<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.
November 14, 2000
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated November
14, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") in connection with the offer by Philips Medical Acquisition
Corporation, a Delaware corporation ("Merger Sub") and a wholly owned subsidiary
of Philips Holding USA Inc. ("Parent"), a Delaware corporation and a wholly
owned subsidiary of Koninklijke Philips Electronics N.V., a company incorporated
under the laws of the Netherlands ("Royal Philips"), to purchase all 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, net to the seller in cash (the
"Common Stock Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF THE SHARES HELD FOR YOUR
ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
AND PURSUANT TO YOUR INSTRUCTIONS. THE ENCLOSED LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
<PAGE> 2
Accordingly, we request instructions as to whether you wish us to tender on
your behalf any or all of the Shares held by us for your account, upon the terms
and subject to the conditions set forth in the Offer to Purchase. Your attention
is invited to the following:
1. The tender price is $18.50 per Share, net to the seller in cash without
interest.
2. The Offer is being made for all outstanding Shares.
3. 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 INTEREST 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 BETWEEN MERGER SUB AND THE COMPANY (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.
4. The Offer and withdrawal rights expire at 12:00 Midnight, New York City
time, on Tuesday, December 12, 2000, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn by the Expiration Date (as defined in the Offer to
Purchase) 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"). 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, Merger
Sub will, under certain circumstances described in the Offer, either exercise
the Top-Up Stock Option described in the Offer 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 also subject to the other conditions set forth in the Offer to
Purchase. See Section(s 1 and) 13 of the Offer to Purchase.
6. Tendering holders of Shares ("Holders") whose Shares are registered in
their own name and who tender directly to Citibank, N.A., as depositary (the
"Depositary"), will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Purchaser pursuant to the Offer. However,
Federal income tax backup withholding at a rate of 31% may be required, unless
an exemption is available or unless the required tax identification information
is provided. See Instruction 8 of the Letter of Transmittal.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates evidencing such Shares (the
"Certificates") or, if such Shares are held in book-entry form, timely
confirmation of a Book-Entry Transfer (a "Book-Entry Confirmation") of such
Shares into the account of the Depositary, at The Depository Trust Company, (ii)
a properly completed and duly executed Letter of Transmittal or a copy thereof
with any required signature guarantees (or, in the case of a Book-Entry
Transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of
the Letter of Transmittal) and (iii) any other documents required by the Letter
of Transmittal. Accordingly, tendering Holders may be paid at different times
depending upon when Certificates for Shares or Book-Entry Confirmations with
respect to Shares are actually received by the Depositary. Under no
circumstances will interest be paid on the purchase price of the Shares to be
paid by the Merger Sub, regardless of any extension of the Offer or any delay in
making such payment.
The Offer is being made only by the Offer to Purchase and the related
Letter of Transmittal and any amendments or supplements thereto, and is being
made to all holders of the Shares. The Offer will not be made to (and tenders
will not be accepted from or on behalf of) tendering holders of Shares in any
jurisdiction where the making of the Offer is prohibited by administrative or
judicial action pursuant to any state statute.
2
<PAGE> 3
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth herein. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD
BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF
PRIOR TO THE EXPIRATION DATE.
3
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ADAC LABORATORIES
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK)
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 undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase, dated November 14, 2000, and the related Letter of Transmittal
(which, as they may be amended and supplemented from time to time, together
constitute the "Offer") in connection with the offer by Philips Medical
Acquisition Corporation, a Delaware corporation ("Merger Sub") and a wholly
owned subsidiary of Philips Holding USA Inc. ("Parent"), a Delaware corporation
and a wholly owned subsidiary of Koninklijke Philips Electronics N.V., a company
incorporated under the laws of the Netherlands ("Royal Philips"), to purchase
all 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, net to the seller in
cash (the "Common Stock Price"), upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated November 14, 2000 and in the related
Letter of Transmittal.
This will instruct you to tender to Merger Sub the number of Shares
indicated below (or, if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
<TABLE>
<S> <C>
Number of Shares to Be Tendered:* SIGN HERE
---------------------------------------------------------- -----------------------------------------------------------
Account No.: ---------------------------------------------- Signature(s)
Dated: -----------------------------------------------------------
------------------------------------------------------ Print Name(s)
-----------------------------------------------------------
Address(es)
-----------------------------------------------------------
Area Code and Telephone Number
-----------------------------------------------------------
Tax Identification or Social Security Number
</TABLE>
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
