SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 4)
----------------------------------------
PACIFIC SCIENTIFIC COMPANY
(Name of Subject Company)
PACIFIC SCIENTIFIC COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(and Associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
----------------------------------------
694806
(CUSIP Number of Class of Securities)
----------------------------------------
LESTER HILL
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
PACIFIC SCIENTIFIC COMPANY
620 NEWPORT CENTER DRIVE, SUITE 700
NEWPORT BEACH, CALIFORNIA 92660
(714) 720-1714
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf
of the Person(s) Filing Statement)
----------------------------------------
With a copy to:
ADAM O. EMMERICH, ESQ. WILLIAM S. SIMPSON, ESQ.
Wachtell, Lipton, Rosen & Katz Paul, Hastings, Janofsky &
51 West 52nd Street Walker LLP
New York, New York 10019-6150 695 Town Center
(212) 403-1000 Costa Mesa, California 92826
(714) 668-6200
<PAGE>
This Amendment No. 4 amends and supplements the Solicitation/
Recommendation Statement on Schedule 14D-9 initially filed with the Securities
and Exchange Commission (the "Commission") on February 6, 1998 (as subsequently
amended, the "Schedule 14D-9"), by Pacific Scientific Company, a California
corporation (the "Company" or "Pacific Scientific"), relating to the tender
offer made by ACC Acquisition Corp. ("Purchaser"), a California corporation and
an indirect wholly owned subsidiary of Danaher Corporation, a Delaware
corporation ("Parent"), as set forth in a Tender Offer Statement on Schedule
14D-1, dated February 6, 1998 (the "Schedule 14D-1"), to purchase all
outstanding Shares at a price of $30.25 per share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated February 6, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"). The Offer is being made
pursuant to an Agreement and Plan of Merger, dated as of January 31, 1998 (the
"Merger Agreement"), by and among DH Holdings Corp., a wholly owned subsidiary
of Parent ("Holdings"), Purchaser and the Company. Unless otherwise indicated,
all capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
On February 25, 1998, an action was commenced against the Company and its
directors in the Superior Court of California, County of Orange, by Jeffrey L.
Doppelt, purporting to bring suit on his behalf and on behalf of all those
similarly situated 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
26 and incorporated herein by reference.
On March 6, 1998, the Company notified holders of Options of its
willingness to cash-out all such Options at a price (the "Option Price") equal
to the product of (i) the total number of Shares previously subject to such
Option and (ii) the excess of the $30.25 (the "Offer Price") over the exercise
price per Share subject to such Option, subject to any required withholding
taxes, three business days after the Purchaser accepts and pays for Shares
tendered in the Offer (the "Early Cash-Out Date"). Pursuant to the Merger
Agreement, following the Early Cash-Out Date, holders of Options who have not
elected to take advantage of the early cash-out will have to wait until the
Effective Time of the Merger to receive the Option Price for such Options or the
Offer Price for any Shares received upon exercise of Options which were not
tendered prior to the Expiration Date of the Offer, unless such Shares are sold
in the open market prior to the consummation of the Merger. The text of the
letter is set forth as Exhibit 27 hereto and is incorporated by reference
herein.
ITEM 9. MATERIAL TO BE FILED ON EXHIBITS
Item 9 is hereby amended and supplemented by adding thereto the
following:
Exhibit 26. Complaint in Doppelt vs. Pacific Scientific Company filed on
February 25, 1998 (Superior Court of California, County of Orange).
<PAGE>
Exhibit 27. Text of letter, dated March 9, 1998, from Pacific Scientific
Company to holders of options (incorporated by reference to exhibit
(c)(3) to Amendment No. 2 to the Schedule 14D-1 of Parent and
Purchaser, dated March 9, 1998).
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
PACIFIC SCIENTIFIC COMPANY
Dated: March 9, 1998 By: /s/ Lester Hill
----------------
Lester Hill
Chairman, President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit 26. Complaint in Doppelt vs. Pacific Scientific Company filed on
February 25, 1998 (Superior Court of California, County of Orange).
Exhibit 27. Text of letter, dated March 9, 1998, from Pacific Scientific
Company to holders of options (incorporated by reference to exhibit
(c)(3) to Amendment No. 2 to the Schedule 14D-1 of Parent and
Purchaser, dated March 9, 1998).
Exhibit 26
LIONEL Z. GLANCY #134180
PETER A. BINKOW #173848
LAW OFFICES OF LIONEL Z. GLANCY
1801 Avenue of the Stars
Suite 308
Los Angeles, California 90067
(310) 201-9150
STANLEY M. GROSSMAN
D. BRIAN HUFFORD
POMERANTZ HAUDEK BLOCK & GROSSMAN
100 Park Avenue
New York, New York 10017-5516
Phone: (212) 661-1100
DAVID JAROSLAWICZ
JAROSLAWICZ & JAROS
150 Williams Street, 19th Floor
New York, NY 10038
Phone (212) 227-2780
Attorneys for Plaintiff
Jeffrey L. Doppelt
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF ORANGE
JEFFREY L. DOPPELT, on his own ) Case No. 790922
behalf and on behalf of all those )
similarly situated ) CLASS ACTION
)
) CLASS ACTION COMPLAINT
Plaintiff, ) FOR VIOLATIONS OF CAL.
) CORP. CODES [Sections] 25400 AND
v. ) 25500, CONSTRUCTIVE
) FRAUD AND BREACH OF
) FIDUCIARY DUTY
PACIFIC SCIENTIFIC COMPANY, LESTER)
HILL, and WINSTON E. HICKMAN )
) Jury Trial Demanded
Defendants.) Judge Tully H. Seymour, Dept. 30
)
<PAGE>
Plaintiff, individually and on behalf of all other persons similarly
situated, by his undersigned attorneys, for his complaint, alleges upon personal
knowledge as to himself and his own acts, and upon information and belief as to
all other matters, based upon, inter alia, the investigation made by and through
its attorneys, which investigation included, among other things, a review of the
public documents and published reports concerning defendant Pacific Scientific
Company ("PSC" or the "Company"), as follows:
SUMMARY OF ACTION
1. On November 24, 1997, Pacific Scientific Company ("PSC" or the
"Company"), at the direction and with the knowledge and acquiescence of the
members of its Board of Directors, called for the redemption of all the
outstanding shares of its 7-3/4% Convertible Subordinated Debentures due on June
15, 2003 (the "Debentures"). Holders of the Debentures were entitled to convert
the bonds into PSC common stock on or December 8, 1997 at a conversion price of
$19 per share. If not converted, bondholders would be paid 100% of the principal
amount of the Debentures, plus accrued interest, on December 15, 1997.
2. As of December 8, 1997, when the conversion decision had to be
made, the PSC common stock was trading at a price of $15-5/16 per share. As
such, the rational economic decision was for the bondholders to redeem their
Debentures rather than to convert them to common stock.
3. Unknown to plaintiff and the class, however, at the very time that
they were compelled to make this important decision, PSC was engaged in
discussions concerning its possible merger with another company at terms which
were very financially attractive to the common shareholders. Under the
California securities laws, and as fiduciaries to members of the
-2-
<PAGE>
class, PSC and the Individual Defendants (defined below) were obligated to
disclose all information which would have been important for the bondholders in
determining which alternative to elect. Yet, defendants did not make known the
proposed merger, which was only disclosed shortly after the redemption was
effected, leading to a substantial rise in the value of the PSC common stock.
Had plaintiff and the class converted their Debentures rather than selling them
back to PSC, the value of the merger package would have given them substantially
more in value than what they received through the redemption.
4. There was no business or contractual reason governing the timing of
the redemption. Accordingly, defendants should have either deterred calling the
Debentures until after making public their merger discussions or disclosed this
information prior to the time that the bondholders had to exercise their option.
5. Defendants are liable for violating the California securities
statutes, committing constructive fraud, and breaching their common law
fiduciary duties, as alleged herein.
JURISDICTION AND VENUE
6. PSC is a California chartered corporation based Newport Beach,
while many of the acts and transactions complained of herein occurred in
substantial part in Orange County. Moreover, a substantial number of PSC's
former bondholders reside in California, the precise number of which can only be
determined by discovery of the Company's records.
7. The amount in controversy is in excess of the jurisdictional
limitation and subject to the jurisdiction of the Superior Court of the County
of Los Angeles.
-3-
<PAGE>
THE PARTIES
8. Plaintiff Jeffrey L. Doppelt was a bondholder of PSC's Debentures,
which were redeemed by the Company on December 15, 1997. As such he is a member
of the Class defined herein.
9. Defendant PSC designs, manufacturers and markets motion control,
process control and safety equipment. A corporation chartered in California, the
Company's headquarters are located at 620 Newport Center Drive, Suite 700,
Newport Beach, California 92660.
10. Defendant Lester Hill ("Hill") is Chairman of PSC's Board of
Directors and its Chief Executive Officer.
11. Defendant Winston E. Hickman ("Hickman") is PSC's Senior Vice
President and Chief Financial Officer. Collectively, Hill and Hickman are
referred to herein as the "Individual Defendants."
12. As directors and/or officers of PSC, the Individual Defendants are
controlling persons of the Company who 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 PSC. As a result of the foregoing, the
Individual Defendants were responsible for the truthfulness and accuracy of the
Company's public reports and releases described herein. Due to their respective
positions with the Company, the Individual Defendants also knew or were reckless
in not knowing of the ongoing merger negotiations at the time of the announced
decision by PSC to redeem its Debentures.
-4-
<PAGE>
13. PSC and the Individual Defendants, as directors and/or officers of
a publicly-held company, had a duty to promptly disseminate truthful and
accurate information with respect to the Company and to promptly correct any
public statements issued by or on behalf of the Company which had become false
or misleading.
14. Defendants knew or recklessly disregarded that the misleading
statements and omissions complained of herein would defraud the holders of the
Debentures by inducing them to redeem their shares rather than converting them
to PSC common stock, which the defendants knew or were reckless in not knowing
would soon be worth substantially more as a result of the anticipated merger.
Defendants acted knowingly or in such a reckless manner as to constitute a fraud
and deceit upon plaintiffs and the other members of the Class.
15. Defendants are liable, jointly and severally, as direct
participants in the wrongs complained of herein.
CLASS ACTION ALLEGATIONS
16. Plaintiff brings this action on his own behalf and as a class
action on behalf of all persons and entities who owned PSC's Debentures and who
had them redeemed by the Company and were injured thereby (the "Class"). The
Class excludes all of the defendants named herein, members of the immediate
families of the Individual Defendants, and any person, firm, trust, corporation
or other entity affiliated with any of the defendants.
17. This action is properly maintainable as a class action pursuant to
the California Code of Civil Procedure [Section] 382 for the following reasons:
(a) The Class is ascertainable and has a well-defined community of
interest. The members of the Class of bondholders for whose benefit this action
is brought are so
-5-
<PAGE>
numerous that joinder of all Class members is impracticable. Prior to the
redemption of the Debentures, as alleged herein, there was an outstanding
principal amount of $16.978 million. While the precise number of Class members
is unknown to the plaintiff at this time and can only be ascertained through
appropriate discovery, the plaintiff believes 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 violated the California securities
statutes, engaged in a constructive fraud and breached their fiduciary duties by
manipulating the redemption and merger transactions in such a way so as to
advance their own interests at the expense of members of the Class and whether
the plaintiff and other members of the Class have been injured by the wrongs
complained of herein.
(c) The claims of plaintiff are typical of the claims of the other
members of the Class. Plaintiff and the members of the Class have sustained
injury as a result of defendants' acts as alleged herein.
(d) Plaintiff is a member of the Class and will fairly and adequately
protect the interests of the Class. He is committed to prosecuting this action,
has retained competent counsel experienced in class and securities litigation,
has no interests that are adverse or antagonistic to the interests of the Class
and is not subject to any unique defenses. Accordingly, plaintiff is an adequate
representative of the Class.
(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
-6-
<PAGE>
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.
SUBSTANTIVE ALLEGATIONS
Redemption of the Debentures
18. On November 24, 1997, the defendants announced in a press release
reported on PRNewswire that PSC had elected to redeem its 7-3/4% Convertible
Subordinated Debentures due on June 15, 2003. Defendant Hickman was quoted in
the press release as stating: "After careful analysis, we believe that the
redemption of this issue at this time is in the best interest of the Company and
our shareholders."
19. At the time of the announcement, there was outstanding principle
amount of $16.978 million of the Debentures, which had been issued by PSC on
April 19, 1983 and were convertible into shares of PSC common stock at a
conversion price of $19 per share, or 52.6315789473 shares per $1,000 principal
amount.
20. The defendants reported that the bondholders would have the right
to convert their Debentures to PSC common stock on or before December 8, 1997,
with the Company to redeem all outstanding Debentures at 100% of the principal,
plus accrued interest, on December 15, 1997.
21. On the day of the announcement, the PSC common stock closed at
$15-7/8 per share. Between that day and December 8, 1997, the last day by which
the bondholders could
-7-
<PAGE>
convert their Debentures, the price did not rise above $15-7/8, before closing
at the end of the period at $15-5/16 per share. In light of the market price,
the most rational financial decision was for the bondholders to redeem their
shares rather than to convert them. Plaintiff and most of the bondholders
subsequently had their Debentures redeemed by PSC on December 15, 1997.
The Tender Offer
22. On December 15, 1997, the very day that PSC redeemed the
Debentures, and only a week after the deadline closed by which the bondholders
had to convert their bonds to Company common stock, Kollmorgen Corporation
("Kollmorgen") announced that it had commenced a tender offer to acquire a
majority of the outstanding shares of PSC common stock at a fully diluted basis
at $20.50 per share, representing a substantial premium of approximately 33%
over the then-current price of the common stock. Kollmorgen also announced that
it was initiating a consent solicitation at which it sought to call a special
meeting of the PSC shareholders, at which meeting Kollmorgen intended to ask PSC
shareholders to remove the entire PSC Board and replace it with new directors
nominated by Kollmorgen who were expected to take actions to consummate the
proposed business combination. The day of the announcement, the price of the PSC
common stock soared by $6-9/16 per share, to close at $22, on tremendous trading
volume.
23. On December 22, 1997, the defendants issued a press release in
response to Kollmorgen's tender offer, reporting that the Board had voted
unanimously to reject the offer, stating:
After considering a number of factors, including the opinion of our
financial advisor, BancAmerica Robertson Stephens, we concluded that
the Kollmorgen offer is financially inadequate, subject to a number of
significant conditions and not in the best interests of Pacific
Scientific or
-8-
<PAGE>
its shareholders. Management strongly believes Kollmorgen has
significantly undervalued the strength of the Company.
The press release also stated that the Board had also authorized management,
working along with its financial advisor, "to explore various strategic and
other alternatives for maximizing shareholder value, including continuing to
pursue its strategic initiatives as an independent company, and also including a
possible sale of or other extraordinary transaction involving the company."
24. The defendants went on to report in the press release that PSC had
initiated its "poison pill" takeover defense, by declaring a dividend
distribution of one Preferred Share Purchase Right on each outstanding share of
PSC common stock, and that it had redeemed the Company's existing Preferred
Share Purchase Rights and delayed the distribution and separation of the new
Preferred Share Purchase Rights until a later date to the determined by the
Board. The new Preferred Share Purchase Rights would be traded with the
Company's common stock. In explaining this transaction, defendant Hill was
quoted in the press release as stating;
The Rights are designed to assure that all of Pacific Scientific's
shareholders receive fair and equal treatment and to guard against
partial tender offers, squeeze-outs, open market accumulations and
other abusive tactics to gain control of Pacific Scientific without
paying a fair price.
25. Upon issuing the press release, Hill also discussed his reaction
to the bid with reporters. According to a report in The Orange County Register
on December 23, 1997, Hill stated:
This is not an entrenched management team that feels this job is their
birthright. Our objective has always been to maximize shareholder
value for shareholders. Kollmorgen's offer was clearly unattractive
and unacceptable.
-9-
<PAGE>
That doesn't mean that should we find an offer that exceeds the value
of executing the [Company's] strategic plan, we won't recommend it.
We just feel this offer was significantly inadequate.
26. The market clearly recognized, based on the defendants' December
22, 1997 announcement, that the Company was eventually going to be sold, but for
a higher price than Kollmorgen's initial offer. PSC's common stock price closed
that day at $22-7/16 per share, well above Kollmorgen's offer price, rising the
next day to close at $22-9/16.
27. Kollmorgen announced on January 8, 1998, that it had succeeded in
its consent solicitation in obtaining more than an agreement of more than 10
percent of the PSC stockholders to call a special shareholders meeting to
consider Kollmorgen's tender offer. The meeting was scheduled for February 14,
1998. On January 15, 1998, Kollmorgen subsequently distributed a proxy statement
recommending dismissal of the PSC Board to be replaced by members who would
agree to consummate the merger.
28. On January 16, 1998, the defendants issued another press release
urging its shareholders to oppose the Kollmorgen offer. According to the
announcement, Hill stated:
The Board of Directors of Pacific Scientific continues to believe that
the Kollmorgen offer is not reflective of the value that has been
created under the strategic plan being implemented by our management
team. We will not allow Pacific Scientific to be bought on the cheap.
The fact that Pacific Scientific's stock is trading more than $3.00
above the tender offer price further underscores our investors' views
of the inadequacy of the Kollmorgen bid. The Board and management are
continuing to work with our financial advisor, BancAmerica Robertson
Stephens, to explore various strategic and other alternatives to
maximize shareholder value, which may include the sale of the Company
or other extraordinary transaction involving the Company. The Board
strongly believes that the interests of Pacific Scientific
shareholders would be best served by continuing that effort and
opposing Kollmorgen's efforts to acquire Pacific Scientific at an
inadequate price.
-10-
<PAGE>
29. Kollmorgen increased its offer for PSC to $23.75 per share in a
press release issued on January 30, 1998. That day, the price of the PSC common
stock closed at $25-1/8 per share.
30. The following business day, on February 2, 1998, Danaher Corp.
("Danaher") announced that it would buy PSC for $30.25 per share in a friendly
merger with the Company, thereby upping Kollmorgen's highest bid by 27 percent.
In response, Kollmorgen reported that it was withdrawing its tender offer. That
day, the price of the PSC common stock rose to $29-7/8 per share, increasing to
over $30 per share by the February 24, 1998.
31. As a result of the Kollmorgen bid, the resulting effort by PSC to
find a friendly merger candidate, and the agreement by Danaher to acquire PSC
for $30.25 per share, the price of the PSC common stock nearly doubled from its
trading price of $15-7/8 per share on December 8, 1997, the last day the holders
of the PSC Debentures were entitled to convert their bonds to Company stock, to
over $30 per share.
The Defendants' Knowledge of the Potential Merger
32. The Kollmorgen proxy statement dated January 15, 1998, makes clear
that the defendants knew full well at the time they announced their redemption
of the Debenture on November 24, 1997, and finally consummated the redemption on
December 15, 1997, that Kollmorgen wished to acquire PSC, that PSC was engaged
in strategic planning to determine the best way to maximize shareholder value,
and that, once news of a potential hit the market, the price of PSC's common
stock would skyrocket.
33. According to Kollmorgen's summary of events, its Senior Vice
President and Chief Financial Officer, Robert J. Cobuzzi ("Cobuzzi"), called
PSC's then Executive Vice
-11-
<PAGE>
President, Chief Financial Officer and Secretary, Richard V. Plat ("Plat"), on
August 1, 1996, to engage in discussions regarding a possessive transaction
involving Kollmorgen and PSC. Plat did not react favorably to the overture,
however, indicating that the market was undervaluing PSC's common stock.
34. After several months, during which Kollmorgen continued to
consider its strategic options, on July 18, 1997, Kollmorgen's Chairman,
President and Chief Executive Officer, Gideon Argov ("Argov") telephoned PSC's
Hill to reopen a possible merger of the two companies, suggesting that they meet
to discuss the alternatives. On August 1, 1997, Argot and Hill met in Newport
Beach, California during which Argov formally proposed a merger, to be
structured as a "merger of equals" transaction, whereby the key executives of
Kollmorgen and PSC would become the senior executives of the combined company.
Hill indicated that he needed some time to consider Argov's proposal and agreed
to speak with him within a few weeks.
35. Argov telephoned Hill on August 13, 1997 to inquire as to whether
he had considered Kollmorgen's proposal. Hill responded that, while he had, he
needed more time since PSC was in the midst of a strategic planning process that
was expected to last until September. Argov agreed to call Hill in September to
follow up on the progress of their discussions.
36. On September 15, 1997, Argov again called Hill to see if he was
prepared to discuss a possible business combination. Hill stated that he was
still not ready, due to PSC's ongoing strategic planning process, and agreed to
discuss the issue further with Argov in mid-October.
37. After unsuccessfully attempting to reach Hill by telephone on
October 15, 1997, Argov finally spoke with him again on October 21, 1997. During
this conversation, Hill
-12-
<PAGE>
stated that he had discussed Kollmorgen's proposal with the PSC Board and had
concluded that a combination of the two companies would not be in the best
interest of PSC.
38. On October 22, 1997, Hill telephoned Argov to offer to sell PSC's
Automation Intelligence, Inc. business to Kollmorgen, but Argov indicated that
Kollmorgen would not be interested in acquiring only a small piece of the PSC
business. Instead, Kollmorgen remained interested in a complete merger of the
two companies.
39. On December 9, 1997, Argov telephoned Hill to inform him that the
Kollmorgen Board was authorized to make a proposal to acquire PSC for $20.50 in
cash and stock, during which call Hill promised to respond by December 12, 1997.
Argov followed this conversation up with a letter dated that same day
reiterating Kollmorgen's proposal.
40. Despite Hill's assurances that he would contact Argov on December
12, 1997, he failed to do so. Instead, Argov tried unsuccessfully to reach Hill
by telephone that day. At the end of the day, Hill sent a short letter to Argov
indicating that the PSC Board would get back to him once it had "fully
considered the matter."
41. On December 15, 1997, Argov sent Hill a letter in which he
disclosed Kollmorgen's intent to initiate a tender offer for PSC. In the letter,
Argov stated:
In August, you and I met to discuss what we at Kollmorgen believe are
the compelling merits of a strategic business combination of
Kollmorgen Corporation and Pacific Scientific Company. We explored a
broad range of topics related to such a combination, all of which, my
colleagues on the Kollmorgen Board and senior management team firmly
believe, lead to the conclusion that a strategic merger of our two
companies offers significant benefits to our respective shareholders,
customers and employees. . . . .
a) We at Kollmorgen were thus quite disappointed that in August and again
in December you refused to negotiate our proposal for this business
combination. Accordingly, we have decided to present our offer
directly to the shareholders of Pacific Scientific . . .
-13-
<PAGE>
42. In light of the above, the defendants clearly knew on November 24,
1997, when they announced the redemption of the PSC convertible Debentures, that
Kollmorgen was extremely interested in a business combination which, once known
to the market, would have a materially positive impact on the price of the
Company's common stock. Defendants knew, or were reckless in not knowing, that a
merger or acquisition of PSC, or even a disclosure to the market that such a
transaction was under consideration1 would have a substantial positive impact on
the value of the PSC common stock. Moreover, in light of the Kollmorgen
overtures and PSC's own strategic analysis, the defendants knew, or were
reckless in not knowing, that the price of the PSC common stock was below its
fair market value and that, in all likelihood, the price would soon rise
substantially, due either to Kollmorgen's anticipated efforts to acquire PSC or
as a result of another similar transaction under active consideration by PSC.
43. Notwithstanding knowing or recklessly disregarding the fact that
the common stock was clearly undervalued in the market, and that the market
would soon be adjusting the price significantly upwards, the defendants
nevertheless initiated the recall of the Debentures, thereby requiring the
bondholders to decide whether to convert to common stock when the stock price
was well below a fair market value. In so doing the defendant knew or recklessly
disregarded the fact that the vast majority of the bondholders would have their
Debentures redeemed rather than converting them to PSC common stock, because to
do otherwise would not make financial sense, given the artificially deflated
value of the stock. Nevertheless, the defendants concealed the likelihood of
such a merger and that the value of the PSC common stock would be enhanced
substantially by such a transaction.
44. The defendants prevented or, at least, unfairly discouraged Class
members from converting their Debentures to PSC common stock by failing to
disclose the likelihood of a
-14-
<PAGE>
merger, by giving Class members inadequate and materially misleading information
and insufficient time and by making it appear that the better economic decision
for Class members was to allow the Company to redeem their Debentures. Had the
defendants disclosed the likelihood of a merger or delayed the timing of the
redemption of the Debentures, the Class members would have elected to convert
their Debentures into PSC common stock.
Defendants' Breach of Duties
45. PSC and the Individual Defendants, as corporate directors and/or
officers, owe to members of the Class the highest fiduciary obligations of good
faith, loyalty and fair dealing, including the duty to disclose, in an
atmosphere of entire candor, all facts material to the Debentures with respect
to their decision to convert their shares to PSC common stock.
46. The fact that PSC had been approached with a serious offer to
engage in merger negotiations and that, at the same time, the Company had
initiated its own strategic review to identify the best way to maximize
shareholder value, was clearly material to Class members, in that such
information would have assumed actual significance in the deliberations of a
reasonable bondholder with respect to whether to convert the Debentures to PSC
common stock.
47. The defendants timed and structured the redemption transaction for
no legitimate business purpose and solely to advance their own interests at the
expense of members of the Class. There is no legitimate business reason for PSC
to have sought to redeem the Debentures on the eve of the then-undisclosed
tender offer. PSC was under no legal or economic compulsion to do so. The
defendants could have easily awaited the outcome of their merger discussions or
its strategic planning, announced the results, and then given Class members
notice
-15-
<PAGE>
of their right to convert their Debentures into shares of PSC common stock or
offered Class members a fair redemption price for their Debentures which
reflected the amount of consideration PSC common stock holders were to receive
in the merger. By manipulating the timing and structure of the redemption and
merger transactions and concealing material facts, defendants violated the
California securities statutes, committed constructive fraud and breached their
fiduciary duties to Class members.
FIRST CAUSE OF ACTION
(AGAINST ALL DEFENDANTS FOR VIOLATION OF SECTIONS 25401
AND 25501 OF THE CALIFORNIA CORPORATIONS CODE)
48. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs above, with the same force and effect as though
fully set forth herein.
49. Defendants violated sections 25401 and 25501 of the California
Corporations Code for offering to purchase the Debentures from plaintiff and the
other members of the Class by means of communications which included an untrue
statement of a material fact or omitted a material fact necessary in order to
make the statements made, in the light of the circumstances under which they
were made, not misleading.
50. These false and misleading statements were made to induce the
bondholders to sell their Debentures back to PSC rather than converting them to
the Company's common stock, as they had a right to do. In justifiable reliance
on the defendants' misrepresentations and omissions, plaintiff and the Class
sold their Debentures to PSC rather than converting them to common stock, and
have suffered damages as a result in an amount to be determined at trial.
-16-
<PAGE>
SECOND CAUSE OF ACTION
(AGAINST ALL DEFENDANTS FOR CONSTRUCTIVE FRAUD)
51. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs above, with the same force and effect as though
fully set forth herein.
52. By virtue of the Individual Defendants' positions as directors and
officers of PSC, the Individual Defendants owed fiduciary duties to the
plaintiff and other members of the Class. Defendants failed to state material
facts necessary, in light of the circumstances under which they were made, to
make them not misleading, and necessary to be stated in order that the
bondholders would be informed of all material facts necessary for an investment
decision concerning whether to convert their Debentures into shares of PSC
common stock. The defendants failed to disclose material facts and structured
and timed the redemption and merger transactions in such a way so as to prevent
or at least discourage Class members from converting their Debentures into PSC
common stock. In doing so, the defendants, and each of them, acted with the
intent to deceive and defraud Class members, including the plaintiff. At the
time the defendants trade their material misrepresentations and omissions as
alleged herein, plaintiff and the other members of the Class were ignorant of
their falsity, and believed them to be true. Plaintiff and other members of the
Class actually and justifiably relied on the defendants in choosing to redeem
their Debentures rather than to convert them to PSC common stock. Had plaintiffs
and other members of the Class known the true facts, they would not have done
so.
53. As fiduciaries, the defendants had a duty to refrain from
disseminating materially false and misleading statements upon which Class
members would reasonably rely
-17-
<PAGE>
and were also under a duty to act with complete candor and fairness in timing
and structuring the redemption and merger transactions. Defendants breached
these duties.
54. As a result of defendants' wrongful conduct, Class members have
sustained many millions of dollars of damage, including, but not limited to, the
loss of the ability to share in the merger consideration to be provided to PSC
common stockholders as a result of the PSC-Danaher merger.
THIRD CAUSE OF ACTION
(AGAINST ALL DEFENDANTS FOR BREACH
OF FIDUCIARY DUTIES)
55. Plaintiff repeats and realleges each and every allegation
contained in the paragraphs above, with the same force and effect as though
fully set forth herein.
56. Defendants, individually and jointly, breached their fiduciary
duties of good faith, loyalty, and fair dealing to the plaintiff and other Class
members by structuring and timing the redemption and merger transactions in such
a way so as to advantage themselves at the expense of the Class, by failing to
disclose Kollmorgen's interest in a merger with PSC or PSC's strategic planning
to identify the best way to maximize shareholder value, including through a
possible transaction to sell the Company, by giving Class members inadequate and
materially misleading information about their conversion rights and by offering
an unreasonably low conversion price to the Class for their Debentures, thereby
effectively discouraging Class members from converting their Debentures into PSC
common stock.
57. By reason of the foregoing acts, the defendants have also failed
to use ordinary care and diligence in the exercise of their respective fiduciary
obligations toward the plaintiff and other members of the Class.
-18-
<PAGE>
58. Plaintiff and the members of the Class have been injured as a
direct and proximate result of the aforesaid conduct of the defendants.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Certifying this action as a plaintiff class action, the plaintiff
as the representative of the Class and its counsel as Class counsel;
B. Finding that PSC and the Individual Defendants violated sections
25401 and 25501 of the California Corporations Code;
C. Finding that PSC and the Individual Defendants have committed
constructive fraud;
D. Finding that PSC and the Individual Defendants have committed a
gross abuse of trust and have breached their fiduciary duties to the plaintiff
and the Class;
E. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys' and experts' fees; and
F. Granting such other and further relief as this Court deems to be
just and proper.
Dated: February 25, 1998 Respectfully submitted,
LAW OFFICES OF LIONEL Z. GLANCY
By /s/
Lionel Z. Glancy, Esquire
Peter A. Binkow, Esquire
1801 Avenue of the Stars
Suite 308
Los Angeles, California 90067
(310) 201-9150
-19-
<PAGE>
STANLEY M. GROSSMAN
D. BRIAN HUFFORD
Pomerantz Haudek Block & Grossman
100 Park Avenue
New York, New York 10017-5516
Phone (212) 661-1100
DAVID JAROSLAWICZ
JAROSLAWICZ & JAROS
150 Williams Street, 19th Floor
New York, NY 10038
Phone: (212) 227-2780
Attorneys for Plaintiff
Jeffrey L. Doppelt
-20-
