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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
KOLLMORGEN CORPORATION
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(Name of Registrant as Specified in Its Charter)
KOLLMORGEN CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[Kollmorgen LOGO]
Reservoir Place
1601 Trapelo Road
Waltham, MA 02154
(781) 890-5655
January 30, 1998
Dear Kollmorgen Shareholder:
Today, we at Kollmorgen have raised our offer for Pacific Scientific to
$23.75 per share from $20.50 per share. This means that we are now offering to
acquire a majority of Pacific Scientific's common stock for $23.75 per share in
cash and to exchange the remaining shares for Kollmorgen common stock with a
value of $23.75 per share, subject to a collar (the "Proposed Combination").
It has been six weeks since we at Kollmorgen first publicly announced our
proposal to acquire Pacific Scientific. Pacific Scientific has indicated that it
intends to explore alternatives to maximize shareholder value, including a
possible sale of the company. Pacific Scientific, however, has refused to enter
into merger negotiations with Kollmorgen, the only party with a firm proposal on
the table, unless Kollmorgen first withdraws its tender offer, cancels the
special meeting of Pacific Scientific shareholders and enters into a standstill
agreement which would prevent us from pursuing a business combination with
Pacific Scientific other than at the invitation of Pacific Scientific.
Kollmorgen believes that these conditions are unacceptable and are not conducive
to negotiating a mutually beneficial transaction in an expeditious manner.
Kollmorgen believes that a negotiated transaction is in the best interests
of both companies and their shareholders. We believe that the Proposed
Combination offers compelling strategic and financial benefits to Kollmorgen and
Pacific Scientific shareholders. Kollmorgen believes that among the many
advantages contributing to the combined company's ability to achieve these
benefits would be: the strategic and operational fit between Kollmorgen and
Pacific Scientific, the ability for the combined company to become a
full-service provider, the anticipated significant financial opportunities
available to the combined company due to synergies and enhanced scale. The
benefits of the Proposed Combination are subject to a variety of risks and
uncertainties which are described in our proxy statement under "Risk Factors".
After consultation with our advisors, we raised our offer for Pacific
Scientific. As a result of that decision, Kollmorgen is increasing the number of
shares for which it is seeking your approval to issue in the Proposed
Combination (the "Share Issuance Proposal").
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE PROPOSED COMBINATION IS FAIR
TO KOLLMORGEN AND FAIR TO YOU AND IN YOUR BEST INTERESTS. THE BOARD HAS
UNANIMOUSLY APPROVED THE ISSUANCE OF THE KOLLMORGEN COMMON STOCK TO BE ISSUED IN
THE PROPOSED COMBINATION, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE
THE ISSUANCE OF THE KOLLMORGEN COMMON STOCK TO BE ISSUED IN THE PROPOSED
COMBINATION.
THE KOLLMORGEN BOARD IS NOW SEEKING YOUR PROXY TO VOTE FOR THE SHARE
ISSUANCE PROPOSAL. WE HAVE PROVIDED YOU WITH A WHITE FORM OF PROXY FOR USE IN
CONNECTION WITH THE SPECIAL MEETING OF KOLLMORGEN SHAREHOLDERS TO BE HELD ON
FEBRUARY 10, 1998 (THE "SPECIAL MEETING"). WE ASK THAT YOU COMPLETE IT, SIGN IT
AND RETURN IT TO US IN THE ENVELOPE PROVIDED.
We have enclosed supplemental proxy materials, along with a WHITE form of
proxy, which describes the Proposed Combination in detail. In addition, we have
previously supplied you with a proxy statement. WE URGE YOU TO READ ALL OF THESE
MATERIALS CAREFULLY.
Because of the significance of the Proposed Combination to our company, your
participation in the Special Meeting, in person or by proxy, is especially
important. We hope you will be able to attend the
<PAGE>
Special Meeting. However, even if you anticipate attending in person, we urge
you to complete, sign and return the enclosed proxy card promptly in the
enclosed postage-paid envelope to ensure that your shares of Kollmorgen Common
Stock will be represented at the Special Meeting. If you do attend, you will, of
course, be able to vote your shares in person.
Thank you and we look forward to seeing you at the Special Meeting.
Sincerely,
/s/ Gideon Argov
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 PROXY. CALL YOUR BANK OR BROKER WITH YOUR INSTRUCTIONS TO
EXECUTE THE FORM OF PROXY.
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT GEORGESON & COMPANY INC., WHICH IS
ASSISTING US, TOLL FREE AT 1-800-223-2064.
TIME IS SHORT. PLEASE SEND IN YOUR WHITE FORM OF PROXY TODAY.
<PAGE>
SUPPLEMENTAL
PROXY MATERIALS DATED JANUARY 30, 1998
THIS SUPPLEMENT (THIS "SUPPLEMENT") TO THE PROXY STATEMENT DATED DECEMBER
29, 1997 (THE "PROXY STATEMENT") OF KOLLMORGEN CORPORATION, A NEW YORK
CORPORATION ("KOLLMORGEN"), SUPPLEMENTS CERTAIN INFORMATION CONTAINED IN THE
PROXY STATEMENT WITH REGARD TO THE ISSUANCE OF SHARES OF COMMON STOCK, PAR VALUE
$2.50 PER SHARE, OF KOLLMORGEN ("KOLLMORGEN COMMON STOCK") (THE "SHARE ISSUANCE
PROPOSAL") TO BE ISSUED IN CONNECTION WITH A PROPOSED BUSINESS COMBINATION (THE
"PROPOSED COMBINATION") BETWEEN KOLLMORGEN AND PACIFIC SCIENTIFIC COMPANY, A
CALIFORNIA CORPORATION ("PACIFIC SCIENTIFIC"). THE SHARE ISSUANCE PROPOSAL WILL
BE VOTED UPON AT THE SPECIAL MEETING OF SHAREHOLDERS OF KOLLMORGEN WHICH WILL
NOW BE HELD ON FEBRUARY 10, 1998 AT 10:00 A.M. AT BANKBOSTON, N.A., 100 FEDERAL
STREET, BOSTON, MASSACHUSETTS (THE "SPECIAL MEETING").
EXCEPT AS OTHERWISE SET FORTH IN THIS SUPPLEMENT, THE TERMS AND CONDITIONS
PREVIOUSLY SET FORTH IN THIS SUPPLEMENT AND THE TERMS AND CONDITIONS PREVIOUSLY
SET FORTH IN THE PROXY STATEMENT REMAIN APPLICABLE IN ALL RESPECTS TO THE PROXY
SOLICITATION, AND THIS SUPPLEMENT SHOULD BE READ IN CONJUNCTION WITH THE PROXY
STATEMENT. UNLESS THE CONTEXT REQUIRES OTHERWISE, TERMS NOT DEFINED HEREIN HAVE
THE MEANINGS ASCRIBED TO THEM IN THE PROXY STATEMENT.
SIGNIFICANT EVENTS
Kollmorgen has raised its offer for Pacific Scientific to $23.75 per share
from $20.50 per share. Kollmorgen is now offering to acquire a majority of
Pacific Scientific's outstanding common stock for $23.75 per share in cash and
to exchange the remaining outstanding shares for Kollmorgen common stock with a
value of $23.75 per share, subject to a collar.
On January 21, 1998, Kollmorgen reached agreement with a third party on a
confidential settlement and paid-up licensing agreement covering certain
Kollmorgen control patents. The settlement amount, $27.2 million, is expected to
be received by Kollmorgen in the first quarter of 1998. On January 21, 1998,
Morgan & Finnegan, L.L.P., patent counsel to Kollmorgen, mailed a letter to Mr.
Lester Hill, Chairman, President and Chief Executive Officer of Pacific
Scientific, regarding certain of Pacific Scientific's motion-control products
that Kollmorgen believes infringe upon one or more of Kollmorgen's patents,
which Kollmorgen believes represents a substantial percentage of Pacific
Scientific's motion-control revenues.
It has been six weeks since Kollmorgen first publicly announced its proposal
to acquire Pacific Scientific. Pacific Scientific has indicated that it intends
to explore alternatives to maximize shareholder value, including a possible sale
of the company, yet Pacific Scientific has refused to enter into merger
negotiations with Kollmorgen, the only party with a firm proposal on the table,
unless Kollmorgen first withdraws its tender offer, cancels the special meeting
of Pacific Scientific shareholders and enters into a standstill agreement which
would prevent Kollmorgen from pursuing a business combination with Pacific
Scientific other than at the invitation of Pacific Scientific. Kollmorgen
believes that these conditions are unacceptable and are not conducive to
negotiating a mutually beneficial transaction in an expeditious manner.
Kollmorgen believes that a negotiated transaction is in the best interests
of both companies and their shareholders. After consultation with its advisors,
Kollmorgen has raised its offer for Pacific Scientific. As a result of that
decision, Kollmorgen is increasing the number of shares for which it is seeking
your approval to issue in the Proposed Combination.
Kollmorgen has announced that it does not intend to extend its offer beyond
the scheduled February 13, 1998 expiration date and will instead withdraw its
proposal to acquire Pacific Scientific, unless Kollmorgen and Pacific Scientific
have previously entered into a merger agreement or Kollmorgen's nominees have
been elected to the Pacific Scientific Board of Directors (the "Pacific
Scientific Board") at the special meeting of Pacific Scientific shareholders to
be held on February 13, 1998.
THE BOARD OF DIRECTORS OF KOLLMORGEN (THE "BOARD") HAS DETERMINED THAT THE
PROPOSED COMBINATION IS FAIR TO KOLLMORGEN AND FAIR TO, AND IN THE BEST
INTERESTS OF, THE SHAREHOLDERS OF KOLLMORGEN, HAS UNANIMOUSLY APPROVED THE SHARE
ISSUANCE PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT KOLLMORGEN SHAREHOLDERS VOTE
"FOR" THE SHARE ISSUANCE PROPOSAL.
<PAGE>
MATTER TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of shares of Kollmorgen Common Stock are
being asked to approve the Share Issuance Proposal. Pursuant to the applicable
rules of the New York Stock Exchange, Inc. (the "NYSE"), on which Kollmorgen
Common Stock is listed, shareholder approval is required for certain issuances
of securities. The Board is seeking your approval of the Share Issuance
Proposal.
In furtherance of the Proposed Combination, Torque Corporation, a wholly
owned subsidiary of Kollmorgen ("Purchaser"), has commenced a tender offer (the
"Offer"), for 6,347,241 shares of common stock, par value $1.00 per share, of
Pacific Scientific (the "Pacific Scientific Common Stock"), including the
associated preferred share purchase rights (the "Rights" and, together with the
Pacific Scientific Common Stock, the "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 a majority of the outstanding Pacific Scientific
Common Shares on a fully diluted basis. On the date hereof, Kollmorgen has
increased the price to be paid in the Offer from $20.50 to $23.75 per Pacific
Scientific Common Share, net to the seller in cash. Consummation of the Offer
would be followed by a merger or similar business combination between Pacific
Scientific and Kollmorgen, Purchaser or another direct or indirect subsidiary of
Kollmorgen (the "Proposed Merger"), in which each share of Pacific Scientific
Common Stock 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
Parent) would be converted into the right to receive $23.75 of Kollmorgen Common
Stock, subject to a collar. The purchase price of $23.75 per share represents
approximately a 54% premium over Pacific Scientific's closing share price of
$15.44 on the NYSE on Friday, December 12, 1997, the last full trading day prior
to Kollmorgen's public announcement of the Proposed Combination.
The exact number of shares of Kollmorgen Common Stock into which each
Pacific Scientific Common Share will be converted will be determined by an
exchange ratio (the "Exchange Ratio") calculated by dividing $23.75 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 1.564 shares of Kollmorgen Common Stock or 1.280 shares
of Kollmorgen Common Stock, respectively, per Pacific Scientific Common Share.
According to Pacific Scientific's Quarterly Report on Form 10-Q for the
quarter ended September 26, 1997, there are approximately 12,694,880 shares of
Pacific Scientific Common Stock outstanding, assuming the exercise of the
weighted average number of dilutive options outstanding during that quarter, of
which just less than half (or approximately 6,347,439 shares) will be converted
into shares of Kollmorgen Common Stock in the Proposed Merger. Hence, the total
number of shares of Kollmorgen Common Stock to be issued in the Proposed Merger
will be determined by multiplying the Exchange Ratio by the 6,347,439 shares of
Pacific Scientific Common Stock to be converted.
Based on the foregoing, the anticipated beneficial ownership of current
Kollmorgen shareholders in the combined company will be 55.2% to 50.2%, while
Pacific Scientific shareholders are expected to beneficially own 44.8% to 49.8%
of the combined company. In any event, the Share Issuance Proposal approves the
issuance of a sufficient number of shares of Kollmorgen Common Stock to complete
the Proposed Merger.
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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.
FOR ILLUSTRATIVE PURPOSES ONLY:
<TABLE>
<CAPTION>
HYPOTHETICAL
AVERAGE AGGREGATE AGGREGATE VALUE
KOLLMORGEN EXCHANGE NUMBER OF OF KOLLMORGEN
SHARE PRICE RATIO SHARES(1)(2) STOCK ISSUED(3)
- ------------- ----------- ----------- -----------------
<S> <C> <C> <C>
$ 20.25 1.280x 8,124,721 $ 164,523,600.25
19.41 1.280 8,124,721 157,700,834.61
18.56 1.280 8,124,721 150,794,821.76
17.72 1.340 8,505,568 150,718,664.96
16.88(4) 1.407 8,930,846 150,752,680.48
16.03 1.482 9,406,904 150,792,671.12
15.19 1.564 9,927,394 150,797,114.86
14.34 1.564 9,927,394 142,358,829.96
13.50 1.564 9,927,394 134,019,819.00
</TABLE>
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(1) The table assumes that approximately 12,694,880 Pacific Scientific Common
Shares were outstanding on a fully diluted basis as of September 26, 1997,
as reported in Pacific Scientific's Quarterly Report on Form 10-Q for the
quarter ended September 26, 1997. Hence, the number of Pacific Scientific
Common Shares to be converted in the Proposed Merger is assumed for purposes
of the table to be just less than half or 6,347,439. Because the foregoing
is based on publicly available information, the actual number of Pacific
Scientific Common Shares outstanding, and accordingly the actual number of
shares of Kollmorgen Common Stock to be issued, may differ.
(2) Calculated by multiplying the number of Pacific Scientific Common Shares to
be acquired (6,347,439) by the Exchange Ratio.
(3) Calculated by multiplying the Hypothetical Average Kollmorgen Share Price by
the Aggregate Number of Shares to be issued.
(4) Represents the closing price of shares of Kollmorgen Common Stock on the
NYSE on December 12, 1997, the last full trading day prior to Kollmorgen's
announcement of the Offer and the Proposed Merger.
BACKGROUND OF THE OFFER SINCE DECEMBER 29, 1997; CONTACTS WITH PACIFIC
SCIENTIFIC.
On January 5, 1998, Pacific Scientific filed an answer to the complaint
filed by Kollmorgen on December 15, 1997.
On January 8, 1998, pursuant to the Consent Solicitation, the shareholders
of Pacific Scientific called a special meeting of shareholders of Pacific
Scientific (the "Pacific Scientific Special Meeting") through the delivery by
Kollmorgen, to the Secretary of Pacific Scientific, of consents from holders of
Pacific Scientific Common Stock significantly in excess of the 10% required to
call the Pacific Scientific Special Meeting, accompanied by a request that
Pacific Scientific give notice of the Pacific Scientific Special Meeting to be
held on February 13, 1998 in order to vote on the following proposals:
(i) a proposal to repeal any and all provisions of Pacific Scientific's
bylaws that have not been duly filed by Pacific Scientific with the
Commission prior to August 11, 1997, including any and all amendments to
Pacific Scientific's bylaws adopted on or after December 15, 1997 (the
"Bylaw Repeal Proposal");
3
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(ii) a proposal to remove from office the entire Pacific Scientific
Board (the "Removal Proposal"); and
(iii) a proposal to fill the newly created vacancies on the Pacific
Scientific Board with the six persons nominated by Kollmorgen (the "Election
Proposal").
On January 12, 1998, Pacific Scientific set January 20, 1998 as the Record
Date for determining the shareholders of Pacific Scientific entitled to notice
of and to vote at the Pacific Scientific Special Meeting.
On January 15, 1998, Kollmorgen mailed to Pacific Scientific's shareholders
and filed with the Commission a proxy statement and form of proxy (the "Pacific
Scientific Proxy Statement"), to vote at the Pacific Scientific Special Meeting,
urging shareholders to vote in favor of the Bylaw Repeal Proposal, the Removal
Proposal and the Election Proposal.
Additionally, on January 15, 1998, Kollmorgen extended the Expiration Date
of the Offer to 5:00 p.m., New York City time, on Thursday, January 29, 1998.
On January 16, 1998, Pacific Scientific filed with the Commission a proxy
statement in opposition to the Kollmorgen Proxy Statement urging shareholders of
Pacific Scientific not to sign, or return any proxy cards sent to them by
Kollmorgen.
On January 21, 1998, Kollmorgen reached agreement with a third party on a
confidential settlement and paid-up licensing agreement covering certain
Kollmorgen motion control patents. The settlement amount, $27.2 million, is
expected to be received by Kollmorgen in the first quarter of 1998. On January
21, 1998, Morgan & Finnegan, L.L.P., patent counsel to Kollmorgen, mailed a
letter to Mr. Hill, regarding certain of Pacific Scientific's motion-control
products that Kollmorgen believes infringe upon one or more of Kollmorgen's
patents. On that same day, Kollmorgen announced that it had formally notified
Pacific Scientific that certain of Pacific Scientific's motion-control products,
which Kollmorgen believes represents a substantial percentage of the Pacific
Scientific's motion-control revenues, infringed on Kollmorgen patents.
Since December 15, 1997, various telephone calls have been initiated by
Kollmorgen's legal and financial advisors ("Kollmorgen's Advisors") to Pacific
Scientific's legal and financial advisors ("Pacific Scientific's Advisors")
requesting access to information regarding Pacific Scientific which Kollmorgen
believes is being made available by Pacific Scientific to other potential
acquirers of Pacific Scientific and requesting Pacific Scientific to enter into
merger discussions with Kollmorgen. Pacific Scientific refused to allow
Kollmorgen to conduct any due diligence or enter into merger discussions with
Pacific Scientific without Kollmorgen first agreeing to certain conditions
described below. The Pacific Scientific Board has also declined Kollmorgen's
offer to meet with them and share information about our company and our offer so
that they can more fully inform themselves concerning the merits of our
proposal.
On January 23, Mr. Argov, telephoned Mr. Hill to suggest that the two
companies enter into merger negotiations. Following that conversation, Pacific
Scientific's Advisors informed Kollmorgen's Advisors that Pacific Scientific
would only enter into merger discussions if Kollmorgen agreed specifically to
terminate the Offer, cancel the Pacific Scientific Special Meeting and agree to
a confidentiality agreement with a "standstill" provision (the "Confidentiality
Agreement") which would prevent Kollmorgen from pursuing a business combination
with Pacific Scientific other than at the invitation of Pacific Scientific.
However, despite Mr. Argov's and Kollmorgen's Advisors requests, Pacific
Scientific's Advisors have yet to deliver the Confidentiality Agreement to
Kollmorgen.
On January 26, 1998, Kollmorgen reported preliminary operating results for
the fourth quarter of 1997 and the year ended December 31, 1997 and reaffirmed
its intention to acquire Pacific Scientific. Also, on January 26, 1998,
Kollmorgen postponed the Kollmorgen Special Meeting for February 10, 1998.
On January 30, 1998, Kollmorgen filed a supplement to the Pacific Scientific
Proxy Statement. Also on January 30, 1998, Kollmorgen filed a supplement to the
Offer to Purchase.
4
<PAGE>
FINANCING
The Board continues to believe that the Proposed Combination is
conservatively financed. Pursuant to a binding commitment letter, as amended,
with Salomon Smith Barney and its affiliate, Salomon Brothers Holding Company
Inc (the "Commitment Letter"), Salomon Brothers Holding Company Inc has
committed to provide, subject to certain conditions, a secured bank facility in
the amount of $320 million to fully finance the transaction. While the Board
recognizes that the combined company would have a significant level of
indebtedness, the Board believes that the financing of the transaction continues
to be conservative and would permit the combined company sufficient liquidity
and financial flexibility to meet operational demands.
REASONS FOR THE PROPOSED COMBINATION; BOARD RECOMMENDATION
The Board continues to believe that the Proposed Combination and the Share
Issuance Proposal are in the best interests of Kollmorgen and its shareholders
for the same material factors enumerated in the Proxy Statement under "Reasons
for the Proposed Combination; Board Recommendation". In addition, the Board
considered the following:
- The new written opinion of Kollmorgen's financial advisor, Salomon
Brothers Inc doing business as Salomon Smith Barney ("Salomon Smith
Barney"), to the effect that, based upon and subject to certain
assumptions, factors and limitations set forth in such written opinion, as
of such date, the new consideration to be paid in the Proposed Combination
is fair, from a financial point of view, to the holders of Kollmorgen
Common Stock.
- The amended commitment letter with Salomon Smith Barney and its affiliate,
Salomon Brothers Holding Company Inc, which provides, subject to certain
conditions, a secured bank facility to fully finance the transaction.
THE BOARD HAS UNANIMOUSLY APPROVED THE SHARE ISSUANCE PROPOSAL AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF KOLLMORGEN COMMON STOCK VOTE TO APPROVE
THE SHARE ISSUANCE PROPOSAL AT THE SPECIAL MEETING.
OPINION OF FINANCIAL ADVISOR
On December 26, 1997, Salomon Smith Barney delivered its written opinion to
the Board to the effect that, based upon and subject to certain assumptions,
factors and limitations set forth in such written opinion, as of such date, the
consideration then proposed to be paid by Kollmorgen in connection with the
Proposed Combination was fair, from a financial point of view, to the holders of
Kollmorgen Common Stock. On January 29, 1998, Salomon Smith Barney presented
certain analyses and delivered a written opinion to the Board, to the same
effect and based upon and subject to the same assumptions, factors and
limitations as its December 26, 1997 opinion, with respect to the consideration
proposed to be paid by Kollmorgen in connection with the Proposed Combination,
which consideration is described in this Supplement. See "Opinion of Financial
Advisor" in the Proxy Statement for a description of the Salomon Smith Barney
opinions and a summary of certain material analyses performed in connection
therewith. Salomon Smith Barney's January 29, 1998 opinion is attached hereto as
Annex I.
Set forth below is a brief summary of certain of the material financial
analyses that Salomon Smith Barney provided to the Board at the January 29, 1998
meeting of the Board. It does not purport to be a complete description of the
analyses performed by Salomon Smith Barney. The following quantitative
information to the extent it is based on market data is based on market data as
it existed on January 26, 1998 and is not necessarily indicative of current
market conditions.
5
<PAGE>
SUMMARY OF ANALYSES
PUBLIC COMPARABLES TRADING ANALYSIS. In connection with its December 26,
1997 opinion, Salomon Smith Barney compared selected financial data of Pacific
Scientific with selected financial data from four publicly traded companies in
similar industries that were considered by Salomon Smith Barney to be comparable
in some respect to Pacific Scientific. Based on that analysis, Salomon Smith
Barney determined an implied per share public trading valuation range of $15.00
to $20.00 per share of Pacific Scientific Common Stock without taking into
account the effect of synergies projected by Kollmorgen management to be
realized as a result of the merger between 1998 and 2002. In connection with its
January 29, 1998 opinion, Salomon Smith Barney noted that assuming such
synergies are realized, the upper limit of the implied per share public trading
valuation range would be $23.00.
PRECEDENT TRANSACTIONS ANALYSIS. In connection with its December 26, 1997
opinion, Salomon Smith Barney reviewed six transactions that were considered
comparable to the merger and based on such review determined an implied per
share precedent transaction valuation range of $18.00 to $23.00 per share of
Pacific Scientific Common Stock. Such determination did not take into account
the effect of synergies projected by Kollmorgen management to be realized as a
result of the merger between 1998 and 2002. In connection with its January 29,
1998 opinion, Salomon Smith Barney noted that assuming such synergies are
realized, the upper limit of the implied per share precedent transaction
valuation range would be $26.00. Salomon Smith Barney noted that the acquisition
price of $23.75 per share was within such revised implied per share precedent
transaction valuation range.
DISCOUNTED CASH FLOW ANALYSIS. In connection with its December 26 opinion,
Salomon Smith Barney performed discounted cash flow analysis of the estimated
free cash flows of Pacific Scientific as a stand-alone entity. This analysis
resulted in a range of equity value per share of Pacific Scientific Common Stock
as of December 31, 1997 of $20.00 to $25.00. Such analysis did not take into
account the effect of synergies projected by Kollmorgen management to be
realized as a result of the merger between 1998 and 2002. In connection with its
January 29, 1998 opinion, Salomon Smith Barney noted that assuming such
synergies are realized, the upper limit of such range would be $28.00. Salomon
Smith Barney noted that the acquisition price of $23.75 per share was within
such revised range.
EARNINGS ACCRETION/DILUTION ANALYSES. Salomon Smith Barney presented an
earnings accretion/dilution analyses based on an acquisition price of $23.75 per
share of Pacific Scientific Common Stock. As part of its analyses, Salomon Smith
Barney took into account certain synergies projected by Kollmorgen management.
Salomon Smith Barney assumed that such synergies would be 75% to 100% realized
and calculated accretion/dilution for each increment of 5 percentage points
between 75% and 100%. Based on such analyses, Salomon Smith Barney calculated a
range of 34% to 27% earnings dilution in 1998, 4% earnings dilution to 8%
earnings accretion in 1999, and 21% to 39% earnings accretion in 2000 for
Kollmorgen shareholders as a result of the Proposed Combination.
TAX MATTERS
On January 23, 1998, the Internal Revenue Service issued Treasury
Regulations effective for transactions occurring after January 28, 1998 which
relaxed the continuity of shareholder interest requirement under U.S. income tax
rules for tax-free reorganization treatment. Treatment of the Offer and Proposed
Merger as a reorganization, however, still requires, among other things, that
less 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) and that the Proposed Merger, if consummated, qualifies as a merger
under applicable state corporation laws. Thus, while neither Kollmorgen nor
Purchaser is obligated to qualify the transaction as a reorganization and such
qualification depends on future events, the changes made by the newly-issued
Treasury Regulations significantly increase the likelihood that
6
<PAGE>
the exchange of Pacific Scientific Common Shares for Kollmorgen Common Stock in
the Proposed Merger ultimately will qualify for nonrecognition treatment as part
of a reorganization. Shareholders of Pacific Scientific are urged to consult
their own tax advisors about the newly-issued Treasury Regulations.
FORWARD LOOKING STATEMENTS
This Supplement contains forward-looking statements which involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statement. 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 include the words "may",
"believes", "expects", "anticipates" or the negation thereof, or similar
expressions. All forward-looking statements included in this Supplement, are
based on the information available to Kollmorgen on the date of this Supplement
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:
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
expenditures 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 person acting on its behalf are qualified in their entirety by the
preceding cautionary statements.
RECENT DEVELOPMENTS
On January 26, 1998, Kollmorgen issued a press release reporting its
financial results for the three and twelve months ended December 31, 1997.
For the year ended December 31, 1997, which was highlighted by a number of
important financial events and special items (detailed below), Kollmorgen
reported that net income rose by 122% to $19.7
7
<PAGE>
million, or $1.90 a share (diluted), on sales of $222.2 million. These results
compare to net income of $8.9 million, or $0.86 a share (diluted), on sales of
$230.4 million in 1997. Excluding special items, net income for
1997 rose by 18% to $10.5 million, or $1.02 per share (diluted).
For the fourth quarter, excluding special items, net income rose 17% to $3.8
million, or $0.36 per share (diluted), on sales of $59.2 million, versus net
income of $3.2 million, or $0.32 per share (diluted), on sales of $60.8 million
in the comparable 1996 period. Excluding revenues from the Macbeth division,
which became part of a joint venture at the end of 1996, Kollmorgen's sales from
ongoing businesses increased by 15% for the fourth quarter and 13% for the year.
After accounting for a charge of $4.2 million for costs associated with the
Offer, earnings in the fourth quarter were $0.2 million or $0.02 per share
(diluted).
These comparative results were affected by several special items:
- Results for 1997 include a net gain after fees and taxes of $24.4 million
from the sale of Kollmorgen's share in its GretagMacbeth joint venture
("GretagMacbeth"). GretagMacbeth was brought public on the Swiss Stock
Exchange in June.
- Results for 1997 reflect approximately $4.2 million in costs associated
with Kollmorgen's offer to purchase shares of Pacific Scientific,
announced in December. These costs are included as expenses in the fourth
quarter.
- Results for 1997 include a charge of $11.4 million for acquired research
and development, principally associated with Kollmorgen's acquisitions of
Servotronix Ltd. and Fritz A. Seidel Elektro-Automatik GmbH in the second
quarter.
- Results for 1997 reflect the effect of income taxes, whereas 1996 results
reflect a zero tax rate due to tax loss carry-forwards from earlier years.
Kollmorgen plans to file with the Commission its audited financial
statements for the year ended December 31, 1997 on Form 10-K on or before March
31, 1998.
On January 22, 1998, Kollmorgen issued a press release announcing that it
will receive $27.2 million under a confidential settlement and paid-up licensing
agreement covering certain Kollmorgen motion control patents. The settlement
amount is expected to be received by Kollmorgen in the first quarter of 1998.
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 herein and the "Unaudited Pro Forma
Financial Data" appearing
8
<PAGE>
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 January 26, 1998 and a resulting
hypothetical exchange ratio of 1.28.
<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 .64(B) 1.28(C)
--------------- ----------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings per share.......................... $ 1.87(a) $ 0.73 $ (0.15) $ (0.10) $ (0.19)
Dividends per share, net.................... $ 0.06 $ 0.09 $ 0.10 $ 0.06 $ 0.13
Book value per share at end of period....... $ 4.19 $ 8.31 $ 10.77 $ 6.89 $ 13.79
</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 .64(B) 1.28(C)
--------------- ----------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings per share.......................... $ 0.86 $ 0.01 $ (0.94) $ (0.60) $ (1.19)
Dividends per share, net.................... $ 0.08 $ 0.12 $ 0.13 $ 0.08 $ 0.17
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.
(b) The hypothetical Pacific Scientific equivalent per share data was calculated
by multiplying the pro forma combined per share data by .64, or half of the
hypothetical exchange ratio of 1.28, 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 1.28, 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.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Set forth below are the unaudited pro forma historical financial information
of Kollmorgen and the unaudited pro forma condensed combined statement of
financial condition combining the historical consolidated balance sheet of
Kollmorgen and Pacific Scientific, giving effect to the Proposed Combination at
the new Offer price of $23.75 in cash per Pacific Scientific Common Share. These
unaudited pro forma condensed combined financial statements are not necessarily
indicative of the operating results and financial position that might have been
achieved had the Proposed Combination occurred as of the beginning of the
earliest period presented nor are they necessarily indicative of operating
results and financial position which may occur in the future.
9
<PAGE>
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 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.
10
<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.
11
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND 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 Kollmorgen's Macbeth division 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 dates 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. This 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.
12
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA ADJUSTED HISTORICAL CONSOLIDATED
STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 the $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
nine months 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 of 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.
13
<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 -- $ 10,816(b) 11,342
---------- ----------- ----------- ---------
Operating Income.................................. 10,453 16,039 (10,816) 15,676
Other Income (Expense), Net....................... (1,856) (1,630) (10,198)(c) (14,370)
(686)(c)
---------- ----------- ----------- ---------
Income Before Taxes............................... 8,597 14,409 (21,700) 1,306
Benefit (Provision) for Income Taxes.............. (3,095) (5,384) 4,354(d) (4,125)
---------- ----------- ----------- ---------
Net Income from Continuing Operations............. $ 5,502 $ 9,025 $ (17,346) $ (2,819)
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
Net Income per Share from Continuing Operations --
Fully Diluted................................... $ 0.53 $ 0.73 $ (0.15)
Weighted Average Number of Common Shares
Outstanding..................................... 10,444 12,443 (12,443)(e) 18,772
8,328(e)
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
14
<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 -- 14,422(b) 15,123
---------- ----------- ----------- ---------
Operating Income.................................. 11,307 4,662 (14,422) 1,547
Other Income (Expense), Net....................... (3,032) (4,362) (13,597)(c) (21,905)
(914)(c)
---------- ----------- ----------- ---------
Income (Loss) Before Taxes........................ 8,275 300 (28,933) (20,358)
Benefit (Provision) for Income Taxes.............. (2,317) (131) 5,804(d) 3,356
---------- ----------- ----------- ---------
Net Income (Loss)................................. 5,958 169 (23,129) (17,002)
Preferred Dividends............................... (285) -- -- (285)
---------- ----------- ----------- ---------
Income Available to Common Shareholders........... $ 5,673 $ 169 (23,129) (17,287)
---------- ----------- ----------- ---------
---------- ----------- ----------- ---------
Net Income (Loss) per Share -- Fully Diluted...... $ 0.56 $ 0.01 $ (0.94)
Weighted Average Number of Common Shares
Outstanding..................................... 10,042 12,457 (12,457)(e) 18,370
8,328(e)
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
15
<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 $ 6,400(c) 53,830
Goodwill, Net..................................... -- -- 216,329(g) 216,329
---------- ----------- ----------- ----------
Total Assets...................................... $142,144 $220,800 $222,729 $585,673
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
LIABILITIES AND SHAREHOLDERS' 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 $169,964(c) 283,773
Minority Interest................................. 72 -- -- 72
---------- ----------- ----------- ----------
Total Liabilities................................. 100,233 117,935 169,964 388,132
Shareholders' Equity.............................. 41,911 102,865 155,630(h) 197,541
(102,865)(h)
---------- ----------- ----------- ----------
Total Liabilities and Shareholders' Equity........ $142,144 $220,800 $222,729 $585,673
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
- ------------------------
Note: The accompanying notes are an integral part of these pro forma combined
condensed consolidated financial statements.
16
<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, in exchange for approximately 8,328,000
shares of common stock of Kollmorgen and cash and other costs of approximately
$169,964 with a total estimated purchase price of approximately $325,594. The
shares of Kollmorgen common stock are assumed to be issued at a value of $18.69
per share, which reflects the closing price of Kollmorgen common stock as of
January 26, 1998. The shares assumed to be issued are adjusted for the impact of
the collar. The ultimate number of shares issued to acquire Pacific Scientific
will be in the range of approximately 8,328,000 to 10,175,000 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 $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.
17
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (CONTINUED)
B. PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(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 $195,000 term loan and a
$125,000 revolving credit facility (the "Loan") as if the issuance occurred on
September 30, 1997. The 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 estimated 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 $10,198 and
$13,597 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 $6,400 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 $686 and $914, 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 shares of Kollmorgen Common
Stock to be exchanged in the transaction of 8,328,000 assuming an exchange ratio
of 1.28 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 $216,329. 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
18
<PAGE>
KOLLMORGEN
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (CONTINUED)
B. PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 8,328,000 common shares at $18.69 per share assumed to
be issued by Kollmorgen in the Proposed Merger to Pacific Scientific
Shareholders of $155,630, and an elimination of the net equity of Pacific
Scientific of $102,865.
19
<PAGE>
mnopqrstuvwx
ANNEX I
[LOGO]
January 29, 1998
Board of Directors
Kollmorgen Corporation
Reservoir Place
1601 Trapelo Road
Waltham, Massachusetts 02154
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of the common stock of Kollmorgen Corporation
(the "Company"), of the consideration proposed to be paid by the Company in
connection with the proposed acquisition (the "Proposed Acquisition") by the
Company of Pacific Scientific Company ("PSC") pursuant to the Offer (as defined
below) and the Proposed Merger (as defined below).
As more specifically set forth in the Consent Solicitation
Statement/Preliminary Prospectus of the Company, dated December 15, 1997, and
the January 29, 1998 draft supplement thereto (together, the "Preliminary
Prospectus"), and the Offer to Purchase of Torque Corporation ("Purchaser"), a
wholly-owned subsidiary of the Company, dated December 15, 1997, and the January
29, 1998 draft supplement thereto (together, the "Offer to Purchase"), on
January 30, 1998, Purchaser plans to increase the consideration offered pursuant
to its tender offer (the "Offer") for a majority of the shares of the issued and
outstanding common stock, $1.00 par value, of PSC (the "PSC Common Stock"),
including the associated preferred stock purchase rights (the "Rights," and
together with shares of PSC Common Stock, the "PSC Shares") issued pursuant to
the Shareholder Protection Agreement, dated as of November 7, 1998, as amended,
between PSC and Manufacturers Hanover Trust Company, to $23.75 per PSC Share,
net to the seller in cash. In conjunction with the Offer, the Company is seeking
to negotiate a merger agreement with PSC pursuant to which PSC would, as soon as
practicable following the consummation of the Offer, consummate a merger or
similar business combination with the Company, Purchaser or another direct or
indirect wholly-owned subsidiary of the Company (the "Proposed Merger"). At the
effective time of the Proposed Merger, each PSC Share then outstanding (other
than PSC Shares held by PSC or any wholly-owned subsidiary of PSC and other than
PSC Shares held by the Company, Purchaser or any other direct or indirect
subsidiary of the Company) would be converted into the right to receive shares
of common stock, $2.50 par value, of the Company (the "Company Common Stock"),
with a market value of $23.75 per share, on terms and subject to the limitations
described below. The exact number of shares of Company Common Stock into which
each PSC Share will be converted (the "Exchange Ratio") will be determined by
dividing $23.75 by the average, over the 20 consecutive trading days ending 5
days prior to the meeting of the holders of PSC Shares called for the purpose of
voting on the Proposed Merger, of the daily sales volume weighted average of the
high and
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low per share sales price of Company Common Stock. In the event that such
average during such period is less than $15.19 or greater than $18.56, the
Exchange Ratio will be fixed at 1.564 shares of Company Common Stock or 1.280
shares of Company Common Stock, respectively, per PSC Share.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Preliminary Prospectus; (ii) the
Offer to Purchase; (iii) certain publicly available information concerning the
Company, including the Annual Reports on Form 10-K of the Company for each of
the years in the three year period ended December 31, 1996 and the Quarterly
Reports on Form 10-Q of the Company for the quarters ended March 31, June 30 and
September 30, 1997, respectively; (iv) certain internal information, primarily
financial in nature, including projections, concerning the business and
operations of the Company, prepared by the Company's management and furnished to
us by the Company for purposes of our analysis; (v) certain publicly available
information concerning the trading of, and the trading market for, Company
Common Stock; (vi) certain publicly available information concerning PSC,
including the Annual Reports on Form 10-K of PSC for each of the years in the
three year period ended December 27, 1996 and the Quarterly Reports on Form 10-Q
of PSC for the quarters ended March 28, June 27 and September 26, 1997,
respectively; (vii) certain other information, primarily financial in nature,
including projections, concerning the business and operations of PSC, that was
prepared by the Company's management based on publicly available information
concerning PSC and the familiarity of the Company's management with PSC's
business and the electrical and safety equipment industry, and furnished to us
by the Company for purposes of our analysis; (viii) certain publicly available
information concerning the trading of, and the trading market for, PSC Common
Stock; (ix) certain publicly available information with respect to certain other
companies that we believe to be comparable to the Company or PSC and the trading
markets for certain of such other companies' securities; and (x) certain
publicly available information concerning the nature and terms of certain other
transactions that we consider relevant to our inquiry. We also have considered
such other information, financial studies, analyses, investigations and
financial, economic and market criteria that we deemed relevant. We have also
met with certain officers and employees of the Company to discuss the foregoing
as well as other matters we believe relevant to our inquiry. We note that we
have not had access to any internal or non-public information, financial or
otherwise, concerning the business and operations of PSC; nor have we had access
to any officers or employees of PSC. With respect to ongoing litigation
involving PSC, we have relied solely on information furnished to us by the
Company. As you are aware, we are not lawyers, nor are we experts with respect
to legal matters, and we have not made or obtained or assumed any responsibility
for making or obtaining any independent evaluations of any potential liability
to PSC or the Company arising out of such litigation.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have neither attempted
independently to verify nor assumed responsibility for verifying any of such
information. We have not made or obtained or assumed any responsibility for
making or obtaining any independent evaluations or appraisals of any of the
properties or facilities of the Company or PSC. We have assumed that the Offer
and Proposed Merger will be consummated on a timely basis and on terms and
conditions that do not differ materially from the terms and conditions contained
in the Offer to Purchase and Preliminary Prospectus. With respect to projections
concerning the Company (including projections intended to reflect the effects of
the Proposed Acquisition), we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company (with and without giving effect to the Proposed
Acquisition), and we express no view with respect to such projections or the
assumptions on which they were based. With respect to the projections concerning
PSC, although we consulted with the Company's management in the
A-2
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[LOGO]
preparation of those projections, for purposes of this opinion we have assumed
that they have been reasonably prepared on bases reflecting the best judgments
of the management of the Company as to the future financial performance of PSC
and we have assumed that such projections will be realized, and we express no
view with respect to such projections or the assumptions or information on which
they were based.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company and PSC; (ii) the business prospects of the Company and PSC; (iii) the
historical and current market for Company Common Stock and PSC Common Stock and
for the equity securities of certain other companies that we believe to be
comparable to the Company and PSC; and (iv) the nature and terms of certain
other acquisition transactions that we believe to be relevant. We also have
taken into account our assessment of general economic, market and financial
conditions as well as our experience in connection with similar transactions and
securities valuation generally. Our opinion necessarily is based upon conditions
as they exist and can be evaluated on the date hereof and we assume no
responsibility to update or revise our opinion based upon circumstances or
events occurring after the date hereof. Our opinion is, in any event, limited to
the fairness, from a financial point of view, to the holders of Company Common
Stock, of the consideration to be paid by the Company in the Proposed
Acquisition and does not address the Company's underlying business decision to
effect the Proposed Acquisition or constitute a recommendation to any holder of
Company Common Stock as to how such holder should vote with respect to the
issuance of Company Common Stock in connection with the Proposed Merger. Nor
does this opinion constitute an opinion as to the price at which the Company's
stock will trade upon the public announcement or the consummation of the
Proposed Acquisition.
As you are aware, Salomon Brothers Inc doing business as Salomon Smith
Barney ("Salomon Smith Barney") is acting as financial advisor to the Company in
connection with the Proposed Acquisition and is acting as Dealer Manager in
connection with the Offer, and will receive a fee for such services, a
substantial portion of which is contingent upon consummation of the Proposed
Acquisition. In addition, Salomon Smith Barney and its affiliate, Salomon
Brothers Holding Company Inc, are expected to arrange loans and participate as a
lender, respectively, in connection with the Company's financing of the Offer,
for which Salomon Smith Barney and Salomon Brothers Holding Company Inc will
receive customary compensation. In the ordinary course of business, Salomon
Smith Barney may actively trade the securities of the Company and PSC for its
own account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities. In addition, we previously
have rendered certain investment banking and financial advisory services to the
Company.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be paid by the Company in connection with the
Proposed Acquisition is fair, from a financial point of view, to the holders of
Company Common Stock.
Very truly yours,
/s/ Salomon Brothers Inc
doing business as
SALOMON SMITH BARNEY
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<PAGE>
TIME IS SHORT. PLEASE SEND IN YOUR WHITE PROXY CARD TODAY.
For assistance or further information, please call
[LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT
(212) 440-7800
ALL OTHERS CALL TOLL FREE 800-223-2064
FAX (212) 440-9009
<PAGE>
KOLLMORGEN CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
Kollmorgen Corporation for the Special Meeting, February 10, 1998
The undersigned hereby constitutes and appoints GIDEON ARGOV, ROBERTJ.
COBUZZI, JAMES A. EDER, and each or any of them, with full power to act with
or without the others and with full power of substitution, as his or her true
and lawful agents and proxies ("Proxies") to represent the undersigned at the
Special Meeting of Shareholders of Kollmorgen Corporation to be held at
BankBoston, N.A., 100 Federal Street, Boston Massachusetts, at 10:00 a.m. on
February 10, 1998, and at any adjournments or postponements thereof, and
authorizes said Proxies to vote all shares of Kollmorgen shown on the other
side of this card with all the powers the undersigned would possess if
personally present thereat.
You are encouraged to specify your choice by marking the appropriate box,
SEE REVERSE SIDE, but you need not mark any box if you wish to vote to approve
the Share Issuance Proposal. The Proxies cannot vote your shares unless you
sign and return this card.
CONTINUED AND TO BESIGNED ON REVERSE SIDE. SEE REVERSE SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark
/ / votes as in
this example.
<TABLE>
<CAPTION>
<S> <C>
FOR AGAINST ABSTAIN
- -------------------------------------------------
KOLLMORGEN CORPORATION APPROVAL OF THE SHARE ISSUANCE / / / / / /
- ------------------------------------------------- PROPOSAL (AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN AND AUTHORIZES THE PROXIES TO
TAKE ACTION IN THEIR DISCRETION UPON OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE SPECIAL MEETING. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
APPROVAL OF THE SHARE ISSUANCE PROPOSAL. MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING. / /
Please sign exactly as your name appears herein. When signing as
attorney, administrator, executor, guardian or trustee, please give
your full title as such. If a corporation, please sign by president
or other authorized officer and indicate title. If shares are
registered in the names of joint tenants or trustees, each tenant or
trustee is required to sign.
Signature: ------------------------------ Date: ------------------------ Signature: ----------------------- Date:-----------------
- -----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
