<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
EIS INTERNATIONAL, INC.
(NAME OF SUBJECT COMPANY)
EIS INTERNATIONAL, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
268539103
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
JAMES E. MCGOWAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EIS INTERNATIONAL, INC.
555 HERNDON PARKWAY
HERNDON, VIRGINIA 20170
(703) 478-9808
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
RANDALL S. PARKS
HUNTON & WILLIAMS
951 EAST BYRD STREET
RIVERFRONT PLAZA, EAST TOWER
RICHMOND, VIRGINIA 23219-4074
(804) 788-8200
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is EIS International, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 555 Herndon Parkway, Herndon, Virginia, 20170. The title of the
class of equity securities to which this Solicitation/Recommendation Statement
on Schedule 14D-9 (this "Statement") relates is common stock, par value $0.01
per share, of the Company, together with the associated rights to purchase
Series A Preferred Stock, par value $0.01 per share, pursuant to that certain
Rights Agreement (the "Rights Agreement"), dated as of May 16, 1997 between the
Company and BankBoston N.A., as amended (collectively, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by SERSys Acquisition
Corporation, a Delaware corporation ("Purchaser") that is a wholly owned
subsidiary of SER (USA), Inc., a Delaware corporation ("SER USA") that is a
wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
dated December 23, 1999 offering to purchase all of the outstanding Shares at a
price of $6.25 per Share, net to the seller in cash (the "Offer Consideration"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated December 23, 1999 (the "Offer to Purchase") and the related Letter of
Transmittal (which, together with the Offer to Purchase, as maybe amended from
time to time, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 17, 1999 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides, among other things, that
following satisfaction or waiver of the conditions set forth in the Merger
Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), Purchaser will be merged with and into the Company (the "Merger"), the
separate corporate existence of Purchaser will cease and the Company will
continue as the surviving corporation (the "Surviving Corporation") and become a
wholly owned subsidiary of SER USA and an indirect wholly owned subsidiary of
Parent. A copy of the Merger Agreement is filed as Exhibit (c)(1) to this
Statement and is incorporated herein by reference.
As set forth in the Schedule 14D-l, the principal executive offices of
Parent are located at Innovationspark Rahms, D-53577 Neustadt/Wied, Germany, and
the principal executive offices of Purchaser are located at 7200 Wisconsin
Avenue, Suite 1001, Bethesda, Maryland 20814.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the best knowledge of the
Company, there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company's executive officers, directors or
affiliates or (ii) Parent or Purchaser or their respective executive officers,
directors or affiliates.
The information included in the Offer to Purchase under the headings "The
Tender Offer -- Background of the Offer; Contacts with the Company," "-- The
Merger Agreement and Other Agreements" and "-- Certain Conditions of the Offer,"
is incorporated herein by reference. Each material contract, agreement,
arrangement and understanding and actual or potential conflict of interest
between the Company or its affiliates and (i) its executive officers, directors
or affiliates or (ii) Parent or Purchaser, or their respective executive
officers, directors or affiliates, is either incorporated by reference by the
preceding sentence, disclosed in the excerpt from the Company's Proxy Statement,
dated April 5, 1999, for its 1999 Annual Meeting of Shareholders, attached
hereto as Exhibit (c)(9), or set forth in this Item 3 below or in Item 5 (the
provisions of which are incorporated by reference herein) below. All information
in this Statement relating to Parent or Purchaser and their respective officers,
directors, representatives or affiliates, or actions or events with respect to
any of them, was provided by Parent or Purchaser, respectively, and the Company
takes no responsibility for such information.
1
<PAGE> 3
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company is a Delaware corporation. Pursuant to Section 145 of the DGCL,
a corporation incorporated under the laws of the State of Delaware is permitted
to indemnify its current and former directors and officers under certain
circumstances against certain liabilities and expenses incurred by them by
reason of their serving in such capacities, if such persons acted in good faith
for a purpose which they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Pursuant to Article Eighth of the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation"), no director
will be personally liable to the Company or any stockholder for damages
resulting from any breach of fiduciary duty in such capacity to the fullest
extent permitted by Delaware law. The Company's Certificate of Incorporation
further provides that neither the amendment nor repeal of Article Eighth thereof
may limit or eliminate the effect of Article Eighth in respect of any acts or
omissions occurring prior to such repeal or modification. Article Eighth of the
Certificate of Incorporation is filed herewith as Exhibit (c)(9) and is
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors
On December 16, 1999, the Board of Directors of the Company (the "Company
Board") unanimously (with Messrs. McGowan and Burton abstaining) approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, determined that the Offer and the Merger, taken together, are
fair to, and in the best interests of, the Company and its stockholders and
recommended that (i) the stockholders accept the Offer and tender their Shares
in the Offer and (ii) the stockholders entitled to vote thereon, approve and
adopt the Merger Agreement, subject to the terms and conditions therein, and the
transactions contemplated thereby. This recommendation is based in part upon an
opinion of the Company's financial advisor, Updata Capital, Inc. ("Updata"),
dated as of December 16, 1999, to the effect that, as of such date, the
consideration to be received by the Company's stockholders in the Offer and the
Merger is fair to the Company's stockholders from a financial point of view (the
"Fairness Opinion"). The Fairness Opinion contains a description of the factors
considered, the assumptions made and the scope of the review undertaken by
Updata in rendering its opinion. The full text of the Fairness Opinion is
attached as Exhibit (a)(9) to this Statement and is incorporated herein by
reference. Stockholders are urged to read the Fairness Opinion in its entirety.
(b) Background; Reasons for the Recommendation of the Company's Board of
Directors
Over the past several years, the management of the Company and the Company
Board have regularly reviewed the Company's performance, strategic direction and
prospects in light of changes in the contact center industry, including the
possibility of increased competition.
In May, 1999, Parent authorized its financial advisor, Broadview Int'l LLC
("Broadview"), to contact the Company regarding Parent's interest in exploring
the possibility of a strategic relationship or business combination between the
Company and Parent. Over the course of the next several months, Mr. Kevin R.
McClelland, a Principal of Broadview, had multiple conversations with Mr. James
E. McGowan, President and Chief Executive Officer of the Company, regarding the
potential benefits of a strategic relationship or business combination.
On September 1, 1999, Dr. Philip A. Storey, Executive Vice President of
Parent, and Mr. McGowan held a meeting at Mr. McGowan's office in Herndon,
Virginia, the first informal senior executive discussions between the Company
and Parent. As a result of this meeting, representatives of Parent and Company
believed that there was potential for a good strategic fit between the two
organizations, along the lines of a business combination, OEM product agreement
or other strategic venture or transaction. A second meeting between Dr. Storey
and Mr. McGowan occurred on the afternoon of September 13, 1999. Prior to this
meeting, Parent and the Company entered into a mutual non-disclosure agreement,
which was amended and superseded by a confidential mutual non-disclosure
agreement on October 15, 1999 (the "Confidentiality
2
<PAGE> 4
Agreement"). At this meeting, the parties discussed the Company's planned
business direction in light of changes in the contact center industry and
Parent's technological capabilities with respect to the Internet and process
automation. As a result of this meeting, and in light of the parties' strategies
discussed thereat, Dr. Storey and Mr. McGowan began to consider the prospect of
a business combination between the Company and Parent.
Following the meeting of September 13, 1999, Dr. Storey discussed the
possibility of a merger between the Company and Parent with other members of the
Management Board of Parent, and Gert J. Reinhardt, Chief Executive Officer of
Parent, fully briefed the Parent's supervisory board about the situation. In
addition, on September 17, representatives from Broadview held a conference call
with Mr. McGowan and other representatives from the Company to discuss the
Company's strategy and its historical and projected financial results. On
September 23, 1999, Broadview and the Parent outlined to the Company preliminary
proposed transaction terms for a merger of the Company and Parent.
On October 6, 1999, Mr. McGowan and Updata, the Company's financial
advisor, presented to the Company Board the preliminary proposed transaction
terms for a merger of the Company and Parent. At this meeting, the Company Board
considered the Company's business, financial condition, results of operations,
current business strategy and future prospects, recent and historical market
prices and trading ranges for the Shares and strategic and other potential
alternatives to a potential business combination.
After conferring with the Company Board, Mr. McGowan informed Dr. Storey,
in early October, that the Company would continue exploring a possible
transaction with Parent and would allow Parent to commence a preliminary senior
level due diligence review of the Company. Representatives of Parent commenced
the preliminary due diligence investigation on October 15, 1999, and continued
their investigation during November, 1999, including holding meetings between
certain members of each of the Company's and Parent's senior managements in
Germany from October 26 to 29, 1999. During this time, the senior management of
each of Parent and the Company discussed generally the possible structures and
potential synergies of a business combination.
In early November, 1999, the senior management and financial advisors of
each of the Company and Parent began to negotiate the amount and form of
consideration that would be payable to Company stockholders in connection with a
business combination. The parties also discussed various strategies for
retaining the services of key Company employees in the event of a business
combination.
During the negotiations of early November, and prior to November 7, 1999,
Dr. Storey fully informed the Management Board of Parent of the status of the
discussions and obtained suitable authorizations to proceed on behalf of Parent.
Also, during this period, Mr. Reinhardt consulted fully with the Supervisory
Board of Parent concerning the negotiations.
On November 7, 1999, following negotiations regarding the amount and form
of consideration, Dr. Storey called Mr. McGowan and informed him that a price of
$6.25, payable in cash for each outstanding Share, would be Parent's best and
highest proposal. Parent indicated that it would require Mr. McGowan and
Frederick C. Foley, the Company's Chief Financial Officer, to enter into
employment agreements and certain stockholders of the Company to enter into a
tender agreements, as a conditions to its willingness to enter into a definitive
merger agreement. While these conversations were occurring, representatives of
Parent continued various aspects of their due diligence review.
On November 10, 1999, certain members of the Company Board met to discuss
Parent's final offer price and related matters. At this meeting, the Company
Board considered the Company's business, financial condition, results of
operations, current business strategy and future prospects, recent and
historical market prices and trading ranges for the Shares, strategic and other
potential alternatives to Parent's offer, and the relevant matters, including
information presented by senior management and by the Company's financial
advisors regarding the progress of the negotiations between Parent and the
Company over the terms of a definitive merger agreement. Senior management and
the Company's financial advisors discussed with the Company Board the proposed
terms of the merger agreement, which contemplated a cash tender offer followed
by a cash merger, and a tender agreement pursuant to which certain officers and
directors of the
3
<PAGE> 5
Company would agree to tender their Shares into the Offer and vote in favor of
the Merger. Based on the information presented at these and previous meetings,
and after extensive deliberation, the Company Board authorized senior management
of the Company to proceed with the negotiation of definitive documentation
relating to the proposed transaction. Also at this meeting, the Company Board
authorized Mr. McGowan and senior management of the Company to enter into a
non-solicitation and standstill agreement to be negotiated by such management in
consultation with legal and financial advisors (the "Non-Solicitation and
Standstill Agreement"). Senior management of the Company and the Parent executed
the Non-Solicitation and Standstill Agreement on November 17, 1999.
From November 22, 1999 through December 15, 1999, Parent and its counsel
continued their due diligence review of the Company, and the parties and their
advisors negotiated the provisions of the Merger Agreement and the Tender
Agreement.
On the morning of December 16, 1999, the members of the Company's Board
received from the Company certain materials in preparation for deliberations
considering the proposed offer, including a summary of the Merger Agreement and
the transactions contemplated thereby, the final draft of the Merger Agreement,
a summary of the proposed terms of the employment agreements for Mr. McGowan and
Mr. Foley, drafts of those employment agreements, an outline of the Company
Board's duties under the DGCL and proposed resolutions with respect to the
Merger Agreement and the transactions contemplated thereby. Also on the morning
of December 16, 1999, the members of the Company's Board received from Updata,
the Company's financial advisors, a presentation and financial analysis
concerning the Merger Agreement and the transactions contemplated thereby.
After having been afforded the full business day to review their materials,
the Company Board held a meeting during the evening of December 16, 1999. At
that meeting, Mr. McGowan, other members of the Company's senior management and
the Company's financial and legal advisors presented to the Company Board the
terms of the proposed Merger Agreement and discussed with the Company Board
various business issues relating to the contemplated transactions. Updata
presented a detailed financial analysis of the proposed transaction and rendered
its written opinion that, as of December 16, 1999, the $6.25 per Share cash
consideration to be received in the Offer and the Merger by holders of Shares
was fair to such holders (other than Parent and its affiliates) from a financial
point of view. The Company's legal advisors discussed with the Company Board the
legal standards applicable to its decisions with respect to the proposed
transaction and reviewed the terms of the transaction documents. After
discussion and due consideration, including discussion while Mr. McGowan and Mr.
Foley had excused themselves from the meeting, the Company Board unanimously
approved (with Messrs. Burton and McGowan abstaining) the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, and
resolved to recommend that holders of Shares tender their Shares in the Offer
and vote in favor of the Merger.
After execution and delivery of the Merger Agreement on the evening of
December 17, 1999, the parties issued a joint press release, before the opening
of Nasdaq on December 20, 1999, announcing the definitive agreement, the Offer
and the Merger.
Reasons for the Company Board's Recommendation
In light of the Board of Directors' review of the Company's competitive and
financial position, recent operating results and prospects, the Board determined
that the Offer and the Merger, taken together, are fair to, and in the best
interests of, the Company and its stockholders and recommended that (i) the
stockholders accept the Offer and tender their Shares in the Offer and (ii) the
stockholders entitled to vote thereon, approve and adopt the Merger Agreement,
subject to the terms and conditions therein, and the transactions contemplated
thereby. In making such recommendation and in approving the Merger Agreement and
the transactions contemplated thereby, the Board considered a number of factors,
including, but not limited to, the following:
(1) the terms and conditions of the Merger Agreement, including the
parties' representations, warranties and covenants, the conditions to their
respective obligations, the limited ability of Parent and
4
<PAGE> 6
Purchaser to terminate the Offer or the Merger Agreement and the provision
for payment of the Offer Consideration in cash with no financing condition;
(2) the financial condition, results of operations, cash flows and
prospects of the Company;
(3) the prospects of the Company if the Company were to remain
independent and the risks inherent in remaining independent, including
competitive risks;
(4) the extensive arms-length negotiations between the Company and
Parent that resulted in the $6.25 per share price;
(5) the history of the Company's discussions with Parent and other
parties;
(6) that the Offer and the Merger provide for a prompt cash tender
offer for all outstanding Shares to be followed by a merger for the same
consideration, thereby enabling the Company's stockholders to obtain the
benefits of the transaction in exchange for their Shares at the earliest
possible time;
(7) the current status of the industries in which the Company competes
and the technological and financial resources available to the Company's
competitors;
(8) the likelihood of continued consolidation in the industries in
which the Company competes and the possibility that changes in those
industries, including the rapid evolution of technology, could adversely
affect the Company and its stockholders;
(9) the recent trading price of the Shares and that the $6.25 per
Share to be paid in the Offer and the Merger represents (i) a premium of
approximately 19% over the $5.25 closing sale price for the Shares on The
Nasdaq National Market on December 14, 1999, and (ii) a premium of
approximately 33.3% over the $4.688 closing sale price for the Shares on
The Nasdaq National Market on November 14, 1999;
(10) the Company's and Updata's determination that the likelihood that
an unconditional superior offer could be found was insufficient to justify
the risk of delay in proceeding with the favorable transaction with Parent;
(11) the presentations of Updata made to the Board on October 6, 1999,
November 10, 1999 and December 16, 1999, and the Fairness Opinion of Updata
delivered to the Company Board at the December 16, 1999 Board meeting to
the effect that, as of such date and based upon and subject to certain
matters stated in such opinion, the cash consideration of $6.25 per share
to be received by holders of the Shares in the Offer and the Merger was
fair, from a financial point of view, to such holders (STOCKHOLDERS ARE
URGED TO READ THE FAIRNESS OPINION IN ITS ENTIRETY);
(12) the Merger Agreement permits the Company Board, in the exercise
of its fiduciary duties, to furnish information and data, and enter into
discussions and negotiations, in connection with a Superior Proposal (as
defined in the Merger Agreement) and to withdraw its recommendation of the
Merger with Parent and Purchaser in favor of a Superior Proposal to the
Company's stockholders;
(13) the Merger Agreement permits the Company Board, in the exercise
of its fiduciary duties, to terminate the Merger Agreement in favor of a
Superior Proposal, provided, that following such termination, the Company
must pay Parent a fee of $3,000,000, (representing approximately 4.3% of
the total value of the consideration to be paid to stockholders in the
Offer and the Merger); and
(14) the business reputation of Parent and its management, and
Parent's financial strength, including its ability to finance the Offer.
The Company Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the Company
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it. In addition, it is possible
that different members of the Company Board assigned different weights to the
factors.
5
<PAGE> 7
The Company Board recognized that, while the consummation of the Offer
gives the Company's stockholders the opportunity to realize a premium over the
price at which the Shares were traded before the public announcement of the
Offer, tendering in the Offer would eliminate the opportunity for such
stockholders to participate in the future growth and profits of the Company. The
Company Board believes that the loss of the opportunity to participate in the
growth and profits of the Company was reflected in the Offer Consideration of
$6.25 per Share. The Company Board also recognized that there can be no
assurance as to the level of growth or profits, if any, to be attained by the
Company in the future.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to the terms of an engagement letter dated October 4, 1999 (the
"Updata Engagement Letter"), the Company retained Updata as its financial
advisor in considering the Company's financial and strategic alternatives,
including the possible sale of (or other extraordinary transactions involving)
the Company and/or its subsidiaries. Mr. Burton, a director of the Company, is
also a Managing Director of Updata.
The Company agreed in the Updata Engagement Letter to pay Updata a
transaction fee, based on a formula set forth therein, which will result in a
cash payment to Updata of approximately $786,200, payable in pro rata
installments upon consummation of the Offer and the Merger. Whether or not any
transaction is consummated, the Company has agreed to reimburse Updata for
reasonable out-of-pocket expenses, including reasonable legal fees and expenses.
In the Updata Engagement Letter, the Company agreed to indemnify Updata against
certain liabilities arising out of Updata's engagement.
The Company has also retained Innovative Software Engineering Practices,
Inc. ("Instep") to assist the Company in evaluating and developing product
positioning, whole product definition and strategic alternatives, and signed an
engagement letter with Instep to such effect on October 15, 1999 (the "Instep
Engagement Letter"). Pursuant to the Instep Engagement Letter, the Company will
pay Instep a transaction fee, based on a formula set forth therein, which will
result in a cash payment to Instep of approximately $275,000. Whether or not any
transaction is consummated, the Company has agreed to reimburse Instep for
reasonable travel expenses and reasonable legal fees and expenses. In the Instep
Engagement Letter, the Company agreed to indemnify Instep against certain
liabilities arising out of Instep's engagement.
Except as disclosed herein, neither the Company nor any person acting on
its behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to the stockholders concerning the Offer or the
Merger on its behalf.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the best of the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by such persons (other
than Shares issuable upon the exercise of Options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Securities Exchange Act of 1934), subject to and consistent
with any fiduciary obligations of such persons. In a Tender and Voting Agreement
dated December 17, 1999 between Parent and the executive officers and directors
of the Company, each of the Company's executive officers and directors agreed
with Parent, among other things, to tender his Shares in the Offer and to vote
for and otherwise to support the Merger.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in
any negotiation in response to the Offer that relates to or would result in; (i)
an extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other
6
<PAGE> 8
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) Except as described in Item 3(b) or 4 above (the provisions of which
are hereby incorporated by reference), there are no transactions, board of
directors' resolutions, agreements in principle, or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Not applicable.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
Exhibit (a)(1) Form of Offer to Purchase, dated as of December 23, 1999
(incorporated by reference to Exhibit (a)(1) to the Schedule
14D-1).*
Exhibit (a)(2) Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(2) to the Schedule 14D-1).*
Exhibit (a)(3) Form of Notice of Guaranteed Delivery (incorporated by
reference to Exhibit (a)(3) to the Schedule 14D-1).*
Exhibit (a)(4) Form of Letter from the Information Agent to Brokers,
Dealers, Commercial Banks, Trust Companies and Nominees
(incorporated by reference to Exhibit (a)(4) to the Schedule
14D-1).*
Exhibit (a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees (incorporated
by reference to Exhibit (a)(5) to the Schedule 14D-1).*
Exhibit (a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 (incorporated by reference to
Exhibit (a)(6) to the Schedule 14D-1).*
Exhibit (a)(7) Letter to Company Stockholders, dated December 23, 1999.*
Exhibit (a)(8) Summary Advertisement, as published on December 23, 1999
(incorporated by reference to Exhibit (a)(7) to the Schedule
14D-1).
Exhibit (a)(9) Fairness Opinion of Updata Capital, Inc. dated December 16,
1999.*
Exhibit (a)(10) Joint Press Release issued by Parent and Company on December
20, 1999 (incorporated by reference to Exhibit (a)(8) to the
Schedule 14D-1).
Exhibit (c)(1) Agreement and Plan of Merger dated as of December 17, 1999
by and among Parent, Purchaser and the Company (incorporated
by reference to Exhibit (c)(1) to the Schedule 14D-1).
Exhibit (c)(2) Tender and Voting Agreement, dated as of December 17, 1999,
among Parent and certain officers and directors of the
Company named therein (incorporated by reference to Exhibit
(c)(2) to the Schedule 14D-1).
Exhibit (c)(3) Employment Agreement by and between Purchaser and James E.
McGowan dated as of December 17, 1999, with exhibits
thereto, (incorporated by reference to Exhibit (c)(3) to the
Schedule 14D-1).
Exhibit (c)(4) Employment Agreement by and between Purchaser and Frederick
C. Foley dated as of December 17, 1999, with exhibits
thereto, (incorporated by reference to Exhibit (c)(4) to the
Schedule 14D-1).
7
<PAGE> 9
Exhibit (c)(5) Confidential Mutual Non-Disclosure Agreement dated as of
October 15, 1999 between Parent and the Company
(incorporated by reference to Exhibit (c)(5) to the Schedule
14D-1).
Exhibit (c)(6) Stockholders Agreement, dated as of December 17, 1999 by and
among Parent, Purchaser and James E. McGowan (incorporated
by reference to Exhibit (c)(6) to the Schedule 14D-1).
Exhibit (c)(7) Stockholders Agreement dated as of December 17, 1999 by and
among Parent, Purchaser and Frederick C. Foley (incorporated
by reference to Exhibit (c)(7) to the Schedule 14D-1).
Exhibit (c)(8) Article Eighth of the Certificate of Incorporation of the
Company.
Exhibit (c)(9) Excerpts from the Company's Proxy Statement, dated April 5,
1999.
Exhibit (c)(10) Form of Stock Option Plan of Purchaser (incorporated by
reference to Exhibit (c)(8) to the Schedule 14D-1.
Exhibit (c)(11) Engagement Letter between the Company and Updata dated
October 4, 1999.
- ---------------
* Included in copies mailed to the stockholders.
8
<PAGE> 10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
EIS INTERNATIONAL, INC.
December 23, 1999
By: /s/ JAMES E. MCGOWAN
------------------------------------
Name: James E. McGowan
Title: President and Chief Executive
Officer
9
<PAGE> 1
EXHIBIT (a)(7)
EIS INTERNATIONAL, INC.
555 HERNDON PARKWAY
HERNDON, VIRGINIA 20170
DECEMBER 23, 1999
Dear Stockholder:
We are pleased to report that EIS International, Inc. has entered into a
merger agreement with SER Systeme AG, a German corporation, that provides for
the acquisition of EIS by SER at a price of $6.25 per share in cash. Under the
terms of the proposed transaction, SER is today commencing a cash tender offer
for all outstanding shares of EIS's common stock at $6.25 per share. Following
the successful completion of the tender offer, a subsidiary of SER will be
merged with and into EIS and all shares not purchased by SER in the tender offer
will be converted into the right to receive $6.25 per share in cash in the
merger.
YOUR BOARD OF DIRECTORS HAS APPROVED THE TENDER OFFER AND DETERMINED THAT
THE TERMS OF THE TENDER OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO, AND
IN THE BEST INTERESTS OF, EIS AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS ACCEPTANCE OF SER'S TENDER OFFER AND APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT BY THE STOCKHOLDERS OF EIS.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion, dated
December 16, 1999, of Updata Capital, Inc., financial advisor to EIS, to the
effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the cash consideration of $6.25 per share to be received
by EIS stockholders in the tender offer and the merger is fair from a financial
point of view to such stockholders.
Accompanying this letter is a copy of EIS's Solicitation/Recommendation
Statement on Schedule 14D-9. Also enclosed is SER's Offer to Purchase and
related materials, including a Letter of Transmittal for your use in tendering
shares. We urge you to read carefully the enclosed materials, including Updata's
opinion, which is attached to the Schedule 14D-9.
The management and directors of EIS International, Inc. thank you for the
support you have given EIS.
Sincerely,
/S/ JAMES E. MCGOWAN
------------------------------
James E. McGowan
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT (a)(9)
[UPDATA CAPITAL LOGO]
DECEMBER 16, 1999
CONFIDENTIAL
Board of Directors
EIS International, Inc.
555 Herndon Parkway
Herndon, Virginia 20170
Dear Members of the Board:
We understand that EIS International, Inc. ("EIS" or the "Company") and SER
Systeme AG a German corporation, and Sersys Acquisition Corporation, a Delaware
corporation (together "SER") have entered into an Agreement and Plan of Merger
(the "Agreement") pursuant to which SER will offer to purchase (the "Offer") all
of the outstanding shares of EIS common stock, par value $0.01 per share ("EIS
Common Stock"), for $6.25 cash per share (the "Consideration") and subsequently
merge with and into EIS (the "Merger"). Pursuant to the Merger, each issued and
outstanding share of EIS not acquired in the Offer will be converted into the
right to receive an amount of cash equal to the Consideration. The terms and
conditions of the above described Offer and Merger (together the "Transaction")
are more fully detailed in the Agreement.
You have requested our opinion as to whether the Consideration to be received by
EIS shareholders in the Transaction is fair, from a financial point of view, to
EIS shareholders.
Updata Capital, Inc. ("Updata") focuses on providing merger and acquisition
advisory services to information technology ("IT") companies. In this capacity,
we are continually engaged in valuing such businesses, and we maintain an
extensive database of IT mergers and acquisitions for comparative purposes. We
are currently acting as financial advisor to you, the Board of Directors of EIS,
and will receive a fee from EIS upon the successful conclusion of the
Transaction.
In rendering our opinion, we have among other things:
1. reviewed the most recent draft of the Agreement and based our opinion on our
understanding that the terms and conditions of the Agreement will not
materially change;
2. reviewed EIS's annual reports and Forms 10-K for the fiscal years ended
December 31, 1998 and 1997, including the audited financial statements
included therein, and EIS's Form 10-Q for the nine months ended September
30, 1999, including the unaudited financial statements included therein;
3. reviewed certain internal financial and operating information, including
certain projections, relating to EIS prepared by EIS management;
4. participated in discussions with EIS management concerning the operations,
business strategy, financial performance and prospects for EIS;
5. reviewed the recent reported closing prices and trading activity for EIS
Common Stock;
6. compared certain aspects of the financial performance of EIS with public
companies we deemed comparable;
7. analyzed available information, both public and private, concerning other
mergers and acquisitions we believe to be comparable in whole or in part to
the Transaction;
8. reviewed SER's annual reports for the fiscal years ended December 31, 1998
and December 31, 1997, including the audited financial statements included
therein;
<PAGE> 2
9. reviewed the recent reported closing prices and trading activity for SER
common stock on the Neuer Market;
10. assessed, based on discussions with EIS and SER management, the strategic
rationale for the Transaction;
11. assisted in negotiations and discussions related to the Transaction among
EIS, SER and their respective legal and investment banking advisors; and
12. conducted other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification, on
the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by EIS. With
respect to the financial projections examined by us, we have assumed that they
were reasonably prepared and reflected the best available estimates and good
faith judgments of the management of EIS as to the future performance of EIS. We
have neither made nor obtained an independent appraisal or valuation of any of
EIS's assets.
Based upon and subject to the foregoing, we are of the opinion that the
Consideration to be received by EIS shareholders in the Transaction is fair,
from a financial point of view, to EIS shareholders.
For purposes of this opinion, we have assumed that EIS is not currently involved
in any material transaction other than the Transaction and those activities
undertaken in the ordinary course of conducting its business. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this opinion. Any change in such
conditions may impact this opinion.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of EIS in connection
with its consideration of the Transaction and does not constitute a
recommendation to any EIS shareholder as to whether such shareholder should
tender its shares in the Offer or as to how such shareholder should vote on the
Merger. Updata does not believe that any person other than the Board of
Directors of EIS has the legal right under state law to rely on this opinion,
and, in the absence of any governing precedents, we would resist any assertion
otherwise by any such person. THIS OPINION MAY NOT BE PUBLISHED OR REFERRED TO,
IN WHOLE OR PART, WITHOUT OUR PRIOR WRITTEN PERMISSION.
SINCERELY,
/s/ UPDATA CAPITAL, INC.
UPDATA CAPITAL, INC.
<PAGE> 1
EXHIBIT (c)(8)
--------------
Excerpt of Article Eighth of the
Amended and Restated Articles of Incorporation of
EIS International, Inc.
EIGHTH:
(1) Directors of the Corporation shall, to the fullest extent permitted
by Section 102(b)(7) of the GCL, have no personal liability for monetary damages
for breach of fiduciary duty of a director.
(2) The Corporation shall indemnify each director and officer of the
Corporation against and hold each such director and officer harmless from, any
and all claims made against any such director or officer in his capacity as
such, whether brought by the Corporation, or by any stockholder, whether in such
stockholder's individual capacity or on behalf of the Corporation, and shall pay
all costs and other losses (including legal fees in the defense thereof)
resulting to each such director or officer from such claims, and shall advance
any and all reasonable costs with respect to the defense thereof, all to the
fullest extent permitted by law.
(3) Nothing contained in Paragraph (1) of this Article EIGHTH shall be
deemed to limit or preclude indemnification of a director or officer by the
Corporation (a) for any liability which has not been eliminated by the
provisions of said paragraph or (b) the cost of defending any claim the
liability for which has been eliminated thereby.
(4) Any repeal or modification of this Article EIGHTH shall not limit
or eliminate the Corporation's obligation to indemnify and hold harmless
directors and officers with respect to claims arising out of matters occurring
prior to the effective date of such repeal or modification.
<PAGE> 1
EXHIBIT (c)(9)
---------------
Excerpts from the Proxy Statement, dated April 5, 1999
of EIS International, Inc. relating to its 1999 Annual
Meeting of Shareholders
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board currently consists of five directors, divided into two
classes of two directors each and one class of one director. If all of the
nominees for election as a director are elected at the Annual Meeting, the Board
will consist of seven directors, divided into two class of two directors each
and one class of three directors. The term of the current Class I Directors will
expire at the Annual Meeting. The terms of the current Class II and Class III
Directors will expire in 2000 and 2001, respectively, at such times as their
respective successors are duly elected and qualified. Directors of each class
are elected for a full term of three years (or any lesser period representing
the balance of the previous term of such class) and until their respective
successors are duly elected and qualified or until their earlier resignation or
removal.
At the Annual Meeting, the holders of record of Common Stock are to
elect (i) three Class I Directors to serve until the annual meeting of the
Company's stockholders to be held in 2002 and (ii) one Class III Director to
serve until the annual meeting of the Company's stockholders to be held in 2001
and, in each case, until such director's successor is duly elected and qualified
or until his earlier resignation or removal. The election of directors requires
the affirmative vote of the holders of a plurality of the Common Stock present
and voting at the Annual Meeting. It is intended that proxies in the
accompanying form that do not withhold the authority to vote for the nominee
will be voted for the election as director of such nominee. All of the nominees
except Messrs. Burton and Foreman are currently directors of the Company.
The nominees have indicated their willingness to serve if elected;
however, if any of the nominees should become unable or unwilling for any reason
before the Annual Meeting to serve as a director, the proxies will be voted for
a substitute person to be selected by the current Board. The Board has no reason
to expect that the nominees will not be candidates at the Annual Meeting and
therefore does not at this time have in mind any substitute for any of the
nominees.
There are no family relationships between any of the Company's
directors and executive officers.
Nominees for Election as a Director
The following table sets forth certain information with respect to each
nominee. Information set forth below concerning age, occupation(s) and other
directorships has been furnished to the Company by the individuals named.
Information with respect to the number of shares of Common Stock beneficially
owned by each director, directly or indirectly, as of January 31, 1999, appears
below under the heading "Security Ownership of Certain Beneficial Holders and
Management."
Class I Directors (terms expire at the Annual Meeting):
<TABLE>
<CAPTION>
Name Age Principal Occupation(s)
---- --- -----------------------
<S> <C> <C>
Robert M. Jesurum 57 Founder of the Company and Private
Consultant (1)
Charles W. McCall 54 President and Chief Executive Officer of
McKesson HBOC, Inc. (1)
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
John F. Burton 47 Managing Director, Updata Capital, Inc.
</TABLE>
- ---------------
(1) Member of the Compensation Committee
Robert M. Jesurum founded the Company in January 1980 and has served as
a director since its inception. He also served as the Company's Chairman of the
Board (from inception to February 1993) and as the Company's Executive Vice
President and Chief Technical Officer (from inception until October 1991). Mr.
Jesurum retired as an employee of the Company in October 1991 and is currently
pursuing noncompetitive independent business research and product development as
a sole proprietor.
Charles W. McCall has been a director of the Company since April 1993.
Mr. McCall has been Chairman of the Board of Directors and Chief Executive
Officer of McKesson HBOC, Inc. since January 1999. He had been President, Chief
Executive Officer and a director of HBO & Company, a company in the business of
providing software in the medical field from January 1991 to January 1999, at
which time HBO & Company merged with McKesson, Inc. to form McKesson HBOC, Inc.
From April 1985 to January 1991, Mr. McCall served as President and Chief
Executive Officer of CompuServe Inc., a computer communications and information
services company. Mr. McCall serves on the board of directors of WestPoint
Stevens, Inc., a publicly-held company.
John F. Burton has been a Managing Director of Updata Capital, Inc., an
investment banking firm, since 1997. From 1995 to March 1997, Mr. Burton was the
Managing Director of Burton Technology Partners, Ltd. From September 1995 to
September 1996, Mr. Burton was Chief Executive Officer of Nat Systems
International, Inc. From 1990 through January 1995, Mr. Burton served as
President, Chief Executive Officer, Chief Operating Officer and a director of
LEGENT Corporation. Mr. Burton serves as a director of Banyan Systems, Inc.,
Treev, Inc., and MapInfo Corporation, all publicly-held companies.
Class III Director (term expires at the 2001 Annual Meeting)
<TABLE>
<S> <C> <C>
Peter B. Foreman 63 President, Sirius Corporation
</TABLE>
Peter B. Foreman has been the President of Sirius Corporation, an
investment management firm which he founded since 1994. From 1976 to 1994, Mr.
Foreman was a founding partner of Harris Associates L.P., an investment advisory
firm. Mr. Foreman continues to manage Hesperus Partners, Ltd., a partnership
focusing on value-oriented investing. He is a member of the boards of directors
of Glacier Water Services, Inc. and Eagle Food Centers, Inc., both publicly-held
companies.
Current Directors
The following table sets forth certain information about those
directors whose terms of office will continue after the Annual Meeting.
Information set forth below concerning age, occupations and other directorships
has been furnished to the Company by the individuals named.
Class II Directors (terms expire at the 2000 Annual Meeting):
<TABLE>
<CAPTION>
Name Age Principal Occupation(s)
---- --- -----------------------
<S> <C> <C>
Kent M. Klineman 66 Secretary of the Company; Attorney and Private
Investor (1)(2)
James E. McGowan 55 President and Chief Executive Officer of the Company
</TABLE>
- - --------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
<PAGE> 3
Kent M. Klineman has been a director since June 1988. He also served as
Treasurer of the Company from June 1988 until December 1989 and has served as
Secretary since June 1988. He is an attorney and private investor and serves as
a director of a number of closely held companies. He is also a director of
Concord Camera Corp., a publicly held corporation.
James E. McGowan has been EIS' Chief Executive Officer, President and a
director of the Company since February 1997. He was also President and Chief
Operating Officer of EIS Systems, an operating division of the Company, from
April 1996 until February 1997. From September 1993 to January 1996, he was
President and Chief Executive Officer of Deluxe Data, a provider of electronic
funds transfer processing and software for financial institutions and automated
teller machine networks. From January 1993 to September 1993, he ran McGowan
Associates, a consulting company which he founded. From January 1990 to December
1992, he served as President and Chief Executive Officer at Xerox Imaging
Systems.
Other Class III Director (term expires at the 2001 Annual Meeting):
<TABLE>
<CAPTION>
Name Age Principal Occupation(s)
---- --- -----------------------
<S> <C> <C>
Robert J. Cresci 54 Chairman of the Board of Directors of the
Company; Managing Director of Pecks
Management Partners Ltd. ("Pecks") (1)
</TABLE>
- ---------------
(1) Member of the Audit Committee
Robert J. Cresci has been a director of the Company since March 1991
and has served as Chairman of the Board of Directors of the Company since
February 1997. He has been a Managing Director of Pecks, an investment
management firm, since September 1990. Mr. Cresci currently serves on the boards
of directors of Bridgeport Machines, Inc., Serv-Tech, Inc., Vestro Natural
Foods, Inc., Olympic Financial Ltd., Hitox, Inc., Sepracor Inc., Garnet
Resources Corporation, HarCor Energy, Inc., Meris Laboratories, Inc., Natures
Elements, Inc. and GeoWaste, Inc., all publicly-held companies, as well as
several private companies.
. . .
Compensation of Directors
Each director of the Company who is not an employee of the Company is
paid an annual fee of $10,000, plus $1,000 for each meeting of the Board
attended (which was increased to $1,500 for meetings after January 1999) and
$500 for each meeting of the Audit Committee and Compensation Committee
attended. In addition, the Company's 1993 Stock Option Plan for Non-Employee
Directors provides for grants of stock options to non-employee directors at such
times, in such amounts and on such vesting terms as the Board may determine.
<PAGE> 4
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation of the Company's Chief Executive Officer and the
four other executive officers whose total annual salary and bonus for 1998
exceeded $100,000 (collectively, the "Named Executive Officers") for each of the
last three fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Other Underlying
Annual Options
Compen- (number of All Other
Name and Principal Position Year Salary Bonus(1) sation shares) Compensation(3)
- ----------------------------- ---- -------- -------- ------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James E. McGowan 1998 $300,000 $125,000 (2) 50,000 $ 49,663
President and Chief Executive 1997 268,447 125,000 (2) 150,000 62,103
Officer 1996 178,042 -- (2) -- 17,612
Frederick C. Foley 1998 $180,000 $ 63,000 (2) 25,000 $ 5,287
Senior Vice President, Finance, 1997 152,832 52,000 (2) 60,000 26,425
Chief Financial Officer and 1996 139,182 -- (2) 5,000 2,163
Treasurer
Edward J. Sarkisian(4) 1998 $164,600 $ 33,000 (2) -- $ 4,667
Senior Vice President,
Worlwide Sales, Marketing,
Customer Operations
Jonathan M. Wineberg(4) 1998 $165,400 $ 32,000 (2) 48,000 $ 94,379
Senior Vice President,
Engineering and Product
Development
Joseph E. Smith(5) 1998 $146,900 $ -- (2) 25,000 $147,028
Former Senior Vice President, 1997 129,079 34,000 (2) 75,000 63,334
Worldwide Sales and
Marketing
</TABLE>
(1) Except as otherwise noted below, all amounts set forth in this column
constitute performance bonuses.
(2) As to each individual named, the aggregate amounts of personal benefits not
included in the Summary Compensation Table do not exceed the lesser of
either $50,000 or 10% of the total annual salary and bonus reported for the
named executive officer.
(3) For 1998, represents premiums paid by EIS with respect to group term life
insurance for the benefit of the Named Executive Officer, and (i) with
respect to Mr. McGowan, $37,428 of loan forgiveness, and a $2,000 401(k)
matching contribution; (ii) with respect to Mr. Foley, a $2,000 401(k)
matching contribution; (iii) with respect to Mr. Sarkisian, a $2,000 401(k)
matching contribution; (iv) with respect to Mr. Wineberg, $92,379 for
relocation expenses and a $2,000 401(k) matching contribution; and (v) with
respect to Mr. Smith, $55,874 for relocation expenses and $91,154 as
severance.
(4) Mr. Wineberg and Mr. Sarkisian became executive officers of EIS in 1998.
Accordingly, no information is provided for 1996 and 1997.
(5) Mr. Smith joined EIS in 1997. Accordingly, no information is provided
<PAGE> 5
for 1996. Mr. Smith resigned from EIS in August 1998.
1998 Option Information
Option Grants in 1998
The following table summarizes certain information regarding options
granted to Named Executive Officers during 1998.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants Terms (1)
--------------------------------------------------------- --------------------------
Percent of
Total
Shares Options
Subject to Granted to Exercise
Options Employees Price Per Expiration
Name Granted in FY Share Date 5% 10%
- ---- --------- ---------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James E. McGowan 24,000 4.7% $7.00 1/28/08 $105,654 $267,749
26,000 5.1% 6.28125 4/28/08 102,706 260,278
Frederick C. Foley 12,500 2.5% $7.00 1/28/08 $55,028 $139,452
12,500 2.5% 6.28125 4/28/08 49,378 125,134
Edward J. Sarkisian -- -- -- -- -- --
Jonathan M. Wineberg 11,500 2.3% $7.00 1/28/08 $50,626 $128,296
11,500 2.3% 6.28125 4/28/08 45,428 115,123
25,000 4.9% 2.00 10/22/08 31,445 77,687
Joseph E. Smith 12,500 2.5% $7.00 1/28/08 (2) (2)
12,500 2.5% 6.28125 4/28/08
</TABLE>
- -----------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
(2) Mr. Smith's options expired upon his resignation from EIS in 1998.
Accordingly, as of December 31, 1998, there was no potential realizable
value of these options.
Option Exercises in 1998
The following table sets forth the number of options exercised in 1998
and the dollar value realized thereon by the Named Executive Officers, along
with the number and dollar value of any options remaining unexercised on
December 31, 1998.
<PAGE> 6
Aggregated Option Exercises in
1998 and 1998 Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at 1998 Year-End(1)(2)
-------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
<S> <C> <C>
James E. McGowan 37,500 162,500
Frederick C. Foley 15,000 70,000
Edward J. Sarkisian 54,750 56,250
Jonathan M. Wineberg 6,750 68,250
Joseph E. Smith -- --
</TABLE>
(1) On December 31, 1998, the average of the closing bid and asked prices per
share of Common Stock as reported by the Nasdaq National Market was $1.688.
As of December 31, 1998, none of the Named Executive Officers held any
in-the-money options.
(2) None of the Named Executive Officers exercised options during 1998.
Compensation Committee Report on Executive Compensation
General. The Compensation Committee is responsible for developing the
Company's executive compensation policies and determining the compensation paid
to the Company's Chief Executive Officer and its other executive officers. To
that end, the Compensation Committee has sought to (i) provide sufficient
compensation to attract, motivate and retain the best available executive
officers, (ii) provide additional incentives to them to exert their maximum
efforts toward the Company's success, and (iii) align the executive officers'
interests with the Company's success by making a portion of their pay dependent
upon the Company's performance. The Compensation Committee has used its
discretion to set executive compensation at levels warranted, in its judgment,
by external, internal or individual circumstances.
Executive officer compensation consists of base salary, annual cash
incentive compensation, long-term incentive compensation in the form of stock
options, and various benefits, including medical and tax-deferred savings plans
generally available to the Company's employees.
Base Salary. In determining base salary levels for the Company's
executive officers, the Compensation Committee takes into account the
compensation of companies in the telecommunications and electronics industries
and other comparable companies, individual responsibilities, experience and
performance and specific issues particular to the Company.
Annual Bonus. To provide the Company's executive officers and other key
employees with direct financial incentives to achieve the Company's annual
goals, the Company currently maintains an incentive arrangement for payment of
bonuses, subject to the Company's achievement of certain financial and operating
results and the accomplishment of certain individual performance goals. Target
bonus levels are set at a level competitive with companies in the
telecommunications and electronics industries as well as a broader group of
companies of comparable size and complexity. The Company paid
performance-related bonuses of $125,000 to Mr. McGowan, $63,000 to Mr. Foley,
$33,000 to Mr. Sarkisian, $32,000 to Mr. Wineberg, and $0 to Mr. Smith relating
to fiscal 1998.
Stock Option and Stock Purchase Plans. To provide additional incentives
to its executive officers and employees to exert their maximum efforts toward
the Company's success, and to provide them with an opportunity to
<PAGE> 7
acquire a proprietary interest in the Company through ownership of Common Stock,
the Company maintains a stock option plan and a stock purchase plan. During
1998, options to purchase an aggregate of 148,000 shares of Common Stock were
granted under the Company's 1998 Stock Incentive Plan to executive officers of
the Company.
Other Benefits. The Company provides all employees, including executive
officers, with group medical, dental, disability and life insurance on a
non-discriminatory basis. The Company maintains a savings and investment plan
intended to qualify under Section 401(a) of the Internal Revenue Code of 1986
(the "Code") and to permit employee salary reductions for tax-deferred savings
purposes pursuant to Section 401(k) of the Code. Contributions to this plan by
the Company are discretionary, and contributions of approximately $119,300 were
made on behalf of all employees in 1998, including $8,000 on behalf of Named
Executive Officers. The Company also maintains a pretax premium plan, intended
to qualify under Section 125 of the Code and to permit salary reductions for
pretax payment of employee health plan contributions.
Compensation of Chief Executive Officer. Mr. McGowan received total
salary and bonus amounting to $425,000 in 1998 and was awarded options to
purchase 24,000 and 26,000 shares of the Company's Common Stock at exercise
prices of $7.00 and $6.28125, respectively, per share.
The foregoing report on executive compensation has been approved by
Messrs. Jesurum, Klineman and McCall, the members of the Compensation Committee.
Employment, Termination and Change-in-Control Arrangements
The Company is party to an employment arrangement with James McGowan,
its President and Chief Executive Officer and a director of the Company.
Pursuant to this arrangement, the Company will pay Mr. McGowan an annual salary
of $300,000 in 1999, with a possible bonus equal to up to 50% of his annual
salary, assuming the achievement of certain performance targets, and additional
possible bonus amounts if such performance targets are exceeded. In addition,
this arrangement provides that Mr. McGowan will be paid monthly severance at a
rate commensurate with his annual salary and will continue to receive health
care and insurance benefits for a period of one year following the termination
of his employment without cause, or until such time as he obtains full- time
employment, whichever occurs first. Furthermore, pursuant to this arrangement,
the Company extended to Mr. McGowan a $100,000 loan, bearing interest at a rate
of 6% per annum and maturing on February 6, 2000. One twelfth of the original
principal amount of this loan, and all accumulated interest thereon, will be
forgiven at the end of each three-month period commencing on May 7, 1997 and
ending on February 7, 2000, unless Mr. McGowan voluntarily terminates his
employment with the Company, at which point any such forgiveness will cease and
he will be required to pay the remaining principal balance of the loan and
remaining accrued interest thereon at maturity. As of December 31, 1998, there
remained $41,875 outstanding under the loan.
Compensation Committee Interlocks and Insider Participation
Mr. Klineman, a director of the Company and a member of its
Compensation Committee, performs legal and consulting services for the Company
and was paid a retainer of $5,000 per month in consideration of these services,
plus an additional amount for extraordinary services rendered, an aggregate of
$83,000 in respect of services rendered during 1998. The Company believes that
this represented the fair market value of such services and that such services
are provided on terms at least as favorable to the Company as those that could
be obtained from an unaffiliated third party. The Company and Mr. Klineman
terminated this arrangement effective January 1, 1999.
. . .
CERTAIN TRANSACTIONS
In February 1997, the Company made a loan to Mr. McGowan in the amount
of $100,000 bearing interest at a rate of 6% per annum and quarterly amounts are
forgiven and included as compensation to Mr. McGowan over
<PAGE> 8
the three year term of the loan. If Mr. McGowan leaves the employ of the Company
prior to the end of the three year term, the balance due at such time must be
repaid in full. As of December 31, 1998, there was $41,875 outstanding under
this loan.
. . .
THE COMPANY'S 1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On January 28, 1999, subject to stockholder approval, the Board of
Directors of the Company adopted an amendment (the "Amendment") to the Company's
1993 Stock Option Plan for Non-Employee Directors (the "Director Plan") to
increase the number of shares of Common Stock issuable under the Director Plan
from 310,000 shares to 410,000 shares. The reason for the Amendments is to have
additional shares available for future grants under the Director Plan (under
which there are currently 30,000 shares available) to those directors who will
contribute to the future success of the Company.
Terms of the Director Plan
The Director Plan provides for grants of nonstatutory stock options to
purchase shares of Common Stock to non-employee directors of the Company. As of
January 31, 1999, the total number of such persons eligible to receive options
under the Director Plan was four. The grant of options under the Director Plan
is discretionary; therefore, the Company cannot now determine the number of
options to be granted in the future to any particular person. In the event of a
merger, consolidation, reorganization or sale of all or substantially all of the
assets of the Company, the holders of options are treated as if all shares
subject to such stock options had been issued and outstanding prior to such
event. The total number of shares of Common Stock issuable pursuant to options
granted under the Director Plan (subject to adjustment in the event of stock
splits and other similar events) is 310,000. This number would increase to
410,000 upon adoption of the Company's stockholders of the Amendment. As of
January 31, 1999, 42,500 shares had been issued upon exercise of outstanding
options, 217,500 shares were subject to outstanding options at exercise prices
per share ranging from $5.00 to $12.375 (expiring on dates ranging from December
2003 to April 2007). As of January 29,1999, the last reported sale price of the
Company Common Stock on the Nasdaq National Market was $2.188.
The Director Plan is administered by the Compensation Committee of the
Board, whose determinations under the Director Plan are conclusive. The
Compensation Committee has the authority, subject to the terms of the Director
Plan, to: interpret the Director Plan; prescribe, amend and rescind rules and
regulations relating to the Director Plan; and make all other determinations and
take all other actions necessary or advisable for the administration of the
Director Plan. The Compensation Committee also determines (i) the number of
shares of Common Stock covered by options and the dates upon which such options
become exercisable, (ii) the exercise price of options, and (iii) the duration
of options.
The exercise price of each option may be paid, as determined by the
Compensation Committee, in cash or shares of Common Stock having a fair market
value equal to the exercise price. If the total number of shares of Common Stock
subject to options to be granted on a particular date under the Director Plan
exceeds the number of remaining shares available, a pro rata reduction will be
made in the number of shares subject to each such option granted on such date.
Each option will terminate on the tenth anniversary of the date of
grant. Shares obtained upon exercise of an option may not be sold until six
months after the date the option was granted. If an optionee ceases to be a
member of the Board, any options granted to such optionee to the extent not
theretofore exercised will expire three months thereafter (or, if such optionee
ceased to be a member of the Board by reason of his death, six months
thereafter) or, if earlier, on the tenth anniversary of the date of grant;
provided, however, that if the optionee was removed or terminated as a member of
the Board for fraud, dishonesty or intentional misrepresentation in connection
with the optionee's duties as a member of the Board or embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
of its subsidiaries, any unexercised options held by such optionee will expire
<PAGE> 9
forthwith. No option will be transferable by the optionee other than by will or
the laws of descent and distribution, and each option will be exercisable during
the lifetime of the optionee only by such optionee.
The Board may at any time terminate the Director Plan or from time to
time make such modifications or amendments of the Director Plan as it may deem
advisable; provided, however, that the Board may not, without approval by the
affirmative vote of the holders of a majority of the outstanding shares of the
capital stock of the Company entitled to vote thereon, (i) increase the maximum
number of shares as to which options may be granted under the Director Plan or
(ii) change the class of persons eligible to receive options under the Director
Plan; and provided, further, that the Director Plan may not be amended more than
once every six months other than to comport with certain changes in the law. The
Director Plan (but not options granted thereunder) will terminate on February
23, 2003, unless sooner terminated by the Board. No termination, modification or
amendment of the Director Plan may, without the consent of any person then
holding an option, adversely affect the rights of such person under such option.
. . .
<PAGE> 1
Exhibit (c)(11)
UPDATA CAPITAL
October 4, 1999
PRIVILEGED & CONFIDENTIAL
Mr. James E. McGowan
President & Chief Executive Officer
EIS INTERNATIONAL, INC.
555 Herndon Parkway
Herndon, Virginia 20170
Dear Jim:
Updata Capital, Inc. ("Updata") would be pleased to represent EIS International,
Inc. ("EIS" or "the Company") in negotiations to merge or sell the Company. This
letter summarizes our proposed approach to this assignment and outlines the fee
arrangement.
Background/Analytical Phase
We will independently determine the value of EIS. Based on our appraisal and
your input, we will determine a fair value range for the company.
Due Diligence Phase
Once a potential buyer has ascertained their interest in the company, we will
make recommendations in order to prepare the Company for proper analysis. We
will also assist you in gathering and presenting the appropriate data requested
by any potential buyer.
Bidding Phase
Once a potential buyer has determined that they are interested in a purchase of
the Company, we will work with this entity in formulating the Letter of Intent.
We will analyze the structure of the transaction, including consideration of
your financial, accounting, tax and legal effects of the transaction structure.
We will advise you as to our recommendation to the most suitable method for
satisfying your objectives.
Confidential Information
During the term hereof and thereafter, Updata will not directly or indirectly
disclose to any third party EIS Confidential Information without EIS' prior
written consent. EIS hereby consents to the release of EIS Confidential
Information to officers, directors, employees or agents of SER Systems A.G. on a
need-to-know basis.
Execution of the Sale
Following an agreement in principle, we will assist you in organizing and
coordinating the many parties (legal, accounting and others) involved and will
help attend to the numerous technical details required in closing a transaction.
These tasks are often the most time-consuming aspects of a transaction,
requiring an anticipation of problems and experienced coordination of attorneys,
<PAGE> 2
EIS International
Page 2 of 3
accountants and other experts as appropriate, while at the same time, making
sure the understandings between the principals are not unnecessarily affected.
Our experience has shown that the anticipation and solution of problems between
the time that agreement is reached among the parties and the closing, materially
increase the chances of bringing the transaction to a successful and timely
conclusion.
Compensation, Expenses and Indemnification
Our fees for services in connection with this assignment are as follows:
1) A non-refundable retainer fee of $25,000 to be applied against the
success fees in No. 2 below.
2) A "success" fee, upon consummation of an acquisition of EIS, of 1.1% of
the consideration paid to EIS if the acquirer is SER Systems, AG. If
acquirer is another entity, then the consideration shall be 5% of the
first five million dollars of consideration, 3% of the next five
million dollars of consideration and 1% of all consideration beyond the
first ten million dollars received initially and subsequently. If any
portion of the aggregate consideration is paid in the form of
securities, the value of such securities, for purposes of calculating
the success fee, will be determined by the average of the last sales
prices for such securities on the five trading days ending prior to the
date of consummation of the transaction. This success fee shall be
based upon the sale price and any other economic benefits inuring to
the seller. The calculated success fee shall be due and payable in cash
at the dosing of a transaction. All success fees due under this
paragraph shall be reduced by the retainer fee paid pursuant to No. 1
above.
For the purpose of calculating the success fee, the consideration shall
include the gross amount paid by the Buyer, including (i) the
assumption of or re-payment of any indebtedness due to any external
financing source or affiliate of the Company and (ii) the value of the
balance sheet, if retained by the Company.
3) If the transaction consummated by the Company includes "contingent
payments", Updata and EIS shall mutually attempt to agree on the net
present value of such payments. Updata's success fee would then be
calculated including the net present value of the future contingent
payments. If Updata and EIS do not agree on the net present value of
the contingent payments, then Updata shall receive its success fees as
EIS is paid by the acquiring entity.
4) It is our practice to be reimbursed monthly for out-of-pocket expenses.
These expenses shall be reasonable in their purpose and amount, and
shall be subject to review and acceptance by EIS. Out-of-pocket
expenses shall be paid regardless of whether or not the transaction is
completed.
In consideration of this agreement to act on your behalf in connection with the
sale of the Company, EIS agrees to indemnify us from and against any third-party
losses, claims, damages
<PAGE> 3
EIS International
Page 3 of 3
or liabilities related to or arising out of this engagement or our role in
connection therewith and EIS agrees to reimburse us for all expenses (including
reasonable counsel fees) in connection with any such action or claim except for
losses, claims, liabilities or expenses that result from Updata's negligence,
omissions or misconduct EIS also agrees we shall not have any liability to EIS
in connection with this engagement, except for losses, claims, damages,
liabilities or expenses incurred by EIS that result from our negligence,
omissions or misconduct.
This effort will take place at once, and will continue until terminated by
either party, in writing, on at least 30 days notice, but not earlier than (6)
months from the date hereof ("Initial Term"). During the term of our agreement,
our representation of EIS shall be exclusive and we shall be entitled to our
schedule of fees should a sale take place, in whole or in part, whether or not
we effected the original introductions.
Upon termination of our services, we will prepare a list of companies ("Schedule
of Potential Buyers") whom we contacted at the Company's request or were in
direct contact with the Company during the Initial Term. We would also be
entitled to our fees should a sale take place within the first twelve months
after expiration of this period with a party listed on the Schedule of Potential
Buyers.
We look forward to assisting you in this very important transaction.
Please return one executed copy of this letter.
Very truly yours,
UPDATA CAPITAL, INC.
/s/ John F. Burton
JOHN F. BURTON
Managing Director
Accepted And Agreed To:
EIS INTERNATIONAL, INC.
/s/ James E. McGowan
----------------------------------------
By: James E. McGowan
President & Chief Executive Officer
5 Oct. 1999
-----------------------------------------
Date
