-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TRlJrGsD1/0zptT6X2QCl+PxCM9SDHEBQtGhsA1noEeLIJoxASxFiAuoITktGWgB f3bZNMbv8VWizTYwJIC7Pw== /in/edgar/work/0000950123-00-010655/0000950123-00-010655.txt : 20001116 0000950123-00-010655.hdr.sgml : 20001116 ACCESSION NUMBER: 0000950123-00-010655 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20001114 GROUP MEMBERS: KONINKLIJKE PHILIPS ELECTRONICS NV GROUP MEMBERS: PHILIPS HOLDING USA INC GROUP MEMBERS: PHILIPS MEDICAL ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ADAC LABORATORIES CENTRAL INDEX KEY: 0000313798 STANDARD INDUSTRIAL CLASSIFICATION: [3844 ] IRS NUMBER: 941725806 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-32403 FILM NUMBER: 769267 BUSINESS ADDRESS: STREET 1: 540 ALDER DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4083219100 MAIL ADDRESS: STREET 1: 540 ALDER DR CITY: MILPITAS STATE: CA ZIP: 95035 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KONINKLIJKE PHILIPS ELECTRONICS NV CENTRAL INDEX KEY: 0000313216 STANDARD INDUSTRIAL CLASSIFICATION: [3600 ] STATE OF INCORPORATION: P7 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: REMBRANDT TOWER AMSTELPLEIN 1 STREET 2: 1096 HA AMSTERDAM CITY: THE NETHERLANDS MAIL ADDRESS: STREET 1: REMBRANDT TOWER AMSTELPLEIN 1 STREET 2: 1096 HA AMSTERDAM CITY: THE NETHERLANDS FORMER COMPANY: FORMER CONFORMED NAME: PHILIPS ELECTRONICS N V DATE OF NAME CHANGE: 19930727 SC TO-T 1 y42617scto-t.txt SCHEDULE TO 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 SCHEDULE TO TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ADAC LABORATORIES (NAME OF SUBJECT COMPANY (ISSUER)) PHILIPS MEDICAL ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF PHILIPS HOLDING USA INC. A WHOLLY OWNED SUBSIDIARY OF KONINKLIJKE PHILIPS ELECTRONICS N.V. (NAMES OF FILING PERSONS) COMMON STOCK, NO PAR VALUE (TITLE OF CLASS OF SECURITIES) 005313200 (CUSIP NUMBER OF CLASS OF SECURITIES) WILLIAM E. CURRAN PRESIDENT PHILIPS HOLDING USA INC. 1251 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 (212) 536-0500 (NAME, ADDRESS, AND TELEPHONE NUMBERS OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSONS) with a copy to: MATTHEW G. HURD SULLIVAN & CROMWELL 125 BROAD STREET NEW YORK, NEW YORK 10004 (212) 558-4000 2 - -------------------------------------------------------------------------------- CALCULATION OF FILING FEE Transaction valuation(1) Amount of filing fee $489,852,842 $97,971
- -------------------------------------------------------------------------------- (1) Based on the offer to purchase all of the outstanding shares of common stock of ADAC Laboratories, together with the associated rights to purchase Series A Junior Participating Preferred Stock, at a purchase price of $18.50 per share, 21,136,116 shares outstanding and outstanding options with respect to 5,342,416 shares, in each case as of November 12, 2000. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Form or Registration No.: N/A Filing Party: N/A Date Filed: N/A [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. [ ] Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] This Tender Offer Statement on Schedule TO relates to the commencement by 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"), of its offer to purchase all of the outstanding shares of common stock, no par value ("Common Stock"), of ADAC Laboratories, a California corporation (the "Company"), together with the associated rights to purchase Series A Junior Participating Preferred Stock ("Rights") issued pursuant to the Rights Agreement, dated as of April 22, 1996, as amended, 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 a price of $18.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 14, 2000 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which, as they may be amended and supplemented from time to time, together constitute the "Offer"). The information in the Offer to Purchase, including all schedules and annexes thereto, is hereby incorporated by reference in response to all the items of this Schedule TO, except as otherwise set forth below. ITEM 10. FINANCIAL STATEMENTS. (a) Financial information. Not applicable. (b) Pro forma information. Not applicable. 1 3 ITEM 11. ADDITIONAL INFORMATION. (b) Other material information. The information set forth in the Letter of Transmittal attached hereto as Exhibit (a)(2) is incorporated herein by reference. ITEM 12. EXHIBITS. The following are attached as exhibits to this Schedule TO: 99(a)(1) Offer to Purchase 99(a)(2) Letter of Transmittal 99(a)(3) Notice of Guaranteed Delivery 99(a)(4) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 99(a)(5) Form of Letter to brokers, dealers, commercial banks, trust companies and other nominees 99(a)(6) Form of Letter to be used by brokers, dealers, commercial banks, trust companies and other nominees to their clients 99(a)(7) Summary newspaper advertisement, dated November 14, 2000, as published in The Wall Street Journal 99(b) None 99(d)(1)(A) Agreement and Plan of Merger, dated as of November 12, 2000, by and among Parent, Merger Sub and the Company 99(d)(1)(B) Stock Option Agreement, dated as of November 12, 2000 between Merger Sub and the Company 99(d)(2) Employment Agreement, dated February 2000, between Dave Cruffell and Philips Electronics North America Corporation 99(g) None 99(h) None
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not applicable. 2 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, we certify that the information set forth in this statement is true, complete and correct. PHILIPS MEDICAL ACQUISITION CORPORATION By: /s/ WILLIAM E. CURRAN -------------------------------------------- Name: William E. Curran Title: President and Director PHILIPS HOLDING USA INC. By: /s/ WILLIAM E. CURRAN -------------------------------------------- Name: William E. Curran Title: Chairman, President and Director KONINKLIJKE PHILIPS ELECTRONICS N.V. By: /s/ COR BOONSTRA -------------------------------------------- Name: Cor Boonstra Title: President, Chairman of the Board of Management and the Group Management Committee By: /s/ JAN H.M. HOMMEN -------------------------------------------- Name: Jan H.M. Hommen Title: Executive Vice-President, Chief Financial Officer, Member of the Board of Management and the Group Management Committee Date: November 14, 2000 3 5 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------------ ------------------- 99(a)(1) Offer to Purchase 99(a)(2) Letter of Transmittal 99(a)(3) Notice of Guaranteed Delivery 99(a)(4) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 99(a)(5) Form of Letter to brokers, dealers, commercial banks, trust companies and other nominees 99(a)(6) Form of Letter to be used by brokers, dealers, commercial banks, trust companies and other nominees to their clients 99(a)(7) Summary newspaper advertisement, dated November 14, 2000, as published in The Wall Street Journal 99(b) None 99(d)(1)(A) Agreement and Plan of Merger, dated as of November 12, 2000, by and among Parent, Merger Sub and the Company 99(d)(1)(B) Stock Option Agreement, dated as of November 12, 2000 between Merger Sub and the Company 99(d)(2) Employment Agreement, dated February 2000, between Dave Cruffell and Philips Electronics North America Corporation 99(g) None 99(h) None
4 EX-99.A.1 2 y42617ex99-a_1.txt OFFER TO PURCHASE 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. 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 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 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 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 6 TABLE OF CONTENTS
SECTION PAGE - ------- ---- 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
1 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 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 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 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 5 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 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 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 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 9 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 10 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 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 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:
CLOSING BID PRICES -------------------------------- HIGH LOW DIVIDENDS ------- -------- --------- 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
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 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 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)
FISCAL YEAR ENDED -------------------------------------------- NINE MONTHS ENDED OCTOBER 3, SEPTEMBER 27, SEPTEMBER 28, JULY 2, 2000 1999 1998 1997 ------------------ ---------- ------------- ------------- (UNAUDITED) 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
- ------------------------ 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 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:
FISCAL YEAR ENDED ----------------- 2001 2002 ------- ------- Booking.................................................... $382.9 $425.0 Revenues................................................... 358.9 394.8 Gross Profit............................................... 141.8 157.9 EBIT....................................................... 40.4 47.3
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 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 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 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 19 25 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. 20 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 21 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 22 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. 23 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 24 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, 25 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 26 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 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 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 29 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 30 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. 31 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 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 33 39 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
PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
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PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
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PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
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PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
A-4 43
PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
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.
PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
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PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
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.
PRESENT PRINCIPAL OCCUPATION OR NAME AND BUSINESS EMPLOYMENT AND FIVE-YEAR ADDRESS OFFICE(S) EMPLOYMENT HISTORY - ------------------------------ ------------------------------ ------------------------------- 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.
A-6 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 B-1 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 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. B-3 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, B-4 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 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 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 C-2 52 (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. C-3 53 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. 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
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: proxy@mackenziepartners.com 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 EX-99.A.2 3 y42617ex99-a_2.txt LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK) OF ADAC LABORATORIES Pursuant to the Offer to Purchase Dated November 14, 2000 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 DEPOSITARY FOR THE OFFER IS: CITIBANK, N.A. BY MAIL: BY COURIER: BY HAND: Citibank, N.A. Citibank, N.A. Citibank, N.A. P.O. Box 685 915 Broadway, 5th Floor Corporate Trust Window Old Chelsea Station New York, NY 10010 111 Wall Street, 5th New York, NY 10113 New York, NY 10010
BY FACSIMILE TRANSMISSION: (FOR ELIGIBLE INSTITUTIONS ONLY) (212) 505-2248 CONFIRM FACSIMILE TRANSMISSION BY TELEPHONE ONLY: (800) 270-0808 2 - ------------------------------------------------------------ DESCRIPTION OF THE SHARES TENDERED - -------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - -------------------------------------------------------------------------------------------------------------------- NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES TENDERED - --------------------------------------------------------------------------------------------------------------------- (1) Need not be completed by Book-Entry Shareholders. (2) Unless otherwise indicated, all shares represented by share certificates delivered to the Depositary will be deemed to have been tendered. See Instruction 4. - ---------------------------------------------------------------------------------------------------------------------
[ ] Check here if certificates have been lost, destroyed or mutilated. See Instruction 11. Number of shares represented by lost, destroyed or mutilated certificates: ----------------------. DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used by shareholders of ADAC Laboratories if certificates for the Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Instruction 2 below) is utilized, if delivery of the Shares is to be made by Book-Entry Transfer to an account maintained by the Depositary at the Book-Entry Transfer Facility (as defined in and pursuant to the procedures set forth in Section 3 of the Offer to Purchase). Holders who deliver Shares by Book-Entry Transfer are referred to herein as "Book-Entry Shareholders" and other shareholders who deliver Shares are referred to herein as "Certificate Shareholders." Shareholders whose certificates for the Shares are not immediately available or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase) with respect to, their Shares and all other documents required hereby to the Depositary prior to the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 2 3 [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: ------------------------------------------------------------------------------- Account No.: ---------------------------------------------------------------------------- Transaction Code No.: ---------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): --------------------------------------------------------------------------- Window Ticket Number (if any): ----------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: --------------------------------------------------------- Name of Institution which Guaranteed Delivery: ------------------------------------------------------------- If delivery is by book-entry transfer, check box: [ ] Account No.: ---------------------------------------------------------------------------- Transaction Code No.: ---------------------------------------------------------------------------- 3 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to 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"), the above-described 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 this related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The undersigned understands that Merger Sub reserves the right to transfer or assign, in whole at any time, or in part from time to time, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Merger Sub of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for any Shares validly tendered and accepted for payment pursuant to the Offer. Receipt of the Offer is hereby acknowledged. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 13, 2000 (the "Merger Agreement"), among the Company, Parent and Merger Sub. Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment), subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Merger Sub all right, title and interest in and to all the Shares that are being tendered hereby (and any and all non-cash dividends, distributions, rights, other shares of common stock or other securities issued or issuable in respect thereof on or after November 12, 2000 (collectively, "Distributions")) and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any and all Distributions), or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Merger Sub, (ii) present such Shares (and any and all Distributions) for transfer on the books of the Company, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms of the Offer. By executing this Letter of Transmittal, the undersigned hereby irrevocably appoints Merger Sub, its officers and designees, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, (i) to vote at any annual or special meeting of the Company's shareholders or any adjournment or postponement thereof or otherwise in such manner as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, (ii) to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, and (iii) to otherwise act as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, all of the Shares (and any and all Distributions) tendered hereby and accepted for payment by Merger Sub. This appointment will be effective if and when, and only to the extent that, Merger Sub accepts such Shares for payment pursuant to the Offer. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for 4 5 payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke any prior powers of attorney and proxies granted by the undersigned at any time with respect to such Shares (and any and all Distributions), and no subsequent powers of attorney, proxies, consents or revocations may be given by the undersigned with respect thereto (and, if given, will not be deemed effective). Merger Sub reserves the right to require that, in order for the Shares to be deemed validly tendered, immediately upon Merger Sub's acceptance for payment of such Shares, Merger Sub must be able to exercise full voting, consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of the Company's shareholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that the undersigned owns the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act, and that when the same are accepted for payment by Merger Sub, Merger Sub will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Merger Sub to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Merger Sub all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Merger Sub shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price the amount or value of such Distribution as determined by Merger Sub in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. This tender is irrevocable; provided that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date and, unless theretofore accepted for payment as provided in the Offer to Purchase, may also be withdrawn at any time after January 12, 2001, subject to the withdrawal rights set forth in Section 4 of the Offer to Purchase. The undersigned understands that the valid tender of the Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and Merger Sub upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms or conditions of any such extension or amendment). Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the terms of the Merger Agreement, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Merger Sub may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of all Shares purchased and/or return any certificates for any Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing above under "Description of the Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of all Shares purchased and/or return any certificates for any Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of the Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and/or return any certificates evidencing Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return any such certificates (and any accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment 5 6 Instructions," please credit any Shares tendered herewith by Book-Entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Merger Sub has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if Merger Sub does not accept for payment any of the Shares so tendered. ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of the Shares accepted for payment is to be issued in the name of someone other than the undersigned, if certificates for any Shares not tendered or not accepted for payment are to be issued in the name of someone other than the undersigned or if any Shares tendered hereby and delivered by Book-Entry transfer that are not accepted for payment are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than the account indicated above. Issue check and/or stock certificates to: Name -------------------------------------------------------------------- (PLEASE PRINT) Address ------------------------------------------------------------------- ------------------------------------------------------------------- (ZIP CODE) ------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9) [ ] Credit Shares delivered by Book-Entry transfer and not purchased to the Book-Entry Transfer Facility account. ------------------------------------------------------------------- (ACCOUNT NUMBER) ------------------------------------------------------------------- ------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for any Shares not tendered or not accepted for payment and/or the check for the purchase price of any Shares accepted for payment is to be sent to someone other than the undersigned or to the undersigned at an address other than that shown under "Description of the Shares Tendered." Mail check and/or stock certificates to: Name -------------------------------------------------------------------- (PLEASE PRINT) Address --------------------------------------------------------------------- -------------------------------------------------------------------- (INCLUDE ZIP CODE) ------------------------------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9) ------------------------------------------------------------------- 6 7 IMPORTANT SHAREHOLDER: SIGN HERE (COMPLETE SUBSTITUTE FORM W-9 BELOW) (SIGNATURE(S) OF OWNER(S)) Name(s) - -------------------------------------------------------------------------------- Name of Firm - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) - -------------------------------------------------------------------------------- (SEE INSTRUCTION 5) Address - -------------------------------------------------------------------------------- (ZIP CODE) Area Code and Telephone Number - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number - -------------------------------------------------------------------------------- (SEE SUBSTITUTE FORM W-9) Dated: - ------------------------------ , 2000 (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by the person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5). GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized signature(s) - -------------------------------------------------------------------------------- Name(s) - -------------------------------------------------------------------------------- Name of Firm - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- (ZIP CODE) Area Code and Telephone Number - --------------------------------------------------------------------------- Dated: - ------------------------------ , 2000 7 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in any of 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 herewith, unless such registered holder(s) has completed either 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 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 or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by shareholders of the Company either if certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if delivery of the Shares is to be made by Book-Entry transfer pursuant to the procedures set forth herein and in Section 3 of the Offer to Purchase. For a shareholder validly to tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), together with any required signature guarantees or an Agent's Message (in connection with Book-Entry transfer of the Shares) and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date and either (i) certificates for tendered Shares must be received by the Depositary at one of such addresses prior to the Expiration Date or (ii) Shares must be delivered pursuant to the procedures for Book-Entry transfer set forth herein and in Section 3 of the Offer to Purchase and a Book-Entry Confirmation must be received by the Depositary prior to the Expiration Date or (b) the tendering shareholder must comply with the guaranteed delivery procedures set forth herein and in Section 3 of the Offer to Purchase. Shareholders whose certificates for the Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot comply with the Book-Entry transfer procedures on a timely basis may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth herein and in Section 3 of the Offer to Purchase. Pursuant to such guaranteed delivery procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary prior to the Expiration Date and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all tendered Shares), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a Book-Entry transfer, an Agent's Message, and any other required documents must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange is open for business. 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 such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against the participant. The signatures on this Letter of Transmittal cover the Shares tendered hereby. THE METHOD OF DELIVERY OF THE SHARES, THIS 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 8 9 SHAREHOLDER. THE 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, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. All tendering shareholders, by executing this Letter of Transmittal (or a manually signed facsimile thereof), waive any right to receive any notice of acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the number of Shares tendered and the certificate numbers with respect to such Shares should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In any such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificates will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date or the termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any stock certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person to so act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment or certificates for any Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares evidenced by certificates listed and transmitted hereby, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the transfer and sale of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or if certificates for any Shares not tendered or not accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. 9 10 Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates evidencing the Shares tendered hereby. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Shares accepted for payment is to be issued in the name of, and/or certificates for any Shares not accepted for payment or not tendered are to be issued in the name of and/or returned to, a person other than the signer of this Letter of Transmittal or if a check is to be sent, and/or such certificates are to be returned, to a person other than the signer of this Letter of Transmittal, or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Any shareholder(s) delivering Shares by Book-Entry transfer may request that Shares not purchased be credited to such account maintained at the Book-Entry Transfer Facility as such shareholder(s) may designate in the box entitled "Special Payment Instructions." If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above as the account from which such Shares were delivered. 8. 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 Substitute Form W-9 in this Letter of Transmittal and certify, under penalties of perjury, that such TIN is correct. If a tendering shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box on the Substitute Form W-9. Backup withholding is not an additional income tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the shareholder upon filing an income tax return. The shareholder is required to give the Depositary the TIN (i.e., social security number or employer identification number) of the record owner of the Shares. If the Shares are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part 1 of the Substitute Form W-9 and sign and date the Substitute Form W-9, and the shareholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such shareholder if a TIN is provided to the Depositary within 60 days. Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate 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 the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at the addresses and phone numbers set forth below. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at its address and phone number set forth below. You may also contact your broker, dealer, commercial bank or trust companies or other nominee for assistance concerning the Offer. 10. WAIVER OF CONDITIONS. Subject to the Merger Agreement, Merger Sub reserves the absolute right in its sole discretion to waive, at any time or from time to time, any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered. In the Merger Agreement, Merger Sub has agreed, 10 11 among other things, that it will not, without the prior written consent of the Company, waive the Minimum Condition, except pursuant to the Merger Agreement, or 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. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify the Depositary by checking the box immediately preceding the special payment/special delivery instructions and indicating the number of Shares lost. THE SHAREHOLDER WILL THEN BE INSTRUCTED AS TO THE STEPS THAT MUST BE TAKEN IN ORDER TO REPLACE THE CERTIFICATE(S). THIS LETTER OF TRANSMITTAL AND RELATED DOCUMENTS CANNOT BE PROCESSED UNTIL THE PROCEDURES FOR REPLACING LOST, DESTROYED OR STOLEN CERTIFICATES HAVE BEEN FOLLOWED. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF) TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE OR THE TENDERING SHAREHOLDERS MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. IMPORTANT TAX INFORMATION Under Federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with such shareholder's correct taxpayer identification number on Substitute Form W-9 below. If such shareholder is an individual, the taxpayer identification number is his social security number. If the Depositary is not provided with the correct taxpayer identification number, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. Certain shareholders (including, among others, all corporations, and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Depositary. Exempt shareholders, other than foreign individuals, should furnish their TIN, write "Exempt" in Part II of the Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service by filing an appropriate claim. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct taxpayer identification number by completing the form contained herein certifying that the taxpayer identification number provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a taxpayer identification number). WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of 11 12 the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part 1 of the Substitute Form W-9 and sign and date the Substitute Form W-9, and the shareholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such shareholder if a TIN is provided to the Depositary within 60 days. PAYOR'S NAME: CITIBANK, N.A.
- ---------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE Name ---------------------------------------------------------------------- FORM W-9 Address-------------------------------------------------------------------- (NUMBER AND STREET) ----------------------------------------------------------------------------- (CITY) (STATE) (ZIP CODE) DEPARTMENT OF THE Check appropriate box: TREASURY Individual [ ] Corporation [ ] INTERNAL REVENUE Partnership [ ] Other (specify) [ ] SERVICE ---------------------------------------------------------------------------------------- REQUEST FOR TAXPAYER SSN: ---------------------- IDENTIFICATION NUMBER (TIN) PART I.--Please provide your taxpayer or AND CERTIFICATION identification number in the space at right. If EIN:----------------------- awaiting TIN, write "Applied For." ---------------------------------------------------------------------------------------- PART II.--For payees exempt from backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9." ---------------------------------------------------------------------------------------- PART III.--CERTIFICATION Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because: (a) I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interests or dividends, or (b) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). ---------------------------------------------------------------------------------------- SIGNATURE ---------------------------------------------------------------- DATE---------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 12 13 Questions and 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 number and location listed below, and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, 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: proxy@mackenziepartners.com 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) 761-8322 EX-99.A.3 4 y42617ex99-a_3.txt NOTICE OF GUARANTEED DELIVERY 1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN ANY DOUBT AS TO THE ACTION TO BE TAKEN, YOU SHOULD SEEK YOUR OWN FINANCIAL ADVICE IMMEDIATELY FROM YOUR OWN APPROPRIATELY AUTHORIZED INDEPENDENT FINANCIAL ADVISOR. IF YOU HAVE SOLD OR TRANSFERRED ALL OF YOUR REGISTERED HOLDINGS OF SHARES (AS DEFINED BELOW), PLEASE FORWARD THIS DOCUMENT AND ALL ACCOMPANYING DOCUMENTS TO THE STOCKBROKER, BANK OR OTHER AGENT THROUGH WHOM THE SALE OR TRANSFER WAS EFFECTED FOR TRANSMISSION TO THE PURCHASER OR TRANSFEREE. Notice of Guaranteed Delivery for Tender of Shares of Common Stock (Including the Associated Rights to Purchase Series A Junior Participating Preferred Stock) of ADAC Laboratories to Philips Medical Acquisition Corporation a wholly owned subsidiary of Philips Holding USA Inc. a wholly owned subsidiary of Koninklijke Philips Electronics N.V. (Not to be used for Signature Guarantees) 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. As set forth under Section 3 -- "Procedure for Tendering Shares" in the Offer to Purchase, dated November 14, 2000, and any supplements or amendments thereto (the "Offer to Purchase"), this form (or a copy hereof) must be used to accept the Offer (as defined in the Offer to Purchase) if (i) certificates (the "Certificates") representing shares of common stock, no par value (the "Shares"), of ADAC Laboratories, a California corporation (the "Company"), are not immediately available, (ii) if the procedures for Book-Entry Transfer cannot be completed on a timely basis or (iii) time will not permit Certificates and all other required documents to reach Citibank, N.A. (the "Depositary") prior to the Expiration Date (as defined in the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by hand, by mail or by overnight courier or transmittal by facsimile transmission to the Depositary and must include a signature guarantee by an Eligible Institution (as defined in the Offer to Purchase) in the form set forth herein. See the guaranteed delivery procedures described in the Offer to Purchase under Section 3 -- "Procedure for Tendering Shares". 2 The Depositary for the Offer is: CITIBANK, N.A. By hand: By courier: Citibank, N.A. Citibank, N.A. Corporate Trust Window 915 Broadway, 5th Floor 111 Wall Street, 5th Floor New York, NY 10010 New York, NY 10043 By mail: Confirm Facsimile Citibank, N.A. Transmission: P.O. Box 685 By Telephone Only: Old Chelsea Station (800) 270-0808 New York, NY 10113 By Facsimile Transmission: (For Eligible Institutions Only) (212) 505-2248
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. 2 3 Ladies and Gentlemen: The undersigned hereby tenders to 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"), upon the terms and subject to the conditions set forth in Merger Sub's 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, constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares set forth below 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"), pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Signature(s) - -------------------------------------------------------------------------------- Name(s) of Record Holder(s) - -------------------------------------------------------------------------------- PLEASE PRINT OR TYPE Number of Shares - -------------------------------------------------------------------------------- Certificate No.(s) (If Available) - ----------------------------------------------------------------------------- Dated ________ , 2000 Address(es) - -------------------------------------------------------------------------------- ZIP CODE Area Code and Tel. No.(s) - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number - -------------------------------------------------------------------------------- Check box if Shares will be tendered by Book-Entry Transfer: [ ] Account Number - -------------------------------------------------------------------------------- 3 4 THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program, the Stock Exchange Medallion Program or an "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender of Shares complies with Rule 14e-4 and (c) guarantees to deliver to the Depositary either certificates representing the Share tendered hereby, in proper form for transfer, or confirmation of Book-Entry Transfer of such Share into the Depositary's accounts at The Depository Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase), and any other required documents, within three trading days (as defined in the Offer to Purchase) after the date hereof. - -------------------------------------------------------------------------------- NAME OF FIRM - -------------------------------------------------------------------------------- ADDRESS - -------------------------------------------------------------------------------- ZIP CODE Area Code and Tel. No. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AUTHORIZED SIGNATURE Name - -------------------------------------------------------------------------------- PLEASE PRINT OR TYPE Title - -------------------------------------------------------------------------------- Date ____________ , 2000 NOTE: DO NOT SEND CERTIFICATES FOR THE SHARES WITH THIS NOTICE. CERTIFICATES SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL. 4 EX-99.A.4 5 y42617ex99-a_4.txt TAX GUIDELINES 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- ------------------------------------------------------ GIVE THE NAME AND SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF- - ------------------------------------------------------ 1. Individual The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, any one of the individuals(1) 3. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(1) savings trust (grantor is also trustee) b. So-called trust The actual owner(1) account that is not a legal or valid trust under State law 5. Sole proprietorship The owner(3) - ------------------------------------------------------
- ------------------------------------------------------ GIVE THE NAME AND EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF- - ------------------------------------------------------ 6. Sole proprietorship The owner(3) 7. A valid trust, estate, Legal entity(1) or pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational or other tax-exempt organization 10. Partnership The partnership 11. A broker or registered The broker or nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Internal Revenue Service Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at your local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - - A corporation. - - financial institution. - - An organization exempt from tax under section 501(a), or an individual retirement plan. - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - - An international organization, or any agency or instrumentality thereof. - - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under section 584(a). - - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. - - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - - Payments described in section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Certain payments other than interest dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1984, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.A.5 6 y42617ex99-a_5.txt FORM OF LETTER TO BROKERS, DEALERS 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 Brokers, Dealers, Commercial Banks, Trust Companies And Other Nominees: We have been appointed 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 act as Dealer Manager in connection with Merger Sub's offer 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 (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. 2 For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. The Offer to Purchase, dated November 14, 2000. 2. The Letter of Transmittal to tender Shares for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if the procedures for tendering Shares set forth in the Offer to Purchase cannot be completed, prior to the Expiration Date. 4. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 5. A letter to shareholders of the Company from R. Andrew Eckert, President and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 dated November 14, 2000, which has been filed by the Company with the Securities and Exchange Commission. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 12, 2000 UNLESS THE OFFER IS EXTENDED. Please note 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 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 prior to the Expiration Date (as defined in the Offer to Purchase) a number of Shares representing at least 90% of the total shares outstanding on a fully diluted basis, as calculated pursuant to the Merger Agreement (the "Minimum Condition"), which, together with the Shares then owned by Merger Sub, Parent and Royal Philips, would represent at least ninety percent (90%) of the total number of outstanding Shares. 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 Sections 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 2 3 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 9 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. In order to take advantage of the Offer, Certificates, as well as a Letter of Transmittal (or copy thereof), properly completed and duly executed 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 all other documents required by the Letter of Transmittal must be received by the Depositary, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. Any Holder who desires to tender Shares and whose Certificate(s) evidencing such Shares are not immediately available, or who cannot comply with the procedures for Book-Entry Transfer described in the Offer to Purchase on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3 -- "Procedures for Tendering Shares" of the Offer to Purchase. Merger Sub will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase). Merger Sub will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Merger Sub will pay or cause to be paid any transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Morgan Stanley & Co. Incorporated, the Dealer Manager for the Offer, at 1585 Broadway, New York, New York 10036, telephone numbers (212) 761-8322 (call collect) or to Mackenzie Partners, Inc., the Information Agent for the Offer, at (800) 322-2885. Requests for copies of the enclosed materials may also be directed to the Dealer Manager or to the Information Agent at the above addresses and telephone numbers. Very truly yours, MORGAN STANLEY & CO. Incorporated NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF PARENT, MERGER SUB, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT, THE DEPOSITARY, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.A.6 7 y42617ex99-a_6.txt FORM OF LETTER TO CLIENTS 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. 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 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 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. 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
* Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A.7 8 y42617ex99-a_7.txt SUMMARY NEWSPAPER ADVERTISEMENT 1 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made only by the Offer to Purchase, dated November 14, 2000, and the related Letter of Transmittal and any amendments or supplements thereto, and is being made to all holders of 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. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock Including the Associated Rights (as defined below) of ADAC Laboratories at $18.50 Net Per Share by Philips Medical Acquisition Corporation a wholly owned subsidiary of Philips Holding USA Inc. an indirect wholly owned subsidiary of Koninklijke Philips Electronics N.V. Philips Medical Acquisition Corporation, a Delaware corporation ("Merger Sub") and a wholly owned subsidiary of Philips Holding USA Inc., a Delaware corporation ("Parent"), and an indirect 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 the Offer to Purchase, dated November 14, 2000 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). 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. Following the Offer, Merger Sub intends to effect the Merger (as described below). 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 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 2 Merger Agreement (the "Minimum Condition"). The Offer is also subject to the other conditions set forth in the Offer to Purchase. See Section 13 of the Offer to Purchase. 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, Parent, and Merger Sub. 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. The Merger Agreement provides that, among other things, Merger Sub will make the Offer and that simultaneously with or as soon as practicable after the expiration of the Offer, receipt of any required approval by the Company's stockholders of the Merger Agreement and the satisfaction or waiver of the other conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company, and the Company will survive and become a wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by Parent, Merger Sub or any other subsidiary of Parent or Shares which are held by shareholders exercising dissenters' rights pursuant to Chapter 13 of the California General Corporation Law ("CGCL")) will be canceled, retired and cease to exist and converted into the right to receive, without interest, an amount in cash equal to $18.50 per Share or such greater amount as may be paid in the Offer. 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 November 12, 2000, between Merger Sub and the Company (the "Stock Option Agreement") and approved the Merger Agreement and the Stock Option Agreement, dated as of November 12, 2000, among 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. 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. 3 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 withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00 midnight, New York City time, on 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. 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, although it reserves the right to do so. 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 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 in the Offer to Purchase)) and any other documents required by the Letter of Transmittal. 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. 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. 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. Subject to the terms of the Merger Agreement and applicable rules and regulations of the SEC, Merger Sub expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering shareholder to withdraw such shareholder's Shares. See Section 4 of the Offer to Purchase. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the SEC, Merger Sub also 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 4 the conditions specified in Section 13 of the Offer to Purchase 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 Section 1.1(d) of the Merger Agreement, (ii) decrease the price per Share or change the form of consideration payable in the Offer, (iii) decrease the number of Shares sought in the Offer, except as otherwise contemplated by Section 1.1(d) of 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. 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 schedule expiration date (such time on such tenth business day, the "Early Date")) or (b) waive the Minimum Condition and exercise its rights under Section 1.1(d)(ii) of the Merger Agreement. 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 and 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 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. 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 of the Offer to Purchase 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 of the Offer to Purchase) 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 5 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 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. 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. 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 the 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, (as defined in the Offer to Purchase) 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 of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. If certificates for the Shares to be withdrawn have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers of the particular certificates evidencing the Shares to be withdrawn must also be furnished to the Depositary as aforesaid prior to the physical release of such certificates. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by 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 of the Offer to Purchase 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 the 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 Section 4 of the Offer to Purchase. 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 6 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. The information required to be disclosed by Paragraph (d)(1) of Rule 14d-6 of the General Rules and Regulations under the Exchange Act, is contained in the Offer to Purchase and is incorporated herein by reference. 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. The 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. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. 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 the Offer to Purchase. Requests for 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. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee. Royal Philips will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase). The Information Agent for the Offer is: [MacKenzie Logo] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) E-mail: proxy@mackenziepartners.com or CALL TOLL-FREE (800) 322-2885 The Dealer Manager for the Offer is: [Morgan Stanley Dean Witter Logo] Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 (212) 761-8340 November 14, 2000 EX-99.D.1.A 9 y42617ex99-d_1a.txt AGREEMENT AND PLAN OF MERGER 1 Exhibit 99(d)(1)(A) EXECUTION COPY AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated as of November 12, 2000, among ADAC Laboratories, a California corporation (the "Company"), Philips Holding USA Inc., a Delaware corporation ("Parent"), and Academy Acquisition Company, a Delaware corporation and a wholly-owned subsidiary of Parent that is to be renamed Philips Medical Acquisition Corporation ("Merger Sub"), the Company and Merger Sub sometimes being hereinafter collectively referred to as the "Constituent Corporations." RECITALS WHEREAS, the Boards of Directors of Parent and the Company each have unanimously adopted this Agreement and approved the Offer (as defined herein) and the Merger (as defined herein) and determined that it is in the best interests of their respective companies and shareholders for Parent to acquire the Company upon the terms and subject to the conditions set forth herein; WHEREAS, as a condition to the willingness of Parent and Merger Sub to enter into this Agreement, Parent and Merger Sub have required that the Company agree, and in order to induce Parent and Merger Sub to enter into this Agreement, the Company has agreed, to grant to Merger Sub an option to purchase Shares (as defined herein) upon the terms and subject to the conditions of the Stock Option Agreement, of even date herewith, among the Company, Parent and Merger Sub (the "Stock Option Agreement"); and WHEREAS, the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with this Agreement. NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I The Tender Offer 2 1.1. Tender Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Article IX hereof and none of the events set forth in Annex A hereto (the "Offer Conditions") shall have occurred or be existing, within five business days of the date hereof, Merger Sub will commence a tender offer (the "Offer") for all of the outstanding shares of common stock, no par value (the "Shares"), of the Company, together with the associated rights to purchase (the "Rights") Series A Junior Participating Preferred Stock, no par value, of the Company (the "Series A Preferred") at a price of $18.50 per Share in cash, net to the seller. The initial expiration date of the Offer (the "Initial Expiration Date") shall be the twentieth business day from and after the date the Offer is commenced. Subject to Section 1.1(d), the obligation of Merger Sub to accept for payment and pay for any Shares tendered pursuant to the Offer shall be subject only to the satisfaction or waiver of the Offer Conditions. 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 (as defined in Annex A), except pursuant to Section 1.1(d), (ii) decrease the price per Share or change the form of consideration payable in the Offer, (iii) decrease the number of Shares sought in the Offer, except pursuant to Section 1.1(d), (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; provided, however, and notwithstanding anything herein to the contrary, it is understood and agreed that Merger Sub may (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) waive the Minimum Condition and exercise its rights under Section 1.1(d), if applicable. Parent and Merger Sub further agree that: (A) in the event of the -2- 3 failure of one or more of the Offer Conditions 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 (B) in the event, after February 28, 2001, of the failure of the Regulatory Condition (as defined in Annex A) 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 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 pursuant to this clause (y), the Company may request further extensions of the Offer in accordance with the terms of this Section 1.1. On the terms of the Offer and subject to the Offer Conditions, Merger Sub shall pay for all Shares validly tendered and not withdrawn pursuant to the Offer that Merger Sub becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. The Company's Board of Directors shall recommend acceptance of the Offer to its shareholders in a Solicitation/Recommendation Statement on Schedule 14D-9 (as supplemented or amended from time to time, the "Schedule 14D-9") to be filed with the Securities and Exchange Commission (the "SEC") upon commencement of the Offer; provided, however, that the Company's Board of Directors may thereafter amend or withdraw its recommendation in accordance with the second paragraph of Section 7.2. (b) Parent and Merger Sub agree, as to the Offer to Purchase and related Letter of Transmittal (which documents, as supplemented or amended from time to time, together constitute the "Offer Documents"), and the Company agrees, as to the Schedule 14D-9, that such documents shall, in all material respects, comply with the requirements of the Exchange Act and the rules and regulations thereunder -3- 4 and other applicable laws. The Company and its counsel, as to the Offer Documents, and Merger Sub and its counsel, as to the Schedule 14D-9, shall be given an opportunity to review such documents prior to their being filed with the SEC. Parent, Merger Sub and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents or the Schedule 14D-9 that shall have become false or misleading in any material respect. Parent and Merger Sub further agree to take all steps necessary to cause the Schedule TO incorporating the Offer Documents as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (c) In connection with the Offer, the Company will cause its transfer agent to furnish promptly to Merger Sub a list, as of the most recent date practicable, of the record holders of Shares and their addresses, as well as mailing labels containing the names and addresses of all record holders of Shares, any non-objecting beneficial owner lists and lists of security positions of Shares held in stock depositories in the Company's possession or control. The Company will furnish Merger Sub with such additional information (including, but not limited to, updated lists of holders of Shares and their addresses, mailing labels, non-objecting beneficial owner lists and lists of security positions) and such other assistance as Parent or Merger Sub or their agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, Parent and Merger Sub shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall, upon request, deliver to the Company all copies of such information then in their possession. -4- 5 (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 Section 1.1(a); (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 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 Koninklijke Philips Electronics N.V., a company incorporated under the laws of the Netherlands ("Grandparent"), Merger Sub, Parent and any other subsidiary of Grandparent, is more than 50% of the then outstanding Shares, Merger Sub shall: (A) reduce the Minimum Condition to that number of Shares that, when added to the Shares then owned directly or indirectly by Grandparent, Merger Sub, Parent and any other subsidiary of Grandparent, 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 by Grandparent, Merger Sub, Parent -5- 6 and any other subsidiary of Grandparent, 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. Notwithstanding any other provision of this Agreement, in the event that 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 this Agreement, the Company shall take no action whatsoever (including, without limitation, the redemption of any Shares) which would have the effect of increasing the percentage ownership of Shares by Grandparent, Merger Sub, Parent and any other subsidiary of Grandparent in excess of the Revised Minimum Number. (e) 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 Grandparent, Merger Sub, Parent and any other subsidiary of Grandparent, 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) above or the action contemplated by Section 1.1(d)(iii) above such that the Offer will expire not later than the tenth business day following such scheduled expiration date. ARTICLE II The Merger; Closing; Effective Time 2.1. The Merger. Upon the terms and subject to the conditions of this Agreement, including, without limitation, Section 2.1(b), at the Effective Time (as defined in Section 2.3) Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease (the "Merger"). Subject to Section 2.1(b), the Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the "Surviving Corporation") and shall continue to be governed by the laws of the State of California, and the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in Section 3.1. The Merger shall have the effects specified in Chapter 11 of the California General Corporation Law (the "CGCL") and Subchapter IX of the Delaware General Corporation Law (the "DGCL"). 2.2. Closing. The closing of the Merger (the "Closing") shall take place (i) at the offices of Sullivan & Cromwell, 1870 Embarcadero Road, Palo Alto, California at 10:00 A.M. on the first business day on which the last to be satisfied or waived of the conditions set forth in Article VIII hereof shall be satisfied or waived in accordance with this Agreement or (ii) at such other place and time and/or on such other date as the Company and Parent may agree. 2.3. Effective Time. As soon as practicable following the Closing, 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 to be filed with the Secretaries of State pursuant to this Section 2.3 being collectively referred to as the "Merger Filings"). The Merger shall become effective upon filing of the last to be filed of the Merger Filings with the relevant Secretary of State and the date and time of such filing is hereinafter referred to as the "Effective Time." ARTICLE III Articles of Incorporation and Bylaws -7- 7 of the Surviving Corporation 3.1. Articles of Incorporation. At the Effective Time, unless the Merger is effected pursuant to Section 1110 of the CGCL, the Articles of Incorporation of the Company (the "Articles") in effect at the Effective Time shall be amended and restated to conform to Annex B. Following the Effective Time, the Articles shall be the Articles of Incorporation of the Surviving Corporation, until duly amended in accordance with the terms thereof and the CGCL. 3.2. The Bylaws. At the Effective Time, the Bylaws of Merger Sub in effect at the Effective Time shall be amended and restated to conform to Annex C and shall be the Bylaws of the Surviving Corporation, until duly amended in accordance with the terms thereof and the CGCL. ARTICLE IV Officers and Directors of the Surviving Corporation 4.1. Officers and Directors. The directors of Merger Sub and the officers of the Company at the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Articles of Incorporation and Bylaws. 4.2. Actions by Directors. For purposes of this Agreement, no action taken by the Board of Directors of the Company after the acceptance for payment of Shares pursuant to the Offer (the "Acceptance Time")and prior to the Merger shall be effective unless such action is approved by the affirmative vote of at least a majority of the Independent Directors (as defined in Section 4.3). 4.3. Boards of Directors; Committees. (a) If requested by Parent, the Company will, subject to compliance with applicable law, immediately following the Acceptance Time and the payment by Merger Sub for Shares pursuant to -8- 8 the Offer, take all actions 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 hereof 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 Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 4.3 and shall provide for inclusion in the Schedule 14D-9 being mailed to shareholders contemporaneously with the commencement of the Offer such information with respect to Parent and its -9- 9 designees as is required under such Section and Rule in order to fulfill its obligations under this Section 4.3 (provided that Parent shall have provided to the Company on a timely basis all information required to be included under such Section and Rule with respect to the designees of Parent). ARTICLE V Conversion or Cancellation of Shares in the Merger 5.1. Conversion or Cancellation of Shares. The manner of converting or canceling shares of the Company and Merger Sub in the Merger shall be as follows: (a) At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by Parent, Merger Sub or any other subsidiary of Parent (collectively, the "Parent Companies")) or Shares which are held by shareholders ("Dissenting Shareholders") exercising dissenters' rights 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 $18.50 or such greater amount which may be paid pursuant to the Offer (the "Merger Consideration"). All such Shares, by virtue of the Merger and without any action on the part of the holders thereof, shall no longer be outstanding and shall be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall thereafter cease to have any rights with respect to such Shares, except the right to receive the Merger Consideration for such Shares upon the surrender of such certificate in accordance with Section 5.2 or the right, if any, to receive payment from the Surviving Corporation of the "fair market value" of such Shares as determined in accordance with Chapter 13 of the CGCL. (b) At the Effective Time, each Share issued and outstanding at the Effective Time and owned by any of the Parent Companies, and each Share issued and held in the Company's treasury at the Effective Time, shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist. -10- 10 (c) At the Effective Time, each share of Common Stock, no par value, of Merger Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Merger Sub or the holders of such shares, be converted into one Share. 5.2. Payment for Shares. Parent shall make available or cause to be made available as and when needed to the bank or trust company appointed by Parent as paying agent prior to the consummation of the Offer, which paying agent shall be reasonably acceptable to the Company (the "Paying Agent"), amounts sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments pursuant to Section 5.1(a) hereof to holders of Shares issued and outstanding immediately prior to the Effective Time. Promptly after the Effective Time, the Surviving Corporation shall instruct the Paying Agent to mail to each person who was, at the Effective Time, a holder of record (other than any of the Parent Companies) of issued and outstanding Shares a form of letter of transmittal and instructions in customary form for use in effecting the surrender of the certificates which, immediately prior to the Effective Time, represented any of such Shares in exchange for payment therefor. Upon surrender to the Paying Agent of such a certificate, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the Surviving Corporation shall promptly cause to be paid to the persons entitled thereto a check in the amount to which such persons are entitled, after giving effect to any required tax withholdings. No interest will be paid or will accrue on the amount payable upon the surrender of any such certificate. If payment is to be made to a person other than the registered holder of the certificate surrendered, it shall be a condition of such payment that the certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the certificate surrendered or establish to the satisfaction of the Surviving Corporation and the Paying Agent that such tax has been paid or is not applicable. 180 days following the Effective Time, the Surviving Corporation shall be entitled to cause the Paying Agent to deliver to it any funds (including any interest received with respect thereto) made available to the Paying Agent which have not been disbursed -11- 11 to holders of certificates formerly representing Shares outstanding immediately prior to the Effective Time, and thereafter such holders shall be entitled to look to the Surviving Corporation only as general creditors thereof with respect to the cash payable upon due surrender of their certificates. Notwithstanding the foregoing, neither the Paying Agent nor any party hereto shall be liable to any holder of certificates formerly representing Shares for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. The Surviving Corporation shall pay all charges and expenses of the Paying Agent in connection with the exchange of cash for Shares and Parent shall reimburse the Surviving Corporation for such charges and expenses. 5.3. Dissenters' Rights. If any Dissenting Shareholder shall be entitled to be paid the "fair market value" of such Dissenting Shareholder's Shares, as provided in Chapter 13 of the CGCL, the Company shall give Parent notice thereof and Parent shall have the right to participate in all negotiations and proceedings with respect to any such demands. Neither the Company nor the Surviving Corporation shall, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment. If any Dissenting Shareholder shall fail to perfect or shall have effectively withdrawn or lost the right to dissent, the Shares held by such Dissenting Shareholder shall thereupon be treated as though such Shares had been converted into the right to receive the Merger Consideration pursuant to Section 5.1. 5.4. Transfer of Shares After the Effective Time. No transfers of Shares shall be made on the stock transfer books of the Surviving Corporation at or after the Effective Time. 5.5. Adjustments to Prevent Dilution. In the event that on or after the date hereof and prior to the Effective Time the Company changes the number of Shares or securities convertible or exchangeable into or exercisable for Shares pursuant to Section 7.1(c)(B), then the Merger Consideration shall be proportionateley adjusted. ARTICLE VI -12- 12 Representations and Warranties 6.1. Representations and Warranties of the Company. Except as set forth in the corresponding section of the disclosure letter, dated the date hereof, delivered by the Company to Parent prior to the execution hereof (the "Disclosure Letter"), the Company hereby represents and warrants to Parent and Merger Sub that: (a) Corporate Organization and Qualification. Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and is in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification, except for any such failure to so qualify or be in such good standing which, when taken together with all other such failures, is not reasonably likely to have a Material Adverse Effect. Each of the Company and its subsidiaries has the requisite corporate power and authority to carry on its respective businesses in all material respects as they are now being conducted. The Company has made available to Parent a complete and correct copy of the Company's Articles of Incorporation and Bylaws and the comparable governing instruments of each of its subsidiaries, each as amended to date. The Company's Articles of Incorporation and Bylaws and the comparable governing instruments of each of its subsidiaries so delivered are in full force and effect. (b) Authorized Capital. The authorized capital stock of the Company consists of 50,000,000 Shares, of which 21,136,116 Shares were outstanding as of November 12, 2000 and 5,000,000 shares of Preferred Stock, no par value (the "Preferred Shares"), of which no shares are outstanding. All of the outstanding Shares and Preferred Shares have been duly authorized and all of the outstanding Shares are validly issued, fully paid and nonassessable. Except for the Stock Option Agreement, the Company has no Shares or Preferred Shares reserved for issuance, except that as of November 12, 2000 there were 5,342,416 Shares reserved for issuance upon exercise of outstanding options under the Company's Directors' Stock Option Plan (1987), as amended, the Company's 1992 Stock Option Plan, as amended, the Company's Amended and Restated Employee Stock Purchase Plan (1994), as amended (the "ESPP"), the Company's 1999 Long- -13- 13 Term Incentive Plan, and the Company's 1999 Supplemental Incentive Plan (collectively, the "Stock Plans"), and 250,000 shares of Series A Preferred reserved for issuance pursuant to the Rights Agreement, dated as of April 22, 1996, between the Company and Chemical Mellon Shareholder Services, L.L.C., as amended (the "Rights Agreement"). Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable and owned, either directly or indirectly, by the Company free and clear of all liens, pledges, security interests, claims or other encumbrances. Except as set forth above and except for the Stock Option Agreement, there are no shares of capital stock of the Company authorized, issued or outstanding and except as set forth above, there are no preemptive rights or outstanding subscriptions, options, warrants, rights or convertible securities of the Company or any of its subsidiaries, or agreements or commitments of the Company or any of its subsidiaries of any character relating to the issued or unissued capital stock or other securities of the Company or any of its subsidiaries. Immediately prior to the consummation of the Offer, no Shares, Preferred Shares or other securities of the Company will be issuable pursuant to the Rights Agreement, and after the Effective Time the Surviving Corporation will have no obligation to issue, transfer or sell any Shares or common stock of the Surviving Corporation pursuant to any Compensation and Benefit Plan (as defined in Section 6.1(h)). (c) Corporate Authority. Subject only to approval of this Agreement by the holders of a majority of the outstanding Shares, the Company has the requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this Agreement and the Stock Option Agreement and to consummate the transactions contemplated hereby and thereby. This Agreement and the Stock Option Agreement are valid and binding agreements of the Company enforceable against the Company in accordance with their terms. The Board of Directors of the Company has (A) unanimously adopted this Agreement and the Stock Option Agreement and approved the transactions contemplated hereby and thereby, and (B) received the opinion of its financial advisor, Bear, Stearns, & Co. Inc., to the effect that, as of the date of this Agreement, the consideration to be received by the holders of Shares (other than Parent and its affiliates) in -14- 14 the Offer and the Merger is fair to such holders from a financial point of view, a copy of the written opinion of which will promptly be provided to Parent. (d) Governmental Filings; No Violations. (i) Other than those notices, reports, filings, consents, registrations, approvals, permits or authorizations provided for in Section 2.3, as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and the antitrust or competition laws and regulations of jurisdictions outside the United States (the "Foreign Filings"), and the Exchange Act (collectively, the "Regulatory Filings"), no notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company from, any governmental or regulatory authority, agency, commission or other entity, domestic or foreign ("Governmental Entity"), in connection with the execution and delivery of this Agreement or the Stock Option Agreement by the Company and the consummation by the Company of the transactions contemplated hereby or thereby, except for those the failure of which to be made or obtained would not, individually or in the aggregate, reasonably be likely to adversely affect the Company in a material way or to prevent the consummation of, or materially impair the Company's ability to consummate, the transactions contemplated hereby or thereby. (ii) The execution and delivery of this Agreement and the Stock Option Agreement by the Company do not, and the consummation by the Company of the transactions contemplated by this Agreement and the Stock Option Agreement will not, constitute or result in (A) a breach or violation of, or a default under, the Articles of Incorporation or Bylaws of the Company or the comparable governing instruments of any of its subsidiaries, (B) a breach or violation of, a default under or the triggering of any payment or other obligations pursuant to, any of the Company's existing Compensation and Benefit Plans or any grant or award made under any of the foregoing, (C) a breach or violation of, or a default under, the acceleration of or the creation of a lien, pledge, security interest or other encumbrance on assets (with or without the giving of notice or the lapse of time) pursuant to, any provision of any agreement, lease, license, contract, note, mortgage, -15- 15 indenture, binding arrangement or other binding obligation ("Contracts") of the Company or any of its subsidiaries or any law, rule, ordinance or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which the Company or any of its subsidiaries is subject or (D) any change in the rights or obligations of any party under any of the Contracts, except in the case of clauses (B), (C) or (D) above, any such breach, violation, default, triggering, acceleration or creation that, individually or in the aggregate, would not reasonably be likely to have a Material Adverse Effect or to prevent the consummation of, or materially impair the ability of the Company to consummate, the transactions contemplated hereby or thereby. Section 6.1(d)(ii) of the Disclosure Letter sets forth, to the knowledge of the Company, a list of (x) any material consents required under any Contracts to be obtained prior to consummation of the transactions contemplated by this Agreement and the Stock Option Agreement (whether or not subject to the exception set forth with respect to clause (C) above) and (y) any Contracts containing any covenants of the Company or any of its subsidiaries not to compete in any line of business or with any person. Section 6.1(d)(X) of the Disclosure Letter lists any consent or consents which the Company and Parent deem significant to the transactions contemplated by this Agreement (the "Significant Consent(s)"). The Company will use its reasonable best efforts to obtain the consents referred to in the Disclosure Letter. (e) Company Reports; Financial Statements. The Company has made available to Parent each registration statement, schedule, report, proxy statement or information statement filed by it since October 3, 1999, including, without limitation, (i) the Company's Annual Report on Form 10-K for the year ended October 3, 1999 and (ii) the Company's Quarterly Report on Form 10-Q for the periods ended January 2, 2000, April 2, 2000, and July 2, 2000, each in the form (including exhibits and any amendments thereto) filed with the SEC (all such statements, schedules and reports, the "Company Reports"). As of their respective dates, and except to the extent that a Company Report filed prior to the date of this Agreement was superseded by another Company Report filed prior to the date of this Agreement, the Company Reports did not, and any Company Reports filed with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or -16- 16 omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. The consolidated balance sheet included the Disclosure Letter fairly presents in all material respects the consolidated financial position of the Company and its subsidiaries as of its date and the unaudited consolidated statements of cash flows and of operations included in the Disclosure Letter fairly presents in all material respects the results of operations, retained earnings and changes in financial position, as the case may be, of the Company and its subsidiaries for the periods set forth therein, in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein. (f) Absence of Certain Changes. Except as disclosed in the Company Reports filed with the SEC prior to the date hereof, since October 1, 2000, the Company and its subsidiaries have conducted their respective businesses only in, and have not engaged in any material transaction other than according to, the ordinary and usual course of such businesses and there has not been (i) any change or development that, individually or in the aggregate, has had, or, individually or in the aggregate, is reasonably likely to have, a Material Adverse Effect; (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to the capital stock of the Company; or (iii) any change by the Company in accounting principles, practices or methods. Since October 1, 2000, except as provided for herein or as disclosed in the Company Reports filed with the SEC prior to the date hereof or as required under agreements disclosed in Section 6.1(h) of the Disclosure Letter and other than in the ordinary course, there has not been any increase in the compensation payable or which could become payable by the Company and its subsidiaries to their officers or key employees, or any amendment of any Compensation and Benefit Plans (as hereinafter defined). (g) Litigation and Liabilities. Except as disclosed in the Company Reports filed with the SEC prior to the date hereof, there are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its -17- 17 subsidiaries or (ii) obligations or liabilities, whether or not accrued, contingent or otherwise, including, without limitation, those relating to matters involving any Environmental Law (as hereinafter defined), in each of cases (i) and (ii), other than those that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. (h) Employee Benefits. (i) All bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans, all employment, termination, severance, welfare, fringe benefit, compensation, medical or health contract or other plan, contract, policy or arrangement which cover employees or former employees (the "Employees") and current and former directors of the Company or its subsidiaries or their respective predecessors (the "Compensation and Benefit Plans"), including, but not limited to, "employee benefit plans" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended("ERISA"), other than Compensation and Benefit Plans which are not material are listed in Section 6.1(h)(i) of the Disclosure Letter. True and complete copies of all Compensation and Benefit Plans and such other benefit plans, contracts or arrangements, including, but not limited to, any material trust instruments and/or insurance contracts, if any, forming a part of any such plans and agreements, and all amendments thereto have been made available to Parent. (ii) All Compensation and Benefit Plans are in material compliance with applicable law and all Compensation and Benefit Plans which are employee benefit plans, other than "multiemployer plans" within the meaning of Sections 3(37) of ERISA, covering Employees (the "Plans"), to the extent subject to ERISA, are in substantial compliance with ERISA. Each Plan which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), has received a favorable determination letter from the Internal Revenue Service and the Company has no knowledge of any circumstances likely to result in revocation of any such favorable determination letter. There is no pending or, to the knowledge of the -18- 18 Company, threatened material litigation relating to the Compensation and Benefit Plans. Neither the Company nor any of its subsidiaries has engaged in a transaction with respect to any Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject the Company or any of its subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. (iii) No liability under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by the Company or any of its subsidiaries with respect to any ongoing, frozen or terminated "single-employer plan", within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"). None of the Company, its subsidiaries or any ERISA Affiliate has contributed to a "multiemployer plan", within the meaning of Section 3(37) of ERISA, at any time on or after September 26, 1980. No notice of a "reportable event", within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Pension Plan or by any ERISA Affiliate within the 12-month period ending on the date hereof. (iv) All material contributions required to be made under the terms of any Plan have been timely made. Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor any of its subsidiaries has provided, or is required to provide, security to any Pension Plan or to any single- employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. (v) Neither the Company, its subsidiaries nor any ERISA Affiliate currently maintain any single-employer plan. (vi) Neither the Company nor any of its subsidiaries have any obligations for retiree health and life benefits under any Compensation and Benefit Plan. There are no restrictions on the rights of the Company or -19- 19 any of its subsidiaries to amend or terminate any such Plan without incurring any material liability thereunder. (vii) All Compensation and Benefit Plans covering foreign Employees comply with applicable local law. Except as disclosed in the Company Reports filed with the SEC prior to the date hereof, neither the Company nor any of its subsidiaries has any material unfunded liabilities with respect to any Pension Plan which covers foreign Employees. (viii) There has been no amendment to, announcement by the Company or any of its subsidiaries relating to, or change in employee participation or coverage under, any Benefit Plan which would increase materially the expense incurred therefor for the most recent fiscal year. Neither the execution of this Agreement nor the consummation of the transactions contemplated by this Agreement will (w) entitle any employees of the Company or any of its subsidiaries to severance pay or any increase in severance pay, upon any termination of employment after the date hereof, (x) accelerate the time of payment or vesting or trigger any payment or funding (through grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Compensation and Benefit Plans, (y) cause the Company or any of its subsidiaries or, after the consummation of the transactions contemplated hereby, Parent, to record additional compensation expense on its income statement with respect to any outstanding stock option or other equity-based award or (z) result in any breach or violation of, or a default under any of the Compensation and Benefit Plans. (ix) No payment (or acceleration of benefits) required to be made to any Employee as a result of the transactions contemplated by this Agreement under any Compensation and Benefit Plan or otherwise will, if made, constitute an "excess parachute payment" within the meaning of Section 280G of the Code. Notwithstanding the foregoing, the Company is not a party to any Contract pursuant to which it could be liable to indemnify any "disqualified individual" as defined in Section 280G(c) of the Code for any excise tax under Section 4999 of the Code with respect to any "excess parachute payment". -20- 20 (i) Brokers and Finders. Neither the Company nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the transactions contemplated herein, except that the Company has employed Bear, Stearns, & Co. Inc. as its financial advisor, the arrangements with which have been disclosed in writing to Parent prior to the date hereof. (j) Rights Plan. (i) The Company has amended the Rights Agreement to provide that neither Parent nor any of its "affiliates" or "associates" (each as defined in the Rights Agreement) (including Merger Sub) shall be deemed an Acquiring Person (as defined in the Rights Agreement) and that the Distribution Date (as defined in the Rights Agreement) shall not be deemed to occur, and that the Rights will not separate from the Shares, as a result of the entering into this Agreement or the Stock Option Agreement, the commencement of the Offer, the exercise of the Stock Option Agreement or the consummation of the Merger or the other transactions contemplated hereby and thereby; (ii) the Company will 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 Parent or any of 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. (k) Takeover Statutes. No "fair price", "moratorium", "control share acquisition", "interested shareholder", "business combination" or other similar antitakeover statute or regulation (each a "Takeover Statute") is, or at the Effective Time will be, applicable to the Company, the Shares, the Offer or the Merger or the transactions contemplated hereby or pursuant to the Stock Option Agreement. (l) Environmental Matters. Except as disclosed in the Company Reports filed with the SEC prior to the date hereof, and except (other than in the case of clause (iii) below) for such matters that, individually or in the aggregate, would not reasonably be likely to have a Material Adverse Effect, (i) the Company and its subsidiaries have at all times complied with all applicable Environmental Laws; (ii) the properties presently owned or operated by the -21- 21 Company or its subsidiaries (including, without limitation, soil, groundwater or surface water on or under the properties, and buildings thereon) (the "Properties") do not contain and have not contained any Hazardous Substance (as hereinafter defined) other than as permitted under applicable Environmental Law, do not contain, and have not contained, any underground storage tanks, do not have any asbestos present and have not been used as a sanitary landfill, dump or hazardous waste disposal site; (iii) neither the Company nor any of its subsidiaries has within the last five years received any notices, demand letters or requests for information from any Governmental Entity or any third party that the Company may be in violation of, or liable under, any Environmental Law and none of the Company, its subsidiaries or the Properties are subject to any court order, administrative order or decree arising under any Environmental Law; and (iv) no Hazardous Substance has been disposed of, transferred, released or transported from any of the Properties during the time such Property was owned or operated by the Company or one of its subsidiaries, other than as permitted under and as would not reasonably be expected to result in any liability under applicable Environmental Law, which, in any such case, is not the subject of a fully adequate reserve. "Environmental Law" means (i) any applicable Federal, state, foreign or local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, common law, legal doctrine, order, judgment, decree, injunction, requirement or agreement with any governmental entity, (x) relating to the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, or (y) the exposure to, or the use, presence, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as amended and as now in effect. "Hazardous Substance" means any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, under any Environmental Law, whether by type or by quantity, including any substance containing any such substance as a component. -22- 22 (m) Intellectual Property. Except as disclosed in the Company Reports filed with the SEC prior to the date hereof: (i) To the knowledge of the Company, the Company and/or each of its subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all material patents, trademarks, trade names, service marks, copyrights, and any applications therefor, technology, know- how, computer software programs or applications, and tangible or intangible proprietary information or materials that are used in the business of the Company and its subsidiaries as currently conducted, and all material patents, trademarks, trade names, service marks and copyrights held by the Company and/or its subsidiaries are valid and subsisting. (ii) (A) neither the Company nor any of its subsidiaries is, nor will the Company or any of its subsidiaries be as a result of the execution and delivery of this Agreement or the performance of the Company's obligations hereunder, in violation of any licenses, sublicenses or other agreements as to which the Company or any of its subsidiaries is a party or pursuant to which the Company or any of its subsidiaries is authorized to use any third-party patents, trademarks, tradenames, service marks, copyrights, trade secrets, technology, know-how or computer software (collectively, "Third-Party Intellectual Property Rights"), in each case which violation would, individually or in the aggregate, reasonably be likely to adversely affect the Company in a material manner; (B) no material claims with respect to (I) the patents, registered and unregistered trademarks and service marks, registered copyrights, trade names, and any applications therefor, trade secrets, know-how, technology or computer software owned by the Company or any of its subsidiaries (collectively, the "Company Intellectual Property Rights"); or (II) Third-Party Intellectual Property Rights are currently pending or, to the knowledge of the Company, are threatened by any person; and (C) to the knowledge of the Company, there is no material unauthorized use, infringement or misappropriation of any of the Company Intellectual Property Rights by any third party, including any employee of the Company or any of its subsidiaries. (n) Tax Matters. -23- 23 (i) The Company has timely filed or caused to be filed all federal, state, local and foreign tax returns and tax reports required to be filed by, or with respect to, the Company and its subsidiaries on or prior to the date hereof, except to the extent that any failure to so file would not, individually or in the aggregate, reasonably be likely to adversely affect the Company in any material manner. Such returns and reports are complete and accurate in all material respects. The Company and its subsidiaries have timely paid (A) all taxes shown as due on such tax returns and (B) all taxes for which no return is required to be filed, except to the extent that any failure to so pay would not, individually or in the aggregate, reasonably be likely to adversely affect the Company in any material manner. All U.S. federal income and employment tax returns and reports of the Company and its subsidiaries have been examined by the Internal Revenue Service for all years through 1991. No material issues have been raised in writing by the relevant taxing authority in connection with any examination of the tax returns and reports referred to in the first sentence of this clause (i). Neither the Company nor any of its subsidiaries is a party to (or has any liability under) any tax sharing, contribution, allocation, indemnification or similar agreement relating to taxes except among themselves. (ii) Completion of the Offer and/or the Merger will not result in the Company or any of its subsidiaries recognizing any gain under Section 355(e) of the Code or any similar provision of other law. (iii) The Company will timely file or cause to be filed all federal, state, local and foreign tax returns and tax reports required to be filed by, or with respect to, the Company and its subsidiaries between the date hereof and the Effective Time, except to the extent that any failure to so file would not, individually or in the aggregate, reasonably be likely to adversely affect the Company in any material manner. Such returns and reports will be complete and accurate in all material respects. (iv) No waivers of statutes of limitations have been given or requested with respect to any material taxes of the Company or its subsidiaries. -24- 24 (v) The Company is not, nor was it at any time during the five-year period ending on the date on which the Effective Time occurs, a "United States real property holding corporation" within the meaning of Section 897(C) of the Code. (o) Insurance. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by the Company or any of its subsidiaries are with reputable insurance carriers, provide adequate coverage for risks incident to the business of the Company and its subsidiaries and their respective properties and assets in character and amount generally comparable with those carried by persons engaged in similar businesses and subject to generally comparable perils or hazards. All such policies are in full force and effect and no notice of cancellation, termination or default has been received with respect to any such policy. All premiums due and payable on such policies covering all periods up to and including the Closing Date have been paid in full or accrued. (p) Product Warranties. (i) There are no material warranties, express or implied, written or oral, with respect to the products of the Company or any of its subsidiaries ("Company Products"); (ii) as of the date hereof there are no pending or threatened material claims with respect to any such warranty; (iii) there are no statements, citations or decisions by any Governmental Entity declaring any Company Products defective or unsafe; (iv) no Company Product fails to meet in any material respect any standards promulgated by any applicable Governmental Entity; (v) there have been no recalls ordered within the past five years by any such Governmental Entity with respect to any Company Product; and (vi) there are no material pending, or, to the knowledge of the Company as of the date hereof, threatened, product liability claims against or involving the Company or any of its subsidiaries or any Company Product and no such claims have been settled or adjudicated since December 31, 1997. (q) Compliance with Applicable Laws. Each of the Company and its subsidiaries has in effect all material federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to -25- 25 own, lease or operate its properties and assets and to carry on its business as now conducted in all material respects, and there has occurred no material default under any such Permit. The Company and its subsidiaries are in compliance in all material respects with all applicable statutes, laws, ordinances, rules, orders and regulations of any Governmental Entity. 6.2. Representations and Warranties of Parent and Merger Sub. Parent and Merger Sub represent and warrant to the Company that: (a) Corporate Organization and Qualification. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and is in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification except for such failure to so qualify or to be in such good standing, which, when taken together with all other such failures, is not reasonably likely to have a material adverse effect on the financial condition, properties, business or results of operations of Parent and its subsidiaries, taken as a whole or on the ability of Parent or Merger Sub to perform their obligations under this Agreement. Merger Sub has made available to the Company true and complete copies of its articles of incorporation and bylaws. (b) Corporate Authority. Parent and Merger Sub each has the requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this Agreement and the Stock Option Agreement and to consummate the transactions contemplated hereby and thereby. This Agreement and the Stock Option Agreement are a valid and binding agreements of Parent and Merger Sub enforceable against Parent and Merger Sub in accordance with their terms. (c) Governmental Filings; No Violations. (i) Other than the Regulatory Filings, no notices, reports or other filings are required to be made by Parent and Merger Sub with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent and Merger Sub from, any Governmental Entity in -26- 26 connection with the execution and delivery of this Agreement or the Stock Option Agreement by Parent and Merger Sub and the consummation of the transactions contemplated hereby or thereby by Parent and Merger Sub, except for those the failure of which to be made or obtained would not, individually or in the aggregate, reasonably be likely to prevent the consummation of, or materially impair the ability of Parent or Merger Sub to consummate, the transactions contemplated hereby and thereby. (ii) The execution and delivery of this Agreement and the Stock Option Agreement by Parent and Merger Sub do not, and the consummation of the transactions contemplated hereby and thereby by Parent and Merger Sub will not, constitute or result in (A) a breach or violation of, or a default under, the Certificate or Articles of Incorporation or Bylaws of Parent or Merger Sub or (B) a breach or violation of, a default under, the acceleration of or the creation of a lien, pledge, security interest or other encumbrance on assets (with or without the giving of notice or the lapse of time) pursuant to, any provision of any Contract of Parent or Merger Sub or any law, ordinance, rule or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which Parent or Merger Sub is subject, except in the case of clause (B) above, any such breach, violation, default, acceleration or creation that, individually or in the aggregate, is not reasonably likely to prevent the consummation of, or materially impair the ability of Parent or Merger Sub to consummate, the transactions contemplated hereby or thereby. (d) Funds. Parent has or will have the funds necessary to consummate the Offer and the Merger. ARTICLE VII Covenants 7.1. Interim Operations of the Company. The Company covenants and agrees that, prior to the Effective Time (unless Parent shall otherwise agree in writing (which agreement shall not be unreasonably withheld or delayed) and except as otherwise contemplated by this Agreement or as set forth in Section 7.1 of the Disclosure Letter): -27- 27 (a) the business of the Company and its subsidiaries shall be conducted only in the ordinary course and, to the extent consistent therewith, each of the Company and its subsidiaries shall use its reasonable best efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees and business associates; (b) the Company shall not (i) sell or pledge or agree to sell or pledge any stock owned by it in any of its subsidiaries; (ii) amend its Articles of Incorporation or Bylaws or amend, modify or terminate the Rights Agreement (except for amendments and modifications to the Rights Agreement necessary to effect a particular Superior Proposal which will not affect the continued accuracy of the representation set forth in Section 6.1(j)); (iii) split, combine or reclassify the outstanding Shares or Preferred Shares; or (iv) declare, set aside or pay any dividend payable in cash, stock or property with respect to the Shares or Preferred Shares; (c) except as contemplated by the Stock Option Agreement, neither the Company nor any of its subsidiaries shall (i) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock other than, in the case of the Company, (A) Shares issuable pursuant to options outstanding on the date hereof under the Stock Plans and (B) the issuance of securities issuable upon the exercise of Rights, other than as a result of the entering into of this Agreement or the Stock Option Agreement, the commencement of the Offer, the exercise of the Stock Option Agreement or the consummation of the Merger or the other transactions contemplated hereby and thereby; (ii) transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any assets or incur or modify any indebtedness or other liability other than in the ordinary course of business; (iii) acquire directly or indirectly by redemption or otherwise any shares of the capital stock of the Company other than pursuant to the cashless -28- 28 exercise of any securities of the Company outstanding on the date hereof; or (iv) authorize capital expenditures in any manner not reflected in the capital budget of the Company attached to the Disclosure Letter or make any acquisition of, or investment in, any business or stock of any other person or entity; (d) other than (i) as provided in 7.8(f) (ii) as required by law or (iii) as required under an existing plan as of the date hereof, neither the Company nor any of its subsidiaries shall (A) grant any severance or termination pay to, or enter into any employment or severance agreement with, any director, officer or other employee of the Company or such subsidiaries; or (B) increase compensation payable to, or establish, adopt, enter into, make any new grants or awards (or accelerate the vesting, or increase the value of any benefit) under, or amend, any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, employee stock ownership, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any directors, officers or employees; (e) neither the Company nor any of its subsidiaries shall settle or compromise any material claims or litigation or, except in the ordinary and usual course of business, modify, amend or terminate any of its material Contracts or waive, release or assign any material rights or claims; (f) neither the Company nor any of its subsidiaries shall make any material tax election or permit any material insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated without the prior written approval of Parent, except in the ordinary and usual course of business; (g) neither the Company nor any of its subsidiaries shall (i) terminate the employment of any Employee who is covered by a change in control, employment, termination or similar agreement, except for Cause (as defined in such agreements) or (ii) permit circumstances to exist that would provide -29- 29 such Employee with Good Reason (as defined in such agreements) to terminate employment; and (h) neither the Company nor any of its subsidiaries shall authorize or enter into an agreement to do any of the foregoing. -30- 30 7.2. Acquisition Proposals. The Company agrees that neither the Company nor any of its subsidiaries nor any of the respective officers and directors of the Company or its subsidiaries shall, and the Company shall direct and use its best efforts to cause its employees, agents and representatives (including, without limitation, any investment 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 shareholders 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 hereinafter 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 Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company will take the necessary steps to promptly inform the individuals or entities referred to in the first sentence hereof of the obligations undertaken in this Section 7.2. 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 -31- 31 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 heretofore 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. Nothing contained in this Agreement shall prohibit the Company from taking and disclosing to its shareholders 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. 7.3. Meetings of the Company's Shareholders. If the approval of the Agreement by the Company's shareholders is required by law following consummation of the Offer, the Company will take, consistent with applicable law and its Articles of Incorporation and Bylaws, all action necessary to convene a meeting of holders of Shares as promptly as practicable to consider and vote upon the approval of this Agreement and the Merger. Subject to fiduciary requirements of applicable law, the Board of Directors of the Company shall recommend such approval and the Company shall take all lawful action to solicit such approval. At any such meeting of the Company all of the Shares then owned by the Parent Companies will be voted in favor of this Agreement and the Merger. The Company's proxy or information statement with respect to such meeting of shareholders (the "Proxy Statement"), at the date thereof and at the date of such meeting, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing shall not apply to the extent that any such untrue statement of a material fact or omission to state a material fact was made by the Company in reliance -32- 32 upon and in conformity with written information concerning the Parent Companies furnished to the Company by Parent specifically for use in the Proxy Statement. The Proxy Statement shall not be filed, and no amendment or supplement to the Proxy Statement will be made by the Company, without prior consultation with Parent and its counsel. 7.4. Filings; Other Action. Subject to the terms and conditions herein provided, the Company and Parent shall: (a) promptly make their respective filings and thereafter make any other required submissions under the HSR Act and other Regulatory Filings with respect to the exercise of the Stock Option Agreement, the Offer and the Merger; and (b) use their respective reasonable best efforts to promptly take, or cause to be taken, all other action and do, or cause to be done, all other things necessary, proper or appropriate under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Stock Option Agreement as soon as practicable after the date hereof; provided, however, that neither Parent nor Merger Sub will be required to divest or hold separate any of their, the Company's or any of their respective affiliates' businesses or assets. 7.5. Access. Upon reasonable notice, the Company shall (and shall cause each of its subsidiaries to) afford Parent's officers, employees, counsel, accountants and other authorized representatives ("Representatives") access, during normal business hours throughout the period prior to the Effective Time, to its properties, books, Contracts and records and, during such period, the Company shall (and shall cause each of its subsidiaries to) furnish promptly to Parent all information concerning its business, properties and personnel as Parent or its Representatives may reasonably request, provided that no investigation pursuant to this Section 7.5 shall affect or be deemed to modify any representation or warranty made by the Company and provided, further, that the foregoing shall not require the Company to permit any inspection, or to disclose any information, which in the reasonable judgment of the Company would result in the disclosure of any trade secrets of third parties or violate any obligation of the Company with respect to confidentiality if the Company shall have used reasonable efforts to obtain the consent of such third party to such inspection or disclosure. All information exchanged pursuant to this Section 7.5 shall be subject to the -33- 33 confidentiality agreement dated March 20, 2000 between Bear Stearns & Co., Inc., for itself and on behalf of the Company, and Parent. All requests for information made pursuant to this Section shall be directed to an executive officer of the Company or such person as may be designated by any such officer. Upon any termination of this Agreement, Parent will collect and deliver to the Company all documents obtained by it or any of its Representatives then in their possession and any copies thereof. 7.6. Notification of Certain Matters. The Company shall give prompt notice to Parent of: (a) any notice of, or other communication relating to, any material environmental matter or any material default or event that, with notice or lapse of time or both, would become a material default, received by the Company or any of its subsidiaries subsequent to the date of this Agreement and prior to the Effective Time, under any Contract to which the Company or any of its subsidiaries is a party or is subject; and (b) any change or development that, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect. Each of the Company and Parent shall give prompt notice to the other party of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement. 7.7. Publicity. The initial press release by the parties hereto with respect to this Agreement shall be a joint press release and thereafter the Company and Parent shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and prior to making any filings with any Governmental Entity or with any national securities exchange with respect thereto. 7.8. Benefits. (a) Stock Options. 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 pursuant to the Stock Plans ("Option"), whether or not then exercisable, shall 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 -34- 34 to such Option, less all applicable withholding Taxes. Such payment shall be made by the Company as soon as administratively feasible after the Effective Time. (b) In accordance with the terms of the ESPP, the Company shall 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 agrees to take such actions as may be necessary so that each employee participating in the ESPP immediately prior to the Effective Time shall 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 agrees to 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. (c) Employee Benefits. Parent agrees that, for a period of two years following the Effective Time, it 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. (d) Service Credit. Employees of the Company and its Subsidiaries as of the Effective Time shall receive credit for service with the Company and its Subsidiaries under the employee benefit plans, programs and policies of Parent, the Surviving Corporation or their respective Subsidiaries in which such employees become participants. Such past service credit shall be given only for purposes of eligibility to participate, vesting, vacation entitlement -35- 35 and severance benefits and only to the same extent that the employee had service credit under a comparable Company Benefit Plan. In no event shall service prior to the Effective Time be credited for purposes of benefit accrual under any defined benefit pension plan or eligibility for post-retirement medical benefits. (e) Option Cancellations. Prior to the Initial Expiration Date, the Company shall 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 shall 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 Section 1.1(d)(ii), 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 shall 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. (f) Miscellaneous. The Company shall offer employment to Gerhard F. Burbach and Ian R. Farmer (the "Executives") within ten days prior to the Closing, 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 shall be on "Similar Terms" (as defined in the Executive Severance Agreements between the Company and each Executive) as the Executive's current employment. Section 7.9. Indemnification; Directors' and Officers' Insurance. (a) From and after the Effective Time, Parent agrees that it will indemnify and hold harmless each present and former director, officer, employee and agent of the Company and its subsidiaries, determined as of the -36- 36 Effective Time (the "Indemnified Parties"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the 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 hereof 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). (b) Any Indemnified Party wishing to claim indemnification under paragraph (a) of Section 7.9, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof; provided, however, that the failure to provide such prompt notice to Parent shall not relieve Parent of any liability which it may have to any Indemnified Party unless, and only to the extent that, such failure has materially prejudiced the defense of such claim, action, suit, proceeding or investigation. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Parent or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly after statements therefor are received; provided, however, that Parent shall be obligated pursuant to this paragraph (b) to pay for only one firm of counsel for all Indemnified Parties -37- 37 in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent; and provided further that Parent shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. (c) For a period of six years after the Effective Time, Parent shall cause to be maintained in effect the current policies of directors' and officers' liability insurance maintained by the Company (provided that Parent may substitute therefor policies with reputable and financially sound carriers of at least the same coverage and amounts containing terms and conditions which are no less advantageous) with respect to claims arising from or related to facts or events which occurred at or before the Effective Time; provided, however, that Parent shall not be obligated to make annual premiums for such insurance to the extent such premiums exceed 150% of the annual premiums paid as of the date hereof by the Company for such insurance (such 150% amount, the "Maximum Premium"). If such insurance coverage cannot be obtained at all, or can only be obtained at an annual premium in excess of the Maximum Premium, Parent shall maintain the most advantageous policies of directors' and officers' insurance obtainable for an annual premium equal to the Maximum Premium. The Company represents to Parent that the Maximum Premium is $705,000. 7.10. Takeover Statutes. If any Takeover Statute is or shall become applicable to the transactions contemplated hereby or pursuant to the Stock Option Agreement, the Company and the Board of Directors of the Company shall grant such approvals and take such actions as are necessary so that the transactions contemplated hereby or thereby may be consummated as promptly as practicable on the terms contemplated hereby or thereby and otherwise act to eliminate the effects of such statute or regulation on the transactions contemplated hereby or thereby. -38- 38 ARTICLE VIII Conditions 8.1. Conditions to Each Party's Obligations to Effect the Merger. The respective obligations of each party to consummate the Merger shall be subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) Shareholder Approval. If approval of the Merger by the holders of Shares is required by applicable law, the Merger shall have been duly approved 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; (b) Purchase of Shares. Merger Sub (or one of the Parent Companies) shall have purchased Shares pursuant to the Offer; and (c) Litigation. No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the Merger (collectively, an "Order"). ARTICLE IX Termination 9.1. Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, before or after the approval by holders of Shares, by the mutual consent of Parent (also acting on behalf of Merger Sub) and the Company, by action of their respective Boards of Directors. 9.2. Termination by either Parent or the Company. This Agreement may be terminated and the Merger may be abandoned by action of the Board of Directors of either Parent or the Company if (i) Merger Sub shall not -39- 39 have accepted for payment any Shares pursuant to the Offer prior to April 30, 2001; provided, however, that the right to terminate this Agreement pursuant to this Section 9.2(i) 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 this 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. 9.3. Termination by Parent. Unless the Offer shall have been consummated, this Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, before or after the approval by holders of Shares, 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 hereunder (other than any immaterial covenants or agreements) or (ii) a representation or warranty of the Company set forth in this Agreement shall have been inaccurate when made or shall thereafter become inaccurate, except for such inaccuracies which, when taken together (in each case without regard to any qualification as to materiality or a Material Adverse Effect contained in the applicable representations and warranties) would not reasonably be likely to have a Material Adverse Effect, 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 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, this Agreement or the Merger or shall have adopted or recommended any Acquisition Proposal, 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. 9.4. Termination by the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, before or after the approval by holders of Shares, by action of the Board of Directors of the Company, (x) if Parent or Merger Sub (or -40- 40 another Parent Company) (i) shall have breached in any material respect any of the representations, warranties, covenants or agreements contained in this 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 within the time required in Section 1.1 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 hereof, 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 hereof 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 Purchaser three business days prior written notice of its intention to terminate this Agreement to accept the Superior Proposal and Purchaser 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 Purchaser in immediately available funds the fee required to be paid pursuant to Section 9.5. 9.5. Effect of Termination and Abandonment. (a) In the event of termination of this Agreement and abandonment of the Merger pursuant to this Article IX, no party hereto (or any of its directors or officers) shall have any liability or further obligation to any other party to this Agreement, except as provided in Section 9.5(b) below and Section 10.2 and except that nothing herein will relieve any party from liability for any wilful breach of its covenants under this Agreement. -41- 41 (b) If (x) (i) the Offer shall have remained open for a minimum of at least 20 business days, (ii) after the date hereof 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 pursuant to Section 9.3(x) (but only if such termination relates to a breach of the Company's obligations under Section 7.2) or pursuant to Section 9.2(i) 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 in Section 7.2, 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 pursuant to Section 9.3(y), or (z) the Company shall have terminated this Agreement pursuant to Section 9.4(y), 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 pursuant to Section 9.4(y), 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. The Company acknowledges that the agreements contained in this Section 9.5(b) are an integral part of the transactions contemplated in this Agreement, and that, without these agreements, Parent and Merger Sub would not enter into this Agreement; accordingly, if the Company fails to promptly pay the amount due pursuant to this Section 9.5(b), 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 payment of the fee set forth in this paragraph (b) 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. -42- 42 ARTICLE X Miscellaneous and General 10.1. Payment of Expenses. (a) Except as otherwise set forth in Section 9.5, whether or not the Merger shall be consummated, each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the Merger. (b) Except as otherwise provided in the fifth sentence of Section 5.2 of this Agreement, all state, local, foreign or provincial sales, use, real property transfer, stock transfer or similar taxes (including any interest, penalties or additions thereto) attributable to the transactions contemplated by this Agreement shall be timely paid by Parent or Merger Sub. 10.2. Survival. The agreements of the Company, Parent and Merger Sub contained in Sections 5.2 (but only to the extent that such Section expressly relates to actions to be taken after the Effective Time), 5.3, 5.4, 7.8, 7.9, 7.10 and 10.1 and this Section 10.2 shall survive the consummation of the Merger. The agreements of the Company, Parent and Merger Sub contained in the second and fourth sentences of Section 7.5 and in Sections 9.5, 10.1, 10.6, 10.7, 10.8, 10.9, 10.11 and 10.12 shall survive the termination of this Agreement. No representation or warranty shall survive the consummation of the Offer. 10.3. Modification or Amendment. Subject to the applicable provisions of the CGCL, at any time prior to the Effective Time, the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties. 10.4. Waiver of Conditions. The conditions to each of the parties' obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. 10.5. Counterparts. For the convenience of the parties hereto, this Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an -43- 43 original instrument, and all such counterparts shall together constitute the same agreement. 10.6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except as otherwise required by the CGCL. 10.7. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by facsimile: if to Parent or Merger Sub Philips Holding USA Inc. 1251 Avenue of the Americas New York, New York 10020 Attention: William E. Curran Fax: (212)536-0506 with a copy to Matthew G. Hurd, Esq. Sullivan & Cromwell 125 Broad Street New York, New York 10004 Fax: (212) 558-3588 if to the Company ADAC Laboratories 540 Alder Drive Milpitas, California Attention: General Counsel Fax: (408)321-9686 and (415)591-7738 with copies to Page Maillard, Esq. Wilson Sonsini Goodrich & Rosati, Professional Corporation 650 Page Mill Road Palo Alto, California 94304 Fax: (650)493-6811 -44- 44 and Steve L. Camahort, Esq. Wilson Sonsini Goodrich & Rosati, Professional Corporation One Market Spear Street Tower Suite 3300 San Francisco, California 94105 Fax: (415) 947-2099 or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. 10.8. Entire Agreement, etc. This Agreement (including the Disclosure Letter and the Annexes hereto) the Stock Option Agreement, the Confidentiality Agreement and any agreement between the Company and Grandparent and/or one of its subsidiaries which expressly refers to this Section 10.8, taken together, (a) constitutes the entire agreement, and any agreement between the Company and Grandparent and/or one of its subsidiaries which expressly refers to this Section 10.8 supersedes all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof, and (b) shall not be assignable by operation of law or otherwise and is not intended to create any obligations to, or (except with respect to the provisions of Section 7.9) rights in respect of, any person other than the parties hereto; provided, however, that Parent may designate, by written notice to the Company, another wholly-owned direct or indirect subsidiary to be a Constituent Corporation in lieu of Merger Sub, in which event all references herein to Merger Sub shall be deemed references to such other subsidiary except that all representations and warranties made herein with respect to Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other subsidiary as of the date of such designation. 10.9. Definitions of "subsidiary", "affiliate", "person", "knowledge" and Material Adverse Effect. When a reference is made in this Agreement to a subsidiary of a party, the word "subsidiary" means any corporation or other organization whether incorporated or unincorporated of which -45- 45 at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries. When a reference is made in this Agreement to an affiliate of a party, the word "affiliate" means any person directly or indirectly controlling, controlled by or under common control with such other person at the time at which the determination of affiliation is being made. The term "control" (including, with correlative meanings, the term "controlled by" or "under common control with"), as applied to any person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or other ownership interests, by contract or otherwise. When a reference is made in this Agreement to a person, the word "person" means any individual, corporation, partnership, association, trust or other entity or organization of whatever nature. When the word "knowledge" is used in this Agreement with reference to the Company or its management or officers, such word will be deemed to refer to the actual knowledge of the executive officers of the Company and such other officer that has primary responsibility for the subject matter with respect to which "knowledge" is being considered. For purposes of this Agreement, "Material Adverse Effect" means any material adverse effect on the financial condition, properties, business or results of operations of the Company and its subsidiaries taken as a whole (excluding any such effect to the extent that it results from (i) the announcement of this Agreement or the transactions contemplated hereby, or (ii) changes in global economic conditions, financial markets generally or conditions in the medical imaging industry generally). 10.10. Obligation of Parent. Whenever this Agreement requires Merger Sub to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause Merger Sub to take such action. 10.11. Captions. The Article, Section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be -46- 46 deemed to limit or otherwise affect any of the provisions hereof. 10.12 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. 10.13 Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. -47- 47 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto on the date first hereinabove written. ADAC LABORATORIES By: /s/ R. Andrew Eckert ---------------------------- Name: Title: Chairman and Chief Executive PHILIPS HOLDING USA INC. By: /s/ William E. Curran ---------------------------- Name: Title: Chairman, President and Director ACADEMY ACQUISITION COMPANY By: /s/ William E. Curran ---------------------------- Name: Title: President and Director -48- 48 Annex A 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 Commission, 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 if (i) a number of Shares that, when taken together with the number of Shares owned directly or indirectly by Grandparent, 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 9:00 a.m., Pacific time, on the business day 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 Section 1.1(d)(ii) of this Agreement, 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 Section 1.1(d)(iii) of this Agreement, 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 49 Offer, or (ii) at or before the time of acceptance for payment of any of 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 Significant Consent 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 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 Grandparent, 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; 50 (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 Conditions. "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 set forth in paragraphs (a) through (e) 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 -3- 51 part at any time and from time to time in their sole discretion. -4- 52 ANNEX B ARTICLES OF INCORPORATION OF ADAC LABORATORIES FIRST. The name of the corporation is ADAC Laboratories. SECOND. The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. THIRD. The name and address of the corporation's initial agent for service of process in the State of California is CT Corporation System, 818 West Seventh Street, Los Angeles, California 90017. FOURTH. The corporation is authorized to issue 1,000 shares of Common Stock, no par value. FIFTH. (a) The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. (b) The corporation is authorized to indemnify its agents to the fullest extent permissible under California law. For purposes of this provision, the term 53 "agent" has the meaning set forth from time to time in Section 317 of the General Corporation Law of California. (c) Any amendment, repeal or modification of any provision of this Article Fifth shall not adversely affect any right of protection of an agent of this corporation existing at the time of such amendment, repeal or modification. -2- 54 ANNEX C BYLAWS OF ADAC LABORATORIES ARTICLE I Shareholders Section 1.1. Annual Meetings. An annual meeting of shareholders shall be held for the election of directors on a date and at a time and place either within or without the State of California fixed by resolution of the Board of Directors. Any other proper business may be transacted at the annual meeting, except as limited by the notice requirements of subdivisions (a) and (d) of Section 601 of the California General Corporation Law. Section 1.2. Special Meetings. Special meetings of the shareholders may be called at any time by the Board of Directors, the Chairman of the Board or the holders of shares entitled to cast not less than ten percent of the votes at the meeting, such meeting to be held on a date and at a time and place either within or without the State of California as may be stated in the notice of the meeting. Section 1.3. Notice of Meetings. Whenever share holders are required or permitted to take any action at a meeting a written notice of the meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each shareholder entitled to vote thereat. Such notice shall state the place, date and hour of the meeting, and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, those matters which the Board, at the time of the mailing of the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include a list of the names of the nominees intended at the time of the mailing of the notice to be presented by the Board for election. 55 Notice of a shareholders' meeting or any report shall be given either personally or by first-class mail or other means of written communication, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. The notice or report shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any notice or report in accordance with the provisions of this bylaw, executed by the Secretary, Assistant Secretary or any transfer agent, shall be prima facie evidence of the giving of the notice or report. If any notice or report addressed to the share holder at the address of such shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice or report to all other shareholders. Except as otherwise prescribed by the Board of Directors in particular instances and except as otherwise provided by subdivision (c) of Section 601 of the California General Corporation Law, the Secretary shall prepare and give, or cause to be prepared and given, the notice of meetings of shareholders. Section 1.4. Adjournments. When a shareholders' meeting is adjourned to another time or place, except as otherwise provided in this Section 1.4, notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at -2- 56 the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. Section 1.5. Validating Meeting of Shareholders; Waiver of Notice. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, except as required by subdivision (f) of Section 601 of the California General Corporation Law. Section 1.6. Quorum. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the shareholders. If a quorum is present, the affirmative vote of a majority of the shares represented and voting at the meeting (which shares voting affirmatively also constitute a majority of the required quorum) shall be the act of the shareholders, unless the vote of a majority or higher percentage of all outstanding shares is required by law or by the articles of incorporation, and except as otherwise provided in this Section 1.6. The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the -3- 57 withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. In the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the vote of a majority of the shares represented either in person or by proxy, but no other business may be transacted, except as provided in this Section 1.6. Section 1.7. Organization. Meetings of share holders shall be presided over by the Chairman of the Board of Directors, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by a Managing Director, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary, an Assistant Secretary, shall act as secretary of the meeting, or in their absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.8. Voting. Unless otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders. Any holder of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares such shareholder is entitled to vote. Except as otherwise provided in the articles of incorporation and subject to the requirements of this Section 1.8, every shareholder entitled to vote at any election of directors may cumulate such shareholder's votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are normally entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder thinks fit. No -4- 58 shareholder shall be entitled to cumulate votes unless such candidate or candidates' names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of the share holder's intention to cumulate the shareholder's votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. In any election of directors, the candidates receiving the highest number of votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected. Elections for directors need not be by ballot unless a shareholder demands election by ballot at the meeting and before the voting begins. Section 1.9. Shareholder's Proxies. Every person entitled to vote shares may authorize another person or persons to act by proxy with respect to such shares. Any proxy purporting to be executed in accordance with the provisions of Section 705 of the California General Corporation Law shall be presumptively valid. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in this Section 1.9. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the corporation. A proxy may be made irrevocable under the circumstances set forth in subdivision (e) of Section 705 of the California General Corporation Law. Any form of proxy distributed to ten or more shareholders shall conform to the requirements of Section 604 of the California General Corporation Law. Section 1.10. Inspectors. In advance of any meeting of shareholders the Board of Directors may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any meeting of shareholders -5- 59 may, and on the request of any shareholder or a share holder's proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed. The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. Section 1.11. Fixing Date for Determination of Shareholders of Record. In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote or to express consent to corporate action in writing without a meeting or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days prior to the date of such meeting nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; (2) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board has been taken, shall be the day on which the first written consent is given; and (3) the record date for determining shareholders for any other purpose shall be at the close of -6- 60 business on the day on which the Board adopts the resolution relating thereto or the sixtieth day prior to the date of such other action, whichever is later. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting. Section 1.12. Consent of Shareholders in Lieu of Meeting. Except as otherwise provided in the articles of incorporation or in this Section 1.12, any action which may be taken at any annual or special meeting of the share holders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Directors may not be elected by written consent except by unanimous consent of all shares entitled to vote for the election of directors. Notwithstanding the foregoing sentence, except for vacancies created by removal, shareholders may fill any vacancy in the Board of Directors not filled by the Board of Directors by electing a director through written consent of a majority of outstanding shares entitled to vote. Any shareholder giving a written consent, or such shareholder's proxyholder, or a transferee of the shares or a personal representative of such shareholder or its respective proxyholder, may revoke the consent by a writing received by the corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the corporation, but may not do so thereafter. Such revocation -7- 61 is effective upon its receipt by the Secretary of the corporation. Unless all shareholders entitled to vote consent in writing, notice of any shareholder approval without a meeting shall be given as provided in subdivision (b) of Section 603 of the California General Corporation Law, or any successor thereof. Any form of written consent distributed to ten or more shareholders shall conform to the requirements of Section 604 of the California General Corporation Law, or any successor thereof. ARTICLE II Board of Directors Section 2.1. Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by, and all corporate powers shall be exercised by or under, the direction of the Board of Directors, except as otherwise provided in these bylaws or in the articles of incorporation. The Board shall consist of two members. Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies. At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. Any director may resign effective upon giving written notice to the Chairman of the Board, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective. Any or all of the directors may be removed without cause if such removal is approved by a majority of the outstanding voting shares, except that no director may be removed (unless the entire Board of Directors is removed) when the votes cast against removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election at which the -8- 62 same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of the director's most recent election were then being elected. Any reductions in the authorized number of directors does not remove any director prior to the expiration of such director's term in office. A vacancy in the Board of Directors shall be deemed to exist (a) if a director dies, resigns, or is removed by the shareholders or an appropriate court, as provided in Sections 303 or 304 of the California General Corporation Law; (b) if the Board of Directors declares vacant the office of a director who has been convicted of a felony or declared of unsound mind by an order of court; (c) if the authorized number of directors is increased; or (d) if at any shareholders' meeting at which one or more directors are elected the shareholders fail to elect the full authorized number of directors to be voted for at that meeting. Unless otherwise provided in the articles of incorporation or these bylaws and except for a vacancy caused by the removal of a director, vacancies on the Board may be filled by appointment by the Board. A vacancy on the Board caused by the removal of a director may be filled only by the shareholders, except that a vacancy created by the Board declaring an office of a director vacant because a director has been convicted of a felony or declared of unsound mind by an order of court may be filled by the Board. The shareholders may elect a director at any time to fill a vacancy not filled by the Board of Directors. If the number of directors then in office is less than a quorum, vacancies on the Board of Directors may be filled by the unanimous written consent of the directors then in office, the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice complying with Section 2.4 hereof or a sole remaining director. Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such places within or without the State of California and at such times as the Board may from time to time determine. -9- 63 Section 2.4. Special Meetings; Notice of Meetings; Waiver of Notice. Special meetings of the Board of Directors may be held at any time or place within or without the State of California whenever called by the Chairman of the Board, by the Vice Chairman of the Board, if any, or by any two directors. Special meetings shall be held on four days' notice by mail or 48 hours' notice delivered personally or by telephone, telegraph or any other means of communication authorized by Section 307 of the California General Corporation Law. Notice delivered personally or by telephone may be transmitted to a person at the director's office who can reasonably be expected to deliver such notice promptly to the director. Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. A notice, or waiver of notice, need not specify the purpose of any regular or special meeting of the Board. Section 2.5. Participation in Meetings by Conference Telephone Permitted. Members of the Board, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, through the use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another, and participation in a meeting pursuant to this Section 2.5 shall constitute presence in person at such meeting. Section 2.6. Quorum; Adjournment; Vote Required for Action. At all meetings of the Board of Directors one-third of the authorized number of directors or three directors, whichever is larger, shall constitute a quorum for the transaction of business. Subject to the provisions of Sections 310 and 317(e) of the California General Corporation Law, every act or decision done or made by a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the -10- 64 articles of incorporation or these bylaws shall require a vote of a greater number. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Any action required or permitted to be taken by the Board of Directors, or any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Section 2.9. Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors for services in any capacity. ARTICLE III Executive and Other Committees -11- 65 Section 3.1. Executive and Other Committees of Directors. The Board of Directors, by resolution adopted by a majority of the authorized number of directors, may designate an executive committee and other committees, each consisting of two or more directors, to serve at the pleasure of the Board, and each of which, to the extent provided in the resolution, shall have all the authority of the Board, except that no such committee shall have power or authority with respect to the following matters: (1) The approval of any action for which the California General Corporation Law also requires the approval of the shareholders or of the outstanding shares; (2) The filling of vacancies in the Board or in any committee thereof; (3) The fixing of compensation of the directors for serving on the Board or on any committee thereof; (4) The amendment or repeal of the bylaws, or the adoption of new bylaws; (5) The amendment or repeal of any resolution of the Board which, by its terms, shall not be so amendable or repealable; (6) The making of distributions to shareholders, except at a rate or in a periodic amount or within a price range set forth in the articles or determined by the Board of Directors; (7) The appointment of other committees of the Board or the members thereof; (8) The removal or indemnification of any director; or (9) The changing of the number of authorized directors on the Board. The Board of Directors may designate one or more directors as alternate members of any such committee, who may replace any absent member or members at any meeting of such committee. -12- 66 Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board of Directors or a pro vision in the rules of such committee to the contrary, each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these bylaws. ARTICLE IV Officers Section 4.1. Officers; Election. As soon as practicable after the annual meeting of shareholders in each year, the Board of Directors shall elect a Chairman of the Board, a Secretary and a Chief Financial Officer, and it may, if it so determines, elect from among its members a Vice Chairman of the Board. The Board may also elect one or more Managing Directors, one or more Assistant Secretaries, and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person. Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of shareholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the Chairman of the Board or the Secretary of the corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the corporation by death, resignation, removal -13- 67 or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.3. Powers and Duties. The officers of the corporation shall have such powers and duties in the management of the corporation as shall be stated in these bylaws or in a resolution of the Board of Directors which is not inconsistent with these bylaws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meetings of the shareholders, the Board of Directors and any committees in a book to be kept for that purpose. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V Forms of Certificates; Loss and Transfer of Shares Section 5.1. Forms of Certificates. Every holder of shares in the corporation shall be entitled to have a certificate signed in the name of the corporation by the Chairman or Vice Chairman of the Board of Directors, if any, and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the corporation, certifying the number of shares and the class or series of shares owned by such shareholder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The corporation may issue a new share certificate or a new certificate for any other security in the place of any certificate thereto fore issued by it, alleged to have been lost, stolen or -14- 68 destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI Records and Reports Section 6.1. Shareholder Records. The corporation shall keep at its principal executive office or at the office of its transfer agent or registrar a record of the names and addresses of all shareholders and the number and class of shares held by each shareholder. A shareholder or shareholders holding at least five percent in the aggregate of the outstanding voting shares of the corporation, or a shareholder who otherwise is authorized by subdivision (a) of Section 1600 of the California General Corporation Law, may inspect and copy the record of shareholders' names and addresses and share holdings during usual business hours, on five days' prior written demand on the corporation, or obtain from the corporation's transfer agent, on written demand and tender of the transfer agent's usual charges for this service, a list of the names and addresses of shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which a list has been compiled or as of a specified date later than the date of demand. This list shall be made available within five days after the demand is received or the date specified therein as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or holder of a voting trust certificate. Any inspection and copying under this section may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand. -15- 69 Section 6.2. Bylaws. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any share holder, furnish to that shareholder a copy of the bylaws as amended to date. Section 6.3. Minutes and Accounting Records. The minutes of proceedings of the shareholders, the Board of Directors, and committees of the Board, and the accounting books and records shall be kept at the principal executive office of the corporation, or at such other place or places as designated by the Board of Directors. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in a form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary of the corporation. Section 6.4. Inspection by Directors. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents. Section 6.5. Annual Report to Shareholders. Inasmuch as, and for as long as, there are fewer than 100 shareholders, the requirement of an annual report to share holders referred to in Section 1501 of the California General Corporation Law is expressly waived. However, -16- 70 nothing in this provision shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the shareholders, as the Board considers appropriate. If at any time and for as long as, the number of shareholders shall exceed 100, the Board of Directors shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year adopted by the corporation. This report shall be sent at least 15 days (if third-class mail is used, 35 days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified for giving notice to shareholders in these bylaws. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and a statement of changes in financial position for the fiscal year prepared in accordance with generally accepted accounting principles applied on a consistent basis and accompanied by any report of independent accountants, or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the corporation's books and records. Section 6.6. Financial Statements. The corporation shall keep a copy of each annual financial statement, quarterly or other periodic income statement, and accompanying balance sheets prepared by the corporation on file in the corporation's principal office for 12 months; these documents shall be exhibited at all reasonable times, or copies provided, to any shareholder on demand. If no annual report for the last fiscal year has been sent to shareholders, on written request of any shareholder made more than 120 days after the close of the fiscal year the corporation shall deliver or mail to the shareholder, within 30 days after receipt of the request, a balance sheet as of the end of that fiscal year and an income statement and statement of changes in financial condition for that fiscal year. A shareholder or shareholders holding five percent or more of the outstanding shares of any class of the corporation may request in writing an income statement for the most recent three-month, six-month, or nine-month period (ending more than 30 days before the date of the request) of -17- 71 the current fiscal year, and a balance sheet of the corporation as of the end of that period. If such documents are not already prepared, the Chief Financial Officer shall cause them to be prepared and shall deliver the documents personally or mail them to the requesting shareholders within 30 days after receipt of the request. A balance sheet, income statement, and statement of changes in financial position for the last fiscal year shall also be included, unless the corporation has sent the shareholders an annual report for the last fiscal year. Quarterly income statements and balance sheets referred to in this Section 6.6 shall be accompanied by the report thereon, if any, of any independent accountant engaged by the corporation or the certificate of an authorized corporate officer stating that the financial statements were prepared without audit from the corporation's books and records. Section 6.7. Form of Records. Any records maintained by the corporation in the regular course of its business, with the exception of minutes of the proceedings of the shareholders, and of the Board of Directors and its committees, but including the corporation's stock ledger and books of account, may be kept on, or be in the form of magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. ARTICLE VII Miscellaneous Section 7.1. Principal Executive or Business Offices. The Board of Directors shall fix the location of the principal executive office of the corporation at any place either within or without the State of California. If the principal executive office is located outside California and the corporation has one or more business offices in California, the Board shall designate one of these offices as the corporation's principal business office in California. -18- 72 Section 7.2. Fiscal Year. The fiscal year of the corporation shall be determined by the Board of Directors. Section 7.3. Seal. The corporation may have a corporate seal which shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 7.4. Interested Directors; Quorum. No contract or transaction between the corporation and one or more of its directors or between the corporation and any other corporation, firm or association in which one or more of its directors are directors, or have a financial interest, shall be void or voidable solely for this reason, or solely because such director or directors are present at the meeting of the Board of Directors or committee thereof which authorizes, approves or ratifies the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are fully disclosed or are known to the shareholders and such contract or transaction is approved by the shareholders in good faith with the shares owned by the interested director or directors not being entitled to vote thereon; (2) the material facts as to his or her relationship or interest and as to the contract or transaction are fully disclosed or are known to the Board or the committee, and the Board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient without counting the vote of the interested director or directors and the contract or transaction is just and reasonable as to the corporation at the time it was authorized, approved or ratified; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. Section 7.5. Indemnification. The corporation shall, to the maximum extent and in the manner permitted by -19- 73 the California General Corporation Law (the "Code"), indemnify each of its directors and officers against expenses (as defined in subdivision (a) of Section 317 of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in subdivision (a) of Section 317 of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 7.5, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in subdivision (a) of Section 317 of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in subdivision (a) of Section 317 of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 7.5, an "employee" or "agent" of the corporation includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. Section 7.6. Amendment of Bylaws. To the extent permitted by law these bylaws may be amended or repealed, and new bylaws adopted, by the Board of Directors. The shareholders entitled to vote, however, retain the right to adopt additional bylaws and may amend or repeal any by-law whether or not adopted by them. -20- EX-99.D.1.B 10 y42617ex99-d_1b.txt STOCK OPTION AGREEMENT 1 Exhibit 99(d)(1)(B) EXECUTION COPY STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of November 12, 2000 (this "Agreement"), among Adac Laboratories, a California corporation (the "Company"), Philips Holding USA Inc., a Delaware corporation ("Parent"), and Academy Acquisition Company, a Delaware corporation and an indirect wholly owned subsidiary of Parent that is to be renamed Philips Medical Acquisition Corporation("Merger Sub"). W I T N E S S E T H: WHEREAS, concurrently with the execution and delivery of this Agreement, the parties hereto are entering into an Agreement and Plan of Merger (as such agreement may hereafter be amended from time to time, the "Merger Agreement") which provides, upon the terms and subject to the conditions set forth therein, for (i) the commencement by Merger Sub of a tender offer (the "Offer") to purchase any and all of the outstanding shares of the common stock, no par value (the "Shares"), of the Company at a price of $18.50 per Share in cash, net to the seller (such price, or such greater amount which may be paid pursuant to the Offer, the "Offer Price") and (ii) the subsequent merger of Merger Sub with and into the Company (the "Merger"), whereby each Share issued and outstanding (other than Shares owned by Parent, Merger Sub or any other subsidiary of Parent and other than Shares which are held by shareholders exercising dissenters' rights pursuant to Chapter 13 of the California General Corporation Law) shall be converted into the right to receive the Offer Price; WHEREAS, as a condition to the willingness of Parent and Merger Sub to enter into the Merger Agreement, Parent and Merger Sub have required that the Company agree, and in order to induce Parent and Merger Sub to enter into the Merger Agreement, the Company has agreed, to grant to Merger Sub an option to purchase Shares upon the terms and subject to the conditions of this Agreement; and WHEREAS, capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Merger Agreement. NOW, THEREFORE, the parties hereto agree as follows: 2 ARTICLE I The Top-Up Option Section 1.01. Grant of Top-Up Stock Option. Subject to the terms and conditions set forth herein, the Company hereby grants 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 [NAME OF PARENT'S PARENT], a company incorporated under the laws of the Netherlands ("Grandparent"), Merger Sub, Parent and any other subsidiary of Grandparent immediately following consummation of the Offer, shall constitute 90% of the 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 (as defined in the Merger Agreement) has been received by the Company and Parent on or prior to 9:00 a.m., Pacific time, on the business day prior to the expiration of the Offer) and shall permit Merger Sub to effect the Merger pursuant to Section 1110 of the California General Corporation Law (assuming the issuance of the Top-Up Option Shares) at a purchase price per Top-Up Option Share equal to the Offer Price; provided, however, that the Top-Up Stock Option shall not be exercisable if the number of Shares subject thereto exceeds the number of authorized Shares available for issuance. The Company agrees to provide Parent and Merger Sub with information regarding the number of Shares available for issuance on an ongoing basis. Section 1.02. Exercise of Top-Up Stock Option. (a) Merger Sub may, at its election, exercise the Top-Up Stock Option 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). (b) A "Top-Up Exercise Event" shall occur for purposes of this Agreement upon Merger Sub's acceptance for payment pursuant to the Offer of Shares constituting, together with Shares owned directly or indirectly by Grandparent, Merger Sub, Parent and any other subsidiary of Grandparent, more than 50% of the Shares then outstanding -2- 3 but less than 90% of the Shares then 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 9:00 a.m., Pacific time, on the business day prior to the expiration of the Offer). (c) Except as provided in the last sentence of this Section 1.02(c), the "Top-Up Termination Date" shall occur for purposes of this 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 Merger Agreement; and (iv) the date on which Merger Sub reduces the Minimum Condition to the Revised Minimum Number and accepts for payment a number of Shares equal to the Revised Minimum Number. Notwithstanding the occurrence of the Top-Up Termination Date, Merger Sub shall be entitled to purchase the Top-Up Option Shares if it has exercised the Top-Up Stock Option in accordance with the terms hereof prior to such occurrence, and the occurrence of the Top-Up Termination Date shall not affect any rights hereunder which by their terms do not terminate or expire prior to or as of the Top-Up Notice Date (as herein defined). (d) In the event Merger Sub wishes to exercise the Top-Up Stock Option, Merger Sub shall send to the Company a written notice (a "Top-Up Exercise Notice," the date of dispatch of which notice is referred to herein as the "Top-Up Notice Date") specifying the denominations of the certificate or certificates evidencing the Top-Up Option Shares which Merger Sub wishes to receive, the place for the closing of the purchase and sale pursuant to the Top-Up Stock Option (the "Top-Up Closing") and a date not earlier than one day nor later than ten business days after the Top-Up Notice Date for the Top-Up Closing; provided, however, that (i) the Top-Up Closing shall occur concurrently with the consummation of the Offer, (ii) if the Top-Up Closing cannot be consummated by reason of any applicable laws or orders, the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which such restriction on consummation has expired or been -3- 4 terminated and (iii) without limiting the foregoing, if prior notification to or approval of any governmental entity is required in connection with such purchase, Merger Sub and the Company shall promptly file the required notice or application for approval and shall cooperate in the expeditious filing of such notice or application, and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (A) any required notification period has expired or been terminated or (B) any required approval has been obtained, and in either event, any requisite waiting period has expired or been terminated. The Company shall, promptly after receipt of the Top-Up Exercise Notice, deliver a written notice to Merger Sub confirming the number of Top-Up Option Shares and the aggregate purchase price therefor. ARTICLE II Closing Section 2.01. Conditions to Closing. 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 hereunder shall 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 violate, or otherwise cause a violation of the rule of the Nasdaq Stock Market set forth in Section 4350(i)1(D) of the NASD Manual. Section 2.02. Closing. (a) At the Top-Up Closing (i) the Company shall deliver to Merger Sub a -4- 5 certificate or certificates evidencing the applicable number of Top-Up Option Shares (in the denominations designated by Merger Sub in the Top-Up Exercise Notice) and (ii) Merger Sub shall purchase each Top-Up Option Share from the Company at the Offer Price. Payment by Merger Sub of the purchase price for the Top-Up Option Shares may be made, at the option of Merger Sub, by delivery of (i) immediately available funds by wire transfer to an account designated by the Company or (ii) a promissory note, in form and substance reasonably satisfactory to the Company and in a principal face amount equal to the aggregate amount of the purchase price, which promissory note shall be secured with property (other than the Top-Up Option Shares) reasonably acceptable to the parties, shall bear interest at a rate equal to 5% per annum and shall be payable in full with accrued interest immediately prior to the Effective Time. (b) The Company shall pay all expenses, and any and all federal, state and local taxes and other charges, that may be payable in connection with the preparation, issuance and delivery of stock certificates under this Section 2.02. (c) Certificates evidencing Top-Up Option Shares delivered hereunder may include legends legally required including the legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. It is understood and agreed that the foregoing legend shall be removed by delivery of substitute certificate(s) without such legend upon the sale of the Top-Up Option Shares pursuant to a registered public offering or Rule 144 under the Securities Act, or any other sale as a result of which such legend is no longer required. ARTICLE III Additional Agreements -5- 6 Section 3.01. Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, Parent, Merger Sub and the Company will use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement. Section 3.02. Further Assurances. Each party shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in Merger Sub and Parent the power to carry out the provisions of this Agreement. If Merger Sub shall exercise the Top-Up Stock Option granted hereunder in accordance with the terms of this Agreement, each party shall, without additional consideration, execute and deliver all such further documents and instruments and take all such further action as any other party may reasonably request to carry out the transactions contemplated by this Agreement. ARTICLE IV Miscellaneous Section 4.01. Notices. Any notice, request and other communication to any party hereunder shall be in writing (including facsimile transmission) and shall be given as specified in Section 10.7 of the Merger Agreement. Section 4.02. Waiver of Conditions. The conditions to each of the parties' obligations to consummate this Agreement are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. Section 4.03. Payment of Expenses. Whether or not the transactions contemplated by this Agreement shall be consummated, each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement. Section 4.04. Entire Agreement, etc. This Agreement, the Merger Agreement and the Confidentiality Agreement, dated March 20, 2000, between Bear Stearns & Co., Inc., for itself and on behalf of the Company, and Parent, -6- 7 taken together, (a) constitute the entire agreement, and supersede all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof, and (b) shall not be assignable by operation of law or otherwise and is not intended to create any obligations to, or (except with respect to the provisions of Section 7.9 of the Merger Agreement) rights in respect of, any person other than the parties hereto; provided, however, that Parent may designate, by written notice to the Company, another wholly-owned direct or indirect subsidiary to purchase the Top-Up Option Shares in lieu of Merger Sub, in which event all references herein to Merger Sub shall be deemed references to such other subsidiary. Section 4.05. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except as otherwise required by the California General Corporation Law. Section 4.06. Counterparts. For the convenience of the parties hereto, this Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. Section 4.07. Captions. The Article, Section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Section 4.08. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. -7- 8 Section 4.09. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. -8- 9 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto on the date first hereinabove written. ADAC LABORATORIES By: /s/ R. Andrew Eckert ________________________________ Name: Title: Chairman and Chief Executive Officer PHILIPS HOLDING USA INC. By: /s/ William E. Curran ________________________________ Name: Title: Chairman, President and Director ACADEMY ACQUISITION COMPANY By: /s/ William E. Curran ________________________________ Name: Title: President and Director -9- EX-99.D.2 11 y42617ex99-d_2.txt EMPLOYMENT AGREEMENT 1 Exhibit 7 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, dated as of November 11, 2000, is by and between Philips Electronics North America Corporation, or a direct or indirect subsidiary or division of Philips Electronics North America Corporation ("Philips") on the one hand, and Dave Crussell ("Executive") on the other hand. WHEREAS, the Executive's current employer, ADAC Laboratories, Inc. (the "Company"), intends to enter into an Agreement and Plan of Merger ("the Merger Agreement") with Philips whereby Philips will acquire the Company and Philips will be the successor entity. WHEREAS, Philips, as successor to the Company, desires to employ the Executive commencing upon the Closing Date (as defined in the Merger Agreement), and the parties desire to enter into an employment agreement describing the terms and conditions of Executive's employment. NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the Executive and Philips agree as follows: 1. Position. On the Closing Date, Philips agrees to employ the Executive, and the Executive agrees to serve as an employee of Philips on the terms and conditions in this Agreement. This Agreement will not become effective unless and until the transaction contemplated by the Merger Agreement is consummated. The "Retention Period" shall commence on the Closing Date and end on the second anniversary of the Closing Date. During the Retention Period, the Executive shall serve as Senior Vice President and General Manager - RTP. 2. Salary. During the Retention Period, Philips shall pay the Executive a base salary equivalent to that paid to the Executive by the Company at the Closing Date. This amount will be subject to an annual merit review in accordance with Philips' merit review program. 3. Annual Bonus. In accordance with Philips' prevailing bonus policies applicable to similarly situated employees of Philips, the Executive shall be eligible to participate in an annual cash bonus plan with a target amount equal to (75) percent of the Executive's base salary, subject to the terms of such bonus plan. The Executive may earn more (up to 150 percent) or less (including a $0 bonus) than the target amount based on both business results and the Executive's individual performance. 4. Welcome to Philips Stock Options. As soon as practicable following the Closing Date, the Executive shall receive a special on-time grant of options to acquire twenty-five thousand (925,000) shares of common stock of Royal Philips Electronics. These options will vest ratably in two equal installments. The first 50 percent shall vest upon the date that is eighteen months following the date of the grant. The remainder will vest upon the date that is thirty six months following the date of the grant. 1 2 5. Regular Philips Stock Options. Beginning in 2002, the Executive shall be eligible to participate in the Philips Electronics Global Stock Option Plan in a manner consistent with similarly situated employees of Philips, subject to the terms of the plan as may be modified from time to time. 6. Philips Retention Bonus. Philips shall provide the Executive with a cash retention bonus equal to $250,000.00. Twenty five percent of the bonus will be paid to the Executive within 60 days of the first anniversary of the Closing Date, provided the Executive is an employee of Philips on that date, or within 60 days of Executive's termination of employment if the Executive's employment has terminated prior to that date as a result of (1) Executive's death, disability (as defined in Section 8(c) herein) or (2) Executive's involuntary termination without Cause (defined as willfully engaging in conduct injurious to Philips, which definition shall be deemed to include, but not be limited to, the activities prohibited in Section 11 below). The remainder of the bonus will be paid to the Executive two years following the Closing Date if the Executive is an employee of Philips on that date, or within 60 days of the Executive's termination if the Executive's employment has terminated prior to that date as a result of Executive's death, disability (as defined in Section 8(c) herein) or involuntary termination without Cause. 7. Employee Benefits. Executive shall be eligible to participate in such employee benefit plans and insurance programs offered by Philips to its similarly situated employees in accordance with the eligibility requirements for participation in those programs. 8. Termination. This Agreement shall be terminated (a) upon the expiration of the Retention Period, (b) upon the death of the Executive, (c) if the Executive shall have been substantially unable to perform his or her duties for a period of six consecutive months ("Disability"), (d) by Philips for Cause and upon written notice, (e) by Philips without Cause and upon written notice, or (f) voluntarily by the Executive. 9. Amounts Due Upon Termination. In the event the Executive's employment is terminated by Philips during the Retention Period other than for Cause, Philips shall pay Executive a cash lump sum within 60 days of termination equal to the base salary for the remaining portion of the Retention Period, but not less than twelve months of Executive's base salary in effect on the date of Executive's termination. In addition, for the year in which Executive's termination for a reason other than Cause occurs, Executive shall be paid a pro rata portion of the Executive's annual bonus. The Executive shall not be entitled to receive severance pursuant to any other severance plan maintained by Philips if the Executive receives the payments above. The payments described in this paragraph shall not be made in the event the Executive voluntarily terminates his or her employment with Philips. 10. Confidential Information. The Executive shall hold in confidence all secret or confidential information relating to Philips ("Confidential Information") which shall have been obtained by the Executive during the Retention Period. The Executive shall not disclose the Confidential Information to third parties without the written consent of Philips. All Confidential Information shall be returned to Philips after the termination of the Executive's employment. The Executive shall sign the Philips standard agreement relating to employee ethics and intellectual property assignment. 2 3 11. NONSOLICITATION. Should the Executive's employment terminate during the Retention Period, for the period remaining in such Retention Period Executive shall not employ or seek to employ any person employed by Philips' medical systems business, or otherwise encourage, or entice such person to leave such employment. During the same period, Executive shall not (a) solicit any customer or prospective customer of Philips' medical systems business to transact any business whose product or activities directly compete with the products or activities of Philips' medical systems business anywhere where Philips conducts its medical systems businesses or to reduce, or refrain from doing any business with Philips' medical systems business or (b) interfere with or damage (or attempt to interfere with or damage) any relationship between Philips' medical systems business and any such customer or prospective customer. 12. WITHHOLDING. All applicable taxes shall be withheld on all payments made to the Executive under this Agreement. 13. TIMING OF ACCEPTANCE. Notwithstanding any other provision contained herein, this Agreement shall expire and become null and void and shall not create any rights or obligations with respect to either Philips or the Executive unless the Executive shall have executed and delivered this Agreement to Judy Rowe by 8:00pm PST on November 12, 2000. 14. SIMILAR TERMS OR SUBSTANTIALLY EQUIVALENT POSITION. Executive covenants and agrees that the terms and conditions contained in this Agreement constitute (a) "similar terms" for purposes of the Executive Severance Agreement by and between the Company and the Executive, and (b) a "substantially equivalent position" for purposes of the Special Severance Agreement by and between the Company and the Executive, when compared to the terms and conditions provided to Executive by the Company immediately prior to the Closing Date. 15. MISCELLANEOUS. This Agreement shall be binding upon and shall inure to the benefit of the parties, their successors, and assigns. This Agreement is governed by the laws of the State of California. This Agreement may not be amended, modified, or waived unless in writing signed by the parties. This Agreement sets forth the entire agreement of the parties with respect to the subject matter, and supersedes all prior agreements, whether oral or written. Philips Executive By: Max Neves By: David Crussel ------------------------- ----------------- Title: V.P., Human Resources Date: 11/11/00 --------------------- --------------- Date: 11-11-00 ---------------------- 3 -----END PRIVACY-ENHANCED MESSAGE-----