgen pro forma adjusted historical financial statements.
(c) These adjustments reflect the goodwill amortization for the periods,
assuming both acquisitions occurred at January 1, 1996. The goodwill resulting
from the acquisitions of Seidel and Servotronix of $10,509 which reflects the
aggregate excess purchase price over the fair value of net assets acquired and
in-process research and development. Goodwill attributable to these acquisitions
is being amortized over 15 years. For purposes of allocating the acquisition
costs among the various assets acquired, the carrying value of the acquired
assets approximated their fair value, with all the excess of such acquisition
costs being attributed to in-process acquired research and development and
goodwill. It is Kollmorgen's intention to continue to evaluate the acquired
assets and, as a result, the allocation of the acquisition costs among the
tangible and intangible assets acquired may change. All material intercorporate
transactions were eliminated.
37
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA) (CONTINUED)
B. PRO FORMA ADJUSTMENTS TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(d) Effective December 31, 1996, Kollmorgen contributed its Macbeth business
to a joint venture for a 48% interest. The investment was accounted for under
the equity method. In the second quarter of 1997, Kollmorgen sold its interest
in the joint venture for a gain of $24,321, which has been eliminated as a pro
forma adjustment. The $1,430 adjustment represents the elimination of
Kollmorgen's proportionate earnings of the joint venture from the beginning of
the period through the time of the sale. Kollmorgen used a portion of the
proceeds from the sale of its interest in the joint venture to repay the
outstanding balance of a $25 million term loan. Accordingly, interest expense
related to this debt of $816 and $1,593, has been excluded from these pro forma
statements of operations for the nine months ended September 30, 1997 and the
year ended December 31, 1996, respectively.
(e) These adjustments represent (i) the estimated income tax effect of the
pro forma adjustments at the blended statutory rates of 36% and 28% for 1997 and
1996, respectively, and (ii) an increase in income tax provision that would have
resulted from the full utilization of net operating loss carryforwards had the
gain on sale of investment in Macbeth occurred at January 1, 1996.
(f) This column represents the historical results of operations of Macbeth
for the period prior to December 31, 1996, the effective date of Kollmorgen's
contribution of that business to a joint venture, at which point those
operations were accounted for on the equity method in Kollmorgen's historical
financial statements.
(g) In March 1996, Kollmorgen sold a portion of its instrumentation business
located in France for its book value. This column represents the elimination of
the results of this business for 1996.
38
<PAGE>
KOLLMORGEN
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KOLLMORGEN
PRO FORMA PACIFIC
ADJUSTED SCIENTIFIC PRO FORMA
HISTORICAL HISTORICAL(A) ADJUSTMENTS PRO FORMA
----------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues.......................................... $ 173,188 $ 227,744 $ 400,932
Cost of Revenues.................................. 120,541 154,428 274,969
----------- ---------------- -----------
Gross Margin...................................... 52,647 73,316 125,963
Operating Expenses:
Sales, Marketing, General and Administrative.... 33,960 47,397 81,357
Research and Development........................ 7,708 9,880 17,588
Amortization of Goodwill........................ 526 -- $ 8,537(b) 9,063
----------- ---------------- ------------ -----------
Operating Income.................................. 10,453 16,039 (8,537) 17,955
Other Income (Expense), Net....................... (1,856) (1,630) (8,838)(c) (12,967)
(643)(c)
----------- ---------------- ------------ -----------
Income Before Taxes............................... 8,597 14,409 (18,018) 4,988
Provision for Income Taxes........................ (3,095) (5,384) 3,792(d) (4,686)
----------- ---------------- ------------ -----------
Net Income from Continuing Operations............. $ 5,502 $ 9,025 $ (14,226) $ 302
----------- ---------------- ------------ -----------
----------- ---------------- ------------ -----------
Net Income per Share from Continuing Operations -
Fully Diluted $ 0.53 $ 0.73 $ 0.02
Weighted Average Number of Common Shares
Outstanding..................................... 10,444 12,443 (12,443 (e) 18,226
7,782 (e)
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
39
<PAGE>
KOLLMORGEN
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KOLLMORGEN
PRO FORMA PACIFIC
ADJUSTED SCIENTIFIC PRO FORMA
HISTORICAL HISTORICAL(F) ADJUSTMENTS PRO FORMA
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenues.............................................. $ 219,133 $ 294,779 $ 513,912
Cost of Revenues...................................... 150,914 203,074 353,988
----------- ------------ -----------
Gross Margin.......................................... 68,219 91,705 159,924
Operating Expenses:
Sales, Marketing, General and
Administrative.................................. 45,541 63,569 109,110
Research and Development.......................... 10,670 15,974 26,644
Cost of Solium Restructuring and Other............ -- 7,500 7,500
Amortization of Goodwill.......................... 701 -- $ 11,383(b) 12,084
----------- ------------ ------------ -----------
Operating Income...................................... 11,307 4,662 (11,383) 4,586
Other Income (Expense), Net........................... (3,032) (4,362) (11,785)(c) (20,036)
(857)(c)
----------- ------------ ------------ -----------
Income (Loss) Before Taxes............................ 8,275 300 (24,025) (15,450)
Benefit (Provision) for Income Taxes.................. (2,317) (131) 5,057(d) 2,609
----------- ------------ ------------ -----------
Net Income (Loss)..................................... 5,958 169 (18,968) (12,841)
Preferred Dividends................................... (285) -- -- (285)
----------- ------------ ------------ -----------
Income Available to Common
Shareholders........................................ $ 5,673 $ 169 $ (18,968) $ (13,126)
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Net Income (Loss) per Share -- Fully
Diluted............................................. $ 0.56 $ 0.01 $ (0.74)
Weighted Average Number of Common
Shares Outstanding.................................. 10,042 12,457 (12,457)(e) 17,824
7,782(e)
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
40
<PAGE>
KOLLMORGEN
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PACIFIC PRO FORMA
KOLLMORGEN SCIENTIFIC ADJUSTMENTS PRO FORMA
----------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents........................ $ 17,881 $ 3,174 $ 21,055
Accounts Receivable, Net......................... 41,367 51,078 92,445
Inventories...................................... 25,486 54,611 80,097
Deferred Income Taxes............................ -- 9,986 9,986
Other Current Assets............................. 6,385 6,946 13,331
----------- ---------------- -----------
Total Current Assets............................. 91,119 125,795 216,914
Property and Equipment, Net........................ 26,006 49,411 75,417
Note Receivable.................................... -- 8,700 8,700
Investment in Joint Venture........................ 14,483 -- 14,483
Other Assets, Net.................................. 10,536 36,894 $ 6,000(c) 53,430
Goodwill, Net...................................... -- -- 170,744(g) 170,744
----------- ---------------- ------------ -----------
Total Assets....................................... $ 142,144 $ 220,800 $ 176,744 $ 539,688
----------- ---------------- ------------ -----------
----------- ---------------- ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Liabilities......... $ 49,759 $ 22,874 $ 72,633
Other Current Liabilities........................ 13,153 13,908 27,061
Reserve for Discontinued Solium Operation........ -- 4,593 4,593
----------- ---------------- -----------
Total Current Liabilities........................ 62,912 41,375 104,287
Long-Term Obligations.............................. 37,249 76,560 $ 147,309(c) 261,118
Minority Interest.................................. 72 -- -- 72
----------- ---------------- ------------ -----------
Total Liabilities.................................. 100,233 117,935 147,309 365,477
Stockholders' Equity............................... 41,911 102,865 132,300(h) 174,211
(102,865)(h)
----------- ---------------- ------------ -----------
Total Liabilities and Stockholders' Equity......... $ 142,144 $ 220,800 $ 176,744 $ 539,688
----------- ---------------- ------------ -----------
----------- ---------------- ------------ -----------
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
41
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A. PRO FORMA BASIS OF PRESENTATION AND ADJUSTMENTS
The pro forma combined condensed consolidated financial statements are
prepared assuming that Kollmorgen has merged with Pacific Scientific, a
manufacturer of high-performance rotating electrical equipment, including
motors, generators and alternators. The Proposed Combination will be effected
through the exchange of approximately 7,782,000 shares of common stock of
Kollmorgen and cash of $132,309, resulting in a total estimated purchase price,
including other costs of approximately $15,000, of approximately $279,609. The
shares of Kollmorgen common stock are assumed to be issued at a value of $17.00
per share, which reflects the closing price of the Company's common stock as of
December 10, 1997. This share price differs from the December 12, 1997 share
price of $16.88 referred to elsewhere in the Consent Solicitation/Prospectus.
Application in these pro forma statements of the $16.88 per share value would
not materially impact the pro forma values presented herein. The ultimate number
of shares issued to acquire Pacific Scientific will be in the range of
approximately 7,007,880 to 8,569,043 shares, dependent upon the 20-day average
closing price of Kollmorgen Common Stock five days prior to closing. Kollmorgen
has ascribed no value to Pacific Scientific's preferred stock purchase rights
which will be acquired in the Proposed Combination. A change in the number of
shares issued upon final consummation of the proposed transaction from the
amounts assumed above would effect the pro forma net income per share for the
periods presented. The transaction will be accounted for as a purchase.
The pro forma combined condensed consolidated balance sheet includes the
financial statements of Kollmorgen and Pacific Scientific at September 30, 1997,
as if the Proposed Combination had occurred on that date.
The pro forma combined condensed consolidated statements of operations set
forth the results of operations for the nine-month period ended September 30,
1997 and the year ended December 31, 1996, as if the Proposed Combination had
occurred at January 1, 1996.
The pro forma combined condensed consolidated financial statements are
intended for information purposes and are not necessarily indicative of actual
results had the Proposed Combination occurred as of the dates indicated above,
nor do they purport to indicate the future consolidated financial position or
future results of operations of the combined entity. Pacific Scientific's
historical financial data was derived from Pacific Scientific's Annual Report on
Form 10-K for the year ended December 27, 1996, and Pacific Scientific's Form
10-Q for the nine-month period ended September 26, 1997. For Kollmorgen's pro
forma adjusted historical financial data, see "Pro Forma Adjusted Historical
Consolidated Statement of Operations" for the nine months ended September 30,
1997 and the year ended December 31, 1996 presented elsewhere herein. These
combined condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in
Kollmorgen's Annual Report on Form 10-K for the year ended December 31, 1996,
Kollmorgen's Form 10-Q for the nine month period ended September 30, 1997,
Pacific Scientific's Annual Report on Form 10-K for the year ended December 27,
1997 and Pacific Scientific's Form 10-Q for the nine-month period ended
September 26, 1997.
B. PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(a) Pacific Scientific's statement of operations as presented on Form 10-Q
for the nine months ended September 26, 1997, reflects a Loss from Discontinued
Operations of $13,563, Net Loss of
42
<PAGE>
$4,358, Loss per share on Discontinued Operations of $1.09 and Net Loss per
share of $0.36. This pro forma statement reflects only results from continuing
operations.
(b) These pro forma adjustments reflect the amortization of goodwill assumed
to be generated in the Proposed Combination over the estimated useful life of
fifteen years on a straight-line basis. The ultimate allocation of the purchase
price to the net assets acquired, goodwill, other intangible assets, liabilities
assumed and incomplete technology is subject to final determination of their
respective fair values. A determination of the fair value of incomplete
technology, if any, is subject to a detailed analysis of the tangible and
intangible assets related to in-process research and development on new products
of Pacific Scientific. The value assigned to in-process research and development
could result in a material charge to operations at consummation of the
transaction and a corresponding reduction in the amounts to be amortized. There
were no intercorporate transactions that required elimination.
(c) The pro forma combined condensed consolidated balance sheet reflects
Kollmorgen's securing the Loan as if the issuance occurred on September 30,
1997. The term loan is payable over seven years. The Loan accrues interest at a
rate of LIBOR plus 2%. At the date of the Proposed Combination, this interest
rate is assumed to be 8%. The pro forma combined condensed consolidated
statements of operations include the interest expense associated with the Loan
as if the issuance occurred at January 1, 1996 of $8,838 and $11,785, for the
nine months ended September 30, 1997 and the year ended December 31, 1996,
respectively. Under applicable pro forma rules, interest income associated with
the proceeds from the Loan, which may partially offset the interest expense, is
not included in the pro forma statements of operations. Estimated debt issuance
costs of $6,000 for credit facility commitment fees have been included in other
long-term assets and are being amortized over the term of the Loan. Amortization
of debt issuance costs on the Loan for the nine months ended September 30, 1997
and the year ended December 31, 1996 are estimated to be $643 and $857,
respectively.
(d) This adjustment represents the estimated income tax effect of the pro
forma adjustments using a combined U.S. federal and state statutory rate of 40%
for both 1996 and the first nine months in 1997.
(e) The pro forma adjustments reflect the exchange of Pacific Scientific's
weighted average number of common shares outstanding of 12,443,000 and
12,457,000, for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively, and the issuance of Kollmorgen's common shares
to be exchanged in the transaction of 7,782,000 assuming an exchange ratio of
1.2 shares of Kollmorgen Common Stock for one share of Pacific Scientific Common
Stock for those shares outstanding as of September 26, 1997 not exchanged for
cash.
(f) The Pacific Scientific historical financial statements for 1996 included
in these pro forma combined condensed consolidated financial statements include
the results of operations of Pacific Scientific's Solium business, which was
discontinued in 1997. Had the pro forma financial statements been adjusted to
exclude the Solium business, net sales would have decreased by $2,416, and
pre-tax income would have increased by $14,541.
(g) The pro forma adjustment reflects the excess purchase price over the
fair value of net assets assumed to be acquired of $170,744. Estimated
transaction related costs of $9,000 for investment banker fees, accounting and
legal fees, and other various deal costs have been included in the determination
of goodwill. For purposes of these pro forma financial statements, the fair
value of the assets acquired is estimated to be equivalent to the historical
financial statement balance as of the date of acquisition. The ultimate
allocation of the purchase price to the net assets acquired, goodwill, other
intangible assets, liabilities assumed and a charge for incomplete technology is
subject to final determination of their respective fair values.
(h) The pro forma combined condensed consolidated balance sheet reflects an
increase for the value of 7,782 common shares at $17.00 per share assumed to be
issued by Kollmorgen in the Proposed Merger to Pacific Scientific shareholders
of $132,300, and an elimination of the net equity of Pacific Scientific of
$102,865.
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<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion, subject to the limitations set forth herein,
describes the material federal income tax consequences of the Offer and the
Proposed Merger to holders of Pacific Scientific Common Shares who hold Pacific
Scientific Common Shares as capital assets and exchange Pacific Scientific
Common Shares for cash and/or shares of Kollmorgen Common Stock pursuant to the
Offer and the Proposed Merger and represents the opinion of Shearman & Sterling,
special tax counsel to Kollmorgen. The tax consequences to a specific
shareholder may vary depending upon such shareholder's particular tax situation,
and the discussion set forth below may not apply to certain categories of
holders of Pacific Scientific Common Shares subject to special treatment under
the Internal Revenue Code of 1986, as amended (the "Code"), such as foreign
shareholders, securities dealers, broker-dealers, insurance companies, financial
institutions, tax-exempt entities and shareholders who acquired such Pacific
Scientific Common Shares pursuant to an exercise of an employee stock option or
otherwise as compensation or who hold restricted stock. The discussion is based
on the Code as in effect on the date of this Consent Solicitation
Statement/Prospectus, as well as regulations promulgated thereunder, existing
administrative interpretations and court decisions currently in effect, all of
which are subject to change, retroactively or prospectively, and to possibly
differing interpretations and does not address state, local or foreign tax laws.
Since the Offer is conditioned upon, among other events, the Rights having been
redeemed or invalidated or being otherwise inapplicable to the Offer and the
Proposed Merger, this tax discussion assumes the satisfaction of such condition
and thus no allocation of consideration to the Rights or the Rights
Certificates. No ruling will be requested from the Internal Revenue Service (the
"IRS") regarding the tax consequences of the Offer and the Proposed Merger and,
thus, there can be no assurance that the IRS will agree with the discussion set
forth below.
The exchange of Pacific Scientific Common Shares for cash and/or shares of
Kollmorgen Common Stock pursuant to the Offer and the Proposed Merger should, if
consummated as currently anticipated, be treated as a single integrated
transaction for federal income tax purposes. Although it cannot be determined at
this time, if the Offer and the Proposed Merger are so treated, and assuming
certain other requirements are satisfied, the Offer and the Proposed Merger,
taken together, will be treated for federal income tax purposes as an exchange
pursuant to a plan of "reorganization" within the meaning of Section
368(a)(1)(A) of the Code. In such event, the exchange of Pacific Scientific
Common Shares for Kollmorgen Common Stock in the Proposed Merger would qualify
for nonrecognition treatment as part of a reorganization. Treatment of the Offer
and the Proposed Merger as a "reorganization" requires, among other things, that
not more than 60% of the consideration received by shareholders of Pacific
Scientific in exchange for Pacific Scientific Common Shares consists of cash
(including cash received in lieu of fractional shares of Kollmorgen Common Stock
and cash received in respect of dissenters' rights, if any, in the Proposed
Merger), that the Proposed Merger, if consummated, qualifies as a merger under
applicable state corporation laws and that the shareholder continuity of
interest tax requirement is satisfied.
If the Proposed Merger does not qualify as a reorganization, the exchange of
Pacific Scientific Common Shares for Kollmorgen Common Stock would be a taxable
exchange. There can be no assurance that the requirements for reorganization
treatment will be satisfied and neither Kollmorgen nor Purchaser is obligated to
undertake to qualify the Offer and the Proposed Merger as a reorganization.
Further, if as matters develop reorganization treatment is not certain,
Kollmorgen may change the form of effecting the Proposed Merger to ensure that
the Proposed Merger will not be taxable to Pacific Scientific. In the event of
such a change, however, the exchange of Pacific Scientific Common Shares for
Kollmorgen Common Stock in the Proposed Merger will be taxable to exchanging
Pacific Scientific shareholders.
SHAREHOLDERS OF PACIFIC SCIENTIFIC SHOULD CONSIDER THAT THE OFFER AND THE
PROPOSED MERGER CONSIDERATION WILL BE PARTIALLY OR FULLY TAXABLE TO THEM AND ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OF
44
<PAGE>
THE OFFER AND THE PROPOSED MERGER. THE EXCHANGE OF PACIFIC SCIENTIFIC COMMON
SHARES FOR KOLLMORGEN COMMON STOCK IN THE PROPOSED MERGER MAY QUALIFY FOR
NONRECOGNITION TREATMENT AS PART OF A REORGANIZATION OR MAY BE A TAXABLE
TRANSACTION. NEITHER KOLLMORGEN NOR PURCHASER IS OBLIGATED TO QUALIFY THE
TRANSACTION AS A REORGANIZATION AND THERE IS NO ASSURANCE THAT THE REQUIREMENTS
FOR REORGANIZATION TREATMENT WILL BE SATISFIED.
TAX CONSEQUENCES IF THE OFFER AND THE PROPOSED MERGER DO NOT QUALIFY AS A
REORGANIZATION OR IF THE PROPOSED MERGER IS TREATED AS A TAXABLE TRANSACTION
If the Proposed Merger is not consummated, or if the Proposed Merger is
consummated but the Offer is treated for federal income tax purposes as a
separate transaction, or if the Offer and the Proposed Merger together are
determined not to qualify as a reorganization as described above, the receipt of
cash pursuant to the Offer will be a taxable transaction for federal income tax
purposes. In that event, each shareholder of Pacific Scientific tendering
pursuant to the Offer will recognize capital gain or loss for federal income tax
purposes measured by the difference between such shareholder's tax basis in such
shareholder's Pacific Scientific Common Shares tendered in the Offer and the
amount of cash received by such shareholder. (See "Taxation of Capital Gains"
below.)
If the Offer is treated as a separate transaction, the Proposed Merger may
still qualify as a reorganization under Section 368(a) of the Code if certain
other requirements are satisfied. In that event, a shareholder of Pacific
Scientific receiving shares of Kollmorgen Common Stock and/or cash (either in
lieu of fractional shares of Kollmorgen Common Stock or in respect of
dissenters' rights) in the Proposed Merger would be subject to the federal
income tax rules concerning reorganizations discussed below with respect to such
shares of Kollmorgen Common Stock and such cash. If the Offer and the Proposed
Merger (or, if treated as separate transactions, the Proposed Merger) do not
qualify as a reorganization within the meaning of Section 368(a) of the Code,
each exchanging shareholder of Pacific Scientific will recognize capital gain or
loss for federal income tax purposes measured by the difference between such
shareholder's tax basis in such shareholder's Pacific Scientific Common Shares
exchanged and the amount of cash, plus the fair market value of the shares of
Kollmorgen Common Stock received by such shareholder in the Proposed Merger.
TAX CONSEQUENCES IF THE OFFER AND THE PROPOSED MERGER QUALIFY AS A
REORGANIZATION
As discussed above, it is possible, although it cannot be determined at this
time, that the Offer and the Proposed Merger, taken together, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code. If the Offer
and the Proposed Merger (if consummated) together qualify as a reorganization,
as discussed above, exchanges of Pacific Scientific Common Shares for cash
and/or shares of Kollmorgen Common Stock, as the case may be, pursuant to the
Offer, the Proposed Merger, or both, will have the following federal income tax
consequences:
(a) EXCHANGE OF PACIFIC SCIENTIFIC COMMON SHARES SOLELY FOR KOLLMORGEN
COMMON STOCK. No gain or loss will be recognized (except in connection with any
cash received in lieu of fractional shares of Kollmorgen Common Stock) by
shareholders of Pacific Scientific who exchange all of their Pacific Scientific
Common Shares actually owned by such shareholders solely for shares of
Kollmorgen Common Stock in the Proposed Merger. Any such shareholders' adjusted
basis for the shares of Kollmorgen Common Stock received pursuant to the
Proposed Merger will be the same as the adjusted basis of such Pacific
Scientific Common Shares surrendered in exchange therefor, and the holding
period of such shares of Kollmorgen Common Stock, as the case may be, will
include the period during which the Pacific Scientific Common Shares exchanged
therefor were held by such shareholder.
(b) EXCHANGE OF PACIFIC SCIENTIFIC COMMON SHARES SOLELY FOR CASH. The
receipt of cash by shareholders of Pacific Scientific who, pursuant to the
Offer, exchange all of their Pacific Scientific Common Shares
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<PAGE>
solely for cash will, except as indicated below under "Dividend
Treatment--Constructive Ownership Rules", result in capital gain or loss to any
such shareholder measured by the difference between the adjusted basis of the
Pacific Scientific Common Shares surrendered and the cash received. (See
"Taxation of Capital Gains" below.) Since the Offer is only an offer to purchase
a majority of the Pacific Scientific Common Shares, if more than a majority of
such shares are tendered, the amount of cash payable to tendering shareholders
pursuant to the Offer will be prorated and the portion of such tendering
shareholders' shares not exchanged in the Offer would be exchanged for
Kollmorgen Common Stock in the Proposed Merger. Because it is likely that more
than a majority of such shares will be tendered pursuant to the Offer, it is
highly unlikely that any of the tendering shareholders of Pacific Scientific
will receive solely cash in exchange for all of their Pacific Scientific Common
Shares.
(c) EXCHANGE OF PACIFIC SCIENTIFIC COMMON SHARES FOR KOLLMORGEN COMMON STOCK
AND CASH. No loss will be recognized (except in connection with any cash
received in lieu of fractional shares of Kollmorgen Common Stock) by
shareholders of Pacific Scientific who, pursuant to the Offer and the Proposed
Merger, receive cash for a portion of their Pacific Scientific Common Shares and
shares of Kollmorgen Common Stock for the balance of their Pacific Scientific
Common Shares. Any such shareholder will realize gain equal to the excess, if
any, of the cash and the aggregate fair market value of the Kollmorgen Common
Stock received pursuant to the Proposed Merger over such shareholder's adjusted
basis in the Pacific Scientific Common Shares exchanged therefor, but will
recognize any realized gain as taxable income only to the extent of the cash
received. Such recognized gain will, as a general rule (except as discussed
below under "Dividend Treatment--Constructive Ownership Rules"), constitute
capital gain (see "Taxation of Capital Gains" below). Such shareholder's
adjusted basis for the shares of Kollmorgen Common Stock received pursuant to
the Proposed Merger will be the same as the adjusted basis of the Pacific
Scientific Common Shares surrendered in exchange therefor plus the adjusted
basis of the Pacific Scientific Common Shares sold pursuant to the Offer,
decreased by the amount of cash received and increased by the amount of gain or
dividend income recognized, and the holding period of such shares of Kollmorgen
Common Stock will include the period during which the Pacific Scientific Common
Shares exchanged therefor were held by such shareholder.
TAXATION OF CASH RECEIVED IN LIEU OF FRACTIONAL SHARES
Where the only cash received by a shareholder of Pacific Scientific is
received in lieu of a fractional share of Kollmorgen Common Stock, such cash
will generally be treated as received in exchange for such fractional share of
Kollmorgen Common Stock and not as a dividend, and gain or loss recognized as a
result of the receipt of such cash will be capital gain or loss if the
fractional share would have constituted a capital asset in the hands of the
shareholder.
TAXATION OF CAPITAL GAINS
Under recently enacted legislation, a noncorporate shareholder would be
subject to tax at ordinary income rates if the Pacific Scientific Common Shares
were held for one year or less, at a maximum rate of 28% if held for more than
one year but not more than eighteen months, and at a maximum rate of 20% if held
for more than eighteen months.
DIVIDEND TREATMENT -- CONSTRUCTIVE OWNERSHIP RULES
As noted above, shareholders of Pacific Scientific who receive both cash
(other than cash solely in lieu of fractional shares of Kollmorgen Common Stock)
and shares of Kollmorgen Common Stock pursuant to the Offer and the Proposed
Merger and realize gain, will, as a general rule, recognize capital gain limited
to the amount of cash received in the event the transaction is treated as a
reorganization. Shareholders of Pacific Scientific who receive cash pursuant to
the Offer who own or are deemed to own constructively Pacific Scientific Common
Shares that are exchanged for shares of Kollmorgen Common Stock in the Proposed
Merger (or that already own or are deemed to own constructively Kollmorgen
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<PAGE>
Common Stock before the Proposed Merger) may be subject to the rules of Section
302 of the Code for purposes of determining whether part or all of the cash
received by them is to be taxed as ordinary dividend income as opposed to
capital gain. A shareholder may be deemed under the constructive ownership rules
of Section 318 of the Code to own Kollmorgen Common Stock or Pacific Scientific
Common Shares that are owned or deemed to be owned by related individuals or
entities, or that are subject to being acquired upon the exercise by such
shareholder or other person of an option or conversion right.
For purposes of determining whether cash received pursuant to the Offer
and/or the Proposed Merger will be treated as capital gain or ordinary dividend
income for federal income tax purposes, a shareholder of Pacific Scientific will
be treated as if such shareholder first exchanged all of such shareholder's
Pacific Scientific Common Shares solely for Kollmorgen Common Stock ("Deemed
Kollmorgen Common Stock Ownership"), and then Kollmorgen immediately redeemed a
portion of such Kollmorgen Common Stock (the "Deemed Redemption") in exchange
for the cash such shareholder actually received.
In general, the determination of whether the cash received will be treated
as generating capital gain or ordinary dividend income depends upon whether and
to what extent there is a reduction in the shareholder's Deemed Kollmorgen
Common Stock Ownership as a result of the Deemed Redemption. A shareholder of
Pacific Scientific who exchanges such Pacific Scientific Common Shares for a
combination of Kollmorgen Common Stock and cash will recognize capital gain
rather than ordinary dividend income if the Deemed Redemption (described in the
preceding paragraph) is either (a) "substantially disproportionate" with respect
to such shareholder or (b) is "not essentially equivalent to a dividend".
SUBSTANTIALLY DISPROPORTIONATE TEST. A shareholder of Pacific Scientific
will satisfy the "substantially disproportionate" test if the percentage of the
outstanding stock of Kollmorgen actually and constructively owned by such
shareholder immediately after the Deemed Redemption by Kollmorgen as a result of
the Offer, the Proposed Merger, or otherwise, is less than 80% of the percentage
of the outstanding stock of Kollmorgen that such shareholder is deemed actually
and constructively to have owned immediately before the Deemed Redemption by
Kollmorgen.
NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. Whether the Deemed
Kollmorgen Common Stock Ownership and the Deemed Redemption are "not essentially
equivalent to a dividend" with respect to a shareholder of Pacific Scientific
will depend upon such shareholder's particular circumstances. In order for a
payment in redemption of stock to be treated as "not essentially equivalent to a
dividend", there must be a "meaningful reduction" in such Pacific Scientific
shareholder's stock ownership. In determining whether a reduction in a Pacific
Scientific shareholder's Deemed Kollmorgen Common Stock Ownership (discussed
above) has occurred, the amount of the Deemed Kollmorgen Common Stock Ownership
should be compared to the Kollmorgen Common Stock actually held by the Pacific
Scientific Shareholder after the Proposed Merger. Even if a shareholder of
Pacific Scientific does not satisfy the "substantially disproportionate" test
described above, the IRS has ruled that a minority shareholder in a publicly
held corporation whose relative stock interest is minimal and who exercises no
control with respect to corporate affairs is considered to have a "meaningful
reduction" if such shareholder has even a fractional reduction in such
shareholder's percentage stock ownership.
In most circumstances, therefore, gain recognized by a shareholder of
Pacific Scientific who exchanges Pacific Scientific Common Shares for a
combination of Kollmorgen Common Stock and cash will not be ordinary income but
will be capital gain, taxed as discussed above under "Taxation of Capital
Gains". Therefore, Kollmorgen intends to treat cash payments pursuant to the
Offer and the Proposed Merger as proceeds arising from the sale or exchange of
Pacific Scientific Common Shares, rather than as dividends, for federal income
tax reporting purposes. Shareholders of Pacific Scientific who receive
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<PAGE>
cash should, however, consult their own tax advisors to determine the proper
treatment of such payments (including the impact, if any, of Pacific Scientific
or Kollmorgen stock owned by persons related to such Pacific Scientific
shareholder).
TRANSFER TAXES
Kollmorgen may pay certain transfer taxes imposed on shareholders of Pacific
Scientific in connection with the Offer and the Proposed Merger. Any such
payments made on behalf of a shareholder should result in the deemed receipt of
additional consideration by such shareholder in proportion to the number of
shares of Pacific Scientific Common Shares owned by such shareholder, taxable as
described above with respect to cash proceeds. In such event, such shareholder
should be deemed to have paid such tax on its own behalf and, therefore, such
shareholder should be permitted to reduce such shareholder's gain (or increase
such shareholder's loss) realized on the sale by the amount of the tax.
Shareholders should consult their tax advisors about the possibility that any
such taxes paid on their behalf would reduce the amount realized and/or be added
to the adjusted basis of any Kollmorgen Common Stock received in the Proposed
Merger.
WITHHOLDING
Unless a shareholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the Code and
Treasury regulations promulgated thereunder, such shareholder may be subject to
backup withholding at a rate of 31% with respect to any consideration received
pursuant to the Offer and Proposed Merger. Shareholders should consult their
brokers to ensure compliance with such procedures. Foreign shareholders should
consult with their own tax advisors regarding withholding taxes.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE MAY NOT APPLY TO CERTAIN
CATEGORIES OF HOLDERS OF PACIFIC SCIENTIFIC COMMON SHARES SUBJECT TO SPECIAL
TREATMENT UNDER THE CODE, SUCH AS FOREIGN HOLDERS AND HOLDERS WHOSE PACIFIC
SCIENTIFIC COMMON SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION, OR WHO HOLD RESTRICTED STOCK.
SHAREHOLDERS OF PACIFIC SCIENTIFIC ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE PROPOSED MERGER,
INCLUDING ANY STATE, LOCAL OR OTHER TAX CONSEQUENCES OF THE OFFER AND THE
PROPOSED MERGER.
COMPARISON OF THE RIGHTS OF HOLDERS OF KOLLMORGEN
COMMON STOCK AND HOLDERS OF PACIFIC SCIENTIFIC COMMON STOCK
As a consequence of the consummation of the Proposed Merger, the
shareholders of Pacific Scientific, a California corporation, will become
shareholders of Kollmorgen, a New York corporation. New York corporations are
governed by the New York Business Corporation Law (the "NYBCL"). California
corporations are governed by the CGCL. Thus, the rights of former Pacific
Scientific shareholders will be governed by the NYBCL rather than the CGCL.
Differences between CGCL and the NYBCL and between the charters and bylaws
of Pacific Scientific and Kollmorgen will result in several changes in the
rights of shareholders of Pacific Scientific if the Proposed Merger is effected.
Certain differences between the rights of holders of shares of Kollmorgen Common
Stock and shares of Pacific Scientific Common Stock are summarized below. The
following summary does not purport to be a complete statement of the rights of
Pacific Scientific shareholders under the CGCL, the Restated Articles of
Incorporation of Pacific Scientific, as amended (the "Pacific Scientific
Charter"), and the Pacific Scientific Bylaws, as compared with the rights of
Kollmorgen
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shareholders under the NYBCL, the Certificate of Incorporation of Kollmorgen
(the "Kollmorgen Charter") and the bylaws of Kollmorgen (the "Kollmorgen
Bylaws") or a complete description of the specific provisions referred to
herein. The identification of specific differences is not meant to indicate that
other equally or more significant differences do not exist. The summary is
qualified in its entirety by reference to the CGCL, the NYBCL and the governing
corporate instruments of Kollmorgen and Pacific Scientific, to which
shareholders are referred. Copies of the Kollmorgen Charter and Kollmorgen
Bylaws are available for inspection at the offices of Kollmorgen and copies will
be sent to the holders of Pacific Scientific Common Stock upon request. Pursuant
to Sections 1500 and 213 of the CGCL, copies of the Pacific Scientific Charter
and the Pacific Scientific Bylaws should be available for inspection at the
principal executive offices of Pacific Scientific.
DIVIDENDS
PACIFIC SCIENTIFIC
Generally, a California corporation may pay dividends out of retained
earnings. Dividends may also be made if, immediately after giving effect
thereto, the sum of (i) the assets (excluding goodwill and certain other assets)
of the corporation is at least equal to 1.25 times its liabilities (excluding
certain deferred credits) and (ii) the current assets of such corporation is at
least equal to its current liabilities or, if the average of the earnings of
such corporation before taxes and interest expense for the two preceding fiscal
years was less than the average of the interest expense of such corporation for
such fiscal years, at least equal to 1.25 times its current liabilities.
KOLLMORGEN
Under the NYBCL, a corporation may declare and pay dividends or make other
distributions on its outstanding shares, in cash, bonds or property except when
currently the corporation is insolvent or would thereby be made insolvent, or
when the declaration, payment or distribution would be contrary to any
restriction contained in the certificate of incorporation. The Kollmorgen
Charter contains no such restriction. Dividends may be declared or paid and
other distributions may be made out of surplus only, so that the net assets of
the corporation remaining after such declaration, payment or distribution shall
at least equal the amount of its stated capital.
SPECIAL MEETINGS OF SHAREHOLDERS; QUORUM; SHAREHOLDER ACTION BY WRITTEN CONSENT
PACIFIC SCIENTIFIC
Under the CGCL, a special meeting of shareholders may be called by the board
of directors, the chairman of the board, the president or the holders of shares
entitled to cast not less than 10% of the votes at the meeting or such
additional persons as may be provided in the charter or bylaws. Neither the
Pacific Scientific Charter nor Pacific Scientific Bylaws permit any other person
to call a special meeting.
A quorum for a meeting of shareholders of Pacific Scientific is generally a
majority of the outstanding shares of Pacific Scientific entitled to vote at
such a meeting. An action by shareholders of Pacific Scientific requires a
majority of votes cast at a meeting of shareholders. The CGCL provides that
these quorum requirements may be increased or decreased by amendment of the
charter, except that in no event shall a quorum consist of less than one-third
of the shares entitled to vote.
Under the CGCL, any action which may be taken at a meeting of shareholders
may also be taken by the written consent of the holders of at least the same
proportion of outstanding shares as would be necessary to take such action at a
meeting at which all shares entitled to vote were present and voted, except that
the election of directors by written consent requires the unanimous consent of
all shares entitled to vote unless otherwise provided in the articles of
incorporation. The Pacific Scientific Charter contains no such provision.
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The Pacific Scientific Bylaws allow for written consent and provide that a
Director may be elected to fill a vacancy on the Pacific Scientific Board, which
has not been filled by Directors, by the written consent of a majority of shares
entitled to vote for the election of the Pacific Scientific Board.
KOLLMORGEN
Pursuant to the Kollmorgen Bylaws, a special meeting of shareholders may be
called at any time by the chairman of the board or the chief executive officer
or by resolution of the Kollmorgen Board, and will be called by the secretary or
any other officer when directed by the chairman of the board or the chief
executive officer or requested in writing by shareholders representing not less
than 50% of the outstanding shares of capital stock of Kollmorgen entitled to
vote at such meeting. No business other than that specified in the notice of the
meeting may be presented at any such special meeting, unless otherwise permitted
by law.
A quorum for a meeting of the shareholders of Kollmorgen generally is a
majority of the outstanding shares of Kollmorgen entitled to vote at such
meeting. An action by the shareholders of Kollmorgen generally requires a
majority of the votes cast at a meeting of shareholders, except that election of
directors requires only a plurality of the votes cast. The NYBCL provides that
these quorum requirements may be increased by a change to the certificate of
incorporation or decreased by a change to the certificate of incorporation or
bylaws (which change to the bylaws may be effected by shareholders or by the
board), so long as the requirement for a quorum does not fall below one-third of
the shares entitled to vote.
Under the NYBCL, whenever shareholders are required or permitted to take any
action by vote, such action may be taken without a meeting on written consent
signed by the holders of all outstanding shares entitled to vote thereon, unless
the certificate of incorporation authorizes written consent of the holders of
less than all outstanding shares.
CERTAIN VOTING RIGHTS
PACIFIC SCIENTIFIC
The CGCL generally requires approval of any reorganization (which includes a
merger, certain exchange reorganizations and certain sale-of-asset
reorganizations) or sale of all or substantially all of the assets of a
corporation, by the affirmative vote of the holders of a majority (unless the
charter requires a higher percentage) of the outstanding shares of each class of
capital stock of the corporation entitled to vote thereon. The Pacific
Scientific Charter does not require a higher percentage.
In general, under the CGCL, no approval of a reorganization is required by
the holders of the outstanding shares in the case of any corporation if such
corporation, or its shareholders immediately before such reorganization, or
both, own, immediately after such reorganization, equity securities (other than
warrants or rights) of the surviving or acquiring corporation, or the partner of
either of the constituent corporations, possessing more than five-sixths of the
voting power of such surviving or acquiring corporation or such parent.
Under the CGCL, a parent corporation may, without shareholder approval,
merge a subsidiary into itself if the parent corporation owns at least 90% of
the outstanding shares of each class of stock of such subsidiary.
KOLLMORGEN
Under the NYBCL, subject to the provisions of the NYBCL described below
under "--Certain Business Combinations and Reorganizations", the recommendation
of the board of directors and the
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approval of two-thirds of the outstanding shares of Kollmorgen entitled to vote
thereon are required to effect a merger or consolidation or to sell, lease or
exchange substantially all of Kollmorgen's assets.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
PACIFIC SCIENTIFIC
Under the CGCL, a Listed Corporation (as defined below) may, by amendment to
its charter or bylaws, divide its board of directors into as many as three
classes, and directors can be elected to serve staggered terms. The Pacific
Scientific Charter and Pacific Scientific Bylaws contain no such provision and,
accordingly, all directors are elected annually for a term of one year or until
a successor is elected.
KOLLMORGEN
Under the NYBCL, by provision in the certificate of incorporation or bylaws,
the board of directors of a corporation may be divided into as many as four
classes, and directors can be elected to serve staggered terms. The Kollmorgen
Bylaws provide for two classes of directors, each class to consist of not less
than three nor more than four directors with each class elected every other year
for a term of two years or until a successor is elected.
ELECTION OF DIRECTORS
PACIFIC SCIENTIFIC
Under the CGCL (unless the corporate charter provides otherwise), any
shareholder of a Listed Corporation (as defined below) is entitled to cumulate
his votes for the election of directors provided that at least one shareholder
has given notice at the meeting prior to the voting of such shareholder's
intention to cumulate his votes and the corporation's charter does not
specifically eliminate cumulative voting. A "Listed Corporation" is defined
under the CGCL as a corporation with (i) securities listed on the New York or
American Stock Exchange or (ii) securities designated as a National Market
System security on the Nasdaq National Market if the corporation has at least
800 holders of equity securities. Cumulative votes may only be cast for
candidates who have been nominated before the voting. The Pacific Scientific
Bylaws provide for cumulative voting in accordance with the CGCL.
KOLLMORGEN
The NYBCL permits a corporation, by inclusion of a provision in its
certificate of incorporation, to utilize cumulative voting. The Kollmorgen
Charter does not contain such a provision. Pursuant to the NYBCL, directors of
Kollmorgen are elected by a plurality of the votes cast at a meeting by the
holders of shares entitled to vote thereon.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
PACIFIC SCIENTIFIC
Under the CGCL, the holders of at least 10% of the number of outstanding
shares of any class of stock may initiate a court action to remove any director
for cause. In addition, any or all of the directors of a California corporation
may be removed without cause by the affirmative vote of a majority of the
outstanding shares entitled to vote. However, no director may be removed (unless
the entire board is removed) when the votes cast against removal would be
sufficient to elect the director if voted cumulatively at an election at which
the same total number of votes were cast and the entire number of the directors
authorized at the time of the director's most recent election were then being
elected. However, in the case of a corporation whose board is classified, a
director may not be removed if the votes cast
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against removal would be sufficient to elect the director if voted cumulatively
at an election at which the same number of votes were cast.
Under the CGCL (unless otherwise provided in the charter or bylaws and
except for a vacancy created by the removal of a director), vacancies on the
board of directors may be filled by approval of the board. The Pacific
Scientific Charter and the Pacific Scientific Bylaws contain no provisions to
the contrary. In addition, any vacancy not filled by the directors and any
vacancies on the board resulting from the removal of directors may be filled by
the vote of the majority of shares entitled to vote.
KOLLMORGEN
Under the NYBCL, any or all of the directors of Kollmorgen may be removed
for cause by a majority of the votes cast at a meeting by the holders of shares
entitled to vote thereon. The NYBCL permits directors to be removed without
cause by action of the board of directors if the certificate of incorporation or
the specific provisions of a bylaw adopted by the shareholders so provides. The
Kollmorgen Charter and the Kollmorgen Bylaws contain no such provisions.
The NYBCL permits the filling of vacancies on the board of directors by
approval of the board in all cases except where the vacancy was caused by the
removal of a director, in which case the vacancy must be filled by vote of the
shareholders. The Kollmorgen Charter and Kollmorgen Bylaws contain no provisions
to the contrary.
AMENDMENT OF CHARTER AND BYLAWS
PACIFIC SCIENTIFIC
Under the CGCL, amendments to the charter of a corporation generally require
approval by vote of directors and the holders of a majority of outstanding
shares entitled to vote thereon and, where their rights are affected, by the
holders of a majority of the outstanding shares of a class, whether or not such
class is entitled to vote thereon by the provision of the charter.
Under the CGCL, bylaws may be adopted, amended or repealed either by the
vote of a majority of the outstanding shares or by the approval of the board of
directors, except (i) if the number of directors is set forth in the charter, in
which case such number may only be changed by an amendment to the charter, or
(ii) if the charter requires a larger percentage of shareholder or director vote
to approve a given action. The Pacific Scientific Charter does not require
approval by a supermajority of the shareholders or directors to approve a given
action, other than the requirement that two-thirds of the outstanding shares
approve certain transfers of assets representing 50% or more of the total assets
of Pacific Scientific (unless the Pacific Scientific Board has unanimously
approved the transaction).
KOLLMORGEN
Under the NYBCL, most amendments to the certificate of incorporation of a
corporation require the approval of both the board of directors and the majority
of the voting power of all outstanding shares of capital stock. The Kollmorgen
Bylaws may be amended by the shareholders at any meeting of shareholders or by
the Kollmorgen Board at any meeting of the Kollmorgen Board.
CERTAIN BUSINESS COMBINATIONS AND REORGANIZATIONS
PACIFIC SCIENTIFIC
The CGCL generally requires that, unless all shareholders of a class or
series consent, each share of such class or series must be treated equally with
respect to any distribution of cash, property, rights or securities. The CGCL
also provides generally that if a corporation that is party to a merger, or its
parent,
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owns more than 50% but less than 90% of the voting power of the other
corporation that is party to such merger, the nonredeemable shares of common
stock of the controlled corporation may be converted only into nonredeemable
shares of the surviving corporation or a parent party unless all of the
shareholders of the class consent. Cash tender offers are not directly regulated
under the CGCL.
KOLLMORGEN
The NYBCL contains provisions which generally would prohibit a business
combination, including mergers, sales and leases of assets, issuance of
securities and similar transactions, by Kollmorgen or a subsidiary with an
interested shareholder (generally the beneficial owner of 20 percent or more of
Kollmorgen's voting stock) within five years after the person or entity becomes
an interested shareholder, unless (i) prior to the person or entity becoming an
interested shareholder, the business combination or the transaction pursuant to
which such person or entity became an interested shareholder shall have been
approved by the Kollmorgen Board or (ii) the business combination is approved by
the holders of a majority of the outstanding voting stock of Kollmorgen,
excluding shares held by the interested shareholders, at a meeting called for
such purpose no earlier than five years after such interested shareholder's
stock acquisition date.
LIMITATION ON DIRECTORS' LIABILITY
PACIFIC SCIENTIFIC
The CGCL provides that a corporation's charter may contain a provision
eliminating or limiting the personal liability of a director for monetary
damages in an action brought by or in the right of the corporation for breach of
a director's duties to the corporation and its shareholders. However, no such
provision may eliminate or limit the liability of directors (i) for acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, (vi) for any improper transaction between a
director and a corporation in which the director has a material financial
interest, (vii) for any unlawful distribution to the shareholders of a
corporation or any unlawful loan of money and property to, or guarantee of the
obligations of, any director or officer of the corporation, (viii) for any act
or omission occurring prior to September 27, 1987 when Section 204 of the CGCL
became effective or (ix) for the liability of an officer for any act or omission
as an officer, notwithstanding that the officer is also a director or that his
or her actions, if negligent or improper, have been ratified by the directors.
The Pacific Scientific Charter provides that the liability of Pacific
Scientific directors for monetary damages will be eliminated to the fullest
extent permissible under the CGCL.
KOLLMORGEN
Under the NYBCL, a corporation may limit or eliminate the personal liability
of directors to the corporation or its shareholders for damages for breach of
duty in such capacity. This limitation on liability is not available for acts or
omissions by a director which (i) were in bad faith, (ii) involved intentional
misconduct or a knowing violation of law, (iii) involved financial profit or
other advantage to which the
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director was not entitled or (iv) resulted in a violation of a statute
prohibiting certain dividend declarations, certain payments to shareholders
after dissolution and particular types of loans. The Kollmorgen Charter provides
for this limitation on directors' liability.
INDEMNIFICATION OF OFFICERS AND DIRECTORS; INSURANCE
PACIFIC SCIENTIFIC
Under the CGCL, (i) a corporation has the power to indemnify, with certain
exceptions, any agent who is a party to any action (other than an action by or
in the right of the corporation to procure a judgment in its favor) against
expenses, judgments, fines and settlements if that person acted in good faith
and in a manner that person reasonably believed to be in the best interests of
the corporation and, in the case of a criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful, and (ii) a corporation has the
power to indemnify, with certain exceptions, any agent who is a party to any
action by or in the right of the corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of the action if that person acted in good faith and in a manner that person
believed to be in the best interests of the corporation and its shareholders. An
agent for purposes of the CGCL includes directors, officers and employees.
The indemnification authorized by the CGCL is not exclusive and a
corporation may grant its directors certain additional rights to
indemnification. The Pacific Scientific Bylaws permit Pacific Scientific to
indemnify each of its agents to the maximum extent permitted by the CGCL.
KOLLMORGEN
The NYBCL provides that a corporation may indemnify its officers and
directors who are made a party to any action, suit or proceeding by reason of
the fact that he or she was a director, officer or employee of the corporation
by, among other things, a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, provided that such officers
and directors acted in good faith and in a manner they reasonably believed to be
in, not opposed to, the best interests of the corporation. The Kollmorgen Bylaws
provide for indemnification of officers and directors as permitted by this
statute.
RIGHTS PLANS
PACIFIC SCIENTIFIC
Pacific Scientific has adopted a shareholder rights plan (the "Pacific
Scientific Rights Plan") under which one right to purchase one one-hundredth
share of Pacific Scientific Series A Junior Participating Preferred Stock was
distributed on each outstanding share of Pacific Scientific Common Stock held of
record as of November 18, 1988, and on each such share issued thereafter, at an
exercise price of $45, subject to adjustment (a "Pacific Scientific Rights").
The Pacific Scientific Rights initially will trade in tandem with the Pacific
Scientific Common Stock. The Pacific Scientific Rights detach from the Pacific
Scientific Common Stock and become exercisable 20 days after a person or group
acquires beneficial ownership of 25% of the Pacific Scientific Common Stock or
commences or announces a tender offer that would result in such person or group
having beneficial ownership of 35% or more of the Pacific Scientific Common
Stock. Each Pacific Scientific Right entitles its holder to purchase, at the
Pacific Scientific Right's then current exercise price, that number of units of
Pacific Scientific Series A Junior Participating Preferred Stock having a value
equal to twice such exercise price. In addition, if Pacific Scientific is
involved in certain business combination transactions, each Pacific Scientific
Right that has not previously been exercised will entitle its holder to
purchase, at the Pacific Scientific Right's then current exercise price, shares
of common stock of such other person or surviving company having a value of
twice the Pacific Scientific Right's exercise price.
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KOLLMORGEN
Kollmorgen has adopted a shareholder rights plan (the "Kollmorgen Rights
Plan") under which one right to purchase one one-thousandth of a share of
Preferred Stock for $50, subject to adjustment, was distributed on each
outstanding share of Kollmorgen Common Stock held of record as of January 4,
1989, and on each such share issued thereafter (the "Kollmorgen Rights"). Under
the Kollmorgen Rights Plan, certificates for Kollmorgen Common Stock represent a
like number of Kollmorgen Rights to purchase Kollmorgen Series B Preferred Stock
issued thereunder. The Kollmorgen Rights will be evidenced by the Kollmorgen
Common Stock certificates until 10 days after a person or group acquires
beneficial ownership of 20% or more of the total voting power in the election of
directors or commences or announces a tender offer that would result in a person
or group beneficially owning 30% or more of the Kollmorgen Common Stock. Each
Kollmorgen Right entitles its holder to purchase, at the Kollmorgen Right's then
current exercise price, that number of units of Kollmorgen Series B Preferred
Stock having a value equal to twice such exercise price. In addition, if
Kollmorgen is involved in certain business combination transactions, each
Kollmorgen Right that has not previously been exercised will entitle its holder
to purchase, at the Kollmorgen Right's then current exercise price, shares of
common stock of such other person or surviving company having a value of twice
the Kollmorgen Right's exercise price.
DISSENTERS' RIGHTS OF PACIFIC SCIENTIFIC SHAREHOLDERS
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the CGCL and is qualified in its entirety by the full
text of Chapter 13 (Sections 1300-1312) of the CGCL, which is attached hereto
and is incorporated herein by reference. See "Schedule III--Chapter 13 of the
General Corporation Law of the State of California".
Holders of Pacific Scientific Common Stock do not have dissenters' rights as
a result of the Offer. However, in the Proposed Merger, holders of Pacific
Scientific Common Stock, by complying with the provisions of Chapter 13 of the
CGCL, may have certain rights to dissent and to require Pacific Scientific to
purchase their Pacific Scientific Common Stock for cash at fair market value. In
general, holders of Pacific Scientific Common Stock would be entitled to
exercise "dissenters' rights" under the CGCL only if the holders of five percent
or more of the outstanding Pacific Scientific Common Stock properly file demands
for payment or if the Pacific Scientific Common Stock held by such holders are
subject to any restriction on transfer imposed by Pacific Scientific or any law
or regulation ("Restricted Shares"). Accordingly, any holder of Restricted
Shares and, if the holders of five percent or more of the Pacific Scientific
Common Stock properly file demands for payment, all other such holders who fully
comply with all other applicable provisions of Chapter 13 of the CGCL will be
entitled to require Pacific Scientific to purchase their Pacific Scientific
Common Stock for cash at their fair market value if the Proposed Merger is
consummated. If the statutory procedures under the CGCL relating to dissenters'
rights are complied with, such rights could result in a judicial determination
of the fair market value of the Pacific Scientific Common Stock. The "fair
market value" would be determined as of the day before the first announcement of
the terms of the Proposed Merger, excluding any appreciation or depreciation in
consequence of the Proposed Merger. The value so determined could be more or
less than the Offer Price. Dissenters' rights will only be available in
connection with the Proposed Merger. You will be advised of the procedures to be
followed at the time when proxies are solicited with respect to the Proposed
Merger.
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SUBSEQUENT VOTES RELATING TO THE PROPOSED MERGER
At the Special Meeting, Pacific Scientific shareholders will be asked to
remove the entire Pacific Scientific Board, elect the Kollmorgen Nominees to
fill the vacancies created thereby and approve the Bylaw Repeal Proposal. The
Special Meeting will be held on February 4, 1998 or, if later, on the thirty-
sixth day following the date on which the requisite number of consents to call
the Special Meeting are delivered to Pacific Scientific. If a definitive merger
agreement relating to the Proposed Merger is approved by the Pacific Scientific
Board (either before or after the incumbent Pacific Scientific Board has been
replaced at the Special Meeting) and the Board of Directors of Purchaser
approves such merger, the approval of the shareholders of Pacific Scientific
would be sought through the solicitation of proxies for use at another special
meeting of shareholders of Pacific Scientific (including any adjournments or
postponements thereof, the "Pacific Scientific Second Special Meeting"). In
addition, pursuant to the rules promulgated by the NYSE, the shareholders of
Kollmorgen must approve the issuance of Kollmorgen Common Stock to be exchanged
for Pacific Scientific Common Stock in the Proposed Merger.
PACIFIC SCIENTIFIC SHAREHOLDER VOTES REQUIRED
Pursuant to the CGCL and the Pacific Scientific Bylaws, a quorum at a
meeting of the Pacific Scientific shareholders will consist of a majority of the
votes entitled to be cast by the holders of all Pacific Scientific Common Stock
that are outstanding and entitled to vote.
A majority of the shares of Pacific Scientific Common Stock outstanding and
entitled to vote must approve the removal of the entire Pacific Scientific
Board. The election of new directors requires the approval of a majority of the
votes entitled to be cast by the holders of all Pacific Scientific Common Stock,
voting together as a single class, that are present or represented at the
shareholder meeting, unless any shareholder announces his intention to cumulate
his votes, in which case cumulative voting rules will apply. Approval of the
Bylaw Repeal Proposal requires the affirmative vote of a majority of the shares
of Pacific Scientific Common Stock represented and voting at the Special
Meeting. Pursuant to the CGCL and the Pacific Scientific Bylaws, a majority of
the votes entitled to be cast by the holders of all Pacific Scientific Common
Stock, voting together as a single class that are present or represented at the
shareholder meeting and entitled to vote will be necessary to approve the merger
agreement relating to the Proposed Merger at the Pacific Scientific Second
Special Meeting.
KOLLMORGEN SHAREHOLDER VOTE REQUIRED
A quorum at a special meeting of the shareholders of Kollmorgen (including
any adjournments or postponements thereof, the "Kollmorgen Special Meeting")
will consist of a majority of the votes entitled to be cast by the holders of
Kollmorgen Common Stock that are outstanding and entitled to vote.
Pursuant to the rules promulgated by the NYSE, the issuance of Kollmorgen
Common Stock in the Proposed Merger will require approval by the majority of the
votes entitled to be cast by the holders of Kollmorgen Common Stock that are
present or represented at the Kollmorgen Special Meeting and entitled to vote.
Kollmorgen has established December 26, 1997 as the record date for the
Kollmorgen Special Meeting and currently expects the Kollmorgen Special Meeting
to be held on or about January 28, 1998.
It is expected that all of the shares of Kollmorgen Common Stock (excluding
shares subject to stock options) beneficially owned by directors and executive
officers of Kollmorgen and their affiliates at the close of business on the
Kollmorgen Special Meeting record date would be voted for the approval of the
issuance of the shares of Kollmorgen Common Stock in the Proposed Merger.
INFORMATION CONCERNING THE SPECIAL MEETINGS
Assuming the Special Meeting is called, Kollmorgen will be furnishing the
Pacific Scientific shareholders with a proxy statement relating to its
proposals, which will contain information about the Special Meeting (including
the date and time of the Special Meeting, the record date therefor, voting by
proxy and certain other matters). Assuming the Pacific Scientific Board and
Board of Directors of Kollmorgen approve a merger agreement with respect to the
Proposed Merger, information about the Pacific
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Scientific Second Special Meeting (including the date and time of the Pacific
Scientific Second Special Meeting, the record date therefor, voting by proxy and
certain other matters) would be set forth in the subsequent proxy statement
relating to the solicitation of votes with respect to the Proposed Merger.
ACCOUNTING TREATMENT
The acquisition will be accounted for as a purchase. Under this method of
accounting, assets and liabilities of Pacific Scientific will be adjusted to
their estimated fair values and combined with the recorded values of the assets
and liabilities of Kollmorgen. Applicable income tax effects of such adjustments
will be included as a component of Kollmorgen's deferred taxes. Kollmorgen has
not had access to Pacific Scientific's records in order to make a determination
of the fair value of its assets and liabilities. Allocation of the purchase
price will be reevaluated upon completion of the acquisition and could result in
significant changes to the valuations of assets (including goodwill) and
liabilities.
REGULATORY MATTERS
Based upon its examination of publicly available information with respect to
Pacific Scientific, neither Purchaser nor Kollmorgen is aware of any license or
other regulatory permit that appears to be material to the business of Pacific
Scientific and its subsidiaries, taken as a whole, which might be adversely
affected by the acquisition of Pacific Scientific Common Shares by Purchaser
pursuant to the Offer or, except as set forth below, of any approval or other
action by any domestic (federal or state) or foreign governmental,
administrative or regulatory authority or agency which would be required prior
to the acquisition of Pacific Scientific Common Shares by Purchaser pursuant to
the Offer or consummation of the Proposed Merger. If any such material approval
or other action is required, it is Purchaser's present intention to seek such
approval or action. Kollmorgen and Purchaser do not currently intend, however,
to delay the purchase of Pacific Scientific Common Shares tendered pursuant to
the Offer pending the outcome of any such action or the receipt of any such
approval (subject to Purchaser's right to decline to purchase Pacific Scientific
Common Shares if any of the conditions set forth in Section 14 of the Offer to
Purchase shall have occurred). There can be no assurance that any such approval
or other action, if needed, would be obtained without substantial conditions or
that adverse consequences might not result to the business of Pacific
Scientific, Purchaser or Kollmorgen or that certain parts of the businesses of
Pacific Scientific, Purchaser or Kollmorgen might not have to be disposed of or
held separate or other substantial conditions complied with in order to obtain
such approval or other action or in the event that such approval was not
obtained or such other action was not taken.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Pacific Scientific Common Shares by Purchaser pursuant to the Offer are
subject to such requirements.
Pursuant to the HSR Act, on December 15, 1997, Kollmorgen filed Premerger
Notification and Report Forms in connection with the purchase of Pacific
Scientific Common Shares pursuant to the Offer with the Antitrust Division and
the FTC. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Pacific Scientific Common Shares pursuant to the Offer may not be
consummated until the expiration of a 15 calendar day waiting period following
the applicable filings by Kollmorgen. Accordingly, the waiting period under the
HSR Act applicable to the purchase of Pacific Scientific Common Shares pursuant
to the Offer will expire at 11:59 p.m., New York City time, on December 30,
1997, unless such waiting period is earlier terminated by the FTC and the
Antitrust Division or extended by a request from the Antitrust Division or the
FTC for additional information or documentary material prior to the expiration
of the waiting period. Pursuant to the HSR Act, Kollmorgen has requested early
termination of the waiting period applicable to the Offer.
There can be no assurance, however, that the 15 calendar day HSR Act waiting
period applicable to the Offer will be terminated early. If the Antitrust
Division or the FTC were to request additional information or documentary
material from Kollmorgen with respect to the Offer, the waiting period with
respect to
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the Offer would expire at 11:59 p.m., New York City time, on the tenth calendar
day after the date of substantial compliance by Kollmorgen with such request.
Thereafter, the consummation of the Offer may only be prevented by a court order
that extends the waiting periods or by an injunction. Kollmorgen will not be
permitted to purchase Pacific Scientific Common Shares pursuant to the Offer or
engage in any other transaction that would result in Kollmorgen having
beneficial ownership of $15 million or more of the outstanding voting securities
of Pacific Scientific until expiration of the waiting period applicable to the
Offer. If the acquisition of Pacific Scientific Common Shares is delayed as a
result of a request by the Antitrust Division or the FTC for additional
information or documentary material pursuant to the HSR Act in connection with
the acquisition of Pacific Scientific Common Shares pursuant to the Offer, the
Offer may, but need not, be extended and, in any event, the purchase of and
payment for Pacific Scientific Common Shares will be deferred until 10 days
after the request is substantially complied with by Kollmorgen, unless the
extended period expires on or before the date when the initial 15 calendar day
period would otherwise have expired, or unless the waiting period is sooner
terminated by the FTC and the Antitrust Division. Only one extension of such
waiting period pursuant to a request for additional information is authorized by
the HSR Act and the rules promulgated thereunder, except by court order. Any
such extension of the waiting period will not give rise to any withdrawal rights
not otherwise provided for by applicable law. Pursuant to the HSR Condition, the
Offer is conditioned upon the waiting period applicable under the HSR Act to the
Offer having expired or been terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Pacific
Scientific Common Shares by Purchaser pursuant to the Offer. At any time before
or after the purchase of Pacific Scientific Common Shares pursuant to the Offer
by Purchaser, the Antitrust Division or the FTC could take such action under the
antitrust laws as they deem necessary or desirable in the public interest,
including seeking to enjoin the purchase of Pacific Scientific Common Shares
pursuant to the Offer or seeking the divestiture of Pacific Scientific Common
Shares purchased by Purchaser or the divestiture of substantial assets of
Kollmorgen, Pacific Scientific or their respective subsidiaries. Private parties
and state attorneys general may also bring legal action under federal or state
antitrust laws under certain circumstances. Based upon an examination of
information available to Kollmorgen relating to the businesses in which
Kollmorgen, Pacific Scientific and their respective subsidiaries are engaged,
Kollmorgen and Purchaser believe that the Offer will not violate the antitrust
laws. Nevertheless, 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, as to what
the result would be.
FOREIGN LAWS. According to publicly available information, Pacific
Scientific also owns property and conducts businesses in a number of other
jurisdictions. In connection with the acquisition of the Pacific Scientific
Common Shares pursuant to the Offer, the laws of certain foreign countries and
jurisdictions may require the filing of information with, or the obtaining of
the approval of, governmental authorities in such countries and jurisdictions.
In addition, the waiting period prior to consummation of the Offer associated
with such filings or approvals may extend beyond the scheduled Expiration Date.
The governments in such countries and jurisdictions might attempt to impose
additional conditions on the Kollmorgen operations conducted in such countries
and jurisdictions as a result of the acquisition of Pacific Scientific Common
Shares pursuant to the Offer or the Proposed Merger.
MARKET PRICES AND DIVIDENDS
The Kollmorgen Common Stock and the Pacific Scientific Common Stock are
listed and principally traded on the NYSE under the symbols "KOL" and "PSX",
respectively. The following table sets forth the range of high and low sales
prices for Kollmorgen Common Stock and for Pacific Scientific Common Stock on
the NYSE, as reported by the Dow Jones News Service, and the amount of cash
dividends paid per share of Pacific Scientific Common Stock, together with the
per share dividends paid by Pacific Scientific during the periods indicated.
58
<PAGE>
MARKET PRICE DATA
<TABLE>
<CAPTION>
KOLLMORGEN PACIFIC SCIENTIFIC
COMMON STOCK COMMON STOCK
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
(IN $) (IN $)
<CAPTION>
HIGH LOW DIV HIGH LOW
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1997
Fourth Quarter (through December 12)............................. 20 3/8 16 3/4 .02 17 3/8 13 1/2
Third Quarter.................................................... 19 5/16 14 3/4 .02 17 7/8 13 1/4
Second Quarter................................................... 15 15/16 11 5/8 .02 14 5/8 11 1/8
First Quarter.................................................... 15 1/8 10 7/8 .02 14 11 1/8
1996
Fourth Quarter................................................... 13 3/4 10 1/8 .02 12 3/4 10 1/4
Third Quarter.................................................... 14 3/4 10 1/2 .02 16 1/2 11
Second Quarter................................................... 15 5/8 11 3/8 .02 22 3/8 15 1/4
First Quarter.................................................... 13 1/8 9 5/8 .02 24 7/8 18 3/4
1995
Fourth Quarter................................................... 11 1/4 9 .02 27 3/8 19 1/2
Third Quarter.................................................... 12 8 .02 26 1/2 17 7/8
Second Quarter................................................... 8 7/8 6 1/8 .02 21 3/4 14 1/8
First Quarter.................................................... 6 7/8 5 5/8 .02 24 1/8 16 1/2
<CAPTION>
<S> <C>
DIV
---------
<S> <C>
1997
Fourth Quarter (through December 12)............................. .03
Third Quarter.................................................... .03
Second Quarter................................................... .03
First Quarter.................................................... .03
1996
Fourth Quarter................................................... .03
Third Quarter.................................................... .03
Second Quarter................................................... .03
First Quarter.................................................... .03
1995
Fourth Quarter................................................... .03
Third Quarter.................................................... .03
Second Quarter................................................... .03
First Quarter.................................................... .03
</TABLE>
On December 12, 1997, the last trading day before Kollmorgen publicly
announced its intention to make the Offer and the last trading day prior to the
date of this Consent Solicitation Statement/ Prospectus, the closing price of
Kollmorgen Common Stock was $16.88. Past price performance is not necessarily
indicative of likely future price performance. Holders of Pacific Scientific
Common Shares are urged to obtain current market quotations for shares of
Kollmorgen Common Stock.
On December 12, 1997, the last trading day before Kollmorgen announced its
intention to make the Offer and the last trading day prior to the date of this
Consent Solicitation Statement/Prospectus, the closing price of Pacific
Scientific Common Stock on the NYSE was $15.44. Past price performance is not
necessarily indicative of likely future price performance. Holders of Pacific
Scientific Common Shares are urged to obtain current market quotations for
shares of Pacific Scientific Common Stock.
Kollmorgen has historically paid dividends on Kollmorgen Common Stock and
intends to continue paying regular cash dividends on Kollmorgen Common Stock
prior to and after the consummation of the Proposed Combination. Holders of
shares of Pacific Scientific Common Stock are entitled to receive dividends from
funds legally available therefor when, as and if declared by the Pacific
Scientific Board. Kollmorgen has no information with respect to the Pacific
Scientific Board's present intentions with respect to its policy of paying
quarterly cash dividends.
According to the Pacific Scientific 1996 10-K, as of February 28, 1997,
there were 1,428 holders of record of shares of Pacific Scientific Common Stock.
As of December 12, 1997, there were approximately 1,700 holders of record of
Kollmorgen Common Stock.
LEGAL MATTERS
Assuming the Proposed Merger is consummated, the validity of the shares of
Kollmorgen Common Stock offered in connection therewith would be passed upon for
Kollmorgen by James A. Eder, Esq., Kollmorgen's General Counsel.
EXPERTS
The consolidated financial statements of Kollmorgen as of December 31, 1995
and 1996, and for each of the three years in the period ended December 31, 1996
incorporated by reference in this Consent Solicitation Statement/Prospectus,
have been incorporated herein in reliance on the report of
59
<PAGE>
Coopers & Lybrand L.L.P., independent accountants. Such consolidated financial
statements are incorporated herein by reference, in reliance upon such report
given upon the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Kollmorgen and Pacific Scientific are each subject to the informational
requirements of the Exchange Act, and, in accordance therewith, file reports,
proxy statements and other information with the Commission. The reports, proxy
statements and other information filed by Kollmorgen and Pacific Scientific with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and should be available at the Commission's
Regional Offices at Seven World Trade Center, Suite 1300, New York, New York
10048, and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a site on the World Wide Web
that contains reports, proxy and information statements and other information on
registrants, such as Kollmorgen and Pacific Scientific, that must file such
material with the Commission electronically. The Commission's internet address
on the World Wide Web is http:// www.sec.gov. The Kollmorgen Common Stock and
the Pacific Scientific Common Stock are listed on the NYSE and certain of
Kollmorgen's and Pacific Scientific's reports, proxy materials and other
information may be available for inspection at the offices of the NYSE at 20
Broad Street, New York, New York 10005.
This Consent Solicitation Statement/Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto,
certain parts of which were omitted as permitted by the rules and regulations of
the Commission. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. and at the Commission's public
reference facilities and internet address described above. Statements contained
in this Consent Solicitation Statement/ Prospectus or in any document
incorporated in this Consent Solicitation Statement/Prospectus by reference
pertaining to the content of any contract or other document referred to herein
or therein are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
Kollmorgen and Purchaser have filed the Tender Offer Statement with the
Commission. Pursuant to Rules 14d-9 and 14e-2 under the Exchange Act, Pacific
Scientific must file with the Commission a Solicitation/Recommendation Statement
on Schedule 14D-9 regarding its position concerning the Offer and certain other
information. Such Schedules and any amendments thereto should be available for
inspection and copying as set forth above (except that such Schedules and any
amendments thereto will not be available at the regional offices of the
Commission).
The information concerning Pacific Scientific contained in this Consent
Solicitation Statement/ Prospectus has been taken from or is based upon
documents and records on file with the Commission and other publicly available
information. Kollmorgen has no knowledge that would indicate that statements
relating to Pacific Scientific contained in this Consent Solicitation
Statement/Prospectus in reliance upon publicly available information are
inaccurate or incomplete. Kollmorgen, however, was not involved in the
preparation of such information and statements, and is not in a position to
verify, or make any representation with respect to the accuracy of, any such
information or statements.
Pursuant to Rule 409 promulgated under the Securities Act and Rule 12b-21
promulgated under the Exchange Act, Kollmorgen is requesting that Pacific
Scientific and its independent accountants, Deloitte & Touche LLP ("Deloitte &
Touche"), provide to Kollmorgen the information required for complete disclosure
concerning the business, operations, financial condition and management of
Pacific Scientific. Neither Pacific Scientific nor Deloitte & Touche has yet
provided any such information. Kollmorgen will provide any and all information
that it receives from Pacific Scientific or Deloitte & Touche prior to the
expiration of the Offer that Kollmorgen deems material, reliable and appropriate
in a subsequently
60
<PAGE>
prepared amendment or supplement hereto. In addition, pursuant to Rule 439
promulgated under the Securities Act, Kollmorgen is requesting that Deloitte &
Touche provide to Kollmorgen the consent required for the incorporation by
reference into this Consent Solicitation Statement/Prospectus of Deloitte &
Touche's report included in the Pacific Scientific 1996 Form 10-K with respect
to its audit of the consolidated financial statements of Pacific Scientific
contained therein. If Kollmorgen receives such consent, it will promptly file
such consent as an exhibit to the Registration Statement.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the management, executive compensation,
various benefit plans (including stock plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to Kollmorgen and Pacific Scientific is set forth in or
incorporated by reference in the Kollmorgen Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and in the Pacific Scientific 1996 Form
10-K, which are incorporated by reference in this Consent Solicitation
Statement/Prospectus. See "Incorporation of Certain Documents by Reference".
Copies of the reports of Kollmorgen are available upon written or oral request
to Kollmorgen at the address or telephone number set forth under "Incorporation
of Certain Documents by Reference".
SOLICITATION OF CONSENTS
The Solicitation is being made by Kollmorgen. Consents may be solicited by
mail, facsimile, telephone, telegraph, in person and by advertisements.
Solicitations may be made by certain directors, officers and employees of
Kollmorgen, none of whom will receive additional compensation for the
Solicitation.
Kollmorgen has retained Georgeson for solicitation and advisory services in
connection with the Solicitation and the Offer, for which Georgeson will receive
a fee of $100,000 plus a fee of $6.00 for each call made to a shareholder
together with reimbursement for its reasonable out-of-pocket expenses and will
be indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. Georgeson will solicit consents
from individuals, brokers, banks, bank nominees and other institutional holders.
Kollmorgen has requested banks, brokerage houses and other custodians, nominees
and fiduciaries to forward all materials related to the Solicitation to the
beneficial owners of the Pacific Scientific Common Shares they hold of record.
Kollmorgen will reimburse these record holders for their reasonable
out-of-pocket expenses in so doing. It is anticipated that Georgeson will employ
approximately 50 persons to solicit Pacific Scientific's shareholders for their
written consents. Georgeson is also acting as Information Agent in connection
with the Offer, for which Georgeson will be paid customary compensation in
addition to reimbursement of reasonable out-of-pocket expenses.
Salomon Brothers Inc, doing business as Salomon Smith Barney ("Salomon Smith
Barney"), is acting as Dealer Manager for the Offer and as financial advisor to
Kollmorgen in connection with the Solicitation and Proposed Combination. As
compensation for its services, Salomon Smith Barney will receive fees of (i)
$350,000 payable by Kollmorgen following an agreement to effect the Proposed
Combination or similar transaction or a public announcement regarding the
Proposed Combination or similar transaction and (ii) $2,700,000 payable by
Kollmorgen upon consummation of the Proposed Combination or similar transaction.
In addition, Salomon Smith Barney is entitled to reimbursement for the fees and
disbursements of Salomon Smith Barney's counsel and all of Salomon Smith
Barney's reasonable travel and other out-of-pocket expenses, as well as
indemnification from certain liabilities. Kollmorgen has also given Salomon
Smith Barney various rights of first refusal respecting certain related
financial transactions as well as the right to 10% of certain proceeds received
by Kollmorgen from the sale of Pacific Scientific stock in the event the
Proposed Combination is not consummated. In addition, Salomon Smith Barney and
its affiliate Salomon Brothers Holding Company Inc have entered into a
commitment letter regarding the financing of the Offer. See "Sources of Funds".
Smith Barney Inc. and Salomon Brothers Inc are affiliated but separately
registered broker/dealers, under the common control of Salomon Smith Barney
Holdings Inc. Salomon Brothers Inc and Salomon Smith Barney Holdings Inc. have
been licensed to use the Salomon Smith Barney service mark.
61
<PAGE>
SOURCES OF FUNDS
The total amount of funds required by Kollmorgen and Purchaser to consummate
the Offer and the Proposed Merger, to refinance certain indebtedness, to provide
a working capital facility for the combined company and to pay related fees and
expenses is estimated to be approximately $300 million. Purchaser will obtain
all of such funds from Kollmorgen. Kollmorgen and Purchaser intend to obtain the
funds from loans to be arranged by Salomon Smith Barney. Salomon Brothers
Holding Company Inc delivered to Kollmorgen a letter, dated December 9, 1997,
committing, subject to the conditions set forth therein, to provide (1) a fully
secured financing for Kollmorgen and Purchaser in the syndicated loan market of
up to $300 million to pay the tender price upon fulfillment of the conditions to
the Offer, to refinance certain indebtedness of Kollmorgen and to pay related
fees and expenses (the "Tender Financing") and (2) a fully secured financing in
the syndicated loan market of up to $300 million to refinance the Tender
Financing, to refinance (or economically defease) certain debt of Pacific
Scientific or Kollmorgen, to pay related fees and expenses and to provide funds
for ongoing general corporate purposes (together with the Tender Financing, the
"Kollmorgen Indebtedness"). Kollmorgen expects that the definitive documentation
with respect to Kollmorgen Indebtedness will contain conditions that are
customary for transactions of this type. Kollmorgen may subsequently refinance
the Kollmorgen Indebtedness in whole or in part.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows Kollmorgen to "incorporate by reference" information
into this Consent Solicitation Statement/Prospectus, which means that Kollmorgen
can disclose important information to you by referring you to another document
filed separately with the Commission. The information incorporated by reference
is deemed to be part of this Consent Solicitation Statement/Prospectus, except
for any information superseded by information in this Consent Solicitation
Statement/Prospectus. This Consent Solicitation Statement/Prospectus
incorporates by reference the documents set forth below that Kollmorgen and
Pacific Scientific have previously filed with the Commission. These documents
contain important information about Kollmorgen and Pacific Scientific and their
finances.
<TABLE>
<CAPTION>
KOLLMORGEN COMMISSION
FILINGS
(FILE NO. 1-5562) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1996
Annual Report on Form 10-K/A Fiscal Year ended December 31, 1996
Quarterly Report on Form 10-Q Quarterly period ended March 31, 1997
Quarterly Report on Form 10-Q Quarterly period ended June 30, 1997
Quarterly Report on Form 10-Q Quarterly period ended September 30, 1997
Proxy Statement Dated April 4, 1997
Current Reports on Form 8-K Dated December 15, 1997, August 18, 1997, January 31,
1997 and January 27, 1997
The Description of Kollmorgen Common Stock contained in Dated September 25, 1967
the Registration Statement on Form S-1 (No. 2-27327)
Registration Statement on Form 8-A Filed on March 14, 1978 (and any amendment or report
filed thereafter for the purpose of updating the
description of Kollmorgen Common Stock)
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
PACIFIC SCIENTIFIC
COMMISSION FILINGS
(FILE NO. 1-7744) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 27, 1996
Quarterly Report on Form 10-Q Quarterly period ended March 28, 1997
Quarterly Report on Form 10-Q Quarterly period ended June 27, 1997
Quarterly Report on Form 10-Q Quarterly period ended September 26, 1997
Proxy Statement Dated March 14, 1997
Current Report on Form 8-K Dated April 21, 1997
</TABLE>
All documents and reports filed by Kollmorgen or Pacific Scientific with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Consent Solicitation Statement/Prospectus and prior to
the date the Offer is terminated or the vote on the Proposed Merger is completed
shall be deemed to be incorporated by reference in this Consent Solicitation
Statement/ Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Consent Solicitation Statement/Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Consent Solicitation Statement/Prospectus.
THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF PACIFIC SCIENTIFIC COMMON SHARES,
TO WHOM THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS IS DELIVERED, ON WRITTEN
OR ORAL REQUEST, TO KOLLMORGEN CORPORATION, RESERVOIR PLACE, 1601 TRAPELO ROAD,
WALTHAM, MASSACHUSETTS 02154, ATTENTION: SECRETARY, OR BY TELEPHONE AT (781)
890-5655.
63
<PAGE>
LOCATION OF DEFINED TERMS
<TABLE>
<S> <C>
"Antitrust Division"................................................................... 31
"Article Fifth Condition".............................................................. 32
"Article Fifth"........................................................................ 5
"Average Kollmorgen Share Price"....................................................... 3
"Bylaw Repeal Proposal"................................................................ iii
"CGCL"................................................................................. 29
"Code"................................................................................. 44
"Commission"........................................................................... ii
"Consent Solicitation Statement/Prospectus"............................................ i
"Deemed Kollmorgen Common Stock Ownership"............................................. 47
"Deemed Redemption".................................................................... 47
"Deloitte & Touche".................................................................... 60
"Effective Time"....................................................................... ii
"Expiration Date"...................................................................... ii
"Financing Condition".................................................................. 32
"FTC".................................................................................. 31
"Georgeson"............................................................................ 30
"HSR Act".............................................................................. 6
"HSR Condition"........................................................................ 31
"IRS".................................................................................. 44
"Joint Venture"........................................................................ 12
"Kollmorgen"........................................................................... i
"Kollmorgen Board"..................................................................... 25
"Kollmorgen Bylaws".................................................................... 49
"Kollmorgen Charter"................................................................... 49
"Kollmorgen Common Stock".............................................................. i
"Kollmorgen Indebtedness".............................................................. 62
"Kollmorgen Nominees".................................................................. ii
"Kollmorgen Rights".................................................................... 55
"Kollmorgen Rights Plan"............................................................... 55
"Kollmorgen Special Meeting"........................................................... 56
"Letter of Transmittal"................................................................ ii
"Listed Corporation"................................................................... 51
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"Loan"................................................................................. 22
"Macbeth".............................................................................. 16
"Minimum Condition".................................................................... 31
"Minimum Number"....................................................................... ii
"NYBCL"................................................................................ 48
"NYSE"................................................................................. 4
"Offer"................................................................................ ii
"Offer Price".......................................................................... ii
"Offer to Purchase".................................................................... ii
"Pacific Scientific"................................................................... i
"Pacific Scientific 1996 Form 10-K".................................................... 8
"Pacific Scientific 1997 Proxy Statement".............................................. 5
"Pacific Scientific Board"............................................................. i
"Pacific Scientific Bylaws"............................................................ ii
"Pacific Scientific Charter"........................................................... 48
"Pacific Scientific Common Shares"..................................................... i
"Pacific Scientific Common Stock"...................................................... i
"Pacific Scientific Rights"............................................................ 54
"Pacific Scientific Rights Plan"....................................................... 54
"Pacific Scientific Second Special Meeting"............................................ 56
"Proposed Combination"................................................................. i
"Proposed Merger"...................................................................... ii
"Purchaser"............................................................................ ii
"Record Date".......................................................................... ii
"Registration Statement"............................................................... 33
"Restricted Shares".................................................................... 55
"Rights"............................................................................... i
"Rights Condition"..................................................................... 32
"Salomon Smith Barney"................................................................. 61
"Seidel"............................................................................... 12
"Servotronix".......................................................................... 12
"Solicitation"......................................................................... i
"Special Meeting"...................................................................... ii
"Tender Financing"..................................................................... 62
"Tender Offer Statement"............................................................... ii
</TABLE>
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND OFFICERS OF KOLLMORGEN
AND CERTAIN REPRESENTATIVES OF KOLLMORGEN WHO MAY ALSO ASSIST
IN THE SOLICITATION
DIRECTORS AND EXECUTIVE OFFICERS OF KOLLMORGEN
The following table shows, with respect to each executive officer or
director of Kollmorgen, such person's name and age, all positions and offices
with Kollmorgen currently held by such person and his or her principal
occupation and business experience during the last five years.
<TABLE>
<CAPTION>
PRESENT BUSINESS EXPERIENCE DURING
NAME AGE POSITION PAST FIVE YEARS
- -------------------------- --- -------------------------- ---------------------------------------------------
<S> <C> <C> <C>
Gideon Argov.............. 41 President and Chief Chairman of the Board since March 1996, President
Executive Officer, and Chief Executive Officer since November 1991;
Director Director since May 1991. From March 1988 to May
1991, President and Chief Executive Officer and
Director of High Voltage Engineering Company. Prior
to that date, for five years, a manager and senior
consultant with Bain & Company.
Robert J. Cobuzzi......... 56 Senior Vice President, Senior Vice President (since February 1993),
Treasurer and Chief Treasurer and Chief Financial Officer since July
Financial Officer, 1991. From April 1989 to July 1991, Vice President
Director and Treasurer of High Voltage Engineering Company.
Prior to April 1989, Vice President and Chief
Financial Officer of Ausimont N.V.
Daniel M. Desmond......... 48 Vice President President of Kollmorgen's Aerospace and Defense
Motion Technologies Group and Vice President since
November 1997. President of Kollmorgen's
Electro-Optical Division since 1989. Previously
Vice President of Program Management.
James A. Eder............. 52 Vice President, Secretary General Counsel since January 1992; Vice President
and General Counsel since January 1990; and Secretary since 1983.
Previously, Assistant Corporate Counsel from 1977
to 1992.
Keith D. Jones............ 39 Controller and Chief Corporate Controller since May 1996; Chief
Accounting Officer Accounting Officer since March 1996. Director of
Finance, Chief Accounting Officer and Corporate
Controller of Cambridge Biotech Corporation from
September 1991 to August 1995.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT BUSINESS EXPERIENCE DURING
NAME AGE POSITION PAST FIVE YEARS
- -------------------------- --- -------------------------- ---------------------------------------------------
<S> <C> <C> <C>
Mark E. Petty............. 42 Vice President President of Kollmorgen's Industrial and Commercial
Motion Technologies Group since November 1997; Vice
President since January 1, 1996. Prior to that, he
held several management positions with Kollmorgen
since March 1992. Previously, President of General
Eastern, Division of High Voltage Engineering
Company.
Jerald G. Fishman......... 51 Director President, Chief Executive Officer and a Director
of Analog Devices, Inc. Prior to November 1996,
President and Chief Operating Officer of Analog
Devices, Inc. for five years.
Herbert L. Henkel......... 49 Director President of Textron Industrial Products, Textron,
Inc. since December 1995. Prior to that date,
Industrial Group Vice President for two years and
President of Greenlee Textron.
James H. Kasschau......... 46 Director President of International Contract Furnishings,
Inc. since October 1995. Prior to that date,
President of Tinicum Incorporated and President of
Tinicum Enterprises, Inc.
J. Douglas Maxwell........ 56 Director Chairman of the Board and Chief Executive Officer
of Swissray Empower, Inc. and its predecessor since
1988.
Robert N. Parker.......... 69 Director Business consultant since 1992. Previously,
Executive Vice President of LTV Aerospace and
Defense Corporation.
Geoffrey S. Renhert....... 40 Director Managing Director and General Partner of Bain
Capital, Inc. Founder of Bain Capital, Inc. in
1984.
George P. Stephan......... 64 Director Managing Director of Stonington Group, Inc. since
1994. Previously Of Counsel to law firm of Murtha,
Cullina, Richter and Pinney. Chairman of the Board
of Kollmorgen from 1991 until March 26, 1996.
</TABLE>
I-2
<PAGE>
SCHEDULE II
PACIFIC SCIENTIFIC COMMON SHARES HELD BY KOLLMORGEN, ITS DIRECTORS
AND OFFICERS
<TABLE>
<CAPTION>
NAME SHARES OWNED
- ------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Kollmorgen Corporation........................................................................... 100
Torque Corporation............................................................................... 100
Gideon Argov..................................................................................... 10
</TABLE>
II-1
<PAGE>
SCHEDULE III
CHAPTER 13 OF THE GENERAL CORPORATION LAW OF THE STATE OF CALIFORNIA
1300 [SHORT FORM MERGER; PURCHASE OF SHARES AT FAIR MARKET VALUE;
"DISSENTING SHARES" AND DISSENTING SHAREHOLDER].--(a) If the approval of the
outstanding shares (Section 152) of a corporation is required for a
reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of
Section 1201, each shareholder of the corporation entitled to vote on the
transaction and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation in which the
shareholder holds shares to purchase for cash at their fair market value the
shares owned by the shareholder which are dissenting shares as defined in
subdivision (b). The fair market value shall be determined as of the day before
the first announcement of the terms of the proposed reorganization or short-form
merger, excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock split, or share
dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100
or (B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; PROVIDED, HOWEVER, that this
provision does not apply to any shares with respect to which there exists
any restriction on transfer imposed by the corporation or by any law or
regulation; and PROVIDED, FURTHER, that this provision does not apply to
any class of shares described in SUBPARAGRAPH (A) OR (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on that date for the termination of shareholders
entitled to vote on the reorganization and (A) were not voted in favor of
the reorganization or, (B) if described in SUBPARAGRAPH (A) OR (B) of
paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held of record on the
effective date of a short-form merger; PROVIDED, HOWEVER, that
SUBPARAGRAPH (A) rather than SUBPARAGRAPH (B) of this paragraph applies
in any case where the approval required by Section 1201 is sought by
written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record. (Last amended by Ch.
543, L. '93, eff. 1-1-94.)
1301 [DISSENTER'S RIGHTS; DEMAND ON CORPORATION FOR PURCHASE OF SHARES].--
(a) If, in the case of a reorganization, any shareholders of a corporation have
a right under Section 1300, subject to compliance with paragraphs (3) and (4) of
subdivision (b) thereof, to require the corporation to purchase their shares for
cash, such corporation shall mail to each such shareholder a notice of the
approval of the reorganization by its outstanding shares (Section 152) within 10
days after the date of such approval, accompanied by a copy of Sections 1300,
1302, 1303, 1304 and this section, a statement of the price determined by the
corporation to represent the fair market value of the dissenting shares,
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and a brief description of the procedure to be followed if the shareholder
desires to exercise the shareholder's right under such sections. The statement
of price constitutes an offer by the corporation to purchase at the price stated
any dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation to purchase such shares and payment to the shareholder in cash of
their fair market value. The demand is not effective for any purpose unless it
is received by the corporation or any transfer agent thereof (1) in the case of
shares described in clause (i) or (ii) of paragraph (1) of subdivision (b) of
Section 1300 (without regard to the provisos in that paragraph), not later than
the date of the shareholders' meeting to vote upon the reorganization, or (2) in
any other case within 30 days after the date on which the notice of the approval
by the outstanding shares pursuant to subdivision (a) or the notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price. (Last
amended by Ch. 1155, L. '80, eff. 1-1-81.)
1302 [DISSENTING SHARES, STAMPING OR ENDORSING].--Within 30 days after the
date on which notice of the approval by the outstanding shares or the notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the
shareholder shall submit to the corporation at its principal office or at the
office of any transfer agent thereof, (a) if the shares are certificated
securities, the shareholder's certificates representing any shares which the
shareholder demands that the corporation purchase, to be stamped or endorsed
with a statement that the shares are dissenting shares or to be exchanged for
certificates of appropriate denomination so stamped or endorsed or (b) if the
shares are uncertificated securities, written notice of the number of shares
which the shareholder demands that the corporation purchase. Upon subsequent
transfers of the dissenting shares on the books of the corporation the new
certificates, initial transaction statement, and other written statements issued
therefor shall bear a like statement, together with the name of the original
dissenting holder of the shares. (Last amended by Ch. 766, L. '86, eff. 1-1-87).
1303 [DISSENTING SHAREHOLDER ENTITLED TO AGREED PRICE WITH INTEREST; TIME OF
PAYMENT].--(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement. (Last amended by Ch. 766, L. '86, eff.
1-1-87).
1304 [DISSENTERS ACTIONS; JOINDER; CONSOLIDATION; APPOINTMENT OF
APPRAISERS].--(a) If the corporation denies that the shares are dissenting
shares, or the corporation and the shareholder fail to agree upon the fair
market values of the shares, then the shareholder demanding purchase of such
shares as dissenting shares or any interested corporation, within six months
after the date on which notice of the approval by the outstanding shares
(Section 152) or notice pursuant to
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subdivision (i) of Section 1110 was mailed to the shareholder, but not
thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305 [APPRAISERS DUTY AND REPORT; COURT JUDGEMENT; PAYMENT; APPEAL; COSTS OF
ACTION].--(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301). (Last amended by Ch. 766 L. '86, eff. 1-1-87.)
1306 [DISSENTING SHAREHOLDERS: EFFECT OF PREVENTION OF PAYMENT OF FAIR
MARKET VALUE].--To the extent that the provisions of Chapter 5 prevent the
payment to any holders to dissenting shares of their fair market value, they
shall become creditors of the corporation for the amount thereof together with
interest at the legal rate on judgments until the date of payment, but
subordinate to all other creditors in any liquidation proceeding, such debt to
be payable when permissible under the provisions of Chapter 5.
1307 [DISSENTING SHARES, DISPOSITION OF DIVIDENDS].--Cash dividends declared
and paid by the corporation upon the dissenting shares after the date of
approval of the reorganization by the outstanding shares (Section 152) and prior
to payment for the shares by the corporation shall be credited against the total
amount to be paid by the corporation therefor.
1308 [DISSENTING SHARES, RIGHTS AND PRIVILEGES].--Except as expressly
limited in this chapter, holders of dissenting shares continue to have all the
rights and privileges incident to their
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shares, until the fair market value of their shares is agreed upon or
determined. A dissenting shareholder may not withdraw a demand for payment
unless the corporation consents thereto.
1309 [DISSENTING SHARES, LOSS OF STATUS].--Dissenting shares lose their
status as dissenting shares and the holders thereof cease to be dissenting
shareholders and cease to be entitled to require the corporation to purchase
their shares upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this
chapter all necessary expenses incurred in such proceedings and
reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending
action as provided in Section 1304, within six months after the date on
which notice of the approval by the outstanding shares or notice pursuant
to subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310 [SUSPENSION OF CERTAIN PROCEEDINGS WHILE LITIGATION IS PENDING].--If
litigation is instituted to test the sufficiency or regularity of the votes of
the shareholders in authorizing a reorganization, any proceedings under Sections
1304 and 1305 shall be suspended until final determination of such litigation.
1311 [CHAPTER INAPPLICABLE TO CERTAIN CLASSES OF SHARES].--This chapter,
EXCEPT SECTION 1312, does not apply to classes of shares whose terms and
provisions specifically set forth the amount to be paid in respect to such
shares in the event of a reorganization or merger. (Last amended by Ch. 919, L.
'88, eff. 1-1-89.)
1312 [VALIDITY OF REORGANIZATION OR SHORT FORM MERGER, ATTACK; SHAREHOLDERS'
RIGHTS; BURDEN OF PROOF].--(a) No shareholder of a corporation who has a right
under this chapter to demand payment of cash for the shares held by the
shareholder shall have any right at law or in equity to attach the validity of
the reorganization or short-form merger, or to have the reorganization or
short-form merger set aside or rescinded, except in an action to test whether
the number of shares required to authorize or approve the reorganization have
been legally voted in favor thereof; but any holder of shares of a class whose
terms and provisions specifically set forth the amount to be paid in respect to
them in the event of a reorganization or short-form merger is entitled to
payment in accordance with those terms and provisions or, IF THE PRINCIPAL TERMS
OF THE REORGANIZATION ARE APPROVED PURSUANT TO SUBDIVISION (B) OF SECTION 1202,
IS ENTITLED TO PAYMENT IN ACCORDANCE WITH THE TERMS AND PROVISIONS OF THE
APPROVED REORGANIZATION.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attach the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or
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rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days prior notice to the corporation and upon a determination by
the court that clearly no other remedy will adequately protect the complaining
shareholder or the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attach the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled. (Last amended by Ch. 919, L.
'88, eff. 1-1-89.)
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IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ADDITIONAL INFORMATION CONCERNING
THIS CONSENT SOLICITATION STATEMENT/PROSPECTUS, PLEASE CONTACT GEORGESON &
COMPANY INC. AT THE ADDRESS SET FORTH BELOW.
[LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT
(212) 440-9800
OR
CALL TOLL-FREE (800) 223-2064
FAX (212) 440-9009
