<PAGE>
Exhibit (a)(1)
Offer to Purchase for Cash
22,250,327 Shares of Common Stock
of
MedQuist Inc.
at
$51.00 Net Per Share
by
Koninklijke Philips Electronics N.V.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JUNE 28, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN 22,250,327 SHARES OF COMMON STOCK, NO PAR VALUE (THE
"SHARES"), OF MEDQUIST INC., A NEW JERSEY CORPORATION ("MEDQUIST"). THE
CONSUMMATION OF THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN
THIS OFFER TO PURCHASE. SEE SECTION 13.
THE OFFER IS BEING MADE PURSUANT TO A TENDER OFFER AGREEMENT, DATED AS OF
MAY 22, 2000 (THE "TENDER OFFER AGREEMENT"), BETWEEN KONINKLIJKE PHILIPS
ELECTRONICS N.V. AND MEDQUIST. AT A MEETING HELD ON MAY 21, 2000, THE BOARD OF
DIRECTORS OF MEDQUIST UNANIMOUSLY DETERMINED THAT THE TERMS OF THE OFFER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF MEDQUIST, AND
APPROVED THE TENDER OFFER AGREEMENT AND THE OTHER AGREEMENTS DESCRIBED IN THIS
OFFER TO PURCHASE. THE BOARD OF DIRECTORS RECOMMENDS THAT MEDQUIST'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should (1) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal,
including any required signature guarantees, and mail or deliver the Letter of
Transmittal or such facsimile with such shareholder's certificate(s) for the
tendered Shares and any other required documents to the Depositary named
herein, (2) follow the procedure for book-entry transfer of Shares set forth in
Section 3 or (3) request such shareholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such shareholder.
Shareholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to
tender Shares so registered.
A shareholder of MedQuist who desires to tender Shares and whose
certificates for such Shares are not immediately available, or who cannot
comply with the procedure for Book-Entry Transfer on a timely basis, may tender
such Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other tender offer materials may be directed to the
Information Agent or the Dealer Manager. Shareholders may also contact their
broker, dealer, commercial bank, trust company or other nominee.
The Dealer Manager for the Offer is:
Goldman, Sachs & Co.
<PAGE>
SUMMARY TERM SHEET
This summary highlights important and material information from this Offer
to Purchase but does not purport to be complete. To fully understand the offer
described in this document and for a more complete description of the terms of
the offer described in this document, you should read carefully this entire
Offer to Purchase and the Letter of Transmittal (which together, as they may be
amended and supplemented, constitute the "Offer"). We have included section
references to direct you to a more complete description of the topics contained
in this summary.
. WHO IS OFFERING TO BUY MY SECURITIES?
Koninklijke Philips Electronics N.V. ("Royal Philips"), is offering to buy
your Shares as described in this document. See Section 9 of this document
for further information about Royal Philips.
. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
Royal Philips is offering to buy 22,250,327 Shares, which constitutes
approximately 57% of the fully diluted Shares. For information about the
conditions to which the Offer is subject, see Section 13.
. HOW MUCH IS ROYAL PHILIPS OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
Royal Philips is offering to pay $51.00 in cash for each Share that it is
offering to purchase. See Section 1 for information about the terms of the
Offer.
. DOES ROYAL PHILIPS HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Yes. Royal Philips presently intends to finance the Offer with its cash
position and cash flow from existing businesses.
. ARE ROYAL PHILIPS' FINANCIAL RESULTS RELEVANT TO MY DECISION AS TO WHETHER
TO TENDER IN THE OFFER?
Since the Offer is for cash and is not subject to any financing condition,
Royal Philips' financial results should not be relevant to your decision on
whether to tender your Shares in the Offer.
. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES?
You may tender your Shares into the Offer until 12:00 midnight, New York
City time, on Wednesday, June 28, 2000, which is the scheduled expiration
date of the offering period, unless Royal Philips decides to extend the
offering period. See Section 3 of this document for information about
tendering your Shares.
. CAN THE OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
Yes, Royal Philips may elect to extend the Offer from time to time for a
period not longer than 20 business days in the aggregate if, at the
initially scheduled expiration date of the Offer any of the conditions to
the Offer are not satisfied. See Section 1 of this document for information
about extension of the Offer.
. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
Royal Philips will announce by press release any extension of the Offer no
later than 9:00 a.m., New York City time, on the next day after the
previously scheduled expiration date. See Section 1 of this document for
more information about extension of the Offer.
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. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
The Offer is conditioned upon, among other things, at least 22,250,327
Shares, which constitutes approximately 57% of the fully diluted Shares,
being validly tendered and not withdrawn. For a complete description of all
of the conditions to which the Offer is subject, see Section 13.
. HOW DO I TENDER MY SHARES?
If you hold the certificates for your Shares, you should complete the
enclosed Letter of Transmittal and enclose all the documents required by
it, including your certificates, and send them to the American Stock
Transfer & Trust Company (the "Depositary") at the address listed on the
back cover of this document. If your broker holds your Shares for you in
"street name" you must instruct your broker to tender your Shares on your
behalf. In any case, the Depositary must receive all required documents
prior to 12:00 midnight, New York City time, on Wednesday, June 28, 2000,
which is the expiration date of the Offer, unless Royal Philips decides to
extend the Offer. If you cannot comply with any of these procedures, you
still may be able to tender your Shares by using the guaranteed delivery
procedures described in this document. See Section 3 for more information
on the procedures for tendering your Shares.
. UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
The tender of your Shares may be withdrawn at any time prior to the
expiration date of the offering period. In addition, if Royal Philips has
not agreed to accept your Shares for payment by Sunday, July 30, 2000, you
can withdraw them at any time after that date until Royal Philips accepts
Shares for payment. See Section 4 of this document for more information.
. HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
You (or your broker or bank if your Shares were held in "street name") must
notify the Depositary at the address and telephone number listed on the
back cover of this document, and your notice must include, among other
things, the name of the shareholder that tendered the Shares, the number of
Shares to be withdrawn and the name in which the tendered Shares are
registered. For complete information about the procedures for withdrawing
your previously tendered Shares, see Section 4.
. WHAT HAPPENS IF MORE THAN 22,250,327 SHARES ARE TENDERED?
Royal Philips is offering to purchase 22,250,327 Shares. If more than
22,250,327 Shares are properly tendered and not withdrawn at the expiration
of the Offer, Royal Philips will purchase Shares on a pro rata basis. This
means that Royal Philips will purchase from each tendering shareholder a
number of Shares equal to the number of Shares properly tendered and not
withdrawn by such shareholder multiplied by a proration factor. The
proration factor is equal to the number of shares Royal Philips is offering
to purchase divided by the total number of Shares properly tendered and not
withdrawn by all shareholders. See Section 2 for more information.
. WHEN WILL I KNOW HOW MANY OF MY SHARES WERE ACCEPTED FOR PAYMENT?
Because of the difficulty of determining the number of Shares properly
tendered and not withdrawn, Royal Philips does not expect that it will be
able to announce the final proration factor or commence payment for any
Shares purchased pursuant to the Offer until approximately four trading
days after the end of the offering period. The preliminary results of any
proration will be announced by press release as promptly as practicable
after the time Royal Philips accepts Shares for payment pursuant to the
Offer. Shareholders may obtain such preliminary information from the
Information Agent and may be able to obtain such information from their
brokers. See Section 2 for more information.
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. WHAT HAPPENS TO THE SHARES THAT ARE NOT ACCEPTED FOR PURCHASE?
If any tendered Shares are not accepted for payment for any reason, the
certificates for such unpurchased Shares will be returned, without expense,
to the tendering shareholder, or such other person as the tendering
shareholder specifies in the Letter of Transmittal. This includes any
Shares not accepted for payment as a result of proration. See Section 2 for
more information.
. WHAT DOES MY BOARD OF DIRECTORS THINK OF THE OFFER?
At a meeting held on May 21, 2000, the board of directors of MedQuist
unanimously determined that the terms of the Offer are fair to, and in the
best interests of, the shareholders of MedQuist, and approved the Tender
Offer Agreement and the other agreements described in this Offer to
Purchase. The board of directors recommends that MedQuist's shareholders
accept the Offer and tender their Shares in the Offer.
. WILL MEDQUIST REMAIN A PUBLIC COMPANY AFTER THE OFFER?
Yes, after the Offer, MedQuist will remain a public company whose common
stock will continue to trade on the Nasdaq Stock Market. Royal Philips will
own approximately 60% of MedQuist's fully diluted Shares. Royal Philips has
entered into a "Governance Agreement" with MedQuist (which will become
effective at the time Royal Philips purchases Shares pursuant to the Offer)
with respect to its Share ownership. See Section 11 for a more complete
description of the terms of the Governance Agreement.
. HAS MEDQUIST ENTERED INTO ANY OTHER AGREEMENTS IN CONNECTION WITH THE OFFER?
MedQuist and a subsidiary of Royal Philips have entered into a Licensing
Agreement pursuant to which, among other things, MedQuist will be granted a
license to use certain speech recognition technology in connection with its
business. MedQuist has also entered into a Governance Agreement with Royal
Philips and new employment agreements with seven members of its senior
management. See Section 11 for a more complete description of the terms of
the Licensing Agreement, the Governance Agreement and the employment
agreements.
. WILL MEDQUIST'S MANAGEMENT PARTICIPATE IN THE OFFER?
Royal Philips has entered into agreements with a number of the members of
MedQuist's senior management. These agreements provide that if Royal
Philips purchases Shares pursuant to the Offer, then promptly after the
Offer expires, Royal Philips will purchase from these individuals an
additional 1,149,759 Shares in the aggregate, which amount represents
approximately 3% of MedQuist's outstanding fully diluted Shares, and
approximately 37% of those individuals' combined holdings. These agreements
also provide that until May 22, 2002, these individuals will not sell or
dispose of any Shares or options they owned on the date of the agreement,
any Shares acquired pursuant to options they held on the date of the
agreement, or any options or Shares acquired pursuant to an option grant
declared by the Compensation Committee of MedQuist's board of directors on
May 21, 2000. See Section 11 for more information.
. IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If fewer than 22,250,327 Shares are validly tendered and not withdrawn in
the Offer, then Royal Philips is not obligated to purchase Shares pursuant
to the Offer and may terminate the Offer, in which case Shares will remain
outstanding and continue to be traded on the Nasdaq Stock Market.
If more than 22,250,327 Shares are validly tendered and not withdrawn in
the Offer, and all the other conditions to the Offer are satisfied or
waived by Royal Philips, Royal Philips will purchase 22,250,327 Shares
pursuant to the terms and conditions of the Offer.
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The purchase of the Shares by Royal Philips will reduce the number of the
Shares that might otherwise trade publicly and may reduce the number of
holders of the Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by the public. In addition, Royal
Philips will own a majority of MedQuist's Shares and will have the right to
control MedQuist, subject to the terms of the Governance Agreement. See
Section 7 of this document for additional information about the effect of
the Offer on your Shares and Section 11 for a discussion of the Governance
Agreement.
. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On May 22, 2000, the last full trading day prior to the public announcement
of the Offer, the reported closing price of the common stock on the Nasdaq
Stock Market was $39.125 per Share. On May 31, 2000, the last full trading
day for which prices were available before the commencement of the Offer,
the reported closing price of the common stock on the Nasdaq Stock Market
was $41.375 per Share. You should obtain a recent market quotation for your
Shares in deciding whether to tender them. See Section 6 of this document
for recent high and low sales prices for the Shares.
. WHO IS RESPONSIBLE FOR THE PAYMENT OF TAXES AND BROKERAGE FEES?
Shareholders of record who tender Shares directly will not be obligated to
pay brokerage fees or commissions or, except as set forth in Instruction 6
of the Letter of Transmittal, stock transfer taxes on the purchase of the
Shares by Royal Philips pursuant to the Offer. However, any tendering
shareholder or other payee who fails to complete and sign the Substitute
Form W-9 included in the Letter of Transmittal may be subject to backup
federal income tax withholding of 31% of the gross proceeds payable to such
shareholder or other payee pursuant to the Offer. See Section 3 for more
information. Shareholders who hold their Shares through a broker, dealer,
commercial bank, trust company or other nominee should check with such
institution as to whether they charge any service fees.
. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
If you have any questions you can call the Dealer Manager, Goldman, Sachs &
Co. at (800) 323-5678, or the Information Agent, Morrow & Co., Inc. at
(800) 566-9061. See the back cover of this Offer to Purchase.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<C> <S> <C>
SUMMARY TERM SHEET....................................................... i
INTRODUCTION............................................................. 1
1. Terms of the Offer.............................................. 2
2. Acceptance for Payment, Proration and Payment for the Shares.... 3
3. Procedure for Tendering Shares.................................. 4
4. Rights of Withdrawal............................................ 7
5. Certain Federal Income Tax Consequences of the Offer............ 8
6. Price Range of the Shares....................................... 8
7. Effect of the Offer on the Market for the Shares................ 9
8. Certain Information Concerning MedQuist......................... 9
9. Certain Information Concerning Royal Philips.................... 11
10. Background of the Offer; Contacts with MedQuist................. 12
11. Purpose of the Offer; Plans for MedQuist; The Tender Offer
Agreement; The Shareholder Agreements; The Licensing
Agreement; The Governance Agreement; The Employment
Agreements................................................... 14
12. Source and Amount of Funds...................................... 26
13. Certain Conditions of the Offer................................. 26
14. Dividends and Distributions..................................... 28
15. Certain Legal Matters........................................... 28
16. Fees and Expenses............................................... 29
17. Miscellaneous................................................... 30
Schedule A Information Concerning the Directors and Executive Officers of
Royal Philips........................................................... A-1
</TABLE>
v
<PAGE>
To the Holders of the Shares of MedQuist Inc.:
INTRODUCTION
Koninklijke Philips Electronics N.V., a company incorporated under the laws
of the Netherlands ("Royal Philips"), hereby offers to purchase 22,250,327
shares of common stock, no par value (the "Shares"), of MedQuist Inc., a New
Jersey corporation ("MedQuist"), which constitutes approximately 57% of the
fully diluted Shares, at $51.00 per Share, net to the seller in cash (the
"Share Price"), upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, as they may
be amended and supplemented from time to time, together constitute the
"Offer"). Tendering shareholders who are record holders of their Shares and
tender directly to the American Stock Transfer & Trust Company (the
"Depositary") will not be obligated to pay brokerage fees or commissions or,
subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes on
the purchase of the Shares by Royal Philips pursuant to the Offer. Shareholders
who hold their Shares through a broker, dealer, commercial bank, trust company
or other nominee should consult such institution as to whether it charges any
service fees in connection with the tender of Shares into the Offer on behalf
of its clients. Royal Philips will pay all charges and expenses of Goldman,
Sachs & Co., as dealer manager ("Dealer Manager"), and of the Depositary and
Morrow & Co., Inc. (the "Information Agent").
At a meeting held on May 21, 2000, the board of directors of MedQuist
unanimously determined that the terms of the Offer are fair to, and in the best
interests of, the shareholders of MedQuist, and approved the Tender Offer
Agreement, dated May 22, 2000, between Royal Philips and MedQuist (the "Tender
Offer Agreement") and the other agreements described in this Offer to Purchase.
The board of directors recommends that MedQuist's shareholders accept the Offer
and tender their Shares in the Offer.
UBS Warburg LLC ("UBS Warburg"), financial advisor to MedQuist, has
delivered to the board of directors of MedQuist a written opinion, dated May
22, 2000, to the effect that, as of such date and based upon and subject to
certain matters described therein, the $51.00 per Share cash consideration to
be received in the Offer (or pursuant to the Shareholder Agreements, as defined
herein) by holders of Shares was fair, from a financial point of view, to such
holders (other than Royal Philips and its affiliates). A copy of UBS Warburg's
opinion, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken, is attached as an exhibit
to MedQuist's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which has been filed by MedQuist with the Securities and
Exchange Commission (the "SEC") in connection with the Offer and which is being
mailed to shareholders herewith. Shareholders are urged to, and should, read
UBS Warburg's opinion carefully and in its entirety.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn at least 22,250,327 Shares, which constitutes
approximately 57% of the fully diluted Shares, and the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, having expired or been terminated. The Offer is also subject to the
other conditions set forth in this Offer to Purchase. See Section 13.
According to MedQuist, as of May 19, 2000 there were 35,452,704 Shares
outstanding and there were 3,547,439 Shares reserved for issuance under
MedQuist's stock option and incentive plans.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND THEY SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1
<PAGE>
1. Terms of the Offer.
Upon the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 13 (the "Offer
Conditions") and, if the Offer is extended or amended, the terms and conditions
of such extension or amendment), Royal Philips will accept for payment, and pay
for, 22,250,327 Shares validly tendered and not withdrawn as permitted by
Section 4, on or prior to the Expiration Date (as defined herein). If more than
22,250,327 Shares are validly tendered and not withdrawn at the Expiration Date
of the Offer, Royal Philips will purchase Shares on a pro rata basis from all
tendering shareholders as explained herein. The term "Expiration Date" means
12:00 midnight, New York City time, on Wednesday, June 28, 2000, unless and
until Royal Philips extends the period for which the Offer is open, in which
event the term "Expiration Date" means the latest time and date on which the
Offer, as so extended by Royal Philips, expires. The period from the date
hereof until 12:00 midnight, New York City time, on Wednesday, June 28, 2000,
as such period may be extended, is referred to as the "Offering Period." The
condition that there be validly tendered and not withdrawn at least 22,250,327
Shares is referred to as the "Tender Offer Condition."
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Subject to the applicable regulations of the SEC, Royal Philips expressly
reserves the right, in its sole discretion, to waive, set forth or change any
term and condition of the Offer; provided, that, unless previously approved by
MedQuist in writing, no provision may be set forth or changed which: (i)
increases or, except as set forth in the next succeeding sentence, decreases
the Tender Offer Condition; (ii) decreases the price per Share to be paid in
the Offer; (iii) changes the form of consideration payable in the Offer (other
than by adding consideration); (iv) imposes additional conditions to the Offer
other than those set forth in the Tender Offer Agreement; or (v) amends or
modifies any term or condition of the Offer in a manner adverse to the holders
of Shares. Without the prior written consent of MedQuist, Royal Philips may not
extend the expiration date of the Offer beyond the initial expiration date of
the Offer; provided, that, if on the initially scheduled expiration date of the
Offer (or any subsequent expiration date) any of the conditions to the Offer
have not been satisfied, Royal Philips may in its sole discretion extend from
time to time the Offer for up to and including an additional twenty (20)
business days in the aggregate after the initial expiration date of the Offer,
and may in its sole discretion, in connection with any such extension, amend
the terms of the Offer, but only to reduce the Tender Offer Condition to any
number of Shares greater than 20,300,320 Shares, it being understood that if
Royal Philips accepts for payment any Shares validly tendered and not withdrawn
pursuant to the Offer, it will accept for payment all such Shares up to the
Tender Offer Condition (i.e., 22,250,327 Shares). During any such extension of
the Offering Period, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the right of a tendering shareholder to
withdraw such shareholder's Shares. See Section 4.
Any extension, delay, termination or amendment of the Offer will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(d), 14d-6(c) and 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
require that any material change in the information published, sent or given to
shareholders in connection with the Offer be promptly disseminated to
shareholders in a manner reasonably designed to inform shareholders of such
change) and without limiting the manner in which Royal Philips may choose to
make any public announcement, Royal Philips will have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release or other public announcement.
Royal Philips will not provide a subsequent offering period, as provided for
in Rule 14d-11 under the Exchange Act.
Royal Philips confirms that if it makes a material change in the terms of
the Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, Royal Philips will extend the Offer to the extent
required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act.
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If, during the Offering Period, Royal Philips decreases the number of Shares
sought pursuant to the Offer (which may be done as explained above) or the
Share Price (which may be done only if previously approved by MedQuist in
writing), such decrease will be applicable to all holders whose Shares are
accepted for payment pursuant to the Offer and, if at the time notice of any
decrease is first published, sent or given to holders of such Shares, the Offer
is scheduled to expire at any time earlier than the tenth business day from and
including the date that such notice is first so published, sent or given, the
Offer will be extended until the expiration of such ten-business day period.
Consummation of the Offer is also conditioned upon expiration or termination
of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations thereunder (the "HSR Act"), and
the other conditions set forth in Section 13. With respect to antitrust
compliance, see Section 15. Royal Philips reserves the right but is not
obligated, in accordance with applicable rules and regulations of the SEC, to
waive any or all of those conditions. If, by the Expiration Date, any or all of
those conditions have not been satisfied, Royal Philips may, prior to the
Expiration Date, in its sole discretion, elect to: (i) extend the Offer from
time to time for up to and including an additional twenty (20) business days in
the aggregate and, subject to applicable withdrawal rights, retain all tendered
Shares until the expiration of the Offer, as extended, subject to the terms of
the Offer; (ii) waive all of the unsatisfied conditions (other than antitrust
approval which may not be waived, and the Tender Offer Condition, which may be
amended only as described above) and, subject to complying with applicable
rules and regulations of the SEC, accept for payment 22,250,327 Shares so
tendered, subject to the pro rata provisions; or (iii) terminate the Offer and
not accept for payment any Shares and return all tendered Shares to tendering
shareholders. In the event that Royal Philips waives any condition set forth in
Section 13, the SEC may, if the waiver is deemed to constitute a material
change to the information previously provided to the shareholders, require that
the Offer remain open for an additional period of time and/or that Royal
Philips disseminate information concerning such waiver.
MedQuist has provided Royal Philips with MedQuist's shareholder lists and
security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed by Royal Philips to
record holders of the Shares and will be furnished by Royal Philips to brokers,
dealers, banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the shareholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of the Shares.
2. Acceptance for Payment, Proration and Payment for the Shares.
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Royal Philips will accept for
payment, and will pay for, 22,250,327 Shares. If more than 22,250,327 Shares
are validly tendered and not withdrawn, Royal Philips will accept for purchase
an amount of the tendered Shares equal to 22,250,327 Shares, on a pro rata
basis from each shareholder who has validly tendered Shares pursuant to the
Offer, promptly after the Expiration Date. Subject to compliance with Rule 14e-
1(c) under the Exchange Act, Royal Philips expressly reserves the right to
delay payment for Shares in order to comply in whole or in part with any
applicable law. See Sections 1 and 15.
In the event that proration of tendered Shares is required, Royal Philips
will determine the appropriate proration factor as soon as practicable
following the Expiration Date. Proration for each shareholder tendering Shares
will be based on the ratio of the number of Shares Royal Philips is offering to
purchase to the total number of Shares properly tendered and not withdrawn by
all shareholders (with adjustments to avoid purchases of fractional shares).
Because of the difficulty in determining the number of Shares properly tendered
(including Shares tendered by guaranteed delivery procedures described in
Section 3 below) and not withdrawn, Royal Philips does not expect that it will
be able to announce the final proration factor or commence payment for any
Shares purchased pursuant to the Offer until approximately four trading days
after
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the Expiration Date. The preliminary results of any proration will be announced
by press release as promptly as practicable after the Expiration Date.
Shareholders may obtain such preliminary information from the Information Agent
and from their brokers. In the event of any proration, the Depositary will
select certain identifiable Shares for payment from the total Shares properly
tendered and not withdrawn by a shareholder in accordance with such
shareholder's directions, if any, as set forth in such shareholder's Letter of
Transmittal.
For purposes of the Offer, Royal Philips will be deemed to have accepted for
payment the Shares validly tendered and not withdrawn, if and when Royal
Philips gives oral or written notice to the Depositary of its acceptance for
payment of such Shares pursuant to the Offer. As noted, if more than 22,250,327
Shares are validly tendered and not withdrawn at the Expiration Date of the
Offer, Royal Philips will accept for purchase Shares on a pro rata basis.
Payment for any Shares accepted for payment pursuant to the Offer will be made
by deposit of the purchase price therefor with the Depositary, which will act
as agent for the tendering shareholders for the purpose of receiving payments
from Royal Philips and transmitting such payments to the tendering
shareholders. In all cases, payment for any Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as
defined below) with respect thereto), (ii) the Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in the case of a Book-Entry Transfer, an
Agent's Message (as defined below) in lieu of a Letter of Transmittal and (iii)
any other documents required by the Letter of Transmittal. Accordingly, payment
may be made to tendering shareholders at different times if delivery of the
certificates and other required documents occur at different times. The price
paid to any holder of the Shares pursuant to the Offer will be the highest
price per Share paid to any other holder of such Shares pursuant to the Offer.
Under no circumstances will interest on the consideration to be paid for the
Shares be paid, regardless of any extension of the Offer or any delay in making
such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, including as a result of proration,
or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased Shares will be returned, without expense, to
the tendering shareholder, or such other person as the tendering shareholder
specifies in the Letter of Transmittal, as promptly as practicable following
the expiration or termination of the Offer. In the case of any Shares delivered
by Book-Entry Transfer into the Depositary's account at the Book-Entry Transfer
Facility (as defined below) pursuant to the procedures set forth in Section 3,
such Shares will be credited to such account maintained at the Book-Entry
Transfer Facility as the tendering shareholder specifies in the Letter of
Transmittal, as promptly as practicable following the expiration or termination
of the Offer. If no such instructions are given with respect to any Shares
delivered by Book-Entry Transfer, any such Shares not tendered or not purchased
will be returned by crediting the account at the Book-Entry Transfer Facility
designated in the Letter of Transmittal as the account from which such Shares
were delivered.
Royal Philips reserves the right to transfer or assign in whole or in part
from time to time to one or more of its direct or indirect subsidiaries the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Royal Philips of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for any Shares validly tendered and
accepted for payment pursuant to the Offer.
3. Procedure for Tendering Shares.
Valid Tender. To tender Shares pursuant to the Offer, either (i) a Letter of
Transmittal (or a manually signed facsimile thereof) properly completed and
duly executed in accordance with the instructions of the Letter of Transmittal,
together with any required signature guarantees and certificates for the Shares
to be tendered, or, in the case of a Book-Entry Transfer, an Agent's Message
(in lieu of a Letter of Transmittal), and any other required documents must be
received by the Depositary prior to the Expiration Date, at one of its
addresses set forth on the back cover of this Offer to Purchase or (ii) the
tendering shareholder must comply with the guaranteed delivery procedures set
forth below.
4
<PAGE>
Book-Entry Delivery. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility")
for purposes of the Offer within two business days after the date of this Offer
to Purchase. Any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make Book-Entry Transfer of the Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of the Shares may be
effected through Book-Entry Transfer, either a Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must, in any
case, be transmitted to and received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase by the Expiration Date,
or the tendering shareholder must comply with the guaranteed delivery
procedures described below. The confirmation of a Book-Entry Transfer of the
Shares into the Depositary's account at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation." The term
"Agent's Message" means a message transmitted by the Book-Entry Transfer
Facility to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received
an express acknowledgment from the participant in the Book-Entry Transfer
Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Royal Philips may enforce such
agreement against the participant. Delivery of documents to the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures does not constitute delivery to the Depositary.
The method of delivery of any Shares, the Letter of Transmittal and all
other required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering shareholder. Shares will
be deemed delivered only when actually received by the Depositary (including,
in the case of a Book-Entry Transfer, by Book-Entry Confirmation). If delivery
is by mail, it is recommended that the shareholder use properly insured
registered mail with return receipt requested. In all cases, sufficient time
should be allowed to ensure timely delivery.
Signature Guarantees. Except as otherwise provided below, all signatures on
a Letter of Transmittal must be guaranteed by a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed (i) if the Letter
of Transmittal is signed by the registered holder (which term, for purposes of
this section, includes any participant in the Book-Entry Transfer Facility's
systems whose name appears on a security position listing as the owner of the
Shares) of the Shares tendered therewith and such registered holder has not
completed the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) if such
Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal. If the certificates for any
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for any
Shares not tendered or not accepted for payment, including as a result of
proration, are to be returned to a person other than the registered holder of
the certificates surrendered, then the tendered certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. A shareholder who desires to tender Shares pursuant to
the Offer and whose certificates for any Shares are not immediately available
or who cannot comply with the procedure for Book-Entry Transfer on a timely
basis, or who cannot deliver all required documents to the Depositary prior to
the Expiration Date, may tender such Shares by following all of the procedures
set forth below:
(i) such tender is made by or through an Eligible Institution;
5
<PAGE>
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Royal Philips, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with any required signature
guarantees (or, in the case of a Book-Entry Transfer, an Agent's Message in
lieu of the Letter of Transmittal), and any other required documents, are
received by the Depositary within three business days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Other Requirements. Notwithstanding any provision of this document, payment
for the Shares accepted for payment pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of the instruments and
documents referred to in Section 2.
Tender Constitutes an Agreement. The valid tender of any Shares pursuant to
one of the procedures described above will constitute a binding agreement
between the tendering shareholder and Royal Philips upon the terms and subject
to the conditions of the Offer, including the right to withdraw such Shares as
described in Section 4.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering shareholder will irrevocably appoint designees of Royal Philips as
such shareholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Royal Philips and with respect to any
and all non-cash dividends, distributions, rights, and other shares of common
stock or other securities issued or issuable in respect of such Shares on or
after May 22, 2000 (collectively, "Distributions"). All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Royal Philips deposits the
payment for such Shares with the Depositary. All such powers of attorney and
proxies will be irrevocable and will be deemed granted in consideration of the
acceptance for payment by Royal Philips of the Shares tendered in accordance
with the terms of the Offer. Upon the effectiveness of such appointment, all
prior powers of attorney, proxies and consents given by such shareholder will
be revoked, and no subsequent powers of attorney, proxies and consents may be
given (and, if given, will not be deemed effective). Royal Philips' designees
will be empowered to exercise all voting and other rights of such shareholder
with respect to such Shares (and any and all Distributions) as they, in their
sole discretion, may deem proper at any annual, special or adjourned meeting of
the shareholders of MedQuist, actions by written consent in lieu of any such
meeting or otherwise. Royal Philips reserves the right to require that, in
order for any Shares to be deemed validly tendered, immediately upon Royal
Philips' depositing the payment for such Shares with the Depositary, Royal
Philips must be able to exercise full voting, consent and other rights with
respect to such Shares (and any and all Distributions).
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of the
Shares will be determined by Royal Philips in its sole discretion, which
determination will be final and binding. Royal Philips reserves the absolute
right to reject any and all tenders determined by it not to be in proper form
or the acceptance for payment of or payment for which may, in the opinion of
Royal Philips' counsel, be unlawful. Royal Philips also reserves the absolute
right to waive any defect or irregularity in the tender of any Shares of any
particular shareholder whether or not similar defects or irregularities are
waived in the case of other shareholders. No tender of any Shares will be
deemed to have been validly made until all defects and irregularities relating
thereto have been cured or waived. None of Royal
6
<PAGE>
Philips, the Depositary, the Information Agent, the Dealer Manager or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Royal Philips' interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and Instructions thereto) will be
final and binding.
Backup Withholding. In order to avoid "backup withholding" of federal income
tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such shareholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalty of perjury that such TIN is
correct and that such shareholder is not subject to backup withholding. If a
shareholder does not provide such shareholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS")
may impose a penalty on such shareholder and payment of cash to such
shareholder pursuant to the Offer may be subject to backup withholding of 31%.
All shareholders surrendering Shares pursuant to the Offer should complete and
sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding (unless an applicable exemption exists
and is proved in a manner satisfactory to Royal Philips and the Depositary).
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. Non-
corporate foreign shareholders should complete and sign the main signature form
and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. See "Important Tax
Information" in the Letter of Transmittal.
4. Rights of Withdrawal.
Tenders of the Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
expiration of the Offering Period and, unless theretofore accepted for payment
by Royal Philips pursuant to the Offer, may also be withdrawn at any time after
Sunday, July 30, 2000.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of the Shares to be withdrawn and the
names in which the certificate(s) evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for Book-Entry Transfer as set forth in Section 3, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares. If certificates for the
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, the name of the registered holder and the serial numbers of the
particular certificates evidencing the Shares to be withdrawn must also be
furnished to the Depositary as aforesaid prior to the physical release of such
certificates. All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by Royal Philips, in
its sole discretion, which determination will be final and binding. None of
Royal Philips, the Dealer Manager, the Depositary, the Information Agent, or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give such notification. Withdrawals of tendered Shares may not be rescinded,
and any Shares properly withdrawn will be deemed not to have been validly
tendered for purposes of the Offer. However, withdrawn Shares may be retendered
by following any one of the procedures described in Section 3 at any time prior
to the Expiration Date.
If Royal Philips extends the Offer, is delayed in its acceptance for payment
of any Shares, or is unable to accept for payment any Shares pursuant to the
Offer for any reason, then, without prejudice to Royal Philips'
7
<PAGE>
rights under this Offer, the Depositary may, nevertheless, on behalf of Royal
Philips, retain tendered Shares, but such Shares may be withdrawn to the extent
that tendering shareholders are entitled to withdrawal rights as set forth in
this Section 4.
5. Certain Federal Income Tax Consequences of the Offer.
Sales of the Shares pursuant to the Offer will be taxable transactions for
federal income tax purposes and may also be taxable under applicable state,
local and other tax laws. The consequences of the receipt of cash in exchange
for Shares pursuant to the Offer may vary depending on the particular
circumstances of a shareholder. For federal income tax purposes, a shareholder
whose Shares are purchased pursuant to the Offer will realize gain or loss
equal to the difference between the adjusted basis of the Shares sold and the
amount of cash received therefor. Such gain or loss will be capital gain or
loss if the Shares are held as capital assets by the shareholder and will be
long-term capital gain or loss if the shareholder's holding period in the
Shares for federal income tax purposes is more than one year at the time the
Shares are accepted for payment. Long-term capital gain of a non-corporate
shareholder is generally subject to a maximum tax rate of 20%. A shareholder's
ability to use capital losses to offset ordinary income is limited.
The income tax discussion set forth above is included for general
information only and may not be applicable to shareholders in special
situations such as shareholders who received their Shares upon the exercise of
stock options or otherwise as compensation and shareholders who are not United
States persons. Shareholders should consult their own tax advisors with respect
to the specific tax consequences to them, in their particular circumstances, of
the Offer, including the application and effect of federal, state, local,
foreign or other tax laws.
6. Price Range of the Shares.
The Shares are listed on the Nasdaq Stock Market under the symbol "MEDQ".
The following table sets forth, for the calendar quarters indicated, the high
and low reported prices for the Shares on the Nasdaq Stock Market based on
public sources:
<TABLE>
<CAPTION>
Sales Price
-------------
High Low
------ ------
<S> <C> <C>
Calendar Year
1998:
First Quarter............................................. $19.56 $15.00
Second Quarter............................................ 29.38 17.63
Third Quarter............................................. 33.00 20.50
Fourth Quarter............................................ 40.00 21.75
1999:
First Quarter............................................. 38.69 27.69
Second Quarter............................................ 43.75 26.69
Third Quarter............................................. 45.75 30.00
Fourth Quarter............................................ 37.06 24.75
2000:
First Quarter............................................. 29.75 16.87
Second Quarter (through May 31, 2000)..................... 45.87 27.06
</TABLE>
The above noted prices reflect a three-for-two stock split effected on June
15, 1998. On May 22, 2000, the last full trading day prior to the public
announcement of the terms of the Offer, the reported closing price on the
Nasdaq Stock Market was $39.125 per Share. On May 31, 2000, the last full
trading day prior to commencement of the Offer, the reported closing price of
the Shares on the Nasdaq Stock Market was $41.375 per Share. MedQuist has never
paid any cash dividends. Shareholders are urged to obtain a current market
quotation for the Shares.
8
<PAGE>
7. Effect of the Offer on the Market for the Shares.
Market for the Shares. The purchase of any Shares by Royal Philips pursuant
to the Offer will reduce the number of the Shares that might otherwise trade
publicly and may reduce the number of holders of the Shares, which could
adversely affect the liquidity and market value of the remaining Shares held by
the public.
8. Certain Information Concerning MedQuist.
MedQuist has its principal executive offices at Five Greentree Centre, Suite
311, Marlton, New Jersey 08053. The telephone number of MedQuist at such
location is (856) 596-8877. MedQuist, which was incorporated in 1984, is the
leading national provider of medical transcription services, a key component in
the provision of healthcare services. Transcription is the process by which
dictation is converted into an electronic medical report. The timely production
of accurate reports is necessary for patient care and for healthcare providers
to receive reimbursement.
Through MedQuist's approximately 8,000 transcriptionists, proprietary
software, sophisticated digital dictation equipment and ability to interface
with healthcare providers' computer systems, MedQuist provides customized
solutions to shorten customers' billing cycles and reduce their overhead and
other administrative costs. In addition to hospital medical records
departments, MedQuist's target markets include patient care departments, such
as radiology, emergency rooms, oncology, pathology, pediatrics and cardiology
departments, health maintenance organizations, physician practice groups and
out-patient clinics.
MedQuist serves approximately 2,300 clients through 68 client service
centers nationwide. Due to the large number of trained transcriptionists and
MedQuist's ability to allocate work among them efficiently, MedQuist believes
that it is able to reduce the production turnaround times for transcribed
medical reports. An in-house staff or small transcription company cannot
generally achieve these efficiencies to the extent MedQuist can.
As a result of internal growth and acquisitions, MedQuist's revenues have
increased from $61.5 million in 1996 (before restatement for acquisitions
accounted for as pooling of interests) to $330 million in 1999.
Set forth below is certain summary consolidated financial information for
each of MedQuist's last three fiscal years for the period ended December 31,
1999 as contained in MedQuist's 1999 Annual Report to Shareholders, and
incorporated by reference in its Annual Report on Form 10-K, as well as
unaudited financial information for the period ended March 31, 2000 as
contained in MedQuist's Quarterly Report on Form 10-Q. More comprehensive
financial information is included in such reports (including management's
discussion and analysis of financial condition and results of operation) and
other documents filed by MedQuist with the SEC, and the following summary is
qualified in its entirety by reference to such reports and other documents and
all of the financial information and notes contained therein. Copies of such
reports and other documents may be examined at or obtained from the SEC and the
Nasdaq Stock Market in the manner set forth below.
9
<PAGE>
MEDQUIST INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 Year Ended December 31,
------------------ --------------------------
1999 1998 1997
(unaudited) -------- -------- --------
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues...................... $92,512 $330,008 $271,655 $216,158
Income before income taxes.... 23,720 67,644 11,657 14,026
Net income.................... 14,232 40,205 3,185 8,733
Net income per common share:
Basic....................... 0.40 1.14 0.10 0.28
Diluted..................... 0.39 1.09 0.09 0.26
Balance Sheet Data (at period
end):
Current assets................ 138,308 143,760 75,084 63,795
Total assets.................. 298,486 302,183 187,311 173,773
Current liabilities........... 41,874 44,406 33,232 27,187
Total shareholders' equity.... 255,444 256,536 151,186 131,373
</TABLE>
Except as otherwise set forth herein, the information concerning MedQuist
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the SEC and other public sources
and is qualified in its entirety by reference thereto. Although Royal Philips
and the Dealer Manager have no knowledge that would indicate that any
statements contained herein based on such documents and records are untrue,
Royal Philips and the Dealer Manager cannot take responsibility for the
accuracy or completeness of the information contained in such documents and
records, or for any failure by MedQuist to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to Royal Philips or the Dealer Manager.
Other Financial Information. During the course of the discussions and
information exchange between Royal Philips and MedQuist that led to the
execution of the Tender Offer Agreement, MedQuist provided Royal Philips and
its financial advisors with certain information and projections about MedQuist
and its historical and projected future financial performance which is not
publicly available. The information provided included the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
2000P 2001P 2002P 2003P 2004P
------ ------ ------ ------ ------
(in millions, except per share
data)
<S> <C> <C> <C> <C> <C>
Revenues..................................... $397.7 $477.3 $572.8 $686.8 $848.8
EBIT......................................... 85.9 105.5 127.8 154.7 187.1
Net Income................................... 52.6 64.9 79.8 98.0 120.0
EPS.......................................... $ 1.41 $ 1.70 $ 2.03 $ 2.43 $ 2.91
</TABLE>
The information set forth above is based on various assumptions, including,
among other things: (i) total revenue growth (including base business and
acquisitions) of approximately 20% annually; (ii) EBITDA margins of 27.3% in
2000 and 27.7% in 2001 and thereafter; and (iii) a tax rate of approximately
40%.
10
<PAGE>
MedQuist has advised Royal Philips that it does not as a matter of course
disclose projections as to future revenues, earnings or other income statement
data and the projections were not prepared with a view to public disclosure. In
addition, the projections were not prepared in accordance with generally
accepted accounting principles, or with a view to compliance with the published
guidelines of the SEC or the American Institute of Certified Public Accountants
regarding projections, which would require a more complete presentation of the
data than is shown above. The projections have not been examined, reviewed or
compiled by MedQuist's independent auditors, and accordingly they have not
expressed an opinion or any other assurance on it. The forecasted information
is included herein solely because such information was furnished to Royal
Philips and its financial advisors prior to the Offer. Accordingly, neither
Royal Philips nor any other person is making any representation with respect
to, or assuming any responsibility for, the accuracy or reliability of such
projections. In addition, because the estimates and assumptions underlying the
projections are inherently subject to significant economic and competitive
uncertainties and contingencies, which are difficult or impossible to predict
accurately and are beyond the control of MedQuist and Royal Philips, there can
be no assurance that results set forth in the above projections will be
realized and it is expected that there will be differences between actual and
projected results, and actual results may be materially higher or lower than
those set forth above.
Available Information. MedQuist is subject to the information and reporting
requirements of the Exchange Act and in accordance therewith is obligated to
file reports and other information with the SEC relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning MedQuist's directors and officers, their remuneration, stock options
granted to them, the principal holders of MedQuist's securities, any material
interests of such persons in transactions with MedQuist and other matters is
required to be disclosed in proxy statements distributed to MedQuist's
shareholders and filed with the SEC. Such reports, proxy statements and other
information should be available for inspection at the public reference room at
the SEC's offices at 450 Fifth Street, N.W., Washington, D.C. 20549 and also
should be available for inspection and copying at the regional offices of the
SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60611. Copies may be obtained by mail, upon payment of the SEC's customary
charges, by writing to its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and can be obtained electronically on
the SEC's Website at http://www.sec.gov.
9. Certain Information Concerning Royal Philips.
Royal Philips is a company organized under the laws of the Netherlands, with
its principal executive offices at Rembrandt Tower, Amstelplein 1, 1096 HA
Amsterdam, the Netherlands. The telephone number of Royal Philips at such
location is 31-20-597-7777.
Royal Philips has manufacturing and sales organizations in over 60
countries. Royal Philips delivers products, systems and services in the fields
of lighting, consumer electronics and communications, domestic appliances and
personal care, components, semiconductors, medical systems and information
technology.
Financial Information of Royal Philips. Royal Philips is subject to the
informational reporting requirements of the Exchange Act.
Other Information Regarding Royal Philips. The name, citizenship, business
address, business telephone number, current principal occupation (including the
name, principal business and address of the organization in which such
occupation is conducted), and material positions held during the past five
years (including the name, principal business and address of the organization
in which such occupation was conducted), of the directors and executive
officers of Royal Philips are set forth in Schedule A to this Offer to
Purchase.
Neither Royal Philips, nor, to the best of its knowledge, any of the persons
listed in Schedule A hereto nor any associate or majority-owned subsidiary of
Royal Philips beneficially owns or has a right to acquire any Shares or has
engaged in any transactions in the Shares in the past 60 days except as set
forth in Sections 10 and 11. Royal Philips has not purchased any Shares during
the past two years.
11
<PAGE>
Except as set forth in Section 10 and Section 11, there have been no
negotiations, transactions or material contacts between Royal Philips, or, to
the best of its knowledge, any of the persons listed in Schedule A hereto, on
the one hand, and MedQuist or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors, or a sale or other transfer of a material
amount of assets. Except as described in Section 10, neither Royal Philips,
nor, to the best of its knowledge, any of the persons listed in Schedule A
hereto, has had any transaction with MedQuist or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the SEC applicable to the Offer.
10. Background of the Offer; Contacts with MedQuist.
Background of the Tender Offer. It is Royal Philips' announced strategy to
expand its activities in healthcare services and MedQuist is the leading
provider in the United States of medical transcription services. Royal Philips'
investment in MedQuist through the purchase of Shares pursuant to the terms of
the Offer and the Shareholder Agreements furthers Royal Philips' announced
strategy and is also an opportunity to create significant growth and leverage
Royal Philips' speech technology capabilities. In addition, Royal Philips'
information technology activities conducted through its affiliate, Origin B.V.,
present opportunities for Royal Philips to assist MedQuist in expanding its
Application Service Provider capabilities.
On March 27, 2000, John A. Donohoe, Jr., MedQuist's President and Chief
Operating Officer, participated in a telephone conference with Tom Stolk,
General Manager--Speech Application of Philips Speech Processing GmbH ("Philips
Speech Processing"). Mr. Stolk informed Mr. Donohoe that Philips Speech
Processing was willing to recommend to the management board of Royal Philips
that Royal Philips make an investment in MedQuist as part of an overall
strategic relationship between the two companies. As a result of that telephone
conference, on April 3, 2000, Mr. David A. Cohen, MedQuist's Chairman and Chief
Executive Officer, Mr. Donohoe, John R. Emery, MedQuist's Chief Financial
Officer, and John M. Suender, MedQuist's General Counsel, met with Cesar
Vohringer, President and Chief Executive Officer of Philips Speech Processing,
Mr. Stolk, David Ames, Vice President of Philips Speech Processing (USA), and
Peter Foster, Executive Vice President of Philips Speech Processing (USA), at
MedQuist's headquarters in Marlton, New Jersey. At that meeting, Mr. Vohringer
reconfirmed that Philips Speech Processing was willing to recommend to the
management board of Royal Philips that Royal Philips make an investment in
MedQuist, although one involving a purchase of less than a majority of the
outstanding Shares.
On April 11, 2000, Messrs. Cohen, Donohoe, Emery and Suender of MedQuist met
in Dallas, Texas, with Messrs. Vohringer, Stolk, Ames and Stephen Havering,
Vice President Corporate Mergers and Acquisitions, of Royal Philips during the
Health Information Management Systems Society conference. Also present were
representatives of UBS Warburg, and representatives of Mercer Management
Consulting, an independent consultant to Royal Philips. At this meeting, Royal
Philips made a proposal to purchase newly issued shares of common stock of
MedQuist equivalent to a post-issue 20% interest in MedQuist, at a per Share
price approximately equal to the then-prevailing market price. Representatives
of MedQuist expressed concern that MedQuist did not have an immediate need for
that amount of capital and, accordingly, any purchase would need to be of
outstanding Shares. There was also disagreement on the price proposed to be
paid by Royal Philips. Representatives of Royal Philips stated that they would
make a presentation to the management board of Royal Philips in the next week,
and that they would arrange a meeting with MedQuist at the end of the following
week to follow up.
On April 17, 2000, MedQuist and Royal Philips entered into a confidentiality
agreement and standstill agreement. On April 19, 2000, Royal Philips retained
Goldman, Sachs & Co. to serve as its exclusive financial advisor with respect
to a potential transaction with MedQuist. Thereafter, on April 20, 2000,
Messrs. Cohen, Donohoe, Emery and Suender of MedQuist met with Messrs.
Vohringer, Stolk, Ames, and Havering of Royal Philips at Royal Philips' offices
in New York City. Also present were representatives of UBS Warburg, and
representatives of Mercer Management Consulting and Goldman, Sachs & Co. At
this meeting, Royal Philips presented a new proposal to acquire a minority
stake in MedQuist's capital stock in exchange for cash and to
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enter into certain other arrangements between the parties that were then
undefined. At the conclusion of the meeting, Mr. Cohen stated that he believed
that MedQuist's board of directors would probably not support a transaction
that did not involve Royal Philips' acquisition of at least a majority of the
capital stock of MedQuist. He again expressed MedQuist's view that any purchase
should be of Shares held directly by MedQuist's shareholders since MedQuist did
not have any immediate need for that much capital and the board of directors
believed that MedQuist's existing shareholders should benefit directly from any
transaction through a purchase of their Shares. Representatives of Royal
Philips indicated that Royal Philips was unlikely to seek to acquire the entire
company, but that they would present a proposal to acquire a majority of the
outstanding Shares to Royal Philips' management board. Representatives of Royal
Philips expressed the belief that it was important for MedQuist to remain
publicly traded for several reasons, including to permit management to continue
to own equity in a publicly-traded entity.
On May 1, 2000, management of Royal Philips made a presentation to its
management board in the Netherlands regarding a proposed transaction with
MedQuist.
On May 4, 2000, a meeting took place at Royal Philips' offices in New York
City. Present for MedQuist were Messrs. Cohen, Donohoe, Emery, Suender, and
Ronald A. Scarpone, MedQuist's Senior Vice President of New Business
Development, and present for Royal Philips were Messrs. Cor Boonstra, President
of Royal Philips, Jan Hommen, Executive Vice President and Chief Financial
Officer of Royal Philips, Adri Baan, Executive Vice President of Royal Philips,
Ivo Lurvink, Executive Vice President of Philips International B.V., Vohringer
and Havering. Royal Philips expressed a willingness to purchase a majority, but
less than all, of the outstanding Shares and requested that all parties focus
on preparing a business plan to be presented to the Royal Philips' management
board for consideration. On May 5, 2000, Messrs. Donohoe, Emery and Suender met
with representatives of Royal Philips in New York City to develop a business
plan.
On May 9, 2000, Mr. Cohen had a discussion with Mr. Hommen of Royal Philips.
In the course of that conversation, Mr. Hommen stated that Royal Philips was
prepared to make an offer to purchase 60% of the fully diluted Shares for
$50.00 per Share, subject to completion of Royal Philips' due diligence. Mr.
Cohen stated that he would present the offer to the board of directors.
After MedQuist's board of directors met and considered the Royal Philips
offer on May 10, 2000, Mr. Cohen called Mr. Hommen and stated that the board of
directors was interested in the proposed transaction but that a price of $50.00
per Share, although a substantial increase from earlier discussions, was not
acceptable.
On May 11, 2000, Messrs. Hommen and Lurvink called Mr. Cohen and stated that
Royal Philips was prepared to raise its offer to $51.00 per Share and
immediately commence due diligence.
On May 13, 2000, attorneys from Sullivan & Cromwell, legal counsel to Royal
Philips, and from Pepper Hamilton, LLP, legal counsel to MedQuist ("Pepper
Hamilton"), visited MedQuist's offices in Marlton, New Jersey to review
documents and records for due diligence purposes. On May 14, 2000, a meeting
was held at the offices of UBS Warburg in New York City to continue due
diligence. The meeting included representatives of MedQuist and UBS Warburg, as
well as representatives of Royal Philips, Goldman, Sachs & Co. and Mercer
Management Consulting. Also on May 14, 2000, representatives of Royal Philips
met with MedQuist's auditors to conduct due diligence. Due diligence continued
from May 14, 2000 through May 21, 2000.
From May 14, 2000 through May 16, 2000, representatives of MedQuist,
including its legal counsel and financial advisors met with representatives of
Royal Philips, including its legal counsel and financial advisors, in New York
City in order to negotiate the terms of the Tender Offer Agreement and the
other agreements described herein.
On May 21, 2000, MedQuist's board of directors met to discuss the proposed
transaction and, at the conclusion of the meeting the board of directors
unanimously (i) determined that the terms of the Offer were fair to, and in the
best interests of, the shareholders of MedQuist and declared that the Offer was
advisable, (ii) approved the Tender Offer Agreement and the other agreements
described herein, and the transactions contemplated thereby, and (iii)
recommended that the shareholders of MedQuist accept the Offer and tender their
Shares pursuant to the Offer.
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On May 21, 2000, a conference call was held between representatives of
MedQuist and Royal Philips in which certain non-economic and technical details
of the Tender Offer Agreement and the other agreements were discussed.
On May 22, 2000, the supervisory board of Royal Philips approved the
transaction and informed MedQuist of such approval. Thereafter, counsel for the
two parties and representatives of MedQuist and Royal Philips finalized the
Tender Offer Agreement and the other agreements described herein, all of which
were executed by the applicable parties on May 22, 2000, after which the
transaction was publicly announced.
11. Purpose of the Offer; Plans for MedQuist; The Tender Offer Agreement; The
Shareholder Agreements; The Licensing Agreement; The Governance Agreement;
The Employment Agreements.
Purpose. The purpose of the Offer is to acquire for cash 22,250,327 Shares,
which constitutes approximately 57% of the fully diluted Shares. In addition,
if Royal Philips accepts for payment and pays for Shares pursuant to the terms
and conditions of the Offer, Royal Philips will, after the Offer expires,
purchase an additional 1,149,759 Shares from seven members of MedQuist's senior
management pursuant to the Shareholder Agreements, as described below. After
completion of the purchase of Shares pursuant to the Offer and pursuant to the
terms of the Shareholder Agreements, Royal Philips will own approximately 60%
of the fully diluted Shares, and MedQuist will be a direct majority-owned
subsidiary of Royal Philips.
Plans for MedQuist. As of the date of this Offer to Purchase, and except as
otherwise described in Section 10 or this Section 11, Royal Philips does not
have any plans or proposals with respect to MedQuist that relate to or would
result in:
a. Any extraordinary transaction, such as a merger, reorganization or
liquidation, involving MedQuist or any of its subsidiaries;
b. Any purchase, sale or transfer of a material amount of assets of
MedQuist or any of its subsidiaries;
c. Any material change in the present dividend rate or policy, or
indebtedness or capitalization of MedQuist;
d. Any change in the present board of directors or management of MedQuist,
including, but not limited to, any plans or proposals to change the
number or the term of directors or to fill any existing vacancies on the
board of directors or to change any material term of the employment
contract of any executive officer;
e. Any other material change in MedQuist's corporate structure or business;
f. Any class of equity securities of MedQuist to be delisted from a
national securities exchange or cease to be authorized to be quoted in
an automated quotations system operated by a national securities
association; or
g. Any class of equity securities of MedQuist becoming eligible for
termination of registration under Section 12(g) (4) of the Exchange Act.
Royal Philips expects to evaluate and review MedQuist and its business,
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel with a view towards determining how to optimally
realize any potential benefits which arise from the relationship of the
operations of MedQuist with those of other business units of Royal Philips and
its affiliates. Accordingly, Royal Philips reserves the right to change its
plans and intentions at any time, as it deems appropriate, and, subject to the
terms and conditions of the Governance Agreement, such changes could include,
among other things, restructuring MedQuist through changes in MedQuist's
business, corporate structure, certificate of incorporation, by-laws,
capitalization or management or could involve consolidating and streamlining
certain operations and reorganizing other businesses and operations. In
particular, although Royal Philips has no present intention to acquire any
Shares other than the 22,250,327 Shares to be acquired pursuant to the Offer
and the 1,149,759 Shares to be acquired
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pursuant to the Shareholder Agreements, and has no present intention to dispose
of any of such Shares once acquired, Royal Philips may, subject to the terms of
the Governance Agreement, acquire additional Shares or may dispose of Shares on
the Nasdaq Stock Market, in privately negotiated transactions or otherwise. Any
such transactions may be effected at any time and from time to time, and may be
made upon such terms and at such prices as Royal Philips shall determine, which
may be more or less than the price paid in the Offer.
As described more fully below, in connection with entering into the Tender
Offer Agreement, Philips Speech Processing entered into the License Agreement
with MedQuist. The License Agreement grants MedQuist a non-assignable, non-
exclusive license to use Philips Speech Processing speech recognition and
processing software, including software used for the improvement of electronic
medical terminology databases, which are known as "contexts", for use in
automatic speech-to-text transformation. MedQuist will also have a non-
assignable, non-exclusive license in the contexts. Although the license granted
under the License Agreement is non-exclusive, Philips Speech Processing has
agreed that it will not license the software or the contexts to any competitor
of MedQuist providing outsourced medical transcription services in the United
States. A more complete description of the material terms of the License
Agreement is set forth below under "The License Agreement".
MedQuist plans to aggressively roll out Philips Speech Processing speech and
other technology after the completion of the Offer to begin a transition to a
digital transcription platform, using regional data centers. Royal Philips and
MedQuist expect that this will result in significant productivity improvements
in the conversion of dictated medical records into written text, and will
generate growth opportunities and additional revenue. Royal Philips and
MedQuist also believe this will allow MedQuist to enter important new markets,
including Europe, where Philips Medical Systems and Philips Speech Processing
have strong existing hospital relationships. The two companies also plan to
expand MedQuist's current range of outsourced transcription services to include
in-house speech recognition software sales and Application Service Provider
models.
Assuming the Tender Offer Condition has been satisfied and Royal Philips
purchases Shares validly tendered and not withdrawn pursuant to the terms and
conditions of the Offer, Royal Philips intends, subject to Rule 14f-1 of the
Exchange Act, to promptly exercise its rights under the Governance Agreement to
obtain majority representation on, and control of, MedQuist's board of
directors. Under the Governance Agreement, MedQuist has agreed that it will
take any and all action necessary so that promptly following Royal Philips'
purchase of Shares pursuant to the terms and conditions of the Offer, the board
of directors will consist of eleven directors, six of which will be designated
by Royal Philips. Royal Philips presently intends to select those designees
included in Schedule I to MedQuist's Solicitation/Recommendation Statement on
Schedule 14D-9.
General Information about the Agreements. The following is a summary of
certain provisions of each of the Tender Offer Agreement, the Shareholder
Agreements (as defined below), the Licensing Agreement, dated as of May 22,
2000, between Philips Speech Processing and MedQuist (the "License Agreement"),
the Governance Agreement, dated as of May 22, 2000, between Royal Philips and
MedQuist (the "Governance Agreement") and the Employment Agreements (as defined
below). This summary of each of such agreements is not a complete description
of the terms and conditions of such agreements and is qualified in its entirety
by reference to the full text of each of the Tender Offer Agreement, the
Shareholder Agreements, the License Agreement, the Governance Agreement and the
Employment Agreements, as applicable, which are filed with the SEC as exhibits
to the Tender Offer Statement on Schedule TO filed by Royal Philips (the
"Schedule TO") and each are hereby incorporated herein by reference.
Capitalized terms not otherwise defined below have the respective meanings set
forth in the Tender Offer Agreement, the Shareholder Agreements, the License
Agreement, the Governance Agreement and the Employment Agreements, as
applicable. Each of the Tender Offer Agreement, the Shareholder Agreements, the
License Agreement, the Governance Agreement and the Employment Agreements may
be examined, and copies obtained, as set forth in Section 8 of this Offer to
Purchase.
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The Tender Offer Agreement.
The Offer. The Tender Offer Agreement provides that Royal Philips will
commence the Offer and that upon the terms and subject to prior satisfaction or
waiver (to the extent permitted to be waived) of the conditions of the Offer,
promptly after expiration of the Offer, Royal Philips will accept for payment,
and pay for, 22,250,327 Shares validly tendered and not withdrawn pursuant to
the Offer that Royal Philips is permitted to accept and pay for under
applicable law. If more than 22,250,327 Shares are validly tendered and not
withdrawn, Royal Philips will accept for purchase an amount of the tendered
Shares equal to 22,250,327 Shares, on a pro rata basis from each shareholder
who has validly tendered Shares pursuant to the Offer, promptly after the
Expiration Date. The Tender Offer Agreement provides that Royal Philips has the
right, in its sole discretion, to modify and make certain changes to the terms
and conditions of the Offer as described above in Section 1.
Termination of the Tender Offer Agreement. The Tender Offer Agreement may be
terminated at any time before Royal Philips has purchased Shares pursuant to
the Offer:
(1) by mutual written consent duly authorized by the boards of directors
of Royal Philips and MedQuist;
(2) by the board of directors of either Royal Philips or MedQuist if:
. such termination of the Offer is not in violation of the terms of
the Offer or the Tender Offer Agreement; or
(3) by MedQuist if:
. Royal Philips has failed to comply in any material respect with
any of its covenants or agreements contained in the Tender Offer,
and which failure has not been cured prior to the earlier of:
. five (5) business days following the giving of written notice
to Royal Philips; or
. the business day prior to the date on which the Offer is
scheduled to expire; or
. the board of directors of MedQuist receives or there is publicly
announced a bona fide written "Acquisition Proposal" (as defined
below under "Acquisition Proposals"), that was unsolicited and did
not otherwise result from a breach of the Tender Offer Agreement,
and the board of directors of MedQuist determines in good faith:
. after consultation with an investment banking firm of national
standing, that such Acquisition Proposal is a Superior
Proposal (as defined below under "Acquisition Proposals"); and
. after consultation with outside counsel, that approval,
acceptance or recommendation of such Acquisition Proposal or
tender or exchange offer is necessary in order for its
directors to comply with their respective fiduciary duties,
and MedQuist substantially concurrently with such termination
enters into a definitive agreement containing the terms of the
Superior Proposal. Notwithstanding the above, MedQuist may not
terminate the Tender Offer Agreement pursuant to this
provision, unless MedQuist complies with:
. all the provisions of the Tender Offer Agreement,
including the applicable notification provisions; and
. all applicable requirements of the Tender Offer Agreement,
including the payment of the termination fee prior to or
concurrently with such termination.
In addition, MedQuist may not exercise its right to
terminate this Agreement pursuant to this provision until
after three days following Royal Philips' receipt of written
notice from MedQuist advising Royal Philips that MedQuist's
board of directors
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has received a Superior Proposal (or that a tender or
exchange offer with respect to the Shares has been commenced)
and that such board of directors will, subject to any action
taken by Royal Philips, cause MedQuist to accept such
proposal (or recommend such tender or exchange offer), and
specifying the material terms and conditions of the proposal
and identifying the person making such proposal (it being
understood and agreed that any amendment to the price or any
other material term of the proposal requires an additional
notice and a new three-day period).
(4) by the board of directors of Royal Philips if:
. MedQuist fails to comply in any material respect with any of its
covenants or agreements contained in the Tender Offer Agreement,
and which failure is not cured prior to the earlier of:
. five (5) business days following the giving of written notice
to MedQuist of such failure; or
. the business day prior to the date on which the Offer is then
scheduled to expire; or
. the board of directors of MedQuist amends or modifies in a manner
adverse to Royal Philips its approval or recommendation of the
Offer, withdraws such recommendation or approves or recommends any
other Acquisition Proposal, or resolves to do any of the
foregoing; or
. if MedQuist or any of the other affiliated or related persons or
entities described in the Tender Offer Agreement takes any actions
that would be proscribed by Section 3.2 of the Tender Offer
Agreement (and which are described below under "Acquisition
Proposals") but for the exception therein allowing certain actions
to be taken by MedQuist's board of directors after consultation
with outside counsel if necessary to comply with its fiduciary
obligations under applicable law.
Effect of Termination. If the Tender Offer Agreement is terminated, neither
Royal Philips nor MedQuist (nor any of their respective directors or officers)
will have any liability or further obligation to the other party, except that
each will remain liable for any breach of the Tender Offer Agreement. In
addition, the Tender Offer Agreement's provisions regarding confidentiality,
public statements regarding the transactions contemplated by the agreement and
fees and expenses will survive termination.
Fees and Expenses. Each of MedQuist and Royal Philips will pay their
respective expenses in connection with the Tender Offer Agreement, except that
the parties have agreed that MedQuist will be required to pay Royal Philips a
termination payment of $44,750,000 if:
. the Offer has remained open for at least 20 business days;
. the Tender Offer Condition has not been satisfied;
. the Offer is terminated without the purchase of any Shares thereunder;
. at the time the Offer is terminated, any corporation, partnership,
person, other entity or group (as defined in Section 13(d)(3) of the
Exchange Act) other than Royal Philips or any of its subsidiaries or
affiliates has publicly announced an intention (whether or not
conditional) to make a proposal or offer relating to an Acquisition
Proposal; and
. within fifteen (15) months after the date of such termination, MedQuist
consummates or enters into an agreement with respect to any Acquisition
Proposal; in addition, if MedQuist recommends acceptance by the
shareholders of a third-party tender offer or exchange offer, such
recommendation will be treated as though an agreement had been entered
into.
In addition, MedQuist will also be required to pay Royal Philips a
termination fee if:
. MedQuist fails to comply in any material respect with any of its
obligations or agreements in the Tender Offer Agreement, which failure
is not cured after Royal Philips informs MedQuist of such failure;
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. MedQuist's board of directors amends or modifies in a manner adverse to
Royal Philips its approval or recommendation of the Offer, withdraws
such recommendation or approves or recommends any other Acquisition
Proposal, or resolves to do any of the foregoing; or
. MedQuist terminates the Tender Offer Agreement in order to accept and
enter into an agreement relating to a Superior Proposal.
If MedQuist is obligated to pay Royal Philips a termination fee as described
above, MedQuist will also reimburse Royal Philips' actual out-of-pocket costs
and expenses incurred in connection with the Tender Offer Agreement and the
transactions contemplated thereby up to a maximum of two million five hundred
thousand dollars ($2,500,000). The parties have agreed that if Goldman, Sachs &
Co. or any of its affiliates is entitled to receive a portion of the
termination payment pursuant to the terms of its engagement with Royal Philips,
such payment will not be deemed part of Royal Philips' costs and expenses.
Acquisition Proposals. Neither MedQuist nor any of its subsidiaries nor any
of the respective officers and directors of MedQuist or its subsidiaries will,
and it will direct and use its best efforts to cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by MedQuist or any of its subsidiaries) not to:
. initiate, solicit or encourage, directly or indirectly, any inquiries or
the making of any proposal or offer (including, without limitation, any
proposal or offer to shareholders of MedQuist) with respect to a merger,
consolidation, share exchange or similar transaction involving, or any
purchase of all or 15% or more of the assets or the equity securities
of, MedQuist or any of its subsidiaries (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"); or
. engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal.
Notwithstanding the foregoing restriction, MedQuist or its board of
directors has the right to:
(1) comply with Rules 14d-9 and 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal;
(2) provide information in response to a request by a person who has made
an unsolicited bona fide written Acquisition Proposal, but only if the
board of directors obtains from that person an executed confidentiality
agreement containing material terms no more favorable to that person
than those contained in the Confidentiality Agreement executed by
MedQuist and Royal Philips;
(3) engage in any negotiations or discussions with any person who has made
an unsolicited bona fide written Acquisition Proposal; or
(4) recommend such an Acquisition Proposal to the shareholders of MedQuist.
MedQuist's ability to engage in any of the actions set forth in clauses
(2), (3) or (4) above is limited, however, in that in order to engage in
such actions the board of directors of MedQuist must first determine in
good faith:
. after consultation with outside counsel, that such action is
necessary in order to comply with their respective fiduciary duties
under applicable law;
. that such Acquisition Proposal, if accepted, is reasonably likely to
be consummated, taking into account appropriate legal, financial and
regulatory aspects of the proposal and the person making the
proposal; and
. after consultation with an investment banking firm of national
standing, that such Acquisition Proposal is reasonably likely, if
consummated, to result in a transaction more favorable to MedQuist's
shareholders from a financial point of view than the transaction
contemplated by the Tender Offer Agreement (any such more favorable
Acquisition Proposal being referred to as a "Superior Proposal").
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MedQuist is required to notify Royal Philips immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with MedQuist or any of its representatives. MedQuist is also required to
further identify the offeror and furnish to Royal Philips a copy of any such
inquiry or proposal, if it is in writing, or to inform Royal Philips of the
material terms of any such inquiry or proposal, if it is oral, and to promptly
advise Royal Philips of any material development relating to such inquiry or
proposal. MedQuist is also required to promptly request each person that has
executed a confidentiality agreement in connection with its consideration of
acquiring MedQuist to return all confidential information furnished to such
person by or on behalf of MedQuist.
Covenants. The Tender Offer Agreement also contains certain other
restrictions as to the conduct of business by MedQuist pending the Offer,
including covenants restricting MedQuist's ability to take, among other things,
actions that would change or affect the capital structure of MedQuist and limit
MedQuist's ability to make capital expenditures, engage in acquisitions, amend
benefit plans and settle claims.
Representations and Warranties. The Tender Offer Agreement contains
representations and warranties by each of MedQuist and Royal Philips that are
customary for a transaction of this kind. Certain of MedQuist's representations
and warranties are qualified by "Company Material Adverse Effect," which is
defined in the Tender Offer Agreement as a material adverse effect on the
condition (financial or otherwise), business or results of operations of
MedQuist and its subsidiaries taken as a whole, other than any effect arising
out of (i) general economic conditions or (ii) economic conditions generally
affecting the medical services industry.
Amendment of the Tender Offer Agreement. Subject to the applicable
provisions of the New Jersey Business Corporation Act, at any time prior to the
purchase of the Shares pursuant to the Offer, MedQuist and Royal Philips may
modify or amend the Tender Offer Agreement only by written agreement executed
and delivered by duly authorized officers of the respective parties. After the
date on which Royal Philips' designees become members of the board of directors
of MedQuist, the Tender Offer Agreement may not be amended in any manner
materially adverse to MedQuist or any third-party beneficiary as provided in
the Tender Offer Agreement without the written consent of the members of the
Supervisory Committee (as defined in the Governance Agreement).
Indemnification of Officers and Directors. From and after the date on which
Shares are purchased pursuant to the Offer, Royal Philips has agreed that it
will cause MedQuist to indemnify and hold harmless each present and former
director and officer of MedQuist, determined as of such date (the "Indemnified
Parties"), against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of matters existing or occurring at or prior to the date on which
Shares are purchased pursuant to the Offer, whether asserted or claimed prior
to, at or after such date, to the fullest extent that MedQuist would have been
permitted under New Jersey law and its Certificate of Incorporation or By-Laws
in effect on the date of the Tender Offer Agreement to indemnify such person.
Royal Philips will also advance expenses as incurred to the fullest extent
permitted under applicable law so long as the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification.
Any Indemnified Party wishing to claim indemnification under the provisions
of the Tender Offer Agreement, upon learning of any such claim, action, suit,
proceeding or investigation, must promptly notify MedQuist thereof, but the
failure to so notify will not relieve MedQuist of any liability it may have to
such Indemnified Party except to the extent such failure prejudices the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the date on which Shares are
purchased pursuant to the Offer), MedQuist has the right to assume and control
the defense thereof and MedQuist will not be liable to such Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof,
except that if MedQuist elects not to assume such defense or counsel for the
Indemnified Parties advises in writing that there are issues which raise
conflicts of interest between MedQuist and the Indemnified Parties, the
Indemnified
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Parties may retain counsel (which counsel will be reasonably satisfactory to
MedQuist), and MedQuist will pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received. This right to have MedQuist pay for counsel chosen by the Indemnified
Party is limited in that MedQuist is obligated to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction. In addition, MedQuist
is not liable for any settlement effected without its prior written consent,
the Indemnified Parties are required to cooperate in the defense of any matter
and MedQuist does not have any obligation to any Indemnified Party when and if
a court of competent jurisdiction ultimately determines, and such determination
has become final, that the indemnification of such Indemnified Party in the
manner contemplated by the Tender Offer Agreement is prohibited by applicable
law.
Royal Philips has further agreed that after Royal Philips' purchase of
Shares pursuant to the Offer, it will cause MedQuist to maintain MedQuist's
existing officers' and directors' liability insurance ("D&O Insurance") for a
period of six years after the purchase of Shares pursuant to the Offer so long
as the annual premium therefor is not in excess of 200% of the last annual
premium paid prior to the date of the Tender Offer Agreement (the "Current
Premium"); provided, however, that (x) Royal Philips may substitute therefor
policies (which may be "tail" policies) containing terms with respect to
coverage and amount no less favorable in any material respect to such directors
and officers, and (y) if the existing D&O Insurance expires, is terminated or
canceled during such six-year period, Royal Philips will use its commercially
reasonable best efforts to obtain as much D&O Insurance as can be obtained for
the remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium.
Treatment of Employee Benefits. Royal Philips has agreed that, during the
period commencing on the date Shares are purchased pursuant to the Offer and
ending on the first anniversary thereof, the employees of MedQuist will
continue to be provided with employee benefit plans which in the aggregate are
substantially comparable to those currently provided by MedQuist to such
employees, provided that employees covered by collective bargaining agreements
need not be provided such benefits. Without limiting the generality of the
foregoing, Royal Philips has agreed to cause MedQuist to honor without
modification all employee (or former employee) benefit obligations, including
severance obligations, accrued as of the time Royal Philips purchases Shares
pursuant to the term of the Offer.
Appraisal Rights. Holders of the Shares do not have appraisal rights as a
result of the Offer pursuant to Section 14A:11-1 of the New Jersey Business
Corporation Act.
The Shareholder Agreements.
On May 22, 2000, Royal Philips also entered into agreements with each of
David A. Cohen, John A. Donohoe, Jr., John R. Emery, John M. Suender, Ronald A.
Scarpone, Ethan Cohen and John W. Quaintance. These agreements are individually
referred to herein as a "Shareholder Agreement" and collectively referred to
herein as the "Shareholder Agreements." Each Shareholder Agreement provides
that if Royal Philips purchases Shares pursuant to the Offer, then promptly
after the Offer expires, Royal Philips will purchase from the shareholder a
party thereto the number of Shares set forth opposite that individual's name in
the following table, at a price per Share equal to the price per Share paid by
Royal Philips in the Offer:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
David A. Cohen..................................................... 779,530
John A. Donohoe, Jr................................................ 124,224
John R. Emery...................................................... 46,057
John M. Suender.................................................... 56,289
Ronald A. Scarpone................................................. 74,570
Ethan Cohen........................................................ 39,489
John W. Quaintance................................................. 29,600
---------
Total............................................................ 1,149,759
=========
</TABLE>
20
<PAGE>
In the aggregate, the 1,149,759 Shares to be purchased by Royal Philips
under the Shareholder Agreements represent approximately 3% of MedQuist's
outstanding fully diluted Shares and approximately 37% of those individuals'
combined holdings.
Each Shareholder Agreement also provides that until May 22, 2002, the
shareholder a party thereto will not sell or dispose of (i) any Shares, or any
options or warrants to purchase any Shares, or any securities convertible into,
exchangeable for or that represent the right to receive Shares, owned on the
date of the Shareholder Agreement, (ii) any Shares issued upon the exercise of
options or warrants to purchase any Shares referred to in the preceding clause
(i), (iii) any options to purchase any Shares issued in accordance with the
option grant contemplated by such individual's employment agreement with
MedQuist, dated as of May 22, 2000, or (iv) any Shares issued upon the exercise
of the options to purchase Shares referred to in the preceding clause (iii), in
each case, owned directly by the shareholder a party thereto or with respect to
which the shareholder has beneficial ownership within the rules and regulations
of the SEC.
Each shareholder who is a party to a Shareholder Agreement has also agreed
that at any shareholder meeting, or in any written consent in lieu thereof,
such shareholder will vote his Shares against any action or agreement that
would impede, interfere with, delay, postpone or attempt to discourage the
Offer, including, but not limited to:
. any acquisition agreement or other similar agreement related to an
Acquisition Proposal;
. any change in MedQuist's management or MedQuist's board of directors,
except as otherwise agreed to in writing by Royal Philips; or
. any other material change in MedQuist's corporate structure or business.
The Shareholder Agreements will terminate concurrent with the earlier of:
(a) the termination of the Tender Offer Agreement and (b) the occurrence of any
of the conditions that result in a revocation of the waiver given by such
shareholder in his employment agreement with MedQuist with respect to certain
options held by such shareholder that would otherwise vest upon Royal Philips'
purchase of Shares pursuant to the Offer.
The License Agreement.
Effective Time of the License Agreement. The License Agreement will become
effective at the time Royal Philips purchases Shares pursuant to the terms and
conditions of the Tender Offer Agreement (the "License Agreement Effective
Time").
Termination of the License Agreement. Subject to the parties' right to
terminate as provided in the License Agreement, the License Agreement will have
an initial term of five (5) years from the License Agreement Effective Time and
will thereafter continue for subsequent five (5) year terms. The License
Agreement may be terminated at any time by one party if the other materially
breaches its obligations under the License Agreement (which, in the case of
MedQuist, includes non-payment of monies owed to Philips Speech Processing
under the License Agreement) or becomes subject to bankruptcy proceedings. The
License Agreement may also be terminated at the election of either party, but
only at the end of the initial five year term and during or at the end of any
subsequent term, in either case with two (2) years written notice.
Subject of the License Agreement. The License Agreement provides that
MedQuist will license from Philips Speech Processing speech recognition and
processing software (the "Licensed Product"). The Licensed Product includes
software for the improvement of the electronic medical terminology databases
for use in automated speech-to-text transformation (the "Contexts"). New
Contexts will be developed in part by using MedQuist's speech data and will be
optimized for a specific user or group of medical specialists, such as
gynecologists or radiologists. These Contexts, as they are developed, will also
be subject to the License Agreement. The License Agreement also provides that
Philips Speech Processing will provide support to MedQuist in the areas of
integration, customization, training and ongoing support.
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<PAGE>
Scope of the License Agreement. The License Agreement provides that Philips
Speech Processing will grant MedQuist a non-assignable, non-exclusive license
to use the Licensed Product and the Contexts, as they are developed, in
connection with its transcription business. Philips Speech Processing has
agreed not to license the Licensed Product or the Contexts to any competitor of
MedQuist providing outsourced medical transcription services in the United
States; and MedQuist has agreed not to use or license a product that competes
with the Licensed Product. MedQuist will not have any ownership in the Licensed
Product or the Contexts, or in any derivative works or related documentation.
Philips Speech Processing will have access to MedQuist's medical documents and
user sound data in order to improve existing Contexts and generate new
Contexts. Philips Speech Processing will have the right to license these
Contexts to other licensees (other than any competitor of MedQuist providing
outsourced medical transcription services in the United States), subject to
MedQuist's right to receive them first. MedQuist will receive a royalty of 3.5%
of the license fees paid by other licencees to Philips Speech Processing in
connection with Contexts developed on the basis of access to MedQuist's speech
data.
License Fee. MedQuist will pay Philips Speech Processing an initial fee of
$2,250,000 and an ongoing license fee based on the number of lines of text
actually transcribed using the Licensed Product. The license fee will be
calculated, and be subject to a minimum license fee (through 2004), as follows.
The parties have assumed that 4% of "payroll lines" will be converted using the
Licensed Product in 2001, 13% in 2002, 25% in 2003 and 45% in 2004 (the
"Projected Use Rate"). The term "payroll line" means the lines that MedQuist
uses as a basis to pay its transcriptionists. The parties have also agreed that
the per payroll line charge will be $0.012 for each line up to 500 million
payroll lines and $0.010 for each line over 500 million lines. For each year
from 2001 to 2004 inclusive, the guaranteed license fee will be equal to a
fraction (which shall be 3/4 for each of 2001 and 2002, 1/2 for 2003 and 1/4
for 2004) of the Projected Use Rate multiplied by the total number of payroll
lines actually transcribed by MedQuist during that year (whether using the
Licensed Product or not), multiplied by the per line charge. MedQuist has also
agreed to pay for certain support services provided by Philips Speech
Processing.
The Governance Agreement.
Effective Time of the Governance Agreement. The Governance Agreement will
become effective at the time Royal Philips purchases Shares pursuant to the
terms and conditions of the Tender Offer Agreement (the "Governance Agreement
Effective Time").
Termination of the Governance Agreement. The Governance Agreement will
terminate on the first date that Royal Philips is no longer the beneficial
owner of five (5) percent of MedQuist's Voting Stock, although Royal Philips
and MedQuist may terminate the agreement earlier by mutual written consent and
except that the provisions of the agreement relating to the establishment of
committees of MedQuist's board of directors will terminate on the first date
that Royal Philips is the beneficial owner of less than a majority of the
outstanding Voting Stock. As used in the Governance Agreement, the term "Voting
Stock" means shares of the capital stock of MedQuist having the right to vote
generally in any election of directors of MedQuist.
Purchases of Shares by Royal Philips After the Offer. The Governance
Agreement provides that until the third anniversary of the Governance Agreement
Effective Time, Royal Philips will not, directly or indirectly, purchase or
otherwise acquire, or propose or offer to purchase or acquire, or otherwise
become the beneficial owner, individually or as a member of a "group" (as
defined for purposes of Section 13d of the Exchange Act), of any Equity
Securities, if, immediately after such transaction, Royal Philips and its
Affiliates or Associates (each of which terms have the respective meanings
ascribed to them under the rules promulgated under the Exchange Act) would,
directly or indirectly, beneficially own in excess of 75% of the then
outstanding shares of Voting Stock. As used in the Governance Agreement, the
term "Equity Security" means Voting Stock, securities of MedQuist convertible
into or exchangeable for Voting Stock, and options, rights, warrants and
similar securities issued by MedQuist to purchase Voting Stock.
22
<PAGE>
Notwithstanding the foregoing restriction, after the first anniversary of
the Governance Agreement Effective Time and until the third anniversary, Royal
Philips or any of its Affiliates or Associates may acquire all, but not less
than all, of the Equity Securities of MedQuist which are not then beneficially
owned by Royal Philips or one or more of its Affiliates or Associates. However,
any transaction or series of related transactions during that time period in
which Royal Philips would acquire all of the Equity Securities it does not then
own is subject to the receipt of the approval of the Supervisory Committee of
MedQuist's board of directors.
Transfers of Shares by Royal Philips After the Offer. Royal Philips has
agreed that until the first anniversary of the Governance Agreement Effective
Time, it will not, and will not permit any of its subsidiaries to, directly or
indirectly, sell, transfer or otherwise dispose of any Equity Securities
beneficially owned, directly or indirectly, by Royal Philips or its
subsidiaries except to Royal Philips or to any subsidiary of Royal Philips.
Notwithstanding the foregoing, the terms of the Governance Agreement permit
Royal Philips to sell, transfer or assign Equity Securities, or permit any of
its subsidiaries which beneficially own Equity Securities to sell, transfer or
assign such Equity Securities, so long as after giving effect to any such
sales, transfers or assignments of Equity Securities, Royal Philips and its
subsidiaries beneficially own at least 60% of the then outstanding shares of
Voting Stock.
After the first anniversary of the Governance Agreement Effective Time and
until the third anniversary of the Governance Agreement Effective Time, Royal
Philips may sell or dispose of any Equity Securities to any person, but may not
enter into or consummate any transaction (or series of related transactions)
involving the sale or transfer of Equity Securities that would result in (i)
any person other than Royal Philips or any Affiliate or Associate of Royal
Philips beneficially owning in excess of 10% of the outstanding Voting Stock (a
"Third Party Purchaser") and (ii) Royal Philips and its Affiliates and
Associates beneficially owning less than a majority of the then outstanding
Voting Stock, unless:
. the Third-Party Purchaser contemporaneously offers to acquire, or
acquires, on the same terms and conditions as are applicable to Royal
Philips, its Affiliates or Associates, 100% of the Voting Stock
beneficially owned by persons or entities other than Royal Philips, its
Affiliates or Associates; or
. the Third-Party Purchaser offers to purchase, on the same terms and
conditions as are applicable to Royal Philips, its Affiliates or
Associates, pursuant to a tender or exchange offer made in accordance
with applicable law, including Section 14(d)(1) and Regulation 14D of
the Exchange Act, all or a specified percentage of the then outstanding
shares of Voting Stock (and Royal Philips has agreed that it and its
Affiliates or Associates will not sell to the Third Party Purchaser any
shares of Voting Stock other than pursuant to such tender or exchange
offer).
After the third anniversary of the Governance Agreement Effective Time,
Royal Philips may sell or dispose of any Equity Securities to any person
without limitation.
MedQuist's Board of Directors.
The Governance Agreement provides that MedQuist will take any and all action
necessary so that promptly following the Governance Agreement Effective Time,
the board of directors will consist of eleven directors. These eleven directors
will be comprised of the following individuals:
. one director will be the Chief Executive Officer of MedQuist and one
director will be another officer of MedQuist designated by the Chief
Executive Officer (together, the "Management Directors");
. six directors will be designated by Royal Philips (the "Purchaser
Directors"); and
. three directors will be "Independent Directors" (as defined below).
After the Governance Agreement Effective Time, the board of directors will
have the power to increase or decrease the size of the board in its discretion
so long as (x) there are at least two Management Directors and three
Independent Directors, and (y) the relative percentage of Management Directors,
Independent Directors
23
<PAGE>
and Purchaser Directors is maintained, in all material respects, as in effect
immediately prior to any such increase or decrease. As used in the Governance
Agreement, the term "Independent Director" means a director of MedQuist (i) who
is not and has never been an officer or employee of MedQuist, any Affiliate or
Associate of MedQuist, or an entity that derived 5% or more of its revenues or
earnings in its most recent fiscal year from transactions involving MedQuist or
any Affiliate or Associate of MedQuist, (ii) who is not and has never been an
officer, employee or director of Royal Philips, any Affiliate or Associate of
Royal Philips, or an entity that derived more than 5% of its revenues or
earnings in its most recent fiscal year from transactions involving Royal
Philips or any Affiliate or Associate of Royal Philips and (iii) who was
nominated for such position by the Nominating Committee in accordance with the
terms of the Governance Agreement. The initial Independent Directors will be
John H. Underwood, Richard H. Stowe and A. Fred Ruttenberg.
In addition, as set forth in the following table, the number of directors
Royal Philips is permitted to designate or nominate under the terms of the
Governance Agreement is based on its beneficial ownership of Voting Stock:
<TABLE>
<CAPTION>
Number of
Royal Philips
Beneficial Ownership of Voting Stock Directors
------------------------------------ -------------
<S> <C>
More than 50%................................................ 6
More than 36%................................................ 4
More than 27%................................................ 3
More than 18%................................................ 2
5% or more................................................... 1
Less than 5%................................................. 0
</TABLE>
If Royal Philips has the right to designate fewer than six directors, the
Nominating Committee of MedQuist's board of directors will nominate that number
of additional Independent Directors as is necessary to constitute the entire
board of directors.
Royal Philips will have the right to designate any replacement for a
Purchaser Director at the termination of such director's term or upon such
director's death, resignation, retirement, disqualification, removal from
office or other cause, and the Chief Executive Officer of MedQuist will have
the right to designate any replacement for a Management Director at the
termination of such director's term or upon such director's death, resignation,
retirement, disqualification, removal from office or other cause.
Committees of MedQuist's Board of Directors.
The Governance Agreement provides that the board of directors will establish
the following three committees, with the following responsibilities:
. a Nominating Committee, responsible, among other things, for the
nomination, subject to the terms of the Governance Agreement, of the
Independent Directors and consisting solely of two Independent
Directors, one Purchaser Director and one Management Director as
selected by the board of directors from time to time;
. a Compensation Committee, responsible, among other things, for the
adoption, amendment and administration of all employee benefit plans and
arrangements and the compensation of all officers of MedQuist, and
consisting of two Independent Directors and two Purchaser Directors as
selected by the Nominating Committee and Royal Philips, respectively,
from time to time;
. a Supervisory Committee, consisting of at least three Independent
Directors selected by a majority of the Independent Directors,
responsible, among other things, for:
(A) the general oversight, administration, amendment and enforcement,
on behalf of MedQuist, of (1) those provisions of the Tender Offer
Agreement that survive Royal Philips' purchase of Shares pursuant
to the Offer, (2) the Governance Agreement and (3) the License
Agreement; and
24
<PAGE>
(B) the entry into, general oversight, administration, amendment and
enforcement, on behalf of MedQuist, of any other agreements or
arrangements between MedQuist or any of its subsidiaries, on the
one hand, and Royal Philips and any of its subsidiaries on the
other hand, which would be required pursuant to Regulation S-K
promulgated by the SEC to be disclosed in a registration statement
filed under the Securities Act or in a proxy statement or other
report filed under the Exchange Act.
The board of directors may establish such other committees as it may
determine in its discretion so long as those other committees do not conflict
with, supersede or duplicate the duties or responsibilities of the Nominating
Committee, the Compensation Committee or the Supervisory Committee.
The Employment Agreements.
In connection with the Tender Offer Agreement, MedQuist entered into new
employment agreements with Messrs. Cohen, Donohoe, Emery, Scarpone, Suender,
Cohen, and Quaintance (collectively, the "executives"). These employment
agreements will become effective at the time Royal Philips pays for the Shares
pursuant to the Tender Offer Agreement (the "effective date"), so long as each
executive is employed by MedQuist at that time. These new agreements will
supercede all prior employment agreements between MedQuist and the executives
and will remain in effect until the third anniversary of the effective date,
with automatic renewals for one year periods unless either party gives 90 days
prior written notice.
The employment agreements provide that each executive will serve MedQuist in
the same position and role in which they served prior to the effective date.
Each executive shall receive the same salary as he earned immediately prior to
the effective date. In addition, each executive will be eligible for
participation in MedQuist's short term targeted bonus plan in an amount equal
to up to a specified percentage of base salary. (For Mr. Cohen, such percentage
will be 75%, for Mr. Donohoe, 45%, for Messrs. Emery, Scarpone, Suender and
Cohen, 30%, and for Quaintance, 25%.) Subject to the completion of the Offer,
on or following the effective date, the executives (with the exception of Mr.
Cohen) will also be granted options to purchase Shares under MedQuist's
Incentive Stock Option Plan for Officers and Key Employees, as follows: Mr.
Donohoe will be granted an option to purchase 100,000 Shares at an exercise
price of $51.00 and 100,000 Shares at an exercise price of $70.00; Messers.
Emery and Suender will each be granted an option to purchase 40,000 Shares at
an exercise price of $51.00 and 40,000 Shares at an exercise price of $70.00;
and Messrs. Cohen, Scarpone and Quaintance will each be granted an option to
purchase 25,000 Shares at an exercise price of $51.00 and 25,000 Shares at an
exercise price of $70.00.
The executives agreed that the consummation of the transactions authorized
by the Tender Offer Agreement will not constitute a "change in control" for
purposes of all (in the case of Messrs. Cohen, Donohoe, Suender and Scarpone),
68,943 out of 78,000 (in the case of Mr. Emery), 59,234 out of 68,071 (in the
case of Mr. Cohen) or 44,400 out of 49,800 (in the case of Mr. Quaintance)
outstanding unvested options held as of the effective date (the "deferred
vesting options") and agreed to waive all rights to the accelerated vesting of
the deferred vesting options which would have occurred upon the consummation of
the transactions authorized by the Tender Offer Agreement. Such waiver shall be
deemed revoked, and all deferred vesting options shall immediately vest in the
event of the executive's death or disability, a termination of the executive by
MedQuist without "cause" (as such term is defined in the employment agreement),
the executive's receipt of notice from MedQuist of nonrenewal of the agreement,
a voluntary resignation by the executive following a required relocation of the
executive's principal place of business by more than fifty miles, or a failure
by MedQuist to pay the compensation authorized by the agreement, provided that
the executive has given MedQuist notice of such breach and MedQuist has not
cured such breach within thirty (30) days of receipt of such notice (a
"material breach").
If MedQuist terminates an executive's employment without cause or if such
executive voluntarily terminates his employment following a required relocation
of his principal place of business by more than fifty (50) miles or following a
material breach, the executive will receive (i) accrued but unpaid salary
prorated
25
<PAGE>
through the date of termination or effective date of resignation ("accrued
salary"); (ii) a lump sum cash payment equal to 2 (in the case of Messrs. Cohen
and Donohoe) or 1.5 (in the case of the other executives) multiplied by the sum
of all cash compensation awarded to such executive in the fiscal year
immediately prior to termination, or if such executive's compensation was
higher or would be higher on an annualized basis, in the fiscal year in which
such termination takes place; (iii) any benefits vested as of the termination
date ("vested benefits"); and (iv) unreimbursed expenses incurred prior to the
termination date. If the executive terminates due to death or disability or
resignation, or if MedQuist terminates the executive's employment for cause,
the executive will receive accrued salary, vested benefits, and unreimbursed
expenses incurred prior to the termination date.
Each executive is entitled to receive an additional tax "gross-up" payment
which would put him in the financial position after-tax that he would have been
in if the excise tax imposed by Code Section 4999 (the "excise tax") did not
apply to any benefits or payments received from MedQuist (the "payments").
Notwithstanding the foregoing, if it is determined that the payments would not
be subject to the excise tax if they were reduced by less than ten percent,
then the payments will be reduced to the maximum amount that could be paid to
the executive without giving rise to the excise tax. In addition, the gross-up
payment shall not apply to any stock option grant if the result would be to
alter the basis on which compensation expense is measured for purposes of
Accounting Principles Board Opinion Number 25.
During the term of the employment agreements, and for two years following an
executive's termination for any reason, each executive is prohibited from
competing with MedQuist (limited to the electronic transcription services and
health information management solutions services businesses) or soliciting
MedQuist's clients or employees.
12. Source and Amount of Funds.
Royal Philips estimates that the total amount of funds required to purchase
22,250,327 Shares pursuant to the Offer and to pay related fees and expenses
will be approximately $1.1 billion. Royal Philips presently intends to finance
the Offer with its cash position and cash flow from existing businesses.
13. Certain Conditions of the Offer.
Notwithstanding any other provision of the Offer and provided that Royal
Philips is not obligated to accept for payment any Shares until expiration of
all applicable waiting periods under the HSR Act, Royal Philips is not required
to accept for payment or pay for, or may delay the acceptance for payment of or
payment for, any tendered Shares, or may, in its sole discretion, terminate or
amend the Offer as to any Shares not then paid for if less than 22,250,327
Shares are properly and validly tendered pursuant to the Offer and not
withdrawn prior to the expiration of the Offer, or, if on or after May 22,
2000, and at or before the time of payment for any of such Shares (whether or
not any Shares have theretofore been accepted for payment), any of the
following events occurs:
(a) MedQuist breaches or fails to perform in any material respect any of
its obligations, covenants or agreements under the Tender Offer Agreement
or any representation or warranty of MedQuist set forth in the Tender Offer
Agreement which is qualified by "Company Material Adverse Effect" was
inaccurate or incomplete as so qualified when made or thereafter has become
inaccurate or incomplete as so qualified, or any representation or warranty
of MedQuist set forth in the Tender Offer Agreement which is not qualified
by "Company Material Adverse Effect" was inaccurate or incomplete in any
material respect when made or thereafter becomes inaccurate or incomplete
in any material respect;
(b) there is instituted or pending any action, litigation, proceeding,
investigation or other application (an "Action") before any court or other
governmental entity by any governmental entity or by any other person,
domestic or foreign (it being understood that, with respect to any Action
by any person other than a governmental entity, this clause (b) will only
apply to bona fide Actions that are reasonably likely to be successful on
the merits): (i) challenging the acquisition by Royal Philips of Shares,
seeking to restrain or
26
<PAGE>
prohibit the consummation of the transactions contemplated by the Offer or
seeking to obtain any material damages in connection with the transactions
contemplated by the Offer; (ii) seeking to prohibit, or impose any material
limitations on, Royal Philips' ownership or operation of all or any portion
of their or MedQuist's business or assets (including the business or assets
of their respective affiliates and subsidiaries), or to compel Royal
Philips to dispose of or hold separate all or any portion of Royal Philips'
or MedQuist's business or assets (including the business or assets of their
respective affiliates and subsidiaries) as a result of the transactions
contemplated by the Offer; (iii) seeking to make the acceptance for
payment, purchase of, or payment for, some or all of the Shares illegal or
render Royal Philips unable to, or result in a delay (other than an
immaterial delay) in, or restrict (other than immaterially), the ability of
Royal Philips to accept for payment, purchase or pay for some or all of the
Shares; (iv) seeking to impose material limitations on the ability of Royal
Philips effectively to acquire or hold or to exercise full rights of
ownership of the Shares including, without limitation, the right to vote
the Shares purchased by them on an equal basis with all other Shares on all
matters properly presented to the shareholders; or (v) that, in any event,
in the reasonable judgment of Royal Philips, is reasonably likely to have a
Company Material Adverse Effect or have a material adverse effect on the
value of the Shares to Royal Philips or the benefits expected to be derived
by Royal Philips as a result of consummation of the transactions
contemplated by the Offer;
(c) any statute, rule, regulation, order or injunction is enacted,
promulgated, entered, enforced or deemed applicable to the Offer, or any
other action has been taken, proposed or threatened, by any court or other
governmental entity other than the application to the Offer of waiting
periods under the HSR Act, that could, directly or indirectly, be
reasonably expected to result in any of the effects of, or have any of the
consequences sought to be obtained or achieved in, any Action referred to
in clauses (i) through (v) of paragraph (b) above;
(d) there has occurred a Company Material Adverse Effect or any
occurrence or event has occurred that is reasonably likely to result in a
Company Material Adverse Effect;
(e) the board of directors of MedQuist (or a special committee thereof)
has amended or modified in a manner adverse to Royal Philips its approval
or recommendation of the Offer, has withdrawn such recommendation or has
approved or recommended any other Acquisition Proposal, or has resolved to
do any of the foregoing;
(f) the Tender Offer Agreement is terminated by MedQuist or Royal
Philips in accordance with its terms, or Royal Philips reaches an agreement
or understanding in writing with MedQuist providing for termination;
(g) any of the Employment Agreements are terminated or repudiated by the
executive a party thereto, except as may result from the death or
disability of such executive;
(h) MedQuist terminates or repudiates the License Agreement;
(i) any of the Shareholder Agreements are terminated or repudiated by
the shareholder a party thereto; or
(j) MedQuist terminates or repudiates the Governance Agreement;
which, in the good faith reasonable judgment of Royal Philips, in any such
case, and regardless of the circumstances (including any action or inaction by
Royal Philips other than a material breach of the Tender Offer Agreement)
giving rise to any such conditions, makes it inadvisable to proceed with the
Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Royal Philips and may
be asserted by Royal Philips regardless of the circumstances (including any
action or inaction by Royal Philips other than a material breach of this
Agreement) giving rise to such condition or may be waived by Royal Philips, in
its sole discretion, by express and specific action to that effect, in whole or
in part at any time and from time to time.
27
<PAGE>
14. Dividends and Distributions.
Pursuant to the Tender Offer Agreement, MedQuist has agreed that during the
term of the Tender Offer Agreement MedQuist may not declare, set aside or pay
any dividend payable in cash, stock or property with respect to the Shares.
15. Certain Legal Matters.
General. Except as otherwise disclosed herein, based upon an examination of
publicly available filings with respect to MedQuist, Royal Philips is not aware
of any licenses or other regulatory permits which appear to be material to the
business of MedQuist and which might be adversely affected by the acquisition
of the Shares by Royal Philips pursuant to the Offer or of any approval or
other action by any governmental, administrative or regulatory agency or
authority which would be required for the acquisition or ownership of the
Shares by Royal Philips pursuant to the Offer. Should any such approval or
other action be required, it is currently contemplated that such approval or
action would be sought or taken. There can be no assurance that any such
approval or action, if needed, would be obtained or, if obtained, that it would
be obtained without substantial conditions or that adverse consequences might
not result to MedQuist's or Royal Philips' business or that certain parts of
MedQuist's or Royal Philips' business might not have to be disposed of in the
event that such approvals were not obtained or such other actions were not
taken, any of which might enable Royal Philips to elect to terminate the Offer
without the purchase of the Shares thereunder, if the relevant conditions to
termination were met. Royal Philips' obligation under the Offer to accept for
payment and pay for the Shares is subject to certain conditions. See Section
13.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission ("FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of the Shares by Royal Philips is subject to
these requirements. See Section 2 of this Offer to Purchase as to the effect of
the HSR Act on the timing of Royal Philips' obligation to accept Shares for
payment.
Pursuant to the HSR Act, Royal Philips expects to file a Notification and
Report Form with respect to the acquisition of the Shares pursuant to the Offer
with the Antitrust Division and the FTC on or about June 2, 2000. Under the
provisions of the HSR Act applicable to the purchase of the Shares pursuant to
the Offer, such purchases may not be made until the expiration of a 15-calendar
day waiting period following the filing by Royal Philips. Accordingly, the
waiting period under the HSR Act will expire at 11:59 p.m., New York City time,
on or about June 17, 2000, unless early termination of the waiting period is
granted or Royal Philips receives a request for additional information or
documentary material prior thereto. Pursuant to the HSR Act, Royal Philips will
request early termination of the waiting period applicable to the Offer. There
can be no assurances given, however, that the 15-day HSR Act waiting period
will be terminated early. If either the FTC or the Antitrust Division were to
request additional information or documentary material from Royal Philips, the
waiting period would expire at 11:59 p.m., New York City time, on the tenth
calendar day after the date of substantial compliance by Royal Philips with
such request unless the waiting period is sooner terminated by the FTC or the
Antitrust Division. Thereafter, the waiting period could be extended only by
agreement or by court order. See Section 2. Only one extension of such waiting
period pursuant to a request for additional information is authorized by the
rules promulgated under the HSR Act, except by agreement or by court order. Any
such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4. Royal
Philips expects the waiting period under the HSR Act to expire at the end of
the 15-day period, if not earlier terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of the
Shares by Royal Philips pursuant to the Offer. At any time before or after
Royal Philips' purchase of the Shares, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the
28
<PAGE>
acquisition of the Shares pursuant to the Offer or seeking divestiture of the
Shares acquired by Royal Philips or the divestiture of substantial assets of
Royal Philips, MedQuist or any of their respective subsidiaries. Private
parties may also bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if a challenge is made, what the result
will be. See Section 13 of this Offer to Purchase for certain conditions to the
Offer that could become applicable in the event of such a challenge.
State Takeover Laws.
Section 14A:10A-4 of the New Jersey Business Corporation Act (the "NJBCA")
limits the ability of a New Jersey corporation to engage in "business
combinations" (as defined in the NJBCA) with an "interested stockholder"
(defined generally as any beneficial owner of 10% or more of the outstanding
voting stock of the corporation) unless, among other things, the corporation's
board of directors has given its approval to the business combination prior to
the shareholder becoming an interested stockholder. MedQuist's board of
directors has granted such approvals and taken such actions as are necessary so
that the Offer may be consummated as promptly as practicable on the terms
contemplated, and has taken such actions so that Royal Philips (or its
affiliates) would not be prevented or prohibited from effectuating a business
combination with MedQuist after the purchase of the Shares pursuant to the
Offer, so long as the subsequent business combination is approved by the
Supervisory Committee of MedQuist's board of directors, and the MedQuist board
of directors has otherwise acted to eliminate or minimize the effects of such
statute or regulation on the transactions contemplated hereby.
Based on information supplied by or on behalf of MedQuist, Royal Philips
does not believe that any state takeover laws purport to apply to the Offer.
Royal Philips has not currently taken any actions necessary to comply with any
state takeover statute or regulation. Royal Philips reserves the right to
challenge the applicability or validity of any state law purportedly applicable
to the Offer and nothing in this Offer to Purchase or any action taken in
connection with the Offer is intended as a waiver of such right. If it is
asserted that any state takeover statute is applicable to the Offer and if an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, Royal Philips might be required to file certain
information with, or to receive approvals from, the relevant state authorities,
and Royal Philips might be unable to accept for payment or pay for any Shares
tendered pursuant to the Offer. In such case, Royal Philips may not be obliged
to accept for payment or pay for any Shares tendered pursuant to the Offer.
16. Fees and Expenses.
Goldman, Sachs & Co. is acting as Dealer Manager in connection with the
Offer and one of its affiliates, Goldman Sachs International (together with
Goldman, Sachs & Co. "Goldman Sachs") has provided certain financial advisory
services to Royal Philips in connection therewith. Royal Philips also has
agreed to pay Goldman Sachs reasonable and customary compensation for its
services as Dealer Manager and as financial advisor in connection with the
Offer. Royal Philips has also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including the fees and expenses of its
counsel, in connection with the Offer, and has agreed to indemnify Goldman
Sachs against certain liabilities and expenses in connection with the Offer,
including liabilities under the Federal securities laws. At any time, Goldman
Sachs and its affiliates may actively trade the Shares for their own account or
for the account of customers and, accordingly, may at any time hold a long or
short position in the Shares.
Morrow & Co., Inc. is acting as Information Agent in connection with the
Offer. The Information Agent may contact holders of the Shares by personal
interview, mail, telephone, telex, telegraph and other methods of electronic
communication and may request brokers, dealers, banks, trust companies and
other nominees to forward the Offer materials to beneficial holders. The
Information Agent will receive reasonable and customary compensation for its
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection with its
services, including certain liabilities under the Federal securities laws.
29
<PAGE>
Royal Philips will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for out-of-
pocket expenses, and will indemnify the Depositary against certain liabilities
and expenses in connection therewith, including liabilities under the Federal
securities laws. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Royal Philips for customary mailing and handling expenses
incurred by them in forwarding material to their customers.
17. Miscellaneous.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of the Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. However, Royal Philips may, in its sole discretion, take
such action as it may deem necessary to make the Offer in any such jurisdiction
and extend the Offer to holders of the Shares in such jurisdiction.
Royal Philips is not aware of any jurisdiction in which the making of the
Offer or the acceptance of the Shares in connection therewith would not be in
compliance with the laws of such jurisdiction.
Royal Philips has filed a Schedule TO with the SEC pursuant to Rule l4d-3 of
the General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. The Schedule TO and any amendments thereto, including exhibits, may be
examined and copies may be obtained from the principal office of the SEC in
Washington, D.C. and the Nasdaq Stock Market in the manner set forth in Section
8. The safe harbor provisions of the Private Securities Litigation Reform Act
of 1995 are not applicable to forward-looking statements made in this Offer to
Purchase.
No person has been authorized to give any information or make any
representation on behalf of Royal Philips not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
Koninklijke Philips Electronics N.V.
June 1, 2000
30
<PAGE>
SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF ROYAL PHILIPS
The following tables set forth the name, business address, present principal
occupation and material positions held within the past five years of each
director and executive officer of Royal Philips.
DIRECTORS AND EXECUTIVE OFFICERS OF ROYAL PHILIPS*
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Business Employment and Five-Year Employment
Address Office(s) History
----------------- -------------------------- ------------------------------------
<S> <C> <C>
Cor Boonstra............ President; Chairman of the President, Chairman of the Board of
Board of Management and Management and the Group Management
the Group Management Committee of Royal Philips
Committee Electronics. Prior to 1999, Member
of the Supervisory Board of PolyGram
N.V. Currently, Member of the
Supervisory Boards of Sara Lee DE
N.V., Hunter Douglas International
N.V., NBM/Amstelland N.V., Ahold
N.V., Technical University
Eindhoven. Member of the Board of
Directors of The Seagram Company
Ltd.
Jan H.M. Hommen......... Executive Vice-President; Executive Vice-President, Member of
Member of the Board of the Board of Management and the
Management and the Group Group Management Committee and Chief
Management Committee; Financial Officer of Royal Philips
Chief Financial Officer Electronics. Prior to 1997, Chief
Financial Officer of Alcoa
International Holdings Co. From 1997
to 1999, Member of the Supervisory
Board of PolyGram N.V.
Adri Baan............... Executive Vice-President; Executive Vice-President, Member of
Member of the Board of the Board of Management and the
Management and the Group Group Management Committee and
Management Committee; President/CEO of the Consumer
President/CEO of the Electronics Division of Royal
Consumer Electronics Philips Electronics. Prior to 1998,
Division Chairman of the Philips Business
Electronics Division of Royal
Philips Electronics.
Arthur P.M. van der Executive Vice-President; Executive Vice-President, Member of
Poel................... Member of the Board of the Board of Management, Member of
Management and the Group the Group Management Committee and
Management Committee; President/CEO of the Semiconductor
President/CEO of the Division of Royal Philips
Semiconductor Division Electronics. Member of the Board of
Directors of Taiwan Semiconductor
Manufacturing Company Ltd.
</TABLE>
--------
* Each person has a business address at Rembrandt Tower, Amstelplein 1, 1096 HA
Amsterdam, the Netherlands and is a citizen of the Netherlands, unless a
different address and/or citizenship is indicated under his or her name.
A-1
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Business Employment and Five-Year Employment
Address Office(s) History
----------------- -------------------------- ------------------------------------
<S> <C> <C>
John W. Whybrow......... Executive Vice-President; Executive Vice-President, Member of
United Kingdom Member of the Board of the Board of Management, Member of
Management and the Group the Group Management Committee and
Management Committee; President/CEO of the Lighting
President/CEO of the Division of Royal Philips
Lighting Division Electronics. Since 1997, Director of
Wolseley PLC.
Gerard J. Kleisterlee... Executive Vice-President; Executive Vice-President, Member of
Member of the Board of the Board of Management, Member of
Management and the Group the Group Management Committee and
Management Committee; President/CEO of the Components
President/CEO of the Division of Royal Philips
Components Division Electronics. Prior to January 1,
1999, Chairman of Philips Taiwan
Ltd.
Ad H.A. Veenhof......... Senior Vice-President; Senior Vice-President, Member of the
Member of the Group Group Management Committee,
Management Committee; President/CEO of the Domestic
President/CEO of the Appliances and Personal Care
Domestic Appliances and Division of Royal Philips
Personal Care Division Electronics. Prior to 1996, Member
of the Management of Philips
Consumer Electronics.
Hans M. Barella......... Senior Vice-President; Senior Vice-President, Member of the
Member of the Group Group Management Committee of Royal
Management Committee; Philips Electronics. President/CEO
President/CEO of the of the Medical Systems Division of
Medical Systems Division Royal Philips Electronics.
Jan P. Oosterveld....... Senior Vice-President and Senior Vice-President, Member of the
Member of the Group Group Management Committee
Management Committee responsible for strategy and regions
responsible for strategy of Royal Philips Electronics. Prior
and regions. to 1997, Member of the Management of
Philips Key Modules.
Arie Westerlaken........ Senior Vice-President; Senior Vice-President, Member of the
Member of the Group Group Management Committee, General
Management Committe; Secretary, Chief Legal Officer and
General Secretary; Chief Secretary to the Board of Management
Legal Officer; Secretary of Royal Philips Electronics. Member
to the Board of Management of the Supervisory Board of ASM
Lithography Holding N.V.
Ad Huijser.............. Senior Vice-President; Senior Vice-President, Member of the
Member of the Group Group Management Committee and CEO
Management Committee and of Philips Research of Royal Philips
CEO of Philips Research Electronics. Prior to 1999, Managing
Director of Philips Research
Coordination. Prior to 1998,
Management of Philips Multimedia
Center. Prior to 1996, Chairman of
the Management Committee of the
Philips Research Laboratories.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Business Employment and Five-Year Employment
Address Office(s) History
----------------- -------------------------- ------------------------------------
<S> <C> <C>
Tjerk Hooghiemstra...... Senior Vice-President; Senior Vice-President and Member of
Member of the Group the Group Management Committee
Management Committee responsible for Corporate Human
responsible for Corporate Resources Management of Royal
Human Resources Management Philips Electronics. From 1996 to
2000, Member of the HRM of the
Philips Consumer Electronics
Division and prior to 1996, Director
of Hay Management Consultants.
Guy Demuynck............ Senior Vice-President; Senior Vice-President, Member of the
Member of the Group Group Management Committee and CEO
Management Committee; CEO of Consumer Electronics Mainstream
of Consumer Electronics of Royal Philips Electronics. Prior
Mainstream to April 2000, Member of the
management of various Philips
Consumer Electronics businesses.
L.C. van Wachem......... Chairman of the Retired. Member of the Supervisory
Supervisory Board Board of Royal Philips Electronics
since 1993. Chairman of the
Supervisory Board of Royal Dutch
Petroleum Company; Member of the
Supervisory Boards of Akzo Nobel,
BMW, and member of the Board of
Directors of IBM, ATCO and Zurich
Insurance.
W. de Kleuver........... Vice-Chairman and Retired. Member of the Supervisory
Secretary of the Board of Royal Philips Electronics
Supervisory Board since 1998. Prior to September 1998,
Executive Vice-President, Member of
the Board of Management and the
Group Management Committee of Royal
Philips Electronics. Prior to 1996,
Member of the Group Management
Committee and Chairman of the
Components Division of Royal Philips
Electronics.
W. Hilger............... Member of the Supervisory Retired. Member of the Supervisory
Germany Board Board of Royal Philips Electronics
since 1990. Member of the
Supervisory Boards of Victoria
Versicherung and Victoria
Lebensversicherung.
L. Schweitzer........... Member of the Supervisory Member of the Supervisory Board of
34 Quai du Point du Board Royal Philips Electronics since
Jour 1997. Chairman and Chief Executive
BP 103 92109 Officer of Renault; Member of the
Boulogne Boards of Pechiney, Banque Nationale
Bilancourt de Paris, Electricite de France.
Cedex, France
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Business Employment and Five-Year Employment
Address Office(s) History
----------------- -------------------------- ------------------------------------
<S> <C> <C>
Sir Richard Greenbury... Member of the Supervisory Member of the Supervisory Board of
United Kingdom Board Royal Philips Electronics since
1998. Former Chairman and CEO of
Marks & Spencer and former non-
executive member of the Board of
Directors of Lloyds TSB, British
Gas, ICI and Zeneca.
J.M. Hessels............ Member of the Supervisory Member of the Supervisory Board of
Board Royal Philips Electronics since
1999. Chief Executive Officer of
Vendex KBB. Member of the
Supervisory Boards of Achmea,
Amsterdam Exchanges, Barnes &
Noble.com, Laurus, Schiphol Group
and Royal Vopak.
K. van Miert............ Member of the Supervisory Member of the Supervisory Board of
Board Royal Philips Electronics since
2000. Chairman--Rector of Nijenrode
University. Former member of the
European Commission.
</TABLE>
A-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. The Letter of Transmittal,
certificates for the Shares and any other required documents should be sent or
delivered by each shareholder of MedQuist or his broker-dealer, commercial
bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
American Stock Transfer & Trust Company
By Registered Mail: By Hand Delivery: By Overnight Courier:
40 Wall Street, 46th 40 Wall Street, 46th 40 Wall Street, 46th
Floor Floor Floor
New York, New York 10005 New York, New York 10005 New York, New York 10005
By Facsimile Transmission:
(718) 234-5001
Confirm Facsimile by Telephone Only:
(718) 921-8200 ext. 6820
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal, the Notice of Guaranteed Delivery
and related materials may be directed to the Information Agent or the Dealer
Manager at their respective telephone numbers and locations listed below. You
may also contact your broker, dealer, commercial bank or trust company or other
nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
445 Park Avenue, 5th Floor
New York, New York 10022
Banks and Brokerage Firms Call:
(880) 662-5200
Shareholders Please Call:
(800) 566-9061
The Dealer Manager for the Offer is:
Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
(212) 902-1000 (call collect)
(800) 323-5678 (call toll free)
