SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )
MedQuist Inc.
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(Name of Issuer)
Common Stock, No Par Value
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(Title of Class of Securities)
584949101
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(CUSIP Number)
Stephen M. Kotran, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498
(212) 558-4000
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 22, 2000
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(Date of Event which Requires Filing of this Statement)
If a filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d- 1(g), check
the following box [ ].
<PAGE>
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CUSIP NO. 584949101
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1. NAME OF REPORTING PERSON
Koninklijke Philips Electronics N.V.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
222531298
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E)
[ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
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7. SOLE VOTING POWER
NUMBER OF -0-
SHARES --------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 3,060,733
EACH --------------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH --------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
3,060,733
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,060,733
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.2%
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14. TYPE OF REPORTING PERSON
CO
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Item 1. Security and Issuer.
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The class of equity securities to which this Statement relates is the
common stock, no par value (the "Shares"), of MedQuist Inc., a New Jersey
corporation (the "Issuer"), whose principal executive offices are located at
Five Greentree Centre, Suite 311, Marlton, New Jersey 08053.
Item 2. Identity and Background.
-----------------------
(a)-(c); (f). This Statement is being filed by Koninklijke Philips
Electronics N.V.("Royal Philips"), a corporation incorporated under the laws of
the Netherlands. Royal Philips has its principal executive offices at Rembrandt
Tower, Amstelplein 1, 1096 HA Amsterdam, the Netherlands. Royal Philips has
manufacturing and sales organizations in over 60 countries. It 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.
Attached as Schedule I hereto and incorporated by reference herein is a
list of the directors and executive officers of Royal Philips. Schedule I sets
forth each of such persons' name, citizenship, business address, present
principal occupation or employment, and the name, principal business and address
of the corporation or other organization in which such employment is conducted.
(d)-(e). During the last five years, neither Royal Philips, nor, to the
best of its knowledge, any person listed in Schedule I has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
Royal Philips estimates that the total amount of funds required to
purchase 1,149,759 Shares (as contemplated
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by the Shareholder Agreements and described in Items 4 and 5 herein) will be
$58,637,709.
Royal Philips presently intends to finance the purchase with its cash
position and cash flow from existing businesses.
Item 4. Purpose of the Transaction.
--------------------------
Purpose: Pursuant to the terms of a Tender Offer Agreement, dated as of
May 22, 2000, between Royal Philips and the Issuer (the "Tender Offer
Agreement"), on June 1, 2000, Royal Philips commenced a tender offer (the
"Offer") for 22,250,327 Shares, which constitutes approximately 57% of the fully
diluted Shares. In connection with the execution and delivery of the Tender
Offer Agreement, Royal Philips also entered into separate Shareholder
Agreements, each dated May 22, 2000, with seven members of the Issuer's senior
management (each a "Shareholder Agreement" and, collectively, the "Shareholder
Agreements"), pursuant to which, if Royal Philips purchases Shares pursuant to
the terms and conditions of the Offer, it will, promptly after expiration of the
Offer, purchase an additional 1,149,759 Shares in the aggregate from the
shareholders who are parties to the Shareholder Agreements.
After the 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 the Issuer will be a direct
majority-owned subsidiary of Royal Philips.
Plans for the Issuer: As of the date hereof and except as otherwise
described in this Item 4, Royal Philips does not have any plans or proposals
with respect to the Issuer that relate to, or would result in:
(a) The acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer or
of any of its subsidiaries;
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(d) Any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter or by-laws or other actions which
may impede the acquisition of control of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or
(j) Any action similar to any of those enumerated above.
Royal Philips expects after acquiring 60% of the fully diluted Shares
upon the successful completion of the Offer and the purchases contemplated by
the Shareholder Agreements to evaluate and review the Issuer 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 the Issuer 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, dated as of May 22, 2000,
between Royal Philips and the Issuer (the "Governance Agreement"), such changes
could include, among other things, restructuring the Issuer through changes in
the Issuer's business, corporate structure, certificate of incorporation,
by-laws, capitalization or management or could involve consolidating
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and streamlining certain operations and reorganizing other businesses and
operations.
Royal Philips also intends to evaluate and review its investment in the
Issuer on an ongoing basis. 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 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.
Assuming the Tender Offer Condition (as such term is defined in the
Tender Offer Agreement), 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, the Issuer's board of directors. Under the
Governance Agreement, the Issuer 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
Issuer's Solicitation/Recommendation Statement on Schedule 14D-9, which was
filed with the Securities and Exchange Commission on June 1, 2000.
Item 5. Interest in Securities of Issuer.
--------------------------------
As of the date hereof, as explained in more detail below, Royal Philips
beneficially owns 3,060,733 Shares, which constitutes approximately 8.2% of the
outstanding Shares on a fully diluted basis and has shared voting and/or
dispositive power over such Shares.
The following is a summary of certain provisions of the Shareholder
Agreements. The following summary is not a complete description of the terms and
conditions of such agreements and is qualified in its entirety by reference to
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the full text of each of the Shareholder Agreements which are attached hereto as
Exhibits 2, 3, 4, 5, 6, 7 and 8 hereto and are incorporated herein by reference.
Capitalized terms not otherwise defined below have the respective meanings set
forth in the Shareholder Agreements.
THE SHAREHOLDER AGREEMENTS.
Royal Philips has entered into the Shareholder Agreements with the
following members of Issuer's senior management:
Name Position
---- --------
David A. Cohen Chairman and Chief Executive
Officer
John A. Donohoe, Jr. President and Chief Operating
Officer
John R. Emery Chief Financial
Officer
John M. Suender General Counsel
Ronald A. Scarpone Senior Vice President of New
Business Development
Ethan Cohen Senior Vice President and
Chief Technology Officer
John W. Quaintance Senior Vice President
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 to be paid by Royal Philips in the Offer:
Name Number of Shares
---- ----------------
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
Each Shareholder Agreement also provides that, except with respect to
the 1,149,759 Shares to be sold to Royal Philips pursuant to the terms of the
Shareholder Agreements, until May 22, 2002 (unless the agreement is
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otherwise terminated in accordance with its terms), the shareholder 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 the Issuer, 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 Securities and
Exchange Commission.
Each shareholder has further 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:
(a) any acquisition agreement or other similar agreement related to an
Acquisition Proposal (as such term is defined in the Tender Offer Agreement);
(b) any change in the Issuer's management or the Issuer's board of
directors, except as otherwise agreed to in writing by Royal Philips; or
(c) any other material change in the Issuer'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
the Issuer with respect to certain options held by such shareholder
that would otherwise vest upon Royal Philips' purchase of Shares
pursuant to the Offer.
The following table sets forth, as of the date hereof, the number
of Shares and options held by each shareholder.
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Name Shares Owned Options Owned*
---- ------------ -------------
David A. Cohen, 1,208,826 740,000
John A. Donohoe, Jr. 109,502 387,392
John R. Emery 143 115,000
John M. Suender 18,722 122,000
Ronald A. Scarpone 0 98,723
Ethan Cohen 15,337 171,088
John W. Quaintance 0 74,000
Total 1,352,530 1,708,203
None of the persons listed in Schedule I beneficially owns or has a
right to acquire any Shares or has engaged in any transaction in the Shares in
the past 60 days.
Item 6. Contracts, Arrangements, Understandings
or Relationships with Respect to
Securities of the Issuer.
---------------------------------------
Other than as set forth in response to Item 5 and in this Item 6, there
are no contracts, arrangements, understandings or relationships (legal or
otherwise) among Royal Philips or any of the persons set forth in Schedule I
hereto and between such persons and any person with respect to any securities of
the Issuer.
The following is a summary of certain provisions of each of the Tender
Offer Agreement and the Governance Agreement. This following summary of each of
such agreements is not a complete description of the terms and
-------------------
* As of the date hereof, the number of Shares issuable upon exercise of options
exercisable within 60 days is as follows: (i) for David A. Cohen, 374,002
Shares; for John A. Donohoe, Jr., 228,392 Shares; for John R. Emery, 45,914
Shares; for John M. Suender, 47,000 Shares; for Ronald A. Scarpone, 90,088
Shares; for Ethan Cohen, 39,489 Shares; and for John W. Quaintance, 29,600
Shares.
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conditions of such agreements and is qualified in its entirety by reference to
the full text of each of the Tender Offer Agreement and the Governance Agreement
which are attached hereto as Exhibits 1 and 9 hereto and are incorporated herein
by reference. Capitalized terms not otherwise defined below have the respective
meanings set forth in the Tender Offer Agreement and the Governance Agreement.
THE TENDER OFFER AGREEMENT.
General. 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 set forth in 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. 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.
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 the Issuer;
(2) by the board of directors of either Royal Philips or the Issuer if:
(a) such termination of the Offer is not in violation of the terms
of the Offer or of the Tender Offer Agreement; or
(3) by the Issuer if:
(a) Royal Philips has failed to comply in any material respect with
any of its covenants or agreements contained in the Tender Offer
Agreement, and which failure has not been cured prior to the earlier
of:
(I) five (5) business days following the giving of written
notice to Royal Philips; or
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(II) the business day prior to the date on which the Offer is
scheduled to expire; or
(b) the board of directors of the Issuer receives or there is
publicly announced a bona fide written Acquisition Proposal that was
unsolicited and did not otherwise result from a breach of the Tender
Offer Agreement, and the board of directors of the Issuer determines in
good faith:
(I) after consultation with an investment banking firm of
national standing, that such Acquisition Proposal is a Superior
Proposal; and
(II) 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 the Issuer
substantially concurrently with such termination enters into a
definitive agreement containing the terms of the Superior Proposal.
Notwithstanding the above, the Issuer may not terminate the Tender
Offer Agreement pursuant to this provision, unless the Issuer
complies with:
(A) all the provisions of the Tender Offer Agreement,
including the applicable notification provisions; and
(B) all applicable requirements of the Tender Offer
Agreement, including the payment of the termination fee prior to
or concurrently with such termination.
In addition, the Issuer may not exercise its right to terminate the
Tender Offer Agreement pursuant to this provision until after three (3) days
following Royal Philips' receipt of written notice from the Issuer advising
Royal Philips that the Issuer's board of directors has received a Superior
Proposal (or that a tender or exchange
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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 the Issuer
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:
(a) the Issuer 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:
(I) five (5) business days following the giving of written
notice to the Issuer of such failure; or
(II) the business day prior to the date on which the Offer is
then scheduled to expire; or
(b) the board of directors of the Issuer 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
(c) if the Issuer 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
but for the exception therein allowing certain actions to be taken by
the Issuer'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 the Issuer (or any of their respective directors or
officers)
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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 the Issuer and Royal Philips will pay their
respective expenses in connection with the Tender Offer Agreement, except that
the parties have agreed that the Issuer will be required to pay Royal Philips a
termination payment of $44,750,000 if:
(i) the Offer has remained open for at least twenty (20) business
days;
(ii) the Tender Offer Condition has not been satisfied;
(iii) the Offer is terminated without the purchase of any Shares
thereunder;
(iv) 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
(v) within fifteen (15) months after the date of such termination,
the Issuer consummates or enters into an agreement with respect to any
Acquisition Proposal; in addition, if the Issuer 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, the Issuer will also be required to pay Royal Philips a
termination fee if:
(i) the Issuer 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 the Issuer of such
failure;
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(ii) the Issuer'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
(iii) the Issuer terminates the Tender Offer Agreement in order to
accept and enter into an agreement relating to a Superior Proposal.
If the Issuer is obligated to pay Royal Philips a termination fee as
described above, the Issuer 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.
THE GOVERNANCE AGREEMENT.
Effectiveness. 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 the Issuer's Voting Stock, although Royal Philips and the
Issuer may terminate the agreement earlier by mutual written consent and except
that the provisions of the agreement relating to the establishment of committees
of the Issuer'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 the Issuer having the right to vote generally in
any election of directors of the Issuer.
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
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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 the
Issuer convertible into or exchangeable for Voting Stock, and options, rights,
warrants and similar securities issued by the Issuer to purchase Voting Stock.
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 the Issuer 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 the Issuer's board of directors.
Transfer of Shares 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
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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:
(i) 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
(ii) 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.
The Issuer's Board of Directors. The Governance Agreement provides that
the Issuer will take any and all action necessary so that, promptly following
the Governance Agreement Effective Time, the board of directors will consist of
eleven (11) directors. These eleven directors will be comprised of the following
individuals:
(i) one director will be the Chief Executive Officer of the Issuer
and one director will be another officer of the Issuer designated by
the Chief Executive Officer of the Issuer (together, the "Management
Directors");
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(ii) six (6) directors would be designated by Royal Philips (the
"Purchaser Directors"); and
(iii) three (3) directors would 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 (2) Management Directors and
three (3) Independent Directors, and (y) the relative percentage of Management
Directors, Independent Directors 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 the Issuer (i) who is not and has never been an officer or
employee of the Issuer, any Affiliate or Associate of the Issuer, or an entity
that derived 5% or more of its revenues or earnings in its most recent fiscal
year from transactions involving the Issuer or any Affiliate or Associate of the
Issuer, (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:
Beneficial Ownership of Voting Stock Number of Directors
------------------------------------ -------------------
More than 50% 6
More than 36% 4
More than 27% 3
More than 18% 2
5% or more 1
Less than 5% 0
If Royal Philips has the right to designate fewer than six (6)
directors, the Nominating Committee of the
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Issuer'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 the Issuer 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 the Issuer's Board of Directors. The Governance Agreement
provides that the board of directors will establish the following three (3)
committees, with the following responsibilities:
(i) 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 (2) Independent
Directors, one Purchaser Director and one Management Director as
selected by the board of directors from time to time;
(ii) 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 the
Issuer, and consisting of two (2) Independent Directors and two (2)
Purchaser Directors as selected by the Nominating Committee and Royal
Philips, respectively, from time to time;
(iii) a Supervisory Committee, consisting of at least three (3)
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 the Issuer, 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
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(3) the License Agreement, dated as of May 22, 2000, between
Philips Speech Processing and the Issuer; and
(b) the entry into, general oversight, administration, amendment
and enforcement, on behalf of the Issuer, of any other agreements
or arrangements between the Issuer 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 of 1933, as amended, 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
have determined in its discretion so long as those other committees did not
conflict with, supersede or duplicate the duties or responsibilities of the
Nominating Committee, the Compensation Committee or the Supervisory Committee.
Item 7. Material to be Filed as Exhibits
Exhibit Description
------- -----------
1 Tender Offer Agreement, dated as of May
22, 2000, between Royal Philips and the
Issuer.
2 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and John
M. Suender.
3 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and
David A. Cohen.
4 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and John
A. Donohoe, Jr.
5 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and John
R. Emery.
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6 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and
Ethan Cohen.
7 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and
Ronald A. Scarpone.
8 Shareholder Agreement, dated as of May
22, 2000, between Royal Philips and John
W. Quaintance.
9 Governance Agreement, dated as of May
22, 2000, between Royal Philips and the
Issuer.
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SIGNATURES
----------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 6, 2000
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By: /s/ JAN H.M. HOMMEN
---------------------------------------
Name: Jan H. M. Hommen
Title: Executive Vice President and
Chief Financial Officer
By: /s/ ADRI BAAN
---------------------------------------
Name: Adri Baan
Title: Executive Vice President
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SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF ROYAL PHILIPS
The following tables set forth the name, citizenship, business address and
present principal occupation of each director and executive officer of Royal
Philips.
DIRECTORS AND EXECUTIVE OFFICERS OF ROYAL PHILIPS*
NAME PRESENT PRINCIPAL
OCCUPATION OR
EMPLOYMENT
Cor Boonstra President, Chairman of the Board of
Management and the Group Management
Committee of Royal Philips Electronics.
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, Member of the
Board of Management and the Group
Management Committee and Chief Financial
Officer of Royal Philips Electronics.
----------------------
*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.
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Adri Baan Executive Vice-President, Member of the
Board of Management and the Group
Management Committee and President/CEO of
the Consumer Electronics Division of
Royal Philips Electronics.
Arthur P.M. van der Poel Executive Vice-President, Member of the
Board of Management, Member of the Group
Management Committee and President/CEO of
the Semiconductor Division of Royal
Philips Electronics.
John W. Whybrow Executive Vice-President, Member of
United Kingdom Member of the Board of Management, Member
of the Group Management Committee and
President/CEO of the Lighting Division of
Royal Philips Electronics.
Gerard J. Kleisterlee Executive Vice-President, Member of the
Board of Management, Member of the Group
Management Committee and President/CEO of
the Components Division of Royal Philips
Electronics.
Ad H.A. Veenhof Senior Vice-President, Member of the
Group Management Committee, President/CEO
of the Domestic Appliances and Personal
Care Division of Royal Philips
Electronics.
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Hans M. Barella Senior Vice-President, Member of the
Group Management Committee of Royal
Philips Electronics. President/CEO of the
Medical Systems Division of Royal Philips
Electronics.
Jan P. Oosterveld Senior Vice-President, Member of the
Group Management Committee responsible
for strategy and regions of Royal Philips
Electronics.
Arie Westerlaken Senior Vice-President, Member of the
Group Management Committee, General
Secretary, Chief Legal Officer and
Secretary to the Board of Management of
Royal Philips Electronics.
Ad Huijser Senior Vice-President, Member of the
Group Management Committee and CEO of
Philips Research of Royal Philips
Electronics.
Tjerk Hooghiemstra Senior Vice-President and Member of the
Group Management Committee responsible
for Corporate Human Resources Management
of Royal Philips Electronics.
Guy Demuynck Senior Vice-President, Member of the
Group Management Committee and CEO of
Consumer Electronics Mainstream of Royal
Philips Electronics.
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L.C. van Wachem Retired. Member of the Supervisory 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 Retired. Member of the Supervisory Board
of Royal Philips Electronics since 1998.
W. Hilger Germany Retired. Member of the Supervisory Board
of Royal Philips Electronics since 1990.
L. Schweitzer Member of the Supervisory Board of Royal
34 Quai du Point du Jour Philips Electronics since 1997.
BP 103 92109 Chairman and Chief Executive Officer of
Boulogne Renault; Member of the Boards of
Bilancourt Pechiney, Banque Nationale de Paris,
Cedex, France Electricite de France.
Sir Richard Greenbury Member of the Supervisory Board of Royal
United Kingdom 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.
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J.M. Hessels Member of the Supervisory Board of 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 Board of Royal
Philips Electronics since 2000. Chairman
- Rector of Nijenrode University.
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