SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 19, 1998
PACIFIC SCIENTIFIC COMPANY
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(Exact name of registrant as specified in its charter)
California 1-7744 94-0744970
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
620 Newport Center Drive, Suite 700, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 720-1714
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On February 19, 1998, an action was commenced against the Company and
its directors in the Superior Court of California, County of Orange, by Shiela
Freiberg, purporting to bring suit as a former holder ("Noteholder") of 7 3/4%
Convertible Subordinated Debentures due June 15, 2003 issued by the Company, on
behalf of a proposed class of all Noteholders. A copy of the complaint is filed
as Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 Complaint in Freiberg vs. Pacific Scientific Company filed on
February 19, 1998 (Superior Court of California, County of
Orange).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 25, 1998
PACIFIC SCIENTIFIC COMPANY
By: /s/ Lester Hill
Name: Lester Hill
Title: Chairman and Chief Executive
Officer
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EXHIBIT LIST
Exhibit 99.1 Complaint in Freiberg vs. Pacific Scientific Company filed on
February 19, 1998 (Superior Court of California, County of
Orange).
MARC M. SELTZER (54534)
DAVID H. BOREN (186316)
SUSMAN GODFREY L.L.P.
3700 Wilshire Boulevard, Suite 820
Los Angeles, California 90010-3085
Telephone: (213) 380-4200
STEPHEN LOWEY
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
The Gateway
One N. Lexington Avenue
White Plains, New York 10601
Telephone: (914) 997-0500
Attorneys for Plaintiffs
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF ORANGE
SHIELA FREIBERG; JAMES SHAVICK;
and LINA B. POPPER, as Trustee for
the Lina B. Popper Revocable
Trust, On Behalf of Themselves and Case No. 790706
All Others Similarly Situated, CLASS ACTION
JUDGE WILLIAM F. MCDONALD
Plaintiffs, DEPT. 20
vs. COMPLAINT FOR BREACH OF
PACIFIC SCIENTIFIC COMPANY, WALTER FIDUCIARY DUTY AND
F. BERAN, RALPH O. BRISCOE, LESTER VIOLATIONS OF THE CALIFORNIA
"BUCK" HILL, RALPH D. KETCHUM, CORPORATIONS CODE
WILLIAM A. PRESTON, and MILLARD H.
PRYOR, JR., and DOES 1-100, Plaintiffs Demand
Inclusive, a Trial By Jury
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Plaintiffs allege upon information and belief, based, in part, upon
public filings, press statements, and additional investigation made by and
through their attorneys, except as to those allegations relating to plaintiffs
and their counsel, which are alleged upon knowledge, as follows:
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NATURE OF THE CASE
1. This is a class action brought by the plaintiffs on behalf of
themselves and the other former holders of 7-3/4% Convertible Subordinated
Debentures due June 15, 2003 (the "Convertible Debentures") issued by defendant
Pacific Scientific Company ("Pacific Scientific" or the "Company"), for damages
and other relief arising out of defendants' conduct in causing the redemption of
the Convertible Debentures without disclosing, among other things, the existence
of merger discussions that had taken place between Pacific Scientific and
Kollmorgen Corporation ("Kollmorgen") and that the Company was the subject to a
potential takeover. On February 2, 1998, in an action taken in response to
Kollmorgen's efforts to acquire the Company, Pacific Scientific and Danaher
Corporation ("Danaher") jointly announced that Danaher will acquire Pacific
Scientific pursuant to a transaction in which Pacific Scientific common
shareholders will receive $30.25 per share in cash. Pacific Scientific has
called a special shareholders meeting for March 27, 1998, to vote on the
acquisition of the Company by a wholly-owned subsidiary of Danaher.
2. On and before November 24, 1997, the date the Convertible
Debentures were called for redemption by the Company, until December 8, 1997,
plaintiffs and the other holders of the Company's Convertible Debentures had the
right, at their option, to convert their Convertible Debentures into shares of
Pacific
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Scientific's common stock rather than having their debentures redeemed by the
Company. Had plaintiffs and the other members of the Class, as defined in
paragraph 23 below, been advised of the existence of discussions concerning the
potential takeover of the Company, they would have been able to make an informed
decision as to whether to convert their Convertible Debentures into shares of
Pacific Scientific common stock or allow their debentures to be redeemed. At the
time of the call for redemption, and up to the last day on which the Convertible
Debentureholders could convert their debentures into Pacific Scientific common
stock, no public disclosure was made of any merger discussions or potential
takeover of the company and the then market price of Pacific Scientific's common
stock made conversion appear to be a financially unattractive alternative to
redemption. That disincentive to convert is demonstrated by the fact that only a
small number of Convertible Debentureholders chose to convert their Convertible
Debentures into Pacific Scientific common stock.
3. Unknown to plaintiffs and the other members of the Class, at the
very time that they were forced by defendants to make the critical decision
whether to convert their convertible Debentures into Pacific Scientific common
stock or accept the redemption price, Kollmorgen had engaged in takeover
discussions with Pacific Scientific and was pressing the Company to merge with
it. The defendants knew or should have known that these facts, if disclosed,
would likely cause the price of Pacific Sci-
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entific's common stock to appreciate significantly over the then prevailing
market price. Indeed, when the proposed Kollmorgen merger was publicly
disclosed, the market price of Pacific Scientific common stock immediately and
dramatically increased on very heavy trading from approximately $15.44 per share
to approximatley $22 per share. The market price of Pacific Scientific's common
stock has increased significantly since that time and now trades at
approximately $30 share.
4. The Convertible Debentureholders were forced to make the important
decision as to whether they should convert their shares solely as a result of
the defendants' unnecessary unilateral action in calling the Convertible
Debentures for redemption. Defendants were under no legal compulsion to call the
Convertible Debentures for redemption at the time they did. Defendants, as
fiduciaries to plaintiffs and the other members of the Class, and because they
caused the Convertible Debentureholders, in effect, to sell their Convertible
Debentures to Pacific Scientific through the mechanism of redemption, were
obligated to act with complete candor and disclose all information which would
be important to plaintiffs and the members of the Class in determining which
alternative to select. Yet, defendants failed to publicly disclose the fact that
merger discussions had occurred and that takeover proposals had been made while
the redemption process was underway.
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5. Pursuant to their fiduciary duties and under applicable law,
defendants should have either abstained from calling the Convertible Debentures
for redemption until after disclosing the foregoing material facts or cancelled
the redemption process, or at least disclosed this highly material information
prior to the time that plaintiffs and the other members of the Class were
compelled by defendants to choose whether or not to allow their Convertible
Debentures to be redeemed by Pacific Scientific.
6. By timing the redemption process in such a way as to disadvantage
plaintiffs and the other members of the Class and by failing to disclose
material facts to plaintiffs and the other members of the Class, defendants
breached their fiduciary duties of loyalty, candor, good faith and due care owed
to the Convertible Debentureholders and violated the California Corporations
Code, as alleged more particularly below.
JURISDICTION AND VENUE
7. Many of the defendants' acts and transactions complained of herein
occurred in substantial part in Orange County, California. The principal
executive offices of Pacific Scientific are located in Orange County. The
individual Defendants, as defined and identified below, reside in Orange County
or regularly conduct substantial business in Orange County. In addi-
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tion, a substantial number of Class members reside in Orange County and
elsewhere in California.
8. The amount in controversy is in excess of the jurisdictional
minimum of this Court.
THE PARTIES
9. Plaintiff Sheila Freiberg ("Freiberg") was an owner of twenty
Convertible Debentures at all times material hereto, and had her Convertible
Debentures redeemed by Pacific Scientific as a proximate result of defendants'
wrongdoing alleged herein. Plaintiff Freiberg is a member of the Class defined
herein.
10. Plaintiff James Shavick ("Shavick") was an owner of ten
Convertible Debentures at all times material hereto, and had his Convertible
Debentures redeemed by Pacific Scientific as a proximate result of defendants'
wrongdoing alleged herein. Plaintiff Shavick is a member of the Class defined
herein.
11. Plaintiff Lina B. Popper ("Popper"), as Trustee of the Lina B.
Popper Revocable Trust, was an owner of ten Convertible Debentures at all times
material hereto, and had her Convertible Debentures redeemed by Pacific
Scientific as a proximate result of defendants' wrongdoing alleged herein.
Plaintiff Popper is a member of the Class defined herein.
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12. Defendant Pacific Scientific is a California corporation with its
principal place of business 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. As of November 24, 1997,
the date Pacific Scientific announced the redemption, there were $16.978 million
in principal amount of Convertible Debentures issued and outstanding. These
Convertible Debentures were issued by the Company on April 19, 1983, and were
convertible into shares of Pacific Scientific Common Stock at a conversion price
of $19.00, or 52.6315789473 shares per $1,000 principal amount of Convertible
Debentures. The original expiration date for redemption was June 15, 2003.
Pursuant to the Company's November 24, 1997 announcement, however, the Company
required Convertible Debentureholders to determine whether or not to convert
their Convertible Debentures into Pacific Scientific common stock on or before
December 8, 1997. If not converted, the debentures would be redeemed and the
Convertible Debentureholders would be paid the principal amount of their
debentures, plus accrued interest, on December 15, 1997.
13. Defendant Lester "Buck" Hill ("Hill") is the Chairman of Pacific
Scientific's Board of Directors and also serves as its President and Chief
Executive Officer. He has held these positions since February 1997.
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14. Defendants Walter F. Beran ("Beran"), Ralph O. Briscoe
("Briscoe"), Ralph D. Ketchum ("Ketchum"), William A. Preston ("Preston"), and
Millard H. Pryor, Jr. ("Pryor") are each currently members of Pacific
Scientific's Board of Directors and were directors of Pacific Scientific at all
times relevant hereto.
15. Defendants Hill, Beran, Briscoe, Preston, Ketchum and Pryor
(collectively referred to herein as the "Individual Defendants"), constitute the
entire Board of Directors of Pacific Scientific.
16. Plaintiffs are as yet unaware of the true names and capacities of
defendants sued herein as Does 1 through 100, inclusive, and therefore sues such
defendants by such fictitious names. Plaintiffs will amend the complaint to
allege the true names and capacities of Does 1 through 100 when the same are
ascertained. These fictitiously named defendants are legally responsible for the
wrongdoing alleged herein. Many if not all of the defendants named as Does 1
through 100 are residents of the State of California or transact substantial
business in this state.
17. As directors and/or officers of Pacific Scientific, the Individual
Defendants stood in a fiduciary relationship with the plaintiffs and the other
members of the Class and owe to them the highest obligations of good faith,
loyalty, can-
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dor, fair dealing and due care, including the duty to disclose all facts
material to the Convertible Debentures holders with respect to, among other
things, the decision they required the Convertible Debentureholders to make as
to whether or not they should convert their Debentures into Pacific Scientific
common stock or allow their Debentures to be redeemed. The Individual Defendants
breached their fiduciary duties by failing to disclose the potential takeover of
Pacific Scientific at the time defendants announced and implemented the
redemption of the Convertible Debentures and by manipulating the timing of the
redemption in such a way so as to cause plaintiffs and the members of the Class
to suffer a loss of the substantial economic benefits they would have otherwise
obtained had they converted their Convertible Debentures into Pacific Scientific
common stock.
18. In acting in their capacity as directors and officers of Pacific
Scientific, the Individual Defendants acted within the course and scope of their
authority. As such, Pacific Scientific is liable for the conduct of the
Individual Defendants under the doctrine of respondeat superior.
19. As directors of Pacific Scientific, the Individual Defendants were
controlling persons of Pacific Scientific and were able to and did, directly or
indirectly, in whole or in material part, control the content of public
statements issued by or on behalf of Pacific Scientific. As a result of the
forego-
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ing, the Individual Defendants were responsible for the truthfulness, accuracy
and completeness of Pacific Scientific's public statements and releases
described herein. Due to their positions with Pacific Scientific, the Individual
Defendants knew of the potential takeover at the time Pacific Scientific
announced the call for and effectuated the redemption of its Convertible
Debentures.
20. Pacific Scientific and the Individual Defendants, as directors of
Pacific Scientific, had a duty to promptly disseminate truthful and accurate
information with respect to Pacific Scientific and to promptly correct any
public statements issued by or on behalf of Pacific Scientific which had become
false or misleading.
21. Defendants, and each of them, knew or recklessly disregarded or
were negligent in not knowing that the misleading statements and omissions
complained of herein would induce Convertible Debentureholders to permit their
debentures to be redeemed rather than causing them to be converted into shares
of Pacific Scientific common stock.
22. Plaintiffs are informed and believe and thereon allege that the
defendants, and each of them, are, and at all times herein mentioned were, the
agents, servants or employees of each other, and in doing the acts and following
the course of conduct set forth herein, each such defendant was acting within
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the course and scope of such agency or employment, and each defendant approved,
ratified or affirmed the acts and conduct of each other defendant.
CLASS ACTION ALLEGATIONS
23. Plaintiffs bring this action on their own behalf and as a class
action on behalf of all persons and entities who owned the Convertible
Debentures which were redeemed by Pacific Scientific (the "Class") on or about
December 15, 1997. The Class excludes all of the defendants, the officers and
directors of Pacific Scientific, the members of the immediate families of the
officers and directors of Pacific Scientific, and any person, firm, trust,
corporation or other person or entity affiliated with any of the defendants, and
the heirs, successors and assigns of any excluded party.
24. This action is properly maintainable as a class action pursuant to
section 382 of the Code of Civil Procedure for the following reasons:
(a) The Class is ascertainable and has a well-defined community
of interest. The members of the Class are so numerous that joinder of all Class
members is impracticable. Prior to the redemption of the Convertible Debentures,
there were $16.978 million in principal amount of Convertible Debentures issued
and outstanding. While the precise number of Class members is unknown to
plaintiffs at this time and can only be ascertained
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through appropriate discovery, plaintiffs believe that there are, at a minimum,
hundreds of members of the Class.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any questions affecting only
individual members, including whether the defendants breached their fiduciary
duties and violated the California Corporate Securities Law of 1968 by
manipulating the timing of the redemption and the disclosure of the merger
discussions in such a way so as to induce plaintiffs and the members of the
Class to refrain from converting their Convertible Debentures into Pacific
Scientific common stock.
(c) The claims of plaintiffs are typical of the claims of the
other members of the Class. Plaintiffs and the members of the Class have
sustained injury as a result of defendants' conduct as alleged herein.
(d) Plaintiffs are members of the Class and will fairly and
adequately protect the interests of the Class. They are committed to prosecuting
this action, have retained competent counsel experienced in conducting class and
securities litigation and have no interests that are adverse or antagonistic to
the interests of the Class. Accordingly, plaintiffs are adequate representatives
of the Class.
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(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for the party opposing the Class.
(f) A class action is superior to the other available methods for
the fair and efficient adjudication of this controversy since joinder of all
members of the Class is impracticable. There will be no difficulty in the
management of this case as a class action.
DEFENDANTS' WRONGFUL COURSE OF CONDUCT
REDEMPTION OF THE CONVERTIBLE DEBENTURES
25. On November 24, 1997, Pacific Scientific issued a press release in
which it publicly announced that it was calling for redemption of all of its
outstanding Convertible Debentures. Pursuant to the announcement, the
Convertible Debentures were to be redeemed at face value, plus accrued interest.
This announcement accelerated the time for redemption by more than five years,
from June 15, 2003, to December 15, 1997.
26. In its November 24th announcement, Pacific Scientific also stated
that the Convertible Debentureholders would have only until December 8, 1997,
one week before the new redemption date, to convert their shares into Pacific
Scientific common stock, at a conversion price of $19.00 per share, or
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52.6315789473 shares per $1,000 principal amount of the Convertible Debentures.
The total principal amount of the outstanding Convertible Debentures was $16.978
million. If all of the Convertible Debentures were converted into common stock,
approximately 893,579 shares of Pacific Scientific common stock would have been
issued to the Convertible Debentureholders.
27. On or about December 15, 1997, Pacific Scientific redeemed the
outstanding Convertible Debentures. Only a small number of Convertible
Debentureholders elected to convert their Convertible Debentures into shares of
the Company's common stock. Due to the defendants' failure to disclose the
material facts alleged herein regarding the potential takeover of the Company,
it appeared that it was more prudent for the holders of the Convertible
Debentures to allow them to be redeemed because Pacific Scientific common stock
was then trading in the range of $15.25 to $15.50 per share and the conversion
price was set at $19 per share. On December 15, 1997, Kollmorgen filed its
tender offer materials with the Securities and Exchange Commission, which
described the Pacific Scientific takeover proposal and the background of the
proposal, including a description of the discussions between Pacific Scientific
and Kollmorgen about a potential takeover of the Company that had taken place
over the preceding six months. Once these matters were publicly disclosed, the
price of Pacific Scientific common stock increased dramatically, closing at $22
per share. At that price, conversion of the de-
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bentures would have provided substantially more economic benefits to the
Convertible Debentureholders than allowing the debentures to be redeemed. The
market price of Pacific Scientific's common stock has increased since then and
the Company's stock now trades in the range of approximately $30 per share.
THE DISCUSSIONS REGARDING THE TAKEOVER OF PACIFIC SCIENTIFIC
28. On or about July 18, 1997, Gideon Argov ("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 combining Kollmorgen and Pacific Scientific. Kollmorgen and
Pacific Scientific both are engaged in the business of providing high
performance motion control products. Defendant Hill agreed to meet with Argov
and a meeting was scheduled for the first week in August 1997.
29. On August 1, 1997, Argov met with defendant Hill in Newport Beach,
California. Argov discussed the businesses of Pacific Scientific and Kollmorgen
and the motion control industry generally with defendant Hill and proposed a
merger of Kollmorgen and Pacific Scientific. At that time, Argov and defendant
Hill explored a broad range of topics related to the proposed combination.
Defendant Hill did not reject Argov's proposal, but stated
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that he needed more time to consider the proposal. Argov and defendant Hill
agreed to speak again within the next few weeks.
30. On or about August 13, 1997, Argov telephoned defendant Hill to
ask whether defendant Hill had considered Argov's proposal. Defendant Hill
responded that he had considered the proposal, but that he needed more time to
do so because the Company was in the midst of a strategic planning process.
Argov agreed to call defendant Hill in early September 1999.
31. On or about September 15, 1997, Argov again telephoned defendant
Hill to ask whether defendant Hill was now ready to discuss a business
combination of their two companies. Defendant Hill again responded that he was
not ready to discuss a possible business combination because of Pacific
Scientific's ongoing strategic planning process. Argov and defendant Hill agreed
to speak again on October 15 or 16, 1997.
32. On or about October 15, 1997, Argov attempted to telephone
defendant Hill, but defendant Hill did not return Argov's calls. On October 21,
1997, Argov telephoned defendant Hill and again proposed discussing the possible
merger of Kollmorgen and Pacific Scientific. Defendant Hill responded that he
had thought about Argov's suggestion and discussed it with the other members of
the Company's Board of Directors and had concluded that it would not be in the
best interests of Pacific Scientific. Argov indicated that he was still
interested in
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pursuing a merger between the two companies and stated that he would consider
what options his company would pursue. On October 22, 1997, defendant Hill
telephoned Argov to offer to sell Pacific Scientific's Automation Intelligence,
Inc. business to Kollmorgen. Argov indicated to defendant Hill that Kollmorgen
was not interested in acquiring only a small piece of Pacific Scientific's
business.
33. On December 9, 1997, Argov telephoned defendant Hill to inform
defendant Hill that Argov was authorized by Kollmorgen's Board of Directors to
make a proposal to acquire Pacific Scientific for $20.50 per share in cash and
Kollmorgen common stock, and that defendant Hill should expect to receive a
letter from Argov making such a proposal. Argov reiterated Kollmorgen's belief
that a combination of Pacific Scientific and Kollmorgen would benefit 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. Defendant Hill promised
to telephone Argov with a response to the proposal on Friday, December 12, 1997.
On December 9, 1997, following that telephone call, Argov sent to defendant Hill
a letter outlining the contemplated terms of the proposed merger.
34. On December 12, 1997, defendant Hill failed to telephone Argov as
previously agreed. Instead, defendant Hill
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sent a letter by telecopy to Argov which stated that defendant Hill had shared
Argov's letter with Pacific Scientific's Board of Directors and further stating:
"We will be back to you once we have had a chance to fully consider the matter."
The letter was signed, "Best Regards, Lester Hill." On December 15, 1997,
Kollmorgen commenced a tender offer to acquire the number of Pacific Scientific
common shares that, when added to the number of Pacific Scientific common shares
already owned by Kollmorgen, directly or indirectly, would constitute a majority
of the Pacific Scientific common stock outstanding on a fully diluted basis. The
tender offer was made to all holders of Pacific Scientific common shares at a
price of $20.50 in cash per Pacific Scientific common share, net to the seller
in cash. This price represented a 33% premium over the then-prevailing market
price of Pacific Scientific common stock on the last trading day before the
announcement of the offer.
35. In accordance with its terms, the tender offer, if successful, was
to be followed by a merger, by which Pacific Scientific would merge with
Kollmorgen or a wholly-owned subsidiary of Kollmorgen. All Pacific Scientific
common shares not held or owned by Kollmorgen or its wholly-owned subsidiary, or
by shareholders exercising their dissenters' rights, if any, would be converted
into the right to receive shares of Kollmorgen common stock with a value of
$20.50 (i.e., the same value as the cash offer), subject to a price collar.
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36. To facilitate the tender offer and the proposed merger, Kollmorgen
also announced on December 15, 1997, its intention to solicit consents to call a
special meeting of Pacific Scientific's shareholders. On January 30, 1998,
Kollmorgen increased its tender offer and merger proposal to $23.75 per share.
37. News of the potential takeover had a substantial positive impact
on the market price of Pacific Scientific's common stock, which closed at $22
per share on December 15, 1997, on very heavy trading volume. In contrast, the
closing price of Pacific Scientific's common stock on December 8, 1997, the last
day Convertible Debentureholders could decide to convert their shares into
Pacific Scientific common stock, was approximately $15.31 per share, more than
$6.60 per share below the closing price on December 15, 1997.
38. On December 15, 1997, notwithstanding the failure to disclose
information material to the decision of the Convertible Debentureholders as to
whether to convert their debentures into Pacific Scientific common stock,
Pacific Scientific completed the redemption and did not provide any means to
allow the Convertible Debentureholders to convert their debentures prior to the
effectiveness of the redemption.
39. Pacific Scientific's November 24, 1997 press release and notice of
redemption were materially misleading in that, among other things, they failed
to disclose the existence
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of corporate takeover discussions with Kollmorgen. Defendants unfairly and
wrongfully discouraged plaintiffs and the other members of the Class from
converting their Convertible Debentures into Pacific Scientific common stock by
giving them inadequate and materially misleading information, and by making it
appear that it was financially desirable for Class members to allow the Company
to redeem their Convertible Debentures. Had defendants disclosed the material
facts in their possession or at least delayed the redemption of the Convertible
Debentures until after the material facts regarding the potential takeover of
the Company were publicly disclosed, plaintiffs and the members of the Class
would have been able to elect to convert their Convertible Debentures into
Pacific Scientific common stock in light of such information. If the Convertible
Debentureholders converted their debentures, they would have been able to
receive additional consideration of approximately $10 million over and above the
redemption price.
THE DANAHER AND PACIFIC SCIENTIFIC MERGER AGREEMENT
40. On February 2, 1998, Pacific Scientific and Danaher jointly
announced a merger agreement between them whereby Danaher would acquire all
outstanding shares of Pacific Scientific common stock in an all cash transaction
valued at approximately $460 million, or $30.25 per share. Danaher is a leading
manufacturer of tools and components and process/environmental controls. The
Individual Defendants have unanimously approved
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the Danaher transaction and recommended that Pacific Scientific shareholders
accept the Danaher offer and tender their shares.
41. It is anticipated that the Danaher-Pacific Scientific merger
transaction will soon be completed. As alleged above, had plaintiffs and other
members of the Class not been deprived of material information by the
defendants, they would have been able to convert their Convertible Debentures
into Pacific Scientific common stock and received approximately $10 million in
additional consideration over and above the redemption price paid by Pacific
Scientific for their Convertible Debentures.
DEFENDANTS' BREACH OF DUTIES
42. The Individual Defendants, as corporate directors and/or officers
of Pacific Scientific, owed to members of the Class the highest fiduciary
obligations of good faith, loyalty, candor, fair dealing and due care, including
the duty to disclose, in an atmosphere of entire candor, all facts material to
the Convertible Debentureholders bearing on their decision to convert their
Convertible Debentures to Pacific Scientific common stock.
43. The fact that Pacific Scientific had participated in discussions
regarding a potential takeover of the Company was material to Class members in
that such information would have assumed actual significance in the
deliberations of a reasonable Convertible Debentureholder with respect to
whether or not to
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convert his or her Convertible Debentures into Pacific Scientific common stock
and would have significantly altered the total mix of information available to
such Convertible Debentureholder.
44. Pacific Scientific was under no legal compulsion to call the
Convertible Debentures for redemption. By manipulating the timing and structure
of the redemption and failing to disclose material facts to the Company's
Convertible Debentureholders, defendants breached their fiduciary duties to
plaintiffs and the members of the Class and violated the provisions of the
California Corporate Securities Law of 1968, as alleged herein.
FIRST CAUSE OF ACTION
(AGAINST ALL DEFENDANTS FOR BREACH OF FIDUCIARY DUTIES
AND/OR AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY)
45. Plaintiffs repeat and reallege each and every allegation contained
in paragraphs 1 through 44 above, with the same force and effect as though fully
set forth herein.
46. Defendants, individually and jointly, breached their fiduciary
duties of good faith, loyalty, candor, fair dealing and due care to the
plaintiffs and other Class members by structuring and timing the redemption in
such a way so as to disadvantage plaintiffs and the Class, by failing to
disclose facts regarding the potential takeover of Pacific Scientific and by
providing inadequate and materially misleading information. As a result,
defendants effectively and unfairly discouraged plain-
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tiffs and other members of the Class from converting their Convertible
Debentures into Pacific Scientific common stock. Such conduct also breached the
implied covenant of good faith and fair dealing owed by defendants to the
Convertible Debentureholders.
47. By reason of the foregoing acts, the defendants also failed to use
ordinary care and diligence in the exercise of their respective fiduciary
obligations toward plaintiffs and the other members of the Class. Alternatively,
the defendants aided and abetted the breaches of fiduciary duty of the other
defendants herein and are jointly and severally liable for their participation
in such wrongdoing.
48. Plaintiffs and the members of the Class have been injured as a
direct and proximate result of the aforesaid conduct of the defendants and
sustained many millions of dollars of damage, including, but not limited to, the
loss of their ability to share in the increased value of the Pacific Scientific
common stock and the proceeds of the Danaher merger transaction.
SECOND CAUSE OF ACTION
(AGAINST ALL DEFENDANTS FOR VIOLATION OF SECTIONS
25400 AND 25500 OF THE CALIFORNIA
CORPORATE SECURITIES LAW)
49. Plaintiffs repeat and reallege each and every allegation contained
in paragraphs 1 through 44 above, with the same force and effect as though fully
set forth herein.
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50. Defendant Pacific Scientific offered to purchase and did purchase
the Convertible Debentures from plaintiffs and the other members of the Class by
means of a press release and other public announcements which omitted to state
material facts necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, in violation of
California Corporations Code [Section][Section] 25400 and 25500. Defendant
Pacific Scientific made such materially misleading statements and omissions for
the purpose of inducing the plaintiffs and other members of the Class to sell
their Convertible Debentures to Pacific Scientific by means of the redemption at
an artificially low and manipulated price. Plaintiffs and the other members of
the Class would not have sold their Convertible Debentures to Pacific Scientific
had they known about the potential takeover of the Company and would have
elected to convert their Convertible Debentures to Pacific Scientific common
stock.
51. Defendants, and each of them, are liable under California
Corporations Code [Section] 25500, for willfully participating in acts or
transactions in violation of [Section] 25400. Defendants, and each of them, are
liable to plaintiffs and other members of the Class who sold their Convertible
Debentures to Pacific Scientific at prices which were affected by wrongful acts
and transactions of the defendants, as alleged above. By virtue of the wrongful
conduct of the defendants, plaintiffs and the other members of the Class have
been damaged. In addition, pursuant to [Section] 25500,
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plaintiffs and the Class are entitled to an award of prejudgment interest.
THIRD CAUSE OF ACTION
(AGAINST ALL DEFENDANTS FOR VIOLATION OF SECTIONS
25401, 25501 AND 25504 OF THE CALIFORNIA
CORPORATE SECURITIES LAW)
52. Plaintiffs repeat and reallege each and every allegation contained
in paragraphs 1 through 44 above, with the same force and effect as though fully
set forth herein.
53. Defendant Pacific Scientific violated [Section][Section] 25401 and
25501 of the California Corporations Code by offering to redeem the Convertible
Debentures from plaintiffs and the other members of the Class by means of
communications which omitted material facts necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
54. Pacific Scientific's materially misleading statements were made to
induce the Convertible Debentureholders to sell their Convertible Debentures
back to Pacific Scientific rather than converting their shares into Pacific
Scientific common stock, as they had a right to do.
55. The Individual Defendants and Does 1 through 100 may be held
liable for violations of [Section] 25501 of the Corporations
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Code pursuant to [Section] 25504 of the Corporations Code insofar as they were
controlling persons of Pacific Scientific.
56. Plaintiffs and other members of the Class suffered substantial
damage in connection with the sale of their Convertible Debentures to Pacific
Scientific. Plaintiffs and the other members of the Class are entitled to
rescind the sale of their Convertible Debentures to Pacific Scientific and to
have such Convertible Debentures converted into shares of Pacific Scientific
common stock at the conversion price offered to Convertible Debentureholders by
Pacific Scientific in its November 24, 1997 press release, or, alternatively, to
an award of damages as provided under [Section] 25501 and other applicable law.
WHEREFORE, plaintiffs pray for judgment and relief as follows:
A. Certifying this action as a plaintiff class action, the plaintiffs
as the representatives of the Class and their counsel as Class counsel;
B. Finding that Pacific Scientific and the Individual Defendants have
breached their fiduciary duties to the plaintiffs and the Class;
C. Finding that Pacific Scientific and the Individual Defendants
violated the California Corporate Securities Law of 1968, as alleged above;
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D. Awarding the plaintiffs and other members of the Class
compensatory, economic and general damages according to proof and prejudgment
interest at the maximum legal rate;
E. Awarding plaintiffs of the costs and disbursements of this action,
including reasonable attorneys' and experts' fees;
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F. Granting such other and further relief as this Court deems to be
just and proper.
MARC M. SELTZER
DAVID H. BOREN
SUSMAN GODFREY L.L.P.
STEPHEN LOWEY
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
By:
Marc M. Seltzer
Attorneys for Plaintiffs
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DEMAND FOR JURY TRIAL
Plaintiffs hereby demand a trial by jury.
MARC M. SELTZER
DAVID H. BOREN
SUSMAN GODFREY L.L.P.
STEPHEN LOWEY
LOWEY DANNENBERG BEMPORAD
& SELINGER, P.C.
By:
Marc M. Seltzer
Attorneys for Plaintiffs
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