<PAGE> 1
Offer to Purchase For Cash
All Outstanding Shares of Common Stock
(Including the Associated Rights to Purchase
Series A Junior Participating Preferred Stock)
of
ADAC Laboratories
at
$18.50 Net Per Share
by
Philips Medical Acquisition Corporation
a wholly owned subsidiary of
Philips Holding USA Inc.
a wholly owned subsidiary of
Koninklijke Philips Electronics N.V.
------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, DECEMBER 12, 2000, UNLESS THE OFFER IS EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED
AND NOT WITHDRAWN BY THE EXPIRATION DATE (AS DEFINED BELOW) A NUMBER OF SHARES
OF COMMON STOCK, NO PAR VALUE (THE "COMMON STOCK"), TOGETHER WITH THE ASSOCIATED
RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK (THE "RIGHTS"
AND, COLLECTIVELY WITH THE COMMON STOCK, THE "SHARES"), OF ADAC LABORATORIES, A
CALIFORNIA COMPANY (THE "COMPANY"), THAT, WHEN TAKEN TOGETHER WITH THE SHARES
THEN OWNED DIRECTLY OR INDIRECTLY BY ROYAL PHILIPS AND ANY SUBSIDIARY OF ROYAL
PHILIPS REPRESENTS AT LEAST 90% OF THE TOTAL SHARES OUTSTANDING ON A FULLY
DILUTED BASIS, AS CALCULATED PURSUANT TO THE MERGER AGREEMENT DESCRIBED BELOW.
THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO
PURCHASE. SEE SECTION 13.
------------------------
IN THE EVENT THAT MORE THAN 50% AND LESS THAN 90% OF THE SHARES THEN OUTSTANDING
ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN, PHILIPS MEDICAL
ACQUISITION CORPORATION ("MERGER SUB") WILL, UNDER CERTAIN CIRCUMSTANCES
DESCRIBED BELOW, EITHER EXERCISE THE STOCK OPTION AGREEMENT DESCRIBED HEREIN OR
REDUCE THE NUMBER OF SHARES SUBJECT TO THE OFFER TO A NUMBER EQUAL TO 49.90% OF
THE SHARES THEN OUTSTANDING.
------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF
NOVEMBER 12, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG THE COMPANY, PHILIPS
HOLDING USA INC. AND MERGER SUB. THE BOARD OF DIRECTORS OF THE COMPANY, BY
UNANIMOUS VOTE OF THE DIRECTORS PRESENT AT A MEETING OF THE BOARD OF DIRECTORS
HELD ON NOVEMBER 12, 2000, DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY,
APPROVED THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT AND THE STOCK OPTION AGREEMENT AND APPROVED THE MERGER AGREEMENT AND
THE STOCK OPTION AGREEMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
<PAGE> 2
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 Tender 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.
Unless the context requires otherwise, all references to Shares herein shall
include the associated Rights.
The Rights are presently evidenced by the certificates for the Common Stock
and a tender by a shareholder of such shareholder's Shares will also constitute
a tender of the associated Rights. A shareholder of the Company 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. Shareholders may also contact their broker, dealer,
commercial bank, trust company or other nominee.
------------------------
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
November 14, 2000
2
<PAGE> 3
NOVEMBER 14, 2000
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 cross
references to sections to direct you to a more complete description of the
topics contained in this summary.
-- WHO IS OFFERING TO BUY MY SECURITIES?
Philips Medical Acquisition Corporation, a wholly owned subsidiary of
Philips Holding USA Inc. and a wholly owned subsidiary of Koninklijke
Philips Electronics N.V., is offering to buy your shares as described in
this document. See Section 9 of this document for further information
about Koninklijke Philips Electronics N.V., Philips Holding USA Inc. and
Philips Medical Acquisition Corporation.
-- WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
Philips Medical Acquisition Corporation is offering to buy all of the
outstanding shares of common stock, including the associated rights, of
ADAC Laboratories. There are approximately 21 million shares outstanding
and approximately 5 million shares issuable upon exercise of outstanding
options.
-- HOW MUCH IS PHILIPS MEDICAL ACQUSITION CORPORATION OFFERING TO PAY AND
WHAT IS THE FORM OF PAYMENT?
Philips Medical Acquisition Corporation is offering to pay $18.50 in cash
for each share.
-- DOES PHILIPS MEDICAL ACQUSITION CORPORATION HAVE THE FINANCIAL RESOURCES
TO MAKE PAYMENT?
Yes. Philips Holding USA Inc., parent of Philips Medical Acquisition
Corporation, will be financing the Offer described in this document with
funds provided by Koninklijke Philips Electronics N.V. and its affiliates.
-- ARE PHILIPS HOLDING USA INC.'S FINANCIAL RESULTS RELEVANT TO MY DECISION
AS TO WHETHER TO TENDER IN THE OFFER?
No. As the Offer is for cash and is not subject to any financing
condition, Philips Holding USA Inc.'s 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 IN THE INITIAL
OFFERING PERIOD?
You may tender your shares into the offer until 12:00 Midnight, New York
City time, on Tuesday, December 12, 2000, which is the scheduled
expiration date of the Offer, unless Philips Medical Acquisition
Corporation decides to extend the Offer. See Section 3 of this document
for information about tendering your shares.
-- CAN THE OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
Yes. In addition Royal Philips may extend the expiration date of the Offer
from time to time on one or more occasions to a date not later than 10
business days following the scheduled expiration date if it reasonably
determines an extension is appropriate in order to enable it to purchase
in the offer at least 90% of the total Shares outstanding on a fully
diluted basis calculated in accordance with the Merger Agreement and all
conditions other than this 90% that condition were satisfied. Merger Sub,
however, is not required to extend the offer beyond February 28, 2001,
unless Merger Sub wishes to extend the offer because of a failure to
satisfy a regulatory condition. In the event that Merger Sub extends a
regulatory condition beyond February 28, 2001, Merger Sub can request from
the Company an extension to the
i
<PAGE> 4
earlier of April 30, 2001 or five business days after the earliest date on
which the Company reasonably believes the regulatory condition will be
satisfied.
-- HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
Philips Medical Acquisition Corporation 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. Any such
press release will state the approximate number of shares tendered to
date.
-- WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
The Offer is conditioned upon, among other things, at least 90% of the
outstanding shares on a fully diluted basis, calculated in accordance with
the Merger Agreement, being validly tendered and not withdrawn. For a
complete description of all of the conditions of the Offer, see Section 13
of this document. In the event that more than 50% and less than 90% of the
shares then outstanding are validly tendered pursuant to the Offer and not
withdrawn, Philips Medical Acquisition Corporation will, under certain
circumstances described in this document, either exercise the stock option
agreement described in this document or reduce the number of shares
subject to the Offer to a number equal to 49.90% of the shares then
outstanding.
-- 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 Citibank, N.A. 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, Citibank, N.A. must
receive all required documents prior to 12:00 Midnight, New York City
time, on Tuesday, December 12, 2000, which is the expiration date of the
Offer, unless Philips Medical Acquisition Corporation 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 of this document 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 Offer. See Section 4 of this document.
-- HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
You (or your broker or bank if your shares were held in "street name")
must notify Citibank, N.A. at the address and telephone number listed on
the back cover of this document, and your notice must include 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 of this document.
-- WHAT DOES MY BOARD OF DIRECTORS THINK OF THE OFFER?
THE BOARD OF DIRECTORS OF ADAC LABORATORIES, BY UNANIMOUS VOTE OF THE
DIRECTORS PRESENT AT A MEETING OF THE BOARD OF DIRECTORS HELD ON NOVEMBER
12, 2000, DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTEREST OF, THE SHAREHOLDERS OF ADAC LABORATORIES,
APPROVED THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT AND THE STOCK OPTION AGREEMENT AND APPROVED THE MERGER AGREEMENT
AND THE STOCK OPTION AGREEMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT
ADAC LABORATORIES'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
IN THE OFFER.
ii
<PAGE> 5
-- IF PHILIPS MEDICAL ACQUISITION CORPORATION CONSUMMATES THE OFFER, WHAT ARE
PHILIPS MEDICAL ACQUISITION CORPORATION'S PLANS WITH RESPECT TO THE SHARES
THAT ARE NOT TENDERED IN THE OFFER?
If Philips Medical Acquisition Corporation purchases at least 90% of the
total shares outstanding on a fully diluted basis calculated in accordance
with the Merger Agreement, it intends to cause a merger to occur between
Philips Medical Acquisition Corporation and ADAC Laboratories in which
shareholders who have not previously tendered their shares will also
receive $18.50 in cash, subject to their right under California law to
dissent and demand the fair market value of their shares.
-- IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
The purchase of the shares by Philips Medical Acquisition Corporation will
reduce the number of the shares that will 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.
The shares may also cease to be traded on the Nasdaq Stock Market. Also,
ADAC Laboratories may cease making filings with the SEC or may otherwise
cease being required to comply with the SEC's rules relating to publicly
held companies. See Section 7 of this document for complete information
about the effect of the Offer on your shares.
-- WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On November 10, 2000, the last full trading day prior to the public
announcement of the offer, the reported closing bid price of the shares on
the Nasdaq Stock Market was $18.125 per Share. On November 13, 2000, the
last full trading day for which prices were available before the
commencement of the Offer, the reported closing bid price of the shares on
the Nasdaq Stock Market was $18.3125 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 closing bid 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 Philips Medical Acquisition Corporation pursuant to the Offer.
However, any tendering shareholder 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. Shareholders who hold their shares through a broker, bank 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, Morgan Stanley
& Co. Incorporated at (212) 761-8340, or the information agent, MacKenzie
Partners, Inc. at (800) 322-2885 (toll free). See the back cover of this
document.
iii
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
SUMMARY TERM SHEET................................................ i
INTRODUCTION...................................................... 2
1. Terms of the Offer.......................................... 4
2. Acceptance for Payment and Payment for the Shares........... 7
3. Procedure for Tendering Shares.............................. 8
4. Rights of Withdrawal........................................ 11
5. Certain Federal Income Tax Consequences of the Offer........ 12
6. Price Range of the Shares................................... 13
7. Effect of the Offer on the Market for the Shares; Stock
Quotation, Margin Regulations and Exchange Act
Registration................................................ 13
8. Certain Information Concerning the Company.................. 14
9. Certain Information Concerning Royal Philips, Parent and
Merger Sub.................................................. 17
10. Background of the Offer; Contacts with the Company.......... 17
11. Purpose of the Offer; Plans for the Company; the Merger..... 19
12. Source and Amount of Funds.................................. 27
13. Certain Conditions of the Offer............................. 27
14. Dividends and Distributions................................. 29
15. Certain Legal Matters....................................... 29
16. Fees and Expenses........................................... 32
17. Miscellaneous............................................... 32
SCHEDULE A Information Concerning Directors and Executive Officers
of Royal Philips, Parent and Merger Sub................ A-1
SCHEDULE B Chapter 13 of the California General Corporation Law... B-1
NOTICE OF SHORT FORM MERGER....................................... C-1
</TABLE>
1
<PAGE> 7
To the Holders of the Common Stock of ADAC Laboratories:
INTRODUCTION
Philips Medical Acquisition Corporation, a Delaware corporation ("Merger
Sub") and a wholly owned subsidiary of Philips Holding USA Inc., a Delaware
corporation ("Parent"), a wholly owned subsidiary of Koninklijke Philips
Electronics N.V., a company incorporated under the laws of the Netherlands
("Royal Philips"), hereby offers to purchase all of the outstanding shares of
Common Stock, no par value (the "Common Stock"), of ADAC Laboratories, a
California corporation (the "Company"), together with the associated rights to
purchase Series A Junior Participating Preferred Stock (the "Rights") issued
pursuant to the Rights Agreement, dated as of April 22, 1996, as amended (the
"Rights Agreement"), between the Company and Chemical Mellon Shareholder
Services, L.L.C. (the Common Stock and the Rights together being referred to
herein as the "Shares"), at $18.50 per Share in cash, net to the seller (the
"Offer Price"), upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). Tendering shareholders who are record holders of their
Shares and tender directly to Citibank, N.A. (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
Merger Sub pursuant to the Offer. Shareholders who hold their Shares through a
broker or bank should consult such institution as to whether it charges any
service fees. Merger Sub will pay all charges and expenses of Morgan Stanley &
Co. Incorporated, as dealer manager ("Morgan Stanley" or the "Dealer Manager"),
the Depositary and MacKenzie Partners, Inc. (the "Information Agent"). Unless
the context requires otherwise, all references to Shares herein shall include
the associated Rights, and all references to the Rights shall include all
benefits that may inure to the holders of the Rights pursuant to the Rights
Agreement.
This Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 12, 2000 (the "Merger Agreement"), by and among the Company,
Parent and Merger Sub, pursuant to which, upon the terms and subject to the
conditions of the Merger Agreement, at the Effective Time (as defined below) in
accordance with Chapter 11 of the California General Corporation Law (the
"CGCL") and Subchapter IX of the Delaware General Corporation Law (the "DGCL"),
Merger Sub shall be merged with and into the Company and the separate existence
of Merger Sub shall thereupon cease (the "Merger"). The Company shall continue
its existence under the laws of the State of California. As a result of the
Merger, the Company (sometimes referred to herein as the "Surviving
Corporation") will become a wholly owned subsidiary of Parent.
The Merger shall become effective upon filing of the last to be filed of
the Merger Filings (as defined below) with the relevant Secretary of State (as
defined below) (such date and time, the "Effective Time"). The Company and
Parent will cause a merger agreement in the form required by the CGCL together
with the related officers' certificates of each of Merger Sub and the Company
(or, if applicable, a certificate of ownership) to be executed and filed with
the Secretary of State of the State of California (the "California Secretary of
State") as provided in the CGCL and a certificate of merger (or, if applicable,
a certificate of ownership and merger) to be executed and filed with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State"
and, collectively with the California Secretary of State, the "Secretaries of
State") as provided in the DGCL (the documents described in this paragraph to be
filed with the Secretaries of State being collectively referred to as the
"Merger Filings"). In the Merger, each issued and outstanding Share (other than
Shares, if any, that are held by shareholders who are entitled to and who
properly exercise dissenters' rights ("Qualifying Shareholders") pursuant to
Chapter 13 of the CGCL) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive, without
interest, an amount in cash equal to the Common Stock Price.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF THE DIRECTORS
PRESENT AT A MEETING OF THE BOARD OF DIRECTORS HELD ON NOVEMBER 12, 2000,
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, APPROVED THE MERGER AND THE
OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND THE STOCK OPTION
AGREEMENT, DATED AS OF NOVEMBER 12, 2000, AMONG MERGER SUB AND THE COMPANY (THE
"STOCK OPTION AGREEMENT") AND APPROVED
2
<PAGE> 8
THE MERGER AGREEMENT AND THE STOCK OPTION AGREEMENT, DATED NOVEMBER 12, 2000
BETWEEN MERGER SUB AND THE COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
BEAR, STEARNS & CO. INC., FINANCIAL ADVISOR TO THE COMPANY, HAS DELIVERED
TO THE BOARD OF DIRECTORS OF THE COMPANY ITS OPINION, DATED NOVEMBER 12, 2000
(THE "FINANCIAL ADVISOR OPINION"), TO THE EFFECT THAT, AS OF SUCH DATE, AND
BASED ON AND SUBJECT TO THE MATTERS SET FORTH THEREIN, THE $18.50 PER SHARE IN
CASH TO BE RECEIVED BY HOLDERS OF THE SHARES IN THE OFFER AND THE MERGER IS FAIR
FROM A FINANCIAL POINT OF VIEW TO SUCH HOLDERS. A COPY OF THE FINANCIAL ADVISOR
OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN IS ATTACHED AS AN EXHIBIT TO THE
COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE
14D-9"), WHICH HAS BEEN FILED BY THE COMPANY 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 THE FINANCIAL
ADVISOR OPINION IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE (AS DEFINED HEREIN) A NUMBER
OF SHARES THAT, WHEN TAKEN TOGETHER WITH THE SHARES THEN OWNED DIRECTLY OR
INDIRECTLY BY ROYAL PHILIPS AND ANY SUBSIDIARY OF ROYAL PHILIPS REPRESENTS AT
LEAST 90% OF THE TOTAL SHARES OUTSTANDING ON A FULLY DILUTED BASIS, AS
CALCULATED PURSUANT TO THE MERGER AGREEMENT (THE "MINIMUM CONDITION"). THE OFFER
IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE
SECTION 13 OF THIS OFFER TO PURCHASE.
ACCORDING TO THE COMPANY, AS OF NOVEMBER 12, 2000 THERE WERE 21,136,116
SHARES OUTSTANDING AND THERE WERE 5,342,416 SHARES RESERVED FOR ISSUANCE UPON
EXERCISE OF OUTSTANDING OPTIONS UNDER THE COMPANY'S STOCK OPTION AND INCENTIVE
PLANS.
The purpose of the Offer is for Parent, indirectly through Merger Sub, to
acquire a voting interest in the Company as the first step in a business
combination. In the event the Minimum Condition (as defined in Section 13) is
not satisfied on any scheduled expiration date of the Offer, Merger Sub may,
without the consent of the Company (i) extend the Offer to a date and time not
later than the Early Date, pursuant to the above paragraph; (ii) amend the Offer
in contemplation of the exercise of the Stock Option Agreement (to the extent
the Stock Option Agreement is exercisable at such time) to reduce the Minimum
Condition to that number of shares (the "Option Exercise Minimum Number") equal
to the lesser of (x) the number of shares (the "Notional Number") which, when
combined with the Option Number, equals 90.1% of the Shares then outstanding,
and (y) such number of Shares as the Company may agree in writing. The "Option
Number" is the maximum number of Shares that are issuable upon exercise of the
Stock Option Agreement without violation of the terms and conditions thereof
such that the sum of the number of Shares so issuable and the Notional Number
equals 90.1% of the Shares then outstanding; or (iii) amend the Offer to provide
that, in the event (x) the Minimum Condition is not satisfied at the next
scheduled expiration date (without giving effect to the exercise of the Stock
Option Agreement) and (y) the number of Shares tendered pursuant to the Offer
and not withdrawn as of such next scheduled expiration date, taken together with
the number of Shares owned directly or indirectly by Royal Philips, Parent and
Merger Sub, is more than 50% of the then outstanding Shares, Merger Sub will (A)
reduce the Minimum Condition to that number of Shares that, when added to the
Shares then owned directly or indirectly by Royal Philips, Merger Sub, Parent
and any other subsidiary of Royal Philips, would equal 49.90% of the Shares
then-outstanding (the "Revised Minimum Number"), (B) reduce the number of Shares
subject to the Offer to a number of Shares that, when added to the Shares then
owned directly or indirectly by Royal Philips, Parent and Merger Sub, will equal
the Revised Minimum Number and (C) if a number of Shares greater than the
Revised Minimum Number is tendered into the Offer and not withdrawn, accept for
payment, on a pro-rata basis, a number of Shares equal to the Revised Minimum
Number.
If, as of any scheduled expiration date of the Offer (other than any
scheduled expiration date occurring prior to the Early Date) (i) the number of
Shares tendered pursuant to the Offer and not withdrawn as of such scheduled
expiration date, taken together with the number of Shares owned directly or
indirectly by Royal Philips, Parent, Merger Sub and any other subsidiary of
Royal Philips, is more than 50% of the then
3
<PAGE> 9
outstanding Shares, (ii) all conditions to the Offer other than the Minimum
Condition shall have been satisfied and (iii) Shares have not been accepted for
payment by Merger Sub, then Merger Sub shall be required to take either the
action contemplated by clause (ii) of the paragraph above or the action
contemplated by clause (iii) of the paragraph above such that the Offer will
expire not later than the tenth business day following such scheduled expiration
date.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger Agreement
by the requisite vote of the shareholders of the Company, if required by the
CGCL. Under the CGCL, if Merger Sub acquires, pursuant to the Offer, the Stock
Option Agreement or otherwise, at least 90% of the Shares then outstanding, it
will be able to effect the Merger without a vote of the shareholders. In such
event, Parent, Merger Sub and the Company have agreed in the Merger Agreement to
take, subject to the satisfaction or waiver of the conditions set forth in the
Merger Agreement, all necessary and appropriate action to cause the Merger to be
effective as soon as practicable after the acceptance for payment and purchase
of Shares pursuant to the Offer, without a meeting of shareholders of the
Company, in accordance with Section 1110 of the CGCL. Under the CGCL, the Merger
Consideration paid to the shareholders of the Company may not be cash if Merger
Sub, Parent and Royal Philips own, directly or indirectly, more than 50% but
less than 90% of the then outstanding Shares, unless either all the shareholders
of the Company consent or the Commissioner of Corporations of the State of
California approves, after a hearing, the terms and conditions of the Merger and
the fairness thereof. If, pursuant to the Offer, the Stock Option Agreement or
otherwise, Merger Sub does not acquire Shares that, taken together with Shares
owned by Parent and Royal Philips, represent at least 90% of the Shares then
outstanding as of any scheduled expiration date of the Offer, and Merger Sub
instead amends the Offer to reduce the number of shares subject to the Offer to
the Revised Minimum Number, then Merger Sub, together with Parent and Royal
Philips, would own upon consummation of the Offer 49.90% of the Shares then
outstanding, and would thereafter solicit the approval of the Merger and the
Merger Agreement by a majority vote of the shareholders of the Company. Under
such circumstances, a significantly longer period of time will be required to
effect the Merger. For a description of the conditions set forth in the Merger
Agreement and the CGCL as it relates to this transaction, see Sections 11, 13
and 15.
Concurrently with the execution of the Merger Agreement, and as a condition
and inducement to Parent's and Merger Sub's entering into the Merger Agreement,
the Company entered into a Stock Option Agreement dated as of November 12, 2000
(the "Stock Option Agreement") with Parent and Merger Sub. Pursuant to the Stock
Option Agreement, the Company granted to Merger Sub an irrevocable option (the
"Top-Up Stock Option") to purchase that number of Shares (the "Top-Up Option
Shares") equal to the number of Shares that, when added to the number of Shares
owned by Merger Sub, Parent and Royal Philips immediately following consummation
of the Offer, will constitute 90% of the Shares then outstanding (assuming the
issuance of the Top-Up Option Shares) at a purchase price per Top-Up Option
Share equal to the Offer Price, subject to the terms and conditions set forth in
the Stock Option Agreement, including, without limitation, that the Top-Up Stock
Option shall not be exercisable if the number of Shares that would otherwise be
issued thereunder would exceed the number of authorized Shares available for
issuance. If the Top-Up Stock Option is exercised by Merger Sub (resulting in
Merger Sub, Parent and Royal Philips owning 90% or more of the Shares then
outstanding), Merger Sub will be able to effect a short-form merger under the
CGCL, subject to the terms and conditions of the Merger Agreement. For a
description of the Stock Option Agreement, see Section 11.
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. 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), Merger Sub will accept for payment, and pay
$18.50 in cash net to the seller for, each Share validly tendered on or prior to
the Expiration Date (as defined herein) and not
4
<PAGE> 10
withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00
midnight, New York City time, on Tuesday, December 12, 2000, unless and until
Merger Sub shall have extended the period for which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date on which
the Offer, as so extended by Merger Sub, shall expire. The period from the date
hereof until 12:00 midnight, New York City time, on December 12, 2000, as such
period may be extended, is referred to as the "Offering Period."
MERGER SUB DOES NOT CURRENTLY INTEND TO MAKE A SUBSEQUENT OFFERING PERIOD
AVAILABLE FOLLOWING THE EXPIRATION DATE PURSUANT TO RULE 14D-11 OF THE
SECURITIES EXCHANGE ACT OF 1934 AS AMENDED (A "SUBSEQUENT OFFERING PERIOD")
ALTHOUGH IT RESERVES THE RIGHT TO DO SO.
Pursuant to the Rights Agreement, each Share currently has associated with
it a right to purchase Series A Junior Participating Preferred Stock. These
Rights presently are transferable only with the certificates for the Shares and
the surrender for transfer of certificates for any Shares will also constitute
the transfer of the Rights associated with the Shares represented by such
certificates. Pursuant to the Offer, no separate payment will be made by Merger
Sub for the Rights. Pursuant to the Merger Agreement, the Board of Directors of
the Company, at its meeting on November 12, 2000, approved an amendment of the
Rights Agreement (the "Rights Amendment") to provide that the execution of the
Merger Agreement or consummation of any of the transactions contemplated
thereby, including, without limitation, the execution of the Stock Option
Agreement or the exercise of the stock option granted therein, the commencement
or consummation of the Offer, the consummation of the Merger, or any
announcement relating thereto will not cause (i) either Parent, Merger Sub or
any of their respective subsidiaries, "affiliates" or "associates" (each as
defined in the Rights Agreement) to be deemed an Acquiring Person (as defined in
the Rights Agreement), (ii) a Distribution Date (as defined in the Rights
Agreement) to occur or (iii) otherwise cause the Rights to separate from the
Shares. Pursuant to the Merger Agreement, the Company has agreed to take all
necessary action with respect to all of the outstanding Rights, so that the
Company, as of the time immediately prior to the purchase of any Shares by any
of Parent, Merger Sub or any other subsidiary of Parent (collectively, the
"Parent Companies") pursuant to the Offer, will have no obligations under the
Rights or the Rights Agreement and the holders will have no rights under the
Rights or the Rights Agreement.
Subject to the terms of the Merger Agreement (see Section 11) and
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC"), Merger Sub expressly reserves the right, in its sole discretion, at any
time or from time to time, (i) to delay acceptance for payment of or (regardless
of whether such Shares were theretofore accepted for payment) payment for, any
tendered Shares, or to amend the Offer as to any Shares not then paid for, on
the occurrence of any of the conditions specified in Section 13 of this Offer
and (ii) to waive any condition and to set forth or change any other term and
condition of the Offer, by giving oral or written notice of such delay,
termination or amendment to the Depositary and by making a public announcement
thereof; provided that, Merger Sub will not, without the prior written consent
of the Company (such consent to be authorized by the Board of Directors of the
Company) (i) waive the Minimum Condition, except as otherwise contemplated by
the Merger Agreement, (ii) decrease the price per Share or change the form of
consideration payable in this Offer, (iii) decrease the number of Shares sought
in the Offer, except as otherwise contemplated by the Merger Agreement, (iv)
impose additional conditions to the Offer, (v) change any Offer Condition or
amend any other term of the Offer if any such change or amendment would be in
any manner adverse to the holders of Shares or (vi) except as provided below,
extend the Offer if all of the Offer Conditions have been satisfied. Pursuant to
the Merger Agreement, (i) in the event of the failure of one or more of the
Offer Conditions set forth in Section 13 to be satisfied or waived on any date
the Offer would otherwise expire, Merger Sub shall from time to time extend the
Offer until such time as such condition is or conditions are satisfied or
waived, provided that, except as set forth below, Merger Sub shall not be
required to extend the Offer beyond February 28, 2001, and (ii) in the event,
after February 28, 2001, of the failure of the Regulatory Condition (as defined
in Section 13) to be satisfied or waived on the date the Offer would otherwise
expire (and the satisfaction or waiver on such date of the other Offer
Conditions other than the Minimum Condition), Merger Sub shall give the Company
notice thereof and, at the request of the Company, from time to time extend the
Offer until the earlier of (1) five business days after such time as the
Regulatory Condition is satisfied or waived and (2) the date chosen by the
Company which shall not be later
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<PAGE> 11
than the earlier of (x) April 30, 2001 or (y) five business days after the
earliest date on which the Company reasonably believes the Regulatory Condition
will be satisfied, provided that if such condition is not satisfied by any date
chosen by the Company as described in this clause (y), the Company may request
further extensions of the Offer in accordance with the terms of the Merger
Agreement.
Merger Sub reserves the right, in its sole discretion, to (a) extend the
expiration date of the Offer after all of the Offer Conditions (other than the
Minimum Condition) have been satisfied or waived as of any scheduled expiration
date of the Offer if it reasonably determines such extension is appropriate in
order to enable it to purchase in the Offer at least the number of Shares equal
to the Minimum Condition (in which case Merger Sub may extend the expiration
date on one or more occasions to a date and time not later than 12:00 Midnight,
New York City time, on the tenth business day following such scheduled
expiration date (such time on such tenth business day, the "Early Date")) or (b)
exercise its rights described in the next paragraph. If Merger Sub accepts any
Shares for payment pursuant to the terms of the Offer, it will accept for
payment all Shares validly tendered prior to the Expiration Date and not
withdrawn, and, subject to the terms and conditions of the Offer, including but
not limited to the Offer Conditions, it will accept for payment and promptly pay
for all Shares so accepted for payment. Merger Sub confirms that its reservation
of the right to delay payment for Shares which it has accepted for payment is
limited by Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), which requires that a tender offeror pay the consideration
offered or return the tendered securities promptly after the termination or
withdrawal of a tender offer.
In the event the Minimum Condition is not satisfied on any scheduled
expiration date of the Offer, Merger Sub may, without the consent of the Company
(i) extend the Offer to a date and time not later than the Early Date, pursuant
to the above paragraph; (ii) amend the Offer in contemplation of the exercise of
the Stock Option Agreement (to the extent the Stock Option Agreement is
exercisable at such time) to reduce the Minimum Condition to that number of
shares (the "Option Exercise Minimum Number") equal to the lesser of (x) the
number of shares (the "Notional Number") which, when combined with the Option
Number, equals 90.1% of the Shares then outstanding, and (y) such number of
Shares as the Company may agree in writing. The "Option Number" is the maximum
number of Shares that are issuable upon exercise of the Stock Option Agreement
without violation of the terms and conditions thereof such that the sum of the
number of Shares so issuable and the Notional Number equals 90.1% of the Shares
then outstanding; or (iii) amend the Offer to provide that, in the event (x) the
Minimum Condition is not satisfied at the next scheduled expiration date
(without giving effect to the exercise of the Stock Option Agreement) and (y)
the number of Shares tendered pursuant to the Offer and not withdrawn as of such
next scheduled Expiration Date, taken together with the number of Shares owned
directly or indirectly by Royal Philips, Parent and Merger Sub, is more than 50%
of the then outstanding Shares, Merger Sub will (x) reduce the Minimum Condition
to the Revised Minimum Number, (y) reduce the number of Shares subject to the
Offer to a number of Shares that, when added to the Shares then owned directly
or indirectly by Royal Philips, Parent and Merger Sub, will equal the Revised
Minimum Number and (z) if a number of Shares greater than the Revised Minimum
Number is tendered into the Offer and not withdrawn, accept for payment, on a
pro rata basis, a number of Shares equal to Revised Minimum Number.
If, as of any scheduled expiration date of the Offer occurring on or after
the Early Date) (i) the number of Shares tendered pursuant to the Offer and not
withdrawn as of such scheduled expiration date, taken together with the number
of Shares owned directly or indirectly by Royal Philips, any subsidiary of Royal
Philips is more than 50% of the then outstanding Shares, (ii) all conditions to
the Offer other than the Minimum Condition shall have been satisfied and (iii)
Shares have not been accepted for payment by Merger Sub, then Merger Sub shall
be required to take either the action contemplated by Section 1.1(d)(ii) of the
Merger Agreement or the action contemplated by Section 1.1(d)(iii) of the Merger
Agreement (including the case of the action contemplated by such Section
1.1(d)(iii), among other things, reducing the Minimum Condition in that number
of Shares that, when added to the Shares then owned directly or indirectly by
Royal Philips and any subsidiary of Royal Philips, would equal 49.9% of the
Shares then outstanding (the "Revised Minimum Number") and reducing the number
of Shares subject to the Offer to a number of shares that, when added to the
Shares then owned directly or indirectly by Royal Philips and any subsidiary of
Royal
6
<PAGE> 12
Philips, would equal the Revised Minimum Number) such that the Offer will expire
not later than the tenth business day following such scheduled expiration date.
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), Merger Sub will accept for
payment, and will pay for, all Shares validly tendered and not withdrawn
promptly after the expiration of the Offering Period. If there is a Subsequent
Offering Period, all Shares tendered during the Subsequent Offering Period will
be immediately accepted for payment and paid for as they are tendered.
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 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
Merger Sub may choose to make any public announcement, Merger Sub shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release or other public announcement.
Merger Sub 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, Merger Sub will extend the Offer to the extent required
by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act.
If, prior to the Expiration Date, Merger Sub, if previously approved by the
Company in writing, shall decrease the percentage of Shares being sought or the
consideration offered to holders of Shares, such decrease shall be applicable to
all holders whose Shares are accepted for payment pursuant to the Offer and, if
at the time notice of any increase or decrease is first published, sent or given
to holders of 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. 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.
The Company has provided Merger Sub with the Company'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 Merger Sub to record holders of
the Shares and will be furnished by Merger Sub 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 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), Merger Sub will accept for
payment, and will pay for, all Shares validly tendered and not withdrawn
promptly after the expiration of the Offering Period. If there is a Subsequent
Offering Period, all Shares tendered during the Subsequent Offering Period will
be immediately accepted for payment and paid for as they are tendered.
For purposes of the Offer, Merger Sub will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when Merger Sub
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. 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 Merger Sub and transmitting such payments
to the tendering shareholders. In all cases, payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares (or a confirmation of
a book-entry transfer of such Shares (a "Book-Entry
7
<PAGE> 13
Confirmation") into the Depositary's account at The Depository Trust Company
(the "Book-Entry Transfer Facility")), a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) (or, in the case of a book-entry
transfer, an Agent's Message (as defined below)) and any other documents
required by the Letter of Transmittal.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE 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, 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, in the case of
Shares tendered by Book-Entry Transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set forth
in Section 3, such Shares will be credited to an account maintained with the
Book-Entry Transfer Facility), as soon as practicable following expiration or
termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. To tender Shares pursuant to the Offer, (a) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions of the Letter of Transmittal, with any required
signature guarantees, certificates for Shares to be tendered, and any other
documents required by the Letter of Transmittal, 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, (b) such Shares must be delivered pursuant
to the procedures for book-entry transfer described below (and a Book-Entry
Confirmation of such delivery received by the Depositary, including an Agent's
Message if the tendering shareholder has not delivered a Letter of Transmittal),
prior to the Expiration Date, or (c) the tendering shareholder must comply with
the guaranteed delivery procedures set forth below. 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 Merger Sub may enforce such agreement against the participant.
Pursuant to the Rights Agreement, as amended, until the close of business
on the Distribution Date, the Rights will be transferred with and only with the
certificates for Common Stock, and the surrender for transfer of any
certificates for Common Stock will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. Pursuant to
the Rights Amendment, no Distribution Date will occur by reason of the execution
of the Merger Agreement or consummation of any of the transactions contemplated
thereby, including, without limitation, the execution of the Stock Option
Agreement or the exercise of the stock option granted therein, the commencement
or consummation of the Offer, the consummation of the Merger, or any
announcement relating thereto.
If separate certificates representing the Rights are issued to holders of
Common Stock prior to the time a holder's Shares are tendered pursuant to the
Offer, certificates representing a number of Rights equal to the number of
shares of Common Stock tendered must be delivered to the Depositary, or, if
available, a Book-Entry Confirmation received by the Depositary with respect
thereto, in order for such shares of Common Stock to be validly tendered. If the
Distribution Date occurs and separate certificates representing the Rights are
not distributed prior to the time shares of Common Stock are tendered pursuant
to the Offer, Rights may be tendered prior to a shareholder receiving the
certificates for Rights by use of the guaranteed delivery procedure described
below. A tender of shares of Common Stock constitutes an agreement by the
tendering shareholder to deliver certificates representing all Rights formerly
associated with the number of shares of Common Stock tendered pursuant to the
Offer to the Depositary prior to expiration of the period permitted by such
guaranteed delivery procedures for delivery of certificates for, or a Book-Entry
Confirmation with respect to, Rights (the "Rights Delivery Period"). However,
after expiration of the Rights Delivery Period, Merger Sub may elect to reject
as invalid a tender of shares of Common Stock with respect to which certificates
for, or
8
<PAGE> 14
a Book-Entry Confirmation with respect to, the number of Rights required to be
tendered with such Common Stock have not been received by the Depositary.
Nevertheless, Merger Sub will be entitled to accept for payment shares of Common
Stock tendered by a shareholder prior to receipt of the certificates for the
Rights required to be tendered with such shares of Common Stock, or a Book-Entry
Confirmation with respect to such Rights, and either (a) subject to complying
with applicable rules and regulations of the SEC, withhold payment for such
shares of Common Stock pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for shares of
Common Stock accepted for payment pending receipt of the certificates for, or a
Book-Entry Confirmation with respect to, such Rights in reliance upon the
agreement of a tendering shareholder to deliver Rights and such guaranteed
delivery procedures. Any determination by Merger Sub to make payment for shares
of Common Stock in reliance upon such agreement and such guaranteed delivery
procedures or, after expiration of the Rights Delivery Period, to reject a
tender as invalid will be made in the sole and absolute discretion of Merger
Sub.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares at 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 system
may make book-entry transfer of 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 Shares may be effected through book-entry transfer, either
the Letter of Transmittal (or 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. If the Distribution Date occurs, the
Depositary will also make a request to establish an account with respect to the
Rights at the Book-Entry Transfer Facility, but no assurance can be given that
book-entry transfer of Rights will be available. If book-entry transfer of
Rights is available, the foregoing book-entry transfer procedures will also
apply to Rights. If book-entry transfer of Rights is not available and the
Distribution Date occurs, a tendering shareholder will be required to tender
Rights by means of physical delivery of certificates for Rights to the
Depositary (in which event references in this Offer to Purchase to Book-Entry
Confirmations with respect to Rights will be inapplicable). The confirmation of
a book-entry transfer of Shares or Rights into the Depositary's account at the
Book-Entry Transfer Facility as described above is referred to herein as a
"Book-Entry Confirmation." 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 SHARES, RIGHTS, 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 (a) 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 (b) 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
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<PAGE> 15
tendered or not accepted for payment 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 (or
Rights, if applicable) pursuant to the Offer and whose certificates for Shares
(or Rights, if applicable) are not immediately available (including because
certificates for Rights have not yet been distributed by the Rights Agent) 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 (and/or Rights, if applicable) by
following all of the procedures set forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Merger Sub, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares and/or Rights, in
proper form for transfer (or a Book-Entry Confirmation with respect to all
such Shares and/or Rights), together with a properly completed and duly
executed Letter of Transmittal (or 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 (a) in the case of Shares,
three business days after the date of execution of such Notice of
Guaranteed Delivery or (b) in the case of Rights, a period ending on the
later of (1) three business days after the date of execution of such Notice
of Guaranteed Delivery or (2) three business days after the date
certificates for Rights are distributed to shareholders by the Rights
Agent.
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 Merger Sub upon the terms and subject to
the conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal as set forth above, the
tendering shareholder will irrevocably appoint designees of Merger Sub 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 Merger Sub 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
November 12, 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, Merger Sub 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 Merger Sub 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). Merger Sub's 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 the Company, actions by written consent in lieu of any such
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<PAGE> 16
meeting or otherwise. Merger Sub reserves the right to require that, in order
for any Shares to be deemed validly tendered, immediately upon Merger Sub's
depositing the payment for such Shares with the Depositary, Merger Sub 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 Merger Sub in its sole discretion, which
determination will be final and binding. Merger Sub 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 Merger
Sub's counsel, be unlawful. Merger Sub 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 Philips, Parent, Merger Sub, 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. Merger Sub's 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 (or
another payee designated by 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 Merger Sub
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 Instruction 8 to 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 Date and, unless theretofore accepted for payment by Merger Sub
pursuant to the Offer, may also be withdrawn at any time after January 12, 2001.
There will be no withdrawal rights during any Subsequent Offering Period for any
Shares tendered during any Subsequent Offering Period.
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 tender 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
11
<PAGE> 17
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
Merger Sub, in its sole discretion, which determination shall be final and
binding. None of Royal Philips, Parent, Merger Sub, 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 one of the procedures described
in Section 3 at any time prior to the Expiration Date.
If Merger Sub 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 Merger Sub's rights under this
Offer, the Depositary may, nevertheless, on behalf of Merger Sub, 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 and the exchange of the Shares
for cash pursuant to the Merger will be taxable transactions for Federal income
tax purposes and may also be taxable under applicable state, local and other tax
laws. For Federal income tax purposes, a shareholder whose Shares are purchased
pursuant to the Offer or who receives cash as a result of the Merger will
realize gain or loss equal to the difference between the adjusted basis of the
Shares sold or exchanged 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. Long-term capital gain of a non-corporate shareholder is
generally subject to a maximum tax rate of 20% in respect of property held for
more than one year.
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 OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
12
<PAGE> 18
6. PRICE RANGE OF THE SHARES.
The Shares are traded on the Nasdaq Stock Market (the "Nasdaq") under the
symbol "ADAC". The following table sets forth, for the calendar quarters
indicated, the high and low closing bid prices for the Shares on the Nasdaq
based on public sources:
<TABLE>
<CAPTION>
CLOSING BID PRICES
--------------------------------
HIGH LOW DIVIDENDS
------- -------- ---------
<S> <C> <C> <C>
CALENDAR YEAR
1998:
First Quarter.................................... $26.625 $18.5312 $0
Second Quarter................................... 24.0625 19.375 $0
Third Quarter.................................... 30.625 20.875 $0
Fourth Quarter................................... 30 19.9375 $0
1999:
First Quarter.................................... 23.5625 13.5 $0
Second Quarter................................... 13.8125 6.5 $0
Third Quarter.................................... 9.875 5.875 $0
Fourth Quarter................................... 12.625 8.375 $0
2000:
First Quarter.................................... 14.125 9.0625 $0
Second Quarter................................... 25.375 12.875 $0
Third Quarter.................................... 26.25 15.6875 $0
Fourth Quarter (through November 10, 2000)....... 20.375 10.0625 $0
</TABLE>
On November 10, 2000, the last full trading day prior to the public
announcement of the terms of the Offer and the Merger, the reported closing bid
price of the Shares on the Nasdaq was $18.125 per Share. On November 13, 2000,
the last full trading day prior to commencement of the Offer, the reported
closing bid price of the Shares on the Nasdaq was $18.3125 per Share.
Shareholders are urged to obtain a current market quotation for the Shares.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION, MARGIN
REGULATIONS AND EXCHANGE ACT REGISTRATION.
MARKET FOR THE SHARES. The purchase of any Shares by Merger Sub pursuant
to the Offer will reduce the number of 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.
STOCK QUOTATION. The Shares are quoted on Nasdaq. According to published
guidelines of Nasdaq, the Shares might no longer be eligible for quotation on
Nasdaq if, among other things, the number of publicly held Shares (excluding
Shares held directly or indirectly by officers, directors and any person who is
a beneficial owner of more than 10% of the Shares) were less than 500,000, the
aggregate market value of publicly held Shares were less than $1,000,000 or
there were fewer than 300 holders of the Shares in round lots. If these
standards were not met, quotations might continue to be published in the over
the counter "additional list" or one of the "local lists" unless, as set forth
in published guidelines of the Nasdaq, the number of publicly held Shares were
less than 100,000, or there were fewer than 300 holders in total. According to
information furnished to Merger Sub by the Company as of the close of business
on November 12, 2000, there were 12,204 holders of record of the Shares not
including beneficial holders of any Shares in street name, and there were
21,136,116 Shares outstanding. If the Common Stock were to cease to be quoted on
Nasdaq, the associated Rights would cease to be quoted as well.
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges, or other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
shareholders and/or the aggregate market value of the Shares remaining at such
13
<PAGE> 19
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
MARGIN REGULATIONS. The shares of Common Stock are presently "margin
securities" under the regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among other
things, of allowing brokers to extend credit on the collateral of the shares of
Common Stock. Depending upon factors similar to those described above regarding
listing and market quotations, the shares of Common Stock might no longer
constitute "margin securities" for the purposes of the Federal Reserve Board's
margin regulations, in which event the shares of Common Stock would be
ineligible as collateral for margin loans made by brokers.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated by the Company upon
application to the SEC if the outstanding Shares are not listed on a national
securities exchange and if there are fewer than 300 holders of record of such
shares. Termination of registration of the Shares under the Exchange Act would
reduce the information required to be furnished by the Company to its
shareholders and to the SEC and would make certain provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and the
requirement to furnish a proxy statement in connection with shareholders'
meetings pursuant to Section 14(a) and the related requirement to furnish an
annual report to shareholders, no longer applicable with respect to the Shares.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 under the Securities Act of 1933, as amended, may be impaired or
eliminated. If registration of the Shares under the Exchange Act were
terminated, the Shares would no longer be eligible for quotation on Nasdaq or
for continued inclusion on the Federal Reserve Board's list of "margin
securities". Merger Sub intends to seek to cause the Company to apply for
termination of registration of the Shares as soon as possible after consummation
of the Offer if the requirements for termination of registration are met. If
registration of the Shares is not terminated prior to the Merger, then the
registration of such Shares under the Exchange Act and the quotation of such
Shares on the Nasdaq will be terminated following the completion of the Merger.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a world leader in nuclear medicine and radiation therapy
planning systems, and an emerging leader in positron emission tomography
("PET"). The Company is headquartered in Milpitas, CA, and employs approximately
900 people worldwide.
The Company's core business is its Medical Systems business, which
generated more than 85% of the company's revenues in fiscal year 2000. The
Company designs, manufactures, markets, and services nuclear medicine and PET
imaging equipment for hospitals and clinics worldwide. The Company's broad line
of gamma cameras, PET imaging systems, workstations and clinical software
applications provide information used primarily for the diagnosis of cancer and
cardiac disease.
Nuclear medicine is a diagnostic imaging modality that images the function
or physiology of organs and lesions. The Company believes the functional imaging
capability of nuclear medicine may allow for earlier diagnosis of certain
diseases than anatomical imaging modalities such as magnetic resonance imaging,
computerized tomography, and ultrasound.
In a typical nuclear medicine procedure, the patient is administered a
small amount of a radiopharmaceutical that localizes in normal and abnormal
tissues according to the make-up of the radiopharmaceutical, the functionality
of the tissue, and the procedure being utilized. The patient is then imaged with
a gamma camera or PET scanner and the images are recorded on a computer. The
physician uses the images and related clinical information to evaluate the
functional and metabolic performance of the portion of the patient's body under
examination.
The Company's Pinnacle radiation therapy planning computers help
oncologists plan, deliver, and evaluate precise radiation treatments for cancer
patients. The systems combine third-party workstations and printers with the
Company's proprietary application software. They offer three-dimensional
volumetric image
14
<PAGE> 20
processing and dose computation capabilities that enable physicians to plan the
precise application of high-energy radiation to a patient's specific targeted
area for the treatment of cancer.
The Company provides equipment service and clinical support for its
worldwide customer base. The company supports over 6,000 systems through a range
of offerings that meet different service and budgetary needs.
Set forth below is certain summary consolidated financial information for
each of the Company's last three fiscal years for the period ended 1999 as
contained in the Company'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. 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 the
Company 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 in the manner set forth
below.
ADAC LABORATORIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------
NINE MONTHS ENDED OCTOBER 3, SEPTEMBER 27, SEPTEMBER 28,
JULY 2, 2000 1999 1998 1997
------------------ ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................... $267,645 $342,131 $300,528 $263,887
Income before income
taxes..................... 5,018 (43,665) 12,108 22,089
Net income.................. 3,261 (33,620) 7,386 13,474
Net income per common share:
Basic....................... $0.16 ($1.64) $0.38 $0.73
Diluted..................... $0.15 ($1.64) $0.36 $0.69
BALANCE SHEET DATA (AT
PERIOD END):
Current assets.............. $142,997 $142,867 $152,209 $109,902
Total assets................ 242,994 239,662 229,783 195,099
Current liabilities......... 124,980 128,441 89,799 69,105
Total Liabilities........... 128,495 132,149 92,881 87,008
Total Shareholders'
equity.................... 114,499 107,513 136,902 108,091
</TABLE>
------------------------
The balance sheet results for the year ended September 28, 1997 have not
been provided because those results have not been restated.
Except as otherwise set forth herein, the information concerning the
Company contained in this document 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,
Merger Sub, Parent 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, Parent, Merger Sub 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 the Company 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, Parent, Merger Sub or the
Dealer Manager.
15
<PAGE> 21
OTHER FINANCIAL INFORMATION. During the course of the discussions and
information exchange between Royal Philips and the Company that led to the
Merger Agreement, the Company provided Royal Philips and its financial advisors
with certain information about the Company and its financial performance that is
not publicly available. The information provided included the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
2001 2002
------- -------
<S> <C> <C>
Booking.................................................... $382.9 $425.0
Revenues................................................... 358.9 394.8
Gross Profit............................................... 141.8 157.9
EBIT....................................................... 40.4 47.3
</TABLE>
The Company has advised Royal Philips, Parent and Merger Sub that it does
not as a matter of course make public any projections as to future performance
or earnings, and the aforementioned projections are included in this Offer to
Purchase solely because such information was provided to Royal Philips and its
financial advisors during the course of Royal Philips's and Parent's evaluation
of the Company. Royal Philips, Parent and Merger Sub did not rely on such
information in their valuation of the Company. The projections were not prepared
with a view to public disclosure or compliance with the published guidelines of
the Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. The Company has
advised Royal Philips, Parent and Merger Sub that (i) its internal operating
projections are, in general, prepared solely for internal use and capital
budgeting and other management decisions and are subjective in many respects and
thus susceptible to various interpretations and periodic revision based on
actual experience and business developments and (ii) the projections were based
on a number of internal assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters
that are inherently subject to significant economic and competitive
uncertainties, all of which are difficult to predict and some of which are
beyond the control of the Company. Accordingly, there can be no assurance, and
no representation or warranty is or has been made by any of the Company, Royal
Philips, Parent, Merger Sub or any of their representatives, that actual results
will not vary materially from those described above. The foregoing information
is forward-looking in nature and inherently subject to significant uncertainties
and contingencies, including industry performance, general business and economic
conditions, currency exchange rates, customer requirements, competition, adverse
changes in applicable laws, regulations or rules governing environmental, tax
and accounting matters and other matters. The inclusion of this information
should not be regarded as an indication that the Company, Royal Philips, Parent,
Merger Sub or anyone who received this information then considered, or now
considers, it a reliable prediction of future events, and this information
should not be relied on as such. None of the Company, Royal Philips, Parent,
Merger Sub or any of their respective financial advisors or the Dealer Manager
intends to, and each of them disclaims any obligation to, update, revise or
correct such projections if they are or become inaccurate (even in the short
term). The projections have not been adjusted to reflect the effects of the
Offer or the Merger.
AVAILABLE INFORMATION. The Company 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 the Company's directors and officers, their remuneration,
stock options granted to them, the principal holders of the Company's
securities, any material interests of such persons in transactions with the
Company and other matters is required to be disclosed in proxy statements
distributed to the Company'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.
16
<PAGE> 22
9. CERTAIN INFORMATION CONCERNING ROYAL PHILIPS, PARENT AND MERGER SUB.
Royal Philips is a company incorporated under the laws of the Netherlands
with 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. 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.
Parent is a Delaware corporation and a wholly owned subsidiary of Royal
Philips. Parent's principal offices are located at 1251 Avenue of the Americas,
New York, New York 10020. Parent does not engage in any activities other than
those incident to its role as a holding company of Royal Philips.
Merger Sub is a Delaware corporation and a wholly owned subsidiary of
Parent, and to date has engaged in no activities other than those incident to
its formation and the commencement of the Offer. The principal offices of Merger
Sub are located at 1251 Avenue of the Americas, New York, New York 10020.
FINANCIAL INFORMATION OF ROYAL PHILIPS. Royal Philips is subject to the
informational reporting requirements of the Exchange Act.
OTHER INFORMATION REGARDING ROYAL PHILIPS, PARENT AND MERGER SUB. 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 each of the
directors and executive officers of Royal Philips, Parent and Merger Sub are set
forth in Schedule A to this Offer to Purchase.
None of Royal Philips, Parent or Merger Sub, or, to the best of their
knowledge, any of the persons listed in Schedule A hereto nor any associate or
majority-owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Shares or has engaged in any transactions in the Shares in
the past 60 days. None of Royal Philips, Parent or Merger Sub has purchased any
Shares during the past two years.
Except as set forth in Section 10, there have been no negotiations,
transactions or material contacts between Royal Philips, Parent or Merger Sub,
or, to the best of their knowledge, any of the persons listed in Schedule A
hereto, on the one hand, and the Company 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, none of Royal
Philips, Parent or Merger Sub, or, to the best of their knowledge, any of the
persons listed in Schedule A hereto, had any transaction with the Company 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 THE COMPANY.
On an ongoing basis, the Board of Directors of ADAC evaluates ADAC's
strategic alternatives, including possible strategic business combinations and
continuing as a stand alone company. In early February 2000, the Board of
Directors retained Bear, Stearns & Co. Inc. ("Bear Stearns") to assist ADAC's
management in this evaluation. ADAC's management and Bear Stearns identified and
contacted nine (including Philips) prospective strategic partners for ADAC based
on strategic fit and their determination of which entities would most likely be
interested in engaging in a strategic combination or arrangement with ADAC. Four
of those parties expressed an interest in a potential transaction and were
provided with a limited amount of information concerning ADAC after executing
appropriate confidentiality agreements. Subsequently, however, only one of the
parties, Philips, provided a proposal to acquire ADAC.
On March 20, 2000, Philips and ADAC entered into a customary
confidentiality agreement. Between March 20, 2000 and mid-April 2000
representatives of Royal Philips and ADAC engaged in various discussions
concerning a proposed business combination.
17
<PAGE> 23
In mid-April 2000, Philips provided a preliminary proposal, subject to due
diligence and several conditions, to acquire ADAC for up to $18.00 per share of
Common Stock.
In late May 2000, Philips began the first phase of its due diligence
investigation of ADAC. For the next month or so, Philips conducted its
investigation.
During the week and a half beginning on June 23, 2000, Philips's management
representatives outlined a plan for a second phase of due diligence but
indicated that certain items uncovered in the first phase of their due diligence
would prevent them from recommending an acquisition of ADAC to the Board of
Directors of Philips. In light of the protracted process involved and the lack
of a clear path to acceptable transaction terms, ADAC did not agree to the
Philips plan for a second phase of due diligence. However, both ADAC and Philips
expressed a desire to keep lines of communication open about a potential
strategic relationship.
[On July 19, 2000, ADAC and Philips jointly signed a multi year preferred
lender contract with Premier, one of the nation's largest healthcare alliance
enterprises a sales contract.]
Between August and October of 2000, there were numerous conversations
between representatives of Bear Stearns and certain senior officers of Philips
based in the United States regarding a potential acquisition of ADAC.
On October 10, 2000, ADAC announced the sale of its Cardiology Systems
Group to Analogic Corporation.
On October 20, 2000, Philips representatives met with senior management
from ADAC in Milpitas, California to discuss ADAC's financial performance.
On October 24, 2000, ADAC announced entering into a definitive agreement to
sell the remaining assets of ADAC Healthcare Information Systems, Inc. to Cerner
Corporation.
On November 2 and 3, 2000, senior officers and advisors from ADAC and
Philips met in New York to discuss due diligence items and an action plan for
negotiating a merger agreement. Philips offered $16.00 per share of Common Stock
subject to completion of six weeks of due diligence. ADAC rejected the proposal.
Philips increased its offer to $17.00 per share of Common Stock subject to three
weeks of due diligence. ADAC rejected the revised proposal as well.
On November 7, 2000, the Managing Board of Royal Philips approved offering
$18.50 per share of Common Stock subject to completion of its due diligence and
negotiation of definitive agreements within a week.
On November 9, 2000, the Board of Directors of ADAC met with
representatives of ADAC's management, outside counsel, Wilson Sonsini Goodrich &
Rosati, P.C., and Bear Sterns and reviewed and discussed the terms of the
proposed acquisition and the status of the negotiations. At the meeting, outside
Counsel gave a presentation to the Board of Directors on the terms of the Merger
Agreement and Stock Option Agreement, the structure of the Offer and the Merger
and the Board of Director's fiduciary duties. In addition, representatives from
Bear Stearns reviewed the financial aspects of the proposed transaction.
On November 12, 2000, the Board of Directors of ADAC met telephonically and
reviewed and discussed the proposed acquisition. Management and outside counsel
provided the Board of Directors with an update on the terms of the Merger
Agreement and related documents. The Board of Directors also received an opinion
from Bear Stearns that as of the date of the meeting, $18.50 cash per share of
Common Stock consideration to be received by the holders thereof pursuant to the
Offer and the Merger as contemplated in the Merger Agreement was fair from a
financial point of view to ADAC's shareholders. The full text of such opinion is
attached hereto as Exhibit 6. Following additional discussion of the terms of
the proposed acquisition, the Board of Directors unanimously:
- determined that the Merger Agreement and the transactions contemplated
thereby, including each of the Offer and the Merger, are fair to and in
the best interests of the holders of the Common Stock;
18
<PAGE> 24
- approved and adopted the Merger Agreement and related Stock Option
Agreement and the transactions contemplated thereby; and
- resolved to recommend that the shareholders of ADAC accept the Offer and
approve and adopt the Merger Agreement and the transactions contemplated
thereby.
On November 12, 2000, the Board of Directors of Parent and Merger Sub
approved the Offer, the Merger and the other transactions contemplated by the
Merger Agreement and the Stock Option Agreement.
On the evening of November 12, 2000, following the meeting of the Board of
Directors of ADAC, the Merger Agreement and related Stock Option Agreement were
executed by ADAC, Parent and Merger Sub.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER.
PURPOSE. The purpose of the Offer and the Merger is to enable Royal
Philips indirectly to acquire control of, and the entire equity interest in, the
Company. The Offer is being made pursuant to the Merger Agreement and is
intended to increase the likelihood that the Merger will be effected. The
purpose of the Merger is to acquire all of the outstanding Shares not purchased
pursuant to the Offer. The Company will, as of the Effective Time, be an
indirect wholly owned subsidiary of Royal Philips.
PLANS FOR THE COMPANY. Assuming the Minimum Condition has been satisfied
and Merger Sub purchases all Shares tendered pursuant to the Offer, Merger Sub
intends, subject to Rule 14f-1 of the Exchange Act, promptly to exercise its
rights under the Merger Agreement to obtain majority representation on, and
control of, the Board of Directors of the Company. Under the Merger Agreement,
the Company has agreed, concurrently with Merger Sub's acceptance for payment
and payment for such Shares, to increase the size of the Company's Board of
Directors by such number as is necessary to enable Merger Sub to elect to the
Board of Directors up to a number of Merger Sub's designees equal to the product
of (i) the total number of directors on the Board of Directors multiplied by
(ii) the percentage that the number of the Shares then beneficially owned by
Merger Sub and its affiliates so accepted for payment and paid plus any Shares
beneficially owned by Parent to the number of the Shares then outstanding.
Merger Sub presently intends to select such designees to the Board of Directors
from among individuals (who are currently officers or directors of Parent, Royal
Philips or affiliates thereof) identified in a list that Parent had provided to
the Company and that the Company has included in its Schedule 14D-9. The Merger
Agreement also provides that the directors of Merger Sub at the Effective Time
shall be the directors of the Company after the consummation of the Merger (also
referred to as the "Surviving Corporation") from and after the Effective Time.
Merger Sub or an affiliate of Merger Sub may, following the consummation or
termination of the Offer, seek to acquire additional Shares through exercise of
the Top-Up Option, open market purchases, privately negotiated transactions, a
tender offer or exchange offer or otherwise, upon such terms and at such prices
as it shall determine, which may be more or less than the price paid in the
Offer. Merger Sub and its affiliates also reserve the right to dispose of any or
all Shares acquired by them, subject to the terms of the Merger Agreement.
THE MERGER AGREEMENT. The following is a summary of certain provisions of
the Merger Agreement. This summary is not a complete description of the terms
and conditions of the Merger Agreement and is qualified in its entirety by
reference to the full text of the Merger Agreement which is filed with the SEC
as an exhibit to the Tender Offer Statement on Schedule TO filed by Royal
Philips, Parent and Merger Sub (the "Schedule TO") and is incorporated herein by
reference. Capitalized terms not otherwise defined below shall have the meanings
set forth in the Merger Agreement. The Merger Agreement may be examined, and
copies obtained, as set forth in Section 8 of this Offer to Purchase.
The Offer. The Merger Agreement provides that Parent will cause Merger Sub
to 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, Parent will cause Merger Sub to accept
for payment, and pay for, all Shares validly tendered and not withdrawn pursuant
to the Offer that Merger Sub is permitted to accept and pay for under applicable
law. The Merger Agreement provides that Merger Sub has
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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.
If Merger Sub acquires 90% or more of the outstanding Shares pursuant to
the Offer, it will have the votes necessary under California law to approve the
Merger without a meeting of the Company's shareholders. Under the CGCL, if Royal
Philips, Parent of Merger Sub directly or indirectly own at least 90% of the
outstanding Shares, the Merger may be effected without the vote of the Company's
shareholders. The Merger Agreement provides that, simultaneously with or as soon
as practicable after expiration of the Offer, receipt of any required approval
by the Company's shareholders of the Merger Agreement and the satisfaction or
waiver of certain other conditions, Merger Sub will be merged into the Company.
At the Effective Time, each then outstanding Share not owned by Parent or any
subsidiary of Parent or held in treasury by the Company or any subsidiary of the
Company (other than Shares held by shareholders of the Company who properly
exercise dissenters' rights under the applicable provisions of the CGCL) will be
converted into the right to receive $18.50 in cash or any higher price which may
be paid for the Shares pursuant to the Offer, without interest (the "Merger
Consideration").
Merger Sub reserves the right, in its sole discretion, to (a) extend the
expiration date of the Offer after all of the Offer Conditions (other than the
Minimum Condition) have been satisfied or waived as of any scheduled expiration
date of the Offer if it reasonably determines such extension is appropriate in
order to enable it to purchase in the Offer at least the number of Shares equal
to the Minimum Condition (in which case Merger Sub may extend the expiration
date on one or more occasions to a date and time not later than the Early Date)
or (b) waive the Minimum Condition and exercise its rights under Section 1.1(d).
Pursuant to Section 1.1(d) of the Merger Agreement ("Section 1.1(d)"), in
the event the Minimum Condition is not satisfied on any scheduled expiration
date of the Offer, Merger Sub may, without the consent of the Company (i) extend
the Offer to a date and time not later than the Early Date pursuant to the above
paragraph; (ii) amend the Offer in contemplation of the exercise of the Stock
Option Agreement (to the extent the Stock Option Agreement is exercisable at
such time) to reduce the Minimum Condition to the Option Exercise Minimum
Number; or (iii) amend the Offer to provide that, in the event (x) the Minimum
Condition is not satisfied at the next scheduled Expiration Date (without giving
effect to the exercise of the Stock Option Agreement) and (y) the number of
Shares tendered pursuant to the Offer and not withdrawn as of such next
scheduled Expiration Date, taken together with the number of Shares owned
directly or indirectly by Royal Philips, Parent, Merger Sub and any other
subsidiary of Royal Philips, is more than 50% of the then outstanding Shares,
Merger Sub will (A) reduce the Minimum Condition to the Revised Minimum Number,
(B) reduce the number of Shares subject to the Offer to a number of Shares that,
when added to the Shares then owned directly or indirectly by Royal Philips,
Parent and Merger Sub will equal the Revised Minimum Number and (C) if a number
of Shares greater than the Revised Minimum Number is tendered into the Offer and
not withdrawn, accept for payment, on a pro rata basis, a number of Shares equal
to Revised Minimum Number. If Merger Sub purchases a number of Shares equal to
the Revised Minimum Number, then without the prior written consent of Merger
Sub, at any time prior to the termination of the Merger Agreement, the Company
will not take any action whatsoever (including, without limitation, the
redemption of any Shares) which would have the effect of increasing the
percentage ownership of Shares owned by Royal Philips, Parent, Merger Sub and
any other subsidiary of Royal Philips in excess of the Revised Minimum Number.
If, as of any scheduled expiration date of the Offer (other than any
scheduled expiration date occurring prior to the Early Date) (i) the number of
Shares tendered pursuant to the Offer and not withdrawn as of such scheduled
expiration date, taken together with the number of Shares owned directly or
indirectly by Royal Philips, Parent, Merger Sub and any other subsidiary of
Royal Philips, is more than 50% of the then outstanding Shares, (ii) all
conditions to the Offer other than the Minimum Condition shall have been
satisfied and (iii) Shares have not been accepted for payment by Merger Sub,
then Merger Sub shall be required to take either the action contemplated by
clause (ii) of the paragraph above or the action contemplated by clause (iii) of
the paragraph above such that the Offer will expire not later than the tenth
business day following such scheduled expiration date.
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<PAGE> 26
Shareholder Approval. The Company has represented in the Merger Agreement
that the execution and delivery of the Merger Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval and adoption of the Merger
by the shareholders of the Company in accordance with the CGCL. In addition, the
Company has represented that the affirmative vote of the holders of a majority
of the outstanding Shares is the only vote of the holders of any of the
Company's capital stock necessary in connection with the consummation of the
Merger. Therefore, unless the Merger is consummated in accordance with the
short-form merger provisions under the CGCL described below (in which case no
action by the shareholders of the Company will be required to consummate the
Merger), the only remaining corporate action of the Company will be the approval
and adoption of the Merger Agreement and the transactions contemplated thereby
by the affirmative vote of the holders of a majority of the Shares. The Merger
Agreement provides that Parent will vote all Shares beneficially owned by it in
favor of the adoption of the Merger Agreement at the Company shareholder's
meeting. In the event that Merger Sub acquires the Revised Minimum Number of
Shares, it would have the ability to ensure approval of the Merger by the
shareholders of the Company with the approval of a de minimis number of
remaining outstanding Shares.
Under the CGCL, the merger consideration paid to the Company's shareholders
may not be cash if Merger Sub, Parent or Royal Philips owns, directly or
indirectly, more than 50% but less than 90% of the then outstanding Shares
unless either all the shareholders consent or the Commissioner of Corporations
of the State of California approves, after a hearing, the terms and conditions
of the Merger and the fairness thereof. If such shareholder consent or
Commissioner of Corporations approval is not obtained, the CGCL requires that
the consideration received in the Merger consist only of non-redeemable common
stock of Parent. The purpose of the Offer is to obtain 90% or more of the Shares
and thus to enable Parent and Merger Sub to acquire all the equity of the
Company for consideration consisting solely of cash.
Conditions to the Merger. The respective obligations of the Company,
Parent and Merger Sub to consummate the Merger are subject to the fulfillment of
certain conditions set forth in the Merger Agreement, including (i) if required
by the CGCL, the approval of the Merger by the holders of a majority of the
outstanding shares of each class of the Company entitled to vote on the Merger,
in accordance with applicable law and the Articles of Incorporation and Bylaws
of the Company, (ii) the purchase by Merger Sub (or one of the Parent Companies)
of Shares pursuant to the Offer, and (iii) there being no statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) enacted, issued, promulgated, enforced or entered by
any court or other Governmental Entity (as defined in the Merger Agreement) of
competent jurisdiction in effect which prohibits consummation of the Merger
(collectively, an "Order").
Termination of the Merger Agreement. According to its terms, the Merger
Agreement may be terminated and the transactions contemplated thereby abandoned
at any time prior to the Effective Time, before or after the approval by holders
of Shares: (a) by the mutual consent of Parent (also acting on behalf of Merger
Sub) and the Company, by action of their respective Boards of Directors; or (b)
by action of the Board of Directors of either Parent or the Company if (i)
Merger Sub shall not have accepted for payment any Shares pursuant to the Offer
prior to April 30, 2001; provided, however, that such right to terminate the
Merger Agreement shall not be available to (A) Parent if any Shares have been
accepted for payment pursuant to the Offer or (B) any party whose failure to
perform any of its obligations under the Merger Agreement results in the failure
of any Offer Condition; or (ii) any Governmental Entity shall have issued an
Order which shall have become final and nonappealable; or (c) unless the Offer
shall have been consummated, by action of the Board of Directors of Parent, if
(x) (i) the Company shall have breached or failed to perform in any material
respect any of its covenants or agreements under the Merger Agreement (other
than any immaterial covenants or agreements) or (ii) a representation or
warranty of the Company set forth in the Merger Agreement shall have been
inaccurate when made or shall thereafter become inaccurate, except for such
inaccuracies which, when taken together would not reasonably be likely to have a
"Material Adverse Effect" as defined in the Merger Agreement), and, with respect
to any such breach, failure to perform or inaccuracy that can be remedied, the
breach, failure or inaccuracy is not remedied within 15 business days
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<PAGE> 27
after the giving of written notice of such breach, failure or inaccuracy to the
Company; or (y) the Board of Directors of the Company shall have withdrawn or
modified in any manner adverse to Parent or Merger Sub its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall have
adopted or recommended any Acquisition Proposal (as defined below), or the Board
of Directors of the Company, upon request by Parent, shall fail to reaffirm such
approval or recommendation within 10 business days after such request if an
Acquisition Proposal is pending, or shall have resolved to do any of the
foregoing; or (d) by action of the Board of Directors of the Company, (x) if
Parent or Merger Sub (or another Parent Company) (i) shall have breached in any
material respect any of the representations, warranties, covenants or agreements
contained in the Merger Agreement (other than any immaterial covenants or
agreements) and, with respect to any such breach that can be remedied, the
breach is not remedied within 15 business days after the Company has provided
Parent with written notice of such breach or (ii) shall have failed to commence
the Offer by November 15, 2000 or to pay for the Shares pursuant to the Offer in
accordance with the terms thereof, (y) if (i) the Board of Directors of the
Company receives a written offer not solicited on or after the date of the
Merger Agreement, with respect to a merger, reorganization, share exchange,
consolidation or sale of all or substantially all of the Company's assets or a
tender or exchange offer not solicited on or after the date of the Merger
Agreement for more than 50% of the outstanding Shares is commenced, and with
respect to which the Board of Directors of the Company concludes in good faith,
after consultation with its independent financial advisor and its outside
counsel, that approval, acceptance or recommendation of such transaction is
required by the fiduciary duties of the Company's Board of Directors under
applicable law (any such transaction, a "Superior Proposal"), (ii) the Company
has given Merger Sub three business days, prior written notice of its intention
to terminate the Merger Agreement to accept the Superior Proposal and Merger Sub
shall have failed to offer to amend the Offer so that it is at least as
favorable to the shareholders of the Company as the Superior Proposal in the
good faith judgment of the Board of Directors of the Company, after consultation
with its independent financial advisor and its outside counsel and (iii) the
Company prior to such termination pays to Merger Sub in immediately available
funds the fees described in the next paragraph.
Fees and Expenses. The Merger Agreement provides that if (x) (i) the Offer
shall have remained open for a minimum of at least 20 business days, (ii) after
the date of the Merger Agreement, any corporation, partnership, person, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act) other than
Parent or Merger Sub or any of their respective subsidiaries or affiliates
(collectively, a "Person") shall have become the beneficial owner of 15% or more
of the outstanding Shares or made (and not withdrawn) any Acquisition Proposal,
(iii) the Minimum Condition shall not have been satisfied and the Offer is
terminated as described in clause (c)(x) of the preceding paragraph (but only if
such termination relates to a breach of the Company's obligations described
under "--Acquisition Proposals" below) or as described in clause (b)(i) of the
preceding paragraph without the purchase of any Shares thereunder and (iv)
within twelve months of such termination the Company enters into an agreement
(other than a confidentiality agreement in customary form) with respect to an
Acquisition Proposal (as such term is defined below, except that the reference
in such definition to 15% shall be deemed a reference to 40% for purposes of
this clause (iv) only) or any person or other entity (other than Parent or any
of its affiliates) becomes the beneficial owner of 40% or more of the
outstanding Shares, (y) Parent shall have terminated this Agreement as described
in clause (c)(y) of the preceding paragraph, or (z) the Company shall have
terminated this Agreement as described in clause (d)(y) of the preceding
paragraph, then the Company shall promptly, but in no event later than five
business days after the date of a request by Parent for payment of such fee
(other than a termination as described in clause (d)(y) of the preceding
paragraph, in which case payment shall be concurrent with termination), pay
Parent a fee of $12,750,000, which amount shall be payable in same day funds. If
the Company fails to promptly pay the amount due pursuant to this paragraph,
and, the Company shall pay to Parent or Merger Sub interest on the amount of the
fee at the prime rate of Citibank, N.A. on the date such payment was required to
be made. In the event that either party commences a suit concerning the fee set
forth in this paragraph which results in a judgment against either party, the
non-prevailing party shall pay to the prevailing party the prevailing party's
costs and expenses (including attorneys' fees) in connection with such suit.
Acquisition Proposals. The Merger Agreement provides that neither the
Company nor any of its subsidiaries nor any of their respective officers and
directors shall, and the Company shall direct and use its best efforts to cause
its employees, agents and representatives (including, without limitation, any
investment
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<PAGE> 28
banker, attorney or accountant retained by the Company or any of its
subsidiaries) not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate (including by providing any confidential information or
data to or having any negotiations or discussions with any person (other than
Parent or its affiliates) making or inquiring with respect to making an
Acquisition Proposal), any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to stockholders of the
Company) with respect to a merger, reorganization, share exchange, consolidation
or similar transaction involving the Company, or any purchase of more than 15%
(on a fair market value basis) of the assets of the Company and its subsidiaries
on a consolidated basis (including any such purchase of assets effected
indirectly through the purchase of such subsidiaries), or any purchase of, or
tender offer for, more than 15% of any equity securities of the Company (any
such proposal or offer being referred to as an "Acquisition Proposal"), except
that the Company shall have the right, if, and only to the extent that, the
Company's Board of Directors concludes in good faith after consultation with
outside legal counsel that such actions are required to comply with the
fiduciary duties of the Company's Board of Directors under applicable law in
response to a bona fide, written Acquisition Proposal not solicited on or after
the date hereof, to engage in negotiations concerning, provide confidential
information or data to, or have discussions with, any person relating to an
Acquisition Proposal. The Merger Agreement provides that the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted with respect to any of
the foregoing, and that the Company will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence of this
paragraph of their obligations. The Merger Agreement provides that the Company
will notify Parent promptly, and in any event within one business day, if any of
the Company's officers or directors become aware that 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, the
Company or any of its subsidiaries, indicating, in connection with such notice,
the name of such person and the material terms of any such proposals or offers,
and shall thereafter keep Parent informed on a current basis of the status and
material terms of any such proposals or offers and the status of any such
discussions or negotiations. The Company also will promptly request each person
which has prior to the date of the Merger Agreement executed a confidentiality
agreement in connection with its consideration of acquiring the Company and/or
any of its subsidiaries to return all confidential information heretofore
furnished to such person by or on behalf of the Company; provided, that Company
shall not be prohibited from taking and disclosing to its stockholders a
position required by Rule 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to the Company's shareholders if, in the good faith
judgment of the Board of Directors of the Company after consultation with
outside counsel, failure to do so would be a violation of its obligations under
applicable law.
Representations and Warranties; Covenants. The Merger Agreement also
contains certain other restrictions as to the conduct of business by the Company
pending the Merger, as well as representations and warranties of each of the
parties customary in transactions of this kind. In addition, the Company has
made representations concerning certain contractual consents relating to
noncompetition arrangements (the "Significant Consent(s)").
Amendment of the Merger Agreement. Subject to the applicable provisions of
the CGCL, at any time prior to the Effective Time, the parties to the Merger
Agreement may modify or amend the Merger Agreement by written agreement executed
and delivered by duly authorized officers of the respective parties.
Treatment of Options. The Merger Agreement provides, prior to the
Effective Time, the Company shall use its reasonable best efforts to take such
actions as may be necessary such that at the Effective Time, each stock option
outstanding ("Option") pursuant to the Company's Directors' Stock Option Plan
(1987), as amended, the Company's 1992 Stock Option Plan, as amended, the
Company's 1999 Long-Term Incentive Plan, and the Company's 1999 Supplemental
Incentive Plan (collectively, the "Stock Plans"), whether or not then
exercisable, will be canceled and only entitle the holder thereof, upon
surrender thereof, to receive an amount in cash equal to the difference between
the Merger Consideration over the exercise price per Share of such Option
multiplied by the number of Shares previously subject to such Option, less all
applicable withholding taxes. Such payment will be made by the Company as soon
as administratively feasible after the Effective Time.
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<PAGE> 29
- in accordance with the terms of the Company's Amended and Restated
Employee Stock Purchase Plan (1994), as amended (the "ESPP"), the Company will
cause each option outstanding under the ESPP immediately prior to the Effective
Time to be automatically exercised immediately prior to the Effective Time. The
Company will take such actions as may be necessary so that each employee
participating in the ESPP immediately prior to the Effective Time will only be
entitled to receive an amount in cash equal to the result of multiplying (i) the
Merger Consideration by (ii) a fraction, the numerator of which is the
accumulated payroll deductions in the employee's account under the ESPP at the
Effective Time, and the denominator of which is the purchase price for the
applicable "Purchase Period" and/or "Offering Period" (as such terms are defined
in the ESPP) in effect immediately prior to the Effective Time. The Company will
take such actions as may be necessary to cease as of the Effective Time all
further Offering Periods and Purchase Periods and payroll deductions under the
ESPP.
- prior to December 12, 2000, the Company will use reasonable efforts to
cause each holder of options to purchase Shares to duly execute an instrument in
a form reasonably acceptable to Parent containing the irrevocable agreement of
such holder that in the event that (i) the Offer is consummated and (ii) Merger
Sub will have either (A) failed to waive or modify the Minimum Condition, or (B)
amended the Offer to reduce the Minimum Condition to the Option Exercise Minimum
Number in accordance with clause (ii) of Section 1.1(d), such option shall be
canceled effective as of the expiration time of the Offer and shall thereafter
represent only the right to receive cash in the amount, if any, which (A) the
product of $18.50 and the number of Shares issuable upon exercise of such option
(with respect to each option, the "Share Number") exceeds (B) the product of the
Share Number and the per-Share exercise price for such option (any such duly
exercised instrument, an "Option Cancellation"). The Company will provide Parent
with a copy of each Option Cancellation received by the Company promptly
following the Company's receipt thereof, but in any event not later than 9:00
a.m., Pacific time, on the business day prior to the expiration of the Offer.
Indemnification of Officers and Directors. The Merger Agreement provides
that from and after the Effective Time, Parent agrees that it will indemnify and
hold harmless each present and former director and officer of the Company and
its subsidiaries, determined as of the Effective Time, against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities 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
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that the Company would have been permitted under
California law and its Articles of Incorporation or Bylaws in effect on the date
of the Merger Agreement to indemnify such person (and Parent shall also advance
expenses as incurred to the fullest extent permitted under applicable law,
provided that 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). The Merger Agreement also provides that Parent
shall cause the Surviving Corporation to maintain the Company's existing
officers' and directors' liability insurance (or equivalent thereof) for a
period of six years after the Effective Time, so long as the annual premium
therefor is not in excess of $705,000.
provided, however, that if such insurance coverage cannot be obtained at all, or
can only be obtained at an annual premium in excess of $705,000, Parent shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to $705,000.
Treatment of Employee Benefits. The Merger Agreement provides that for a
period of two years following the Effective Time, Parent will cause the Company
to continue to provide the Employees with compensation and employee benefit
plans (other than stock option or other plans involving the potential issuance
of securities of the Company or of any of the Parent Companies) which in the
aggregate are substantially comparable to those currently provided by the
Company to such employees immediately prior to the Effective Time, provided that
employees covered by collective bargaining agreements need not be provided such
benefits. Parent will, or will cause the Surviving Corporation to, honor without
modification all employee (or former employee) benefit obligations accrued as of
the Effective Time.
Composition of the Board of Directors. If requested by Parent, the Company
will, subject to compliance with applicable law, immediately following the
acceptance for payment of, and payment by Merger Sub for a number of Shares that
satisfies the Minimum Condition or the Revised Minimum Number, take all actions
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<PAGE> 30
necessary to cause persons designated by Parent to become directors of the
Company so that the total number of such persons equals at least that number of
directors, rounded up to the next whole number, which represents the product of
(x) the total number of directors on the Board of Directors multiplied by (y)
the percentage that the number of Shares so accepted for payment and paid for
plus any Shares beneficially owned by Parent or its affiliates on the date of
the Merger Agreement bears to the number of Shares outstanding at the time of
such payment. In furtherance thereof, the Company will increase the size of the
Board, or use its best efforts to secure the resignation of directors, or both,
as is necessary to permit Parent's designees to be elected to the Company's
Board of Directors; provided, however, that prior to the Effective Time, the
Company's Board of Directors shall always have at least three members (the
"Independent Directors") who are neither officers of Parent nor designees,
shareholders or affiliates of Parent or Parent's affiliates ("Parent Insiders");
and provided further that, in such event, if the number of Independent Directors
shall be reduced below three for any reason whatsoever, any remaining
Independent Directors (or Independent Director, if there shall be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Independent Directors for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate
three persons to fill such vacancies who shall not be officers or affiliates of
Parent or any of Parent's affiliates, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. At such time, the Company,
if so requested, will use its best efforts to cause persons designated by Parent
to constitute the same percentage of each committee of such board, each board of
directors of each subsidiary of the Company and each committee of each such
board (in each case to the extent of the Company's ability to elect such
persons). The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder.
Dissenters' Rights. Holders of Shares do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, certain holders of
Shares ("Qualifying Shareholders") who fully comply with and meet all the
requirements of the provisions of Chapter 13 of the CGCL ("Qualifying
Shareholders"), may have certain rights to dissent and to require the Company to
purchase their Shares for cash at "fair market value." Additionally, Qualifying
Shareholders will be entitled to exercise dissenters' rights under the CGCL only
if the holders of five percent or more of the outstanding Shares properly file
demands for payment or if the Shares held by such holders are subject to any
restriction on transfer imposed by the Company or by any law or regulation
("Restricted Shares"). Accordingly, if any holder of Restricted Shares or the
holders of five percent or more of the Shares properly file demands for payment
in compliance with Chapter 13 of the CGCL, all other Qualifying Shareholders
will be entitled to require the Company to purchase their Shares for cash at
their fair market value if the Merger is consummated. In addition, if
immediately prior to the Effective Time, the Shares are not listed on a national
securities exchange or on the list of over-the-counter margin stocks issued by
the Federal Reserve Board, holders of Shares may exercise dissenters' rights as
to any or all of their Shares entitled to such rights.
Under the CGCL, the "fair market value" of the Shares may be one agreed to
by the Company and the Qualifying Shareholder or judicially determined,
depending on the circumstances. The "fair market value" is determined as of the
day before the first announcement of the terms of the proposed Merger, excluding
any appreciation or depreciation as a result of the Merger and subject to
adjustments. The value so determined could be more or less than the Offer Price.
The foregoing discussion of the rights of Qualifying Shareholders does not
purport to be a complete statement of the procedures to be followed by
shareholders desiring to exercise any available dissenters' rights and is
qualified in its entirety by reference to Chapter 13 of the CGCL, which is set
forth in Schedule B to this Offer to Purchase and incorporated herein by
reference.
FAILURE TO FOLLOW THE STEPS REQUIRED BY CHAPTER 13 OF THE CGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Rule 13e-3. The Merger would have to comply with any applicable Federal
law operative at the time of its consummation. Rule 13e-3 under the Exchange Act
is applicable to certain "going private" transactions. Merger Sub does not
believe that Rule 13e-3 will be applicable to the Merger unless the Merger is
consummated more than one year after the termination of the Offer. If
applicable, Rule 13e-3 would require,
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<PAGE> 31
among other things, that certain financial information concerning the Company
and certain information relating to the fairness of the Merger and the
consideration offered to minority shareholders be filed with the SEC and
disclosed to minority shareholders prior to consummation of the Merger.
Rights. The Rights presently are transferable only with the certificates
for the Shares and the surrender for transfer of certificates for any Shares
will also constitute the transfer of the Rights associated with the Shares
represented by such certificates. Pursuant to the terms of the Merger Agreement,
the Company has taken all necessary action so that the Offer will not result in
the grant of any Rights or enable or require any Rights to be exercised,
distributed or triggered.
Employment. Pursuant to the Merger Agreement, the Company will offer
employment to Gerhard F. Burbach and Ian R. Farmer (the "Executives") within ten
days prior to the closing of the Merger, with terms of employment that are
substantially comparable to, and include total compensation which is no greater
than, the Executive's current terms of employment and which terms of employment
will be on "Similar Terms" (as defined in the Executive Severance Agreements
between the Company and each Executive) as the Executive's current employment.
STOCK OPTION AGREEMENT. The following is a summary of certain provisions
of the Stock Option Agreement entered into between the Company, Parent and
Merger Sub, a copy of which is filed as an Exhibit to the Schedule TO. Such
summary is qualified in its entirety by reference to the Stock Option Agreement.
Under the Stock Option Agreement, the Company granted to Merger Sub an
irrevocable Top-Up Stock Option to purchase that number of Top-Up Option Shares
equal to the number of Shares that, when added to the number of Shares owned by
Merger Sub, Parent and Royal Philips immediately following consummation of the
Offer, will constitute 90% of the Shares then outstanding on a fully diluted
basis, calculated in accordance with the Stock Option Agreement at a purchase
price per Top-Up Option Share equal to the Offer Price. However, the Top-Up
Stock Option will not be exercisable if the number of Shares subject thereto
exceeds the number of authorized Shares available for issuance.
Subject to the terms and conditions of the Stock Option Agreement, the
Top-Up Stock Option may be exercised by Merger Sub, at its election, in whole,
but not in part, at any one time after the occurrence of a Top-Up Exercise Event
(as defined below) and prior to the Top-Up Termination Date (as defined below).
A "Top-Up Exercise Event" will occur for purposes of the Stock Option Agreement
upon Merger Sub's acceptance for payment pursuant to the Offer of Shares
constituting, together with Shares owned directly or indirectly by Parent and
Royal Philips, more than 50% but less than 90% of the Shares then outstanding.
Except as provided in the last sentence of this paragraph, the "Top-Up
Termination Date" will occur for purposes of the Stock Option Agreement upon the
earliest to occur of: (i) the Effective Time; (ii) the date which is 20 business
days after the occurrence of a Top-Up Exercise Event; (iii) the termination of
the and the date on which Merger Sub reduces the Minimum Condition to the
Revised Minimum Number and accepts for payment the Revised Minimum Number of
Shares. Nevertheless, even if the Top-Up Termination Date has occurred, Merger
Sub will be entitled to purchase the Top-Up Option Shares if it has exercised
the Top-Up Stock Option in accordance with the terms of the Stock Option
Agreement prior to such occurrence.
The obligation of the Company to deliver Top-Up Option Shares upon the
exercise of the Top-Up Stock Option is subject to the following conditions: (a)
any applicable waiting period under the HSR Act and any applicable non-United
States laws regulating competition, antitrust, investment or exchange controls
relating to the issuance of the Top-Up Option Shares will have expired or been
terminated; (b) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the exercise of the Top-Up
Stock Option or the delivery of the Top-Up Option Shares in respect of any such
exercise; and (c) delivery of the Top-Up Option Shares would not require the
approval of the Company's shareholders pursuant to the rules of the Nasdaq stock
market.
EMPLOYMENT AGREEMENTS
Philips Electronics North America Corporation has entered into an agreement
with Dave Crussell to continue employment with the Company as Senior Vice
President and General Manager RTP at the same
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<PAGE> 32
base salary and target bonus as he is eligible to receive at the closing of the
Merger. The agreement is contingent upon the closing of the Merger and provides
for payment of a retention bonus of $250,000 payable 25% after the first
anniversary of the closing and 75% payable after the second anniversary of the
closing, provided that Mr. Crussell is still employed with the Company at each
date. Mr. Crussell will also receive options to purchase 25,000 shares of stock
in Royal Philips. The options are subject to the following vesting schedule
which is contingent on continued employment: fifty percent will vest 18 months
following the closing of the Merger and the remaining fifty percent will vest 36
months following the closing of the Merger. Philips Electronics North America
Corporation has also entered into agreements with ten other key employees which
provide for continued employment at the same salary and target bonuses as the
employees are eligible for at the closing, and retention bonuses and stock
options with the same payment vesting schedules as described above. Philips
Electronics North America Corporation is currently in discussions with R. Andrew
Eckert, Neil Laird, Ian Farmer and Gerhard Burbach to continue their employment
to ensure a smooth transition period following the completion of this tender
offer. No written agreement or formal arrangement or understanding has been
entered into with those executives.
12. SOURCE AND AMOUNT OF FUNDS.
Merger Sub estimates that the total amount of funds required to purchase
all of the outstanding Shares pursuant to the Offer and the Merger and to pay
related fees and expenses will be approximately $489,852,842. Parent will
finance the Offer and the Merger with funds provided by Royal Philips and its
affiliates.
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, but subject to the terms
and conditions of the Merger Agreement (and provided that Merger Sub shall not
be obligated to accept for payment any Shares until expiration or termination of
all applicable waiting periods under the HSR Act and any applicable waiting
periods relating to the Foreign Filings, in each case with respect to the Offer
and/or the Merger (the "Regulatory Condition")), Merger Sub (x) shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange
Act (relating to Merger Sub's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for and (y) may
delay the acceptance for payment of or (subject to such rules and regulations,
including Rule 14e-1(c)) payment for, any tendered Shares, in each case a number
of Shares that, when taken together with the number of Shares owned directly or
indirectly by Royal Philips, Merger Sub, Parent and any other subsidiary of
Parent is equal to (A) 90% of the total Shares outstanding on a fully diluted
basis (but excluding, solely for the purpose of calculating the total number of
Shares outstanding on a fully diluted basis, Shares issuable upon exercise of
any stock option as to which a duly executed Option Cancellation has been
received by the Company and Parent on or prior to the expiration of the Offer)
and as will permit Merger Sub to effect the Merger pursuant to Section 1110 of
the CGCL shall not have been properly and validly tendered pursuant to the Offer
and not withdrawn prior to the expiration of the Offer (the "Minimum
Condition"), or (B) in the event that Merger Sub has taken the action
contemplated by clause (ii) of Section 1.1(d), a number of shares equal to or
greater than the Option Exercise Minimum Number shall not have been properly and
validly tendered and not withdrawn prior to the expiration of the Offer, or (C)
in the event that Merger Sub has taken the action contemplated by clause (iii)
of Section 1.1(d), 49.9% of the total Shares outstanding shall not have been
properly and validly tendered pursuant to the Offer and not withdrawn prior to
the expiration of the Offer, or (ii) at or before the time of acceptance for
payment of any such Shares, any of the following events shall occur and remain
in effect:
(a)(i) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements (other than any
immaterial covenants or agreements) under the Merger Agreement or shall
have failed to obtain any consent or consents which the Company and Parent
deem significant to the transactions contemplated by the Merger Agreement
or (ii) any representation or warranty of the Company set forth in the
Merger Agreement shall have been inaccurate when made or shall be
inaccurate as of the expiration of the Offer, except in the case of clause
(a)(ii) for such inaccuracies which, when taken together (in each case
without regard to any qualifications as to
27
<PAGE> 33
materiality or a Material Adverse Effect contained in the applicable
representations and warranties) would not reasonably be likely to have a
Material Adverse Effect;
(b) there shall be threatened, instituted or pending any action,
litigation or proceeding (hereinafter, an "Action") by any Governmental
Entity: (i) challenging the acquisition by Parent or Merger Sub of Shares
or seeking to restrain or prohibit the consummation of the Offer or the
Merger; (ii) seeking to prohibit or impose any material limitations on
Parent's, Merger Sub's or any of their respective affiliates' ownership or
operation of all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole or the business or assets of
any significant subsidiary of Royal Philips, or to compel Parent or Merger
Sub to dispose of or hold separate all or any portion of Parent's or Merger
Sub's or the Company's business or assets (including the business or assets
of their respective affiliates and subsidiaries) as a result of the Offer
or the Merger; (iii) seeking to impose material limitations on the ability
of Parent or Merger Sub 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 of the
Company; or (iv) that, in any event, would, individually or in the
aggregate, reasonably be likely to have a Material Adverse Effect;
(c) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed to or become applicable
to the Offer or the Merger, or any other action shall have been taken,
proposed or threatened, by any court or other Governmental Entity, that is
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 (iv) of paragraph (b) above;
(d) any change or development shall have occurred that, individually
or in the aggregate, is reasonably likely to have a Material Adverse
Effect;
(e) the Merger Agreement shall have been terminated by the Company or
Parent or Merger Sub in accordance with its terms; or
(f) the Closing contemplated by that certain Agreement and Plan of
Merger, entered into as of October 23, 2000 (the "HCIS Agreement"), by and
between Cerner Corporation, Cerner RIS Acquisition Corporation, the Company
and ADAC Healthcare Information Systems, Inc. ("HCIS") shall not have
occurred, and the Company shall not have disposed of all of the outstanding
capital stock of HCIS on Equivalent Terms and Condition. "Equivalent Terms
and Conditions" means terms and conditions that are not materially less
favorable in the aggregate to the Company than the terms and conditions of
the HCIS Agreement
which, in the reasonable judgment of Parent and Merger Sub, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or Merger Sub) 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 may be asserted by Parent or Merger Sub regardless
of the circumstances (including any action or inaction by Parent or Merger Sub)
giving rise to such condition. The conditions described in paragraphs (a)
through (f) above are for the sole benefit of Parent and Merger Sub and may be
waived by Parent or Merger Sub, by express and specific action to that effect,
in whole or in part at any time and from time to time in their sole discretion.
The failure by Merger Sub at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and other circumstances will not be deemed a waiver
with respect to any other facts and circumstances, and each such right will be
deemed an ongoing right that may be asserted at any time and from time to time.
A public announcement will be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
28
<PAGE> 34
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by Merger Sub or Parent of any of its
rights under the Merger Agreement or a limitation of remedies available to
Merger Sub or Parent for any breach of the Merger Agreement, including
termination thereof.
In the Merger Agreement, the Company has agreed not to (1) split, combine
or otherwise change the Shares or its capitalization, (2) acquire currently
outstanding Shares or otherwise cause a reduction in the number of outstanding
Shares or (3) issue or sell additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, to acquire any of the foregoing, other than Shares
issued pursuant to the exercise of stock options outstanding as of the date of
the Merger Agreement.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any cash dividend on the Shares or other distribution on the
Shares, or issue with respect to the Shares any additional Shares, shares of any
other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to shareholders of
record on a date prior to the transfer of the Shares purchased pursuant to the
Offer to Merger Sub or its nominee or transferee on the Company's stock transfer
record.
15. CERTAIN LEGAL MATTERS.
General. Except as otherwise disclosed herein, based upon an examination
of publicly available filings with respect to the Company, Parent and Merger Sub
are not aware of any licenses or other regulatory permits which appear to be
material to the business of the Company and which might be adversely affected by
the acquisition of the Shares by Merger Sub 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 Merger Sub 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 will
be obtained without substantial conditions or that adverse consequences might
not result to the Company's or Parent's business or that certain parts of the
Company's or Parent's 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 Merger Sub to elect to terminate the Offer without the
purchase of the Shares thereunder, if the relevant conditions to termination
were met. Merger Sub's 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 Merger Sub 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 Merger Sub's obligation to accept Shares for payment.
Pursuant to the HSR Act, Parent expects to file a Notification and Report
Form with respect to the acquisition of the Shares pursuant to the Offer and the
Merger with the Antitrust Division and the FTC on or about November 14, 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 Parent. Accordingly, the
waiting period under the HSR Act will expire at 11:59 p.m., New York City time,
on or about November 29, 2000, unless early termination of the waiting period is
granted or Parent receives a request for additional information or documentary
material prior thereto. Pursuant to the HSR Act, Parent 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 Parent, the waiting period
would expire at 11:59 p.m., New York City time, on the tenth calendar day
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<PAGE> 35
after the date of substantial compliance by Parent 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. Parent 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 Merger Sub pursuant to the Offer. At any time before or after Merger
Sub's 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 acquisition of the Shares pursuant to
the Offer or seeking divestiture of the Shares acquired by Merger Sub or the
divestiture of substantial assets of Parent, the Company 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.
Other Foreign Filings. Royal Philips and the Company each conduct
operations in a number of foreign countries, and filings may have to be made
with foreign governments under their pre-merger notification statutes. The
filing requirements of various nations are being analyzed by the parties, and,
where necessary, the parties intend to make such filings.
STATE TAKEOVER LAWS.
Section 1203 of the CGCL. The Company is incorporated under the laws of
the State of California. Section 1203 of the CGCL provides that if a tender
offer is made to some or all of a corporation's shareholders by an "interested
party," an affirmative opinion in writing as to the fairness of the
consideration to the shareholders of such corporation is required to be
delivered to the shareholders at the time that the tender offer is first made in
writing to the shareholders. However, if the tender offer is commenced by
publication and tender offer materials are subsequently mailed or otherwise
distributed to the shareholders, the opinion may be omitted in the publication
if the opinion is included in the materials distributed to the shareholders. For
purposes of Section 1203, the term "interested party" includes, among other
things, a person who is a party to the transaction and (A) directly or
indirectly controls the corporation that is the subject of the tender offer or
proposal, (B) is, or is directly or indirectly controlled by, an officer or
director of the subject corporation or (C) is an entity in which a material
financial interest is held by any director or executive officer of the subject
corporation. While none of the Company, Parent or Merger Sub believes that the
Offer constitutes a transaction that falls within the provisions of Section
1203, an independent financial advisor, Lehman Brothers, has been retained by
the Company to provide a fairness opinion with respect to the Offer.
Under the CGCL, the Merger consideration paid to the shareholders of the
Company may not be cash if Merger Sub, Parent or Royal Philips owns directly or
indirectly more than 50% but less than 90% of the then outstanding Shares,
unless either all the shareholders of the Company consent or the Commissioner of
Corporations of the State of California approves, after a hearing, the terms and
conditions of the Merger and the fairness thereof.
In the event the Minimum Condition is not satisfied on any scheduled
expiration date of the Offer, Merger Sub may, without the consent of the Company
(i) extend the Offer to a date and time not later than the Early Date, pursuant
to the above paragraph; (ii) amend the Offer in contemplation of the exercise of
the Stock Option Agreement (to the extent the Stock Option Agreement is
exercisable at such time) to reduce the Minimum Condition to that number of
shares (the "Option Exercise Minimum Number") equal to the lesser of (x) the
number of shares (the "Notional Number") which, when combined with the Option
Number, equals 90.1% of the Shares then outstanding, and (y) such number of
Shares as the Company may agree in writing. The "Option Number" is the maximum
number of Shares that are issuable upon exercise of
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<PAGE> 36
the Stock Option Agreement without violation of the terms and conditions thereof
such that the sum of the number of Shares so issuable and the Notional Number
equals 90.1% of the Shares then outstanding; or (iii) amend the Offer to provide
that, in the event (x) the Minimum Condition is not satisfied at the next
scheduled expiration date of the offer (without giving effect to the exercise of
the Stock Option Agreement) and (y) the number of Shares tendered pursuant to
the Offer and not withdrawn as of such next scheduled Expiration Date, taken
together with the number of Shares owned directly or indirectly by Royal
Philips, Parent, Merger Sub and any other subsidiary of Royal Philips is more
than 50% of the then outstanding Shares, Merger Sub will (A) reduce the Minimum
Condition to the Revised Minimum Number, (B) reduce the number of Shares subject
to the Offer to a number of Shares that, when added to the Shares then owned
directly or indirectly by Royal Philips, Parent, Merger Sub and any other
subsidiary of Royal Philips will equal the Revised Minimum Number and (C) if a
number of Shares greater than the Revised Minimum Number is tendered into the
Offer and not withdrawn, accept for payment, on a pro rata basis, a number of
Shares equal to Revised Minimum Number.
If, as of any scheduled expiration date of the Offer (other than any
scheduled expiration date occurring prior to the Early Date) (i) the number of
Shares tendered pursuant to the Offer and not withdrawn as of such scheduled
expiration date, taken together with the number of Shares owned directly or
indirectly by Royal Philips, Parent and Merger Sub, is more than 50% of the then
outstanding Shares, (ii) all conditions to the Offer other than the Minimum
Condition shall have been satisfied and (iii) Shares have not been accepted for
payment by Merger Sub, then Merger Sub shall be required to take either the
action contemplated by clause (ii) of the paragraph above or the action
contemplated by clause (iii) of the paragraph above such that the Offer will
expire not later than the tenth business day following such scheduled expiration
date. [In the event that Merger Sub acquires the Revised Minimum Number of
Shares, it would have the ability to ensure approval of the Merger by the
shareholders of the Company with the approval of a de minimis number of
remaining outstanding Shares.]
State Takeover Statutes--Other. A number of states have adopted laws which
purport, to varying degrees, to apply to attempts to acquire corporations that
are incorporated in, or which have substantial assets, shareholders, principal
executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in, such states. The Company,
directly or through subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted such laws. Except as
described herein, Merger Sub does not know whether any of these laws will, by
their terms, apply to the Offer or any merger or other business combination
between Merger Sub or any of its affiliates and the Company and has not complied
with any such laws. To the extent that certain provisions of these laws purport
to apply to the Offer or any such merger or other business combination, Merger
Sub believes that there are reasonable bases for contesting such laws.
In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987, in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana
could, as a matter of corporate law, constitutionally disqualify a potential
acquiror from voting shares of a target corporation without the prior approval
of the remaining shareholders where, among other things, the corporation is
incorporated in, and has a substantial number of shareholders in, the state.
Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court
in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as
they apply to corporations incorporated outside Oklahoma in that they would
subject such corporations to inconsistent regulations. Similarly, in Tyson
Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that four
Tennessee takeover statutes were unconstitutional as applied to corporations
incorporated outside Tennessee. This decision was affirmed by the United States
Court of Appeals for the Sixth Circuit. In December 1988, a Federal District
Court in Florida held in Grand Metropolitan PLC v. Butterworth, that the
provisions of the Florida Affiliated Transactions Act and the Florida Control
Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
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<PAGE> 37
Parent and Merger Sub do not believe that any state takeover laws purport
to apply to the Offer or the Merger. Neither Parent nor Merger Sub has currently
complied with any state takeover statute or regulation. If any government
official or third party should seek to apply any state takeover law to the Offer
or any merger or other business combination between Merger Sub or any of its
affiliates and the Company, Merger Sub will take such action as then appears
desirable, which action may include challenging the applicability or validity of
such statute in appropriate court proceedings. In the event it is asserted that
one or more state takeover statutes is applicable to the Offer or any such
merger or other business combination and an appropriate court does not determine
that it is inapplicable or invalid as applied to the Offer or any such merger or
other business combination, Merger Sub might be required to file certain
information with, or to receive approvals from, the relevant state authorities
or holders of Shares, and Merger Sub might be unable to accept for payment or
pay for Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer or any such merger or other business combination. In such
case, Merger Sub may not be obligated to accept for payment or pay for any
tendered Shares. See Section 15.
16. FEES AND EXPENSES.
Morgan Stanley is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services to Royal Philips in connection
therewith. Royal Philips has agreed to pay Morgan Stanley reasonable and
customary compensation for its financial advisory services in connection with
the Offer. Royal Philips also has agreed to reimburse Morgan Stanley for its
expenses, including the fees and expenses of its counsel, in connection with its
engagement, and has agreed to indemnify Morgan Stanley and certain related
persons against certain liabilities and expenses in connection with its
engagement, including liabilities under the federal securities laws.
MacKenzie Partners, 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.
Merger Sub 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 Merger Sub 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, Merger Sub 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.
None of Royal Philips, Parent or Merger Sub is 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, Parent and Merger Sub have 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,
32
<PAGE> 38
including exhibits, may be examined and copies may be obtained from the
principal office of the SEC in Washington, D.C. in the manner set forth in
Section 8.
No person has been authorized to give any information or make any
representation on behalf of Royal Philips, Parent or Merger Sub 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.
PHILIPS MEDICAL ACQUISITION CORPORATION
November 14, 2000
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SCHEDULE A
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF ROYAL PHILIPS, PARENT AND MERGER SUB
1. DIRECTORS AND EXECUTIVE OFFICERS OF ROYAL PHILIPS. The following table
sets forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
Director and executive officers of Royal Philips. Unless otherwise indicated,
each such person is a citizen of the Netherlands and the business address of
each such person is Rembrandt Tower, Amstelplein 1, 1096 HA Amsterdam, the
Netherlands.
DIRECTORS AND EXECUTIVE OFFICERS OF ROYAL PHILLIPS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
Cor Boonstra.................. President; Chairman of the President, Chairman of the
Board of Management and the Board of Management and the
Group Management Committee Group Management Committee of
Royal Philips 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 the Board of Member of the Board of
Management and the Group Management and the Group
Management Committee; Chief Management Committee and Chief
Financial Officer Financial Officer of Royal
Philips 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.
</TABLE>
A-1
<PAGE> 40
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
Adri Baan..................... Executive Vice-President; Executive Vice-President,
Member of the Board of Member of the Board of
Management and the Group Management and the Group
Management Committee Management Committee. Prior to
1998, Chairman of the Philips
Business Electronics Division
of Royal Philips Electronics.
Arthur P.M. van der Poel...... Executive Vice-President; Executive Vice-President,
Member of the Board of Member of the Board of
Management and the Group Management, Member of the Group
Management Committee; Management Committee and
President/CEO of the President/CEO of the
Semiconductor Division Semiconductor Division of Royal
Philips Electronics. Member of
the Board of Directors of
Taiwan Semiconductor
Manufacturing Company Ltd.
John W. Whybrow............... Executive Vice-President; Executive Vice-President,
United Kingdom Member of the Board of Member of the Board of
Management and the Group Management, Member of the Group
Management Committee; Management Committee and
President/CEO of the Lighting President/CEO of the Lighting
Division Division of Royal Philips
Electronics. Since 1997,
Director of Wolseley PLC.
Gerard J. Kleisterlee......... Executive Vice-President; Executive Vice-President,
Member of the Board of Member of the Board of
Management and the Group Management, Member of the Group
Management Committee; Chief Management Committee and Chief
Operating Officer Operating Officer of Royal
Philips Electronics and until
September 15, 2000
President/CEO of the Components
Division of Royal Philips
Electronics. Prior to January
1, 1999, Chairman of Philips
Taiwan Ltd.
Ad H.A. Veenhof............... Senior Vice-President; Member Senior Vice-President, Member
of the Group Management of the Group Management
Committee; President/CEO of Committee, President/CEO of the
the Domestic Appliances and Domestic Appliances and
Personal Care Division Personal Care Division of Royal
Philips Electronics. Prior to
1996, Member of the Management
of Philips Consumer
Electronics.
</TABLE>
A-2
<PAGE> 41
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
Hans M. Barella............... Senior Vice-President; Member Senior Vice-President, Member
of the Group Management of the Group Management
Committee; President/CEO of Committee of Royal Philips
the Medical Systems Division Electronics. President/CEO of
the Medical Systems Division of
Royal Philips Electronics.
Jan P. Oosterveld............. Senior Vice-President and Senior Vice-President, Member
Member of the Group Management of the Group Management
Committee responsible for Committee responsible for
strategy and regions. strategy and regions of Royal
Philips Electronics. Prior to
1997, Member of the Management
of Philips Key Modules.
Arie Westerlaken.............. Senior Vice-President; Member Senior Vice-President, Member
of the Group Management of the Group Management
Committee; General Secretary; Committee, General Secretary,
Chief Legal Officer; Secretary Chief Legal Officer and
to the Board of Management Secretary to the Board of
Management of Royal Philips
Electronics. Member of the
Supervisory Board of ASM
Lithography Holding N.V.
Ad Huijser.................... Senior Vice-President; Member Senior Vice-President, Member
of the Group Management of the Group Management
Committee and CEO of Philips Committee and CEO of Philips
Research Research of Royal Philips
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.
Tjerk Hooghiemstra............ Senior Vice-President; Member Senior Vice-President and
of the Group Management Member of the Group Management
Committee responsible for Committee responsible for
Corporate Human Resources Corporate Human Resources
Management Management of Royal 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.
</TABLE>
A-3
<PAGE> 42
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
Guy Demuynck.................. Senior Vice-President; Member Senior Vice-President, Member
of the Group Management of the Group Management
Committee; CEO of Consumer Committee and CEO of Consumer
Electronics Mainstream Electronics Mainstream of Royal
Philips Electronics. Prior to
April 2000, Member of the
management of various Philips
Consumer Electronics
businesses.
Matt Madeiros................. Senior Vice President; Member Senior Vice-President, Member
of the Group Management of the Group Management
Committee; President and CEO Committee and President and CEO
of the components division of the Components Division of
Royal Philips Electronics.
Prior to September 15, 2000
Member of Management of Philips
Components.
L.C. van Wachem............... Chairman of the Supervisory Retired. Member of the
Board 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................. Vice-Chairman and Secretary of Retired. Member of the
the Supervisory Board Supervisory Board of Royal
Philips Electronics 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
Board
Germany Supervisory Board of Royal
Philips Electronics since 1990.
Member of the Supervisory
Boards of Victoria Versicherung
and Victoria
Lebensversicherung.
</TABLE>
A-4
<PAGE> 43
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
L. Schweitzer................. Member of the Supervisory Member of the Supervisory Board
Board
34 Quai du Point of Royal Philips Electronics
du Jour since 1997. Chairman and Chief
BP 103 92109 Executive Officer of Renault;
Boulogne Member of the Boards of
Bilancourt Pechiney, Banque Nationale de
Cedex, France Paris, Electricite de France.
Sir Richard Greenbury......... Member of the Supervisory Member of the Supervisory Board
Board
United Kingdom of 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
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 Member of the Supervisory Board
Board of Royal Philips Electronics
since 2000. Chairman -- Rector
of Nijenrode University. Former
member of the European
Commission.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Parent. Each such person is a citizen of the
United States, unless otherwise noted, and the business address of each such
person is 1251 Avenue of the Americas, New York, NY 10020.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
William E. Curran............. Chairman and President; Chairman, President and
Director Director of Philips Holding USA
Inc. Senior Vice President and
Chief Financial Officer of
Philips Electronics North
America Corporation since
February 1996. Prior to that
time, Vice President, Chief
Operating Officer and Chief
Financial Officer of Philips
Medical Systems.
</TABLE>
A-5
<PAGE> 44
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
Belinda W. Chew............... Senior Vice President; Senior Vice President,
Secretary; Director Secretary and Director of
Philips Holding USA Inc. Senior
Vice President, Secretary and
General Counsel of Philips
Electronics North America
Corporation since January 1999.
Prior to that time, General
Counsel of Philips Consumer
Communications L.P. Prior to
October 1997, Counsel of
Philips Electronics North
America Corporation.
</TABLE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB. The following table
sets forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Merger Sub. Each such person is a citizen of
the United States, unless otherwise noted, and the business address of each such
person is 1251 Avenue of the Americas, New York, NY 10020.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR
ADDRESS OFFICE(S) EMPLOYMENT HISTORY
------------------------------ ------------------------------ -------------------------------
<S> <C> <C>
William E. Curran............. President; Director Chairman, President and
Director of Philips Holding USA
Inc. Senior Vice President and
Chief Financial Officer of
Philips Electronics North
America Corporation since
February 1996. Prior to that
time, Vice President, Chief
Operating Officer and Chief
Financial Officer of Philips
Medical Systems.
Belinda W. Chew............... Vice President; Director Senior Vice President,
Secretary and Director of
Philips Holding USA Inc. Senior
Vice President, Secretary and
General Counsel of Philips
Electronics North America
Corporation since January 1999.
Prior to that time, General
Counsel of Philips Consumer
Communications L.P. Prior to
October 1997, Counsel of
Philips Electronics North
America Corporation.
Paul S. Friedlander........... Vice President Vice President - Tax, Vice
President of Philips Holding
USA Inc.
</TABLE>
A-6
<PAGE> 45
SCHEDULE B
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW
DISSENTERS' RIGHTS
SEC.1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either
(A) listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the National Market System of the Nasdaq Stock
Market, and the notice of meeting of shareholders to act upon the
reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares
described in subparagraph (A) or (B) if demands for payment are filed
with respect to 5 percent or more of the outstanding shares of that
class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
SEC.1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND FOR
PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
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<PAGE> 46
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SEC. 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SEC. 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET
VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SEC. 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF
ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was
B-2
<PAGE> 47
mailed to the shareholder, but not thereafter, may file a complaint in the
superior court of the proper county praying the court to determine whether the
shares are dissenting shares or the fair market value of the dissenting shares
or both or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SEC. 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT; JUDGMENT;
PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SEC. 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SEC. 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
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<PAGE> 48
SEC. 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
SEC. 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending action
as provided in Section 1304, within six months after the date on which
notice of the approval by the outstanding shares or notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SEC. 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SEC. 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
SEC. 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded,
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<PAGE> 49
the shareholder shall not thereafter have any right to demand payment of cash
for the shareholder's shares pursuant to this chapter. The court in any action
attacking the validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded shall not restrain or
enjoin the consummation of the transaction except upon 10 days' prior notice to
the corporation and upon a determination by the court that clearly no other
remedy will adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short- form merger set aside or rescinded, (1) a party to a
reorganization or short- form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
B-5
<PAGE> 50
SCHEDULE C
NOTICE OF SHORT FORM MERGER
This notice is being furnished to holders of the outstanding shares of
capital stock of the Company pursuant to Section 1110 of the CGCL.
1. If the Minimum Condition and the other conditions to the Offer are satisfied
as of the expiration date and the Offer is consummated, Merger Sub will be
the owner of at least 90% of the outstanding shares of each class of the
Company's capital stock. Under such circumstances, Merger Sub anticipates
that it will effect a short form merger of Merger Sub with and into the
Company pursuant to Section 1110 of the CGCL (the "Short Form Merger") as
soon as practicable following consummation of the Offer. Under such
circumstances, the Short Form Merger will become effective on or after
December 14, 2000.
2. The following resolution was adopted by the Boards of Directors of the
Company and Merger Sub and by holders of all of the outstanding shares of
capital stock of Merger Sub on November 12, 2000:
RESOLVED: That, pursuant to Section 1110 of the California Corporations
Code, the Board hereby adopts and approves (i) the Merger, (ii) the
assumption of all liabilities of Merger Sub by the Company as a result of the
Merger, (iii) the receipt by the holder of each share of Company Common Stock
in the Merger of $18.50 in cash, and (iv) the conversion as a result of the
Merger of each share of common stock of Merger Sub into one share of Company
Common Stock in the Merger.
3. A copy of Sections 1300 through 1304 of the CGCL is set forth below.
sec. 1300. Reorganization or short-form merger; dissenting shares; corporate
purchase at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b)
or subdivision (e) or (f) of Section 1201, each shareholder of the
corporation entitled to vote on the transaction and each shareholder of a
subsidiary corporation in a short-form merger may, by complying with this
chapter, require the corporation in which the shareholder holds shares to
purchase for cash at their fair market value the shares owned by the
shareholder which are dissenting shares as defined in subdivision (b). The
fair market value shall be determined as of the day before the first
announcement of the terms of the proposed reorganization or short-form
merger, excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock split, or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either
(A) listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100
or
(B) listed on the National Market System of the Nasdaq Stock
Market, and the notice of meeting of shareholders to act upon the
reorganization summarizes this section and Sections 1301, 1302, 1303
and 1304; provided, however, that this provision does not apply to
any shares with respect to which there exists any restriction on
transfer imposed by the corporation or by any law or regulation; and
provided, further, that this provision does not apply to any class of
shares described in subparagraph (A) or (B) if demands for payment
are filed with respect to 5 percent or more of the outstanding shares
of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in
subparagraph (A) or (B) of paragraph (1) (without regard to the provisos
in that paragraph), were voted against the reorganization, or which were
held of record on the effective date of a short-form
C-1
<PAGE> 51
merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the
approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement,
in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
sec. 1301. Notice to holders of dissenting shares in reorganizations;
demand for purchase; time; contents
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the
corporation to purchase their shares for cash, such corporation shall mail
to each such shareholder a notice of the approval of the reorganization by
its outstanding shares (Section 152) within 10 days after the date of such
approval, accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this
section, a statement of the price determined by the corporation to
represent the fair market value of the dissenting shares, and a brief
description of the procedure to be followed if the shareholder desires to
exercise the shareholder's right under such sections. The statement of
price constitutes an offer by the corporation to purchase at the price
stated any dissenting shares as defined in subdivision (b) of Section 1300,
unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand
upon the corporation for the purchase of such shares and payment to the
shareholder in cash of their fair market value. The demand is not effective
for any purpose unless it is received by the corporation or any transfer
agent thereof (1) in the case of shares described in clause (i) or (ii) of
paragraph (1) of subdivision (b) of Section 1300 (without regard to the
provisos in that paragraph), not later than the date of the shareholders'
meeting to vote upon the reorganization, or (2) in any other case within 30
days after the date on which the notice of the approval by the outstanding
shares pursuant to subdivision (a) or the notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the
corporation purchase and shall contain a statement of what such shareholder
claims to be the fair market value of those shares as of the day before the
announcement of the proposed reorganization or short-form merger. The
statement of fair market value constitutes an offer by the shareholder to
sell the shares at such price.
sec. 1302. Submission of share certificates for endorsement; uncertificated
securities
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section
1110 was mailed to the shareholder, the shareholder shall submit to the
corporation at its principal office or at the office of any transfer agent
thereof, (a) if the shares are certificated securities, the shareholder's
certificates representing any shares which the shareholder demands that the
corporation purchase, to be stamped or endorsed with a statement that the
shares are dissenting shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed or (b) if the shares are
uncertificated securities, written notice of the number of shares which the
shareholder demands that the corporation purchase. Upon subsequent
transfers of the dissenting shares on the books of the corporation, the new
certificates, initial transaction statement, and other written statements
issued therefor shall bear a like statement, together with the name of the
original dissenting holder of the shares.
sec. 1303. Payment of agreed price with interest; agreement fixing fair
market value; filing; time of payment
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(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the
legal rate on judgments from the date of the agreement. Any agreements
fixing the fair market value of any dissenting shares as between the
corporation and the holders thereof shall be filed with the secretary of
the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the
amount thereof has been agreed or within 30 days after any statutory or
contractual conditions to the reorganization are satisfied, whichever is
later, and in the case of certificated securities, subject to surrender of
the certificates therefor, unless provided otherwise by agreement.
sec. 1304. Action to determine whether shares are dissenting shares or fair
market value; limitation; joinder; consolidation; determination of issues;
appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares,
or the corporation and the shareholder fail to agree upon the fair market
value of the shares, then the shareholder demanding purchase of such shares
as dissenting shares or any interested corporation, within six months after
the date on which notice of the approval by the outstanding shares (Section
152) or notice pursuant to subdivision (i) of Section 1110 was mailed to
the shareholder, but not thereafter, may file a complaint in the superior
court of the proper county praying the court to determine whether the
shares are dissenting shares or the fair market value of the dissenting
shares or both or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court
shall first determine that issue. If the fair market value of the
dissenting shares is in issue, the court shall determine, or shall appoint
one or more impartial appraisers to determine, the fair market value of the
shares.
4. The price determined by the Company to represent the fair market value of the
dissenting shares is $18.50 per share.
5. A brief description of the procedure to be followed if a shareholder desires
to exercise his or her rights under Sections 1300 through 1304 of the CGCL is
set forth below.
1. Any shareholder who has a right to require the Company to purchase the
shareholder's shares for cash under Section 1300 of the CGCL, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and
who desires the Company to purchase such shares must make a written
demand upon the Company for the purchase of such shares and payment to
the shareholder in cash of their fair market value.
2. Such demand should be sent to the Secretary of the Company at the
address specified on page .
3. The demand is not effective for any purpose unless it is received by the
Secretary of the Company or any transfer agent thereof by December 14,
2000, which is the 31st day after this notice was mailed to
shareholders.
4. The demand must state the number and class of the shares held of record
by the shareholder which the shareholder demands that the Company
purchase and must contain a statement of what such shareholder claims to
be the fair market value of those shares as of the day before the
announcement of the Short Form Merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such
price.
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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 the Company or such shareholder's broker, dealer, commercial
bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
CITIBANK, N.A.
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<S> <C>
By mail: By courier:
Citibank, N.A. Citibank, N.A.
P.O. Box 685 915 Broadway, 5th Floor
Old Chelsea Station New York, NY 10010
New York, NY 10113
By hand: Confirm Facsimile Transmission:
Citibank, N.A. By Telephone Only:
Corporate Trust Window (800) 270-0808
111 Wall Street, 5th Floor
New York, NY 10043
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By Facsimile Transmission:
(For Eligible Institutions Only)
(212) 505-2248
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and locations
listed below. Requests for additional copies of the Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and other tender offer
materials may be directed to the Information Agent at its telephone numbers and
location 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:
[MACKENZIE PARTNERS LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
E-mail: [email protected]
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
(212) 761-8340
