<PAGE>
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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. 5)
----------------------------
PACIFIC SCIENTIFIC COMPANY
(NAME OF SUBJECT COMPANY)
PACIFIC SCIENTIFIC COMPANY
(NAME OF PERSON 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
620 NEWPORT CENTER DRIVE, SUITE 700
NEWPORT BEACH, CALIFORNIA 92660
(714) 720-1714
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
With Copies To:
ADAM O. EMMERICH, ESQ. WILLIAM J. SIMPSON, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ PAUL, HASTINGS, JANOFSKY & WALKER, LLP
51 WEST 52ND STREET 695 TOWN CENTER
NEW YORK, NEW YORK 10019 COSTA MESA, CALIFORNIA 92826
(212) 403-1000 (714) 668-6200
- --------------------------------------------------------------------------------
<PAGE>
This Amendment No. 5 amends and supplements the Solicitation/
Recommendation Statement on Schedule 14D-9 initially filed with the Securities
and Exchange Commission (the "Commission") on December 22, 1997 (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 Torque Corporation ("Bidder"), a Delaware corporation and a wholly
owned subsidiary of Kollmorgen Corporation, a New York corporation
("Kollmorgen"), to purchase 6,347,241 shares of Common Stock, including the
associated rights (or such greater or lesser number of shares of Common Stock
that, when added to the number of shares of Common Stock owned by Kollmorgen and
Bidder, will constitute a majority of the Common Stock outstanding on a fully
diluted basis) at a price of $20.50 per share, net to the Seller in cash on the
terms and subject to the conditions set forth in the Offer to Purchase, dated
December 15, 1997, and in the related Letter of Transmittal, as disclosed in a
Tender Offer Statement on Schedule 14D-1, initially filed with the Commission on
December 15, 1997 and as subsequently amended. Unless otherwise indicated, all
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Schedule 14D-9.
Item 2. Tender Offer of Bidder.
Item 2 is hereby amended and supplemented by adding thereto the
following:
On January 16, 1998, Pacific Scientific filed with the Commission a
definitive proxy statement with respect to the special meeting of
shareholders to be held on February 13, 1998 (the "Special Meeting Proxy
Statement"). Also on January 16, 1998, the Company issued a press
release in connection with the Special Meeting Proxy Statement. Copies
of the Special Meeting Proxy Statement and the press release filed in
connection therewith are filed as Exhibits 30 and 31 hereto and are
incorporated herein by reference.
Item 4. The Solicitation or Recommendation
Item 4 is hereby amended by adding thereto the same paragraph set forth
above as an amendment to Item 2.
Item 9. Material to be Filed as Exhibits
Item 9 is hereby amended and supplemented by adding thereto the
following:
Exhibit 30 Special Meeting Proxy Statement dated January 16, 1998
Exhibit 31 Press release issued by the Company on January 16, 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: January 16, 1998 By: /s/ Lester Hill
--------------------------------
Name: Lester Hill
Title: Chairman, President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit 30 Special Meeting Proxy Statement dated January 16, 1998
Exhibit 31 Press Release issued by the Company on January 16, 1998
<PAGE>
JANUARY 16, 1998
[LOGO OF PACIFIC SCIENTIFIC]
To Our Shareholders:
On December 15, 1997, a subsidiary of Kollmorgen Corporation began an
unsolicited tender offer for a majority of the outstanding shares of common
stock of Pacific Scientific at a price of $20.50 per share in cash, and
Kollmorgen proposed to enter into an agreement for the merger of Pacific
Scientific with Kollmorgen in which the remaining Pacific Scientific common
stock would be converted into the right to receive shares of common stock of
Kollmorgen. To that end, Kollmorgen and the holders of at least 10% of Pacific
Scientific's common stock have called a Special Meeting of Shareholders to (i)
repeal any and all provisions of the Bylaws of the Company that have not been
duly filed by the Company with the Securities and Exchange Commission prior to
August 11, 1997, including any and all amendments to the Bylaws of the Company
adopted on or after December 15, 1997; (ii) to remove from office all members of
the Company's Board of Directors; and (iii) to fill the newly created vacancies
on the Company's Board of Directors by electing six persons nominated by
Kollmorgen to the Company Board, who are expected to take such action, subject
to their fiduciary duties under applicable law, as may be necessary to
consummate the Kollmorgen Tender Offer and Merger. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY DETERMINED THAT THE KOLLMORGEN TENDER OFFER AND MERGER ARE
INADEQUATE AND NOT IN THE BEST INTERESTS OF PACIFIC SCIENTIFIC OR ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AND
URGES THAT YOU NOT SIGN OR RETURN ANY PROXY CARDS SENT TO YOU BY KOLLMORGEN. IF
YOU HAVE PREVIOUSLY SIGNED AND RETURNED ANY SUCH PROXY CARD TO KOLLMORGEN YOU
HAVE EVERY RIGHT TO CHANGE YOUR VOTE AND REVOKE YOUR PROXY.
In reaching the determination that the Kollmorgen offer and merger are
inadequate and not in the best interests of Pacific Scientific or its
shareholders, your Board gave careful consideration to Pacific Scientific's
financial performance and future prospects; the opinion of Pacific Scientific's
financial advisor, BancAmerica Robertson Stephens, that the consideration
offered to Pacific Scientific's shareholders (other than Kollmorgen) pursuant to
the Kollmorgen offer and merger are inadequate to such shareholders from a
financial point of view; the significant conditions to consummation of the
Kollmorgen offer; and the other factors described in the attached Proxy
Statement. We urge you to carefully read the attached document in its entirety
so that you will be fully informed as to the Board's recommendation.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE KOLLMORGEN OFFER AND MERGER FAIL
TO RECOGNIZE THE CURRENT VALUE OF PACIFIC SCIENTIFIC. YOUR BOARD IS ENGAGED IN
AN ACTIVE EFFORT TO EXPLORE ALTERNATIVES TO MAXIMIZE SHAREHOLDER VALUE. 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.
If you have any questions or need any assistance in revoking your proxy
from the Kollmorgen offer please contact MacKenzie Partners, Inc. at (800)
322-2885 Toll-Free or at (212) 929-5500 Collect. You may also check our website,
www.pacsci.com, for further developments.
Your Directors thank you for your continued support.
On behalf of the Board of Directors
Sincerely,
/s/ Lester Hill
LESTER HILL
Chairman and Chief Executive Officer
<PAGE>
PACIFIC SCIENTIFIC COMPANY
620 NEWPORT CENTER DRIVE, SUITE 700
NEWPORT BEACH, CALIFORNIA 92660
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, FEBRUARY 13, 1998
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Pacific Scientific Company will be held at The Hyatt Regency Irvine
Hotel, 17900 Jamboree Road, Irvine, California, on Friday, February 13, 1998, at
2:00 p.m. (local time) for the following purposes:
(1) To consider and act upon a shareholder proposal to repeal any and
all provisions of the Company's Bylaws that have not been duly filed by the
Company with the Securities and Exchange Commission prior to August 11,
1997, including any and all amendments to such Bylaws adopted on or after
December 15, 1997;
(2) To consider and act upon a shareholder proposal to remove all of
the members of the Board of Directors of the Company;
(3) If Proposal 2 is approved, to consider and act upon a shareholder
proposal to elect the six director nominees designated by such shareholder
to fill all vacancies on the Board to serve until the 1998 Annual Meeting
of Shareholders and until their respective successors shall have been duly
elected and qualified; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on January 20, 1998
will be entitled to notice of and to vote at the Special Meeting. All
shareholders of record are invited to attend the Special Meeting.
YOUR VOTE IS VERY IMPORTANT. THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE
AND MAIL THE ENCLOSED BLUE PROXY CARD AS SOON AS POSSIBLE IN THE RETURN ENVELOPE
PROVIDED WHETHER OR NOT YOU HAVE PREVIOUSLY VOTED. This will not prevent you
from voting in person, should you so desire, but will help to secure a quorum
and avoid added solicitation costs. Your proxy may be revoked by you at any time
before it is voted.
By Order of the Board of Directors,
/s/ Lester Hill
LESTER HILL
Chairman and Chief Executive Officer
Newport Beach, California
January 16, 1998
<PAGE>
PROXY STATEMENT OF PACIFIC SCIENTIFIC COMPANY
------------------------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 13, 1998
------------------------------------
This Proxy Statement is being furnished by the Board of Directors of
Pacific Scientific Company, a California corporation (the "Company"), to the
holders (the "Shareholders") of shares of common stock, par value $1.00, of the
Company ("Common Stock") in connection with the solicitation of proxies by the
Company's Board of Directors for use at a special meeting of shareholders to be
held at the Hyatt Regency Irvine Hotel, 17900 Jamboree Road, Irvine, California,
on Friday, February 13, 1998 at 2:00 p.m. (local time), and any adjournment or
postponement thereof (the "Special Meeting"). The Special Meeting was called
pursuant to a demand by the holders of not less than 10% of all of the shares of
Common Stock entitled to vote at the Special Meeting in accordance with the
California General Corporation Law (the "CGCL") and the Company's Bylaws. The
first date this Proxy Statement and blue proxy card with respect thereto are
being sent or given to shareholders is on or about January 16, 1998.
At the Special Meeting the Shareholders will consider and act upon
proposals (the "Kollmorgen Proposals") described below that were made by
Kollmorgen Corporation, a New York corporation ("Kollmorgen").
In accordance with California law and the Company's Bylaws, the Company's
Board of Directors has fixed January 20, 1998 (the "Record Date") as the date
for determining the shareholders of the Company entitled to receive notice of
and to vote at the Special Meeting. As of the Record Date, there will be
12,480,056 shares of Common Stock issued and outstanding.
THE BOARD OF DIRECTORS OF THE COMPANY VIGOROUSLY OPPOSES THE SOLICITATION
OF PROXIES BY KOLLMORGEN, BELIEVES THE KOLLMORGEN PROPOSALS ARE NOT IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, AND URGES YOU NOT TO SIGN OR
RETURN ANY WHITE PROXY CARDS SENT TO YOU BY KOLLMORGEN. IF YOU HAVE PREVIOUSLY
SIGNED AND RETURNED ANY SUCH WHITE PROXY CARD TO KOLLMORGEN, YOU HAVE EVERY
RIGHT TO CHANGE YOUR VOTE AND REVOKE YOUR PROXY BY SIGNING, DATING, AND
RETURNING THE ENCLOSED BLUE PROXY CARD. THE BOARD URGES YOU TO COMPLETE, SIGN,
DATE, AND MAIL THE ENCLOSED BLUE PROXY CARD AS SOON AS POSSIBLE IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
THE KOLLMORGEN PROPOSALS
Kollmorgen is soliciting proxies from the Company's shareholders to vote in
favor of the Kollmorgen Proposals, which are as follows:
(1) To repeal any and all provisions of the Company's Bylaws that have
not been duly filed by the Company with the Securities and Exchange
Commission (the "SEC") prior to August 11, 1997, including any and all
amendments to such Bylaws adopted on or after December 15, 1997 ("Proposal
1");
(2) To remove all of the members of the Board of Directors of the
Company ("Proposal 2"); and
(3) If proposal (2) above is approved, to elect the six director
nominees designated by Kollmorgen and all other persons nominated by
Kollmorgen to fill all vacancies on the Board to serve until the 1998
Annual Meeting of Shareholders and until their respective successors shall
have been duly elected and qualified ("Proposal 3").
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The Company's Board of Directors has carefully considered the Kollmorgen
Proposals, information filed by Kollmorgen with the SEC, information delivered
to the Company by Kollmorgen outlining its proposed plans to replace the
Company's Board of Directors, and the potential effects of the removal of the
current Board of Directors and the election of Kollmorgen's director nominees on
the Company, its shareholders, its employees, and its business operations. The
Board of Directors has determined that the Kollmorgen Proposals are not in the
best interests of the Company and its shareholders and urges shareholders to
vote AGAINST the Kollmorgen
<PAGE>
Proposals by returning the BLUE proxy card, which is being solicited by the
Board of Directors. See "Background."
THE COMPANY'S BOARD OF DIRECTORS HAS DETERMINED THAT THE KOLLMORGEN
PROPOSALS ARE NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS,
VIGOROUSLY OPPOSES KOLLMORGEN'S SOLICITATION OF PROXIES, AND URGES SHAREHOLDERS
TO VOTE AGAINST THE KOLLMORGEN PROPOSALS BY SIGNING, DATING, AND RETURNING THE
ENCLOSED BLUE PROXY CARD.
VOTING PROCEDURE
VOTING RIGHTS
Except as set forth below, each share of Common Stock outstanding on the
Record Date is entitled to one vote on all matters to be voted on at the Special
Meeting. Approval of Proposal 1 to repeal provisions of the Company's Bylaws and
approval of Proposal 2 to remove all of the Company's directors will both
require an affirmative vote for the proposals of a majority of the issued and
outstanding shares of Common Stock.
As provided by the Company's Bylaws and by California law, in electing
directors no stockholder shall be entitled to cumulate votes for the election of
directors (i.e., cast for any one candidate a number of votes greater than the
number of such stockholder's shares) unless the candidates' names have been
placed in nomination prior to the commencement of voting and at least one
stockholder has given notice prior to commencement of the voting of an intention
to cumulate votes. If any stockholder has given such notice, then each
stockholder may cumulate votes and give one candidate a number of votes equal to
the number of directors to be elected multiplied by the number of votes to which
the stockholder's shares are entitled, or the stockholder may distribute his
votes on the same principle among as many candidates as may be desired. The
candidates receiving the highest number of votes, up to the number of directors
to be elected, shall be elected. If cumulative voting is in effect, the persons
named in the accompanying proxy will vote the shares covered by proxies received
by them among the candidates named herein as they shall determine, unless a
contrary direction is made on such proxies.
Abstentions and broker non-votes are each included in the determination of
the number of shares present and entitled to vote for purposes of determining
the presence of a quorum. Abstentions and broker non-votes are tabulated
separately. Abstentions and broker non-votes do not constitute a vote "for" or
"against" any matter and thus will be disregarded in any calculation of "votes
cast," except for Proposals 1 and 2 as to which abstentions and broker non-votes
will have the effect of votes "against" such proposals. The New York Stock
Exchange ("NYSE") determines whether brokers that do not receive instructions
from beneficial owners are entitled to vote on management proposals. In the
event of a broker non-vote with respect to a management proposal arising from
the absence of authorization by the beneficial owner to vote as to a management
proposal, the proxy will not be deemed as present and entitled to vote as to the
management proposal for determining the total number of shares of which a
majority is required for adoption.
EFFECT OF BLUE PROXY
The Company's Board of Directors is soliciting proxies AGAINST the
Kollmorgen Proposals.
If the BLUE proxy card is duly completed and returned, it will be voted in
accordance with the instructions thereon. If a shareholder returns the BLUE
proxy card duly executed, but does not indicate the manner in which it is to be
voted, it will be voted AGAINST each of the Kollmorgen Proposals and in the
discretion of the proxies named thereon as to any other matters properly coming
before the Special Meeting.
Any shareholder executing and delivering the enclosed blue proxy card may
revoke such Proxy by (i) filing with the Secretary of the Company, at or before
the Special Meeting, a written notice of revocation bearing a date later than
the date of the proxy card, (ii) signing and returning a later dated proxy card,
or (iii) attending the Special Meeting and voting in person (although attendance
at the Special Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be sent to: Pacific
Scientific
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Company, 620 Newport Center Drive, Newport Beach, California 92660, Attention:
Winston E. Hickman, Senior Vice President, Chief Financial Officer and
Secretary.
The Board of Directors urges you NOT to sign the WHITE proxy card sent to
you by Kollmorgen. Whether or not you have previously executed a WHITE proxy
card, the Board urges you to show your support for the Company's Board of
Directors by executing and dating the enclosed BLUE proxy card and mailing it in
the enclosed postage-paid envelope as soon as possible. A later dated and signed
BLUE proxy card will revoke any previously provided WHITE proxy card.
BACKGROUND
On December 9, 1997, the Company received a written proposal by Kollmorgen
(the "Original Kollmorgen Proposal") for a business combination between
Kollmorgen and the Company in which Kollmorgen proposed that the Company's
shareholders would receive consideration of $20.50 per share, half in cash and
the balance in Kollmorgen stock (without specifying the basis on which such
stock would be valued), and related matters. At a Board of Directors meeting
held on December 12, 1997, the Board of Directors authorized Lester Hill,
Chairman of the Board and Chief Executive Officer of the Company, to respond to
Kollmorgen and inform it that the Company would respond to the Original
Kollmorgen Proposal after having had the chance to fully consider the matter. On
December 15, 1997, Kollmorgen filed with the SEC a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the Kollmorgen Offer (as
defined below) and a Consent Solicitation Statement/Preliminary Prospectus (the
"Kollmorgen Consent Solicitation Statement") with respect to the solicitation of
consents to call a special meeting of the Company's shareholders to act on the
proposals described herein (the "Kollmorgen Solicitation"). The Special Meeting
is being held as a result of the Kollmorgen Solicitation. Kollmorgen proposes to
have shareholders act at the Special Meeting to (i) repeal any and all
provisions of the Bylaws of the Company that have not been duly filed by the
Company with the SEC prior to August 11, 1997, including any and all amendments
to the Bylaws of the Company adopted on or after December 15, 1997; (ii) remove
from office all members of the Board of Directors of the Company (the "Company
Board"); and (iii) fill the newly created vacancies on the Company Board by
electing six persons nominated by Kollmorgen to the Company Board, who are
expected to take such actions, subject to their fiduciary duties under
applicable law, as may be necessary to consummate the Kollmorgen Offer and the
Proposed Merger (as defined below). The only provision of the Bylaws potentially
affected by Proposal 1 was filed with the SEC on August 11, 1997 and reflects a
change to the Bylaw provisions as to the officers of the Company. The Bylaws,
prior to August 11, 1997, provided for the positions of Chief Executive Officer
and President to be held by the same individual. The revision made to Article V
of the Bylaws as filed on August 11, 1997 allows for these two positions to be
held by different individuals. If Proposal 1 is approved, then the positions of
Chief Executive Officer and President will no longer be able to be held by
different individuals. Additional information as to certain matters relating to
the Kollmorgen Proposals may be found in the Kollmorgen Proxy Statement dated
January 15, 1998, filed by Kollmorgen with the Securities and Exchange
Commission (the "Commission") as definitive proxy materials under cover of a
Schedule 14A. Shareholders are urged to consult the Kollmorgen Proxy Statement
for additional details as to the Proposed Merger and related matters. According
to the Kollmorgen Proxy Statement, as of January 15, 1998, Kollmorgen
beneficially owned 100 shares of Common Stock, representing less than 0.001% of
the outstanding shares of Common Stock as of such date.
The Kollmorgen Offer was commenced on December 15, 1997. The Company Board
met on December 17 and 21, 1997 to consider the Kollmorgen Offer and related
matters. At those meetings, the Company Board considered the Company's business,
financial condition, results of operations, current business strategy and future
prospects, recent and historical market prices for the Common Stock, the terms
of the Original Kollmorgen Proposal, the terms and conditions of the Kollmorgen
Offer and the Proposed Merger, strategic and other potential alternatives to the
Kollmorgen Offer and the Proposed Merger, and other matters, including
information presented by the Company's management, BancAmerica Robertson
Stephens ("BARS"), the Company's financial advisor, and the Company's legal
advisors. At its December 21st meeting, the Company Board unanimously (i)
determined to redeem the preferred share purchase rights then currently issued
and outstanding under the Company's then existing preferred share purchase
rights plan (the "Existing Rights") and simultaneously adopted a new Preferred
Share Purchase Rights Plan (the "New Rights Agreement") and declared a dividend
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distribution of new preferred share purchase rights ("New Rights") thereunder;
(ii) declined to render the Existing Rights or the New Rights inapplicable to
the Kollmorgen Offer or the Proposed Merger; and (iii) declined to recommend the
Kollmorgen Offer or the Proposed Merger or to approve the Proposed Merger for
purposes of Article FIFTH of the Company's Articles of Incorporation.
ACCORDINGLY, THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
REJECT THE KOLLMORGEN PROPOSALS. The Company Board has directed management and
the Company's advisors to explore such strategic and other alternatives and to
report back to the Company Board promptly with respect thereto.
Kollmorgen and Torque Corporation ("Bidder"), a Delaware corporation and
wholly owned subsidiary of Kollmorgen, have made the Kollmorgen Offer to
purchase 6,347,241 shares of Common Stock (or such greater or lesser number of
shares of Common Stock that, when added to the number of shares of Common Stock
owned by Kollmorgen and Bidder, will constitute a majority of the Common Stock
outstanding on a fully diluted basis), at a price of $20.50 per share, net to
the seller in cash on the terms and subject to the conditions set forth in the
Offer to Purchase, dated December 15, 1997, and in the related Letter of
Transmittal (which together constitute the "Kollmorgen Offer").
According to the Schedule 14D-1, Kollmorgen is also seeking to negotiate
with the Company a definitive merger agreement pursuant to which the Company
would, as soon as practicable following consummation of the Kollmorgen Offer,
consummate a merger or similar business combination with Kollmorgen, Bidder or
another direct or indirect subsidiary of Kollmorgen (the "Proposed Merger").
According to the Schedule 14D-1, in the Proposed Merger, each share of Common
Stock then outstanding (other than shares held by the Company or any wholly
owned subsidiary of the Company and shares of Common Stock owned by Kollmorgen,
Bidder or any other direct or indirect wholly owned subsidiary of Kollmorgen and
shares held by shareholders who properly exercised their appraisal rights) would
be converted into the right to receive shares of common stock, par value $2.50
per share, of Kollmorgen ("Kollmorgen Common Stock"). The Schedule 14D-1 states
that the exact number of shares of Kollmorgen Common Stock into which each share
of Common Stock will be converted in the Proposed Merger will be determined by a
formula based upon the price of Kollmorgen Common Stock during a fixed period
prior to the time the Proposed Merger would be voted upon by the holders of
Common Stock and having a nominal value of $20.50 per share of Common Stock,
subject to a collar which could have the effect, should the price of the
Kollmorgen Common Stock fall below a specified trading price, of rendering the
immediate market value of the shares of Kollmorgen Common Stock which would be
received in the Proposed Merger less than $20.50. Should the price of Kollmorgen
Common Stock rise above a specified trading range, the immediate market value of
the shares of Kollmorgen Common Stock which would be received in the Proposed
Merger could also be greater than $20.50. In either case, if the Company's
shareholders tender more shares pursuant to the Kollmorgen Offer than Kollmorgen
seeks to acquire through the Kollmorgen Offer, tendering shareholders will not
receive the $20.50 cash payment for all of their tendered shares and instead
will receive a mixture of cash and Kollmorgen Common Stock. As a result of this
fact, and the fact that only Kollmorgen Common Stock will be paid in connection
with the Proposed Merger, any shares of Common Stock in respect of which cash is
not paid in connection with the Kollmorgen Offer (whether as a result of
proration in the Kollmorgen Offer or because such shares were not tendered in
the Kollmorgen Offer) will be converted into Kollmorgen Common Stock assuming
consummation of the Proposed Merger.
THE KOLLMORGEN OFFER AND THE KOLLMORGEN PROPOSALS ARE INTEGRAL PARTS OF
KOLLMORGEN'S ATTEMPT TO ACQUIRE THE COMPANY. Election of Kollmorgen's nominees
to the Company Board will facilitate the satisfaction of the conditions to the
Kollmorgen Offer and the consummation of the Kollmorgen Offer, as such nominees
will, if elected, in their capacity as members of the Company Board, be able to
take action to cause the Company to satisfy certain of the conditions to the
Kollmorgen Offer that would not otherwise be satisfied. The Kollmorgen Offer, in
turn, is designed to give Kollmorgen control of the Company through the purchase
of a majority of the Company's Common Stock. By controlling a majority of the
Common Stock, Kollmorgen will be assured of shareholder approval of the Proposed
Merger if and when shareholders were to vote on the Proposed Merger. Thus, in
order to assure consummation of the Kollmorgen Offer and Company Board approval
of the Proposed Merger, Kollmorgen is seeking to replace the Company Board with
Kollmorgen's own nominees, which Kollmorgen expects will act to facilitate the
Proposed Merger. If Kollmorgen is successful in its effort, Kollmorgen will
effectively gain the
4
<PAGE>
board approval it requires to complete the Kollmorgen Offer and the Proposed
Merger. Such board approval, together with the control of the Company's Common
Stock Kollmorgen seeks to gain through the Kollmorgen Offer, would ensure
consummation of the Kollmorgen Offer and the Proposed Merger.
INFORMATION REGARDING THE DIRECTORS OF THE COMPANY
Certain information regarding each of the current directors including their
principal occupation, age and period of service as a director of the Company are
set forth below.
WALTER F. BERAN; AGE 71; CHAIRMAN, PACIFIC ALLIANCE GROUP Mr. Beran was
elected a director of the Company in 1987. He served as Vice Chairman and
Western Regional Managing Partner of Ernst & Young LLP from 1971 until his
retirement on September 30, 1986, when he became an independent consultant. He
joined the Pacific Alliance Group (a financial services firm) in 1988, as
Chairman. Mr. Beran also serves as a director of Arco Chemical Company,
Fleetwood Enterprises Inc., Vencor Inc., and Eureka Mutual Funds.
RALPH O. BRISCOE; AGE 70; RETIRED Mr. Briscoe was elected a director of
the Company in 1985. Prior to his retirement in 1986, Mr. Briscoe was President,
Chief Executive Officer and a director of Triton Group Ltd.
LESTER HILL; AGE 54; CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF
THE COMPANY Mr. Hill was elected a director, Chairman of the Board, President
and Chief Executive Officer of the Company in February 1997. In July 1997, Mr.
Schlotterbeck became President and Chief Operating Officer of the Company. Prior
to joining the Company, Mr. Hill was a business consultant since 1996; from 1992
to 1995, he was Executive Vice President of the Communications Division of
General Instrument Corporation; from 1989 to 1992, he was President of Portable
Systems Division of Symbol Technologies, Inc.; from 1987 to 1989, he was
President and CEO of Data Design Laboratories Inc.; and from 1968 to 1987, he
was employed by TRW, Inc., most recently as Vice President and General Manager
of the Electronic Components Group. Mr. Hill also serves as a director of
Metrologic Instruments, Inc.
RALPH D. KETCHUM; AGE 71; PRESIDENT, RDK CAPITAL, INC. Mr. Ketchum was
elected a director of the Company in 1994. He also serves on the boards of
Oglebay Norton Company, Thomas Industries, Lithium Technologies Corporation, and
Metropolitan Savings Bank. He is also the General Partner of RDK Capital, L.P.,
and as such is the majority owner and CEO of Heintz Corporation (a manufacturer
of aircraft engine components) which filed for voluntary reorganization under
Chapter 11 of the United States Bankruptcy Code, in the federal bankruptcy court
of the Eastern District of Pennsylvania, on August 4, 1993. Mr. Ketchum was a
long-time employee of General Electric Company, rising to the position of Senior
Vice President and Group Executive at the time of his retirement. Mr. Ketchum
was with GE from 1946 to 1987, except for a three-year period (1969-1972) when
he served as Vice President of Control Data Corporation.
WILLIAM A. PRESTON; AGE 61; CHAIRMAN AND MAJORITY OWNER OF APM, INC. Mr.
Preston was elected a director of the Company in 1979. He has been Chairman and
majority owner of APM, Inc., a specialty plastics manufacturer, since 1969. Mr.
Preston is also a director of University National Bank & Trust Company.
MILLARD H. PRYOR, JR.; AGE 64; MANAGING DIRECTOR, PRYOR & CLARK
COMPANY Mr. Pryor became a director of the Company in 1992. He is a Managing
Director of Pryor & Clark Company (a real estate and investment holding
company), which he had served as an executive since 1970. He has been a director
of Corcap, Inc. since 1988 and served as an executive officer with that company
from 1988 to 1992. Mr. Pryor is also a director of The Hartford Funds, Infodata
Systems Inc. and Compudyn Corporation. Additionally, Mr. Pryor was the Chief
Executive Officer of Lydall Inc. (a manufacturer of materials from specialty
fibers) from 1972 through 1988.
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
The Company has standing Executive, Audit, Compensation and Personnel and
Nominating and Corporate Governance Committees. During the Company's 1997 fiscal
year, the Board of Directors held 11 meetings and each director attended at
least 75% of all Board meetings and meetings of Committees on which he served.
5
<PAGE>
Executive Committee
The Executive Committee, during the 1997 fiscal year consisted of Messrs.
Briscoe, Hill and Preston (Chairman), has all the powers and authority of the
Company Board in the management of the business and the affairs of the Company,
except those powers which by law cannot be delegated by the Board of Directors.
Although the Executive Committee has broad powers, in practice it meets only
when it would be inconvenient to call a meeting of the Company Board. The
Executive Committee did not meet during the Company's 1997 fiscal year.
Audit Committee
The Audit Committee, consisting of Messrs. Beran (Chairman), Briscoe,
Ketchum, Preston and Pryor, met three times during the 1997 fiscal year. The
Audit Committee makes recommendations concerning the engagement of the Company's
independent auditors, consults with the independent auditors concerning the
audit plan and reviews the comments and recommendations resulting from the
auditors' report and management letter. The Audit Committee also reviews the
Company's program of internal audit and consults with the Company's internal
auditor on questions of interest.
Compensation and Personnel Committee
The Compensation and Personnel Committee, consisting of Messrs. Ketchum
(Chairman), Beran and Preston, met four times during the 1997 fiscal year. The
Compensation and Personnel Committee makes recommendations to the Company Board
on the annual salary rates of all elected officers of the Company, makes
recommendations to the Company Board on incentive compensation, stock options
and compensation matters and administers the incentive compensation, stock
option and other compensation plans of the Company.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee, consisting of Messrs.
Briscoe (Chairman), Preston and Pryor makes recommendations to the Board of
Directors regarding candidates to fill future vacancies on the Company Board.
There is no established procedure for submission of nominations by shareholders
and to establish corporate governance policies. The Nominating and Corporate
Governance Committee did not meet during the 1997 fiscal year.
Directors' Compensation
Each director who is not an employee of the Company receives a $17,500
annual retainer and $900 for each Company Board and committee meeting attended.
As of July 1, 1997, the Company discontinued participation in the Company's
Directors' Retirement Plan (the "Retirement Plan") and froze the benefits
payable to the current non-employee directors. As a replacement for the
Retirement Plan, each of the Company's non-employee directors are to receive an
annual grant of a fully exercisable ten-year option to purchase 3,000 shares of
the Company's Common Stock. The option exercise price is to equal to the closing
price of the Common Stock on the date of grant. The initial grant was made to
the non-employee directors on May 29, 1997 and subsequent grants will be made on
the date of the Company's annual meeting of shareholders.
Those non-employee directors who were members of the Company Board on May
29, 1997 are still eligible to receive an annual benefit under the Retirement
Plan of up to $16,000, provided that they have served on the Company Board for a
period of five years. Under the Retirement Plan, annual benefits commence on the
latter of (i) when the eligible director reaches age 65 or (ii) when the
director is no longer serving as a director of the Company. Non-employee
directors who leave the Company Board before age sixty-five (65) after
completing five (5) years of Company Board service are eligible to receive a
benefit upon attaining age sixty-five (65).
The Retirement Plan provides that the retirement benefit will be paid over
the lesser of twelve (12) years or the number of years a director serves on the
Company Board. In the event of death while a director, a surviving spouse is
entitled to receive an annual benefit equal to 50% of the annual retainer
payable to the director at the date of death, such benefit to be paid for a
period equal to the total number of years of service the deceased
6
<PAGE>
director served on the Company Board, not to exceed twelve (12) years. The
benefits paid under the Retirement Plan are a direct obligation of the Company
and are reflected as a financial statement liability determined in accordance
with accepted actuarial assumptions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than ten percent of the
outstanding shares of Common Stock are required to report their ownership of
such shares and any changes in that ownership to the SEC and the NYSE. These
persons also are required by SEC regulations to furnish the Company with copies
of these reports. Specific due dates for these reports have been established and
the Company is required to report in this Proxy Statement any failure to file by
these dates during the 1997 fiscal year. Based solely on a review of the reports
furnished to the Company or written representations from the Company's directors
and executive officers, the Company believes that all of these filing
requirements were satisfied by the Company's directors, executive officers and
ten percent holders during the 1997 Fiscal Year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company knows of no beneficial owners of more than five percent (5%) of
the shares of Common Stock as of December 26, 1997. The Company has no other
class of equity security outstanding.
The following table sets forth information with respect to beneficial
ownership as of December 26, 1997 by the Company's directors, the named
executive officers and by all directors and executive officers as a group,
together with the percentage of the outstanding shares of Common Stock which
such ownership represents. Unless otherwise indicated, the beneficial ownership
consists of sole voting and investment power with respect to the shares
indicated, except to the extent that authority is shared by spouses under
applicable law.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) CLASS
- ------------------------------------------------------------------------------- -------------------------- ----------
<S> <C> <C>
Walter F. Beran................................................................ 6,000 *
Ralph O. Briscoe............................................................... 20,000 *
Lester Hill.................................................................... 100,000 *
Ralph D. Ketchum............................................................... 11,500 *
William A. Preston............................................................. 13,000 *
Millard H. Pryor, Jr........................................................... 7,000 *
David L. Schlotterbeck......................................................... -- *
Richard V. Plat................................................................ 264,778 2.1%
William R. Fejes............................................................... 10,000 *
Richard G. Knoblock............................................................ 18,300 *
Edgar S. Brower(3)............................................................. 116,000 *
All Directors and Current Executive Officers as a Group (13 persons)........... 472,712 3.7%
</TABLE>
- ------------------
* Represents less than 1%.
(1) Information with respect to beneficial ownership is based upon the Company's
stock records and data supplied to the Company by the individuals.
(2) Includes certain shares which the following have the right to acquire within
60 days of December 26, 1997 through the exercise of stock options to
purchase shares of Common Stock: Messrs. Beran, Briscoe, Ketchum, Preston
and Pryor, 3,000 shares each; Mr. Hill, 100,000 shares; Mr. Plat, 105,500
shares; Mr. Fejes, 10,000 shares; Mr. Knoblock, 18,300 shares; Mr. Brower,
15,000 shares and all directors and current executive officers as a group,
268,450 shares. In the event of a change of control (as defined in the
relevant plan and related documents) of the Company, outstanding options
granted to employees shall vest and become immediately exercisable, subject
to certain limitations.
(3) Mr. Brower resigned as a director and the Company's Chief Executive Officer
on February 19, 1997.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table discloses compensation received for the three fiscal
years ended December 26, 1997 by the Chief Executive Officer at such time, the
Company's former Chief Executive Officer and the Company's next four most highly
paid executive officers (collectively, the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -----------------------------------
--------------------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR(1) SALARY($) BONUS($)(2) COMPENSATION($)(3) OPTIONS(#) COMPENSATION($)(4)
- -------------------------- ------- --------- ----------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Edgar S. Brower(5) ....... 1997 $256,982 -- -- -- $ 3,750
Former Chairman of the 1996 403,198 -- -- 20,000 3,750
Board, Director, and Chief 1995 376,640 $ 155,341 $6,000 20,000 90,620
Executive Officer
Lester Hill .............. 1997 291,150 290,000 -- 250,000 60,773
Chairman of the Board and
Chief Executive Officer
David L. Schlotterbeck ... 1997 125,000 245,000 -- 150,000 1,500
President and Chief
Operating Officer
Richard V. Plat .......... 1997 300,000 -- -- -- 3,750
Executive Vice President 1996 298,355 -- -- 10,000 3,750
Former Chief Financial 1995 284,904 100,924 -- 10,000 4,620
Officer and Secretary
Richard G. Knoblock ...... 1997 175,099 72,205 -- 10,000 3,750
Vice President and 1996 163,270 66,086 -- 5,000 3,750
President, Safety Aviation 1995 147,117 64,150 -- 4,000 3,678
Group
William T. Fejes ......... 1997 200,000 -- -- 8,000 3,750
Senior Vice President and 1996 190,270 33,550 -- 8,000 3,750
President, Automation 1995 151,951 -- -- 5,000 3,449
Technology Group
</TABLE>
- ------------------
(1) Messrs. Hill and Schlotterbeck joined the Company in 1997 and, accordingly,
no information is disclosed with respect to prior years for these
individuals.
(2) The amounts shown in this column reflect payments under the Company's
Management Incentive Plan. Except for Messrs. Hill and Schlotterbeck as
described below, amounts disclosed in this column are for bonuses paid in a
given year which were based on the prior year's performance. The bonus
payments for Messrs. Hill and Schlotterbeck reflect bonuses paid at the end
of 1997 for 1997. To the extent such amounts exceed the bonuses which would
otherwise be payable to Messrs. Hill and Schlotterbeck in 1998, such excess
shall reduce future bonuses and/or severance payments otherwise payable to
these individuals.
(3) The amounts shown in this column reflect the non-preferential dividends
earned by Mr. Brower as part of his long-term incentive agreement with the
Company. Mr. Brower held 100,000 shares of restricted common stock. The
restricted term expired in July 1995; therefore, this amount represents the
non-preferential dividends paid by the Company during 1994 and the first two
quarters of 1995. The fair market value of the 100,000 shares of restricted
stock was $1,950,000 on the date that the restriction expired.
(4) The amounts disclosed in this column for fiscal 1997 for the Company's
contributions under Pacific Scientific's Savings Plan, a defined
contribution, for the following individuals include: Mr. Brower, $3,750; Mr.
Hill, $3,750; Mr. Schlotterbeck, $1,500; Mr. Plat, $3,750; Mr. Knoblock,
$3,750; and Mr. Fejes, $3,750. In addition, in fiscal 1997 the Company
credited Mr. Hill a total of $57,023 under his special supplemental
retirement plan.
(5) Mr. Brower resigned as a director and officer on February 19, 1997.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1997 to
the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES IN TERM(3)
OPTIONS FISCAL YEAR EXERCISE EXPIRATION ------------------------
NAME GRANTED(#)(1) 1997(2) PRICE($/SH) DATE 5% 10%
- -------------------------------- ------------- ------------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edgar S. Brower(4).............. -- -- -- -- -- --
Lester Hill..................... 250,000 32.0% $ 12.625 Feb 2007 $1,985,000 $5,030,250
David L. Schlotterbeck.......... 150,000 19.2% 13.94 July 2007 1,315,500 3,333,000
Richard V. Plat................. -- -- -- -- -- --
Richard G. Knoblock............. 8,000 1.3% 11.75 Apr 2007 59,120 149,840
2,000 * 13.00 May 2007 16,360 41,440
William T. Fejes................ 5,000 * 11.75 Apr 2007 36,950 93,650
3,000 * 13.00 May 2007 24,540 62,160
</TABLE>
- ------------------
* Represents less than 1%
(1) Except for Messrs. Hill and Schlotterbeck, the options listed were granted
pursuant to the Pacific Scientific Company 1995 Stock Option Plan. The
options granted under the 1995 Stock Option Plan generally become fully
exercisable after four years with normal vesting occurring at a rate of 25%
per year and the plan grants broad discretion to the Board of Directors to
change or modify the material terms of option grants. Messrs. Hill and
Schlotterbeck entered into nonstatutory stock option agreements with the
Company pursuant to which Mr. Hill and Mr. Schlotterbeck were granted
options to purchase 250,000 and 150,000 shares of Company Common Stock,
respectively. The options granted to Mr. Hill become fully exercisable after
four years with 20% vested as of the grant date and an additional 20%
vesting each year. The options granted to Mr. Schlotterbeck vest over four
years with normal vesting occurring at a rate of 25% per year. In the event
of a change of control (within the meaning of the 1997 Pacific Scientific
Company Change of Control Severance Plan) all outstanding options will
become immediately exercisable by the holder thereof, subject to certain
limitations under such plan.
(2) The Company granted options representing 780,955 shares to employees in
fiscal 1997.
(3) The dollar amounts in these columns are determined using assumed rates of
appreciation set by the Securities and Exchange Commission and are not
intended to forecast future appreciation, if any, in the market value of the
Company's Common Stock. Such amounts are based on the assumption that the
named persons hold the options for the full ten-year term. The actual value
of the options will vary in accordance with the market price of the
Company's Common Stock.
(4) Mr. Brower resigned as a director and officer on February 19, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on the number of exercised and
unexercised options and the value of the in-the-money unexercised options held
by the named executive officers at December 26, 1997. The Company currently does
not grant stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edgar S. Brower(3)............ 214,000 $1,628,525 15,000 -- $ 81,563 --
Lester Hill................... -- -- 50,000 200,000 546,875 $ 2,187,500
David L. Schlotterbeck........ -- -- -- 150,000 -- 1,443,375
Richard V. Plat............... -- -- 103,000 21,000 1,451,594 137,094
Richard G. Knoblock........... -- -- 17,050 17,150 204,034 152,978
William T. Fejes.............. 6,700 56,281 8,000 17,400 60,331 132,681
</TABLE>
- ------------------
(1) The amounts in this column were calculated using the difference between the
closing market price of the Company's Common Stock at exercise minus the
option exercise price.
(2) The amounts in this column were calculated by using the difference between
the closing price of the Company's Common Stock on December 26, 1997 and the
option exercise prices. The closing price of the Company's Common Stock on
December 26, 1997 on the New York Stock Exchange was $23.5625.
(3) Mr. Brower resigned as a director and officer on February 19, 1997.
9
<PAGE>
RETIREMENT BENEFITS
To provide for retirement income for its employees, the Company has pension
plans designed to qualify under applicable provisions of the Internal Revenue
Code of 1986, as amended. All full-time employees and certain part-time
employees in the United States are eligible to participate in a pension plan
after one year of service. The plans are funded solely by Company contributions.
Effective January 1, 1985, the Company's pension plans were revised to
combine all existing employee group retirement plans of the Company into one
defined benefit plan. Employees hired on and after January 1, 1985 participate
in the Post-1985 Retirement Plan. Employees hired prior to January 1, 1985 have
the option of receiving retirement benefits from the Pre-1985 or Post-1985
Retirement Plan whichever plan provides the higher benefits.
PRE-1985 RETIREMENT PLAN
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
HIGHEST
FIVE-YEAR 15 YEARS 20 YEARS
AVERAGE OF OF 25 YEARS OF 30 YEARS OF 35 YEARS OF
COMPENSATION SERVICE SERVICE SERVICE(1) SERVICE(1) SERVICE(1)
- -------------------------------------- -------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$125,000.............................. $ 48,800 $ 65,500 $ 80,000 $ 80,000 $ 80,000
175,000.............................. 70,700 94,700 115,000 115,000 115,000
225,000.............................. 92,600 123,900 150,000 150,000 150,000
275,000.............................. 114,500 153,100 185,000 185,000 185,000
325,000.............................. 136,400 182,300 220,000 220,000 220,000
375,000.............................. 158,300 211,500 255,000 255,000 255,000
425,000.............................. 180,200 240,700 290,000 290,000 290,000
475,000.............................. 202,100 269,900 325,000 325,000 325,000
525,000.............................. 224,000 299,100 360,000 360,000 360,000
</TABLE>
POST-1985 RETIREMENT PLAN
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
HIGHEST
FIVE-YEAR 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE OF OF OF OF OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................... $ 26,100 $ 34,700 $ 43,400 $ 52,100 $ 60,800
175,000................................... 37,300 49,700 62,200 74,600 87,000
225,000................................... 48,600 64,700 80,900 97,100 133,300
275,000................................... 59,800 79,700 99,700 119,600 139,500
325,000................................... 71,100 94,700 118,400 142,100 165,800
375,000................................... 82,300 109,700 137,200 164,600 192,000
425,000................................... 93,600 124,700 155,900 187,100 218,300
475,000................................... 104,800 139,700 174,700 209,600 244,500
525,000................................... 116,100 154,700 193,400 232,100 270,800
</TABLE>
- ------------------
(1) Maximum benefits are obtained at 24 pension service years.
The compensation covered by the plans for which benefits are summarized in
the tables above include salary, wages, bonuses and commissions. The covered
compensation for each of the executive officers named in the Summary
Compensation Table is the highest 5 consecutive years' average of the past 10
years of salary and bonus. Mr. Brower is provided with a supplementary Executive
Retirement Plan which is in addition to and duplicates the benefits provided by
the Post-1985 Company Plan, including the Pacific Scientific Company Pension
Restoration Plan. Mr. Hill is provided with a special supplemental retirement
plan, consisting of a monthly defined contribution of $5,000, plus interest
accruing on such amounts at the rate of nine percent per
10
<PAGE>
year for 1997. This plan is in addition to the Company's regular Employee
Pension Plan and the Pacific Scientific Company Pension Restoration Plan.
The officers named in the Summary Compensation Table have been credited
with the following years of service: Mr. Brower, 12 years; Mr. Hill, 0 years;
Mr. Schlotterbeck, 0 years; Mr. Plat, 20 years; Mr. Knoblock, 8 years; and Mr.
Fejes, 11 years. Of these officers, Mr. Plat is the only one to have the option
of receiving benefits in either of the plans as described above.
The benefits under the Pre-1985 Retirement Plan are subject to the
deduction of a portion of Social Security or equivalent benefits (maximum
deduction limited to 50%, which is reached at 18.75 pension service years) and
are computed on the ten-year certain and life amounts.
The benefits under the Post-1985 Retirement Plan are not subject to any
deduction for Social Security (nor are there any other offset amounts) and are
computed on the basis of an excess plan.
During 1994, the Company adopted the Pacific Scientific Company Pension
Restoration Plan. This plan was implemented to restore the pension benefit that
would otherwise be payable but for the $150,000 per year pay limitation imposed
during 1994 by Section 401(A)(17) of the Internal Revenue Code. This plan
preserves the pension benefit in effect prior to 1994. As a result, if an
individual's compensation exceeds the prescribed limits, the excess benefits
will be paid by the Company pursuant to this plan.
INTERESTS OF CERTAIN PERSONS
Additional information, including certain compensation information, as to
certain interests of the Company Board and the Company's executive officers is
set forth in the Solicitation/Recommendation Statement on Schedule 14D-9 filed
by the Company with the Commission on December 22, 1997 and previously delivered
to shareholders of the Company (as amended, the "Schedule 14D-9").
PROXY SOLICITATION
Proxies are being solicited by and on behalf of the Company. All expenses
of the Company's solicitation of proxies, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by use of the mails, proxies may be solicited by directors, certain
officers, and employees of the Company in person or by telephone, telegram,
advertisement, courier service, or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for out-of-pocket expenses in connection with such solicitation. In
addition, the Company has retained MacKenzie Partners, Inc. ("MacKenzie") to
assist in the solicitation of proxies. The Company has agreed that MacKenzie
will be paid a fee not to exceed $100,000, plus reimbursement for their
reasonable out-of-pocket expenses. The Company has also agreed to indemnify
MacKenzie against certain liabilities and expenses, including certain
liabilities and expenses under the federal securities law. It is anticipated
that MacKenzie will employ approximately 40 persons to solicit shareholders.
The Company has engaged BARS to act as its financial advisor in connection
with Kollmorgen's unsolicited offer and related matters, including this
solicitation. BARS may assist in the solicitation of proxies. Information as to
the terms of BARS' engagement is set forth in the Schedule 14D-9. BARS will not
receive any fee for, or in connection with, any solicitation activities apart
from the fees it is otherwise entitled to receive under its engagement. BARS
does not admit or deny that any of its directors, officers, or employees is a
"participant" as defined in Schedule 14A promulgated by the SEC under the
Securities Exchange Act of 1934, as amended, or that such Schedule 14A requires
the disclosure of certain information concerning such persons. In the normal
course of its business, BARS regularly buys and sells the Common Stock and other
securities for its own account and for the accounts of its customers, which
transactions may result from time to time in BARS and its associates having a
net "long" or net "short" position in the Common Stock or other securities or
option contracts or derivatives in or relating to the Company's securities. If
BARS assists the Company in connection with the solicitation of proxies, such
activity will be carried out by a team of individuals consisting of officers and
employees of BARS.
11
<PAGE>
The Company estimates that its total expenditures relating to the Company's
solicitation (excluding costs representing salaries and wages of regular
employees and officers of the Company) will be approximately $500,000. The
Company to date has incurred estimated total expenses of approximately $200,000.
In addition to the members of the Company Board (which consists of Messrs.
Beran, Briscoe, Hill, Ketchum, Preston and Pryor), Mr. David L. Schlotterbeck,
President of the Company, and Mr. Winston E. Hickman, Senior Vice President and
Chief Financial Officer of the Company, may solicit proxies. The business
address for each of the members of the Company Board and executive officers
named above is, and the Company's executive offices are located at: 620 Newport
Center Drive, Suite 700, Newport Beach, California 92660.
SHARE TRANSACTIONS BY PARTICIPANTS
The following table sets forth all purchases and sales of Common Stock
during the past two years by the directors of the Company and those executive
officers that are participants in the solicitation of proxies:
<TABLE>
<CAPTION>
TYPE OF NUMBER OF PER SHARE
NAME TRANSACTION SHARES DATE PRICE
- -------------------------------------------------------- ----------- --------- ------- -----------
<S> <C> <C> <C> <C>
Walter F. Beran......................................... Purchase 1,000 3/1/96 $22.625
Ralph D. Ketchum........................................ Purchase 3,500 7/3/96 $ 13.00
Purchase 2,000 5/24/96 $18.875
Purchase 1,000 4/12/96 $18.375
Purchase 1,000 2/2/96 $ 21.00
William A. Preston...................................... Purchase 2,000 7/12/96 $12.375
</TABLE>
Additional information regarding option grants within the last two years to
the members of the Company's Board of Directors and to Messrs. Hill,
Schlotterbeck and Hickman, is set forth in the Solicitation/Recommendation
Statement on Schedule 14D-9 filed by the Commission on December 22, 1997, as
amended, and previously delivered to the shareholders under the caption "Item
3(b)-IDENTITY AND BACKGROUND--Certain Stock Ownership Information."
SHAREHOLDER PROPOSALS FOR 1998 PROXY MATERIALS
The Board will make provision for presentation of proposals by shareholders
at the 1998 annual meeting of shareholders provided such proposals are submitted
in accordance with the Company's Bylaws by eligible shareholders. In order for
any such proposals to be included in the proxy materials for consideration at
the 1998 annual meeting, the proposals, which must comply with relevant SEC
regulations, must have been received no later than November 13, 1997.
OTHER BUSINESS
The management of the Company is not aware of any other matters to be
brought before the Special Meeting. However, if any other matters are properly
brought before the Special Meeting, including proposals to adjourn or postpone
the Special Meeting, the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.
By order of the Board of Directors,
/s/ Lester Hill
LESTER HILL
Chairman and Chief Executive Officer
January 16, 1998
12
<PAGE>
FORM OF -- PROXY CARD
[PACIFIC SCIENTIFIC LOGO]
PACIFIC SCIENTIFIC COMPANY PROXY
SPECIAL MEETING OF SHAREHOLDERS, FEBRUARY 13, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Lester Hill or David L. Schlotterbeck, or
either of them, as proxies with power of substitution to vote all shares of the
undersigned at the special meeting of the shareholders of Pacific Scientific
Company to be held on February 13, 1998, at 2:00 p.m. (local time) at the Hyatt
Regency Irvine Hotel, 17900 Jamboree Road, Irvine, California, and at any
adjournments or postponements thereof, in accordance with the directions given
on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST PROPOSALS 1 AND 2 AND TO
WITHHOLD AUTHORITY TO VOTE AS TO EACH OF THE NOMINEES FOR DIRECTOR SET FORTH IN
PROPOSAL 3.
<TABLE>
<S> <C>
1. To repeal any and all provisions of the Company's Bylaws that have not been duly filed by the Company with the
Securities and Exchange Commission prior to August 11, 1997, including any and all amendments to such Bylaws adopted
on or after December 15, 1997.
/ / AGAINST / / FOR / / ABSTAIN
2. To remove all of the members of the Board of Directors of the Company.
/ / AGAINST / / FOR / / ABSTAIN
3. If proposal 2 is approved, to elect the following director nominees nominated by Kollmorgen.
/ / WITHHOLD AUTHORITY AS TO ALL / / FOR ALL / / WITHHOLD AUTHORITY AS TO ALL EXCEPT
</TABLE>
<PAGE>
(INSTRUCTION: TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE BOX TO "WITHHOLD
AUTHORITY AS TO ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE
LINE BELOW.)
________________________________________________________________________________
David Berthelot, Stuart L. Klein, David Nierenberg,
William J. Recker, Mark A. Snider, Andre Weiss
<TABLE>
<S> <C>
4. In their discretion, on such other matters as may properly come before the meeting or any adjournment or postponement
thereof.
</TABLE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS
ARE GIVEN, THE SHARES WILL BE VOTED AGAINST PROPOSALS 1 AND 2 AND TO WITHHOLD
AUTHORITY TO VOTE FOR EACH OF THE DIRECTOR NOMINEES NAMED IN PROPOSAL 3.
Dated: _____________________, 1998
__________________________________
Signature
__________________________________
Signature (If held jointly)
Title ____________________________
SIGNATURE OF SHAREHOLDER(S) SHOULD
CORRESPOND EXACTLY WITH THE NAME
PRINTED HEREON. JOINT OWNERS
SHOULD EACH SIGN PERSONALLY.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC., SHOULD GIVE FULL
TITLE AND AUTHORITY.
<PAGE>
PACIFIC
SCIENTIFIC NEWS RELEASE
- --------------------------------------------------------------------------------
Contacts:
Chuck Burgess or Joele Frank 620 Newport Center Drive, Suite 700
Abernathy MacGregor Frank Newport Beach, California 92660-8007
(212) 371-5999 (714) 720-1741 Fax (714) 720-1083
PACIFIC SCIENTIFIC MAILS PROXY MATERIALS TO SHAREHOLDERS
Shareholders Urged Not To Sign Or Return Any Proxy Cards Sent By
Kollmorgen
NEWPORT BEACH, CA, January 16, 1998 - Pacific Scientific Company (NYSE:PSX)
announced that it has filed definitive proxy materials with the Securities and
Exchange Commission (SEC) in Washington, D.C. today with respect to its Special
Meeting of Shareholders. Pacific Scientific's shareholders of record as of
January 20, 1998 will be entitled to vote at the February 13 Special Meeting.
As previously announced, Kollmorgen Corporation (NYSE:KOL) is seeking to acquire
Pacific Scientific in an unsolicited transaction. The Special Meeting has been
called by Kollmorgen to remove existing members of Pacific Scientific's Board of
Directors and to elect Kollmorgen's nominees to the Board, in an attempt to
further Kollmorgen's proposed transaction. Kollmorgen has previously delivered
to Pacific Scientific the consents of holders of Pacific Scientific common stock
stated by Kollmorgen to be sufficient to call a Special Meeting of Pacific
Scientific. Pacific Scientific has stated that it will review the consents to
determine whether they are valid under applicable law. The Board of Directors of
Pacific Scientific has unanimously determined that the Kollmorgen tender offer
and merger are inadequate and not in the best interests of Pacific Scientific or
its shareholders.
Lester Hill, Pacific Scientific's Chairman and Chief Executive Officer, said,
"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 new 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' view 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."
<PAGE>
The Board of Directors of Pacific Scientific unanimously recommends and urges
Pacific Scientific shareholders to not sign or return any proxy card sent to you
by Kollmorgen. If shareholders have previously signed and returned any such
proxy card to Kollmorgen, they have every right to change their vote and revoke
their proxy by sending a later dated BLUE proxy card to Pacific Scientific. The
Pacific Scientific Board recommends that shareholders vote AGAINST Kollmorgen's
proposals by returning the BLUE proxy card they will receive shortly to
Pacific Scientific. Pacific Scientific will begin mailing its proxy materials
today.
Pacific Scientific shareholders who have any questions or need any assistance in
revoking their proxy from the Kollmorgen offer, or would like to receive a copy
of the Pacific Scientific proxy materials, should contact MacKenzie Partners,
Inc. at (800) 322-2885 Toll Free or at (212) 929-5500 Collect.
Pacific Scientific Company is an international business that designs,
manufactures and markets motion control, process control and safety equipment.
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