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Allied Motion Technologies Inc – ‘DEFM14A’ on 6/21/02

On:  Friday, 6/21/02, at 9:46pm ET   ·   As of:  6/24/02   ·   Accession #:  912057-2-25044   ·   File #:  0-04041

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/24/02  Allied Motion Technologies Inc    DEFM14A     6/21/02    1:990K                                   Merrill Corp/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEFM14A     Definitive Proxy Solicitation Material -- Merger    HTML    928K 
                          or Acquisition                                         

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

		Definitive Proxy Statement

June 24, 2002

Dear Shareholder:

        You are cordially invited to attend the Special Meeting of Shareholders of Hathaway Corporation to be held on July 25, 2002, commencing at 2:00 p.m. (Mountain Time) at the Lone Tree Country Club, 9808 Sunningdale Blvd., Littleton, Colorado. The Board of Directors and management look forward to personally greeting those shareholders able to attend the meeting.

        At the Special Meeting you will be asked to consider and vote on a proposal to sell substantially all our power and process segment to subsidiaries of Danaher Corporation for cash and the assumption of certain related liabilities.

        Your Board of Directors unanimously approved and recommends a vote FOR the sale of the power and process segment. Regardless of the number of shares you own and whether or not you plan to attend, it is important that your shares are represented and voted at the Special Meeting. Accordingly, you are requested to sign, date and mail the enclosed proxy at your earliest convenience.

        On behalf of the Board of Directors, thank you for your cooperation and support.

		Sincerely,
		Richard D. Smith Chief Executive Officer

HATHAWAY CORPORATION
8228 PARK MEADOWS DRIVE
LITTLETON, COLORADO 80124

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held July 25, 2002

To the Shareholders of
Hathaway Corporation:

        You are hereby notified that a Special Meeting of Shareholders of Hathaway Corporation will be held on July 25, 2002 at 2:00 p.m. (Mountain Time) at the Lone Tree Country Club, 9808 Sunningdale Blvd., Littleton, Colorado, for the following purposes:

        Item 1.    to consider and vote on the sale of substantially all of Hathaway's power and process segment (including our consent to the sale of substantially all the property of our directly and indirectly wholly owned subsidiaries: Hathaway Systems Corporation, Hathaway Industrial Automation, Inc., Hathaway Systems, Ltd., and Hathaway Process Instrumentation Corporation (except its calibration business), together with our investment in two China joint ventures) pursuant to an Asset Purchase Agreement dated May 17, 2002, among Qualitrol Power Products, LLC and Danaher UK Industries Limited, as Buyers, and Hathaway Systems Corporation, Hathaway Industrial Automation, Inc., Hathaway Systems, Ltd., Hathaway Process Instrumentation Corporation and Hathaway Corporation, as Seller, for a cash consideration to us and the assumption of certain related liabilities; and

        Item 2.    to consider and act upon such other business as may properly be presented for action at the Special Meeting or any adjournment thereof.

        The Board of Directors has fixed the close of business on June 17, 2002 as the Record Date for the Special Meeting. Only Shareholders of record at the close of business on the Record Date will be entitled to notice of and to vote at the Special Meeting. Our transfer books will not be closed. Shareholders are entitled to certain dissenters' rights under Article 113 of the Colorado Business Corporation Act.

        The Board of Directors extends a cordial invitation to all Shareholders to attend the Special Meeting, as it is important that your shares be represented at the meeting. Even if you plan to attend the Special Meeting, you are strongly encouraged to mark, date, sign and mail the enclosed proxy card in the return envelope provided as promptly as possible.

        You may revoke your proxy by following the procedures set forth in the accompanying proxy statement. If you are unable to attend, your written proxy will assure that your vote is counted.

		By Order of the Board of Directors
		Susan M. Chiarmonte Secretary
Denver, Colorado June 24, 2002

TABLE OF CONTENTS

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HATHAWAY CORPORATION
8228 Park Meadows Drive
Littleton, Colorado 80124

PROXY STATEMENT

        This proxy statement and the accompanying proxy card are being furnished to the holders of Common Stock of Hathaway Corporation in connection with the solicitation of proxies by the Board of Directors to be voted at the Special Meeting of shareholders to be held on July 25, 2002 at 2:00 p.m. (Mountain Time) at the Lone Tree Country Club, 9808 Sunningdale Blvd., Littleton, Colorado. The Special Meeting is called for the purposes set forth in the accompanying Notice of Special Meeting of Shareholders. This proxy statement and the accompanying proxy card are intended to be mailed to shareholders on or about June 24, 2002.

QUORUM AND VOTING RIGHTS

        Broker non-votes and abstentions are considered to be present to determine whether a quorum is present, but with respect to non-routine matters (such as the power and process transaction) they are not counted in favor of such matters. THEREFORE, IF YOU WISH TO VOTE IN FAVOR OF THE POWER AND PROCESS SALE TRANSACTION, YOU SHOULD INDICATE ON THE PROXY CARD THAT YOU VOTE IN FAVOR OF THE PROPOSALS AND NOT MERELY SIGN THE PROXY CARD. As explained later in this section, if you do not indicate how your proxy should be voted the designated proxies will vote your shares FOR Item 1, but marking your card to indicate your desired vote is the preferable action.

        Under applicable rules, brokers who hold shares of Common Stock in a street name have the authority to vote the shares in the broker's discretion on "routine matters" even if they have not received specific instructions from the beneficial owner of the shares. Routine matters involve ordinary course events of limited significance. The power and process transaction represents a fundamental change WHICH IS NOT a "routine" matter for this purpose. Therefore, with respect to the power and process transaction, brokers may not vote shares held in a street name without specific instructions from the beneficial owner.

        The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast on the matter presented is necessary to constitute a quorum at the Special Meeting. The affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote at the Special Meeting is required for the approval of the sale of substantially all our power and process segment (Item 1). The Record Date for determination of shareholders entitled to notice of, and to vote at, the Special Meeting is the close of business on June 17, 2002. As of the Record Date, there were 4,673,688 shares of Common Stock outstanding, each of which is entitled to one vote at the Special Meeting. Therefore, a quorum will consist of at least 2,336,845 shares, and at least that number will be required to approve the power and process transaction. Since sale of substantially all the power and process segment requires the approving vote to be measured against all shares of all Common Stock entitled to vote, withholding authority (including broker non-votes) from that vote is the equivalent of a vote against the sale.

        All shares of Common Stock represented by properly executed proxies will, unless such proxies have been revoked previously, be voted in accordance with the instructions indicated in such proxies. If no such instructions are indicated, such shares will be voted FOR the approval of the sale of substantially all the power and process segment (Item 1), and in the discretion of the proxy holders on any other matter that may properly come before the Special Meeting (Item 2). The Board of Directors does not know of any matters other than the power and process transaction that are to come before the Special Meeting. Pursuant to our bylaws, no shareholder proposal may be submitted by a shareholder unless the shareholder desiring to submit a proposal first files a notice with us setting forth information required by Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934.

        Any holder of Common Stock has the unconditional right to revoke his or her proxy at any time prior to the voting thereof at the Special Meeting by (i) filing with Hathaway's corporate Secretary written revocation of his or her proxy prior to the voting thereof, (ii) giving a duly executed proxy bearing a later date, or (iii) voting in person at the Special Meeting. If a shareholder's shares are held by a nominee and the shareholder seeks to vote shares in person at the Special Meeting, THE SHAREHOLDER MUST BRING TO THE SPECIAL MEETING A WRITTEN STATEMENT FROM THE NOMINEE CONFIRMING THE SHAREHOLDER'S BENEFICIAL OWNERSHIP OF A STATED NUMBER OF SHARES AND THAT SUCH SHARES HAVE NOT BEEN VOTED BY THE NOMINEE. Attendance by a shareholder at the Special Meeting will not in itself revoke his or her proxy.

        If a quorum is not present, or for any other good reason, the shareholders entitled to vote who are present in person or represented by proxy at the Special Meeting have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or other reasons for adjournment are satisfied. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the Special Meeting as originally called.

        Solicitation of proxies for use at the Special Meeting may be made in person or by mail, telephone or telegram, by our directors, officers and regular employees. Such persons will receive no special compensation for any solicitation activities. In addition, Hathaway may retain the services of D.F. King & Co., Inc. to aid in the solicitation of proxies in person, by mail, telephone or telegram. If retained, the costs are not expected to exceed $5,000 plus expenses. We will request banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation materials to the beneficial owners of Common Stock held of record by such entities, and we will, upon the request of such record holders, reimburse reasonable forwarding expenses. The costs of preparing, printing, assembling and mailing the proxy statement, proxy card and all materials used in the solicitation of proxies to shareholders, and all clerical and other expenses of such solicitation, will be borne by Hathaway.

CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS

        This proxy statement contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, cash flows, financing plans, business strategies, capital and other expenditures, growth opportunities, and plans and objectives of management. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results to differ materially from the forward looking statements. These statements appear in a number of places in this proxy statement, but particularly under the caption Motion Control Business Strategy and include all statements that are not historical facts. Some of the forward looking statements relate to our intent, belief or expectations of our management regarding our strategies and plans for operations and growth. Other forward looking statements relate to trends affecting our financial condition and results of operations, and our anticipated capital needs and expenditures. Investors are cautioned that such forward looking statements are not guarantees of future performance, and involve risks and uncertainties. Important factors that could cause actual results to differ materially include: (i) post-closing adjustments, which may reduce the amount of net proceeds available to us which, in turn, may result in a lower amount available for our operations; (ii) actions of customers and competitors; (iii) our ability to obtain future financing on favorable terms; and (iv) other risks and contingencies described in the section entitled "RISK FACTORS" and other risk factors included in our Forms 10-K and 10-Q filed with the Securities and Exchange Commission.

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PROPOSAL TO SELL SUBSTANTIALLY ALL OUR POWER AND PROCESS SEGMENT
(ITEM 1)

        This section of the proxy statement describes certain aspects of the sale of substantially all the assets of our power and process segment. The power and process segment includes our power instrumentation products, process instrumentation products (except calibration products) and systems and automation products, as well as investments in our two active China joint ventures and the capital stock of Electric Power Research, Ltd. The calibration products manufactured by Hathaway Process Instrumentation Corporation in Dallas, Texas are not included in the sale. Therefore, the power and process transaction described in this proxy statement means the sale of assets comprising the power and process segment except the calibration products which remain with Hathaway but are for sale. We recommend that you read carefully the complete Asset Purchase Agreement for the terms of the sale and other information that may be important to you. The Asset Purchase Agreement is included in this proxy statement as Appendix A.

SUMMARY TERM SHEET

        The following is a brief summary of the material terms of the proposed power and process transaction. This summary highlights selected information in this proxy statement and may not contain all of the information that may be important to you. You should carefully read this entire proxy statement and the other documents referenced herein for a more complete understanding of the matters being considered at the Special Meeting.

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        This summary may not contain all of the information that may be important to you. You should read carefully this entire document and the other documents referred to for a complete understanding of the power and process transaction. In particular, you should read the documents attached to this proxy statement, including the Asset Purchase Agreement, which is attached as Appendix A, and the opinion of Green, Manning & Bunch, which is attached as Appendix B.

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QUESTIONS AND ANSWERS ABOUT THE POWER AND PROCESS TRANSACTION

Q.

WHAT IS THE PROPOSED POWER AND PROCESS TRANSACTION?

A.

We will sell substantially all the assets of our power and process segment, including investments in two China joint ventures, and transfer the majority of the liabilities of our power and process segment to Qualitrol. Hathaway subsidiary corporations whose assets are being sold and liabilities assumed are Hathaway Systems Corporation, Hathaway Industrial Automation, Inc., Hathaway Systems, Ltd., and Hathaway Process Instrumentation Corporation (except for its calibration products). The purchase price for the assets being sold is $6,550,000, plus the amount of any guarantees issued by banks guaranteeing performance of work in process, subject to increase or decrease pursuant to a post-closing adjustment based on the net equity (acquired assets less assumed liabilities) of the power and process segment at the Closing The power and process segment (excluding the calibration business) employs 183 individuals or approximately 53% of our total workforce of 344 persons. The power and process transaction will constitute the sale of substantially all the assets of the power and process segment, which is a significant portion of our total assets. This sale marks the termination of our participation as a manufacturer in the power and process industries. The power and process transaction does not include the calibration products manufactured and marketed by Hathaway Process Instrumentation Corporation. Since we are terminating our power and process business, the calibration products will be sold.

Q.

WILL ANY OF THE SALE PROCEEDS BE DISTRIBUTED TO SHAREHOLDERS?

A.

No. The net proceeds will be retained by the Company to help grow the motion control business.

Q.

HOW WILL THE PROPOSED POWER AND PROCESS TRANSACTION AFFECT HATHAWAY CORPORATION?

A.

After the sale of substantially all of our power and process segment to Qualitrol and of the calibration products, our remaining operations will be our motion control business. We are currently involved in analyzing acquisitions of other motion control assets. See the caption USE OF PROCEEDS. The motion control segment had an operating profit of $4,067,000 in fiscal year 2001 and $1,022,000 in the first nine months of fiscal year 2002 which does not include any corporate expenses. The motion control segment employs 146 individuals or approximately 42% of our total work force. We do not anticipate terminating any present employees of the motion control segment. Disposition of the power and process segment will allow us to devote substantially all of our energies and resources to development of our motion control business, as opposed to dividing our management time between two unrelated businesses.

Q.

WHAT WILL HATHAWAY DO IF ITS SHAREHOLDERS DO NOT APPROVE THE PROPOSED POWER AND PROCESS TRANSACTION?

A.

In the event our shareholders do not approve the proposed power and process transaction, we will continue to operate the power and process business in accordance with our past practice and current and future strategy for that business, but may be required to raise additional debt or equity in order to properly fund future operations of the power and process segment. In addition, we will seek out a different proposal for the disposition of the power and process business.

Q.

HOW DO I VOTE?

A.

You may vote by indicating on the enclosed proxy card how you want to vote, and by signing and mailing the proxy card in the enclosed pre-paid return envelope. Please vote as soon as possible to insure that your shares are represented at the Special Meeting.

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Q.

WHAT ARE BROKER NONVOTES?

A.

If a broker holding shares in street name submits a proxy card on which the broker physically lines out the matter, whether it is "routine" or "non-routine" or does not indicate a specific choice ("FOR", "AGAINST", or "ABSTAIN") on a matter that is non-routine, that action is called a broker non-vote as to that matter.

Q.

IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY SHARES FOR ME?

A.

Since the power and process transaction is a non-routine matter, your broker will vote your shares only if you provide your broker instructions on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares.

Q.

CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY FORM?

A.

Yes. You can change your vote at any time before we vote your proxy at the Special Meeting in one of three ways. First, you may file with Hathaway's corporate secretary the written revocation of your proxy prior to the voting thereof. Second, you may complete a new proxy form and send it to the Secretary and a new proxy form will automatically replace any earlier proxy form you returned. Third, you may attend and vote in person at the Special Meeting. See page 2 for information on voting in person.

You should send any written notice or new proxy to the secretary at the following address: Susan M. Chiarmonte, Secretary, Hathaway Corporation, 8228 Park Meadows Drive, Littleton, Colorado 80124.

Q.

WHO DO I CONTACT IF I HAVE ADDITIONAL QUESTIONS OR WOULD LIKE ADDITIONAL COPIES OF THE PROXY STATEMENT?

A.

You may contact: Hathaway Corporation, 8228 Park Meadows Drive, Littleton, Colorado 80124, 303-799-8200, Attention: Susan M. Chiarmonte, Secretary

THE BUYERS

        Qualitrol Power Products, LLC ("Qualitrol Power") is a newly-formed Delaware limited liability company and a wholly-owned subsidiary of Qualitrol Corporation. The principal executive offices of Qualitrol Power and Qualitrol Corporation are located at 1385 Fairport Road, Fairport, New York 14450. The telephone number of Qualitrol Power and Qualitrol Corporation is (716) 586-1515. Qualitrol Power has not conducted any business other than in connection with the acquisition of the power and process segment of Hathaway. Qualitrol Corporation is a leading supplier of instruments, controls and monitoring systems utilized on transmission and distribution equipment in the electric utility industry. Qualitrol Corporation is a New York corporation and an indirect wholly-owned subsidiary of Danaher Corporation. Danaher UK Industries Limited ("DUKI") is a company incorporated under the laws of the United Kingdom with principal executive offices located at Danaher House, Parkway One Business Centre, Parkway Drive, Sheffield, S9 4WU England. (Qualitrol Power and DUKI are referred herein together as "Qualitrol"). DUKI's telephone number is 011-44-114-256-4200. DUKI is a leading manufacturer of Process/Environmental Controls and is an indirect wholly-owned subsidiary of Danaher Corporation. Danaher Corporation is a Delaware corporation with principal executive offices located at 2099 Pennsylvania Avenue, NW, 12^th Floor, Washington, D.C. 20006-1813. Danaher Corporation's telephone number is (202) 828-0850. Danaher Corporation is a leading manufacturer of Process/Environmental Controls and Tools and Components.

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RISK FACTORS

        You should carefully consider the risks described below regarding the power and process transaction and Hathaway's business following the power and process transaction, together with all the other information included in this proxy statement, before making a decision about voting on the proposal submitted for your consideration. If any of the following risks actually occur, Hathaway's business, financial condition or result of operation could be materially harmed. If Hathaway's business is harmed, the trading price of Common Stock could decline and you could lose all or part of your investment.

RISKS ASSOCIATED WITH THE SALE OF THE POWER AND PROCESS SEGMENT

If the post closing adjustments to the purchase price reflect a decrease in the net assets of the power and process business, the purchase price will be less than we expect.

        The purchase price in the power and process transaction of $6,550,000 is subject to post closing adjustments based upon changes in the net assets of the power and process business from November 30, 2001 to the closing date of the transaction. Although we currently do not expect the net purchase price to be less than $6,550,000, there can be no assurance that the purchase price as adjusted will not be less than our expectation. If the final purchase price is less than expected, our financial condition after the closing may be adversely affected, and we may not be able to acquire additional motion control assets.

Sale of the power and process segment may cause the price of our common stock to decline.

        As explained elsewhere in this proxy statement, we believe the market does not understand our two segments, and does not properly relate our market price to those segments. One of the reasons for the sale of the power and process segment is to simplify our structure and become a "pure play" company in the motion control segment. Even so, it is possible that with the sale of the power and process segment, the price of our Common Stock will decline.

Exercise of Dissenters' Rights may decrease funds available for operation after sale of the power and process segment.

        The right of Hathaway shareholders to dissent from the power and process transaction and obtain payment in cash of the fair value of their shares of Common Stock could diminish the amount of funds available to Hathaway to fund operations of the motion control segment. Payment to dissenters who exercise their right will be at the fair value of shares immediately before the Closing Date of the transaction, excluding any appreciation or depreciation in anticipation of the transaction, except to the extent that exclusion would be inequitable. If any shareholders exercise their dissenters' rights, Hathaway will make the initial determination of fair value and make payment of that amount. Dissenters have the right, however, to contest the Hathaway payment, and if Hathaway and the dissenters cannot resolve the amount payable, the determination of fair value may be made in a court proceeding. As finally determined, the fair value of dissenters' shares may be enough to adversely affect the operation of the motion control segment after disposition of the power and process segment.

RISKS ASSOCIATED WITH OUR BUSINESS FOLLOWING THE POWER AND PROCESS TRANSACTION

We may not be able to sustain or accelerate growth of, or sustain or accelerate recurring revenue from, the motion control segment.

        There can be no assurance that demand for our motion control services and products will increase or be sustained, or that our current or future products will have market acceptance in that product

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category. To the extent we do not achieve growth it may be difficult for us to generate meaningful revenue at acceptable margins or achieve profitability. To the extent the motion control segment is not successful, because market acceptance declines, or other competing technologies evolve in connection with the evolving market for our motion control products or for any other reason, we might have future unexpected declines in revenues.

Rapid technological change could render our motion control products and services obsolete.

        The industries serviced by our motion control products undergo rapid changes in user and customer requirements and preference. Frequent new product and service introductions and the emergence of new industry standards and practices are necessary. Each of these characteristics could render our motion control products obsolete. The rapid evolution of our market requires that we improve continually the performance, features and reliability of our products and services, particularly in response to competitive offerings. Our success also will depend, in part, on our ability to:

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develop, acquire or license new products, services and technology that address the varied needs of our customers and prospective customers; and



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respond to technological advances and emerging industry standards and practices on a cost effective and timely basis.

        If we are unable, for technical, financial, legal or other reasons, to adapt in a timely manner to changing market conditions or user preferences, we could lose customers, which would cause a decrease in our revenue.

We may be unable to obtain additional capital to grow our business, which would adversely impact our business.

        If we raise additional financing through the issuance of equity securities, you may suffer significant dilution. Although we expect that cash from the power and process transaction, our bank line of credit, and cash from operations will be sufficient to satisfy our working capital and capital expenditure needs over the next twelve months, we may have to seek third party investment in order to provide additional working capital and to finance acquisitions to enhance our motion control segment. We cannot be certain that financing from third parties will be available on acceptable terms to us or at all. Our future capital requirements will depend upon several factors, including the rate of market acceptance of our products and services, our ability to expand our customer base, our level of expenditures for sales and marketing and our requirements for acquisition of additional motion control assets. If our capital requirements vary materially from those currently planned, we may require additional financing sooner than anticipated. If we cannot raise funds on acceptable terms, we may not be able to develop our motion control products and services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which could have a material adverse affect on our ability to grow our business. Further, if we issue equity securities, the new equity securities may have rights, preferences or privileges senior to those of our Common Stock.

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INFORMATION ABOUT HATHAWAY'S BUSINESS

GENERAL

        Hathaway was organized under the laws of Colorado in 1962. Hathaway is engaged in the business of designing, manufacturing and selling advanced systems and instrumentation to the worldwide power and process industries, as well as motion control products to a broad spectrum of customers throughout the world. Hathaway operates primarily in the United States and the United Kingdom and has joint venture investments in China.

POWER AND PROCESS SEGMENT

Power Instrumentation

        Hathaway's power instrumentation products help ensure that electric utilities provide high quality service to consumers of electricity. With manufacturing facilities in Seattle and Belfast, Northern Ireland, and sales and engineering functions in Seattle, Belfast and Denver, the power instrumentation products group produces a comprehensive and cost-effective range of products designed exclusively for the power industry worldwide. Hathaway's equipment assists the electric power system operators in operating and maintaining proper system performance. The products, which are used to monitor and control the power generation, transmission and distribution processes, include fault recording products, fault location products, condition monitoring (circuit breaker) products and remote terminal units for Supervisory Control and Data Acquisition (SCADA) systems. The Hathaway subsidiary corporations involved in the power instrumentation products are Hathaway Systems Corporation, a wholly owned subsidiary of Hathaway, which operates out of Denver, Colorado and Seattle, Washington; Hathaway Process Instrumentation Corporation, a wholly owned subsidiary of Hathaway Systems Corporation, which operates out of Seattle, Washington; and Hathaway Systems, Ltd., which operates out of Belfast, Northern Ireland. Hathaway Systems, Ltd. is a wholly owned subsidiary of Hathaway Systems (UK) Group, Ltd., a corporation formed under the laws of the United Kingdom, and which is a wholly owned subsidiary of Hathaway Systems Corporation.

Systems and Automation

        In September 1996, Hathaway acquired Tate Integrated Systems which has since operated under the name of Hathaway Industrial Automation ("Automation"), a wholly-owned subsidiary of Hathaway Systems Corporation. Automation is located near Baltimore, Maryland and is a full service supplier of process automation systems for industrial applications. Automation has developed a software system for SCADA and distributed control systems. The Automation system has been used to automate such industrial applications as water and wastewater treatment plants and glass manufacturing plants. The focus of the systems business has shifted from industrial automation applications to the power generation and transmission industry. Hathaway has been successful at integrating the Automation system with certain other Hathaway products and targeting the integrated product at substation automation applications used in the electric power industry.

        The automation system provides the user the ability to securely send and receive information to and from intelligent electronic devices in transmission and distribution substations to help monitor and control the delivery of electricity. In addition, the Automation system is used by organizations responsible for operating the transmission grid and ensuring the reliable delivery of electricity. It is used to communicate with and control the output of power generators and to securely communicate metering information from such generators to ensure the proper billing for such electricity.

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Process Instrumentation

        The process instrumentation products group manufactures and markets products for industrial applications including monitoring systems, called visual annunciators and sequential event recorders, which provide both visual and audible alarms and are used to control processes in various plants, including electrical generating plants, chemical, petroleum, food and beverage, pulp and paper, and textiles through Hathaway Process Instrumentation Corporation, with offices in Seattle, Washington, a wholly owned subsidiary of Hathaway Systems Corporation. Hathaway Process Instrumentation Corporation also manages the calibration equipment which is not included in the sale. Calibration equipment is used to test and adjust instrumentation for proper and accurate operation in measuring electricity, temperatures and pressure within the process industry.

China Joint Ventures

        Hathaway has investments in two China joint ventures-a 25% interest in Zibo Kehui Electric Company Ltd. ("Zibo") and a 40% interest in Hathaway Power Monitoring Systems Company, Ltd. ("Power"). Zibo designs, manufactures and sells cable and overhead fault location products, Supervisory Control and Data Acquisition systems and other test instruments within the China market and Hathaway may sell these products outside of China. Power manufactures and sells, under a license from Hathaway, instrumentation products designed by Hathaway to electric power companies in China. Zibo and Power are part of the power and process segment and are included in the power and process transaction.

MOTION CONTROL SEGMENT

        The motion control segment, which will be our remaining business after the sale of substantially all our power and process segment, offers quality, cost-effective products that suit a wide range of applications in the telecommunications, semi-conductor processing, industrial, medical, military and aerospace industries, as well as in the manufacturing of analytical instruments and computer peripherals. End products using Hathaway technology include tunable lasers, wavelength meters and spectrum analyzers for the fiber optic industry, robotic systems for the semiconductor industry, gun control systems for the military, anti-lock braking transducers, satellite tracking systems, MRI scanners and high definition printers.

        The motion control segment is organized into one division and three direct and indirect subsidiaries of Hathaway Motion Control Corporation, a wholly-owned subsidiary of Hathaway: Motors and Instruments Division ("MI"), Emoteq Corporation ("Emoteq-Tulsa"), Computer Optical Products, Inc. ("COPI"—Chatsworth, CA) and Emoteq UK, Limited ("Emoteq UK"), a wholly owned subsidiary of Emoteq-Tulsa.

        The MI division manufactures precision direct-current fractional horsepower motors and certain motor components. Industrial equipment and military products are the major application for the motors. This division also supplies spare parts and replacement equipment for general-purpose instrumentation products.

        Emoteq-Tulsa designs, manufactures and markets direct current brushless motors, related components, and drive and control electronics. Markets served include semiconductor manufacturing, industrial automation, medical equipment, and military and aerospace.

        In July 1998, Emoteq-Tulsa acquired all of the outstanding shares of Ashurst Logistic Electronics Limited of Bournemouth, England (renamed Emoteq UK Limited). Emoteq UK manufactures drive electronics and position controllers for a variety of motor technologies as well as a family of static frequency converters for military and aerospace applications and has extensive experience in power

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electronics design and software development required for the application of specialized drive electronics technology.

        Optical encoders are manufactured by COPI. They are used to measure rotational and linear movements of parts in diverse applications such as tunable lasers, spectrum analyzers, machine tools, robots, printers and medical equipment. The primary markets for the optical encoders are in the telecommunications, computer peripheral manufacturing, industrial and medical sectors. COPI also designs, manufactures and markets fiber optic-based encoders with special characteristics, such as immunity to radio frequency interference and high temperature tolerance, suited for industrial, aerospace and military environments. Applications include airborne navigational systems, anti-lock braking transducers, missile flight surface controls and high temperature process control equipment.

Motion Control Business Strategy

        Hathaway's Board of Directors has approved the recommendation of its management team to focus the company on the execution of a "Pure-Play" Motion Strategy and its ultimate goal of building a significant platform within the precision motion control marketplace. We believe that small to mid-sized companies, employing a pure-play strategy, are rewarded with higher market valuations when compared to their counterparts with multiple product platforms. The key elements of the strategy include multiple strategic acquisitions, niche marketing and improving internal operating efficiencies through the utilization and implementation of lean manufacturing principles throughout the organization. Hathaway is currently in active discussion with numerous motion companies and fully expects to have an opportunity to make definitive offers for selected companies within a reasonably short period of time. Each potential acquisition is being evaluated on its ability to be successful on a stand-alone basis and that ability will be a critical factor in our decision to proceed with an acquisition.

        Having recently enjoyed good success and growth in the custom fractional horsepower motor and control market, a sub-set of the overall $85 billion worldwide motor and control market, Hathaway believes that additional emphasis within this segment will provide even greater opportunities and accelerate our growth in the future. The customized industrial fractional horsepower motor segment can be defined as highly fragmented, with most manufacturers producing for niche markets, thereby lacking a clearly identifiable leader. The products are used in a wide variety of applications and in numerous market segments including the industrial automation, semiconductor, telecommunications, medical, aviation and defense industries. Given the current market conditions, we believe that Hathaway has the opportunity to carve out it's own niche and to become a leader in certain well defined market segments.

        The products supplied by Hathaway, and the intended future acquisitions, can be characterized as providing the means to optimally achieve the performance requirements of an application, while at the same time satisfying the trend towards increased precision, miniaturization, flexibility and mass customization. In many applications, the optimized solutions provide an opportunity to enhance and accelerate the conversion from mechanical to electro-mechanical motion solutions by providing the required precision, throughput and cost effectiveness to simplify the justification and approval process during the engineering design cycle. This ability opens many significant segments of the older "power transmission" market to a conversion that will result in further acceleration of the growth in the precision motion control market.

        The sales process within the industry can best be described as "A Solution Looking For A Problem" approach, whereby the engineering teams of both the customer and manufacturer jointly develop a prototype as a solution for the application(s). A shorter lead-time in the design to prototype cycle will greatly enhance the chance of success in the application. Due to this process, the manufacturer is most often a sole sourced supplier for the application, leading to a stable and diverse customer base. A further development of our marketing/sales strategy will result in a "target market"

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approach whereby we develop optimal solutions to meet the special needs of selected market segments. These solutions will be directly sold and supported to a targeted customer base, by a team of highly qualified sales engineering, applications engineering and design engineering personnel.

        The breadth and fragmented nature of the motion control marketplace provides Hathaway with an opportunity to become highly focused and to significantly grow the company in the years ahead. As with any venture, we fully recognize that a major factor in the success can be directly attributed to the strength of the management team within the company. To that end, we believe that our current management team, supplemented by our ability to attract and add highly experienced and proven performers within the industry, provides Hathaway and its shareholders a significant opportunity for success in the future.

Product Distribution and Principal Markets

        Hathaway maintains a direct sales force, which will be continued after the power and process transaction. In addition to its own marketing and sales force, Hathaway has developed a worldwide network of independent sales representatives and agents to market its various product lines.

        We face competition in all of our markets, although the number of competitors varies depending upon the product. There are numerous competitors in the motion control market. No clear market share data is available for our product areas. Competition involves primarily product performance and price, although service and warranty are also important.

Proforma Financial Information

        The following unaudited pro forma consolidated financial statements have been prepared from our historical financial statements to give effect to the sale of substantially all our power and process segment. The unaudited pro forma consolidated balance sheet reflects adjustments as if the sale had occurred on March 31, 2002. The unaudited pro forma combined statements of operations for the nine months ended March 31, 2002 and for the years ended June 20, 2001, 2000 and 1999 reflect adjustments as if the sale had occurred on July 1, 2001, 2000, 1999 and 1998, respectively.

        The unaudited pro forma consolidated financial statements do not purport to present the financial position or results of operations of Hathaway had the transactions and events assumed therein occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future.

        The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements, including the related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Hathaway from its Annual Report on Form 10-K for the year ended June 30, 2001 and from Hathaway's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. In addition, the unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements of the power and process business being sold, which are included in this proxy statement.

See accompanying notes to unaudited pro forma consolidated financial statements.

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HATHAWAY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2002

(In thousands, except per share data)

See accompanying notes to unaudited pro forma consolidated financial statements.

17

HATHAWAY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2002

(In thousands, except per share data)

See accompanying notes to unaudited pro forma consolidated financial statements.

18

HATHAWAY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2001

(In thousands, except per share data)

See accompanying notes to unaudited pro forma consolidated financial statements.

19

HATHAWAY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000

(In thousands, except per share data)

See accompanying notes to unaudited pro forma consolidated financial statements.

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HATHAWAY CORPORATION

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999

(In thousands, except per share data)

See accompanying notes to unaudited pro forma consolidated financial statements.

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HATHAWAY CORPORATION

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

        The accompanying unaudited pro forma consolidated financial statements are presented to reflect the sale of substantially all Hathaway's power and process segment ("the power and process transaction").

        The accompanying unaudited pro forma consolidated balance sheet presents the historical financial information of Hathaway as of March 31, 2002 as adjusted for the power and process transaction as if the transaction had occurred on March 31, 2002.

        The accompanying unaudited pro forma consolidated statements of operations for the nine months ended March 31, 2002 and years ended June 30, 2001, 2000 and 1999 subtract the historical operations of the business to be sold from the historical operations of Hathaway and add pro forma adjustments, as if the power and process transaction had occurred on July 1, 2001, 2000, 1999 and 1998 respectively.

Note 2—Pro Forma Adjustments

        The unaudited pro forma consolidated financial statements reflect the following pro forma adjustments:

(a)

Proceeds from the power and process transaction. These proceeds include $701,000 of proceeds due Hathaway as a result of the increase in the net book value of the business over a pre-determined value as determined at March 31, 2002.

(b)

The assets sold and liabilities assumed by Qualitrol in the power and process transaction. Qualitrol will not acquire the cash and cash equivalents, restricted cash and certain other current assets totaling $13,000 at March 31, 2002. In addition, Qualitrol will not assume certain accrued liabilities totaling $354,000 at March 31, 2002.

(c)

Accrual for estimated costs incurred in the power and process transaction. These costs include legal, investment banking, accounting, severance and other transaction related costs.

(d)

Estimated tax liability on the gain on the power and process transaction, calculated at the statutory rate of 37%.

(e)

Estimated after-tax gain on the power and process transaction.

(f)

Power and process segment revenues and expenses. The expenses exclude corporate allocations and charges, which will not be eliminated. The corporate allocations and charges that were not eliminated are $984,000 for the nine months ended March 31, 2002 and $1,166,000, $1,292,000 and $1,185,000 for the years ended June 30, 2001, 2000 and 1999, respectively.

(g)

The tax effect for all pre-tax pro forma adjustments has been calculated to reflect the pro forma tax provision at anticipated effective tax rates.

Sales Backlog

        Our backlog at March 31, 2002 for the motion control segment consisted of sales orders totaling approximately $9,246,000. This compares to a backlog of $13,044,000 at June 30,2001 and $12,305,000 at June 30, 2000.

Engineering and Development Activities

        Our expenditures on engineering and development for the motion control segment were $622,000 for the nine months ended March 31, 2002, $961,000 in fiscal 2001, and $861,000 in fiscal 2000. Of these expenditures, no material amounts were charged directly to customers.

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Environmental Issues

        No significant pollution or other types of emission result from motion control operations and it is not anticipated that Hathaway's proposed operations will be affected by federal, state or local provisions concerning environmental controls. However, there can be no assurance that any future regulations will not affect our operations.

        Hathaway, with other parties, has been named as a defendant in an environmental contamination lawsuit. We are investigating the nature of the claims, but believe the claims are without merit. Nevertheless, we will remain a party to the action until we can establish our position and be dismissed from the action. Any adverse finding in this matter could have a material adverse impact on our financial position and results of operations.

Employees

        At the end of fiscal 2001, we had approximately 146 full-time employees in the motion control segment.

Properties

        Hathaway leases its administrative offices and manufacturing facilities for the motion control segment as follows:

        We believe the above-described facilities are adequate to meet our current and foreseeable needs. All facilities described above are operating at less than full capacity.

LEGAL PROCEEDINGS

        In addition to the environmental action described under Environmental Issues, Hathaway is involved in certain actions that have arisen out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse affect on Hathaway's consolidated financial position or results of operations.

USE OF PROCEEDS

        Hathaway proposes to use the proceeds from the power and process transaction to increase its investment in the motion control segment and expand its business in that segment. See the caption Motion Control Business Strategy for information concerning our desire to become a "pure play" company. Hathaway has negotiations underway for the acquisition of multiple motion control companies and is aware of other opportunities for acquisitions in the motion control business.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table and notes set forth, as of the Record Date (except for Mr. Albert for whom information is provided as of March 16, 2000), the beneficial ownership, as defined by the regulations of the Securities and Exchange Commission, of Common Stock by each person known to Hathaway to be the beneficial owner of more than 5% of the outstanding shares of Common Stock (based on the records of Hathaway's stock transfer agent or a representation by the beneficial owner), each director and nominee, the executive officer and all persons who serve as executive officers and directors of Hathaway, as a group.

(1)

All beneficial ownership is sole and direct unless otherwise noted.

(2)

No percent of class is shown for holdings of less than 1%.

(3)

Mr. Prince retired as President and Chief Executive Officer on August 31, 1998. Includes 84,500 shares of Common Stock which Mr. Prince has the right to acquire within 60 days of the Record Date upon exercise of options. Includes 88,800 shares of Common Stock held by the Prince Children's Trusts, of which Mr. Prince's wife is trustee and as to which Mr. Prince disclaims beneficial ownership.

(4)

Includes 430,000 shares of Common Stock which Mr. Smith has the right to acquire within 60 days of the Record Date upon exercise of outstanding options and 121,784 shares of Common Stock held by Hathaway's Employee Stock Ownership Plan ("ESOP") as of the Record Date, as to which Mr. Smith could be deemed to have shared investment power as a trustee of the ESOP, which includes 4,575 shares of Common Stock credited to the ESOP account of Mr. Smith. Includes 12,583 shares of Common Stock held by Smith Family Trust, of which Mr. Smith is trustee.

(5)

Based on Schedule 13D filed by Mr. Albert with the Securities and Exchange Commission on or about March 16, 2000; includes 117,600 shares of Common Stock, held by Albert Investment Associates, L.P., as to which Mr. Albert has sole voting and investment power; includes 133,200 shares of Common Stock held by various accounts as to which Mr. Albert has sole investment power.

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(6)

Includes 30,500 shares of Common Stock which Mr. Hock has the right to acquire within 60 days of the Record date upon exercise of outstanding options.

(7)

Consists of 30,500 shares of Common Stock which Mr. Hubbard has the right to acquire within 60 days of the Record Date upon exercise of outstanding options.

(8)

Includes 5,000 shares of Common Stock which Mr. Pilmanis has the right to acquire within 60 days of the Record Date upon exercise of outstanding options.

(9)

Includes 580,500 shares of Common Stock which directors and executive officers have the right to acquire within 60 days of the Record Date upon exercise of outstanding options and 121,784 shares of Common Stock held by the ESOP as to which Mr. Smith has shared investment power as trustee of the ESOP, which includes 4,150 shares of Common Stock held by the ESOP for the account of Mr. Smith.

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MARKET PRICE OF HATHAWAY'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS

        Hathaway Corporation's Common Stock is traded on the Nasdaq Small Cap Market system and trades under the symbol HATH. The number of holders of record of Hathaway's Common Stock as of the close of business on June 17 was 573. Hathaway did not pay or declare any dividends during fiscal years 2001 and 2000 as our long-term financing agreement prohibits us from doing so without prior approval. We have applied and intend to continue to apply any retained and current earnings toward the development of our business and to finance the growth of the motion control business after the power and process transaction. Consequently, we currently do not anticipate paying cash dividends on Common Stock in the foreseeable future.

        The following table sets forth, for the periods indicated, the high and low prices of the Company's common stock on the Nasdaq Small Cap Market system, as reported by Nasdaq.

CHANGES TO STOCK OPTIONS

        Under our 1991 Stock Option Plan as originally written, options were cancelled on the date of termination of services, and under our 2000 Stock Option Plan as originally written, options were cancelled 30 days after the date of termination.

        Because of the decrease in the market value of our Common Stock, some of the options that have been granted are "underwater," which means that the exercise price is greater than the current market price of our stock. In addition, the term of options originally granted was seven years from the date of grant, but that term could be lengthened to as much as 10 years, thereby giving additional time for exercise of options by terminated optionees. The same limitations would apply in the event of termination after a change in control.

        The Board has amended the 1991 Stock Option Plan as it applies to corporate employees and directors to provide that in the event of termination after a change in control for any reason other than cause, as defined, voluntary termination, disability or death, the option expiration date was extended to 10 years after the date of grant, but the options may expire earlier due to termination for cause, as defined, voluntary termination, disability or death in accordance with the Plan. Stock Option Agreements were also amended, but they require the consent of the option holder. Not all consents have been obtained. In the event of termination after a change in control of all directors and corporate office employees, we would be required to record a compensation charge of $221,000 as a result of the amendments.

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        This action affected four employees in the corporate office who had unexercised options totaling 62,900 shares. The action affected options granted to directors as stated below:

        All options held by power and process segment employees will be fully vested when the sale closes, and those employees will be able to exercise options in accordance with the agreements. Options to purchase 445,667 shares of Common Stock are held by power and process employees at exercise prices ranging from $1.13 to $6.72. There will be no compensation charge required to be recorded as a result of the acceleration of the options. As of May 31, 2002, an aggregate of 109,967 such shares were exercisable at prices below the market price of common stock.

SEVERANCE AGREEMENTS

        Hathaway has severance agreements with four key employees of the power and process segment that require it to pay an amount equal to one year base salary plus incentive compensation and other incidental amounts if the employee is terminated under certain circumstances within specified periods following a sale of the assets of their particular employer. The power and process transaction will constitute such a sale, and key employees will be entitled to severance benefits. Three of these key employees will be continued by Qualitrol, and Qualitrol will assume their severance agreements, or the contracts with Hathaway will be canceled and new ones entered into with Qualitrol. The employment of the other employee covered by a serverance agreement will not be continued by Qualitrol. Hathaway will continue to be bound by the severance agreement with him.

HATHAWAY APPOINTS NEW PRESIDENT

        Effective May 1, 2002, Hathaway hired Richard S. Warzala as president. Richard D. Smith will continue as the chief executive officer and chief financial officer, as well as a member of the board of directors. Mr. Warzala has over 20 years experience in the motion control industry. From 2000 to 2001, he was president of the Motion Components Group, a subsidiary of Danaher Corporation. From 1993 to 2000, he was president of API Motion, Inc., a subsidiary of American Precision Industries, Inc., a Delaware corporation.

THE POWER AND PROCESS TRANSACTION PROPOSAL

        This section of the proxy statement describes certain aspects of the sale of substantially all the assets comprising our power and process segment. We recommend that you read carefully the complete Asset Purchase Agreement for the terms of the sale and other information that may be important to you. The Asset Purchase Agreement is included in this proxy statement as Appendix A.

BOARD OF DIRECTORS RECOMMENDATION

        THE BOARD OF DIRECTORS RECOMMENDS TO THE SHAREHOLDERS THAT THE SHAREHOLDERS VOTE "FOR" THE POWER AND PROCESS TRANSACTION PROPOSAL TO SELL SUBSTANTIALLY ALL THE OPERATING ASSETS OF THE POWER AND PROCESS SEGMENT TO QUALITROL FOR A PURCHASE PRICE OF $6,550,000, SUBJECT TO CERTAIN POST-CLOSING ADJUSTMENTS AND THE ASSUMPTION OF CERTAIN OF THE LIABILITIES OF THE POWER AND PROCESS SEGMENT. THE BOARD HAS DETERMINED THAT THE

27

POWER AND PROCESS TRANSACTION PROPOSAL IS IN THE BEST INTERESTS OF THE SHAREHOLDERS.

REASONS FOR THE POWER AND PROCESS TRANSACTION

Introduction

        Today we conduct our operations in two business segments: our power and process segment and the motion control segment. We believe Hathaway currently does not have sufficient access to the capital resources required to restructure our finances to grow both business segments. We further believe that among the available opportunities, selling the power and process segment presents the best opportunity to resolve our current strategic and financial concerns. While the calibration business and equipment of Hathaway Process Instrumentation Corporation are not being sold as a part of the power and process transaction, we intend to sell them.

Factors Considered

        In reaching its determination to approve the sale of the power and process segment, the Board considered, among other factors, (1) management's belief that the sale of the power and process transaction would help provide the remaining business flexibility to expand operations to meet changing demands, and (2) the opinion of Green, Manning & Bunch regarding the fairness, from the financial point of view, of the consideration to be received by Hathaway pursuant to the proposed power and process transaction. See Green, Manning & Bunch Opinion and see Appendix B where that opinion is reprinted in full. The other material positive factors considered by the Board of Directors in reaching this determination are:

        1.    Management's belief that the market price of our Common Stock has been adversely affected by the inability of the market to see us as one company with two different product segments. The market has difficulty in analyzing our power and process business and our motion control business and relate a market price to those two distinct but unrelated products. In the view of management this results in a low price for our Common Stock.

        2.    Management believes it would be desirable to become a "pure play" company and focus our efforts on one industry that is recognizable in the market.

        3.    The power instrumentation and systems automation business is affected by the uncertainties of deregulation and pending rulings by the Federal Energy Regulatory Commission, and will most likely continue to require large investments into the future before becoming profitable. The motion control industry is diverse and is currently suffering the effects of the downturn in the economy resulting in motion control businesses with low valuations.

        4.    The power and process segment has generated operating losses in each of the last five years; whereas the motion control segment has generated operating profits.

        Material negative factors considered by the Board of Directors in reaching its determination are:

        1.    The power and process transaction will result in a significant reduction in the size of our total operations and operating revenues.

        2.    Certain expenses relating to the power and process segment will not be avoided by the sale and will be absorbed by the remaining motion control business.

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BACKGROUND OF THE POWER AND PROCESS TRANSACTION

General

        Hathaway Common Stock is traded on the NASDAQ Small Cap Market under the symbol "HATH." We have long been concerned with the inability of the stock market to reconcile the diverse business segments of Hathaway into a market price for Hathaway Common Stock that reflects the values of these diverse segments. This problem first became apparent during the 1980s when Hathaway was operating its power business, together with an application software business. The two businesses were not related and the price of Hathaway's Common Stock in the market fell well below a price recognizing the relative values of the two business segments.

        The application software business was sold in 1994, but the problem of disparate business segments continued with the development of the motion control segment.

        In 1996, Hathaway purchased its systems automation business, which has been operated by Hathaway Industrial Automation, Inc. The systems automation business is included in the power and process transaction. At about the same time as that acquisition, Hathaway became involved in efforts to reorganize the separate structure of its businesses into distinct subsidiaries and divisions. This applied both to the power and process side of the business as well as the motion control business. This reorganization was undertaken in an effort to consolidate accounting and reporting of the different business operations, with the hope that investors would be better able to analyze the product lines and reflect the different product lines in the market price for Common Stock.

        In April 1997, Hathaway considered the spin-off of its motion control business into a separate corporation which would have its own market for common stock, separate and apart from the power and process business which would remain in Hathaway. A ruling request to the Internal Revenue Service with respect to the proposed spin-off was undertaken in 1997. The ruling request was finalized and filed with the Internal Revenue Service in 1998.

        In 1997 and 1998, Hathaway received inquiries from various corporations with respect to acquiring the company or some of its product lines. In February 1998, Hathaway hired Green Manning & Bunch, Ltd. ("GMB") to review strategic alternatives, with a view to achieving the best value to shareholders. GMB an investment banking firm that was founded in 1988 and is located in Denver, Colorado. GMB provides financial advisory services to its clients with an emphasis on mergers and acquisitions and institutional private placements of debt and equity. GMB was asked to prepare an analysis regarding Hathaway's strategic alternatives to maximize shareholder value. In 1998, GMB reported back to Hathaway and concluded that the equity value of Hathaway, based on the individual business units, was significantly greater than its current stock value, and that Hathaway could not maximize shareholder value with its current structure. GMB recommended that Hathaway sell the power/process/systems business, and focus on the motion control business. GMB recommended that Hathaway not pursue a spinoff of the power/process/systems business, or the motion control business, into a separately traded company because neither of the resulting corporations would be of significant size or would likely qualify to be listed on the NASDAQ national market system, and while the motion control business might be able to obtain financing, the power/process/systems business would not be able to obtain financing because of its history of losses.

        In the meantime, Hathaway continued to receive inquiries from outside parties interested in purchasing either the power and process business, or the motion control business, but at prices which the Hathaway Board felt did not recognize the intrinsic value of either line of business. In April of 1998, the Board authorized continuing discussions with various inquiring companies and asked GMB to serve as our financial advisor to implement their recommendation to sell the power/process/systems business. GMB developed confidential memoranda covering both the power/process/systems business and the motion control business. In early 1999, GMB had completed its valuation of Hathaway, and we

29

were prepared to go forward with a renewed effort to achieve sale of the entire company or of at least one of its product segments. A favorable ruling on the spinoff request was issued by the Internal Revenue Service in December 1998. The ruling required financing for the motion control business to be in place within 30 days after spinoff, and within one year significantly more money would have to be provided to the two businesses than was available to them before the spinoff. These requirements made utilization of the spinoff ruling difficult and impractical.

        The effort to dispose of the power/systems/process business was delayed in 1999 because of promising developments for the systems automation business due to power problems in California. The Board of Directors approved going forward with the sale of the motion control business and authorized GMB to solicit interested parties. By mid 1999, GMB had developed several parties interested in acquiring the motion control business. While efforts to market the power/systems/process business had been delayed, Hathaway continued to consider restructuring the business so it would be in position for a sale if and when negotiations could be resumed. In late 1999, a proposal was received from one party for the purchase of the motion control business, and the Board of Directors authorized discussion toward a negotiated sale. The potential buyer determined not to move forward with negotiations, however, because of its own economic situation. The Board then authorized GMB to pursue other possibilities and determined that the situation in California would now permit the proposal to go forward with the sale of the power/systems/process business. GMB finalized their confidential memorandum for the sale of the power/systems/process business, and requested indications of interest from various parties. By February 2000, GMB had contacted 21 prospective purchasers, but had received no responses indicating an interest. GMB suggested that Hathaway wait a period of 18-24 months and try another marketing effort. Hathaway's involvement with GMB was then terminated.

        At that time, Hathaway engaged Blitzer, Ricketson and Co. ("BRC"), a New York City based investment banking firm, to dispose of the product lines of the process instrumentation business. The reason for the sale of the process instrumentation division was to effect a downsizing of the division to eliminate losses and a furthering of the restructuring operation.

        In mid-2000, one party continued to show an interest in acquiring the motion control segment, but the Board rejected a proposal on the determination that it did not reflect the true value of the segment based on its recent financial results and projection for the future. The Board notified the interested party that the Board would consider further reasonable offers the interested party might present.

        In October 2000, negotiations for the sale of the process instrumentation business were terminated by the interested party because of a change in its business. The Board of Directors then approved restructuring the process instrumentation business and asked BRC to continue with its efforts to effect a sale. At this time, the Board again resolved to continue to evaluate strategies to maximize shareholder value, and authorized management to proceed with efforts to sell parts of the Company. Preliminary negotiations with one party at a purchase price within the range of the current proposal from Qualitrol were terminated when it suffered an economic downturn. By that time discussions had been opened with representatives of Danaher, although another possible purchaser indicated further interests in mid-2001, and proposed a merger to combine its privately held company with Hathaway as a public company. The Board of Directors reviewed the relative values of the two companies as proposed by the offeror and concluded they were not in the best interest of Hathaway shareholders. The president was authorized to tell the offeror their proposal was not acceptable, but to continue negotiations with the intention of developing terms that would be acceptable.

        After study by management and the development of proposals in mid-2001, the Board of Directors approved a proposed roll-up strategy that involved the sale of the power and process segment and expansion of the motion control segment, with the realization this strategy would require significant additional financing. By October 2001, a strategy to complete the roll-up financing was developed. The

30

Board determined that refocusing the systems business to the power industry would take longer than previously anticipated. Historically, the power industry has not quickly embraced new technologies and the uncertainties of deregulation and pending rules by the Federal Energy Regulatory Commission will probably keep the industry in turmoil for many years. The power instrumentation and systems automation business would continue to require investment into the future before becoming profitable. On the other hand, there was significant diversity in the motion control business, as that industry was being adversely affected by the economic downturn. The Board also took into consideration that the power and process segment has generated operating losses during each of the last five years, whereas the motion control segment has generated operating profits. The Board concluded that the recommended roll-up strategy, which involved disposition of the power and process business and expansion of the motion control business, would help investors better understand Hathaway, and would contribute to the "pure play" objective which the board had previously approved. As a part of this strategy, the Board of Directors determined it would be beneficial to Hathaway to proceed with proposals to sell the power and process business, and at the same time acquire a greater investment in the motion control business. By this time Danaher, who is the parent entity of the purchaser in the power and process transaction, submitted an offer to acquire Hathaway. The Board of Directors rejected the Danaher offer because the price per share did not represent an adequate value for the total company, but the Board of Directors encouraged Danaher to reconsider their offer solely as a purchase of the power business. Discussions with other potential buyers were terminated because of loss of interest. Management entered into discussions with other entities for the purchase of additional motion control assets.

        In December 2001, Danaher showed interest in purchasing the power and process business for a cash consideration the Board of Directors thought adequate, and the president was authorized to proceed with negotiations with Danaher to sell the assets of the power and process business to Danaher. Danaher did not include the calibration business in its offer and management was authorized to proceed with efforts to sell the calibration business.

        Negotiations with Danaher for the sale of the power and process segment continued, resulting ultimately in the submission of an Asset Purchase Agreement in February 2002, which resulted in agreement between Hathaway and Qualitrol for the sale of the power and process segment (except the calibration products), which is the subject of the power and process transaction being considered in this proxy statement.

Green Manning & Bunch Opinion

        Effective February 14, 2002, Hathaway retained GMB to provide its Board of Directors with a fairness opinion regarding the financial aspects of the proposed power and process transaction. Specifically, the Company asked GMB to opine on whether the financial aspects of the power and process transaction, considered in their entirety, are fair to the shareholders from a financial point of view. GMB's opinion is intended for the sole use of Hathaway's Board of Directors for the purpose of evaluating the financial aspects of the power and process transaction. Neither GMB's opinion, nor the following discussion, is intended to, nor does it constitute, a recommendation to any holder of Hathaway Common Stock as to whether such holder should vote in favor of the power and process transaction.

        GMB is an investment banking firm that was founded in 1988 and is located in Denver, Colorado. GMB provides financial advisory services to its clients with an emphasis on mergers and acquisitions and institutional private placements of debt and equity.

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        GMB has provided its opinion to Hathaway's Board of Directors that the financial aspects of the power and process transaction are fair to Hathaway from a financial point of view. In rendering this opinion, GMB:

1.

Reviewed the Asset Purchase Agreement, as executed May 17, 2002 between Hathaway and Qualitrol;



2.

Reviewed and analyzed financial information of certain publicly-traded companies that GMB deemed reasonably comparable to the power and process segment;



3.

Reviewed and analyzed financial information of certain change of control business combination transactions that GMB deemed reasonably comparable to the power and process segment;



4.

Conducted an unleveraged post-tax discounted cash flow analysis of projected five-year financial performance of the power and process segment, based on information provided by Hathaway;



5.

Held discussions with certain members of Hathaway's management team;



6.

Considered qualitative factors including, but not limited to, the power and process segment's competitive position, the marketplace in which it operates, its size, and its access to capital;



7.

Conducted such other studies, analyses and investigations and reviewed such other information as GMB considered appropriate for the purposes of its opinion; and



8.

Made qualitative judgments as to the significance and relevance of each such analysis and factor.

        In GMB's review and analysis, and in formulating the valuations, GMB assumed and relied upon the accuracy and completeness of all the financial and other information provided and has not assumed any responsibility for independent verification of, and expresses no opinion as to the accuracy of, any such information. With respect to forward looking financial information, GMB has relied upon the reasonableness and accuracy of the information, and has assumed that such information was reasonably prepared in good faith and on a basis reflecting the best currently available judgments and estimates of Hathaway's management. GMB also assumed that management is unaware of any facts not disclosed to GMB that would make any of the information provided materially incomplete or misleading. GMB has not reviewed any of the books or records of the power and process segment or conducted, or assumed any responsibility for conducting, a physical inspection of the properties or facilities of the power and process segment or for making or obtaining an independent valuation or appraisal of the assets or liabilities of the power and process segment. GMB's valuation is necessarily based on economic and market conditions and other circumstances as they currently exist and can be evaluated by GMB as of the date hereof.

        GMB reviewed the following information, provided by Hathaway if not otherwise noted, in connection with its evaluation of the financial aspects of the power and process transaction:

1.

Financial statements for the power and process segment for the fiscal years ended June 30, 1997 through June 30, 2001;



2.

Financial statements for the power and process segment for the interim periods ended September 30, 2001, December 31, 2001 and March 31, 2002;



3.

Financial estimates and projections prepared by Hathaway's management for the power and process segment for the fiscal years ended June 30, 2002 through June 30, 2004;



4.

Descriptive information on the power and process segment contained on Hathaway's website and in publicly-filed documents;

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5.

Descriptive information on the power and process segment contained in presentation materials;



6.

Information on comparable companies gathered from public sources;



7.

Information on comparable acquisitions gathered from public sources;



8.

New business development summaries relating to the power and process segment from regular board meetings; and



9.

Copies of written correspondence between Hathaway and Danaher Corporation.

A COPY OF THE FULL TEXT OF THE OPINION OF GMB DATED MAY 28, 2002, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX B. THE SUMMARY DISCUSSION THAT FOLLOWS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.

        The following is a summary of the quantitative valuation analyses performed by GMB in connection with the rendering of its opinion. GMB relied upon these analyses, as well as certain other qualitative factors, in opining on whether the financial aspects of the power and process transaction, considered in their entirety, are fair to the shareholders of Hathaway from a financial point of view.

Comparable Company Analysis

        Utilizing its experience in valuing middle market companies and its understanding of the power and process segment's core business, GMB sought to identify a group of comparable companies that, as a whole, it believed reflected the risk, opportunity and business fundamentals that are reasonably similar to the power and process segment. GMB selected the following seven companies for detailed analysis and comparison:

1.

Badger Meter, Inc.



2.

Intelligent Controls, Inc.



3.

Metretek Technologies, Inc.



4.

Powell Industries, Inc.



5.

Sutron Corporation



6.

Technology Research Corporation



7.

Transmation, Inc.

        GMB gathered financial results for the above seven companies from publicly-filed documents. Using this data, in conjunction with current capitalization for each company, GMB calculated a variety of trading multiples, as well as average and median figures, for the entire group. In calculating average and median figures for the group, GMB discarded abnormally high and/or low values that, at its discretion, it determined to be statistical outliers.

        In GMB's view, the size, profitability and liquidity of a company may have an effect on its market value. Larger companies are typically better suited to withstand economic or financial downturns, and may be assigned a valuation premium by the market for this durability. The same may true of profitable companies, as they are typically able to fund their operations internally, or, in the event of a severe downturn, they may be better able to access capital markets due to historical financial performance. Conversely, smaller unprofitable companies are likely to be assigned a market discount. Finally, privately-held companies and divisions of publicly-traded companies are often assigned a

33

valuation discount by the market because their stock and/or assets are less liquid and therefore carry greater risk.

        The power and process segment is similar in size and profitability to the majority of the companies included in the comparable company analysis. However, in GMB's opinion, the assets of the power and process segment are less liquid than the assets and/or stock of the seven companies included in the comparable company analysis. GMB therefore included a 35.0% discount, which GMB believes to be an appropriate liquidity discount in the investment banking industry, in the comparable company analysis.

        GMB calculated median revenue and EBITDA multiples for the seven companies discussed above and applied a 15.0% premium and a 15.0% discount to those multiples to arrive at multiple ranges. GMB applied the respective multiple ranges to the power and process segment's last-twelve-month ("LTM") net sales and Adjusted EBITDA, then averaged the implied value ranges to arrive at an entity value reference range of $9.668—$13.081 million. Finally, GMB discounted both the low and high values of this range by 35.0%, based on the lack of liquidity of the Segment, to arrive at a discounted entity value reference range of $6.284 -$8.502 million.

Hathaway Corporation—Power and Process Segment
Comparable Company Analysis

Valuation Summary

NMF: Not meaningful

(1)

Low multiples represent a 15% discount to median revenue and EBITDA multiples for comparable companies. High multiples represent a 15% premium to median revenue and EBITDA multiples for comparable companies.

(2)

Adjusted EBITDA is defined as EBITDA plus Total Intercompany Expenses (Income). This analysis assumes that a potential buyer would value Hathaway's power and process segment based on a multiple of Adjusted EBITDA, as opposed to EBITDA inclusive of Intercompany Expenses.

(3)

Entity Value Reference Range is calculated as the average of the implied value range based on a revenue multiple and the implied value range based on an Adjusted EBITDA multiple.

(4)

Because the assets of the power and process segment are less liquid than the stock of the publicly-traded companies included in the Comparable Company Analysis, a 35% liquidity discount is applied to the Entity Value Reference Range.

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Comparable Acquisition Analysis

        The comparable acquisition analysis utilizes the financial data of various change of control business combinations in the Power, Process and Systems Automation industries, to the extent information is publicly available, to determine an appropriate valuation range for the power and process segment. GMB sought to identify a group of comparable acquisitions that, as a whole, it believed reflected the same risk, opportunity and business fundamentals as the power and process segment. GMB focused its review on the following 20 acquisitions for which financial data was publicly-available:

        GMB gathered certain operating results and determined both equity and entity values for the above target companies, and then calculated standard valuation multiples for each of the acquisitions in the analysis.

        GMB considered some transactions to be more relevant than others, based on size and profitability. GMB calculated the median revenue and EBITDA multiples for the six most comparable transactions and applied a 15.0% premium and a 15.0% discount to those multiples to arrive at multiple ranges. GMB applied the respective multiple ranges to the power and process segment's LTM net sales and Adjusted EBITDA, then averaged the implied value ranges to arrive at an entity value reference range of $5.328—$7.209 million.

Discounted Cash Flow Analysis

        A discounted cash flow analysis values a business based on its future expected cash flows, discounted at a rate that reflects the estimated risk associated with the company's ability to achieve those cash flows.

35

Hathaway Corporation—Power and Process Segment
Comparable Acquisition Analysis

Valuation Summary

NMF: Not meaningful

(1)

Low multiples represent a 15% discount to median revenue and EBITDA multiples for comparable transactions. High multiples represent a 15% premium to median revenue and EBITDA multiples for comparable transactions.

(2)

Adjusted EBITDA is defined as EBITDA plus Total Intercompany Expenses (Income). This analysis assumes that a potential buyer would value Hathaway's Power and Process Segment based on a multiple of Adjusted EBITDA, as opposed to EBITDA inclusive of Intercompany Expenses.

(3)

Entity Value Reference Range is calculated as the average of the implied value range based on a revenue multiple and the implied value range based on an Adjusted EBITDA multiple.

Hathaway Corporation—Power and Process Segment
Discounted Cash Flow Analysis

Valuation Summary