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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
PACIFIC SCIENTIFIC COMPANY
------------------------------------------------
(Name of Subject Company)
KOLLMORGEN CORPORATION
TORQUE CORPORATION
------------------------------------
(Bidders)
Common Stock, $1.00 par value per share
(Including the Associated Preferred Stock Purchase Rights)
------------------------------------------------------------
(Title of Class of Securities)
694806 (Common Stock)
------------------------------------
(CUSIP Number of Class of Securities)
James A. Eder, Esq.
KOLLMORGEN CORPORATION
1601 Trapelo Road
Waltham, Massachusetts 02154
(781) 890-5655
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(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications on Behalf of Bidders)
Copy to:
Creighton O'M. Condon, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
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CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
$130,118,441 $26,023.69
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/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ___$36,973.84____________________________
Form or Registration No.: __Schedule 14A_________________________
Filing Party: __Kollmorgen Corporation___________________________
Date Filed: ___November 26, 1997
- ------------------------
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 6,347,241 shares of Common Stock, $1.00 par value, of
Pacific Scientific Company, including the associated Preferred Stock
Purchase Rights, at $20.50 net per share in cash. Note: The Transaction
Value is calculated by multiplying $20.50, the per share tender offer price,
by 6,347,241, 50% of the sum of (i) the number of shares of Common Stock
outstanding and (ii) the weighted average number of shares of Common Stock
subject to options outstanding.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate value of cash offered by Torque Corporation for
such number of Shares. However, pursuant to Rule 0-11 (a)(2), the filing fee
has been reduced by $8,710.78 (which represents the portion of the
$36,973.84 paid on November 25, 1997 in connection with the filing of
Kollmorgen's preliminary consent solicitation materials not offset pursuant
to Rule 457(b) in connection with Kollmorgen's registration statement on
Form S-4, filed on December 15, 1997). Accordingly, the balance of the
filing fee to be paid in connection herewith is $17,312.91.
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ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Pacific Scientific Company, a
California corporation (the "Company"), which has its principal executive
offices at 620 Newport Center Drive, Suite 700, Newport Beach, California 92660.
(b) This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates
to the offer by Torque Corporation, a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Kollmorgen Corporation, a New York corporation
("Parent"), to purchase 6,347,241 shares of common stock, par value $1.00 per
share (the "Common Stock"), of the Company, including the associated preferred
stock purchase rights (the "Rights" and, together with the Common Stock, the
"Shares") issued pursuant to the Shareholder Protection Agreement, dated as of
November 7, 1988, as amended (the "Rights Agreement"), between the Company and
Manufacturers Hanover Trust Company, as successor Rights Agent (the "Rights
Agent"), or such greater or lesser number of Shares that, together with the
Shares owned by Parent and Purchaser, would constitute a majority of the
outstanding Shares on a fully diluted basis (such number of Shares being the
"Minimum Number"), at a price of $20.50 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase dated December 15, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer"), copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively. The information set forth in the
Introduction and Section 1 ("Terms of the Offer; Proration; Expiration Date") of
the Offer to Purchase is incorporated herein by reference.
According to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 26, 1997 (the "Company Form 10-Q"), as of September 26,
1997 there were 12,381,595 shares of Common Stock issued and outstanding.
According to the Company Form 10-Q, as of September 26, 1997, the weighted
average number of shares of Common Stock subject to issuance under the Company's
1995 Stock Option Plan (the "Stock Option Plan Common Stock") during the third
fiscal quarter of 1997 was 313,285. Parent currently owns 100 Shares, and
Purchaser owns 100 Shares, which Parent and Purchaser recently acquired in open
market transactions. Based on the foregoing and assuming that (i) no shares of
Common Stock are issued or acquired by the Company after September 26, 1997
(other than as described in clause (iii) below), (ii) no options are granted or
expired after September 26, 1997 and (iii) all 313,285 Shares of the Stock
Option Plan Common Stock are issued at or prior to the consummation of the
Offer, there would be 12,694,880 Shares outstanding immediately following the
consummation of the Offer and the Minimum Number of Shares would be 6,347,241
Shares.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser and Parent. The
information concerning the name, state or other place of organization, principal
business and address of the principal office of each of Purchaser and Parent,
and the information concerning the name, business address, present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such employment or occupation is
conducted, material occupations, positions, offices or employments during the
last five years and citizenship of each of the executive officers and directors
of Purchaser and Parent are set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser and Parent") and Schedule I of the Offer to
Purchase and are incorporated herein by reference.
(e) and (f) During the last five years, none of Purchaser or Parent, and, to
the best knowledge of Purchaser and Parent, none of the persons listed in
Schedule I of the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
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ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Parent") and Section 10 ("Background of the Offer; Contacts with
the Company") of the Offer to Purchase is incorporated herein by reference.
(b) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information Concerning
Purchaser and Parent"), Section 10 ("Background of the Offer; Contacts with the
Company") and Section 11 ("Purpose of the Offer; Plans for the Company After the
Offer and the Proposed Merger") of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Financing of the Offer and
the Proposed Merger") of the Offer to Purchase is incorporated herein by
reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose
of the Offer; Plans for the Company After the Offer and the Proposed Merger") of
the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer on
the Market for Shares, Exchange Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 8
("Certain Information Concerning Purchaser and Parent") and in Schedule II
("Schedule of Transactions in Shares During the Past 60 Days") of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser and Parent"), Section 10 ("Background of the
Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer; Plans
for the Company After the Offer and the Proposed Merger") of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 18 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
2
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(b) and (c) The information set forth in the Introduction and Section 15
("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is
incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the Introduction, Section 10 ("Background
of the Offer; Contacts with the Company") and Section 15 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Form of Offer to Purchase dated December 15, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Salomon Smith Barney to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on December 15,
1997.
(a)(8) Press Release issued by Parent on December 15, 1997.
(a)(9) Definitive Consent Solicitation Statement/Prospectus filed with the Commission on
December 15, 1997.
(a)(10) Form of Consent.
(a)(11) Parent Letter to Company Shareholders dated December 15, 1997.
(a)(12) Form of Press Release dated December 15, 1997, relating to the record date for
action by consent of Pacific Scientific Shareholders.
(b)(1) Commitment Letter among Salomon Brothers Inc, Salomon Brothers Holding Company
Inc and Parent, dated December 9, 1997.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) None.
(g)(1) Complaint seeking Declaratory and Injunctive Relief filed in the United States
District Court for the Central District of California on December 15, 1997.
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3
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EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
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(a)(1) Form of Offer to Purchase dated December 15, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Salomon Smith Barney to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to
Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on December 15, 1997.
(a)(8) Press Release issued by Parent on December 15, 1997.
(a)(9) Definitive Consent Solicitation Statement/Prospectus filed with the Commission on December 15,
1997.
(a)(10) Form of Consent.
(a)(11) Parent Letter to Company Shareholders dated December 15, 1997.
(a)(12) Form of Press Release dated December 15, 1997, relating to the record date for action by consent of
Pacific Scientific Shareholders.
(b)(1) Commitment Letter among Salomon Brothers Inc, Salomon Brothers Holding Company Inc and Parent,
dated December 9, 1997.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) None.
(g)(1) Complaint seeking Declaratory and Injunctive Relief filed in the United States District Court for
the Central District of California on December 15, 1997.
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4
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: December 15, 1997
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TORQUE CORPORATION
By: -----------------------------------------
Name:
Title:
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5
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: December 15, 1997 KOLLMORGEN CORPORATION
By:
-----------------------------------------
Name:
Title:
6
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OFFER TO PURCHASE FOR CASH
6,347,241 Shares of Common Stock
(including the associated
Preferred Stock Purchase Rights)
of
Pacific Scientific Company
at
$20.50 Net Per Share
by
Torque Corporation
a wholly owned subsidiary of
Kollmorgen Corporation
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY
TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER 6,347,241 SHARES
OF COMMON STOCK, PAR VALUE $1.00 PER SHARE (THE "COMMON STOCK"), OF PACIFIC
SCIENTIFIC COMPANY (THE "COMPANY"), INCLUDING THE ASSOCIATED PREFERRED STOCK
PURCHASE RIGHTS ISSUED PURSUANT TO THE SHAREHOLDER PROTECTION AGREEMENT, DATED
AS OF NOVEMBER 7, 1988, AS AMENDED, BETWEEN THE COMPANY AND MANUFACTURERS
HANOVER TRUST COMPANY, AS SUCCESSOR RIGHTS AGENT (THE "RIGHTS" AND, TOGETHER
WITH THE COMMON STOCK, THE "SHARES"), OR SUCH GREATER OR LESSER NUMBER OF SHARES
THAT, TOGETHER WITH THE SHARES OWNED BY KOLLMORGEN CORPORATION ("PARENT") AND
TORQUE CORPORATION, A WHOLLY OWNED SUBSIDIARY OF PARENT ("PURCHASER"), WOULD
CONSTITUTE A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, (2)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, (3) PARENT AND
PURCHASER HAVING OBTAINED, PRIOR TO THE EXPIRATION OF THE OFFER, ON TERMS
SATISFACTORY TO PARENT IN ITS SOLE DISCRETION, SUFFICIENT FINANCING TO ENABLE
CONSUMMATION OF THE OFFER AND THE PROPOSED MERGER DESCRIBED HEREIN (THE
"PROPOSED MERGER"), (4) 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, (5) PURCHASER BEING SATISFIED, IN ITS SOLE
DISCRETION, THAT THE OFFER AND THE PROPOSED MERGER HAVE BEEN APPROVED FOR
PURPOSES OF ARTICLE FIFTH OF THE COMPANY'S ARTICLES OF INCORPORATION (IF
NECESSARY) OR ARTICLE FIFTH OF THE COMPANY'S ARTICLES OF INCORPORATION HAS BEEN
INVALIDATED OR IS OTHERWISE SATISFIED WITH RESPECT TO THE OFFER AND THE PROPOSED
MERGER AND (6) THE APPROVAL BY PARENT'S SHAREHOLDERS OF THE ISSUANCE OF COMMON
STOCK OF PARENT, PAR VALUE $2.50 PER SHARE ("PARENT COMMON STOCK"), IN THE
PROPOSED MERGER. THE OFFER IS ALSO SUBJECT TO THE OTHER TERMS AND CONDITIONS
WHICH ARE CONTAINED IN THIS OFFER TO PURCHASE. SEE "SECTION 14. CERTAIN
CONDITIONS OF THE OFFER".
(COVER CONTINUED ON NEXT PAGE)
------------------------------
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
December 15, 1997
<PAGE>
IMPORTANT
Parent and Purchaser intend to continue to seek to negotiate with the
Company with respect to the acquisition of the Company by Parent or Purchaser.
Purchaser reserves the right to amend the Offer (including amending the number
of Shares to be purchased, the purchase prices therefor and the proposed merger
consideration) at any time, including upon entering into a merger agreement with
the Company, or to negotiate a merger agreement with the Company not involving a
tender offer pursuant to which Purchaser would terminate the Offer and the
Shares would, upon consummation of such merger, be converted into cash and
Parent Common Stock in such amounts as are negotiated by Parent and the Company;
provided, however, that Parent has no intention of reducing the consideration
paid to the Company's shareholders below that being offered in the Offer and the
Proposed Merger.
------------------------
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it, together with the certificate(s) evidencing
tendered Shares and, if separate, the certificates representing the associated
Rights, and any other required documents, to the Depositary (as defined herein)
or tender such Shares pursuant to the procedures for book-entry transfer set
forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" or
(2) request such shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such shareholder. Any shareholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such shareholder desires to tender such
Shares. Unless and until Purchaser declares that the Rights Condition (as
defined herein) is satisfied, shareholders will be required to tender one Right
for each Share tendered in order to effect a valid tender of such Share.
A shareholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares".
Questions or requests for assistance may be directed to the Information
Agent (as defined herein) or to the Dealer Manager at their respective addresses
and telephone numbers set forth on the back cover of this Offer to Purchase.
Additional copies of this Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may also be obtained from the Information Agent or
from brokers, dealers, commercial banks or trust companies.
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION............................................................................................... 1
1. Terms of the Offer; Proration; Expiration Date......................................................... 5
2. Acceptance for Payment and Payment for Shares.......................................................... 7
3. Procedures for Accepting the Offer and Tendering Shares................................................ 8
4. Withdrawal Rights...................................................................................... 10
5. Certain Federal Income Tax Consequences................................................................ 11
6. Price Range of Shares; Dividends....................................................................... 15
7. Certain Information Concerning the Company............................................................. 16
8. Certain Information Concerning Purchaser and Parent.................................................... 18
9. Financing of the Offer and the Proposed Merger......................................................... 20
10. Background of the Offer; Contacts with the Company..................................................... 22
11. Purpose of the Offer; Plans for the Company After the Offer and the Proposed Merger.................... 24
12. Dividends and Distributions............................................................................ 27
13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration....... 27
14. Certain Conditions of the Offer........................................................................ 28
15. Certain Legal Matters and Regulatory Approvals......................................................... 32
16. Shareholder Rights Plan................................................................................ 34
17. Article Fifth of the Company's Articles of Incorporation............................................... 36
18. Fees and Expenses...................................................................................... 38
19. Miscellaneous.......................................................................................... 39
Schedule I. Directors and Executive Officers of Parent and Purchaser....................................... I-1
Schedule II. Schedule of Transactions in Shares During the Past 60 Days.................................... II-1
Schedule III. Chapter 13 of the General Corporation Law of the State of California......................... III-1
</TABLE>
i
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To the Holders of Common Stock (including the
associated Preferred Stock Purchase Rights) of
Pacific Scientific Company:
INTRODUCTION
Torque Corporation, a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Kollmorgen Corporation, a New York corporation ("Parent"), hereby
offers to purchase 6,347,241 of shares of common stock, par value $1.00 per
share (the "Common Stock"), of Pacific Scientific Company, a California
corporation (the "Company"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares") issued
pursuant to the Shareholder Protection Agreement, dated as of November 7, 1988,
as amended (the "Rights Agreement"), between the Company and Manufacturers
Hanover Trust Company, as successor Rights Agent (the "Rights Agent"), or such
greater or lesser number of Shares that, together with the Shares owned by
Parent and Purchaser, would constitute a majority of the outstanding Shares on a
fully diluted basis (such number of Shares being the "Minimum Number") at a
price of $20.50 per Share, net to the seller in cash (the "Offer Price"), upon
the terms and subject to the conditions set forth in this Offer to Purchase
(this "Offer to Purchase") and in the related Letter of Transmittal (the "Letter
of Transmittal", as amended from time to time, and the Offer to Purchase, as it
may be amended from time to time, which together constitute the "Offer"). Unless
the context otherwise requires, all references to the Rights shall include the
benefits that may inure to holders of the Rights pursuant to the Rights
Agreement.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
Salomon Brothers Inc, doing business as Salomon Smith Barney ("Salomon Smith
Barney"), which is acting as the Dealer Manager for the Offer (in such capacity,
the "Dealer Manager"), Harris Trust Company of New York (the "Depositary") and
Georgeson & Company Inc. (the "Information Agent") incurred in connection with
the Offer. See "Section 18. Fees and Expenses".
The purpose of the Offer is to acquire control of, and ultimately the entire
equity interest in, the Company. Parent is seeking to negotiate with the Company
a definitive merger agreement pursuant to which the Company would, as soon as
practicable following consummation of the Offer, consummate a merger or similar
business combination with Parent, Purchaser or another direct or indirect
subsidiary of Parent (the "Proposed Merger"). At the effective time of the
Proposed Merger (the "Effective Time"), each Share then outstanding (other than
Shares held by the Company or any wholly owned subsidiary of the Company and
Shares owned by Parent, Purchaser or any other direct or indirect wholly owned
subsidiary of Parent and Shares held by shareholders of the Company who shall
have demanded and perfected, and who shall not have withdrawn or otherwise lost,
dissenters' rights, if any, under the California General Corporation Law (the
"CGCL")) would be converted into the right to receive $20.50 of common stock,
par value $2.50 per share, of Parent ("Parent Common Stock"). The exact number
of shares of Parent Common Stock into which each Share will be converted in the
Proposed Merger will be determined by dividing $20.50 by the average, over the
20 consecutive trading days ending five days prior to the meeting of the
shareholders of the Company called for the purpose of voting on the Proposed
Merger, of the daily average of the high and low per share sales prices of
Parent Common Stock (weighted by sales volume). 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 Parent Common Stock or 1.104 shares of
Parent Common Stock, respectively, per Share. In such event, the Company's
shareholders could receive Parent Common Stock in the Proposed Merger with a
value greater or lesser than $20.50. See "Section 11. Purpose of the Offer;
Plans for the Company After the Offer and the Proposed Merger".
THIS OFFER TO PURCHASE IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF
OFFERS TO BUY ANY SECURITIES THAT MAY BE ISSUED IN ANY MERGER OR SIMILAR
BUSINESS COMBINATION INVOLVING PARENT, PURCHASER OR THE COMPANY. THE ISSUANCE OF
SUCH SECURITIES WOULD BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES
<PAGE>
ACT"), AND SUCH SECURITIES WOULD BE OFFERED ONLY BY MEANS OF A PROSPECTUS
COMPLYING WITH THE REQUIREMENTS OF THE SECURITIES ACT. ON DECEMBER 15, 1997,
PARENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") A
REGISTRATION STATEMENT ON FORM S-4 WITH RESPECT TO THE SHARES OF PARENT COMMON
STOCK TO BE ISSUED IN THE PROPOSED MERGER.
To date, the Company has refused to enter into negotiations with Parent.
Accordingly, Parent has commenced a solicitation (the "Solicitation") to urge
the Company's shareholders to take action by written consent to call a special
meeting of the Company's 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 the Company, in order to, among other things, remove the entire Board of
Directors of the Company (the "Company Board") and fill the newly created
vacancies on the Company Board by electing six persons nominated by Parent (the
"Parent Nominees"). Parent expects that, if elected, and subject to their
fiduciary duties under applicable law, the Parent Nominees would cause the
Company Board to (i) amend the Rights Agreement or redeem the Rights, or
otherwise act to ensure that the Rights Condition (as defined below) is
satisfied, (ii) approve the Offer and the Proposed Merger for purposes of
Article Fifth of the Company's Articles of Incorporation ("Article Fifth") or
otherwise act to ensure that the Article Fifth Condition (as defined below) is
satisfied and (iii) take any other actions necessary to permit the Offer and the
Proposed Merger to be consummated. The Solicitation will be made pursuant to
separate consent solicitation materials complying with the requirements of
Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder. On December 15,
1997, Parent filed definitive consent solicitation materials in connection with
the Solicitation with the Commission, which are being mailed to shareholders of
the Company together with this Offer to Purchase.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF, OR ACTION BY WRITTEN CONSENT BY, THE COMPANY'S SHAREHOLDERS.
THE SOLICITATION WILL BE MADE ONLY PURSUANT TO SEPARATE CONSENT SOLICITATION
MATERIALS COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE
EXCHANGE ACT.
On December 15, 1997, Parent commenced litigation ( the "Litigation")
against the Company and the Company 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 Company
Board's fiduciary duties to the Company's shareholders under California law,
(ii) invalidating the Rights or compelling the Company Board to redeem the
Rights or render the Rights inapplicable to the Offer and the Proposed Merger,
(iii) compelling the Company Board to approve the Offer and the Proposed Merger
for purposes of Article Fifth, and (iv) enjoining the Company Board from taking
any actions to interfere with the Offer, the Solicitation or the Proposed
Merger.
BY TENDERING SHARES IN THE OFFER, PARENT BELIEVES THAT THE COMPANY'S
SHAREHOLDERS EFFECTIVELY WILL EXPRESS TO THE COMPANY BOARD THAT THEY WISH TO BE
ABLE TO ACCEPT THE OFFER AND TO APPROVE THE PROPOSED MERGER OR A SIMILAR
TRANSACTION WITH PARENT AND ITS AFFILIATES.
Purchaser reserves the right to amend the Offer (including amending the
number of Shares to be purchased, the purchase prices therefor and the proposed
merger consideration) at any time, including upon entering into a merger
agreement with the Company, or to negotiate a merger agreement with the Company
in connection with a merger not involving a tender offer pursuant to which
Purchaser would terminate the Offer and the Shares would, upon consummation of
such merger, be converted into cash and Parent Common Stock in such amounts as
are negotiated by Parent and the Company, provided,
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however, that Parent has no intention of reducing the consideration paid to the
Company's shareholders being offered in the Offer and the Proposed Merger.
The timing of consummation of the Offer and the Proposed Merger will depend
on a variety of factors and legal requirements, the actions of the Company Board
and whether the conditions to the Offer and the Proposed Merger are satisfied or
waived. 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 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 Shares. See "Section 1. Terms of the Offer; Proration;
Expiration Date" and "Section 14. Certain Conditions of the Offer".
According to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 26, 1997 (the "Company Form 10-Q"), as of September 26,
1997 there were 12,381,595 shares of Common Stock issued and outstanding.
According to the Company Form 10-Q, as of September 26, 1997, the weighted
average number of shares of Common Stock subject to issuance under the Company's
1995 Stock Option Plan (the "Stock Option Plan Common Stock") during the third
fiscal quarter of 1997 was 313,285. Parent currently owns 100 Shares, and
Purchaser owns 100 Shares, which Parent and Purchaser recently acquired in open
market transactions. See "Schedule II. Schedule of Transactions in Shares During
the Past 60 Days". Based on the foregoing and assuming that (i) no shares of
Common Stock are issued or acquired by the Company after September 26, 1997
(other than as described in clause (iii) below), (ii) no options are granted or
expired after September 26, 1997 and (iii) all 313,285 Shares of the Stock
Option Plan Common Stock is issued at or prior to the consummation of the Offer,
there would be 12,694,880 Shares outstanding immediately following the
consummation of the Offer and the Minimum Number of Shares would be 6,347,241
Shares.
HSR CONDITION. Consummation of the Offer is conditioned upon the expiration
or termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") (the "HSR
Condition"). On December 15, 1997, Parent 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, Parent 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 period. See "Section 15. Certain
Legal Matters and Regulatory Approvals".
FINANCING CONDITION. Consummation of the Offer is conditioned upon Parent
and Purchaser obtaining, prior to the expiration of the Offer, on terms
satisfactory to Parent in its sole discretion, sufficient financing to enable
consummation of the Offer and the Proposed Merger (the "Financing Condition").
Parent, Salomon Smith Barney and Salomon Brothers Holding Company Inc ("SBHCI"),
an affiliate of Salomon Smith Barney, have entered into a commitment letter
dated December 9, 1997 pursuant to which SBHCI has committed, subject to certain
conditions set forth therein (including, without limitation, that all conditions
of the Offer are satisfied and that either (i) Parent has entered into a
definitive merger agreement with the Company or (ii) that the Parent Nominees
shall, or that SBHCI shall otherwise be satisfied that the Parent Nominees will,
upon consummation of the Offer, constitute a majority of the Company Board), to
provide such financing, consisting of a fully secured financing in the
syndicated loan market in the principal amount of $300 million. See "Section 9.
Financing of the Offer
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and the Proposed Merger" for a description of the proposed financing of the
Offer and the Proposed Merger.
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"). See "Section 16. Shareholder Rights Plan".
Parent expects that, if elected, and subject to their fiduciary duties under
applicable law, the Parent Nominees would cause the Company Board to amend the
Rights Agreement or redeem the Rights, or otherwise act to ensure that the
Rights Condition is satisfied.
In addition, on December 15, 1997, Parent commenced the Litigation 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 would
constitute a breach of the Company Board's fiduciary duties to the Company's
shareholders under California law and (ii) invalidating the Rights or compelling
the Company Board to redeem the Rights or render the Rights inapplicable to the
Offer and the Proposed Merger.
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 for purposes of Article Fifth (if necessary)
or Article Fifth has been invalidated or is otherwise satisfied with respect to
the Offer and the Proposed Merger (the "Article Fifth Condition"). See "Section
17. Article Fifth of the Company's Articles of Incorporation".
Parent expects that, if elected, and subject to their fiduciary duties under
applicable law, the Parent Nominees would cause the Company Board to approve the
Offer and the Proposed Merger for purposes of Article Fifth.
In addition, on December 15, 1997, Parent commenced the Litigation seeking,
among other things, an order (i) declaring that failure to approve the Offer and
the Proposed Merger for purposes of Article Fifth would constitute a breach of
the Company Board's fiduciary duties to the Company's shareholders under
California law and (ii) compelling the Company Board to approve the Offer and
the Proposed Merger for purposes of Article Fifth.
PARENT SHAREHOLDER APPROVAL CONDITION. Consummation of the Offer is
conditioned upon the approval by shareholders of Parent of the issuance of
Parent Common Stock in the Proposed Merger. Pursuant to rules promulgated by the
New York Stock Exchange, Inc. (the "NYSE"), approval by shareholders of Parent
of the issuance of Parent Common Stock in the Proposed Merger prior to the
issuance thereof is required where the present or potential issuance of Parent
Common Stock is or will be equal to or in excess of 20% of the number of shares
of Parent Common Stock outstanding before such issuance of Parent Common Stock.
Parent currently intends to hold a special meeting of its shareholders on or
about January 28, 1998 for purposes of approving the issuance of Parent Common
Stock to be issued in the Proposed Merger and has set December 26, 1997 as the
record date for determining the holders of Parent Common Stock entitled to
notice of, and to vote at, the special meeting of Parent's shareholders.
THE OFFER IS ALSO SUBJECT TO THE OTHER TERMS AND CONDITIONS WHICH ARE
CONTAINED IN THIS OFFER TO PURCHASE. SEE "SECTION 14. CERTAIN CONDITIONS OF THE
OFFER", WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of such extension or
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amendment), Purchaser will accept for payment and pay for the Minimum Number of
Shares validly tendered prior to the Expiration Date (as defined herein) and not
withdrawn as permitted by "Section 4. Withdrawal Rights". The term "Expiration
Date" means 12:00 midnight, New York City time, on Wednesday, January 14, 1998,
unless and until Purchaser, in its sole discretion, shall have extended the
period during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by
Purchaser, shall expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition, the HSR Condition, the Financing Condition, the Rights
Condition, the Article Fifth Condition and the Parent Shareholder Approval
Condition. If any or all of such conditions are not satisfied, or if any or all
of the other events set forth in "Section 14. Certain Conditions of the Offer"
shall have occurred prior to the Expiration Date, Purchaser reserves the right
(but shall not be obligated) to (i) decline to purchase any of the Shares
tendered in the Offer and terminate the Offer and return all tendered Shares to
the tendering shareholders or (ii) waive or reduce the Minimum Condition, or
waive or amend any or all other conditions to the Offer to the extent permitted
by applicable law and, subject to complying with applicable rules and
regulations of the Commission, purchase all Shares validly tendered, or extend
the Offer and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares which have been tendered during the period or
periods for which the Offer is extended.
Upon the terms and subject to the conditions of the Offer, if more than the
Minimum Number of Shares shall be validly tendered and not withdrawn prior to
the Expiration Date, Purchaser will, upon the terms and subject to the
conditions of the Offer, purchase the Minimum Number of Shares on a pro rata
basis (with adjustments to avoid purchases of fractional Shares) based upon the
aggregate number of Shares validly tendered and not withdrawn prior to the
Expiration Date. Because of the difficulty of determining the precise number of
Shares validly tendered and not withdrawn, if proration is required, Purchaser
does not expect to be able to announce the final proration factor until
approximately five NYSE trading days after the Expiration Date. Preliminary
results of proration will be announced by press release as promptly as
practicable after the Expiration Date. Shareholders of the Company may obtain
such preliminary information from the Information Agent, and may be able to
obtain such information from their brokers. Purchaser will not pay for any
Shares accepted for payment pursuant to the Offer until the final proration
factor is known.
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during which
the Offer is open, including the occurrence of any of the conditions specified
in "Section 14. Certain Conditions of the Offer", by giving oral or written
notice of such extension to the Depositary. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the rights of tendering shareholders to withdraw their Shares. See
"Section 4. Withdrawal Rights".
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion, at any time and from time
to time, (i) to delay acceptance for payment of, or, regardless of whether such
Shares were theretofore accepted for payment, payment for any Shares pending
receipt of any regulatory approval specified in "Section 15. Certain Legal
Matters and Regulatory Approvals", (ii) to terminate the Offer and not accept
for payment any Shares upon the occurrence of any of the conditions specified in
"Section 14. Certain Conditions of the Offer" and (iii) to waive any condition
or otherwise amend the Offer in any respect, by giving oral or written notice of
such delay, termination, waiver or amendment to the Depositary and by making a
public announcement thereof. Purchaser acknowledges that (i) Rule 14e-1(c) under
the Exchange Act requires Purchaser to pay the consideration offered or return
the Shares tendered promptly after the termination or withdrawal of the Offer
and (ii) Purchaser may not delay acceptance for payment of, or payment for
(except as provided in clause (i) of the first sentence of this paragraph), any
Shares upon the occurrence of any of the conditions specified in "Section 14.
Certain Conditions of the Offer" without extending the period of time
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<PAGE>
during which the Offer is open. Under no circumstances will interest be paid on
the purchase price for tendered shares, whether or not Parent exercises its
right to extend the Offer.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that material changes be promptly disseminated to shareholders in
a manner reasonably designed to inform them of such changes) and without
limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c)
and 14d-6(d) under the Exchange Act.
Purchaser reserves the right (but shall not be obligated) to accept for
payment more than the Minimum Number of Shares pursuant to the Offer. Purchaser
has no present intention of exercising such right. If, prior to the Expiration
Date, Purchaser should decide to increase or decrease the number of Shares being
sought or to increase or decrease the consideration being offered in the Offer,
such increase or decrease in the number of Shares being sought or such increase
or decrease in the consideration being offered will be applicable to all
shareholders whose Shares are accepted for payment pursuant to the Offer and, if
at the time notice of any such increase or decrease in the number of Shares
being sought or such increase or decrease in the consideration being offered is
first published, sent or given to holders of such Shares, the Offer is scheduled
to expire at any time earlier than the period ending on the tenth business day
from and including the date that such notice is first so published, sent or
given, the Offer will be extended at least until the expiration of such ten
business day period. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time.
As of the date of this Offer to Purchase, the Rights are evidenced by the
Share Certificates (as defined herein) evidencing the Shares and do not trade
separately. Accordingly, by tendering a Share Certificate evidencing Shares, a
shareholder is automatically tendering a similar number of associated Rights.
If, however, pursuant to the Rights Agreement or for any other reason, the
Rights detach and separate Rights Certificates (as defined herein) are issued,
shareholders will be required to tender one Right for each share of Common Stock
tendered in order to effect a valid tender of such share of Common Stock.
A request is being made to the Company for the use of the Company's
shareholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. Upon compliance by the Company with such
request, this Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
shareholder list or who are listed as participants in a clearing agency's
security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or amended,
the terms and conditions of any such extension or amendment), Purchaser will
accept for payment, and will pay for, the Minimum Number of Shares validly
tendered prior to the Expiration Date and not properly withdrawn promptly after
the Expiration Date. Notwithstanding the immediately preceding sentence and
subject to applicable rules of the Commission, Purchaser expressly reserves the
right to delay acceptance for payment of, or payment
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for, Shares pending receipt of any regulatory approvals specified in "Section
15. Certain Legal Matters and Regulatory Approvals" or in order to comply in
whole or in part with applicable laws. Any such delay will be effected in
compliance with Rule 14e-1(c) under the Exchange Act (which requires a bidder to
pay the consideration offered or return the securities deposited by or on behalf
of holders of securities promptly after the termination or withdrawal of such
bidder's offer).
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") and, if the
Rights are at such time separately traded, certificates representing the Rights
associated with shares of Common Stock (the "Rights Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares (and Rights, if applicable) into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility" and, together, the "Book-Entry Transfer
Facilities") pursuant to the procedures set forth in "Section 3. Procedures for
Accepting the Offer and Tendering Shares", (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message (as defined below) and (iii) any other documents required under the
Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation that states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering shareholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including proration due to tenders of
Shares pursuant to the Offer in excess of the Minimum Number of Shares), or if
Share Certificates are submitted evidencing more Shares than are tendered or
accepted for payment, Share Certificates evidencing unpurchased Shares will be
returned, without expense to the tendering shareholder (or, in the case of
Shares tendered by book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility pursuant to the procedure set forth in "Section 3.
Procedures for Accepting the Offer and Tendering Shares", such Shares will be
credited to an account maintained at such Book-Entry Transfer Facility), as
promptly as practicable following the expiration or termination of the Offer.
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If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering shareholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares to validly tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or any Agent's Message (in the
case of any book-entry transfer) and any other documents required by the Letter
of Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) the Share
Certificates evidencing tendered Shares must be received by the Depositary at
such address or such Shares must be tendered pursuant to the procedure for book-
entry transfer described below and a Book-Entry Confirmation must be received by
the Depositary, in each case prior to the Expiration Date, or (ii) the tendering
shareholder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, RIGHTS CERTIFICATES (IF
APPLICABLE) AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of any Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing such Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in lieu of the Letter of Transmittal, and any other required documents, must, in
any case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering shareholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution", as such term is
defined in Rule 17Ad-5 promulgated under the Exchange Act (each of the foregoing
being referred to as an "Eligible Institution"), except in cases where Shares
are tendered (i) by a registered holder of Shares who has not completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed
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exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates evidencing such Shares are
not immediately available or such shareholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such shareholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is received
prior to the Expiration Date by the Depositary as provided below; and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required by
the Letter of Transmittal are received by the Depositary within three NYSE
trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.
DISTRIBUTION OF RIGHTS. Unless the Rights are redeemed prior to the
Expiration Date, holders of Shares will be required to tender one Right for each
Share tendered to effect a valid tender of such Share. Unless and until the
Separation Time (as defined below) occurs, the Rights are represented by and
transferred with the Shares. Accordingly, if the Separation Time does not occur
prior to the Expiration Date, a tender of Shares will constitute a tender of the
associated Rights. If the Separation Time has occurred, certificates
representing a number of Rights equal to the number of shares of Common Stock
being tendered must be delivered to the Depositary in order for such shares of
Common Stock to be validly tendered. If the Separation Time has occurred, a
tender of shares of Common Stock without Rights constitutes an agreement by the
tendering shareholder to deliver certificates representing a number of Rights
equal to the number of shares of Common Stock tendered pursuant to the Offer to
the Depositary within three NYSE trading days after the date such certificates
are distributed. Purchaser reserves the right to require that it receive such
certificates prior to accepting shares of Common Stock for payment. Payment for
shares of Common Stock tendered and purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of, among other things, such
certificates, if such certificates have been distributed to holders of shares of
Common Stock. Purchaser will not pay any additional consideration for the Rights
tendered pursuant to the Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute
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right to reject any and all tenders determined by it not to be in proper form or
the acceptance for payment of which may, in the opinion of its counsel, be
unlawful. Purchaser also reserves the absolute right to waive any condition of
the Offer or any defect or irregularity in the tender of any Shares of any
particular shareholder, whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived. None of Purchaser, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Shares (including the associated Rights) tendered by
such shareholder and accepted for payment by Purchaser (and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date of this Offer to Purchase). All such proxies shall
be considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Shares for payment. Upon such acceptance for payment, all prior proxies given by
such shareholder with respect to such Shares (and such other Shares and
securities) will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consent executed by such shareholder
(and, if given or executed, will not be deemed to be effective) with respect
thereto. The designees of Purchaser will, with respect to the Shares for which
the appointment is effective, be empowered to exercise all voting and other
rights of such shareholder as they in their sole discretion may deem proper at
any annual or special meeting of the Company's shareholders or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the conditions
of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after February 12,
1998. If Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the
10
<PAGE>
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in "Section 3. Procedures for Accepting the
Offer and Tendering Shares", any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares".
5. CERTAIN 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
Shares who hold the Shares as capital assets and exchange Shares for cash and/or
shares of Parent Common Stock pursuant to the Offer and the Proposed Merger. 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 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 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 Offer to Purchase, 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 Shares for cash and/or shares of Parent 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 Shares for Parent 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 the Company in exchange for Shares consists of cash (including
cash received in lieu of fractional shares of Parent Common Stock and cash
received in respect of dissenters'
11
<PAGE>
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
Shares for Parent Common Stock would be a taxable exchange. There can be no
assurance that the requirements for reorganization treatment will be satisfied
and neither Parent 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, Parent may change the form of effecting
the Proposed Merger to ensure that the Proposed Merger will not be taxable to
the Company. In the event of such a change, however, the exchange of Shares for
Parent Common Stock in the Proposed Merger will be taxable to exchanging
shareholders of the Company.
SHAREHOLDERS OF THE COMPANY 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 THE OFFER AND
THE PROPOSED MERGER. THE EXCHANGE OF SHARES FOR PARENT COMMON STOCK IN THE
PROPOSED MERGER MAY QUALIFY FOR NONRECOGNITION TREATMENT AS PART OF A
REORGANIZATION OR MAY BE A TAXABLE TRANSACTION. NEITHER PARENT 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 the Company 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 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 the Company
receiving shares of Parent Common Stock and/or cash (either in lieu of
fractional shares of Parent 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 Parent Common
Stock and such cash. If the Offer and the Proposed Merger (or, if treated as
separate transactions, the Proposed Merger) does not qualify as a reorganization
within the meaning of Section 368(a) of the Code, each exchanging shareholder of
the Company 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 Shares exchanged and the amount of cash, plus the fair market
value of the shares of Parent 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 Shares for cash and/or shares
of Parent 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 SHARES SOLELY FOR PARENT COMMON STOCK. No gain or loss
will be recognized (except in connection with any cash received in lieu of
fractional shares of Parent Common Stock)
12
<PAGE>
by shareholders of the Company who exchange all of their Shares actually
owned by such shareholders solely for shares of Parent Common Stock in the
Proposed Merger. Any such shareholder's adjusted basis for the shares of
Parent Common Stock received pursuant to the Proposed Merger will be the
same as the adjusted basis of such Shares surrendered in exchange therefor,
and the holding period of such shares of Parent Common Stock, as the case
may be, will include the period during which the Shares exchanged therefor
were held by such shareholder.
(b) EXCHANGE OF SHARES SOLELY FOR CASH. The receipt of cash by
shareholders of the Company who, pursuant to the Offer, exchange all of
their Shares solely for cash will, except as indicated below under "Dividend
Treatment -- Constructive Ownership Rules", result in capital gain or loss
to such shareholder measured by the difference between the adjusted basis of
the 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 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 Parent 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 the Company will receive solely cash in
exchange for all of their Shares.
(c) EXCHANGE OF SHARES FOR PARENT COMMON STOCK AND CASH. No loss will be
recognized (except in connection with any cash received in lieu of
fractional shares of Parent Common Stock) by shareholders of the Company
who, pursuant to the Offer and the Proposed Merger, receive cash for a
portion of their Shares and shares of Parent Common Stock for the balance of
their Shares. Any such shareholder will realize gain equal to the excess, if
any, of the cash and the aggregate fair market value of the Parent Common
Stock received pursuant to the Proposed Merger over such shareholder's
adjusted basis in the 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 Parent Common Stock received pursuant to
the Proposed Merger will be the same as the adjusted basis of the Shares
surrendered in exchange therefor plus the adjusted basis of the 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 Parent Common Stock will include the period
during which the 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 the Company is received in lieu of a fractional
share of Parent Common Stock, such cash will generally be treated as received in
exchange for such fractional share of Parent 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
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 the Company who receive both cash (other than cash solely in
lieu of fractional shares of Parent Common Stock) and shares of Parent 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 the
Company who receive cash pursuant to the Offer who own or are deemed to own
constructively Shares that are exchanged for shares of Parent Common Stock in
the Proposed Merger (or that already own or are deemed to own constructively
Parent
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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 Parent Common Stock or 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 the Company will be
treated as if such shareholder first exchanged all of such shareholder's Shares
solely for Parent Common Stock ("Deemed Parent Common Stock Ownership"), and
then Parent immediately redeemed a portion of such Parent 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 Parent Common
Stock Ownership as a result of the Deemed Redemption. A shareholder of the
Company who exchanges such Shares for a combination of Parent 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 the Company will
satisfy the "substantially disproportionate" test if the percentage of the
outstanding stock of Parent actually and constructively owned by such
shareholder immediately after the Deemed Redemption by Parent as a result of
the Offer, the Proposed Merger, or otherwise, is less than 80% of the
percentage of the outstanding stock of Parent that such shareholder is
deemed actually and constructively to have owned immediately before the
Deemed Redemption by Parent.
NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. Whether the Deemed
Parent Common Stock Ownership and the Deemed Redemption are "not essentially
equivalent to a dividend" with respect to a shareholder of the Company 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 Company
shareholder's stock ownership. In determining whether a reduction in a
shareholder of the Company's Deemed Parent Common Stock Ownership (discussed
above) has occurred, the amount of the Deemed Parent Common Stock Ownership
should be compared to the Parent Common Stock actually held by a shareholder
of the Company after the Proposed Merger. Even if a shareholder of the
Company 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
the Company who exchanges Shares for a combination of Parent Common Stock
and cash will not be ordinary income but will be capital gain, taxed as
discussed above under "Taxation of Capital Gains". Therefore, Parent intends
to treat cash payments pursuant to the Offer and the Proposed Merger as
proceeds arising from the sale or exchange of Shares, rather than as
dividends, for federal income tax reporting purposes. Shareholders of the
Company who receive cash should, however, consult their own tax advisors to
determine the proper treatment of such payments (including the impact, if
any, of the Shares or Parent Common Stock owned by persons related to such
shareholder of the Company).
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<PAGE>
TRANSFER TAXES. Parent may pay certain transfer taxes imposed on
shareholders of the Company 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 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 Parent 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 SHARES SUBJECT TO SPECIAL TREATMENT UNDER THE CODE,
SUCH AS FOREIGN HOLDERS AND HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE
EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION, OR WHO HOLD
RESTRICTED STOCK. SHAREHOLDERS OF THE COMPANY 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.
6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual
Report on Form 10-K for the fiscal year ended December 27, 1996 (the "Company
Form 10-K"), the Shares are listed and principally traded on the NYSE and quoted
under the symbol "PSX". The following table sets forth, for the quarters
indicated, the high and low sales prices per Share on the NYSE as reported by
the Dow Jones News Service and the amount of cash dividends paid per Share
according to published financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
----------- ----------- -----------
<S> <C> <C> <C>
Calendar Year Ended December 31, 1995:
First Quarter................................................................... $ 241/8 $ 161/2 $ 0.03
Second Quarter.................................................................. 213/4 141/8 0.03
Third Quarter................................................................... 261/2 177/8 0.03
Fourth Quarter.................................................................. 273/8 191/2 0.03
Calendar Year Ended December 31, 1996:
First Quarter................................................................... $ 247/8 $ 183/4 $ 0.03
Second Quarter.................................................................. 223/8 151/4 0.03
Third Quarter................................................................... 161/2 11 0.03
Fourth Quarter.................................................................. 123/4 101/4 0.03
Calendar Year Ending December 31, 1997:
First Quarter................................................................... $ 14 $ 111/8 $ 0.03
Second Quarter.................................................................. 145/8 111/8 0.03
Third Quarter................................................................... 177/8 131/4 0.03
Fourth Quarter (through December 12, 1997)...................................... 173/8 131/2 0.03
</TABLE>
On December 12, 1997, the last full trading day prior to the date of this
Offer to Purchase and Parent's public announcement of its intention to make the
Offer, the closing price per Share as reported on the NYSE was $15.44. Past
performance is not necessarily indicative of likely future price performance.
15
<PAGE>
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
Prior to the occurrence of the Separation Time, the Rights are attached to
outstanding Shares and may not be traded separately. As a result, the sales
prices per Share set forth above include the associated Rights. As a result of
the commencement of the Offer, the Separation Time may occur, after which the
Rights will separate and will begin trading apart from the Shares. IN SUCH
EVENT, SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION, IF ANY, FOR
THE RIGHTS.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial information
and information relating to the Rights and the Rights Agreement, has been taken
from or based upon publicly available documents and records on file with the
Commission and other public sources. Neither Purchaser nor Parent assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Purchaser or Parent.
GENERAL. According to the Company Form 10-K, the Company is a California
corporation with its principal executive offices located at 620 Newport Center
Drive, Suite 700, Newport Beach, California 92660. According to the Company Form
10-K, the Company 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.
FINANCIAL INFORMATION. The following table represents the selected
historical statement of operations and balance sheet data of the Company. 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 the Company in
the Company'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 the Company in the
Company'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 the Company in the
Company'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 the Company in the Company's 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 the Company in the Company's 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. The Company'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.
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.
16
<PAGE>
PACIFIC SCIENTIFIC COMPANY
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE
FISCAL YEARS ENDED(1) MONTHS ENDED
(AUDITED) (UNAUDITED)
---------------------------------------------- --------------
DECEMBER 30, DECEMBER 29, DECEMBER 27, SEPTEMBER 26,
1994 1995 1996 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales.............................................. $ 247,683 $ 284,812 $ 294,779 $ 227,744
Costs and Expenses
Cost of Sales........................................ 164,941 186,224 203,074 154,428
Selling, Marketing, General and Administrative....... 51,967 59,519 63,569 47,397
Research and Development............................. 11,793 15,750 15,974 9,880
Cost of Solium Restructuring and Other Charges......... -- -- 7,500 --
-------------- -------------- -------------- --------------
Operating Income....................................... 18,982 23,319 4,662 16,039
Other Income (Expense), net.......................... (2,240) (3,229) (4,362) (1,630)
-------------- -------------- -------------- --------------
Income Before Income Taxes............................. 16,742 20,090 300 14,409
Income Taxes........................................... (6,481) (7,340) (131) (5,384)
Loss from Discontinued Operations...................... -- -- -- (13,563)
-------------- -------------- -------------- --------------
Net Income (Loss)...................................... $ 10,261 $ 12,750 $ 169 ($ 4,538)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net Income (Loss) per share (Fully diluted)............ $ 0.83 $ 1.01 $ 0.01 $ (0.36)
BALANCE SHEET DATA:(2)
Total Assets........................................... $ 180,635 $ 225,018 $ 229,490 $ 220,800
Long-Term Debt......................................... $ 42,936 $ 63,719 $ 83,108 $ 70,187
Common Stock Outstanding at Par Value.................. $ 11,922 $ 12,071 $ 12,195 $ 12,382
Total Stockholders' Equity............................. $ 92,773 $ 106,486 $ 106,810 $ 102,865
</TABLE>
- ------------------------
(1) Statements of Operations for the years presented do not include the
operating results of Solium as a Discontinued Operation as this information
was not publicly available (refer to the Company 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.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
shareholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection at the
Commission's regional offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. The Commission also maintains an Internet
site on the World Wide Web at http:// www.sec.gov that contains reports, proxy
statements and other information. Copies of such materials
17
<PAGE>
may also be obtained by mail, upon payment of the Commission's customary fees,
by writing to its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The information should also be available for inspection at the NYSE, 20
Broad Street, New York, New York 10005.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser is a
newly incorporated Delaware corporation organized in connection with the Offer
and the Proposed Merger and has not carried on any activities other than in
connection with the Offer and the Proposed Merger. The principal offices of
Purchaser are located at Reservoir Place, 1601 Trapelo Road, Waltham,
Massachusetts 02154. Purchaser is a wholly owned subsidiary of Parent.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Proposed Merger. Because Purchaser is newly formed and has
minimal assets and capitalization, no meaningful financial information regarding
Purchaser is available.
Parent is a New York corporation. Parent's principal offices are located at
Reservoir Place, 1601 Trapelo Road, Waltham, Massachusetts 02154. Parent
believes it is one of the major worldwide manufacturers of high performance
electronic motion control components and systems. Parent's products include
brushless, permanent magnet motors and associated electronic servo amplifiers
and controllers. Parent 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 Parent in the United States, France, Germany, Israel, India, Vietnam and the
People's Republic of China, and are sold around the world by Parent's separate
sales and marketing organizations for each of the commercial and industrial and
aerospace and defense markets.
Parent'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.
Parent'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 Parent, Proto-Power Corporation, provides
engineering services to domestic fossil and nuclear electric companies and
independent power producers.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser and Parent and certain other information are set forth in
Schedule I hereto.
Set forth below are certain selected consolidated financial data relating to
Parent and its subsidiaries for Parent's last three fiscal years, which have
been excerpted or derived from the audited financial statements contained in
Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and from the unaudited financial statements contained in Parent's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1997, in each
case filed by Parent with the Commission. More comprehensive financial
information is included in such reports and other documents filed by Parent with
the Commission, and the following financial data is qualified in its entirety by
reference to such reports and other documents, including the financial
information and related notes contained therein, which are incorporated herein
by reference. Such reports and other documents may be inspected and copies may
be obtained from the offices of the Commission in the same manner as set forth
with respect to information about the Company in "Section 7. Certain Information
Concerning the Company".
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KOLLMORGEN CORPORATION
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
FISCAL YEARS ENDED DECEMBER 31, SEPTEMBER 30,
(AUDITED) (UNAUDITED)
------------------------------------- --------------
1994 1995 1996 1997
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales................................................. $ 191,771 $ 228,655 $ 230,424 $ 163,054
Cost of sales............................................. 124,627 152,614 152,928 113,590
----------- ----------- ----------- --------------
Gross profit.............................................. 67,144 76,041 77,496 49,464
----------- ----------- ----------- --------------
Selling and marketing expense............................. 27,753 29,412 27,570 15,003
General and administrative expense........................ 21,491 22,435 24,348 17,412
Research and development expense.......................... 10,843 13,178 12,143 7,249
Acquired research and development......................... -- -- -- 11,391
----------- ----------- ----------- --------------
Income (loss) before interest, minority interest and
taxes................................................... 7,057 11,016 13,435 (1,591)
Other (income) expense:................................... 3,821 3,859 5,045 2,868
----------- ----------- ----------- --------------
Income (loss) before minority interest and income taxes... 3,236 7,157 8,390 (4,459)
Minority interest......................................... -- -- 514 222
Income tax benefit (provision)............................ 815 -- -- (1,978)
Joint Venture:
Equity in Earnings.................................... -- -- -- 1,430
Gain on sale of investment, net of income taxes..... -- -- -- 24,321
----------- ----------- ----------- --------------
Net income (loss)......................................... $ 4,051 $ 7,157 $ 8,904 $ 19,536
----------- ----------- ----------- --------------
----------- ----------- ----------- --------------
Net income available to common shareholders............... $ 1,727 $ 2,509 $ 8,619 $ 19,536
Earnings (loss) per common share fully diluted............ $ 0.18 $ 0.26 $ 0.86 $ 1.87
Number of shares used in calculating earnings per share... 9,642 9,670 10,042 10,444
BALANCE SHEET DATA:
Total Assets.............................................. $ 138,201 $ 147,474 $ 141,330 $ 142,144
Total Debt................................................ $ 53,991 $ 49,808 $ 65,541 $ 44,775
Redeemable Preferred Stock (a)............................ $ 22,532 $ 25,506 -- --
Cash Dividends............................................ $ 0.08 $ 0.08 $ 0.08 $ 0.06
Common Stock Outstanding at Par Value..................... $ 26,891 $ 26,904 $ 26,914 $ 26,919
Total Shareholders' Equity................................ $ 9,880 $ 11,297 $ 21,779 $ 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)
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PARENT CORPORATION
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(1) Effective December 31, 1996, Parent 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 Parent's financial
statements, but instead Parent accounted for its interest in the Joint
Venture using the equity method.
Effective June 17, 1997, Parent 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 Parent sold approximately 88% of its interest in the Joint Venture,
receiving approximately $38 million. Subsequently in August, 1997, Parent
sold the remaining shares to the underwriter, receiving approximately $4.0
million in cash. Parent'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 Parent's Annual
Report on Form 10-K for the year ended December 31, 1996 for additional
information.
(2) Effective April 2, 1997, Parent 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 Parent Common Stock. The shares
not yet purchased are a liability of Parent in the amount of $1.8 million at
September 30, 1997. Accordingly, Parent has accounted for the purchase of
Servotronix as if 100% of the shares were purchased on April 2, 1997.
(3) Effective June 10, 1997, Parent entered into a binding agreement to purchase
all of the shares of Fritz A. Seidel Elektro-Automatik GmbH ("Seidel").
Accordingly, Parent 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 Parent's financial statements.
(4) In connection with the acquisitions of Servotronix and Seidel, Parent 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.
Parent owns 100 Shares and Purchaser owns 100 Shares, together representing
less than one percent of the 12,381,595 Shares outstanding at September 26,
1997, which were acquired in open market transactions on December 3, 1997 at
$15 3/16 per Share. Schedule II hereto sets forth information with respect to
each purchase of Shares made by Parent during the past 60 days.
Except as described in this Offer to Purchase and in Schedule II hereto, (i)
none of Purchaser, Parent nor, to the best knowledge of Purchaser and Parent,
any of the persons listed in Schedule I to this Offer to Purchase or any
associate or majority-owned subsidiary of Purchaser, Parent or any of the
persons so listed, beneficially owns or has any right to acquire, directly or
indirectly, any Shares and (ii) none of Purchaser, Parent nor, to the best
knowledge of Purchaser and Parent, any of the persons or entities referred to
above nor any director, executive officer or subsidiary of any of the foregoing
has effected any transaction in the Shares during the past 60 days.
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Except as otherwise described in this Offer to Purchase, none of Purchaser,
Parent nor, to the best knowledge of Purchaser and Parent, any of the persons
listed in Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies. Except as set forth in this Offer to Purchase, since December 31, 1993,
neither Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent,
any of the persons listed on Schedule I hereto, has had any business
relationship or transaction with the Company or any of its executive officers,
directors or affiliates that is required to be reported under the rules and
regulations of the Commission applicable to the Offer. Except as set forth in
this Offer to Purchase, since December 31, 1993, there have been no contacts,
negotiations or transactions between any of Purchaser, Parent, or any of their
respective subsidiaries or, to the best knowledge of Purchaser and Parent, any
of the persons listed in Schedule I to this Offer to Purchase, on the one hand,
and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
9. FINANCING OF THE OFFER AND THE PROPOSED MERGER. The total amount of funds
required for the purchase of 6,347,241 Shares is approximately $130.1 million.
The determination that such number of Shares equals a majority of the Shares
outstanding on a fully diluted basis is based on publicly available information
about the Company, and the actual Minimum Number of Shares, and the total amount
of funds required to purchase such Shares, may differ. Purchaser will obtain all
of such funds from Parent. Parent intends to obtain the funds from a bank
facility (the "Facility") to be arranged by Salomon Smith Barney. Parent,
Salomon Smith Barney and SBHCI have entered into a commitment letter, dated
December 9, 1997 (the "Commitment Letter"), pursuant to which SBHCI has
committed, subject to the conditions set forth therein (including, without
limitation, that all conditions of the Offer are satisfied and that Parent has
either (i) entered into a definitive merger agreement with the Company or (ii)
that the Parent Nominees shall, or that SBHCI shall otherwise be satisfied that
the Parent Nominees will upon consummation of the Offer, constitute a majority
of the Company Board), to provide to Parent and the Company up to $300 million
pursuant to a fully secured financing (the "Financing"), to pay the Offer Price
for the Shares to be purchased in the Offer, to refinance existing indebtedness
of Parent and the Company, to provide funds for general corporate purposes and
to pay related fees and expenses. SBHCI expects to syndicate the Facility in the
bank syndicate market.
The Financing consists of two phases. In Phase I there are two nine-month
secured revolving credit facilities available for borrowing, one in an aggregate
principal amount of $175 million (the "Phase I Tender Facility"), available to
Parent and the other in an aggregate principal amount of $125 million, available
to the Company (the "Phase I Company Facility", and together with the Phase I
Tender Facility, the "Phase I Facilities"). The Phase I Facilities may be drawn
on or after the date on which Purchaser accepts the Shares for payment and
consummates the Tender Offer (the "Closing Date") and may be drawn in multiple
drawings. Phase II of the Financing consists of a secured term credit facility
in an aggregate principal amount of $175 million, available to both Parent and
the Company (the "Term Facility") and a secured revolving credit facility in an
aggregate principal amount of $125 million (the "Revolving Credit Facility", and
together with the Term Facility, the "Phase II Facilities"), a portion of which
may be used for letters of credit. The entire Term Facility must be drawn in a
single drawing on the date on which the Proposed Merger is consummated (the
"Merger Date") and the Revolving Credit Facility is also available on or after
the Merger Date. Amounts borrowed under the Revolving Credit Facility and the
Phase I Facilities that are repaid may be reborrowed. Amounts borrowed under the
Term Facility that are repaid or prepaid may not be reborrowed.
The Facility will be available to Parent and the Company subject to various
conditions precedent including, but not limited to (i) satisfaction of the
conditions to the Offer; (ii) Parent having entered into a
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<PAGE>
definitive merger agreement with the Company or Parent Nominees constituting, or
that SBHCI shall otherwise be satisfied that Parent's Nominees will constitute
upon consummation of the Offer, a majority of the Company Board; and (iii)
certain other conditions customary for facilities and transactions of this type.
Parent may borrow funds from the Phase I Facilities at an interest rate
equal to either (i) the London InterBank Offered Rate plus 2% or (ii) the
Alternate Base Rate (defined as the higher of (A) the Prime Rate of the
administrative agent or reference bank and (B) the Federal Funds Effective Rate
plus 1/2 of 1%) plus 0.5%. Such interest shall be calculated on the basis of
actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may
be, in the case of Alternate Base Rate loans based on the Prime Rate) and will
be paid quarterly, in arrears or at the end of an interest period, in arrears.
Default interest is paid at the applicable interest rate plus 2%. A commitment
fee of 0.5% per annum will accrue on any unused portion of the Phase I
Facilities. The interest rates and commitment fees applicable to the Phase II
Facilities will be determined at a later date.
The obligations of Parent and the Company under the facilities will be
unconditionally guaranteed by each domestic and certain foreign subsidiaries of
Parent other than the Purchaser. In addition, all borrowings under the Phase I
Company Facility will be guaranteed by Parent. The Obligations of both Parent
and Purchaser under the Phase I Tender Facility and the guarantees thereof will
be secured by a perfected first priority security interest in substantially all
of the tangible and intangible assets of Parent, and certain significant
subsidiaries (other than Company Common Stock). The Phase I Company Facility and
the guarantees thereof will be secured by a perfected first priority security
interest in substantially all of the assets of the Company and certain of its
subsidiaries. The Phase II Facilities will be secured by all of the assets of
both the Company and Parent as well as the stock of the Company and its
subsidiaries.
The Phase I Facilities will mature upon the earlier of nine months after the
Closing Date or the Merger Date. The Term Facility will mature seven years after
the Closing Date and will amortize quarterly. The Revolving Credit Facility will
mature on the earlier of (i) seven years after the Closing Date or (ii) the
repayment in full of the Term Facility. Parent must mandatorily prepay
borrowings with a percentage of Excess Cash Flow, 100% of the net cash proceeds
of all non-ordinary-course asset sales or other dispositions of property by
Parent and its subsidiaries (subject to certain exceptions to be agreed upon),
100% of the net proceeds of debt issuances, and 50% of the net proceeds of
certain issuances of equity of Parent and its subsidiaries. Parent may
voluntarily prepay its loans at any time without premium or penalty.
Parent makes customary representations, warranties and covenants for
facilities of this type including, without limitation: (i) financial maintenance
tests consisting of a maximum leverage ratio, a minimum fixed charge coverage
ratio, and a minimum net worth level; (ii) maintenance of corporate existence,
compliance with laws, payment of taxes, and maintenance of properties and
insurance; (iii) maintenance of appropriate interest protection and other
hedging arrangements in respect of, at any time, not less than 50% of the
aggregate principal amount of loans outstanding at such time under the
Facilities; and (iv) limitations on cash dividends, capital stock redemptions
and repurchases, indebtedness, liens, loans, investments, capital expenditures,
mergers, acquisitions, asset sales (other than sales of margin securities),
prepayments, repurchases and redemption of debt, and certain changes in Parent's
business. The Facilities also include customary events of default including,
without limitation, payment defaults, covenant defaults, cross default, cross
acceleration, bankruptcy, material judgments, certain Employee Retirement Income
Security Act of 1974 events, actual or asserted invalidity of security documents
and a change of control (to be defined in the loan documentation) of Parent.
Parent expects that the definitive documentation with respect to the Financing
will contain conditions that are customary for transactions of this type.
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<PAGE>
The foregoing is not intended to be a complete description of the terms and
conditions of the Commitment Letter and is qualified in its entirety by
reference to the full text thereof which is incorporated herein by reference and
copies of which have been filed as an exhibit to the Tender Offer Statement on
Schedule 14D-1. All capitalized terms which are used in this section and not
otherwise defined shall have the meanings ascribed to them in the Commitment
Letter.
Parent has no current specific plans or arrangements for the repayment or
refinancing of the borrowings under the Facility. Such plans or arrangements,
when made, will be based on Parent's review from time to time of the
advisability of particular actions, as well as on prevailing interest rates and
financial and other economic conditions.
Parent and the Purchaser have not had access to all of the instruments and
agreements under which the Company has existing debt or other obligations
(collectively "Company Debt"). There can be no assurance that the purchase of
the Shares and the Proposed Merger will not result in an event of default, cross
default or other adverse consequences under any or all of the instruments
defining the rights of the holders of Company Debt. As a result, it is possible
that holders of certain of the Company Debt may have the right to require its
immediate payment and Parent may need to refinance this additional indebtedness.
In the event that the holders of some or all of the Company Debt have the right
to demand its immediate payment upon purchase of the Shares pursuant to the
Offer or consummation of the Proposed Merger, Parent presently intends to seek
such holders' consent to the Purchaser's assumption of the Company Debt pursuant
to the same terms and conditions as such Company Debt presently outstanding or
to refinance such Company Debt through additional borrowings.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In the ordinary
course of business, Parent 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, Parent's Senior
Vice President and Chief Financial Officer, telephoned Mr. Richard V. Plat, who
was at the time the Company's Executive Vice President, Chief Financial Officer
and Secretary, to engage in discussions regarding a possible transaction
involving Parent and the Company. Mr. Plat reacted negatively, suggesting that
the Company's common stock was undervalued by the market. Thereafter, as a
matter of course, Parent continued to evaluate a wide array of strategic
options. In the second quarter of 1997, Parent intensified its review of a
possible business combination with the Company.
After several months of detailed review of the implications of a possible
Parent-Company combination, on or about July 18, 1997, Mr. Gideon Argov,
Parent's Chairman, President and Chief Executive Officer, telephoned Mr. Lester
Hill, the Company'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 Parent and the Company. 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 Parent and the Company. 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 Parent and the Company 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 the Company was in the midst of a
strategic planning process that was expected to last into September, 1997. 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
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discuss a possible business combination because of the Company'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
Parent and the Company commence discussions regarding a possible merger. Mr.
Hill responded that he had thought about Mr. Argov's suggestion and discussed it
with the Company Board and had concluded that it would not be in the best
interests of the Company.
On October 22, 1997, Mr. Hill telephoned Mr. Argov to offer to sell the
Company's Automation Intelligence, Inc. business to Parent. Mr. Argov indicated
that Parent would not be interested in acquiring only a small piece of the
Company's business.
On December 9, 1997, Mr. Argov telephoned Mr. Hill to inform Mr. Hill that
Mr. Argov was authorized by the Parent Board to make a proposal to acquire the
Company 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
Parent's belief that a combination of the Company and Parent offered unsurpassed
benefits to both companies' shareholders and expressed his hope that Mr. Hill
and the Company's Board would, once they had undertaken an informed review of
Parent's proposal, support the proposed combination and open substantive
discussions with Parent. 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 success.
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
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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 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.
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, 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,
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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
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 MANAGEMENT HAS
DELIVERED YEAR OVER YEAR GROWTH IN SALES AND OPERATING INCOME FROM
CONTINUING OPERATIONS FROM 1994 THROUGH 1996, AND WILL DO SO GAIN 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
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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 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, Parent 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, Parent commenced the Litigation 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 Company Board's fiduciary duties to the Company's shareholders
under California law, (ii) invalidating the Rights or compelling the Company
Board to redeem the Rights or render the Rights inapplicable to the Offer and
the Proposed Merger, (iii) compelling the Company Board to approve the Offer and
the Proposed Merger for purposes of Article Fifth and (iv) enjoining the Company
Board from taking any actions to interfere with the Offer, the Solicitation or
the Proposed Merger.
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11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
PROPOSED MERGER.
PURPOSE OF THE OFFER. The purpose of the Offer and the Proposed Merger is
for Parent to acquire control of, and the entire equity interest in, the
Company. The purpose of the Proposed Merger is for Parent to acquire all Shares
not purchased pursuant to the Offer. Upon consummation of the Proposed Merger,
the Company will become a wholly owned subsidiary of Parent.
Parent is seeking to negotiate with the Company a definitive merger
agreement pursuant to which the Company would, as soon as practicable following
consummation of the Offer, consummate a Proposed Merger or similar business
combination with Parent, Purchaser or another direct or indirect subsidiary of
Parent. At the Effective Time, each Share then outstanding (other than Shares
held by the Company or any wholly owned subsidiary of the Company and Shares
owned by Parent, Purchaser or any other direct or indirect wholly owned
subsidiary of Parent and Shares held by shareholders of the Company who shall
have demanded and perfected, and who shall not have withdrawn or otherwise lost,
dissenters' rights, if any, under the CGCL) would be converted into the right to
receive $20.50 of Parent Common Stock. The exact number of shares of Parent
Common Stock into which each Share will be converted in the Proposed Merger will
be determined by dividing $20.50 by the average, over the 20 consecutive trading
days ending five days prior to the meeting of the shareholders of the Company
called for the purpose of voting on the Proposed Merger, of the daily average of
the high and low per share sales prices of Parent Common Stock (weighted by
sales volume). 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 Parent Common Stock or 1.104 shares of Parent Common Stock, respectively, per
Share. In such event, the Company's shareholders could receive Parent Common
Stock in the Proposed Merger with a value greater or lesser than $20.50.
To date, the Company has refused to enter into negotiations with Parent.
Accordingly, Parent has commenced the Solicitation to urge the Company's
shareholders to take action by written consent to call the Special Meeting in
order to, among other things, remove the entire Company Board and fill the newly
created vacancies on the Company Board with the Parent Nominees, 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. Parent expects that, if elected, and subject to their fiduciary duties
under applicable law, the Parent Nominees would cause the Company Board to (i)
amend the Rights Agreement or redeem the Rights, or otherwise act to ensure that
the Rights Condition is satisfied, (ii) approve the Offer and the Proposed
Merger for purposes of Article Fifth or otherwise act to ensure that the Article
Fifth Condition is satisfied and (iii) take any other actions necessary to
permit the Offer and the Proposed Merger to be consummated. The Solicitation
will be made pursuant to separate consent solicitation materials complying with
the requirements of Section 14(a) of the Exchange Act, and the rules and
regulations promulgated thereunder. On December 15, 1997, Parent filed
definitive consent solicitation materials in connection with the Solicitation
with the Commission, which are being mailed to shareholders of the Company
together with this Offer to Purchase.
On December 15, 1997, Parent commenced the Litigation, 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 (if
necessary) the Offer and the Proposed Merger for purposes of Article Fifth would
constitute a breach of the Company Board's fiduciary duties to the Company's
shareholders under California law, (ii) invalidating the Rights or compelling
the Company Board to redeem the Rights or render the Rights inapplicable to the
Offer and the Proposed Merger, (iii) compelling the Company Board to approve the
Offer and the Proposed Merger for purposes of Article Fifth, if necessary and
(iv) enjoining the Company Board from taking any actions to interfere with the
Offer, the Solicitation or the Proposed Merger.
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Subject to the terms and conditions of the Proposed Merger and in accordance
with the CGCL and the DGCL, the Company will be merged with and into Purchaser.
It is expected that Purchaser will be the surviving corporation in the Proposed
Merger, and will continue its corporate existence under Delaware law. Purchaser
reserves the right to amend the Offer and/or the Proposed Merger (including
amending the number of Shares to be purchased, the purchase prices therefor, the
proposed merger consideration and the form of the Proposed Merger) at any time,
including upon entering into a merger agreement with the Company, or to
negotiate a merger agreement with the Company in connection with a merger not
involving a tender offer pursuant to which Purchaser would terminate the Offer
and the Shares would, upon consummation of such merger, be converted into cash
and Parent Common Stock in such amounts as are negotiated by Parent and the
Company; 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.
DISSENTERS' RIGHTS. California law provides for rights of dissenting
shareholders in certain business combinations to receive fair value for their
shares. Accordingly, while shareholders of the Company will not have dissenters'
rights as a result of the Offer, they may have certain rights in connection with
the Proposed Merger to dissent and to require the Company to purchase their
Shares for cash at fair market value.
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 Shares do not have dissenters' rights as a result of the Offer.
However, in connection with the Proposed Merger, holders of Shares, by complying
with the provisions of Chapter 13 of the CGCL, may have certain rights to
dissent and to require the Company to purchase their Shares for cash at fair
market value. In general, holders of Shares will be entitled to exercise
"dissenters' rights" under the CGCL only if the holders of five percent or more
of the outstanding Shares properly file demands for payment or if the Shares
held by such holders are subject to any restriction on transfer imposed by the
Company or any law or regulation ("Restricted Shares"). Accordingly, any holder
of Restricted Shares and, if the holders of five percent or more of the Shares
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 the Company to purchase their Shares for cash at their fair market value
if the Proposed Merger is consummated. If the statutory procedures under the
CGCL relating to dissenters' rights is complied with, such rights could result
in a judicial determination of the fair market value of the Shares. 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.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Proposed Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Proposed
Merger. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
shareholders in such transaction, be filed with the Commission and disclosed to
shareholders prior to consummation of the transaction.
PLANS FOR THE COMPANY. In connection with the Offer, Parent and Purchaser
have reviewed, and will continue to review, on the basis of publicly available
information, various possible business strategies
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that they might consider in the event that Purchaser acquires control of the
Company. Parent expects that the merged company will combine the highly
complementary motion control product lines of Parent and the Company to become a
full-service provider. Parent believes that the combined company will be
well-positioned to capitalize on the complementary product lines and differing
strengths of Parent and the Company, enabling the combined company to provide
its products and support services on a global basis and as a result satisfy
today's sophisticated customers demand by offering them a global supplier for
their electronic motion control requirements. The increased size and global
scope of the resulting entity, Parent believes, will allow it to more
effectively market its products to customers around the world, which will make
it well positioned to build on this foundation, particularly in Europe and the
Pacific Rim. Parent expects 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 raising its visibility in the business and financial
communities. Parent sees the combined company as being well-positioned,
strategically, operationally and financially, to aggressively pursue attractive
opportunities for external and internal growth.
In addition, if and to the extent that Purchase acquires control of the
Company or otherwise obtains access to the books and records of the Company,
Parent and Purchaser intend to conduct a detailed review of the Company 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 the Company's
potential in conjunction with Parent's business. Such strategies could include,
among other things, changes in the Company's business, corporate structure,
marketing strategies, capitalization, management or dividend policy and changes
to the Company's Articles of Incorporation or Bylaws.
Parent has commenced the Solicitation to urge the Company's shareholders to
take action by written consent to call the Special Meeting in order to, among
other things, remove the entire Company Board and fill the newly created
vacancies on the Company Board with the Parent Nominees, 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. Parent expects
that, if elected, and subject to their fiduciary duties under applicable law,
the Parent Nominees would cause the Company Board to (i) amend the Rights
Agreement or redeem the Rights, or otherwise act to ensure that the Rights
Condition is satisfied, (ii) approve the Offer and the Proposed Merger for
purposes of Article Fifth or otherwise act to ensure that the Article Fifth
Condition is satisfied and (iii) take any other actions necessary to permit the
Offer and the Proposed Merger to be consummated. The Solicitation will be made
pursuant to separate consent solicitation materials complying with the
requirements of Section 14(a) of the Exchange Act, and the rules and regulations
promulgated thereunder. On December 15, 1997, Parent filed definitive consent
solicitation materials in connection with the Solicitation with the Commission,
which are being mailed to shareholders of the Company together with this Offer
to Purchase.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company, a sale or transfer of a
material amount of assets of the Company or any subsidiary of the Company or any
material change in the Company's capitalization or dividend policy or any other
material changes in the Company's corporate structure or business, or the
composition of the Company Board or the Company's management.
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<PAGE>
12. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of this Offer to
Purchase, the Company should (i) split, combine or otherwise change the Shares
or its capitalization, (ii) acquire or otherwise cause a reduction in the number
of outstanding Shares or (iii) issue or sell any additional Shares, shares of
any other class or series of capital stock, other voting securities or any
securities convertible into, or options, rights or warrants, conditional or
otherwise, to acquire, any of the foregoing, then, without prejudice to
Purchaser's rights under "Section 14. Certain Conditions of the Offer",
Purchaser, in its sole discretion, may make such adjustments to the purchase
price and other terms of the Offer (including the number and type of securities
to be purchased) as it deems appropriate to reflect such split, combination or
other change.
If, on or after the date of this Offer to Purchase, the Company should
declare or pay any dividend on the Shares or make any other distribution
(including the issuance of additional shares of capital stock pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities) with respect to the Shares that is
payable or distributable to shareholders of record on a date prior to the
transfer to the name of Purchaser or its nominee or transferee on the Company's
stock transfer records of the Shares purchased pursuant to the Offer, other than
regular quarterly dividends on the Shares declared and paid at times consistent
with past practice and in an amount not in excess of $0.03 per Share, then,
without prejudice to Purchaser's rights under "Section 14. Certain Conditions of
the Offer", (i) the purchase price per Share payable by Purchaser pursuant to
the Offer will be reduced to the extent any such dividend or distribution is
payable in cash and (ii) any non-cash dividend, distribution or right shall be
received and held by the tendering shareholder for the account of Purchaser and
will be required to be promptly remitted and transferred by each tendering
shareholder to the Depositary for the account of Purchaser, accompanied by
appropriate documentation of transfer. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all the rights and privileges as
owner of any such non-cash dividend, distribution or right and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by Purchaser in its sole discretion.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing and
may be delisted from the NYSE. According to the NYSE's published guidelines, the
NYSE would consider delisting the Shares if, among other things, (i) the number
of record holders of at least 100 Shares should fall below 1,200, (ii) the
number of publicly held Shares (exclusive of holdings of officers, directors and
their families and other concentrated holdings of 10% or more ("NYSE Excluded
Holdings")) should fall below 600,000, (iii) the aggregate market value of
publicly held Shares, subject to adjustment (and exclusive of NYSE Excluded
Holdings), should fall below $5,000,000 or (iv) the aggregate market value of
Shares outstanding (excluding treasury stock) should fall below $8,000,000 and
average net income after taxes of the Company for the past three years is less
than $600,000. If, as a result of the purchase of Shares pursuant to the Offer
or otherwise, the Shares no longer meet the requirements of the NYSE for
continued listing and the listing of the Shares is discontinued, the market for
the Shares could be adversely affected. Based on these guidelines and publicly
available information, however, Parent and Purchaser do not believe that the
purchase of the Minimum Number of Shares is likely to result in the delisting of
the Shares on the NYSE.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
other sources. The extent of the public market therefor and the availability of
such quotations would depend, however, upon such factors as the number of
shareholders
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and/or the aggregate market value of such securities remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration under the Exchange Act as described
below, and other factors. Parent and Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect on the market price for or marketability of the
Shares or whether it would cause future market prices to be greater or less than
the Offer Price.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders. The termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with shareholders' meetings and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities" or be eligible for
reporting on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ").
As soon as practicable after the Separation Time has occurred, Rights
Certificates are to be sent to all holders of Rights. If the Separation Time has
occurred and the Rights separate from the Shares, the foregoing discussion with
respect to the effect of the Offer on the market for the Shares, NYSE listing
and Exchange Act registration would apply to the Rights in a similar manner.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, and in addition to (and not in limitation of) Purchaser's rights to
extend and amend the Offer at any time, in its sole discretion, Purchaser shall
not be required to accept for payment or pay for any Shares tendered pursuant to
the Offer, and may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for, Shares tendered, if (i) any one or more of the
Minimum Condition, the HSR Condition, the Financing Condition, the Rights
Condition, the Article Fifth Condition and the Parent Shareholder Approval
Condition shall not have been satisfied or (ii) at any time on or after December
15, 1997, and prior to the acceptance for payment of Shares, any of the
following conditions shall exist:
(a) there shall have been threatened, instituted or be pending any
action or proceeding before any court or governmental, administrative or
regulatory authority or agency, domestic or foreign (each, a "Governmental
Entity"), or by any other person, domestic or foreign, before any court or
Governmental Entity, (i) challenging or seeking to, or which is reasonably
likely to, make illegal, materially delay or otherwise directly or
indirectly restrain or prohibit or seeking to, or which is reasonably likely
to, impose voting, procedural, price or other requirements, in addition to
those required by federal securities laws and the CGCL (each as in effect on
the date of this Offer to Purchase), in connection with the making of the
Offer, the acceptance for payment of, or payment for, any Shares by Parent,
Purchaser or any other affiliate of Parent or the consummation by Purchaser
or Parent or any other affiliate of Parent of the Proposed Merger or other
business
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combination with the Company, or seeking to obtain material damages in
connection therewith; (ii) seeking to prohibit or limit materially the
ownership or operation by the Company, Parent or any of their subsidiaries
of all or any material portion of the business or assets of the Company,
Parent or any of their subsidiaries, or to compel the Company, Parent or any
of their subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of the Company, Parent or any of their
subsidiaries; (iii) seeking to impose or confirm limitations on the ability
of Parent, Purchaser or any other affiliate of Parent to exercise
effectively full rights of ownership of any Shares (including the Rights
associated with Shares), including, without limitation, the right to vote
any Shares acquired by Purchaser pursuant to the Offer or otherwise on all
matters properly presented to the Company's shareholders; (iv) seeking to
require divestiture by Parent, Purchaser or any other affiliate of Parent of
any Shares; (v) seeking any material diminution in the benefits expected to
be derived by Purchaser, Parent or any other affiliate of Parent as a result
of the transactions contemplated by the Offer or the Proposed Merger or any
other similar business combination with the Company; (vi) otherwise directly
or indirectly relating to the Offer or which otherwise, in the sole judgment
of Purchaser, might materially adversely affect the Company or any of its
subsidiaries or Purchaser, Parent or any other affiliate of Parent or the
value of the Shares; or (vii) which otherwise, in the sole judgment of
Purchaser, is reasonably likely to materially adversely affect the business,
operations (including, without limitation, results of operations),
properties (including, without limitation, intangible properties), condition
(financial or otherwise), assets or liabilities (including, without
limitation, contingent liabilities) or prospects of either the Company or
any of its subsidiaries or Parent;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, Purchaser, the Company or any subsidiary or
affiliate of Parent or the Company or (ii) the Offer or the Proposed Merger
or other business combination by Purchaser or Parent or any affiliate of
Parent with the Company, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or the Proposed Merger, which, in the sole
judgment of Purchaser, is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through
(vii) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that, in the sole judgment of Purchaser, is or is reasonably
likely to be materially adverse to the business, operations (including,
without limitation, results of operations), properties (including, without
limitation, intangible properties), condition (financial or otherwise),
assets or liabilities (including, without limitation, contingent
liabilities) or prospects of the Company or any of its subsidiaries;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the NYSE, (ii) any
decline, measured from the close of business on December 12, 1997, in the
Standard & Poor's 500 Index by an amount in excess of 15%, (iii) any
material adverse change in United States currency exchange rates or a
suspension of, or limitation on, currency exchange markets, (iv) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (v) any limitation (whether or not mandatory)
by any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on, or other event that, in the sole judgment
of Purchaser, might affect the extension of credit by banks or other lending
institutions, (vi) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States or (vii) in the case of any of the foregoing existing on
December 12, 1997, a material acceleration or worsening thereof;
(e) the Company or any of its subsidiaries, joint ventures or partners
or other affiliates shall have, directly or indirectly, (i) split, combined
or otherwise changed, or authorized or proposed a split, combination or
other change of, the Shares or its capitalization (other than by redemption
of
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the Rights in accordance with their terms as such terms have been publicly
disclosed prior to the date of this Offer to Purchase), (ii) acquired or
otherwise caused a reduction in the number of, or authorized or proposed the
acquisition or other reduction in the number of, outstanding Shares or other
securities (other than as aforesaid), (iii) issued or sold, or authorized or
proposed the issuance, distribution or sale of, additional Shares (other
than the issuance of Shares under option prior to the date of this Offer to
Purchase, in accordance with the terms of such options as such terms have
been publicly disclosed prior to the date of this Offer to Purchase), shares
of any other class of capital stock, other voting securities or any
securities convertible into, or rights, warrants or options, conditional or
otherwise, to acquire, any of the foregoing, (iv) declared or paid, or
proposed to declare or pay, any dividend or other distribution, whether
payable in cash, securities or other property, on or with respect to any
shares of capital stock of the Company (other than (A) a regular cash
quarterly dividend not in excess of $0.03 per Share, having customary and
usual record and payment dates and (B) in the event the Rights are redeemed,
the price of redemption thereof), (v) altered or proposed to alter any
material term of any outstanding security (including the Rights) other than
to amend the Rights Agreement to make the Rights inapplicable to the Offer
and the Proposed Merger, (vi) incurred any debt other than in the ordinary
course of business or any debt containing burdensome covenants, (vii)
authorized, recommended, proposed or entered into an agreement, agreement in
principle or arrangement or understanding with respect to any merger,
consolidation, liquidation, dissolution, business combination, acquisition
of assets, disposition of assets, release or relinquishment of any material
contractual or other right of the Company or any of its subsidiaries or any
comparable event not in the ordinary course of business, (viii) authorized,
recommended, proposed or entered into, or announced its intention to
authorize, recommend, propose or enter into, any agreement, arrangement or
understanding with any person or group that in the sole judgment of
Purchaser could adversely affect either the value of the Company or any of
its subsidiaries, joint ventures or partnerships or the value of the Shares
to Purchaser, Parent or any other affiliate of Parent, (ix) entered into or
amended any employment, change in control, severance, executive compensation
or similar agreement, arrangement or plan with or for the benefit of any of
its employees, consultants or directors, or made grants or awards
thereunder, other than in the ordinary course of business or entered into or
amended any agreements, arrangements or plans so as to provide for increased
or accelerated benefits to any such persons, (x) except as may be required
by law, taken any action to terminate or amend any employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended) of the Company or any of its subsidiaries, or Purchaser
shall have become aware of any such action that was not disclosed in
publicly available filings prior to the date of this Offer to Purchase, or
(xi) amended or authorized or proposed any amendment to the Company's
Articles of Incorporation or Bylaws, or Purchaser shall have become aware
that the Company or any of its subsidiaries shall have proposed or adopted
any such amendment that was not disclosed in publicly available filings
prior to the date of this Offer to Purchase;
(f) a tender or exchange offer for any Shares shall have been made or
publicly proposed to be made by any other person (including the Company or
any of its subsidiaries or affiliates), or it shall have been publicly
disclosed or Purchaser shall have otherwise learned that (i) any person,
entity (including the Company or any of its subsidiaries) or "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire beneficial ownership of more than 5% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares), other than acquisitions
for bona fide arbitrage purposes only and other than as disclosed in a
Schedule 13G on file with the Commission prior to the date of this Offer to
Purchase, (ii) any such person, entity or group that prior to the date of
this Offer to Purchase had filed such a Schedule 13G with the Commission has
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acquired or proposes to acquire, through the acquisition of stock, the
formation of a group or otherwise, beneficial ownership of 1% or more of any
class or series of capital stock of the Company (including the Shares), or
shall have been granted any right, option or warrant, conditional or
otherwise, to acquire beneficial ownership of 1% or more of any class or
series of capital stock of the Company (including the Shares), (iii) any
person or group shall have entered into a definitive agreement or an
agreement in principle or made a proposal with respect to a tender offer or
exchange offer or a merger, consolidation or other business combination with
or involving the Company or (iv) any person shall have filed a Notification
and Report Form under the HSR Act (or amended a prior filing to increase the
applicable filing threshold set forth therein) or made a public announcement
reflecting an intent to acquire the Company or any subsidiary or significant
assets of the Company;
(g) any approval, permit, authorization or consent of any governmental
authority or agency (including those described or referred to in "Section
15. Certain Legal Matters and Regulatory Approvals") shall not have been
obtained on terms satisfactory to Purchaser in its sole discretion;
(h) Purchaser shall have reached an agreement or understanding with the
Company providing for termination of the Offer, or Purchaser, Parent or any
other affiliate of Parent shall have entered into a definitive agreement or
announced an agreement in principle with the Company providing for a merger
or other business combination with the Company or the purchase of stock or
assets of the Company; or
(i) (i) any material contractual right of the Company or any of its
subsidiaries or affiliates shall be impaired or otherwise adversely affected
or any material amount of indebtedness of the Company or any of its
subsidiaries, joint ventures or partnerships shall become accelerated or
otherwise become due before its stated due date, in either case, with or
without notice or the lapse of time or both, as a result of the transactions
contemplated by the Offer or the Proposed Merger or (ii) any covenant, term
or condition in any of the Company's or any of its subsidiaries', joint
ventures' or partnerships' instruments or agreements is or may be materially
adverse to the value of the Shares in the hands of Purchaser (including, but
not limited to, any event of default that may ensue as a result of the
consummation of the Offer or the Proposed Merger or the acquisition by
Parent of control of the Company);
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Purchaser or Parent in
whole or in part at any time and from time to time in their reasonable
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances; and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
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15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Based upon
its examination of publicly available information with respect to the Company,
neither Purchaser nor Parent is aware of any license or other regulatory permit
that appears to be material to the business of the Company and its subsidiaries,
taken as a whole, which might be adversely affected by the acquisition of 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 Shares by Purchaser pursuant to the Offer
and the Proposed Merger. Should any such approval or other action be required,
it is Purchaser's present intention to seek such approval or action. Purchaser
does not currently intend, however, to delay the purchase of 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 Shares if
any of the conditions in "Section 14. Certain Conditions of the Offer" 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 businesses of the Company,
Purchaser or Parent or that certain parts of the businesses of the Company,
Purchaser or Parent 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. Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 15. See "Section 14. Certain
Conditions of the Offer".
STATE TAKEOVER LAWS. The Company's principal executive offices are located
in, and the Company is incorporated under the laws of, the State of California,
which currently has no takeover statute that would apply to the Offer or to the
Proposed Merger. However, there can be no assurances that California will not,
prior to the completion of the Offer, adopt such a statute. Under California
law, the Proposed Merger may not be accomplished for cash paid to the Company's
shareholders if Purchaser or Parent owns directly or indirectly more than 50%
but less than 90% of the then outstanding Shares unless either all the
shareholders consent or the Commissioner of Corporations of the State of
California approves, after a hearing, the terms and conditions of the Proposed
Merger and the fairness thereof. Because the consideration to be paid in the
Proposed Merger consists of Parent Common Stock and not cash, this provision of
California law will not interfere with the consummation of the Offer or the
Proposed Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining shareholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of shareholders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Proposed Merger and has not sought to comply with any
such laws. Should any person seek to apply any state takeover law, Purchaser
will take such action as then appears desirable, which may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws is
applicable to the Offer or the Proposed Merger, and an appropriate court does
not determine that it is
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inapplicable or invalid as applied to the Offer, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer and the Proposed Merger. In such case, Purchaser may
not be obligated to accept for payment any Shares tendered. See "Section 14.
Certain Conditions of the Offer".
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 Shares by Purchaser pursuant to the Offer are subject to such requirements.
Pursuant to the HSR Act, on December 15, 1997, Parent will file Premerger
Notification and Report Forms in connection with the purchase of 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 Shares pursuant to the
Offer may not be consummated until the expiration of a 15-calendar day waiting
period following the applicable filings by Parent. Accordingly, the waiting
period under the HSR Act applicable to the purchase of 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, Parent 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 Parent with respect to the Offer, the waiting period with respect
to 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 Parent with such
request. Thereafter, the consummation of the Offer may only be prevented by a
court order that extends the waiting period or by an injunction. Parent will not
be permitted to purchase Shares pursuant to the Offer or engage in any other
transaction that would result in Parent having beneficial ownership of $15
million or more of the outstanding voting securities of the Company until
expiration of the waiting period applicable to the Offer. If the acquisition of
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 Shares pursuant to the Offer, the Offer may,
but need not, be extended and, in any event, the purchase of and payment for
Shares will be deferred until 10 days after the request is substantially
complied with by Parent, unless the extended period expires on or before the
date when the initial 15-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 to the Offer under the HSR Act 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 Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
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
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, the Company 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 Parent
relating to the businesses in which Parent, the Company and their respective
subsidiaries are engaged, Parent and Purchaser believe that the Offer will not
violate the
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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,
what the result would be.
FOREIGN LAWS. According to publicly available information, the Company also
owns property and conducts businesses in a number of other jurisdictions. In
connection with the acquisition of the 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 Company's
operations conducted in such countries and jurisdictions as a result of the
acquisition of Shares pursuant to the Offer or the Proposed Merger.
CERTAIN LITIGATION. On December 15, 1997, Parent commenced the Litigation
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 Company Board's fiduciary duties to the Company's
shareholders under California law, (ii) invalidating the Rights or compelling
the Company Board to redeem the Rights or render the Rights inapplicable to the
Offer and the Proposed Merger, (iii) compelling the Company Board to approve the
Offer and the Proposed Merger for purposes of Article Fifth, and (iv) enjoining
the Company Board from taking any actions to interfere with the Offer, the
Solicitation or the Proposed Merger. See "Section 15. Certain Legal Matters and
Regulatory Approvals".
16. SHAREHOLDER RIGHTS PLAN. The Rights Agreement and the Rights issued
thereunder are described in the Company's Current Report on Form 8-K filed on
February 16, 1996, and a summary of that description is provided below.
Under the provisions of the Rights Agreement, one Right to purchase a
fractional share of the Company's Series A Junior Participating Preferred Stock
(the "Preferred Stock") was distributed as a dividend on each outstanding share
of Common Stock held of record as of November 18, 1988, and on each such share
issued thereafter. The Rights trade in tandem with the Common Stock. Each Right
entitles holders of Common Stock to purchase 1/100th of a share of Preferred
Stock at an exercise price of $45, subject to adjustment (the "Exercise Price").
The holders of Preferred Stock will be entitled to receive, when, as and if
declared by the Board, semiannual dividends equal to the greater of $4 or 100
times the dividend or other distribution on the Common Stock. Each share of
Preferred Stock will have a liquidation preference of $100 plus accrued but
unpaid dividends. The holders of Common Stock and Preferred Stock generally will
vote together as a class, with holders of Preferred Stock authorized to cast 100
votes on each matter for each such share held.
Until the Separation Time (as defined below), the Rights are not
exercisable. Prior to the Separation Time, certificates representing the Rights
will not be sent to shareholders and the Rights will attach to and trade only
together with shares of Common Stock. Shares of Common Stock issued after the
record date and prior to the Separation Time will be issued with accompanying
Rights.
Separate Rights Certificates will be issued and the Rights will become
exercisable on the date (the "Separation Time") which is 20 days following the
earlier to occur of the following events (each an "Acquisition Event") (i) the
date on which a person (or its affiliates or associates) acquires, or obtains
the right to acquire, beneficial ownership of 25% or more of the outstanding
shares of Common Stock (such person thereby becoming an "Acquiring Person") and
(ii) the date of commencement by any person of, or public announcement of the
intention of any person to commence, a tender or exchange offer for outstanding
shares of Common Stock that would result in such person owning beneficially 35%
or more of the outstanding shares of Common Stock. The Rights are redeemable,
for $0.01 each, by action of the Board prior to the occurrence of an Acquisition
Event.
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If, after the Separation Time, unless the Rights are earlier redeemed as
described below, (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation or
in which all or any part of the Company's outstanding shares of Common Stock are
changed or exchanged for cash, stock or other assets or (ii) 50% or more of the
Company's consolidated assets or earning power is sold, then proper provision
must be made so that each holder of a Right which has not theretofore been
exercised will thereafter have the Right to receive in lieu of Preferred Stock,
upon exercise and payment of the then current Exercise Price therefor, shares of
common stock of the acquiring or surviving company (which may be the Company),
or certain related entities, having a value equal to two times the Exercise
Price.
If any person or group acquires 25% beneficial ownership or announces or
commences a tender offer, each Right not owned by such person or related parties
will entitle its holder to purchase, at the Right's then current Exercise Price,
that number of units of Preferred Stock equal to the then current Exercise Price
divided by 50% of an average market price for the Common Stock.
Following the Separation Time, holders of the Rights (other than Rights
beneficially owned by the Acquiring Person and certain related entities, which
will thereafter be void) will be entitled to receive, upon exercise and the
payment of the Exercise Price, one unit of Preferred Stock. The rights,
preferences, privileges and restrictions of Preferred Stock are set forth in a
Certificate of Designation filed by the Company with the office of the
California Secretary of State. The Company initially has reserved 300,000 shares
of Preferred Stock for issuance upon exercise of the Rights.
The Rights will expire at the close of business on November 7, 1998 (the
"Rights Expiration Time"), unless earlier redeemed as described below.
The Company Board may, at its option, at any time prior to the earlier of
the Separation Time or the Rights Expiration Time, redeem all but not less than
all of the then outstanding Rights at a redemption price of $.01 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction (the "Redemption Price"). The redemption of the
Rights by the Company Board may be made effective at such time on such basis and
with such conditions as the Company Board in its sole discretion may establish.
The Company may, at its option, pay the Redemption Price in cash, shares of
Common Stock (based on the market price at the time of redemption) or any other
form of consideration deemed appropriate by the Company Board.
If the Company receives a written proposal (a "Proposal") from a Person who
beneficially owns 1% or less of the outstanding Common Stock as of the date of
delivery of the Proposal (the "Proposal Date") and who has not within one year
prior to the Proposal Date beneficially owned in excess of 1% of the then
outstanding Common Stock and disclosed, or caused the disclosure of, any
intention that relates to or would result in the acquisition, or influence or
control, of the Company, and the Proposal provides for the (i) acquisition of
all outstanding shares of Common Stock of the Company, (ii) states that the
offeror has committed financing sufficient to consummate the proposal
acquisition, (iii) is accompanied by a fairness opinion of a nationally
recognized investment banking firm and (iv) requests a special shareholders'
meeting to vote on the proposed acquisition, the Rights Agreement contains
mechanisms for the Company Board to call a special meeting of shareholders for
the purpose of voting on a precatory resolution with respect to the Proposal.
The provisions of the Rights Agreement may be supplemented or amended by the
Company Board, without approval of holders of Rights, in any manner prior to the
Separation Time. Any amendment adopted by the Company Board after the Separation
Time may not materially and adversely affect the interests of the holders of
Rights.
The Exercise Price payable, the number of Rights issued per share of Common
Stock and the number of fractions of shares of Preferred Stock or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution.
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If the Company does not have a sufficient number of shares of Preferred
Stock to permit the exercise in full of the Rights, the Company may issue, in
lieu of units of Preferred Stock, cash, shares or fractions of shares of Common
Stock, Preferred Stock or equity or debt securities of the Company, assets of
the Company, or any combination of the foregoing, or may reduce the Exercise
Price. The Company may elect not to issue fractional shares of Preferred Stock
upon exercise of a Right, and in lieu thereof may evidence such fractional
shares by depositary receipts, or may make an adjustment in cash based on the
then current market price of Preferred Stock. The holders of any such depositary
receipts shall have all the Rights, privileges, preferences and restrictions to
which they are entitled or subject as holders of Preferred Stock.
Until a Right is exercised, the holder thereof, as such, will have no Rights
as a shareholder of the Company (other than rights resulting from such holder's
ownership of shares of Common Stock), including, without limitation, the right
to vote or to receive dividends.
The issuance of Preferred Stock upon exercise of the Rights is subject to
the effectiveness of a registration statement under the Securities Act. A copy
of the Rights Agreement has been filed with the Commission as an exhibit to a
registration statement on Form 8-A under the Exchange Act.
Shareholders of the Company will be required to tender one Right for each
Share tendered in order to effect a valid tender of Shares in accordance with
the procedures set forth in "Section 2. Acceptance for Payment and Payment for
Shares". Unless a Separation Time occurs, a tender of Shares will also
constitute a tender of the associated Rights.
17. ARTICLE FIFTH OF THE COMPANY'S ARTICLES OF INCORPORATION. Under Article
Fifth, certain business combinations (each a "Transaction"), including a merger
of the Company with or into any other Person (as defined below) that is an
Associate (as defined below) of the Company require the approval of both (i) the
holders of at least two-thirds of the outstanding shares of stock of the Company
entitled to vote, and (ii) the holders of at least a majority of the outstanding
shares of stock of the Company entitled to vote, exclusive of shares "owned
beneficially" (as defined below) by any such other Person. Such voting
requirements are not applicable if (i) the Transaction is a merger for which,
except for the requirements of Article Fifth, approval by the shareholders of
the Company is not required by the CGCL; (ii) the Transaction is a merger in
which the Company is the "surviving entity" (as defined below); (iii) the
Transaction has been approved by the Company Board either (a) unanimously, or
(b) prior to the acquisition by any Person that is an Associate of the Company
of the beneficial ownership of five percent or more of the outstanding shares of
stock of the Company; or (iv) all of the following conditions are met:
(1) The cash or fair market value of the property, securities or other
consideration to be received per share by holders of the stock of the
Company in such Transaction is not less than the higher of (a) the Highest
Per Share Price (as defined below) paid by such associated Person in
acquiring any of its holdings of the Company's stock or (b) an amount which
bears the same or a greater percentage relationship to the market price of
the Company's stock immediately prior to the announcement of such
Transaction as the Highest Per Share Price determined in (a) above bears to
the market price of the Company's stock immediately prior to the
commencement of acquisition of the Company's stock by such associated
Person, but in no event in excess of two times the Highest Per Share Price
determined in (a) above;
(2) After becoming an associated Person and prior to the consummation of
such business combination, (a) such associated Person has not acquired any
newly issued shares of capital stock, directly or indirectly, from the
Company (except upon conversion of convertible securities acquired by it
prior to becoming an associated Person or upon compliance with the
provisions of the Article Fifth or as a result of a pro rata stock dividend
or stock split), (b) such associated Person has not received the benefit,
directly or indirectly (except proportionately as a shareholder), of any
loans, other financial assistance or tax credits provided by the Company, or
made any major changes in the Company's business or equity capital
structure, and (c) there has been no reduction
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in the rate of dividends payable on the Company's common stock, except as
may have been approved by unanimous vote of directors; and
(3) A proxy statement responsive to the requirements of the Exchange
Act, whether or not the Company is then subject to such requirements, is
mailed to the public shareholders of the Company for the purpose of
soliciting shareholder approval of such transaction and contains at the
front thereof, in a prominent place (i) any recommendations as to the
advisability (or inadvisability) of the Transaction which any of the
directors may choose to state, and (ii) the opinion of a reputable national
investment banking firm as to the fairness (or not) of the terms of such
business combination, from the point of view of the remaining public
shareholders of the Company (such investment banking firm to be engaged
solely on behalf of the remaining public shareholders, to be paid a
reasonable fee for its services by the Company upon receipt of such opinion,
to be one of the so-called major bracket investment banking firms which has
not previously been associated with such associated Person, and, if there
are at the time any such directors, to be selected by a majority of the
outside directors).
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the specified Person.
"Associate" means with respect to a specified Person (A) any Person who is,
directly or indirectly, the Beneficial Owner of five percent or more of any
class of equity securities of such specified Person or who is an officer,
director, trustee or partner of such specified Person or any Affiliate of such
specified Person, (B) any trust or estate in which such specified Person has a
substantial beneficial interest or as to which such specified Person serves as a
trustee or in a similar fiduciary capacity, and (C) any relative or spouse of
such specified Person, or any relative of such spouse, who has the same home as
such specified Person.
"Beneficial Owner" means any Person who beneficially owns shares of stock of
the Company (A) which such specified Person or any Affiliate or Associate or
such Person beneficially owns, directly or indirectly, whether of record or not,
(B) which such specified Person or any Affiliate or Associate of such Person has
the right to acquire pursuant to any agreement or (C) which are beneficially
owned, directly or indirectly including shares deemed owned through application
of clauses (A) or (B) above, by any other Person with which such specified
Person or any Affiliate or Associate of such specified Person has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of voting securities of the Company.
"Highest Per Share Price" means the per share price inclusive of brokerage
commissions, soliciting dealers' fees, dealer-management compensation, and other
expenses, including, but not limited to, costs of newspaper advertisements,
printing expenses and attorneys' fees.
"Person" means an individual corporation, partnership, joint venture, trust
or unincorporated organization, or a government or any agency or political
subdivision thereof.
The company shall be the "surviving entity" in any merger in which: (A) the
shareholders of the Company immediately prior to the merger own immediately
after the merger the same stock of the Company they owned immediately prior to
the merger, subject to their rights, if any, under the CGCL as dissenting
shareholders; and (B) the shareholders of the Company immediately prior to the
merger (other than any Person with or into which the Company merges or any
Affiliate or Associate of such Person) own immediately after the merger, subject
to the same rights, if any, as dissenting shareholders, stock possessing at
least a majority of the voting power of the Company.
Pursuant to the terms of Article Fifth, the Company Board has the power to
determine, (i) whether any Person referred to in Article Fifth is the Beneficial
Owner of the outstanding securities of the
41
<PAGE>
Company entitled to vote and the extent of such "beneficial ownership"; and (ii)
whether Article Fifth is satisfied or does not apply to a Transaction.
The foregoing description of Article Fifth is qualified in its entirety by
reference to the text of the Articles of Incorporation of the Company, copies of
which have been filed by the Company as exhibits to documents filed with the
Commission and may be obtained from, the same places and in the same manner as
described in "Section 7. Certain Information Regarding the Company".
Parent expects that, if elected, and subject to their fiduciary duties under
applicable law, the Parent Nominees would cause the Company Board to approve the
Offer and the Proposed Merger for purposes of Article Fifth.
18. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Salomon Smith Barney is acting as Dealer Manager for the Offer and as
financial advisor to Parent in connection with the Proposed Merger. Questions
regarding the Offer may be directed to Salomon Smith Barney at the phone number
and address set forth on the back cover hereof.
As compensation for its services to Parent in connection with the Offer and
Proposed Merger, Salomon Smith Barney will receive fees of (i) $350,000 payable
by Parent following an agreement to effect the Proposed Merger or similar
transaction or a public announcement regarding the Proposed Merger or similar
transaction and (ii) $2,700,000 payable by Parent upon consummation of the
Proposed Merger 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.
Parent 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 Parent from the sale of Shares in the event the
Proposed Merger is not consummated. In addition, Salomon Smith Barney and its
affiliate SBHCI entered into a commitment letter pursuant to which SBHCI has
agreed to provide financing for the Offer. See "Section 9. Financing of the
Offer and the Proposed Merger".
Salomon Smith Barney is a service mark of Smith Barney Inc. Salomon Brothers
Inc and Smith Barney Inc. are affiliated but separately registered
broker/dealers under 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.
Purchaser and Parent have retained Georgeson & Company Inc. ("Georgeson") as
the Information Agent, and Harris Trust Company of New York as the Depositary,
in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telecopy, telegraph and personal interview and
may request banks, brokers, dealers and other nominee shareholders to forward
materials relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Georgeson will be paid a fee of $100,000 plus a fee of $6.00 for each
call made to a shareholder and will also be reimbursed for certain out-of-pocket
expenses and may be indemnified against certain liabilities and expenses in
connection with the Offer, including certain liabilities under the federal
securities laws. Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, plus reimbursement
for out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including certain liabilities
under the federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by Purchaser for customary handling and mailing
expenses incurred by them in forwarding material to their customers.
19. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser
42
<PAGE>
becomes aware of any valid state statute prohibiting the making of the Offer or
the acceptance of Shares pursuant thereto, Purchaser will make a good faith
effort to comply with any such state statute. If, after such good faith effort,
Purchaser cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of Purchaser by the Dealer Manager or by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same places
and in the same manner as set forth in "Section 7. Certain Information Regarding
the Company" (except that they will not be available at the regional offices of
the Commission).
TORQUE CORPORATION
December 15, 1997
43
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of Parent. Unless otherwise indicated, the
current business address of each person is 1601 Trapelo Road, Waltham,
Massachusetts 02154. Unless otherwise indicated, each such person is a citizen
of the United States of America and has held his or her present position as set
forth below for the past five years. Unless otherwise indicated, each occupation
set forth opposite an individual's name refers to employment with Parent.
<TABLE>
<CAPTION>
PRESENT BUSINESS EXPERIENCE DURING
NAME POSITION PAST FIVE YEARS
- ----------------------- ---------------------------------- ----------------------------------------------
<S> <C> <C>
Gideon Argov Chairman of the Board, President Chairman of the Board since March 1996,
and Chief Executive Officer, President and Chief Executive Officer since
Director November 1991; 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 Senior Vice President, Treasurer Senior Vice President (since February 1993),
and Chief Financial Officer, Treasurer and Chief Financial Officer since
Director July 1991. From April 1989 to July 1991, Vice
President and Treasurer of High Voltage
Engineering Company. Prior to April 1989, Vice
President and Chief Financial Officer of
Ausimont N.V.
Daniel M. Desmond Vice President President of Parent's Aerospace and Defense
Motion Technologies Group and Vice President
since November 1997. President of Parent
Electro-Optical Division since 1989.
Previously Vice President of Program
Management.
James A. Eder Vice President, Secretary and General Counsel since January 1992; Vice
General Counsel President since January 1990; and Secretary
since 1983. Previously he had been Assistant
Corporate Counsel from 1977 to 1992.
Keith D. Jones Controller and Chief Accounting Corporate Controller since May 1996. Chief
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>
<PAGE>
<TABLE>
<CAPTION>
PRESENT BUSINESS EXPERIENCE DURING
NAME POSITION PAST FIVE YEARS
- ----------------------- ---------------------------------- ----------------------------------------------
<S> <C> <C>
Mark E. Petty Vice President President of Parent'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 Parent since March
1992. Previously, President of General
Eastern, Division of High Voltage Engineering
Company.
Jerald G. Fishman 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 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 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 Director Chairman of the Board and Chief Executive
Officer of Swissray Empower, Inc. since 1988.
Robert N. Parker Director Business consultant since 1992. Previously
Executive Vice President of LTV Aerospace and
Defense Corporation.
Geoffrey S. Renhart Director Managing Director and General Partner of Bain
Capital, Inc. Founder of Bain Capital, Inc. in
1984.
George P. Stephan 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 Parent from 1991
until March 26, 1996.
</TABLE>
I-2
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments thereof for the past five years of each director and executive
officer of Purchaser. Unless otherwise indicated, the current business address
of each person is 1601Trapelo Road, Waltham Massachussets 02154. Unless
otherwise indicated, each such person is a citizen of the United States of
America, and each occupation set forth opposite an individual's name refers to
employment with Purchaser.
<TABLE>
<CAPTION>
PRESENT BUSINESS EXPERIENCE DURING
NAME POSITION PAST FIVE YEARS
- --------------------- --------------------------- --------------------------------------------------------
<S> <C> <C>
Gideon Argov President President since November 1997. Chairman of the Board of
Parent since March 1996; President and Chief Executive
Officer of Parent since November 1991; and Director of
Parent 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 Vice President, Treasurer Vice President, Treasurer and Assistant Secretary since
and Assistant Secretary November 1997. Senior Vice President of Parent (since
February 1993); and Treasurer and Chief Financial
Officer of Parent since July 1991. From April 1989 to
July 1991, Vice President and Treasurer of High Voltage
Engineering Company. Prior to April 1989, Vice President
and Chief Financial Officer of Ausimont N.V.
James A. Eder Chairman of the Board, Vice Chairman of the Board, Vice President, Secretary and
President and Secretary, Director since November 1997. Vice President of Parent
Director since January 1990; General Counsel of Parent since
January 1992; and Secretary of Parent since 1983.
Previously he had been Assistant Corporate Counsel from
1977 to 1982.
Keith D. Jones Vice President and Vice President and Assistant Secretary and Director
Assistant Secretary, since November 1997. Corporate Controller of Parent
Director since May 1996; and Chief Accounting Officer of Parent
since March 1996. Director of Finance, Chief Accounting
Officer, and Corporate Controller of Cambridge Biotech
Corporation from September 1991 to August 1995.
</TABLE>
I-3
<PAGE>
SCHEDULE II
SCHEDULE OF TRANSACTIONS IN SHARES
DURING THE PAST 60 DAYS
The following table sets forth purchases of the Shares within the past 60
days by or on behalf of Parent or Purchaser. All transactions were effected in
open market transactions.
<TABLE>
<CAPTION>
BENEFICIAL NUMBER OF SHARES
OWNER DATE PURCHASED PRICE PER SHARE
- ---------------------------------------------- --------------------- --------------------- ---------------
<C> <S> <C> <C>
Parent December 3, 1997 100 $ 15 3/16
Purchaser December 3, 1997 100 $ 15 3/16
---
Total 200
---
---
</TABLE>
<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, 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
<PAGE>
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 shortform 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 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
III-2
<PAGE>
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 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.
III-3
<PAGE>
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 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
III-4
<PAGE>
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.)
III-5
<PAGE>
Facsimiles of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates evidencing Shares and any other required documents
should be sent or delivered by each shareholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
WALL STREET STATION RECEIVE WINDOW
P.O. BOX 1023 WALL STREET PLAZA
NEW YORK, NEW YORK 10268-1023 88 PINE STREET, 19TH FLOOR
NEW YORK, NEW YORK 10005
</TABLE>
BY FACSIMILE:
(212) 701-7636
CONFIRM BY TELEPHONE:
(212) 701-7624
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A shareholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
WALL STREET PLAZA
NEW YORK, NY 10005
BANKS AND BROKERS CALL COLLECT (212) 440-9800
OR
ALL OTHERS CALL TOLL-FREE (800) 223-2064
THE DEALER MANAGER FOR THE OFFER IS:
SALOMON SMITH BARNEY
SEVEN WORLD TRADE CENTER
NEW YORK, NY 10048
CALL TOLL-FREE (888) 746-7939
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PACIFIC SCIENTIFIC COMPANY
AT
$20.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 15, 1997
OF
TORQUE CORPORATION
a wholly owned subsidiary of
KOLLMORGEN CORPORATION
- -----------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS THE OFFER
IS EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
BY FACSIMILE:
(212) 701-7636
CONFIRM BY TELEPHONE:
(212) 701-7624
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares or, if applicable, Rights (as such terms are
defined below) are to be forwarded herewith or if delivery of Shares or, if
applicable, Rights, is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company ("DTC") or the Philadelphia Depository
Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and together, the
"Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedures
described in Section 3 ("Procedures for Accepting the Offer and Tendering
Shares") of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
As of the date of the Offer to Purchase, the Rights are evidenced by the
certificates evidencing the Shares (the "Share Certificates") and do not trade
separately. Accordingly, by tendering a Share Certificate evidencing Shares, a
shareholder is automatically tendering a similar number of associated Rights.
If, however, pursuant to the Rights Agreement (as defined below) or for any
other reason, the Rights detach and separate certificates evidencing the Rights
("Rights Certificates") are issued, shareholders will be required to tender one
Right for each share of Common Stock tendered in order to effect a valid tender
of such share of Common Stock.
Shareholders whose Share Certificates (or, if applicable, Rights Certificates)
are not immediately available or who cannot deliver their Share Certificates
(or, if applicable, Rights Certificates) and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in Section 1 ("Terms
of the Offer; Proration; Expiration Date") of the Offer to Purchase) or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis and who wish to tender their Shares, must do so pursuant to the guaranteed
delivery procedure described in Section 3 ("Procedures for Accepting the Offer
and Tendering Shares") of the Offer to Purchase. See Instruction 2.
<TABLE>
<S> <C>
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT
ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) / / DTC / / PDTC
</TABLE>
Account Number________________________________________
Transaction Code Number________________________________________
<TABLE>
<S> <C>
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY
SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Window Ticket No. (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
</TABLE>
If delivery is by book-entry transfer, check box of applicable Book-Entry
Transfer Facility:
<TABLE>
<S> <C>
(CHECK ONE) DTC / / / / PDTC
</TABLE>
Account Number________________________________________
Transaction Code Number________________________________________
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL NUMBER
OF
SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF RIGHTS TENDERED*
----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(S) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON RIGHTS CERTIFICATE(S) AND RIGHT(S) TENDERED
RIGHTS CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL NUMBER
OF
RIGHTS
RIGHTS EVIDENCED BY NUMBER OF
CERTIFICATE RIGHTS RIGHTS
NUMBER(S)** CERTIFICATE(S)** TENDERED***
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL RIGHTS
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed unless separate Rights Certificates have been issued.
** Need not be completed by shareholders delivering Rights by book-entry
transfer.
*** Unless otherwise indicated, it will be assumed that all Rights evidenced by
each Rights Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
- --------------------------------------------------------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Torque Corporation, a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Kollmorgen Corporation, a New
York corporation ("Parent"), the above-described shares of common stock, par
value $1.00 per share (the "Common Stock"), of Pacific Scientific Company, a
California corporation (the "Company"), including the associated preferred stock
purchase rights (the "Rights" and, together with the Common Stock, the "Shares")
issued pursuant to the Shareholder Protection Agreement, dated as of November 7,
1988, as amended (the "Rights Agreement"), between the Company and Manufacturers
Hanover Trust Company, as successor Rights Agent (the "Rights Agent"), pursuant
to Purchaser's offer to purchase 6,347,241 Shares, or such greater or lesser
number of Shares that, together with Shares owned by Parent and Purchaser, would
constitute a majority of the outstanding Shares on a fully diluted basis (such
number of Shares being the "Minimum Number") at a price of $20.50 per Share, net
to the seller in cash (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 15, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, as amended from time to time, and the Offer to
Purchase as it may be amended from time to time, together constitute the
"Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer.
<PAGE>
The undersigned understands that, unless the Rights are redeemed prior to
the Expiration Date (as defined in the Offer to Purchase), holders of Shares
will be required to tender one Right for each Share tendered in order to effect
a valid tender of such Share. Unless and until the Separation Time (as defined
in the Offer to Purchase) occurs, the Rights are represented by and transferred
with the Shares. Accordingly, if the Separation Time does not occur prior to the
Expiration Date, a tender of Shares will constitute a tender of the associated
Rights. If a Separation Time has occurred, certificates representing a number of
Rights ("Rights Certificates") equal to the number of shares of Common Stock
being tendered must be delivered to the Depositary in order for such shares of
Common Stock to be validly tendered. If a Separation Time has occurred, the
undersigned agrees hereby to deliver Rights Certificates representing a number
of Rights equal to the number of shares of Common Stock tendered herewith to the
Depositary within three business days after the date such Rights Certificates
are distributed. Purchaser reserves the right to require that the Depositary
receive such Rights Certificates, or a Book-Entry Confirmation (as defined in
this Offer to Purchase), if available, with respect to such Rights prior to
accepting shares of Common Stock for payment. Payment for shares of Common Stock
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of, among other things, such Rights
Certificates, if such certificates have been distributed to holders of Shares.
Purchaser will not pay any additional consideration for the Rights tendered
pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of and subject to the conditions
of the Offer, the undersigned hereby sells, assigns and transfers to, or upon
the order of, Purchaser, all right, title and interest in and to all the Shares
that are being tendered hereby and all dividends, distributions (including,
without limitation, distributions of additional Shares) and rights declared,
paid or distributed in respect of such Shares on or after December 15, 1997,
other than regular quarterly dividends on the Shares declared and paid at times
consistent with past practice in an amount not in excess of $0.03 per Share
(collectively, "Distributions") and irrevocably appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares and all Distributions, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver Share Certificates evidencing such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
<PAGE>
The undersigned hereby irrevocably appoints James A. Eder, Robert J. Cobuzzi
and Gideon Argov, and each of them, as the attorneys and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with the terms
of the Offer. Such acceptance for payment shall revoke all other proxies and
powers of attorney granted by the undersigned at any time with respect to such
Shares (and all Shares and other securities issued in Distributions in respect
of such Shares), and no subsequent proxy or power of attorney shall be given or
written consent executed (and if given or executed, shall not be effective) by
the undersigned with respect thereto. The undersigned understands that, in order
for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance of such Shares for payment, Purchaser must be able to exercise full
voting and other rights with respect to such Shares, including, without
limitation, voting at any meeting of the Company's shareholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment by
Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restrictions,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned, upon request, shall execute and
deliver all additional documents deemed by the Depositary or Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby and all Distributions. In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and pending such remittance and transfer
or appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 ("Procedures for Accepting the Offer and
Tendering Shares") of the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer.
<PAGE>
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates (or, if applicable, Rights
Certificates) evidencing Shares not purchased or not tendered in the name(s) of
the registered holder(s) appearing above under "Description of Shares Tendered."
Similarly, unless otherwise indicated in the box entitled "Special Delivery
Instructions," please mail the check for the purchase price of all Shares
purchased and all Share Certificates (or, if applicable, Rights Certificates)
evidencing Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates (or, if applicable, Rights Certificates)
evidencing Shares not purchased or not tendered in the name(s) of, and mail such
check and Share Certificates (or, if applicable, Rights Certificates) to, the
person(s) so indicated. The undersigned recognizes that Purchaser has no
obligation, pursuant to the Special Payment Instructions, to transfer any Shares
from the name of the registered holder(s) thereof if Purchaser does not purchase
any of the Shares tendered hereby.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if the check for the purchase price of Shares or
Share Certificates (or, if applicable, Rights Certificates) evidencing
Shares not tendered or not purchased are to be issued in the name of someone
other than the undersigned.
Issue / / check / / Share Certificates (or, if applicable, Rights
Certificates) to:
Name ______________________________________________________________________
PLEASE PRINT
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9
ON REVERSE SIDE)
/ / Credit Shares (or Rights, if applicable) delivered by book-entry
transfer and not purchased to the account set forth below:
Check appropriate box: / / DTC / / PDTC
Account Number: ____________________________________________________________
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates (or, if applicable, Rights Certificates)
evidencing Shares not tendered or not purchased are to be mailed to someone
other than the undersigned, or to the undersigned at an address other than
that shown under "Description of Shares Tendered" (or, if applicable,
"Description of Rights Tendered").
Mail / / check / / Share Certificates (or, if applicable, Rights
Certificates) to:
Name _______________________________________________________________________
PLEASE PRINT
Address ____________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
------------------------------
<PAGE>
IMPORTANT
SHAREHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
------------------------------------------------------------
------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _______________________________, 199 __
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates (or, if applicable, Rights Certificates) or on a security
position listing by (a) person(s) authorized to become (a) registered
holder(s) by certificates and documents transmitted herewith. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, please provide the following information and see
Instruction 5.)
NAME(S) ____________________________________________________________________
(PLEASE PRINT)
CAPACITY (full title) ______________________________________________________
ADDRESS ____________________________________________________________________
(INCLUDE ZIP CODE)
AREA CODE AND TELEPHONE NO. ( )___________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY NO. __________________________________
(SEE SUBSTITUTE FORM W-9 ON
REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE
MEDALLION GUARANTEE IN SPACE BELOW.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Medallion Signature
Guarantee Program, or by any other "eligible guarantor institution," as such
term is defined in Rule 17Ad-5 promulgated under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES (OR, IF
APPLICABLE, RIGHTS CERTIFICATES). This Letter of Transmittal is to be used
either if Share Certificates (or, if applicable, Rights Certificates) are to be
forwarded herewith or if Shares are to be delivered by book-entry transfer
pursuant to the procedure set forth in Section 3 ("Procedures for Accepting the
Offer and Tendering Shares") of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or a confirmation of a book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility of all
Shares delivered by book-entry transfer, as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined below), in the case of a
book-entry delivery, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the reverse hereof prior to the Expiration Date (as defined in Section
1 ("Terms of the Offer; Proration; Expiration Date") of the Offer to Purchase).
If a Separation Time (as defined in the Offer to Purchase) has occurred, Rights
Certificates, or Book-Entry Confirmation of a transfer of Rights into the
Depositary's account at a Book-Entry Transfer Facility, if available (together
with, if Rights are forwarded separately from Shares, a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) with any required
signature guarantee, or an Agent's Message in the case of a book-entry delivery,
and any other documents required by this Letter of Transmittal), must be
received by the Depositary at one of its addresses set forth herein prior to the
Expiration Date or, if later, within three business days after the date on which
such Rights Certificates are distributed. If Share Certificates (or, if
applicable, Rights Certificates) are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Shareholders whose Share Certificates (or, if
applicable, Rights Certificates) are not immediately available, who cannot
deliver their Share Certificates (or, if applicable, Rights Certificates) and
all other required documents to the Depositary prior to the Expiration Date or
who cannot complete the procedure for delivery by book-entry transfer on a
timely basis, may tender their Shares pursuant to the guaranteed delivery
procedure described in Section 3 ("Procedures for Accepting the Offer and
Tendering Shares") of the Offer to Purchase. Pursuant to such procedure: (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form made available by Purchaser, must be received by the Depositary prior to
the Expiration Date; and (iii) the Share Certificates (or, if applicable, Rights
Certificates) evidencing all physically delivered Shares in proper form for
transfer by delivery, or a confirmation of a book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer, in each case together with a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by this Letter of Transmittal, must be
received by the Depositary within (A) three New York Stock Exchange, Inc.
("NYSE") trading days after the date of execution of such Notice of Guaranteed
Delivery, all as described in Section 3 of the Offer to Purchase, or (B) three
business days after Rights Certificates are distributed to holders of Shares, as
applicable.
<PAGE>
The method of delivery of this Letter of Transmittal, Share Certificates
(or, if applicable, Rights Certificates) and all other required documents,
including delivery through any Book-Entry Transfer Facility, is at the option
and risk of the tendering shareholder, and the delivery will be deemed made only
when actually received by the Depositary. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate (or, if applicable, Rights
Certificate) numbers, the number of Shares evidenced by such Share Certificates
(or, if applicable, the number of Rights evidenced by such Rights Certificates)
and the number of Shares (or, if applicable, Rights) tendered should be listed
on a separate signed schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate (or,
if applicable, fewer than all the Rights evidenced by any Rights Certificate)
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares (or, if applicable, Rights) which are to be tendered in the box
entitled "Number of Shares Tendered" (or, if applicable, "Number of Rights
Tendered"). In such cases, new Share Certificates (or, if applicable, the
remainder of Rights that were evidenced by the Rights Certificates) evidencing
the remainder of the Shares that were evidenced by the Share Certificates (or,
if applicable, Rights Certificates) delivered to the Depositary herewith will be
sent to the person(s) signing this Letter of Transmittal, unless otherwise
provided in the box entitled "Special Delivery Instructions" on the reverse
hereof, as soon as practicable after the expiration or termination of the Offer.
All Shares (or, if applicable, Rights) evidenced by Share Certificates (or, if
applicable, Rights Certificates) delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates (or, if applicable, Rights Certificates)
evidencing such Shares without alteration, enlargement or any other change
whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates (or, if
applicable, Rights Certificates) or separate stock powers are required, unless
payment is to be made to, or Share Certificates (or, if applicable, Rights
Certificates) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), in which case, the
Share Certificates (or, if applicable Rights Certificates) evidencing the Shares
tendered hereby must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on such Share Certificates (or, if applicable Rights Certificates). Signatures
on such Share Certificates (or, if applicable Rights Certificates) and stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificates (or,
if applicable, Rights Certificate(s)) evidencing the Shares tendered hereby must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such Share
Certificates (or, if applicable Rights Certificates). Signatures on such Share
Certificates (or, if applicable Rights Certificates) and stock powers must be
guaranteed by an Eligible Institution.
<PAGE>
If this Letter of Transmittal or any Share Certificate (or, if applicable,
Rights Certificate) or stock power is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and proper evidence satisfactory to Purchaser of such
person's authority so to act must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificates (or, if applicable Rights Certificates) evidencing Shares not
tendered or not purchased are to be issued in the name of, a person other than
the registered holder(s), the amount of any stock transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable on
account of the transfer to such other person will be deducted from the purchase
price of such Shares purchased, unless evidence satisfactory to Purchaser of the
payment of such taxes, or exemption therefrom, is submitted. Except as provided
in this Instruction 6, it will not be necessary for transfer tax stamps to be
affixed to the Share Certificates (or, if applicable, Rights Certificates)
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificates (or,
if applicable, Rights Certificates) evidencing Shares not tendered or not
purchased are to be issued, in the name of a person other than the person(s)
signing this Letter of Transmittal or if such check or any such Share
Certificate (or, if applicable, Rights Certificate) is to be sent to someone
other than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal but at an address other than that shown in
the box entitled "Description of Shares Tendered" (or, if applicable, "Number of
Rights Tendered") on the reverse hereof, the appropriate boxes on the reverse of
this Letter of Transmittal must be completed. Shareholders delivering Shares
tendered hereby by book-entry transfer may request that Shares not purchased be
credited to such account maintained at a Book-Entry Transfer Facility as such
shareholder may designate in the box entitled "Special Payment Instructions" on
the reverse hereof.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Information Agent
or from brokers, dealers, commercial banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide
the Depositary with a correct taxpayer identification number ("TIN") and other
information on the Substitute Form W-9 which is provided under "Important Tax
Information" below, and to certify whether such shareholder is subject to backup
withholding of federal income tax. If a tendering shareholder has been notified
by the Internal Revenue Service that such shareholder is subject to backup
withholding, such shareholder must cross out item (2) of the Certification box
of the Substitute Form W-9, unless such shareholder has since been notified by
the Internal Revenue Service that such shareholder is no longer subject to
backup withholding. Failure to provide the correct information on the Substitute
Form W-9 may subject the tendering shareholder to a $50 penalty imposed by the
Internal Revenue Service and 31% federal income tax backup withholding on the
payment of the purchase price of all Shares purchased from such shareholder. If
the tendering shareholder has not been issued a TIN and has applied for one or
intends to apply for one in the near future, such shareholder should write
"Applied For" in the space provided for the TIN in Part I of the Substitute Form
W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in
Part I and the Depositary is not provided with a TIN by the time of payment, the
Depositary will withhold 31% on all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Share Certificate(s) or
Rights Certificate(s) (has) (have) been lost, destroyed or stolen, the
shareholder should promptly notify the Depositary. The shareholder will then be
instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES (OR, IF APPLICABLE, RIGHTS CERTIFICATES) OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED
AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%. In
addition, if a shareholder makes a false statement that results in no imposition
of backup withholding, and there was no reasonable basis for such statement, a
$500 penalty may also be imposed by the Internal Revenue Service.
Certain shareholders (including, among others, corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a properly completed Form W-8 (or
substitute form), signed under penalties of perjury, attesting to such
individual's exempt status. A Form W-8 can be obtained from the Depositary. See
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions. A shareholder should consult
his or her tax advisor as to such shareholder's qualification for exemption from
backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained, provided that proper information is
submitted to the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such
shareholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such shareholder
that such shareholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report. If the tendering shareholder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all payments of the purchase price
to such shareholder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: Harris Trust Company of New York
<TABLE>
<C> <S> <C>
SUBSTITUTE PART I--Taxpayer Identification Number--
FORM W-9 For all accounts, enter taxpayer Social Security Number
Department of the Treasury identification number in the box at OR
Internal Revenue Service right. (For most individuals, this is
your social security number. If you do Employer Identification Number
not have a number, see Obtaining a (If awaiting TIN write
Number in the enclosed GUIDELINES). "Applied For")
Certify by signing and dating below.
Note: If the account is in more than one
name, see the chart in the enclosed
GUIDELINES to determine which social
security or employer identification
number to give the payer.
Payer s Request for Taxpayer PART II--For Payees Exempt From Backup Withholding, see the enclosed GUIDELINES
Identification number (TIN) and complete as instructed therein.
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to
me), and
(2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to
backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer
subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed GUIDELINES.)
SIGNATURE DATE , 199
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31%. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU INDICATED
"APPLIED FOR" IN PLACE OF A TIN IN SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED
TO ME, AND EITHER (1) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER
IDENTIFICATION NUMBER TO THE APPROPRIATE INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY
ADMINISTRATION OFFICE, OR (2) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I
UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER BY THE TIME OF PAYMENT, 31% OF
ALL REPORTABLE PAYMENTS MADE TO ME WILL BE WITHHELD, BUT THAT SUCH AMOUNTS MAY BE REFUNDED TO ME IF
I THEN PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN SIXTY (60) DAYS.
SIGNATURE DATE , 199
</TABLE>
<PAGE>
Facsimiles of this Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates evidencing
Shares and any other required documents should be sent or delivered by each
shareholder or such shareholder's broker, dealer, commercial bank, trust company
or other nominee to the Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
BY FACSIMILE:
(212) 701-7636
CONFIRM BY TELEPHONE:
(212) 701-7624
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A shareholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT (212) 440-9800
ALL OTHERS CALL TOLL-FREE: (800) 223-2064
THE DEALER MANAGER FOR THE OFFER IS:
SALOMON SMITH BARNEY
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TEL: (888) 746-7939
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
PACIFIC SCIENTIFIC COMPANY
(Not to be Used for Signature Guarantees)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates ("Share
Certificates") evidencing shares of common stock, par value $1.00 per share (the
"Common Stock"), of Pacific Scientific Company, a California corporation (the
"Company"), including the associated preferred stock purchase rights (together
with the Common Stock, the "Shares"), are not immediately available, (ii) if
certificates evidencing the Shares and all other required documents cannot be
delivered to Harris Trust Company of New York, as Depositary (the "Depositary"),
prior to the Expiration Date (as defined in Section 1 ("Terms of the Offer;
Proration; Expiration Date") of the Offer to Purchase (as defined below)) or
(iii) if the procedure for delivery by book-entry transfer cannot be completed
on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand
or mail or transmitted by telegram or facsimile transmission to the Depositary.
See Section 3 ("Procedures for Accepting the Offer and Tendering Shares") of the
Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Receive Window
Wall Street Station Wall Street Plaza
P.O. Box 1023 88 Pine Street, 19th Floor
New York, New York 10268-1023 New York, New York 10005
</TABLE>
BY FACSIMILE:
(212) 701-7636
CONFIRM BY TELEPHONE:
(212) 701-7624
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Torque Corporation, a Delaware corporation
and a wholly owned subsidiary of Parent Corporation, a New York corporation,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 15, 1997 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"), receipt of each of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure described in
Section 3 ("Procedures for Accepting the Offer and Tendering Shares") of the
Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares (including the associated
Preferred Stock Purchase Rights):
- -------------------------------------------- --------------------------------------------
--------------------------------------------
Signature(s) of Holder(s)
Share
Certificate Nos. (if available):
Dated: , 199
- --------------------------------------------
Name(s) of Holders:
- --------------------------------------------
--------------------------------------------
--------------------------------------------
Please Type or Print
Check one box if Shares will be delivered by
book-entry transfer:
--------------------------------------------
Address
/ / The Depository Trust Company
--------------------------------------------
Zip Code
/ / Philadelphia Depository Trust Company
--------------------------------------------
Area Code and Telephone No.
Account No.
</TABLE>
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of the Medallion Signature
Guarantee Program (or is an "eligible guarantor institution", as such term is
defined in Rule 17Ad-5 promulgated under the Securities Exchange Act of 1934, as
amended), guarantees to deliver to the Depositary, at one of its addresses set
forth above, either certificates evidencing the Shares tendered hereby, in
proper form for transfer, or confirmation of book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company, in each case with delivery of a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed with any
required signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery, and any other required
documents, all within three New York Stock Exchange, Inc. trading days of the
date hereof.
<TABLE>
<S> <C>
NAME OF FIRM AUTHORIZED SIGNATURE
ADDRESS TITLE
Name:
ZIP CODE PLEASE TYPE OR PRINT
Dated: , 199
AREA CODE AND TELEPHONE NO.
</TABLE>
DO NOT SEND CERTIFICATES EVIDENCING SHARES WITH THIS NOTICE.
CERTIFICATES EVIDENCING SHARES SHOULD BE SENT WITH
YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
SALOMON SMITH BARNEY
Seven World Trade Center
New York, New York 10048
OFFER TO PURCHASE FOR CASH
6,347,241 SHARES OF COMMON STOCK
(including the associated Preferred Stock Purchase Rights)
of
PACIFIC SCIENTIFIC COMPANY
at
$20.50 NET PER SHARE
by
TORQUE CORPORATION
a wholly owned subsidiary of
KOLLMORGEN CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS THE OFFER IS
EXTENDED.
December 15, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Torque Corporation, a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Kollmorgen Corporation, a New
York corporation ("Parent"), to act as the Dealer Manager in connection with
Purchaser's offer to purchase 6,347,241 shares of common stock, par value $1.00
per share (the "Common Stock"), of Pacific Scientific Company, a California
corporation (the "Company"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares"), or such
greater or lesser number of Shares that, together with the Shares owned by
Parent and Purchaser, would constitute a majority of the outstanding Shares on a
fully diluted basis (such number of Shares being the "Minimum Number") at a
price of $20.50 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in Purchaser's Offer to Purchase, dated December 15,
1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
as amended from time to time, together constitute the "Offer") enclosed
herewith. Please furnish copies of the enclosed materials to those of your
clients for whose accounts you hold Shares registered in your name or in the
name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
MINIMUM NUMBER OF SHARES, (2) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED, (3) PARENT AND PURCHASER HAVING OBTAINED, PRIOR TO THE EXPIRATION OF
THE OFFER, ON TERMS SATISFACTORY TO PARENT IN ITS SOLE DISCRETION, SUFFICIENT
FINANCING TO ENABLE CONSUMMATION OF THE OFFER AND THE PROPOSED MERGER DESCRIBED
BELOW, (4) 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, (5) PURCHASER BEING SATISFIED, IN ITS SOLE DISCRETION, THAT
THE OFFER AND THE PROPOSED MERGER HAVE BEEN APPROVED FOR PURPOSES OF ARTICLE
<PAGE>
FIFTH OF THE COMPANY'S ARTICLES OF INCORPORATION (IF NECESSARY) OR ARTICLE FIFTH
OF THE COMPANY'S ARTICLES OF INCORPORATION HAS BEEN INVALIDATED OR IS OTHERWISE
SATISFIED WITH RESPECT TO THE OFFER AND PROPOSED MERGER AND (6) THE APPROVAL BY
PARENT'S SHAREHOLDERS OF THE ISSUANCE OF COMMON STOCK, PAR VALUE $2.50 PER
SHARE, OF PARENT IN THE PROPOSED MERGER. THE OFFER IS ALSO SUBJECT TO THE OTHER
TERMS AND CONDITIONS WHICH ARE CONTAINED IN THE OFFER TO PURCHASE.
If more than the Minimum Number of Shares shall be validly tendered and not
withdrawn prior to the Expiration Date (as defined in the Offer to Purchase),
Purchaser will, upon the terms and subject to the conditions of the Offer,
purchase the Minimum Number of Shares on a pro rata basis (with adjustments to
avoid purchases of fractional Shares) based upon the number of Shares validly
tendered and not withdrawn prior to the Expiration Date.
As of the date of the Offer to Purchase, the Rights are evidenced by the
Share Certificates (as defined below) evidencing the Shares and do not trade
separately. Accordingly, by tendering a Share Certificate evidencing Shares, a
shareholder is automatically tendering a similar number of associated Rights.
If, however, the Rights detach and separate Rights Certificates (as defined
below) are issued, stockholders will be required to tender one Right for each
share of Common Stock tendered in order to effect a valid tender of such share
of Common Stock.
Enclosed for your information and use are copies of the following documents:
1. Offer to Purchase, dated December 15, 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares (including Rights);
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to Harris Trust Company of New York (the "Depositary")
by the Expiration Date or if the procedure for book-entry transfer cannot be
completed by the Expiration Date;
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS THE OFFER IS
EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") and, if the Rights are at such
time separately traded, certificates representing the Rights associated with
shares of the Common Stock (the "Rights Certificates") (or timely confirmation
of a book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a
Letter of Transmittal (or facsimile thereof) properly completed and duly
executed, with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase), and any
other required documents.
If holders of Shares wish to tender pursuant to the Offer, but cannot
deliver their certificates or other required documents or cannot comply with the
procedure for book-entry transfer prior to the expiration of the Offer, a tender
may be effected by following the guaranteed delivery procedure described in
Section 3 ("Procedures for Accepting the Offer and Tendering Shares") of the
Offer to Purchase.
2
<PAGE>
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer to Purchase) in connection with the solicitation
of tenders of Shares pursuant to the Offer. However, Purchaser will reimburse
you for customary mailing and handling expenses incurred by you in forwarding
any of the enclosed materials to your clients. Purchaser will pay or cause to be
paid any stock transfer taxes payable with respect to the transfer of Shares to
it, except as otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Salomon Smith Barney or Georgeson & Company Inc. (the "Information Agent") at
their respective addresses and telephone numbers set forth on the back cover
page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
SALOMON SMITH BARNEY
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
6,347,241 SHARES OF COMMON STOCK
(including the associated Preferred Stock Purchase Rights)
of
PACIFIC SCIENTIFIC COMPANY
at
$20.50 NET PER SHARE
BY
TORQUE CORPORATION
a wholly owned subsidiary of
KOLLMORGEN CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS THE OFFER IS
EXTENDED.
December 15, 1997
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated December 15,
1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended from time to time, together constitute the "Offer") in connection with
the offer by Torque Corporation, a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Kollmorgen Corporation, a New York corporation
("Parent"), to purchase 6,347,241 shares of common stock, par value $1.00 per
share (the "Common Stock"), of
Pacific Scientific Company, a California corporation (the "Company"), including
the associated preferred stock purchase rights (the "Rights" and, together with
the Common Stock, the "Shares"), or such greater or lesser number of Shares
that, together with the Shares owned by Parent and Purchaser, would constitute a
majority of the outstanding Shares on a fully diluted basis (such number of
Shares being the "Minimum Number") at a price of $20.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions contained in the
Offer. We are the holder of record of Shares held by us for your account. A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $20.50 per Share, net to the seller in cash.
2. The Offer is being made for the Minimum Number of Shares. If more
than the Minimum Number of Shares is validly tendered and not withdrawn
prior to the Expiration Date (as defined in the Offer to Purchase),
Purchaser will, upon the terms and subject to the conditions of the Offer,
purchase the Minimum Number of Shares on a pro rata basis (with adjustments
to avoid purchases of fractional Shares) based upon the number of Shares
validly tendered and not withdrawn prior to the Expiration Date.
<PAGE>
3. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS
THE OFFER IS EXTENDED.
4. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least the Minimum Number of Shares, (2) the expiration or termination of any
applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, (3) Parent and Purchaser having
obtained, prior to the expiration of the Offer, on terms satisfactory to
Parent in its sole discretion, sufficient financing to enable consummation
of the Offer and the Proposed Merger (as defined in the Offer to Purchase),
(4) 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, (5) Purchaser being satisfied, in its sole discretion,
that the Offer and the Proposed Merger have been approved for purposes of
Article Fifth of the Company's Articles of Incorporation or Article Fifth of
the Company's Articles of Incorporation (if necessary) has been invalidated
or is otherwise satisfied with respect to the Offer and Proposed Merger and
(6) the approval by Parent's shareholders of the issuance of common stock,
par value $2.50 per share, of Parent in the Proposed Merger. The Offer is
also subject to the other terms and conditions which are contained in the
Offer to Purchase.
5. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes with respect to the purchase of
Shares by Purchaser pursuant to the Offer.
6. As of the date of the Offer to Purchase, the Rights are evidenced by
the certificates evidencing the Shares (the "Share Certificates") and do not
trade separately. Accordingly, by tendering a Share Certificate evidencing
Shares, a shareholder is automatically tendering a similar number of
associated Rights. If, however, the Rights detach and separate certificates
representing the Rights are issued, shareholders will be required to tender
one Right for each share of Common Stock tendered in order to effect a valid
tender of such share of Common Stock.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US WITH AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON
YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes aware
of any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by Salomon Smith Barney or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
SHARES OF COMMON STOCK
OF
PACIFIC SCIENTIFIC COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated December 15, 1997, and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer") in
connection with the offer by Torque Corporation, a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Kollmorgen Corporation, a New
York corporation ("Parent"), to purchase 6,347,241 shares of common stock, par
value $1.00 per share (the "Common Stock"), of Pacific Scientific Company, a
California corporation (the "Company"), including the associated preferred stock
purchase rights (together with the Common Stock, the "Shares"), or such greater
or lesser number of Shares that, together with the Shares owned by Parent and
Purchaser, would constitute a majority of the outstanding Shares on a fully
diluted basis, at a price of $20.50 per Share, net to the seller in cash.
This form will instruct you to tender the number of Shares indicated below
(or, if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
<TABLE>
<CAPTION>
NUMBER OF SHARES TO BE TENDERED:* SIGN HERE
SHARES
(INCLUDING THE ASSOCIATED PREFERRED
STOCK PURCHASE RIGHTS)
--------------------------------------------
<S> <C>
--------------------------------------------
SIGNATURE(S)
Dated: , 199
-------------------------------------------
-------------------------------------------
PLEASE TYPE OR PRINT NAME(S)
--------------------------------------------
--------------------------------------------
PLEASE TYPE OR PRINT ADDRESS
--------------------------------------------
AREA CODE AND TELEPHONE NUMBER
--------------------------------------------
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The
revocable savings grantor-trustee(1)
trust (grantor is
also trustee)
b. So-called trust
account that is The actual owner(1)
not a legal or
valid trust under
state law.
5. Sole proprietorship The owner(3)
6. A valid trust, The legal entity (Do
estate, or pension not furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
- -----------------------------------------------------
<CAPTION>
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C> <C>
- -----------------------------------------------------
7. Corporate account The corporation
8. Religious, The organization
charitable, or
educational
organization account
9. Partnership account The partnership
10. Association, club, The organization
or other tax-exempt
organization
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business or "doing
business as" name. You may use either your social security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name listed, the number
will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Note: Section references are to the Internal Revenue Code unless otherwise
noted.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisors Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation
(other than certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (1) through (5) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries, Inc.,
Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends that generally are exempt from
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments of mortgage interest to you.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated December 15, 1997 and the related Letter of
Transmittal, and is being made to all holders of Shares. Purchaser (as defined
below) is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Salomon Smith Barney
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
6,347,241 Shares of Common Stock
(including the associated Preferred Stock Purchase Rights)
of
Pacific Scientific Company
at
$20.50 Net Per Share
by
Torque Corporation,
a wholly owned subsidiary of
Kollmorgen Corporation
Torque Corporation, a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Kollmorgen Corporation, a New York corporation ("Kollmorgen"),
hereby offers to purchase 6,347,241 shares of common stock, par value $1.00 per
share (the "Common Stock"), of Pacific Scientific Company, a California
corporation ("Pacific Scientific"), including the associated preferred stock
purchase rights (the "Rights" and, together with the Common Stock, the "Shares")
issued pursuant to the Shareholder Protection Agreement, dated as of November 7,
1988, as amended (the "Rights Agreement"), between Pacific Scientific and
Manufacturers Hanover Trust Company, as successor Rights Agent (the "Rights
Agent"), or such greater or lesser number of Shares as would constitute a
majority of the outstanding Shares on a fully diluted basis (such number of
Shares being the "Minimum Number") at a price of $20.50 per Share, net to the
seller in cash (the "Offer Price"), upon the terms and subject to the conditions
set forth in the Offer to Purchase dated December 15, 1997 (the "Offer to
Purchase") and the related Letter of Transmittal (which, as amended from time to
time, together constitute the "Offer").
<PAGE>
Unless the context otherwise requires, all references to Rights shall
include the benefits that may inure to holders of the Rights pursuant to the
Rights Agreement. Unless the Rights are redeemed prior to the Expiration Date
(as defined below), holders of Shares will be required to tender one associated
Right for each Share tendered in order to effect a valid tender of such Share.
Unless and until the Separation Time (as defined in the Offer to Purchase)
occurs, the Rights are represented by and transferred with the Shares.
Accordingly, if the Separation Time does not occur prior to the Expiration Date,
a tender of shares of Common Stock will constitute a tender of the associated
Rights. If the Separation Time has occurred, certificates representing a number
of Rights equal to the number of shares of Common Stock being tendered must be
delivered to the Depositary (as defined herein) in order for such shares of
Common Stock to be validly tendered.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 14, 1998, UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
MINIMUM NUMBER OF SHARES, (2) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED, (3) KOLLMORGEN AND PURCHASER HAVING OBTAINED, PRIOR TO THE
EXPIRATION OF THE OFFER, ON TERMS SATISFACTORY TO KOLLMORGEN IN ITS SOLE
DISCRETION, SUFFICIENT FINANCING TO ENABLE CONSUMMATION OF THE OFFER AND THE
PROPOSED MERGER DESCRIBED BELOW, (4) 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, (5) PURCHASER BEING
SATISFIED, IN ITS SOLE DISCRETION, THAT THE OFFER AND THE PROPOSED MERGER HAVE
BEEN APPROVED FOR PURPOSES OF ARTICLE FIFTH OF PACIFIC SCIENTIFIC'S ARTICLES OF
INCORPORATION (IF NECESSARY) OR ARTICLE FIFTH OF PACIFIC SCIENTIFIC'S ARTICLES
OF INCORPORATION HAS BEEN INVALIDATED OR IS OTHERWISE SATISFIED WITH RESPECT TO
THE OFFER AND PROPOSED MERGER AND (6) THE APPROVAL BY KOLLMORGEN'S SHAREHOLDERS
OF THE ISSUANCE OF COMMON STOCK, PAR VALUE $2.50 PER SHARE, OF KOLLMORGEN
("KOLLMORGEN COMMON STOCK") IN THE PROPOSED MERGER. THE OFFER IS ALSO SUBJECT
TO THE OTHER TERMS AND CONDITIONS WHICH ARE CONTAINED IN THE OFFER TO PURCHASE.
The purpose of the Offer is to acquire control of, and ultimately the
entire equity interest in, Pacific Scientific. Kollmorgen is seeking to
negotiate with Pacific Scientific a definitive merger agreement 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 Share then outstanding (other than Shares held by Pacific Scientific or any
wholly owned subsidiary of Pacific Scientific and Shares owned by Kollmorgen,
Purchaser or any other direct or indirect wholly owned subsidiary of Kollmorgen
and Shares held by shareholders who shall have demanded and perfected,
<PAGE>
and who shall not have withdrawn or otherwise lost, dissenters' rights, if any,
under California law) 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 Share will be converted in the Proposed Merger shall be
determined by dividing $20.50 by the average, over the twenty consecutive
trading days ending five days prior to the meeting of the shareholders of
Pacific Scientific called for the purpose of voting on the Proposed Merger, of
the daily average of the high and low per share sales price of Kollmorgen Common
Stock (weighted by sales volume). 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 Share.
Kollmorgen intends to solicit the consent of Pacific Scientific's
shareholders to take action by written consent to call a special meeting in
order to, among other things, remove from office the entire Pacific Scientific
Board of Directors (the "Pacific Scientific Board") and fill the newly created
vacancies on the Pacific Scientific Board by electing six persons nominated by
Kollmorgen 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.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to Harris Trust
Company of New York (the "Depositary") of Purchaser's acceptance for payment of
such Shares pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Shares accepted for payment pursuant to the Offer will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payments from Purchaser and transmitting such payments to tendering shareholders
whose Shares have been accepted for payment. Under no circumstances will
interest on the purchase price for Shares be paid, regardless of any delay in
making such payment. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) the certificates evidencing such Shares (the "Share
Certificates") and, if the Rights are at such time separately traded,
certificates representing the Rights associated with the shares of Common Stock
(the "Rights Certificates") or timely confirmation of a book-entry transfer of
such Shares (and Rights, if applicable) into the Depositary's account at one of
the Book-Entry Transfer Facilities (as defined in Section 2 ("Acceptance for
Payment and Payment for Shares") of the Offer to Purchase) pursuant to the
procedures set forth in Section 3 ("Procedures for Accepting the Offer and
Tendering Shares") of the Offer to Purchase, (ii) the Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message (as defined in Section 2 ("Acceptance for Payment and Payment for
Shares") of the Offer to Purchase) and (iii) any other documents required under
the Letter of Transmittal.
<PAGE>
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during which
the Offer is open, including the occurrence of any condition specified in
Section 14 ("Certain Conditions of the Offer") of the Offer to Purchase, by
giving oral or written notice of such extension to the Depositary. Any such
extension will be followed as promptly as practicable by public announcement
thereof, such announcement thereof to be made no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of tendering shareholders to withdraw their Shares.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Wednesday, January 14, 1998, unless and until Purchaser, in its sole discretion,
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by Purchaser, will expire.
If more than the Minimum Number of Shares shall be validly tendered and not
withdrawn prior to the Expiration Date, Purchaser will, upon the terms and
subject to the conditions of the Offer, purchase the Minimum Number of Shares on
a pro rata basis (with adjustments to avoid purchases of fractional Shares)
based upon the number of Shares validly tendered and not withdrawn prior to the
Expiration Date. Because of the difficulty of determining the precise number of
Shares validly tendered and not withdrawn, if proration is required, Purchaser
does not expect to be able to announce the final proration factor until
approximately five New York Stock Exchange, Inc. trading days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Shareholders of
Pacific Scientific may obtain such preliminary information from the Information
Agent, and may be able to obtain such information from their brokers. Purchaser
will not pay for any Shares accepted for payment pursuant to the Offer until the
final proration factor is known.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 midnight, New York City
time, on Wednesday, January 14, 1998 (or the latest time and date at which the
Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted
for payment by Purchaser pursuant to the Offer, may also be withdrawn at any
time after Thursday, February 12, 1998. For a withdrawal to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the back
cover page of the Offer to Purchase. Any such notice of withdrawal must specify
the name of the person who tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of such Shares, if
different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the
<PAGE>
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 ("Procedures for Accepting the Offer and
Tendering Shares") of the Offer to Purchase), unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 ("Procedures for Accepting the Offer and Tendering Shares") of the
Offer to Purchase, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares. All questions as to the form and validity (including the time
of receipt) of any notice of withdrawal will be determined by Purchaser, in its
sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
A request is being made to Pacific Scientific for the use of Pacific
Scientific's shareholder list and security position listings for the purpose of
disseminating the Offer to holders of Shares. Upon compliance by Pacific
Scientific with such request, the Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
Pacific Scientific's shareholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or who are listed as participants in a
clearing agency's security position listing.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
<PAGE>
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below, and copies will be furnished promptly at Purchaser's expense. No
fees or commissions will be paid to brokers, dealers or other persons (other
than the Information Agent and the Dealer Manager) for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
GEORGESON
& COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect: (212) 440-9800
ALL OTHERS CALL TOLL-FREE: (800) 223-2064
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
Seven World Trade Center
New York, New York 10048
(888) 746-7939
Salomon Brothers Inc, doing business as Salomon Smith Barney, is
acting as Dealer Manager in connection with the Offer. Salomon Smith
Barney is a service mark of Smith Barney Inc. Salomon Brothers Inc
and Smith Barney Inc. are affiliated but separately registered
broker/dealers under common control of Salomon Smith Barney Holdings
Inc. Salomon Brothers Inc and Salomon Smith Barney Holding Inc. have
been licensed to use the Salomon Smith Barney service mark.
December 15, 1997
<PAGE>
Contacts: Roy Winnick or Mark Semer
Kekst and Company
212-521-4842 or 4802
KOLLMORGEN CORPORATION ANNOUNCES $20.50 PER SHARE OFFER
FOR PACIFIC SCIENTIFIC COMPANY
-- Transaction Would Establish Combined Enterprise as a Leader
in the Fast-Growing Electronic Motion Control Business --
WALTHAM, Mass., December 15, 1997 -- Kollmorgen Corporation (NYSE: KOL), of
Waltham, Mass., announced that it has proposed a business combination with
Pacific Scientific Company (NYSE: PSX), of Newport Beach, Calif., that values
Pacific Scientific common stock at $20.50 per share. The offer price
represents an approximately 33% premium over Pacific Scientific's closing
market price on Friday, December 12, of $15.44 on the New York Stock Exchange
and a premium of approximately 37% over the average closing price for the
preceding 30 trading days.
As part of the proposed transaction, Kollmorgen will today commence a tender
offer to acquire a majority of Pacific Scientific's common stock outstanding
for $20.50 per share in cash. If more than a majority of Pacific Scientific
shares are tendered into the offer, Kollmorgen will purchase a majority of
the shares outstanding on a pro rata basis. The offer, proration period and
withdrawal rights will expire at 12:00 midnight, New York City time, on
Wednesday, January 14, 1998, unless the offer is extended.
Under Kollmorgen's proposal, following the tender offer, Kollmorgen and
Pacific Scientific would merge, and each remaining share of Pacific
Scientific common stock would be exchanged for Kollmorgen common stock with a
value of $20.50, subject to a collar. Following the merger, Pacific
Scientific's current shareholders would own approximately 43% of the combined
enterprise, based upon Kollmorgen's closing stock price on December 12, 1997
of $16.88.
Kollmorgen believes that the combination would be accretive to the company's
earnings in 1999 and increasingly so thereafter.
In order to ensure that Pacific Scientific's shareholders are permitted to
choose freely to accept its offer, Kollmorgen also is announcing today that
it will 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 Kollmorgen's nominees to the Board. Under applicable law,
the holders of 10% of Pacific Scientific's outstanding shares have the power
to call a special meeting. Kollmorgen expects that, if elected and subject
to their fiduciary duties, Kollmorgen's nominees would act to facilitate the
proposed combination, including by redeeming or otherwise making inapplicable
to the
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<PAGE>
2
proposed combination, the Rights outstanding under Pacific Scientific's
shareholder rights plan and approving the proposed business combination (if
required) under Pacific Scientific's "fair price" charter provision.
Kollmorgen also announced that it is commencing litigation against Pacific
Scientific and its 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 Kollmorgen's offer and proposed merger.
Salomon Smith Barney is acting as financial advisor to Kollmorgen.
Kollmorgen has entered into a binding commitment letter with an affiliate of
Salomon Smith Barney, which has committed, subject to certain conditions, to
provide $300 million of secured bank financing for the cash necessary to
consummate the transaction, including amounts necessary to refinance certain
existing indebtedness and to provide a working capital facility for the
combined company.
In announcing the proposed combination, Gideon Argov, Chairman of the Board,
President and Chief Executive Officer of Kollmorgen Corporation, stated: "My
colleagues and I have been disappointed that to date, Pacific Scientific's
management and Board of Directors have declined to negotiate our proposal.
We are firmly convinced that a combination of our two companies offers
compelling strategic and financial benefits. We hope that we will now be
able to engage the Pacific Scientific Board in discussions leading to a
prompt, friendly negotiated transaction."
Mr. Argov noted that "this transaction will bring together two companies with
highly complementary motion control product lines. We are convinced that by
establishing a combined enterprise with a strong customer base, dedicated
employees and a strong balance sheet, the new company will be well-positioned
to aggressively pursue attractive opportunities for external and internal
growth, to realize its revenue and earnings potential, and to build value for
its shareholders, customers and employees."
Consummation of the tender offer is subject to certain conditions, including,
among others, expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, receipt of
the requisite financing for the transaction, approval by Kollmorgen's
shareholders of the issuance of the Kollmorgen common shares in the proposed
merger, and satisfaction of conditions relating to Pacific Scientific's
shareholder rights plan and "fair price" charter provision, all as more fully
described in Kollmorgen's Offer to Purchase relating to the tender offer.
Copies of the Offer to Purchase and related documents may be obtained from
Georgeson & Company Inc., the information agent for the tender offer.
The Kollmorgen offer was communicated today in a letter from Mr. Argov to
Lester Hill, Chairman, President and Chief Executive Officer of Pacific
Scientific Company. The following is the complete text of Mr. Argov's letter
to Mr. Hill:
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<PAGE>
3
December 15, 1997
Mr. Lester Hill
Chairman of the Board, President
and Chief Executive Officer
Pacific Scientific Company
620 Newport Center Drive, Suite 700
Newport Beach, California 92660
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 seriously consider 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 will commence a tender offer to acquire half of Pacific Scientific's
outstanding shares for $20.50 per share in cash. Under 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, subject to 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 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 tender offer is successfully
consummated.
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<PAGE>
4
- - 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 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 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. 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.
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<PAGE>
5
- - 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 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
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<PAGE>
6
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 the benefits of
the combination 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 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,
/s/ Gideon Argov
Chairman, President and
Chief Executive Officer
cc: Members of the Board of Directors
of Pacific Scientific Company
# # #
Kollmorgen's primary business is in the area of high-performance electronic
motion control. Growth in this business area is fueled by the need for
higher productivity in every industrial, commercial, aerospace, and consumer
market segment. Additional
<PAGE>
7
information can be found on the World Wide Web at http://kollmorgen.com.
This press release contains certain forward-looking statements, including
assumptions as to how Kollmorgen, Pacific Scientific and the combined company
may perform in the future, which 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. For a discussion of such risks and
uncertainties, shareholders are referred to the discussion thereof in the
consent solicitation materials to be filed today by Kollmorgen with the
Securities and Exchange Commission.
# # #
<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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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.................................................................................. 6
Interest of Certain Persons in the Proposed Combination............................................... 6
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...................................................... 29
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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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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<S> <C>
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
<PAGE>
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
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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.
22
<PAGE>
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
23
<PAGE>
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.
24
<PAGE>
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
25
<PAGE>
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
26
<PAGE>
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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<PAGE>
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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<PAGE>
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
29
<PAGE>
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.
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<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,
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<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.
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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
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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.
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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.
43
<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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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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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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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.
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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
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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
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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.
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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".......................................................................... iii
"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,
III-1
<PAGE>
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
III-2
<PAGE>
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
III-3
<PAGE>
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
III-4
<PAGE>
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.)
III-5
<PAGE>
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
<PAGE>
CONSENT TO ACTION OF SHAREHOLDERS WITHOUT A MEETING
REVOCABLE CONSENT SOLICITED ON BEHALF OF KOLLMORGEN CORPORATION
The undersigned, a common shareholder of Pacific Scientific Company
("Pacific Scientific"), acting with respect to all of the shares of Common
Stock, par value $1.00 per share (the "Common Stock"), held by the undersigned,
hereby consents, withholds consent or abstains as specified on the reverse side
with respect to the taking of corporate action without a meeting pursuant to
Section 603 of the California General Corporation Law. All capitalized terms
used but not defined herein shall have the meanings ascribed to such terms in
the Consent Solicitation Statement/Preliminary Prospectus furnished herewith
(the "Consent Solicitation Statement/Prospectus").
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTION DESCRIBED ON THE REVERSE SIDE OF THIS CARD.
Shareholders wishing to approve the actions set forth herein should mark the
"Consent" box on the reverse side of this consent card. Those opposing such
action should register their position by marking the "Withhold Consent" or
"Abstain" box on the reverse side of this consent card or by not returning this
consent card. Unless you otherwise indicate on this consent card, this consent
card will be voted as set forth on the reverse side with respect to all shares
of Common Stock held by the undersigned, and if no choice is indicated but this
consent card is otherwise completed, you will be deemed to have consented to the
action set forth on the reverse side of this consent card. By executing this
card the undersigned hereby revokes any and all prior consents or revocations of
consent and hereby affirms that the undersigned has the power to deliver a
consent for the number of shares represented by this consent.
SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO THE ACTION SET FORTH
ON THE REVERSE SIDE OF THIS CARD.
Kollmorgen Corporation is soliciting consents to call a special meeting of
Pacific Scientific shareholders (the "Special Meeting") for the purpose of
voting on (i) the approval of a shareholder resolution to repeal any and all
provisions of the bylaws of Pacific Scientific (the "Pacific Scientific Bylaws")
that have not been duly filed by Pacific Scientific with the Securities and
Exchange 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"), (ii) the removal from office of the entire Pacific
Scientific Board of Directors (the "Pacific Scientific Board") and (iii) the
election of six persons to be nominated by Kollmorgen Corporation (the
"Kollmorgen Nominees") to fill the vacancies created thereby. 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 (the "Special Meeting Date").
Calling of the Special Meeting is conditioned upon receiving the consent of the
holders of not less than 10% of the outstanding shares of Common Stock entitled
to vote at the Special Meeting. Unless previously revoked, this consent will be
effective when and if delivered to Pacific Scientific along with consents
representing the percentage of shares indicated in the immediately preceding
sentence.
PLEASE SIGN AND DATE ON REVERSE SIDE
<PAGE>
YOUR CONSENT TO THE CALLING OF THE SPECIAL MEETING WILL NOT REQUIRE YOU TO VOTE
FOR ANY OF THE PROPOSALS AT THE SPECIAL MEETING. YOU WILL STILL HAVE THE CHOICE
OF HOW YOU WILL VOTE ON ANY MATTER TO BE PROPOSED AT THE SPECIAL MEETING.
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO
ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE
CORPORATE ACTION DESCRIBED BELOW.
PROPOSAL: CALLING THE SPECIAL MEETING
<TABLE>
<S> <C>
CONSENT
Calling of the Special Meeting on the Special Meeting Date for the purpose of voting on (i) the Bylaw Repeal / /
Proposal, (ii) the removal from office of the entire Pacific Scientific Board and (iii) the election of the
Kollmorgen Nominees to fill the vacancies created thereby.
<CAPTION>
WITHHOLD
<S> <C>
Calling of the Special Meeting on the Special Meeting Date for the purpose of voting on (i) the Bylaw Repeal / /
Proposal, (ii) the removal from office of the entire Pacific Scientific Board and (iii) the election of the
Kollmorgen Nominees to fill the vacancies created thereby.
<CAPTION>
ABSTAIN
Calling of the Special Meeting on the Special Meeting Date for the purpose of voting on (i) the Bylaw Repeal / /
Proposal, (ii) the removal from office of the entire Pacific Scientific Board and (iii) the election of the
Kollmorgen Nominees to fill the vacancies created thereby.
<CAPTION>
Calling of the Special Meeting on the Special Meeting Date for the purpose of voting on (i) the Bylaw Repeal
Proposal, (ii) the removal from office of the entire Pacific Scientific Board and (iii) the election of the
Kollmorgen Nominees to fill the vacancies created thereby.
</TABLE>
When shares are held by joint tenants, both
must sign. When signing as attorney-in-fact,
executor, administrator, trustee, guardian,
corporate officer or partner, please give
full title as such. If a corporation, please
sign in a corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Signature ___________________________ Dated: _______________
Signature ___________________________ Dated: _______________
<PAGE>
RESERVOIR PLACE
[LOGO]
1601 TRAPELO ROAD
WALTHAM, MA 02154
(781) 890-5655
DECEMBER 15, 1997
Dear Pacific Scientific Shareholders:
Kollmorgen Corporation has proposed a business combination with Pacific
Scientific Company (the "Proposed Combination") which Kollmorgen believes would
offer exceptional benefits to the shareholders of both Pacific Scientific and
Kollmorgen. To date, the Pacific Scientific Board of Directors (the "Board") has
refused to enter into negotiations regarding the Proposed Combination despite
Kollmorgen's repeated requests to do so. Because the Board is attempting to deny
you the opportunity to share in the rewards of the combined company, Kollmorgen
is presenting this opportunity directly to the Pacific Scientific shareholders.
Kollmorgen urges you to join us in calling for a special meeting of Pacific
Scientific shareholders (the "Special Meeting") in order to remove the entire
Board and elect Kollmorgen's nominees to the 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 Proposed Combination.
WE HAVE PROVIDED YOU WITH A FORM OF CONSENT FOR USE IN CALLING THE SPECIAL
MEETING. WE ASK THAT YOU COMPLETE IT, SIGN IT, AND RETURN IT TO US IN THE
ENVELOPE PROVIDED.
As part of the Proposed Combination, we have commenced a tender offer (the
"Tender Offer") to acquire a majority of Pacific Scientific's outstanding common
stock for $20.50 per share in cash. Assuming the Tender Offer is successful,
Kollmorgen and Pacific Scientific will then merge (the "Proposed Merger"), and
each remaining share of Pacific Scientific common stock will be exchanged for
Kollmorgen common stock with a value of $20.50 per share, subject to a collar.
If the Tender Offer is successful, the affirmative vote of Pacific Scientific's
shareholders on the Proposed Merger is assured.
If more than half of Pacific Scientific's outstanding common stock is
tendered into the Tender Offer, tendered shares will be purchased on a pro rata
basis. In such case, shareholders who tendered shares will receive a mix of cash
and stock in the Proposed Combination. You are free to tender all, part or none
of your Pacific Scientific common shares into the Tender Offer. However, to the
extent that your shares are purchased in the Tender Offer, you will not receive
Kollmorgen stock for such purchased shares and, as a result, you will not
participate in any future growth of the combined company.
Enclosed with this letter is important information about the Proposed
Combination. It is important that you understand the purpose of each of the
documents you are receiving. First, we have sent you an Offer to Purchase, a
Letter of Transmittal and other documents relating to the Tender Offer. These
documents describe our offer to purchase your Pacific Scientific common stock
for $20.50 per share in cash. Following the instructions contained in the Tender
Offer documents, you can tender your shares to us as soon as you wish. The
second set of materials sent to you relate to calling the Special Meeting.
Accompanying this letter is a consent solicitation statement/preliminary
prospectus, which describes the Proposed Combination in detail, along with a
Form of Consent which you can use to join us in calling for the Special Meeting.
After the Special Meeting has been called, we will send you proxy materials
asking you to vote in favor of our proposals in connection with the Proposed
Combination, namely the removal of the entire Board, the election of our
nominees to the Board and the repeal of any bylaws not filed with the Securities
and Exchange Commission prior to August 11, 1997, including any amendments
adopted on or after December 15, 1997. In the next few weeks, we will make
additional mailings to you. WE URGE YOU TO READ CAREFULLY EACH DOCUMENT SENT TO
YOU.
Kollmorgen is not currently seeking your proxy for the removal of the entire
Pacific Scientific Board, the election of the Kollmorgen nominees to the Pacific
Scientific Board or the approval of the bylaw repeal
<PAGE>
proposal. After the Special Meeting 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, however, be asked to vote on the Proposed Merger in the future.
THE ONLY ACTION WE ARE CURRENTLY ASKING YOU TO TAKE IS GIVE YOUR CONSENT TO
CALLING THE SPECIAL MEETING BY EXECUTING THE ENCLOSED FORM OF CONSENT.
If consummated, the financial benefits of the Proposed Combination 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 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 proposed merger, you 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.
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's management team and advisors have carefully analyzed the
implications of the Proposed Combination between Kollmorgen and Pacific
Scientific. We concluded that a combination offered real benefits to our
respective shareholders, customers and employees. We then approached Pacific
Scientific's management on several occasions to discuss our analysis and to
pursue discussions we hoped would lead to a merger agreement between our two
companies. Despite what we are convinced are the compelling benefits offered by
such a combination, Pacific Scientific management decided not to enter into
2
<PAGE>
a meaningful dialogue with us. We were surprised at Pacific Scientific
management's reaction to the opportunities offered by this combination.
We continue to firmly believe that consolidation in our industry is
inevitable, and 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. Kollmorgen believes that this reality, coupled with the
natural fit of our two companies, makes a Pacific Scientific-Kollmorgen
combination compelling. 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 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 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.
Your execution of a Form of Consent to call the Special Meeting will not
require you to tender your shares or to vote for any of the proposals at the
Special Meeting. You will still have the choice of whether or not to tender and
of how you will vote on any matter to be proposed at the Special Meeting. Even
if you are currently undecided as to whether to embrace the Proposed
Combination, calling the Special Meeting
3
<PAGE>
will preserve your right and the right of your fellow shareholders to decide
whether to receive $20.50 per share in the Tender Offer and the Proposed Merger.
PLEASE EXECUTE THE ENCLOSED FORM OF CONSENT AND RETURN IT TO KOLLMORGEN, C/O
GEORGESON & COMPANY INC., IN THE ENCLOSED ENVELOPE TO JOIN WITH US IN CALLING
THE SPECIAL MEETING TO PERMIT SHAREHOLDERS TO CONSIDER AND VOTE UPON OUR
PROPOSALS.
We at Kollmorgen are excited at the prospect of combining our two fine
companies. Once you have had the chance to review the enclosed materials, we are
certain that you will share our vision and give us your support.
Sincerely,
[LOGO]
Gideon Argov
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Kollmorgen Corporation
IF YOUR SHARES ARE HELD BY YOUR BANK OR BROKERAGE FIRM, ONLY THAT FIRM CAN
EXECUTE YOUR FORM OF CONSENT TO CALL THE SPECIAL MEETING. CALL YOUR BANK OR
BROKER WITH YOUR INSTRUCTIONS TO EXECUTE YOUR FORM OF CONSENT.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL GEORGESON & COMPANY INC., WHICH IS
ASSISTING US, TOLL FREE AT 1-800-223-2064.
4
<PAGE>
Contact: Roy Winnick or Mark Semer
Kekst and Company
(212) 521-4842 or 4802
RECORD DATE OF DECEMBER 15 SET TO
CALL SPECIAL MEETING OF PACIFIC SCIENTIFIC SHAREHOLDERS
IN CONNECTION WITH KOLLMORGEN OFFER
WALTHAM, Massachusetts, December 15, 1997 -- Kollmorgen Corporation (NYSE: KOL)
announced today that a record date of today, December 15, has been established
for the consent solicitation to call a special meeting of shareholders of
Pacific Scientific Company (NYSE: PSX) commenced earlier today by Kollmorgen.
The consent solicitation is being undertaken in connection with the business
combination proposal made today by Kollmorgen to acquire Pacific Scientific at a
price of $20.50 per share.
Torque Corporation, a wholly owned subsidiary of Kollmorgen and the record owner
of 100 shares of Pacific Scientific common stock, has today delivered its
written consent to the Secretary of Pacific Scientific to call a special meeting
of Pacific Scientific shareholders. Under California law, the day that the
first written consent is delivered is the record date for determining
shareholders entitled to consent to the calling of the special meeting.
At the meeting, if successfully called, Kollmorgen will ask Pacific Scientific
shareholders to remove the entire Pacific Scientific Board of Directors and
replace it with new directors nominated by Kollmorgen, who are expected, subject
to their fiduciary duties under applicable law, to take actions to consummate
the proposed business combination. In addition, Kollmorgen will propose a
binding shareholder resolution at the special meeting that will preclude or
rescind any attempt the Pacific Scientific Board has made or may make to amend
the Pacific Scientific bylaws.
Further, as part of the proposed business combination, Kollmorgen also commenced
today a tender offer to acquire a majority of the outstanding shares of Pacific
Scientific
<PAGE>
on a fully diluted basis at $20.50 per share. Under Kollmorgen's proposal,
following successful consummation of the tender offer, Pacific Scientific
shareholders would receive Kollmorgen common stock with a value of $20.50
(subject to a collar) in a second step merger.
# # #
<PAGE>
EXHIBIT 99(b)(1)
December 9, 1997
Kollmorgen Corporation
1601 Trapelo Road
Waltham, MA 02154
Attention:
PROJECT TORQUE
$300,000,000 SECURED CREDIT FACILITIES
Ladies and Gentlemen:
You have advised Salomon Brothers Holding Company Inc
("SBHCI") and Salomon Brothers Inc ("SBI") that you propose through a
newly-formed Delaware corporation (the "Bidder") that is a wholly owned
subsidiary of Kollmorgen Corporation (the "Company") to offer to purchase, at a
price per share not in excess of the price set forth in the letter, dated as of
the date hereof, from the Company to a California corporation which we have
agreed to call P Co., a majority of the outstanding shares of common stock, par
value $1.00 per share, (including the associated preferred stock purchase
rights) of P Co., pursuant to the terms of an Offer to Purchase, a draft of
which you have furnished to us (the "Tender Offer"). You also have advised SBHCI
and SBI that as soon as practicable following the consummation of the Tender
Offer, you will seek to consummate a merger or similar business combination with
P Co. in order to acquire for shares of your common stock the balance of such
common stock of P Co. (the "Merger" and, together with the Tender Offer, the
"Transaction").
You have further indicated that the Transaction and your
ongoing working capital needs would require approximately $300,000,000, and have
requested that SBHCI provide you with such funds. The anticipated sources and
uses of such funds are those previously disclosed to us in our discussions.
In connection with the foregoing and in reliance upon the
information you have provided to SBHCI and SBI, SBHCI is pleased to advise you
of its
<PAGE>
commitment, upon your acceptance hereof, to provide the entire principal
amount of such financing pursuant to the facilities hereinafter described (the
"Facilities"), upon the terms and subject to the conditions set forth or
referred to in this Commitment Letter and in the Summary of Principal Terms and
Conditions attached hereto as Exhibit A (the "Term Sheet"). You hereby appoint
SBI to act, and SBI hereby agrees to act, as sole and exclusive advisor and
arranger for the Facilities on the terms set forth or referred to in this
Commitment Letter and in the Term Sheet.
It is understood and agreed that (a) no additional agents,
co-agents or arrangers will be appointed and no other titles awarded in
connection with the Facilities without the approval of SBHCI and SBI and (b) no
Lender (as defined below) will receive compensation outside the terms contained
herein and in the Fee Letter referred to below in order to obtain its commitment
to participate in the Facilities.
SBHCI reserves the right, prior to or after the execution of
definitive documentation for the Facilities, to syndicate all or a portion of
its commitment hereunder to one or more financial institutions that will become
parties to such definitive documentation pursuant to syndications to be managed
by SBI (the financial institutions becoming parties to such definitive
documentation being collectively referred to herein as the "Lenders"). You
understand that SBI intends to commence such syndication efforts promptly after
your public announcement of the Transaction and you agree actively to assist SBI
in completing timely and orderly syndication satisfactory to SBI. Such
assistance shall include (a) your using all reasonable efforts to ensure that
the syndication efforts benefit from your existing lending relationships, (b)
direct contact during the syndication between senior management, representatives
and advisors of the Company and its subsidiaries, on the one hand, and the
proposed Lenders, on the other hand, (c) assistance (including the use of all
reasonable efforts to cause your affiliates and advisors to assist) in the
preparation of a Confidential Information Memorandum for the Facilities and
other marketing materials to be used in connection with the syndication and (d)
the hosting, with SBI, of one or more meetings of prospective Lenders. In the
full syndication of the Facilities, SBI will, upon your request, extend to your
existing bank lenders the opportunity to participate in the Facilities.
It is understood and agreed that SBI, after consultation with
you, will manage all aspects of the syndication, including selection of Lenders,
determination of when SBI will approach potential Lenders and the time of
acceptance of the Lenders, any naming rights and the final allocations of the
commitments among the Lenders. You understand that any portion of the Facilities
allocated to the Lenders (other than SBHCI) will reduce the amount of the total
Facilities committed by SBHCI in this
2
<PAGE>
Commitment Letter. It is also understood and agreed that the amount and
distribution of fees among the Lenders will be at SBI's discretion. To assist
SBI in its syndication efforts, you agree promptly to prepare and provide to
SBHCI and SBI all information with respect to the Company, the Bidder, P Co. (to
the extent publicly available) and the Transaction, including all financial
information and projections, as SBHCI or SBI may reasonably request in
connection with the arrangements and syndication of the Facilities. You hereby
represent and covenant that (a) to the best of your knowledge, all information
other than the projections that have been or will be prepared by or on behalf of
you or any of your authorized representatives and made available to SBHCI or SBI
(the "Information"), when taken as a whole, is or will be, when furnished,
complete and correct in all material respects and does not or will not, when
furnished, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such statements
are made and (b) the projections that have been or will be prepared by or on
behalf of you or any of your authorized representatives and made available to
SBHCI or SBI have been or will be prepared in good faith based upon assumptions
that are reasonable at the time made and at the time the related projections are
made available to SBHCI or SBI; provided that the foregoing representation and
covenant does not cover information concerning P Co. or projections derived from
information concerning P Co. You agree that if, at any time from and including
the date hereof until the closing of the Facilities, any of the representations
in the preceding sentence would be incorrect in any material respect if the
Information and projections were being furnished, and such representations were
being made, at such time, then you will promptly supplement the Information and
such projections so that such representations will be correct in all material
respects under those circumstances.
As consideration for SBHCI's commitment hereunder and SBI's
agreement to structure, arrange and syndicate the Facilities and to provide
advisory services in connection therewith, you agree to pay to SBHCI the fees as
set forth in the Term Sheet and in the Fee Letter dated the date hereof and
delivered herewith with respect to the Facilities (the "Fee Letter"). Once paid,
such fees shall not be refundable under any circumstances.
SBHCI's commitment hereunder is subject to (a) SBHCI not
discovering or otherwise becoming aware of any information not previously
disclosed to it or publicly available prior to the date hereof that it believes
to be materially inconsistent with its understanding, based on the information
provided to it prior to the date hereof, of the business, assets, operations,
properties, financial condition, contingent liabilities (including pending
litigation), prospects and material agreements of the Company, the Bidder and P
Co., (b) there not having occurred since September
3
<PAGE>
26, 1997, any material adverse change in the business, assets, operations,
properties, financial condition, contingent liabilities (including pending
litigation), prospects or material agreements of the Company and its
subsidiaries, taken as a whole, or P Co. and its subsidiaries, taken as a whole,
other than changes which have been publicly reported prior to the date hereof,
(c) prior to and during the syndication of the Facilities there shall be no
competing issues of debt securities or commercial bank or other credit
facilities of the Company or any of its subsidiaries being offered, placed or
arranged, (d) SBHCI's reasonable satisfaction in all respects with (i) the
structure of the Transaction and all related tax, legal and accounting matters,
(ii) the material terms of the Tender Offer, the Merger and all other agreements
to be entered into in connection with the Transaction and (iii) the
capitalization of the Company and P Co. after giving effect to the Transaction,
(e) the negotiation, execution and delivery of definitive documentation with
respect to the Facilities satisfactory to SBHCI and its counsel, (f) SBHCI's
satisfaction that the Company, the Bidder and P Co. are not subject to material
contractual or other restrictions that would be violated by the Transaction and
the financing therefor contemplated hereby, including restrictions on the
granting of security interests and guarantees and the payment of dividends by
subsidiaries, (g) SBHCI's reasonable satisfaction with any material change from
the date hereof as to the timing and schedule for the Transaction, (h) your
compliance in all material respects with the terms of this Commitment Letter and
(i) the other conditions set forth or referred to in the Term Sheet. The terms
and conditions of SBHCI's commitment hereunder and of the Facilities are not
limited to those set forth herein and in the Term Sheet. Those matters that are
not covered by or made clear under the provisions hereof and of the Term Sheet
are subject to the approval and agreement of SBHCI, SBI and you.
You agree that this Commitment Letter and the transactions
contemplated hereby, by the Fee Letter, the Term Sheet and the Facilities are
matters covered by your indemnification obligations contained in the letter
agreement dated June 27, 1997, between the Company and SBI. In addition, you
will reimburse SBHCI and SBI from time to time, upon presentation of a summary
statement, for all reasonable out-of-pocket expenses (including but not limited
to expenses of SBHCI's due diligence investigation, consultants' fees,
syndication expenses, travel expenses and reasonable fees, disbursements and
other charges of counsel), in each case incurred in connection with the
Facilities and the preparation of this Commitment Letter, the Term Sheet, the
Fee Letter, the definitive documentation for the Facilities and any security
arrangements in connection therewith. Notwithstanding any other provision of
this Commitment Letter, no indemnified person shall be liable for any indirect
or consequential damages in connection with its activities related to the
Facilities.
4
<PAGE>
You acknowledge that SBHCI and SBI may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. Neither
SBHCI nor SBI will use confidential information obtained from you by virtue of
the transactions contemplated by this Commitment Letter or its other
relationships with you in connection with the performance by SBHCI or SBI of
services for other companies, and neither SBHCI nor SBI will furnish any such
information to others. You also acknowledge that neither SBHCI nor SBI has any
obligation to use in connection with the transactions contemplated by this
Commitment Letter, or to furnish to you, confidential information obtained by
SBHCI or SBI from other companies. It is understood and agreed that, subject to
the provisions of this agreement, SBHCI and SBI may share and exchange with each
other information relating to the Transaction and any financing related thereto
for use solely in connection with the transactions contemplated hereby.
You agree that you will not disclose this Commitment Letter,
the Term Sheet, the Fee Letter, the contents of any of the foregoing or the
activities of SBHCI or SBI pursuant hereto or thereto to any person without the
prior approval of SBHCI, except that (a) you may disclose this Commitment
Letter, the Term Sheet, the Fee Letter and the contents hereof and thereof (i)
to the Bidder and the respective directors, officers, employees, attorneys,
accountants and other advisors of you and the Bidder on a confidential and
need-to-know basis and (ii) as required by applicable law or compulsory legal
process and (b) after your acceptance hereof and of the Fee Letter, you may
disclose this Commitment Letter, the Term Sheet and the contents hereof and
thereof (but not the Fee Letter or the contents thereof) as you may deem
appropriate in connection with the Transaction. Any disclosure of the contents
hereof other than as set forth above will result in the automatic termination of
our obligations hereunder.
This Commitment Letter and SBHCI's commitment hereunder shall
not be assignable by you without the prior written consent of SBHCI, and any
attempted assignment without such consent shall be void. This Commitment Letter
may not be amended or any provision hereof waived or modified except by an
instrument in writing signed by SBHCI, SBI and you. This Commitment Letter may
be executed in any number of counterparts, each of which shall be an original
and all of which, when taken together, shall constitute one agreement. Delivery
of an executed counterpart of a signature page of this Commitment Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Commitment Letter. This Commitment Letter is intended to be
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor
5
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of, any person other than the parties hereto. This Commitment Letter shall be
governed by, and construed in accordance with, the law of the State of New York.
You hereby submit to the jurisdiction of the United States District Court for
the Southern District of New York and of any New York State court sitting in the
Borough of Manhattan with respect to actions brought by us with respect to this
letter, the requested financing or the transaction for which such financing is
being requested, and you agree that any action brought by you with respect to
such matters shall be brought only in one of such courts.
Each party hereto irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this letter or the transactions
contemplated hereby or the actions of SBHCI and SBI and their affiliates in the
negotiation, performance or enforcement hereof.
Please indicate your acceptance of the terms hereof and of the
Fee Letter by signing in the appropriate space below and in the Fee Letter and
returning to SBHCI the enclosed duplicate originals (or facsimiles) of this
Commitment Letter and the Fee Letter not later than 5:00 p.m., New York City
time, on December 9, 1997. SBHCI's commitment hereunder will expire at such time
in the event that SBHCI has not received such executed duplicate originals (or
facsimiles) in accordance with the immediately preceding sentence. In the event
that the borrowing under the Facilities does not occur on or before May 1, 1998,
then this Commitment Letter and SBHCI's commitment hereunder shall automatically
terminate unless SBHCI and SBI, in their discretion, shall agree to an
extension. The compensation, reimbursement and confidentiality provisions
contained herein and in the Fee Letter shall remain in full force and effect
regardless of whether definitive financing documentation shall be executed and
delivered and notwithstanding the termination of this Commitment Letter or
SBHCI's commitment hereunder.
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SBHCI and SBI are pleased to have been given the opportunity
to assist you in connection with the financing for the Transaction.
Very truly yours,
SALOMON BROTHERS HOLDING COMPANY INC
By:
----------------------------------
Name:
Title:
SALOMON BROTHERS INC
By:
----------------------------------
Name:
Title:
Accepted and agreed to as of the date first above written:
Kollmorgen Corporation
By:
------------------------------
Name:
Title:
7
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CONFIDENTIAL EXHIBIT A
12/9/97
PROJECT TORQUE
$300,000,000 SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
COMPANY: Kollmorgen Corporation (the "Company")
TRANSACTION: Pursuant to the terms of an Offer to Purchase, a draft of
which has been furnished to SBHCI and SBI (as defined
herein) (the "Offer to Purchase"), a newly formed wholly
owned subsidiary of the Company (the "Bidder") will offer to
purchase (the "Tender Offer") a majority of the outstanding
shares of common stock, par value $1.00 per share,
(including the associated preferred stock purchase rights)
of a California corporation we have agreed to call P Co. As
soon as practicable following the consummation of the Tender
Offer, the Company will seek to consummate a merger or
similar business combination with P Co. (the "Merger", and
together with the Tender Offer, the "Transaction") in order
to acquire for shares of common stock of the Company any
balance of such common stock of P Co.
AGENT: Salomon Brothers Holding Company Inc ("SBHCI").
ADVISOR AND
ARRANGER: Salomon Brothers Inc ("SBI").
LENDERS: A syndicate of financial institutions arranged by SBI,
including SBHCI (the "Lenders").
FACILITIES: PHASE I
A nine month secured revolving credit facility in an
aggregate principal amount of up to $175,000,000 to be made
available to the Company (the "Phase I Tender Facility").
A nine month secured revolving credit facility in an
aggregate principal amount of up to $125,000,000 to be made
available solely to P Co. (the "Phase I P Co.
<PAGE>
Facility" and, together with the Phase I Tender Facility,
the "Phase I Facilities").
PHASE II
A secured term credit facility in an aggregate principal
amount of up to $175,000,000 to be made available to the
Company and P Co. (the "Term Facility").
A secured revolving credit facility in an aggregate
principal amount of up to $125,000,000 to be made available
to the Company and P Co. (the "Revolving Facility" and,
together with the Term Facility, the "Phase II Facilities"),
of which up to an amount to be agreed upon may be used for
letters of credit.
The Phase I Facilities and the Phase II Facilities are
hereinafter sometimes collectively referred to as the
"Facilities."
PURPOSE: PHASE I
The proceeds of the Phase I Tender Facility will be used by
the Company to consummate the Tender Offer, to pay related
fees and expenses and for general corporate purposes.
The proceeds of the Phase I P Co. Facility will be made
available only to P Co. in order to refinance outstanding
indebtedness of P Co. Any amount not used to refinance such
indebtedness may be used by P Co. for general corporate
purposes.
PHASE II
The proceeds of loans under the Term Facility will be used
by the Company and P Co. to refinance existing outstanding
indebtedness under the Phase I Facilities.
The proceeds of loans under the Revolving Facility will be
available to the Company and to P Co. to refinance
outstanding indebtedness under the Phase I Facilities and
for general corporate purposes. Letters of credit issued
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under the Revolving Facility may be used by the Company and
P Co. for general corporate purposes.
AVAILABILITY: PHASE I
The full amount of the Phase I Facilities will be available
on consummation of the Tender Offer and the acquisition of
shares of P Co. in connection therewith (the "Closing
Date"), and at any time prior to the final maturity of the
Phase I Facilities, in minimum principal amount to be agreed
upon. Amounts repaid under the Phase I Facilities may be
reborrowed.
PHASE II
The full amount of the Term Facility must be drawn in a
single drawing on the date on which the Merger is
consummated (the "Merger Date"). Amounts borrowed under the
Term Facility that are repaid or prepaid may not be
reborrowed.
The full amount of the Revolving Facility will be available
on the Merger Date and at any time prior to the final
maturity of the Revolving Facility, in minimum principal
amounts to be agreed upon. Amounts repaid under the
Revolving Facility may be reborrowed.
INTEREST RATES
AND FEES: As set forth on Annex I hereto.
DEFAULT RATE: For so long as an Event of Default is continuing, the
applicable interest rate plus 2% per annum.
FINAL MATURITY
AND AMORTIZATION: PHASE I
The Phase I Facilities will mature on the date that is nine
months after the Closing Date or on the Merger Date,
whichever is earlier.
PHASE II
The Term Facility will mature on the date that is seven
years after the Closing Date and will amortize in quarterly
installments under a schedule to be agreed
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upon. The Revolving Facility will mature on the earlier of
(a) the date that is seven years after the Closing Date; or
(b) the final repayment in full of the Term Facility.
GUARANTEES: All obligations of the Company under the Phase I
Tender Facility and under any interest protection or other
hedging arrangements entered into with a Lender (or any
affiliate thereof) and obligations of both the Company and P
Co. under the Phase II Facilities will be unconditionally
guaranteed (the "Guarantees") by each existing and
subsequently acquired or organized domestic and, to the
extent no adverse tax consequences would result, foreign
subsidiary of the Company, other than the Bidder and its
subsidiaries.
All borrowings under the Phase I P Co. Facility will be
guaranteed by the Company and by each existing and
subsequently acquired or organized domestic and, to the
extent no adverse tax consequences would result, foreign
subsidiary of P Co.
SECURITY: The Phase I Tender Facility, the guarantees and each
interest protection and other hedging arrangement entered
into with a Lender (or any affiliate thereof) will be
secured by all the assets (other than margin securities) of
the Company and each existing and subsequently acquired or
organized domestic and, to the extent no adverse tax
consequences would result, foreign subsidiary of the
Company, including but not limited to (a) a first-priority
pledge of all the capital stock of the Bidder and each
domestic subsidiary of the Company (other than P Co. and it
subsidiaries) and two-thirds of the capital stock of each
foreign subsidiary of the Company, and the capital stock of
each subsequently acquired or organized subsidiary of the
Company, other than P Co. (which pledge, in the case of any
foreign subsidiary, shall be limited to two-thirds of the
capital stock of such foreign subsidiary to the extent the
pledge of any greater percentage would result in adverse tax
consequences to the Company), and (b) perfected
first-priority security interests in, and mortgages on,
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substantially all tangible and intangible assets (other than
margin securities) of the Company and each existing or
subsequently acquired or organized domestic or, subject to
the foregoing limitation, foreign subsidiary of the Company
(other than P Co. and subsidiaries of P Co.), including but
not limited to security interests in accounts receivable,
inventory, intellectual property, real property, cash and
proceeds of the foregoing.
The Phase I P Co. Facility, the guarantees and each interest
protection and other hedging arrangement entered into with a
Lender (or any affiliate thereof) will be secured by all the
assets (other than margin securities) of P Co. and each
existing and subsequently acquired or organized domestic
and, to the extent no adverse tax consequences would result,
foreign subsidiary of P Co., including but not limited to
(a) a first-priority pledge of all the capital stock of each
domestic subsidiary of P Co. (other than P Co. and it
subsidiaries) and two-thirds of the capital stock of each
foreign subsidiary of P Co., and the capital stock of each
subsequently acquired or organized subsidiary of P Co.
(which pledge, in the case of any foreign subsidiary, shall
be limited to two-thirds of the capital stock of such
foreign subsidiary to the extent the pledge of any greater
percentage would result in adverse tax consequences to the
Company), and (b) perfected first-priority security
interests in, and mortgages on, substantially all tangible
and intangible assets (other than margin securities) of P
Co. and each existing or subsequently acquired or organized
domestic or, subject to the foregoing limitation, foreign
subsidiary of P Co. including but not limited to security
interests in accounts receivable, inventory, intellectual
property, real property, cash and proceeds of the foregoing.
The Phase II Facilities shall be secured by all of the
foregoing as well as the stock of P Co., all of its domestic
subsidiaries and, subject to the foregoing limitation, its
foreign subsidiaries.
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All the above-described pledges, security interests and
mortgages (the "Collateral") shall be created on terms, and
pursuant to documentation, satisfactory to the Agent, and
none of the Collateral shall be subject to any other
pledges, security interests or mortgages, except for, in the
case of each of the Facilities, appropriate exceptions to be
agreed upon for customarily permitted liens and certain
existing encumbrances.
MANDATORY
PREPAYMENTS: Loans under the Facilities shall be prepaid with (a) a to be
agreed upon percentage of Excess Cash Flow (to be defined),
(b) 100% of the net cash proceeds of all non-ordinary-course
asset sales or other dispositions of property (other than
margin securities) by the Company and its subsidiaries
(including insurance and condemnation proceeds in excess of
an agreed-upon amount), subject to limited exceptions and a
basket to be agreed upon, (c) 100% of the net proceeds of
issuances of debt obligations of the Company and (d) 50% of
the net proceeds of issuances of equity of the Company and
its subsidiaries, subject to limited exceptions for employee
stock options and other similar issuances to be agreed upon.
Under the Phase II Facilities, prepayments shall be
allocated to the Term Facility and, when there are no longer
loans outstanding in the Term Facility, to reduce loans, but
not commitments, under the Revolving Facility.
VOLUNTARY PREPAY-
MENTS/REDUCTIONS
IN COMMITMENTS: Voluntary prepayments of borrowings under the Facilities
will be permitted at any time, in minimum principal amounts
to be agreed upon, without premium or penalty, subject to
reimbursement of the Lenders' redeployment costs in the case
of a prepayment of Adjusted LIBOR borrowings other than on
the last day of the relevant Interest Period (to be
defined).
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REPRESENTATIONS
AND WARRANTIES: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent, including,
without limitation: accuracy of financial statements; no
material adverse change; absence of litigation; no violation
of agreements or instruments; compliance with law (including
ERISA, margin regulations and environmental laws); payment
of taxes; ownership of properties; inapplicability of the
Investment Company Act and Public Utility Holding Company
Act; solvency; effectiveness of regulatory approvals; labor
matters; environmental matters; accuracy of information; and
validity, priority and perfection of security interests in
the Collateral.
CONDITIONS
PRECEDENT TO
INITIAL BORROWING
UNDER EACH
FACILITY: Usual for facilities and transactions of this type, those
specified below and others to be reasonably specified by the
Agent, including, without limitation, first-priority
perfected security interests in the Collateral (free and
clear of all liens, subject to limited exceptions to be
agreed upon); execution of the Guarantees, which shall be in
full force and effect; and delivery of borrowing
certificates, including without limitation:
o There has been no material change to the terms of the
Transaction from those advised to SBHCI and SBI on the date
hereof other than, in each case, such changes, including
changes to the timing and terms of the Merger, as are
reasonably acceptable to SBHCI and SBI in all material
respects;
o The Company shall have entered into a definitive merger
agreement with P Co. or the Company's nominees shall
constitute a majority of the Board of Directors of P Co. or
the Agent shall otherwise be satisfied that the designees of
the Company will constitute a majority of the Board of
Directors of P Co. upon consummation of the Tender Offer;
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<PAGE>
o The Bidder shall have acquired shares of P Co. stock having
sufficient voting power to enable the Bidder, voting without
any other shareholder of P Co., to approve the Merger, and
there shall be no other condition or circumstance which, in
the reasonable judgment of SBHCI and SBI, would prevent the
Merger from being effected promptly;
o P Co.'s Board of Directors shall have redeemed the Series A
Junior Participating Preferred Stock Purchase Rights issued
by P Co. or SBHCI and SBI shall otherwise be satisfied that
such Rights are not applicable to the Tender Offer or the
Merger;
o Article Fifth of the Articles of Incorporation of P Co.
shall have been satisfied or invalidated with respect to the
Transaction;
o The shareholders of the Company shall have approved the
issuance by the Company of its shares of common stock, par
value $2.50 per share, in the Merger as contemplated in the
Offer to Purchase;
o The Tender Offer shall have been consummated pursuant to the
terms and conditions set forth in the Offer to Purchase and
in compliance with all relevant laws and regulations, and
the terms of the Tender Offer as recited in the Offer to
Purchase and all references therein to SBHCI and SBI shall
not have been modified, amended or supplemented in any
material respect without the prior written consent of SBHCI
and SBI from that set forth in the drafts of such documents
heretofore furnished to SBHCI and SBI and no condition
specified therein shall have been waived without the prior
written consent of SBHCI and SBI;
o Each of SBHCI and SBI shall be satisfied in its reasonable
judgment that (i) the Company's and P Co.'s and their
respective subsidiaries' existing debts and liens do not
exceed an amount agreed upon prior to the Closing Date, and
(ii) there shall not occur as a result of the consummation
of the Tender Offer or the Merger, a
8
<PAGE>
default (or any event which with the giving of notice or
lapse of time or both would be a default) under any of the
Company's, P Co.'s or their respective its subsidiaries'
debt instruments (other than those for which refinancing is
available or those that in the aggregate would have no
material adverse effect);
o All necessary governmental and third party approvals in
connection with the Transaction and the financing therefor
(other than consents and approvals with respect to
mortgages, leases, permits and licenses of P Co. and its
subsidiaries that relate to a change in control as a result
of the Tender Offer or the Merger which can be obtained in
the ordinary course or, in the case of consents of lenders
to P Co., for which the Company has obtained refinancing)
shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any
action being taken by any competent authority which
restrains, prevents, impedes, delays or imposes materially
adverse conditions upon the Company or the Transaction or
the rights and remedies of SBHCI and SBI with respect to the
financing contemplated hereby;
o There shall not exist any judgment, order, injunction or
other restraint prohibiting or, in the reasonable judgment
of SBHCI and SBI, having a reasonable likelihood of imposing
materially adverse conditions upon the Company, P Co., the
Transaction or the financing contemplated hereby;
o Other than those publicly disclosed as of the date hereof,
there shall exist no claim, action, suit, investigation,
litigation or proceeding pending or threatened in any court
or before any arbitrator or governmental instrumentality
which in the reasonable judgment of SBHCI and SBI has a
reasonable likelihood of having a material adverse effect on
(i) the condition (financial or otherwise), operations,
business, properties or prospects of the Company and its
subsidiaries taken as a whole or
9
<PAGE>
P Co. and its subsidiaries taken as a whole, (ii) the
Transaction or (iii) the financing contemplated hereby;
o There shall have occurred no material adverse change since
September 30, 1997 in the condition (financial or
otherwise), operations, performance, properties or prospects
of the Company and its subsidiaries taken as a whole or P
Co. and its subsidiaries taken as a whole, and nothing shall
have occurred since the date hereof which has or in the
reasonable judgment of SBHCI and SBI has a reasonable
likelihood of having a material adverse effect on the rights
and remedies of SBHCI and SBI with respect to the financing
contemplated hereby or on the ability of the Company or P
Co. to perform its obligations to SBHCI and SBI;
o As to the Phase I Facilities only, there shall have occurred
no material adverse change in the market for senior debt
financings for leveraged acquisitions or in the financial or
capital markets generally since the date of SBHCI and SBI's
commitment that materially impairs the syndication of this
loan;
o All loans made by or stock issued in connection with the
acquisition of P Co. shall be in full compliance with all
applicable requirements of law, including Regulations G, U
and X of the Board of Governors of the Federal Reserve
System;
o After giving effect to all extensions of credit to be made
on the Closing Date, there shall exist no event of default
(or event which would constitute an event of default with
the giving of notice and/or lapse of time) under any of the
financing documents therefor and on the Closing Date the
representations and warranties of the Company and each of
its subsidiaries in each financing agreement with SBHCI and
SBI shall be true and correct in all material respects;
o SBHCI and SBI shall have received such financial and other
information regarding the Company and its
10
<PAGE>
respective subsidiaries, to the extent available, P
Co. and its subsidiaries and the Transaction as is customary
for acquisition financings or otherwise as they may
reasonably request;
o All documentation relating to the financing contemplated
hereby shall be in form and substance satisfactory to SBHCI,
SBI and their counsel;
o SBHCI and SBI shall have received all fees and expenses
(including reasonable fees and expenses of counsel to the
extent invoiced) required to be paid to SBHCI and SBI on or
before the Closing Date;
o SBHCI and SBI shall have received a satisfactory opinion of
the Company's independent counsel;
o SBHCI and SBI shall have received a pro forma consolidated
and, with respect to P Co. to the extent available,
consolidating balance sheet of the Company and its
subsidiaries as of the Closing Date, which balance sheet
gives effect to the Transaction, all related financing
(including the financing contemplated hereby), any other
transaction contemplated hereby and the payment or accrual
of all fees and expenses related to the foregoing;
o The Agent shall have received satisfactory title insurance
policies, current certified surveys, evidence of zoning and
other legal compliance, certificates of occupancy and other
permits (including such endorsements as the Agent may
require), legal opinions and other customary documentation
required by the Agent with respect to all real property of
the Company, and its subsidiaries, and to the extent
available, P Co. and its subsidiaries, subject to mortgages;
and
o For the Phase II Facilities only, the Merger shall have been
consummated in accordance with its terms.
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CONDITIONS
PRECEDENT TO
EACH BORROWING
UNDER EACH
FACILITY: Usual for facilities and transactions of this type, those
specified below and others to be reasonably specified by the
Agent, including, without limitation:
o After giving effect to the proposed extension of credit
there shall exist no event of default (or event which would
constitute an event of default with the giving of notice
and/or lapse of time) under any of the loan documents and
the representations and warranties of the Company therein
shall be true and correct in all material respects on the
date such extension of credit is proposed to occur; and
o The making of any loan or the extension of credit under the
loan documents shall not violate any requirement of law and
shall not be enjoined, temporarily, preliminarily or
permanently.
AFFIRMATIVE
COVENANTS: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent (to be
applicable to the Company and each of its respective
subsidiaries), including, without limitation, maintenance of
corporate existence and rights; performance of obligations;
delivery of audited annual consolidated financial statements
for the Company and unaudited quarterly and monthly
consolidated financial statements for the Company, together
with other unaudited financial information for each of the
Company's product categories and business lines as the Agent
may reasonably request; notices of default and litigation;
maintenance of properties in good working order: maintenance
of satisfactory insurance; compliance with laws; inspection
of books and properties; further assurances; and payment of
taxes.
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The Company will also be required to maintain appropriate
interest protection and other hedging arrangements in
respect of, at any time, not less than 50% of the aggregate
principal amount of loans outstanding at such time under the
Facilities with one or more Lenders (or affiliates thereof)
on terms reasonably satisfactory to the Agent.
NEGATIVE COVENANTS: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent (to be
applicable to the Company and each of its respective
subsidiaries), including, without limitation, limitations on
dividends on capital stock (the Company shall be permitted
to maintain the current level of the P Co. dividend until
the Merger Date); limitations on redemptions and repurchases
of capital stock; prohibition of prepayments, redemptions
and repurchases of debt (other than loans under the
Facilities); limitations on liens and sale-leaseback
transactions; limitations on loans and investments;
limitations on debt (including obligations in respect of
foreign currency exchange and other hedging arrangements);
limitations on capital expenditures; limitations on mergers,
acquisitions and asset sales other than sales of margin
securities; limitations on transactions with affiliates;
limitations on changes in business conducted by the Company
and its subsidiaries; and limitations on amendment of debt
and other material agreements. Without limiting the
foregoing, the Bidder shall engage in no activities other
than (a) engaging in the Transaction and (b) certain
activities reasonably incidental thereto.
All restrictions on liens on, and sales of, assets of the
Company will not apply to margin securities. The Company may
sell margin securities at fair value for cash. The Company
will be required to retain the proceeds of such sales in
cash or invest such proceeds in short term United States
government obligations.
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SELECTED FINANCIAL
COVENANTS: Usual for facilities and transactions of this type,
including, without limitation, a maximum leverage ratio, a
minimum fixed charge coverage ratio, a minimum interest
coverage ratio and a minimum net worth level (with
definitions and levels to be agreed upon).
EVENTS OF DEFAULT: Usual for facilities and transactions of this type and
others to be reasonably specified by the Agent, including,
without limitation, nonpayment of principal or interest,
violation of covenants, incorrectness of representations and
warranties in any material respect, cross default and cross
acceleration, bankruptcy, material judgments, ERISA, actual
or asserted invalidity of security documents and Change in
Control (to be defined), with customary notice and grace
periods.
VOTING: Amendments and waivers of the Credit Agreement (to be
defined) and the other definitive credit documentation will
require the approval of Lenders holding more than 50% of the
aggregate amount of the loans and commitments under the
Facilities, except that (a) the consent of each Lender
adversely affected thereby shall be required with respect
to, among other things, (i) increases in commitments, (ii)
reductions of principal, interest or fees, (iii) extensions
of scheduled amortization or final maturity and (iv)
releases of all or any substantial part of the Collateral
(other than in connection with any sale of Collateral
permitted by the Credit Agreement) and (b) the consent of
Lenders holding more than 50% of the Facilities shall be
required with respect to any amendment that changes the
allocation among the Facilities of any voluntary or
mandatory prepayments of loans under the Facilities (or the
application of such prepayments to the remaining
amortization payment under the Facilities).
TAX PROVISIONS: All payments in respect of the definitive credit
documentation, unless otherwise required by applicable law,
will be made without deduction for or on account of any
current or future or other withholding taxes. If
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<PAGE>
any such deduction is so required, the Company will pay such
additional amounts as will result in the receipt by each
Lender of the full amount that would otherwise have been
due.
COST AND YIELD
PROTECTION: Usual for facilities and transactions of this type.
ASSIGNMENTS AND
PARTICIPATIONS: The Lenders will have the absolute and unconditional right
to assign their loans and their commitments to Eligible
Assignees (to be defined) without the consent of the Company
or P Co. Assignments will be by novation which will release
the obligations of the assigning Lender. SBHCI will act as
the Agent for all assignees (if any) holding such assigned
loans from time to time.
Lenders will be permitted to participate their loans to
other financial institutions without restriction, other than
customary voting limitations. Participants will have the
same benefits as the selling Lenders would have had absent
such participation (and will be limited to the amount of
such benefits) with regard to yield protection and increased
costs.
EXPENSES AND
INDEMNIFICATION: All reasonable out-of-pocket expenses (including, without
limitation, expenses incurred in connection with due
diligence) of the Arranger and the Agent associated with the
syndication of the Facilities and with the preparation,
execution and delivery, administration, waiver or
modification and enforcement of the Credit Agreement and the
other documentation contemplated hereby and thereby
(including the reasonable fees and disbursements of counsel)
are to be paid by the Company. In addition, all reasonable
out-of-pocket expenses of the Lenders for enforcement costs
and documentary taxes associated with the Facilities are to
be paid by the Company.
The Company will indemnify the Arranger, the Agent and the
other Lenders and hold them harmless from and
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against all costs, expenses (including reasonable fees and
disbursements of counsel) and liabilities of the Arranger,
the Agent and the other Lenders arising out of or relating
to any claim or any litigation or other proceedings
(regardless of whether the Arranger, the Agent or any other
Lender is a party thereto) that relate to the proposed
transactions, including the financing contemplated hereby,
the Tender Offer and the Merger or any transactions
connected therewith, provided that none of the Arranger, the
Agent or any other Lender will be indemnified for its gross
negligence, bad faith or willful misconduct or be liable for
any consequential, exemplary or punitive damages.
GOVERNING LAW
AND FORUM: New York.
COUNSEL TO AGENT
AND ARRANGER: Weil, Gotshal & Manges LLP.
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ANNEX I
PHASE I
INTEREST RATES: The interest rates for the Phase I Facilities initially will
be, at the option of the Company, as follows:
Adjusted LIBOR plus 2% or ABR plus .5% during the term of
the Tender Offer.
The Company may elect interest periods of 1, 2, 3 or 6
months for Adjusted LIBOR borrowings.
Calculation of interest shall be on the basis of actual days
elapsed in a year of 360 days (or 365 or 366 days, as the
case may be, in the case of ABR loans based on the Prime
Rate).
Interest will be payable in arrears (a) for loans accruing
interest at a rate based on Adjusted LIBOR at the end of
each Adjusted LIBOR period and on the Maturity Date and (b)
for loans accruing interest based on ABR, at the end of each
calendar quarter following the Closing Date and on the
Maturity Date.
ABR is the Alternate Base Rate, which is the higher of (i)
the Prime Rate of the administrative agent or reference bank
and (ii) the Federal Funds Effective Rate plus 1/2 of 1%.
Adjusted LIBOR will at all times include statutory reserves.
PHASE I
COMMITMENT FEE: 1/2 of 1% per annum on the undrawn portion of the
commitments in respect of the Facilities, in each case
commencing to accrue with respect to each Lender's
commitment upon the acceptance of such Lender's commitment,
payable on the Closing Date and quarterly in arrears after
the Closing Date, PROVIDED that such fee shall not be
payable unless the Closing Date shall have
occurred.
<PAGE>
LETTER OF
CREDIT FEE: A per annum fee equal to the spread over Adjusted LIBOR
under the Revolving Facility will accrue on the aggregate
face amount of outstanding letters of credit under the
Revolving Facility, payable in arrears at the end of each
quarter and upon the termination of the Revolving Facility,
in each case for the actual number of days elapsed over a
360-day year. Such fees shall be distributed to the Lenders
participating in the Revolving Facility pro rata in
accordance with the amount of each such Lender's Revolving
Facility commitment. In addition, the Company shall pay to
the Issuing Lender, for its own account, (a) a fronting fee
of 1/4 of 1% per annum on the aggregate face amount of
outstanding letters of credit, payable in arrears at the end
of each quarter and upon the termination of the Revolving
Facility, in each case for the actual number of days elapsed
over a 360-day year, and (b) customary issuance and
administration fees.
PHASE II
COMMITMENT FEE
AND INTEREST RATES: The Phase II Credit Agreement will contain provisions under
which commitment fee and interest rates under the Phase II
Facilities will be reduced in increments to be agreed upon
based on performance goals to be agreed upon.
2
<PAGE>
Exhibit g(1)
Jaculin Aaron (State Bar No. 133983)
SHEARMAN & STERLING
777 South Figueroa Street, 34th Floor
Los Angeles, California 90017-5418
Tel: (213) 239-0300
Fax: (213) 239-0381
-and-
James P. Tallon (State Bar No. 154035)
SHEARMAN & STERLING
Citicorp Center
153 East 53rd Street
New York, New York 10022-4676
Tel: (212) 848-4000
Fax: (212) 848-5252
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION
KOLLMORGEN CORPORATION )
and TORQUE CORPORATION )
)
Plaintiffs, )
) Case No. 97-Civ-__
)
v. ) COMPLAINT
) FOR DECLARATORY
) AND INJUNCTIVE RELIEF
PACIFIC SCIENTIFIC COMPANY, )
WALTER F. BERAN, RALPH O. )
BRISCOE, LESTER "BUCK" HILL, )
RALPH D. KETCHUM, WILLIAM A. )
PRESTON, and MILLARD H. )
PRYOR, JR. )
)
Defendants. )
Plaintiffs Kollmorgen Corporation ("Kollmorgen") and Torque
Corporation ("Torque"), by their undersigned attorneys, and upon knowledge as to
themselves and upon information and belief as to all other matters, allege as
follows:
JURISDICTION AND VENUE
----------------------
1. This Court has jurisdiction of the subject matter of this action
pursuant to 28 U.S.C. Section 1332 in that it is a dispute among citizens of
different states and the matter in controversy exceeds the sum of $75,000,
exclusive of interest and costs.
<PAGE>
2
2. Venue is proper in this district pursuant to 28 U.S.C. Section
1391(a) and (c).
NATURE OF THE ACTION
--------------------
3. During the second half of 1997, Kollmorgen has repeatedly
presented Pacific Scientific Company ("Pacific Scientific") with a proposal for
combining the two companies. Such a merger would create one of the world's
leading suppliers of electronic motion control solutions -- one better
positioned to compete globally and generate significant shareholder value -- in
a transaction that offers a 33% premium for Pacific Scientific's current
shareholders as well as a continuing significant equity interest in the combined
company.
4. In response to Kollmorgen's overtures, Pacific Scientific has
flatly refused to negotiate the terms of the proposed business combination, even
though the combination would realize substantial benefits for the shareholders
of Pacific Scientific. There is only one possible explanation for the summary
treatment Pacific Scientific has afforded this unique and compelling opportunity
to enhance shareholder value: the desire of the Pacific Scientific Board of
Directors (the "Board" or the "Director Defendants") and of management to
perpetuate their current positions without regard for the best interests of the
company's shareholders.
5. Indeed, rather than permit Pacific Scientific's shareholders to
decide for themselves how to respond to Kollmorgen's offer, the Director
Defendants have maintained structural takeover defenses, including a poison pill
(the "Poison Pill") and Article Fifth of Pacific Scientific's Restated Articles
of Incorporation ("Article 5"), a so-called "fair price" provision that is
intended to preclude certain types of mergers. The Director Defendants are
likely to implement additional defenses.
6. Unless restrained, defendants will invoke various anti-takeover
devices to prevent the successful completion of the contemplated merger between
Kollmorgen and Pacific Scientific (the "Proposed Merger") and the concomitant
benefits to the Pacific Scientific shareholders. Unless prevented from doing so
by this Court, the Proposed
<PAGE>
3
Merger's substantial -- and irreplaceable -- value to Pacific Scientific's
shareholders may be forever lost. As such, Kollmorgen and Torque bring this
action against Pacific Scientific and the Director Defendants for injunctive and
declaratory relief to prevent the defendants from delaying or impeding
Kollmorgen's tender offer (the "Offer") and the Proposed Merger, through Pacific
Scientific's anti-takeover devices or other defensive measures.
THE PARTIES
-----------
7. Plaintiff Kollmorgen is a New York corporation whose principal
place of business is located at 1601 Trapelo Road, Waltham, Massachusetts 02154.
Kollmorgen is, among other things, one of the major worldwide manufacturers of
high performance electronic motion control components and systems. Kollmorgen's
products are manufactured and sold worldwide to the commercial & industrial and
aerospace & defense markets. For the nine months ended September 30, 1997,
Kollmorgen had revenues of $163,054,000; as of September 30, 1997, Kollmorgen
had total assets of $142,144,000 and total common shareholders' equity of
$41,911,000. Kollmorgen beneficially owns common stock of Pacific Scientific.
8. Plaintiff Torque is a Delaware corporation whose principal place
of business is located at 1601 Trapelo Road, Waltham, Massachusetts 02154. It
is a wholly owned subsidiary of Kollmorgen, was formed for the sole purpose of
effecting the Offer and the Proposed Merger, and has not conducted any unrelated
activities since its organization. Torque owns common stock of Pacific
Scientific.
9. Defendant Pacific Scientific is a California corporation whose
principal place of business is located at 620 Newport Center Drive, Suite 700,
Newport Beach, California 92660. Pacific Scientific is a manufacturer and
seller of electrical equipment and safety equipment products. For the nine
months ended September 26, 1997, Pacific Scientific had revenues of
$227,744,000; as of September 26, 1997, Pacific Scientific had total assets of
$220,800,000 and total shareholders' equity of $102,865,000.
10. Defendant Lester "Buck" Hill ("Hill") is a citizen of California.
Hill was elected a director, Chairman of the Board, President and Chief
Executive Officer of
<PAGE>
4
Pacific Scientific in February 1997.
11. Defendants Walter F. Beran ("Beran"), Ralph O. Briscoe
("Briscoe"), Ralph D. Ketchum ("Ketchum"), William A. Preston ("Preston"), and
Millard H. Pryor, Jr. ("Pryor") are currently directors of Pacific Scientific
and have been directors of Pacific Scientific at all times relevant to this
action. Upon information and belief, Beran, Briscoe and Preston are citizens of
California. Also upon information and belief, Ketchum is a citizen of Ohio, and
Pryor is a citizen of Connecticut. The Director Defendants all owe fiduciary
duties to Pacific Scientific and its shareholders.
FACTUAL BACKGROUND
------------------
A. THE BENEFITS OF A KOLLMORGEN-PACIFIC SCIENTIFIC COMBINATION
12. As part of an ongoing effort to maximize value for its
shareholders, Kollmorgen has proposed a business combination with Pacific
Scientific.
13. Analysis of the business combination shows that such a
combination would produce compelling benefits for both companies. These
opportunities include:
(a) the creation of a leader in the high performance electronic
motion control segment of the motors and controls industry;
(b) a superior strategic and operational unit capitalizing on the
complementary product lines and differing strengths of Kollmorgen and Pacific
Scientific to provide products and support services globally;
(c) the enhanced capability to tap foreign markets through the
combined company's increased size and global scope, resulting in an expanded
customer base and the ability to conduct more effective and cost-efficient
global research and development, marketing, production and sourcing;
(d) improved financial results for the combined companies through
synergies achieved from cost savings and through additional revenues gained from
global marketing and cross-selling efforts;
(e) the benefit of Kollmorgen's successful management team; and
<PAGE>
5
(f) enhanced external and internal growth opportunities presented by
the combined company's increased size and scope and higher visibility in the
business and financial communities.
B. KOLLMORGEN'S PROPOSALS AND PACIFIC SCIENTIFIC'S REBUFFS
14. On or about July 18, 1997, after detailed review of the
implications of a possible combination of the two companies, Gideon Argov,
Kollmorgen's Chairman, President and Chief Executive Officer, telephoned
defendant 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 merging Kollmorgen and Pacific Scientific.
15. On August 1, 1997, Mr. Argov met with defendant Hill in Newport
Beach, California. Mr. Argov discussed the two companies and the motion control
industry with defendant Hill and proposed a merger of Kollmorgen and Pacific
Scientific. Defendant Hill indicated that he needed more time to consider Mr.
Argov's proposal. Mr. Argov and defendant Hill agreed to speak again within the
next few weeks.
16. On August 13, 1997, Mr. Argov telephoned defendant Hill to ask
whether defendant Hill had considered Mr. Argov's proposal. Defendant Hill
responded that he had but that he needed more time to do so. Mr. Argov agreed
to call defendant Hill in early September.
17. On September 15, 1997, Mr. Argov again telephoned defendant Hill
to ask whether defendant Hill was prepared to discuss a possible business
combination. Defendant Hill again responded that he was not ready to discuss a
possible business combination. Mr. Argov and defendant Hill agreed to speak
again on October 15 or 16.
18. On October 15, 1997, Mr. Argov attempted to telephone defendant
Hill, but defendant Hill did not return Mr. Argov's calls.
19. On October 21, 1997, Mr. Argov telephoned defendant Hill and
again proposed the commencement of discussions of a possible merger of
Kollmorgen and Pacific Scientific. Defendant Hill responded that he had thought
about Mr. Argov's suggestion and
<PAGE>
6
discussed it with the Director Defendants and had concluded that it would not be
in the best interests of Pacific Scientific.
20. On December 9, 1997, Mr. Argov telephoned defendant Hill to
inform defendant Hill that Mr. Argov was authorized by the Kollmorgen Board of
Directors to make a proposal to acquire Pacific Scientific, and that defendant
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 unsurpassed benefits to both companies'
shareholders and expressed his hope that defendant 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 with Kollmorgen. Defendant Hill promised to telephone Mr. Argov
with a response to the proposal on Friday, December 12, 1997. Following that
telephone call, Mr. Argov sent to defendant Hill a letter outlining the
contemplated terms of the Proposed Merger.
21. On December 12, 1997, defendant Hill failed to telephone Mr.
Argov as previously agreed. Mr. Argov attempted to reach defendant Hill by
telephone without success. After the close of business on December 12, 1997,
Mr. Argov received a terse three-sentence letter by telecopy from defendant
Hill. Defendant Hill's abrupt letter did not include any indication of a
willingness to negotiate a business combination with Kollmorgen.
22. Kollmorgen was understandably surprised by Pacific Scientific's
disregard of the opportunities presented by a business combination between the
two companies -- this despite the clear and compelling benefits such a
combination offered to Pacific Scientific and its shareholders.
23. Rebuffed at every turn by the management of Pacific Scientific,
which has, with the full support of the Director Defendants, failed adequately
to consider the substantial opportunities presented by a proposed merger between
Kollmorgen and Pacific Scientific, Kollmorgen was left with no alternative but
to present its proposal directly to the shareholders of Pacific Scientific for
their evaluation. This Kollmorgen accomplished by commencing the Offer through
its subsidiary and by soliciting consents from Pacific
<PAGE>
7
Scientific's shareholders (the "Solicitation") to call a special meeting of
shareholders.
C. THE OFFER AND THE PROPOSED MERGER
24. On December 15, 1997, Torque commenced a tender offer to acquire
the number of Pacific Scientific Common Shares that, when added to the number of
Pacific Scientific Common Shares owned by Kollmorgen and Torque, would
constitute a majority of the Pacific Scientific Common Shares outstanding on a
fully diluted basis. The Offer is being made to all holders of Pacific
Scientific common shares at a price of $20.50 in cash per Pacific Scientific
Common Share (the "Pacific Scientific Offer Price"), net to the seller in cash,
representing a 33% premium to the market price of Pacific Scientific common
stock on the last trading day before the announcement of the Offer. The Offer
is conditioned, INTER ALIA, on the valid tender of a majority of the outstanding
shares on a fully diluted basis, the redemption or invalidation of the Poison
Pill, and the approval of the Offer and the Proposed Merger for purposes of
Article 5 (if required).
25. The Offer, if successful, will be followed by the Proposed
Merger, by which Pacific Scientific will merge with Kollmorgen or a wholly-owned
subsidiary of Kollmorgen. All Pacific Scientific Common Shares not held or
owned by Kollmorgen, Torque or a wholly-owned subsidiary of Kollmorgen, or by
shareholders exercising their dissenters' rights, if any, will be converted into
the right to receive shares of Kollmorgen common stock with a value of $20.50
(I.E., the same value of as the cash offer), subject to a collar. Kollmorgen
has filed a Registration Statement on Form S-4 with the United States Securities
and Exchange Commission (the "SEC") in connection with the Solicitation and the
Proposed Merger.
26. To facilitate the Offer and the Proposed Merger, Kollmorgen
announced on December 15, 1997 its intention to solicit consents to call a
special meeting of Pacific Scientific's shareholders (i) to remove the incumbent
members of the Pacific Scientific Board, (ii) to nominate a slate of six
directors for election to Pacific Scientific's Board (the "Kollmorgen
Nominees"), and (iii) to repeal any Pacific Scientific bylaws that have not been
filed with the SEC as of August 11, 1997, and any amendments that have been
<PAGE>
8
adopted after December 15, 1997. Subject to their fiduciary duties and if
elected, it is expected that the Kollmorgen Nominees would amend the Poison Pill
or redeem the rights to enable the consummation of the Proposed Merger, approve
the Proposed Merger if required under Pacific Scientific's charter, and take all
other actions necessary to remove any impediments to Pacific Scientific
shareholders' ability to accept the Offer and consummate the Proposed Merger.
D. PACIFIC SCIENTIFIC'S ANTI-TAKEOVER MEASURES
27. Unless modified, Pacific Scientific's anti-takeover devices will
interfere with the Offer and the Proposed Merger. Given the nature of the Offer
and the Proposed Merger and their benefits to Pacific Scientific shareholders,
Pacific Scientific should not be permitted to impede them by employing
inappropriate defensive maneuvers. Nor should Pacific Scientific be permitted
to impede or delay Kollmorgen's efforts to conduct its Solicitation, activities
to which Kollmorgen has a right under California law.
1. THE POISON PILL
28. In 1988, Pacific Scientific's Board of Directors adopted the
Poison Pill, which allows the Board to preclude consummation of any tender or
exchange offer, even those, such as the Offer, that are fully priced,
noncoercive and provide substantial benefits to Pacific Scientific shareholders.
The Poison Pill was amended in 1990.
29. The Board initially implemented the Poison Pill by declaring a
dividend distribution of one right to each Pacific Scientific shareholder of
record as of November 18, 1988 and on each such share issued thereafter (the
"Right"). Each Right entitles the holder thereof to purchase from Pacific
Scientific a unit consisting of one-hundredth of a share of Series A Pacific
Scientific Junior Participating Preferred Stock, at an exercise price of $45 per
share, subject to adjustment. The Rights expire on November 7, 1998.
30. The Rights do not separate from Pacific Scientific's shares of
common stock until the "Separation Time." The "Separation Time" is the earlier
of twenty days following (i) the date on which a person (or its affiliates or
associates) acquires, or obtains the right to acquire, beneficial ownership of
25% or more of the outstanding shares of
<PAGE>
9
common stock (the "Acquiring Person"), and (ii) the date of commencement by any
person of, or public announcement of the intention of any person to commence, a
tender or exchange offer for outstanding shares of Common Stock that would
result in such person owning beneficially 35% or more of the outstanding shares
of Common Stock.
31. After the Separation Time, each Right entitles the holder (EXCEPT
the Acquiring Person and certain related entities, whose Rights will become
disenfranchised) to buy $90 worth of Pacific Scientific stock for $45. This
"flip-in" feature dilutes the Acquiring Person's holdings and increases the
number of shares that the Acquiring Person would have to purchase in order to
consummate a merger.
32. In addition, if, after the Separation Time, Pacific Scientific
has not redeemed the Rights, certain "triggering events" -- most significantly a
merger in which Pacific Scientific is not the surviving corporation or its
common stock is changed or exchanged -- would also entitle each holder of a
Right to purchase $90 worth of the acquiring company's shares for $45 per right.
This "flip-over" feature subjects the Acquiring Person to a half-price sale of
its own stock, diluting the interest of its existing shareholders and impairing
its capital structure.
33. Due to the prohibitive costs the Poison Pill imposes on the
Acquiring Person, any tender offer or exchange offer (such as the Offer) that
would trigger the Rights cannot practically be consummated unless Pacific
Scientific's Board redeems the Rights or amends the Poison Pill. Pacific
Scientific's Board can redeem the Rights at a redemption price of $0.01 per
right or can amend the Poison Pill to make the Rights inapplicable to the Offer.
Accordingly, simply by refusing to redeem or to amend the Poison Pill, Pacific
Scientific's Board can block the Offer regardless of the interests of Pacific
Scientific's shareholders. The triggering of the Poison Pill would be
particularly unjustified given the premium price and fair structure of the Offer
and Proposed Merger. As applied here, the Poison Pill serves only one true
purpose: entrenchment of the Director Defendants for their own personal gain
and at the expense of their duty to act in the best interests of Pacific
Scientific shareholders. A failure by Pacific Scientific and the Director
Defendants to
<PAGE>
10
redeem the Rights or to amend the Poison Pill would be a breach of the Director
Defendants' fiduciary duties because such failure will effectively hinder or
prevent the shareholders of Pacific Scientific from exercising their fundamental
rights under California law to determine the future of the company they own.
2. ARTICLE 5 OF PACIFIC SCIENTIFIC'S ARTICLES OF INCORPORATION
34. Article 5 of Pacific Scientific's Articles of Incorporation
imposes substantial restrictions on business combinations involving a party who
becomes the beneficial owner of 5% or more of the voting power of Pacific
Scientific (the "Acquiror"). Article 5 purports to prohibit a business
combination between Pacific Scientific and an Acquiror unless: (i) the
transaction is approved by at least two-thirds of all Pacific Scientific's
voting shareholders, as well as by a majority of shares held by shareholders
other than the Acquiror; (ii) the transaction is approved unanimously by the
Board of Directors or by a majority of the Board of Directors prior to the
acquisition by any person of beneficial ownership of 5% or more of Pacific
Scientific Common Stock; or (iii) the Acquiror meets certain so-called "fair
price" and procedural requirements.
35. Given the premium price and fair structure of the Offer and the
Proposed Merger, failure on the part of Pacific Scientific and the Director
Defendants to approve the Offer and the Proposed Merger for purposes of Article
5 breaches their fiduciary duties. Such a failure effectively hinders or
prevents the shareholders of Pacific Scientific from exercising their
fundamental rights under California law to determine the future of the company
they own, and instead serves only to entrench the Director Defendants.
DECLARATORY RELIEF
------------------
36. Pacific Scientific's anti-takeover devices, its rejection of
Kollmorgen's previous attempts to negotiate a business combination, and its
unwillingness to redeem the Rights, to amend the Poison Pill, or to take the
necessary steps to approve the Offer and the Proposed Merger for purposes of
Article 5 demonstrate that there is a substantial controversy between the
parties. Moreover, Pacific Scientific's unreasonable anti-takeover devices and
other defensive measures will interfere with Kollmorgen's Offer and
Solicitation. The
<PAGE>
11
adverse legal interests of the parties are real and immediate.
37. The granting of the requested declaratory relief will serve the
public interest by affording relief from uncertainty and by avoiding delay as
well as conserving judicial resources by avoiding piecemeal litigation.
IRREPARABLE INJURY
------------------
38. Pacific Scientific's unwillingness to redeem the Rights or amend
the Poison Pill, or to take the necessary steps to approve the Offer and the
Proposed Merger for the purposes of Article 5, will hinder and potentially
prevent Kollmorgen from proceeding with the Offer and the Proposed Merger.
Should that occur, Kollmorgen will have lost the unique opportunity to acquire
Pacific Scientific. The resulting injury to Kollmorgen will not be compensable
in money damages and plaintiffs have no adequate remedy at law.
COUNT ONE
---------
(DECLARATORY AND INJUNCTIVE RELIEF: THE POISON PILL)
-----------------------------------------------------
39. Kollmorgen repeats and realleges each and every allegation set
forth in paragraphs 1 through 38 as if fully set forth herein.
40. The Director Defendants stand in a fiduciary relationship with
Pacific Scientific's shareholders, including Kollmorgen and Torque. As
fiduciaries, the Director Defendants owe the highest duties of care, loyalty and
good faith.
41. The Offer and the Proposed Merger are noncoercive,
nondiscriminatory, and the holders of Pacific Scientific shares not purchased in
the Offer will receive consideration of the same value in the Proposed Merger.
The Offer and the Proposed Merger pose no threat to Pacific Scientific's
corporate policy and effectiveness. The Offer and the Proposed Merger represent
a substantial premium over the market price of Pacific Scientific stock prior to
the public announcement of the Offer and the Proposed Merger.
42. Failure of the Pacific Scientific Board to redeem the Rights or
to amend the Poison Pill, or otherwise to make it inapplicable to the Offer and
the Proposed Merger, is a severe and inappropriate response to the Offer and the
Proposed Merger. In addition,
<PAGE>
12
failure of the Pacific Scientific Board to determine that the Offer and the
Proposed Merger are fair to and in the best interests of Pacific Scientific and
its shareholders constitutes a violation of the Director Defendants' fiduciary
duties.
43. Kollmorgen seeks: (i) a declaration that the failure to redeem
the Rights or to otherwise amend the Poison Pill to make it inapplicable to the
Offer and the Proposed Merger is a breach of fiduciary duty; and (ii) an
injunction compelling Pacific Scientific and the Director Defendants to redeem
the Rights or otherwise to amend the Poison Pill to make it inapplicable to the
Offer and the Proposed Merger.
44. Kollmorgen has no adequate remedy at law.
COUNT TWO
---------
(DECLARATORY AND INJUNCTIVE RELIEF: ARTICLE 5)
-----------------------------------------------
45. Kollmorgen repeats and realleges each and every allegation set
forth in paragraphs 1 through 44 as if fully set forth herein.
46. The Offer and the Proposed Merger are noncoercive,
nondiscriminatory, and the holders of Pacific Scientific shares not purchased in
the Offer will receive consideration of the same value in the Proposed Merger.
The Offer and Proposed Merger pose no threat to Pacific Scientific's corporate
policy and effectiveness. The Offer and the Proposed Merger represent a
substantial premium over the market price of Pacific Scientific stock prior to
the public announcement of the Offer and the Proposed Merger.
47. Application of Article 5 to impede, delay, or prevent
consummation of the Offer and the Proposed Merger is not proportionate to any
threat posed by, or within the range of reasonable responses to, the Offer and
the Proposed Merger, and violates the Director Defendants' fiduciary duties.
48. Kollmorgen seeks: (i) a declaration that the application of
Article 5 to impede, delay, or otherwise frustrate the Offer and the Proposed
Merger is a breach of fiduciary duty; and (ii) an injunction compelling Pacific
Scientific and the Director Defendants to approve the Offer and Proposed Merger
for purposes of Article 5.
49. Kollmorgen has no adequate remedy at law.
<PAGE>
13
COUNT THREE
-----------
(INJUNCTIVE RELIEF: NO DEFENSIVE MEASURES)
-------------------------------------------
50. Kollmorgen repeats and realleges each and every allegation set
forth in paragraphs 1 through 49 as if fully set forth herein.
51. The Offer and the Proposed Merger are noncoercive,
nondiscriminatory, and the holders of Pacific Scientific shares not purchased in
the Offer will receive consideration of the same value in the Proposed Merger.
The Offer and the Proposed Merger pose no threat to Pacific Scientific's
corporate policy and effectiveness. The Offer and the Proposed Merger
represent a substantial premium over the market price of Pacific Scientific
stock prior to the public announcement of the Offer and the Proposed Merger.
52. The Offer and the Solicitation comply with all applicable laws,
obligations and agreements, including the securities laws and any contractual
and common law obligations that may be owed by Kollmorgen to Pacific Scientific.
53. Adoption of any defensive measure or amendment of any existing
defensive measure against the Offer, the Solicitation or the Proposed Merger
that would have the effect of impeding the Offer, the Solicitation or the
Proposed Merger or preventing a future Pacific Scientific Board from exercising
its powers and fiduciary duties, would be a violation of California law and of
the fiduciary duties of the current Board to Pacific Scientific shareholders.
54. Kollmorgen seeks an injunction prohibiting any such defensive
measure by Pacific Scientific and the Defendant Directors to thwart the Offer,
the Solicitation and the Proposed Merger.
55. Kollmorgen has no adequate remedy at law.
WHEREFORE, Kollmorgen respectfully requests that the Court enter an
order:
a. declaring that failure to (i) redeem the Rights or to otherwise
amend the Poison Pill to make it inapplicable to the Offer and the Proposed
Merger, or (ii) approve the
<PAGE>
14
Offer and the Proposed Merger pursuant to Article 5 constitutes a breach of the
Director Defendants' fiduciary duties;
b. declaring that the Poison Pill is unenforceable as to the Offer
and the Proposed Merger under California law;
c. compelling Pacific Scientific and the Director Defendants to
redeem the Rights or to amend the Poison Pill to make it inapplicable to the
Offer and the Proposed Merger, and enjoining Pacific Scientific and the Director
Defendants from taking any action to utilize the Poison Pill to interfere with,
impede or delay the consummation of the Offer, the Solicitation or the Proposed
Merger;
d. compelling Pacific Scientific and the Director Defendants to
approve the Offer and the Proposed Merger for the purposes of Article 5, and
enjoining Pacific Scientific and the Director Defendants from taking any action
to enforce or apply Article 5 so as to interfere with, impede or delay the
consummation of the Offer, the Solicitation or the Proposed Merger;
e. enjoining Pacific Scientific and the Director Defendants from
adopting or employing any defensive device or taking any steps to impede or
interfere with the Offer, the Solicitation or the Proposed Merger;
f. declaring that Pacific Scientific and the Director Defendants may
not commence, and enjoining them from commencing, other judicial proceedings so
as to delay or impede consummation of the Offer, the Solicitation or the
Proposed Merger;
g. granting damages for all incidental injuries suffered as a result
of defendants' unlawful conduct;
h. awarding Kollmorgen its costs and expenses in this action,
including reasonable attorneys' fees; and
i. granting such other and further relief as the Court deems just
and proper.
<PAGE>
15
Dated: December 15, 1997
-------------------------------------------
Jaculin Aaron (State Bar No. 133983)
SHEARMAN & STERLING
777 South Figueroa Street,
34th Floor
Los Angeles, California 90017-5418
Tel: (213) 239-0300
Fax: (213) 239-0381
Attorneys for Plaintiffs
Kollmorgen Corporation and
Torque Corporation
Of counsel:
James P. Tallon (State Bar No. 154035)
SHEARMAN & STERLING
Citicorp Center
153 East 53rd Street
New York, New York 10022-4676
Tel: (212) 848-4000
Fax: (212) 848-5252
