-----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, TUJaJYLAm4JuknjxPdJcEKwdVae9iaVhITJW2a7aRYJV42p5VE5Myq/gt0ZgciE5 HejGm98wI69PXqpOaFu4zg== 0000950133-99-003991.txt : 19991224 0000950133-99-003991.hdr.sgml : 19991224 ACCESSION NUMBER: 0000950133-99-003991 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19991223 GROUP MEMBERS: SERSYS ACQUISITION CORP GROUP MEMBERS: SERSYS ACQUISITION CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EIS INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000032251 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 061017599 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-43073 FILM NUMBER: 99779530 BUSINESS ADDRESS: STREET 1: 555 HERNDON PARKWAY CITY: HERNDON STATE: VA ZIP: 20170 BUSINESS PHONE: 7033266400 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONIC INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19940218 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SERSYS ACQUISITION CORP CENTRAL INDEX KEY: 0001101479 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 7200 WISCONSIN AVENUE STREET 2: SUITE 1001 CITY: BETHESDA STATE: MD ZIP: 20814 BUSINESS PHONE: 3018411190 MAIL ADDRESS: STREET 1: 7200 WISCONSIN AVENUE STREET 2: SUITE 1001 CITY: BETHESDA STATE: MD ZIP: 20814 SC 14D1 1 SCHEDULE 14D-1 TENDER OFFER 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 EIS INTERNATIONAL, INC. (NAME OF SUBJECT COMPANY) SERSYS ACQUISITION CORPORATION SER SYSTEME AG (BIDDERS) COMMON STOCK, PAR VALUE $0.01 PER SHARE AND ASSOCIATED RIGHTS (TITLE OF CLASS OF SECURITIES) 268539103 (CUSIP NUMBER OF CLASS OF SECURITIES) DR. PHILIP A. STOREY EXECUTIVE VICE PRESIDENT SER SYSTEME AG 7200 WISCONSIN AVE. SUITE 1001 BETHESDA, MD 20814 (301) 841-1190 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) COPY TO: JOHN L. SULLIVAN, III, ESQ. VENABLE, BAETJER AND HOWARD, LLP 2010 CORPORATE RIDGE SUITE 400 MCLEAN, VIRGINIA 22102 (703) 760-1600 CALCULATION OF FILING FEE - --------------------------------------------- ---------------------------------- TRANSACTION VALUE* AMOUNT OF FILING FEE** - --------------------------------------------- ---------------------------------- $69,183,550.00 $13,837.00 - --------------------------------------------- ---------------------------------- 2 * Based on the offer to purchase all of the outstanding Shares (as defined below) of the subject company at a purchase price of $6.25 per share of which 10,593,869 Shares were issued and outstanding and to pay the Option Consideration (as defined in Exhibit (a)(i) hereto) on outstanding options (at varying exercise prices) with respect to 1,455,058 Shares, in each case as of December 17, 1999. ** 1/50 of 1% of Transaction Value. [ ] Check 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: Form or Registration No.: Filing Party: Date Filed: This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") relates to the offer by SERSys Acquisition Corporation, a Delaware corporation ("Purchaser"), that is an indirect (through SER (USA), Inc. ("SER USA")) wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent"), to purchase all of the outstanding shares of common stock of EIS, International, Inc., a Delaware corporation ("Company"), par value $0.01 per share (the "Common Stock") and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997 between Company and BankBoston N.A., as amended (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), at a purchase price of $6.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 17, 1999 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal (which, together with the Offer to Purchase, as may be amended from time to time, constitute the "Offer"), a copy of which is attached hereto as Exhibit (a)(2). ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is EIS International, Inc., a Delaware corporation ("Company"). The address of the Company's principal executive offices is 555 Herndon Parkway, Herndon, Virginia 20170. (b) The exact title of the Company's class of equity securities being sought in the Offer is Common Stock, par value $0.01 per share, together with their associated rights to purchase Series A Preferred Stock, par value $0.01 per share. The information set forth in the Introduction of the Offer to Purchase is incorporated herein by reference. The Company has represented that, as of December 17, 1999, there were 10,593,869 shares of Common Stock issued and outstanding. Purchaser is seeking to acquire all outstanding shares of Common Stock and associated Rights at a purchase price of $6.25 per share. 2 3 (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a) - (d) and (g) This Statement is filed by Purchaser and Parent. The information set forth in Section 8 ("Certain Information Concerning Purchaser and Parent") of the Offer to Purchase and in Schedule I thereto is incorporated herein by reference. (e) and (f) During the last five years, neither Purchaser nor Parent nor, to the best knowledge of Purchaser or Parent, any of the persons listed in Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) and (b) The information set forth in Section 8 ("Certain Information Concerning Purchaser and Parent"), Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement and Other Agreements") and Section 12 ("Purpose of the Offer; Plans for the Company; The Merger ") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a) - (g) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement and Other Agreements"), Section 12 ("Purpose of the Offer; Plans for the Company; The Merger ") and Section 14 ("Effect of the Offer on the Market for the Shares; Stock Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. 3 4 (a) and (b) Not applicable. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement and Other Agreements") and Section 12 ("Purpose of the Offer; Plans for the Company; the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and Section 17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not Applicable. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 11 ("The Merger Agreement and Other Agreements") is incorporated herein by reference. (b) and (c) The information set forth in Section 11 ("The Merger Agreement and Other Agreements"), Section 12 ("Purpose of the Offer; Plans for the Company; the Merger") and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 14 ("Effect of the Offer on the Market for the Shares; Stock Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated December 23, 1999. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. 4 5 (a)(4) Form of Letter from the Information Agent to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published on December 23, 1999. (a)(8) Joint Press Release issued by Parent and the Company on December 20, 1999. (b)(1) Letter Agreement, dated December 16, 1999, between Parent and IKB International S.A. (b)(2) Letter Agreement, dated December 15, 1999, between Parent and IKB Deutsche Industriebank. (b)(3) Letter Agreement, dated December 8, 1999, between Parent and COMMERZBANK Aktiengesellschaft, Koblenz Branch. (c)(1) Agreement and Plan of Merger, dated as of December 17, 1999, by and among Parent, Purchaser and the Company. (c)(2) Tender and Voting Agreement, dated as of December 17, 1999, among Parent and certain officers and directors of the Company named therein. (c)(3) Employment Agreement between Purchaser and James E. McGowan, dated as of December 17, 1999, and exhibits thereto. (c)(4) Employment Agreement between Purchaser and Frederick C. Foley, dated as of December 17, 1999, and exhibits thereto. (c)(5) Confidential Mutual Non-Disclosure Agreement, dated October 15, 1999, between Parent and the Company. (c)(6) Stockholders Agreement, dated December 17, 1999, by and among Parent, Purchaser and James E. McGowan. (c)(7) Stockholders Agreement, dated December 17, 1999, by and among Parent, Purchaser and Frederick C. Foley. (c)(8) Form of Stock Option Plan of Purchaser. (d) Not applicable. (e) Not applicable. (f) Not applicable. 5 6 SIGNATURES After due inquiry and to the best of our knowledge and belief, we hereby certify that the information set forth in this Statement is true, complete and correct. SER SYSTEME AG By: Dr. Philip A. Storey /s/ DR. PHILIP A. STOREY ---------------------------------- Name: Dr. Philip A. Storey Title: Executive Vice President SERSYS ACQUISITION CORPORATION By: Dr. Philip A. Storey /s/ DR. PHILIP A. STOREY ---------------------------------- Name: Dr. Philip A. Storey Title: President Date: December 23, 1999 6 7 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - -------------------------------------------------------------------------------- (a)(1) Offer to Purchase dated December 23, 1999. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Notice of Guaranteed Delivery. (a)(4) Form of Letter from the Information Agent to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published on December 23, 1999. (a)(8) Joint Press Release issued by Parent and the Company on December 20, 1999. (b)(1) Letter Agreement, dated December 16, 1999, between Parent and IKB International S.A. (b)(2) Letter Agreement, dated December 15, 1999, between Parent and IKB Deutsche Industriebank. (b)(3) Letter Agreement, dated December 8, 1999, between Parent and COMMERZBANK Aktiengesellschaft, Koblenz Branch. (c)(1) Agreement and Plan of Merger, dated as of December 17, 1999, by and among Parent, Purchaser and the Company. (c)(2) Tender and Voting Agreement, dated as of December 17, 1999, among Parent and certain officers and directors of the Company named therein. (c)(3) Employment Agreement between Purchaser and James E. McGowan, dated as of December 17, 1999, and exhibits thereto. (c)(4) Employment Agreement between Purchaser and Frederick C. Foley, dated as of December 17, 1999, and exhibits thereto. (c)(5) Confidential Mutual Non-Disclosure Agreement, dated October 15, 1999, between Parent and the Company. (c)(6) Stockholders Agreement, dated December 17, 1999, by and among Parent, Purchaser and James E. McGowan. (c)(7) Stockholders Agreement, dated December 17, 1999, by and among Parent, Purchaser and Frederick C. Foley. (c)(8) Form of Stock Option Plan of Purchaser. 7 8 (d) Not applicable. (e) Not applicable. (f) Not applicable. 8 EX-99.A.1 2 OFFER TO PURCHASE DATED DECEMBER 23,1999 1 EXHIBIT (a)(i) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. AT $6.25 NET PER SHARE BY SERSYS ACQUISITION CORPORATION AN INDIRECT WHOLLY OWNED SUBSIDIARY OF SER SYSTEME AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 24, 2000, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF EIS INTERNATIONAL, INC. (THE "COMPANY") HAS UNANIMOUSLY (WITH MESSRS. MCGOWAN AND BURTON ABSTAINING) APPROVED THE AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENT") AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS SUCH TERMS ARE DEFINED IN THE INTRODUCTION), AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF THE SHARES (AS DEFINED IN THE INTRODUCTION), AND RECOMMENDS THAT THE HOLDERS OF THE SHARES TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES THAT CONSTITUTES MORE THAN FIFTY PERCENT (50%) OF THE VOTING POWER (DETERMINED ON A FULLY DILUTED BASIS) ON THE DATE OF PURCHASE, OF ALL THE SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER. IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's shares of common stock of the Company, par value $0.01 per share (the "Common Stock") and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997, between the Company and BankBoston N.A., as amended (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), should either (1) complete and sign the enclosed Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, and mail or deliver the Letter of Transmittal (or such facsimile) and any other required documents to the Depositary (as defined in the Introduction), and either deliver the certificates representing the tendered Shares and any other required documents to the Depositary or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3, or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such stockholder. Stockholders 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. A stockholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot deliver the certificates for Shares and all other required documents to reach the Depositary on or prior to the expiration of the Offer, or who cannot complete the procedure for book-entry transfer on a timely basis, must tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to D. F. King & Co., Inc. (the "Information Agent") at its address and telephone number as set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent. ------------------------ THE INFORMATION AGENT FOR THE OFFER IS: D. F. KING & CO., INC. DECEMBER 23, 1999 2 TABLE OF CONTENTS
PAGE ---- Introduction....................................................... 1 The Tender Offer.................................................. 3 1. Terms of the Offer; Expiration Date......................... 3 2. Acceptance for Payment and Payment for Shares............... 4 3. Procedure for Tendering Shares.............................. 5 4. Withdrawal Rights........................................... 8 5. Certain United States Federal Income Tax Consequences....... 9 6. Price Range of Shares; Dividends............................ 9 7. Certain Information Concerning the Company.................. 10 8. Certain Information Concerning Purchaser and Parent......... 14 9. Source and Amount of Funds.................................. 15 10. Background of the Offer; Contacts with the Company.......... 16 11. The Merger Agreement and Other Agreements................... 18 12. Purpose of the Offer; Plans for the Company; The Merger..... 37 13. Dividends and Distributions................................. 39 14. Effect of the Offer on the Market for the Shares; Stock Exchange Listing and Exchange Act Registration............ 39 15. Certain Conditions of the Offer............................. 40 16. Certain Legal Matters and Regulatory Approvals.............. 41 17. Fees and Expenses........................................... 43 18. Miscellaneous............................................... 43 Schedule I -- Directors and Executive Officers of Parent and Purchaser........................................................ S-1
3 TO THE HOLDERS OF SHARES OF EIS INTERNATIONAL, INC.: INTRODUCTION SERSys Acquisition Corporation, a Delaware corporation ("Purchaser"), that is an indirect (through SER (USA), Inc. ("SER USA")) wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent"), hereby offers to purchase all of the outstanding shares of common stock of EIS International, Inc., a Delaware corporation ("Company"), par value $.01 per share (the "Common Stock") and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997, between the Company and BankBoston N.A., as amended (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), at a purchase price of $6.25 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). The Offer is being made pursuant to the Agreement and Plan of Merger dated as of December 17, 1999, by and among Parent, Purchaser and the Company (the "Merger Agreement"). Tendering stockholders 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 transfer and sale of Shares pursuant to the Offer. Purchaser will pay all fees and expenses incurred in connection with the Offer by American Stock Transfer & Trust Company (the "Depositary"), which is acting as the Depositary, and D. F. King & Co., Inc. (the "Information Agent"), which is acting as the Information Agent. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY (WITH MESSRS. MCGOWAN AND BURTON ABSTAINING) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE HOLDERS OF SHARES TENDER THEIR SHARES TO PURCHASER PURSUANT TO THE OFFER. THE FACTORS CONSIDERED BY THE COMPANY BOARD IN ARRIVING AT ITS DECISION TO APPROVE THE MERGER AGREEMENT AND RELATED TRANSACTIONS AND TO RECOMMEND THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES ARE DESCRIBED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"). The Company Board has received the written opinion, dated December 15, 1999, of Updata Capital, Inc. ("Updata"), financial advisor to the Company, to the effect that, as of such date, and based upon and subject to certain matters stated therein, the $6.25 per Share cash consideration to be received in the Offer by holders of Shares (other than Parent and its "Affiliates," as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is fair to such holders from a financial point of view. A copy of the written opinion of Updata is attached to the Schedule 14D-9, which is being distributed to the stockholders of the Company. STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY FOR THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY UPDATA. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the Expiration Date (as defined in Section 1 hereof) that number of Shares which constitutes more than fifty percent (50%) of the voting power (determined on a fully diluted basis) on the date of purchase, of all of the securities of the Company entitled to vote generally in the election of directors or in a merger (the "Minimum Condition"), and (2) the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act") applicable to the purchase of the Shares pursuant to the Offer having expired or been terminated (the "HSR Approval"). The Offer is also subject to certain other terms and conditions. See Sections 1, 11, 15 and 16. Parent and Purchaser each reserves the right, subject only to the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), to waive each of the conditions (other than the Minimum Condition) to the obligations of Purchaser to consummate the Offer. 4 The Merger The Offer is being made pursuant to the terms of the Merger Agreement, which provides, among other things, that, following the completion of the Offer, upon the terms and subject to the conditions of 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"). Following the effective time of the Merger (the "Effective Time"), 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. At the Effective Time, the separate corporate existence of Purchaser will cease. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than (1) Shares held by the Company as treasury stock or by Parent, Purchaser or any other wholly owned subsidiary of Parent or the Company, such Shares to be canceled, and (2) Dissenting Shares (as defined in Section 11), if any) will, by virtue of the Merger and without any action on the part of the holders of the Shares, be converted into the right to receive in cash the $6.25 per Share price paid in the Offer (the "Merger Consideration"), payable to the holder thereof, without interest, upon surrender of the certificate(s) formerly representing such Share(s), less any required withholding taxes. The affirmative vote of the holders of a majority of the voting power of the then outstanding Shares (including Shares owned by the Purchaser) would be required under the DGCL to approve the Merger. If the Purchaser acquires a majority of the voting power of the outstanding Shares (on a fully diluted basis) in the Offer, as would be the case upon satisfying the Minimum Condition, it would have sufficient voting power to effect the Merger without the affirmative vote of any other stockholder of the Company. In the event that, in connection with the Offer, holders tender in excess of ninety percent (90%) of the outstanding Shares, the Purchaser will be able, and intends, to effect a "short-form" Merger, pursuant to Section 253 of the DGCL, without prior notice to or a vote by any other stockholder of the Company. The Merger Agreement is more fully described in Section 11. Certain federal income tax consequences of the sale of the Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. The Rights The Company Board has made all determinations and taken all actions that are required under the Rights Agreement so that the Rights will not separate from the Company's Common Stock and become exercisable as a result of the Offer and the Merger. Intention of Officers and Directors to Tender Shares All of the directors and executive officers of the Company holding Shares (including vested Company Options (as defined below) and Company Options which shall vest within sixty (60) days of the date of the Merger Agreement) representing, as of the date hereof, approximately 11.5% of the issued and outstanding Shares, on a fully diluted basis, have contractually agreed with Parent, among other things, to tender their Shares in the Offer and otherwise to support the Merger. See Section 11 for a discussion of the Tender and Voting Agreement, dated as of December 17, 1999, among Parent and the Company's directors and executive officers (the "Tender Agreement"). THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 5 THE TENDER OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered on or prior to the Expiration Date and not theretofore withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on January 24, 2000, unless and until Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), extends the period during which the Offer is open, in which event the term "Expiration Date" means the latest time and date at which the Offer, as so extended by Purchaser, will expire. The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition, receipt of the HSR Approval, and certain other conditions. Holders of Shares should review Section 15, which sets forth in full the conditions to the Offer (the "Offer Conditions"). Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the Commission, Parent and Purchaser reserve the right to waive any or all Offer Conditions, other than the Minimum Condition and, subject to the provisions described below, to make any other changes to the terms of the Offer. Subject to the provisions of the Merger Agreement, including the provisions described in the next paragraph, and the applicable rules and regulations of the Commission if, by the Expiration Date, any or all of such Offer Conditions have not been satisfied, Parent and Purchaser each reserves the right (but will not be obligated) to (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) waive such unsatisfied Offer Condition(s) (other than the Minimum Condition) and purchase all Shares validly tendered, or (iii) extend the Offer and, subject to the terms of the Offer (including the rights of stockholders to withdraw their Shares), retain the Shares which have been tendered until the termination of the Offer, as extended. Subject to the applicable rules and regulations of the Commission and the provisions of the Merger Agreement, Purchaser expressly reserves the right (but shall not be obligated), at any time and from time to time, and regardless of whether or not any of the events set forth in Section 15 have occurred or have been determined by Purchaser to have occurred, to (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and payment for, any Shares, by giving oral or written notice of such extension to the Depositary, or (ii) amend the Offer in any respect permitted by the Merger Agreement by giving oral or written notice of such amendment to the Depositary. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such stockholder's Shares. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE MERGER CONSIDERATION TO BE RECEIVED IN THE OFFER FOR TENDERED SHARES, WHETHER OR NOT PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER. Under the terms of the Merger Agreement, Parent and Purchaser have agreed with the Company that neither shall, without the prior written consent of the Company, (i) amend or waive the Minimum Condition, (ii) change the form of consideration to be paid in the Offer (other than by adding cash consideration), (iii) decrease the cash per Share price paid in the Offer, (iv) reduce the number of Shares sought in the Offer, (v) impose additional conditions to the Offer, or (vi) amend any other condition of the Offer in any manner adverse to the holders of the Shares. The Merger Agreement provides that Purchaser may, without the consent of the Company, (i) extend the Offer on one or more occasions for up to ten (10) Business Days (as defined below) for each such extension beyond the then-scheduled Expiration Date if at any such date any of the Offer Conditions to Purchaser's obligation to purchase Shares have not been satisfied or waived, until such time as such conditions are satisfied or waived, but not later than February 28, 2000 and, at the request of the Company, Purchaser will, subject to Parent's right to terminate the Merger Agreement pursuant to Article VIII thereof, extend the Offer for additional periods up to but not later than February 28, 2000, if the only condition not satisfied or earlier waived on the then-scheduled Expiration Date is the HSR Approval condition, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer, and (iii) provided that Parent and Purchaser irrevocably waive the Offer Conditions, 3 6 other than the Minimum Condition, and agree not to assert such as a basis for not consummating the Offer, extend the Offer for an aggregate period of not more than ten (10) Business Days beyond the latest Expiration Date otherwise permitted under clause (i) or (ii) above if the Minimum Condition has been satisfied but there have not been tendered sufficient Shares so that the Merger could be effected without a vote of the Company's stockholders in accordance with Section 253 of the DGCL. The Offer Conditions other than the Minimum Condition are solely for the benefit of Parent and its Affiliates and all Offer Conditions may be asserted regardless of the circumstances resulting in a condition not being satisfied (except for any action or inaction by Purchaser or Parent constituting a breach of the Merger Agreement) and, except for the Minimum Condition, may be waived by each of Parent and Purchaser, in whole or in part at any time and from time to time. There can be no assurance that Purchaser will exercise its right to extend the Offer. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made in accordance with Rule 14e-1(d) under the Exchange Act, no later than 9:00 a.m., New York City time, on the next Business Day after the previously scheduled Expiration Date. Without limiting the manner in which Purchaser may choose to make any public announcement, except as provided by applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes be promptly disseminated to holders of Shares), Purchaser will have no obligation to publish, advertise or otherwise communicate any such public announcement. If Purchaser makes a material change in the terms of the Offer or if it waives a material condition of the Offer, Purchaser will disseminate additional tender offer material and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances, including the materiality of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought, a minimum ten (10) Business Day period from the day of such change is generally required to allow for adequate dissemination to stockholders. For purposes of the Offer, a "Business Day" means any day other than a Saturday, Sunday, or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time and includes the date of the event which begins the running of the applicable time period. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and will purchase and pay for all Shares validly tendered and not properly withdrawn commencing at the later of (i) the Expiration Date, and (ii) the satisfaction or waiver of the Offer Conditions set forth in Section 15, except to the extent, as described above in Section 1, that Purchaser extends the Offer in an effort to satisfy the requirements of Section 253 of the DGCL. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to a bidder's obligation to pay for or return tendered securities promptly after the termination or withdrawal of such bidder's offer). 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 (i) certificates representing Shares (the "Share Certificates"), or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed 4 7 and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. 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 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 such participant. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for 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 tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to stockholders whose Shares have been accepted for payment. If, for any reason whatsoever, acceptance for payment of or payment for any Shares tendered pursuant to the Offer is delayed or Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer then, without prejudice to Purchaser's rights set forth herein, the Depositary may nevertheless, on behalf of Purchaser and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to exercise and duly exercises withdrawal rights as described in Section 4. If any tendered Shares are not accepted for payment for any reason or if Share Certificates are submitted for more Shares than are tendered, Share Certificates evidencing unpurchased or untendered Shares will be returned without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer 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 at the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer. Purchaser reserves the right to transfer or assign, in whole or from time to time in part, 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 Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES. Valid Tenders. Except as set forth below, in order for a stockholder to tender validly Shares pursuant to the Offer, (i) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, and either (a) Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case on or prior to the Expiration Date, or (b) the guaranteed delivery procedures described below must be complied with. If Share Certificates are forwarded separately in multiple deliveries to the Depositary, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) must accompany each such delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. Book-Entry Transfer. The Depositary will make a request to establish accounts with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two (2) Business Days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be 5 8 effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by the Letter of Transmittal, must in any case be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. 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 THE LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF 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. Signature Guarantees. Signatures on Letters of Transmittal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Exchange Act) (each of the foregoing being referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the Share Certificates are registered in the name of a person other than the person signing of the Letter of Transmittal, or if payment is to be made, or Share Certificates not accepted for payment or not tendered are to be returned, to a person other than the registered holder, the Share Certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name of the registered holder appears on such certificates, with the signatures on such certificates or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Share Certificates are not immediately available, or such stockholder cannot deliver the Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date, or such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (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 made available by Purchaser, is received by the Depositary, as provided below, on or prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation), representing all tendered Shares in proper form for transfer, together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three (3) trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which The Nasdaq Stock Market ("Nasdaq") is open for business. 6 9 The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution and a representation that the stockholder owns the Shares tendered within the meaning of, and that the tender of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act, each in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) Share Certificates for, or of Book-Entry Confirmation with respect to, such Shares, (b) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and (c) any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time and will depend upon when Share Certificates or Book-Entry Confirmations with respect to such Shares are received into the Depositary's account at a Book-Entry Transfer Facility. Appointment as Proxy. By executing the Letter of Transmittal (including delivery through an Agent's Message), a tendering stockholder irrevocably appoints designees of Purchaser and each of them as such stockholder's agents, attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (and with respect to any and all dividends, distributions, rights, other Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect of such Shares on or after December 17, 1999 and prior to the transfer to the name of Purchaser (or a nominee or transferee of Purchaser) on the Company's stock transfer record of such Shares (collectively, "Distributions")). All such powers of attorney and proxies will be considered irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such appointment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares (and Distributions) will be revoked without further action, and no subsequent powers of attorney and proxies may be given or any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of Purchaser will, with respect to the Shares (and Distributions) for which such appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting, or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares and all Distributions, including voting at any meeting of stockholders or by consent in lieu of such meeting. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination will be final and binding. Purchaser 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 which may, in the opinion of its counsel, be unlawful. Purchaser also reserves the absolute right to waive any of the Offer Conditions (subject to the provisions of the Merger Agreement and except for the Minimum Condition) or any defect or irregularity in any tender of Shares of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, Parent, any of their Affiliates or assigns, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. 7 10 Backup U.S. Federal Income Tax Withholding and Substitute Form W-9. Under the "backup withholding" provisions of U.S. federal income tax law, the Depositary may be required to withhold 31% of the amount of any cash payments pursuant to the Offer or the Merger. In order to avoid backup withholding, each stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the payor of such cash with such stockholder's correct taxpayer identification number ("TIN") on a substitute Form W-9 and certify, under penalties of perjury, that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service ("IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the substitute Form W-9 included with 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 the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign 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 9 of the Letter of Transmittal. Other Requirements. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms of and subject to the Offer Conditions, including the tendering stockholder's representation and warranty that the stockholder is the holder of the Shares within the meaning of, and that the tender of the Shares complies with, Rule 14e-4 under the Exchange Act. 4. WITHDRAWAL RIGHTS. Except as otherwise indicated in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures below at any time on or prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after February 20, 2000. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares, or is unable to purchase Shares validly tendered pursuant to the Offer for any reason, then without prejudice to Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described in this Section 4. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be received timely by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signatures 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 procedure for book-entry transfer 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, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, which determination will be final and binding. Purchaser reserves the absolute right to reject any and all withdrawals determined by it not to be in proper form. Purchaser also reserves the absolute right to waive any defect or irregularity in any withdrawal of Shares of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. No withdrawal of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, Parent, any of their Affiliates or assigns, the 8 11 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 any such notification. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The summary of tax consequences set forth below is for general information only and is based on the law as currently in effect. The tax treatment of each stockholder will depend in part upon such stockholder's particular situation. Special tax consequences not described below may be applicable to particular classes of taxpayers, such as financial institutions, broker-dealers, life insurance companies, holders of Dissenting Shares, stockholders who hold their Shares as part of a straddle, hedge, conversion or constructive sale transaction, stockholders who acquired their Shares through the exercise of employee stock options or otherwise as compensation, and persons who received payments in respect of options to acquire Shares. This summary deals only with stockholders who are "United States persons" (as defined below) and who hold their Shares as capital assets. For purposes of this discussion (i) "United States person" means a person who is (a) a citizen or resident of the United States, (b) a corporation or partnership created or organized in the United States or under the laws of the United States or any political subdivision thereof, (c) an estate the income of which is subject to the United States federal income taxation regardless of its source, or (d) a trust (x) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons (as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the "Code") or (y) that has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person, and (ii) "Non-U.S. person" means a stockholder who is not a United States person. The receipt of cash pursuant to the Offer or the Merger in exchange for Shares will be a taxable transaction for U.S. federal income tax purposes, and may also be a taxable transaction under applicable state, local, foreign income or other tax laws. Generally, for U.S. federal income tax purposes, a stockholder will recognize gain or loss in an amount equal to the difference between the cash received by the stockholder pursuant to the Offer or the Merger and the stockholder's adjusted tax basis in the Shares exchanged. Gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer or exchanged pursuant to the Merger, as the case may be. For U.S. federal income tax purposes, such gain or loss will be a capital gain or loss if the Shares are a capital asset in the hands of the stockholder, and a long-term capital gain or loss if the stockholder's holding period is more than one year as of the date Purchaser accepts such Shares for payment pursuant to the Offer or the effective date of the Merger, as the case may be. The long-term capital gains of individuals are subject to U.S. federal income tax at a minimum rate of 20%. The deductibility of capital losses is subject to limitations. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on the Nasdaq National Market under the symbol "EISI." The following table sets forth, for the quarters indicated, the high and low sales prices per Share as reported by 9 12 Nasdaq -- Amex Online(SM). The Company has not paid any dividends on its Shares since its initial public offering in July of 1992.
SALE PRICE ---------------- HIGH LOW ------- ------ Fiscal Year Ended December 31, 1997: Fourth Quarter.............................................. $ 9.875 $5.219 Fiscal Year Ended December 31, 1998: First Quarter............................................. $ 9.189 $5.625 Second Quarter............................................ $ 9.063 $4.938 Third Quarter............................................. $ 5.500 $1.188 Fourth Quarter............................................ $ 2.500 $1.406 Fiscal Year Ended December 31, 1999: First Quarter............................................. $ 3.000 $1.750 Second Quarter............................................ $ 3.938 $2.250 Third Quarter............................................. $ 3.688 $2.688 Fourth Quarter (through December 17, 1999)................ $ 5.938 $2.188
On December 17, 1999, the last full trading day prior to announcement of the signing of the Merger Agreement, the closing price per Share quoted on the Nasdaq National Market was $5.625. On December 21, 1999, two days prior to the commencement of the Offer, the closing price per Share quoted on the Nasdaq National Market was $5.875. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company in this Section 7 and elsewhere in this Offer to Purchase is derived from the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 1998 (the "1998 Annual Report"), the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 (the "Quarterly Reports") and other publicly available information. The summary information set forth below is qualified in its entirety by reference to such reports (which may be obtained and inspected as described below) and should be considered in conjunction with the more comprehensive financial and other information in such reports and other publicly available reports and documents filed by the Company with the Commission and other publicly available information. Although neither Purchaser nor Parent has any knowledge that would indicate that any statements contained herein based upon such reports are untrue, neither Purchaser nor Parent assumes any responsibility for the accuracy or completeness of the information contained therein, or herein based upon such reports, or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but which are unknown to Parent and Purchaser. General. According to the 1998 Annual Report, the Company and its wholly owned subsidiaries provide systems, software and services to businesses that use the telephone in campaigns directed at large targeted audiences. The Company's products improve the productivity and effectiveness of call centers (also known as "contact centers"), including campaign management, staffing and technology integration. The Company is a supplier of advanced technology for contact centers and a leading provider of outbound and integrated inbound/outbound technology. The Company is a Delaware corporation organized in 1988. It is the successor by merger to a Connecticut corporation founded in 1980 to engage in software consulting. The Company sold its first contact center system in 1988 and became publicly traded in July of 1992. The Company's headquarters are located at 555 Herndon Parkway, Herndon, VA 20170, and its telephone number is (703) 478-9808. Financial Information. Set forth below are certain selected consolidated financial data which were derived from the Quarterly Report for the quarter ended September 30, 1999. More comprehensive financial information (including management's discussion and analysis of financial condition and results of operations) is included in the reports and other documents filed by the Company with the Commission, and the following financial data are qualified in their entirety by reference to such reports and other documents, including the financial information and related notes contained therein. Such reports and other documents may be examined and copies thereof may be obtained from the offices of the Commission in the manner set forth below. 10 13 EIS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents................................. $ 21,674 $ 28,194 Short-term investments.................................... 6,920 -- Accounts receivable, trade, less allowances for doubtful accounts and sales returns of $3,031 in 1999 and $3,513 in 1998................................................ 10,344 8,727 Current portion of installment and lease receivables...... 769 857 Inventories............................................... 3,630 3,751 Deferred income taxes..................................... 1,223 2,446 Prepaids and other current assets......................... 1,096 922 Refundable income taxes................................... 230 200 -------- -------- Total current assets................................... 45,886 45,097 Capitalized software development costs, net................. 3,663 4,454 Property and equipment, net................................. 4,171 5,896 Installment and lease receivables, less current portion..... 287 402 Deferred income taxes....................................... 1,421 1,421 Other assets................................................ 115 429 -------- -------- Total assets........................................... $ 55,543 $ 57,699 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities.................. $ 7,696 $ 9,487 Deferred revenue.......................................... 2,593 3,058 -------- -------- Total current liabilities.............................. 10,289 12,545 Commitments and Contingencies Stockholders' equity Common Stock, $.01 par value, 15,000,000 shares authorized, issued 11,759,212 shares in 1999 and 11,734,585 shares in 1998.............................. 118 117 Additional paid-in capital................................ 60,738 60,672 Accumulated translation adjustments....................... (295) (287) Retained deficit.......................................... (11,831) (13,640) Treasury stock, at cost -- 1,165,343 shares in 1999 and 512,725 shares in 1998................................. (3,476) (1,708) -------- -------- Total stockholders' equity............................. 45,254 45,154 -------- -------- Total liabilities and stockholders' equity............. $ 55,543 $ 57,699 ======== ========
11 14 EIS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net revenues Product and software............................... $ 6,675 $ 7,029 $21,901 $26,066 Service and other.................................. 5,603 6,321 17,698 19,603 ------- ------- ------- ------- 12,278 13,350 39,599 45,669 Cost of revenues Cost of product and software sold.................. 3,558 3,822 10,940 11,997 Recovery of provision for contract losses.......... -- -- (250) (1,636) Cost of service and other.......................... 2,483 3,611 8,308 10,420 ------- ------- ------- ------- 6,041 7,433 18,998 20,781 ------- ------- ------- ------- Gross margin.................................... 6,237 5,917 20,601 24,888 ------- ------- ------- ------- Operating cost and expense Research and development cost...................... 1,835 2,282 5,649 7,361 Selling, general, and administrative............... 4,065 6,040 13,002 20,098 Restructuring costs................................ -- -- -- 543 ------- ------- ------- ------- 5,900 8,322 18,651 28,002 ------- ------- ------- ------- Operating income (loss).............................. 337 (2,405) 1,950 (3,114) Other income, net:................................. 373 324 1,082 983 ------- ------- ------- ------- Income (loss) before income taxes.................... 710 (2,081) 3,032 (2,131) Income tax expense................................. (284) (4) (1,223) (16) ------- ------- ------- ------- Net income (loss).................................... $ 426 $(2,085) $ 1,809 $(2,147) ======= ======= ======= ======= Basic earnings (loss) per share...................... $ 0.04 $ (0.18) $ 0.17 $ (0.19) Diluted earnings (loss) per share.................... 0.04 (0.18) 0.17 (0.19) Weighted average common and common equivalent shares Basic......................................... 10,599 11,633 10,746 11,589 Diluted....................................... 10,744 11,633 10,859 11,589
12 15 EIS INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1999 1998 -------- -------- Cash flows from operating activities Net income (loss)......................................... $ 1,809 $(2,147) Adjustments to reconcile net income (loss) to net cash used in operating activities Provision for doubtful accounts and sales returns...... 2,477 2,789 Recovery of provision for contract losses.............. (250) (1,636) Depreciation and amortization.......................... 4,237 5,248 Deferred income taxes.................................. 1,223 -- Changes in assets and liabilities Accounts receivable, trade.................................................. (4,094) (1,288) Proceeds from sale of lease receivables................ -- 745 Installment and lease receivables...................... 203 651 Inventories............................................ 121 824 Prepaids and other current assets...................... (30) 94 Accounts payable and accrued expenses.................. (1,541) (5,387) Deferred revenue....................................... (465) 142 Other.................................................. (186) (192) ------- ------- Net cash provided by (used in) operating activities......... 3,504 (157) ------- ------- Cash flows from investing activities Additions to property and equipment....................... (688) (2,271) Purchase of short-term investments........................ (6,920) -- Sales of short-term investments........................... -- 2,332 Capitalization of software development costs.............. (715) (1,617) ------- ------- Net cash used in investing activities....................... (8,323) (1,556) ------- ------- Cash flows from financing activities Proceeds from exercise of stock options and warrants...... 67 315 Purchase of treasury stock................................ (1,768) -- ------- ------- Net cash provided by (used in) financing activities......... (1,701) 315 ------- ------- Net decrease in cash and cash equivalents................... (6,520) (1,398) Cash and cash equivalents at beginning of period............ 28,194 22,525 ------- ------- Cash and cash equivalents at end of period.................. $21,674 $21,127 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest............................................... $ 38 $ 68 Income taxes........................................... 217 362
13 16 Other Information. The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational filing requirements of the Exchange Act and in accordance therewith is obligated to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in such reports, proxy statements and other information distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information are available for inspection at the public reference facilities of the Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Such reports, proxy statements and other information may also be obtained at the Web site maintained by the Commission at http://www.sec.gov. Copies of this material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Except as otherwise noted in this Offer to Purchase, all of the information with respect to the Company set forth in this Offer to Purchase has been derived from publicly available information. 8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser. Purchaser is a Delaware corporation that is a wholly owned subsidiary of SER USA, which in turn is a wholly owned subsidiary of Parent. Purchaser was incorporated on December 14, 1999, for the sole purposes of entering into the Merger Agreement and consummating the transactions contemplated thereby, including making the Offer. Purchaser has not carried on any activities to date other than those incident to its formation, its entering into the Merger Agreement and the agreements described in Section 11 hereof and filed as exhibits with the Commission, and its commencement of the Offer. Parent. Parent is a corporation organized under the laws of Germany. Parent is a German public company, which has been traded on the Frankfurt Neuer Markt since 1997 under the symbol "SES." Parent is Europe's largest supplier of document management systems and workflow solutions, which are being implemented in a broad range of industry sectors and applications. Parent conducts its domestic and international businesses through various subsidiaries. Parent's executive offices are located at Innovationspark Rahms, D-53577, Neustadt/Wied, Germany. Parent's telephone number at such offices is 011 49 2683 984 0. The executive office of each of SER USA and Purchaser is located at 7200 Wisconsin Avenue, Suite 1001, Bethesda, MD 20814. The telephone number of both Purchaser and SER USA at such office is (301) 841-1190. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the (i) members of the supervisory board and board of managing directors of Parent, and (ii) directors and executive officers of Purchaser are set forth on Schedule I hereto. Certain Transactions. Except as set forth in this Offer to Purchase, none of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the persons listed on Schedule I hereto, or any associate or majority owned subsidiary of Parent, Purchaser or any of such persons, beneficially owns, or has a right to acquire directly or indirectly, any Shares, and none of Parent or Purchaser or, to the best knowledge of Parent or Purchaser, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in the Shares during the past sixty (60) days. Except as set forth in this Offer to Purchase, none of Parent or Purchaser or, to the best knowledge of Parent and Purchaser, any of the persons listed on Schedule I hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. 14 17 Except as set forth in this Offer to Purchase, none of Parent or Purchaser or, to the best knowledge of Parent and Purchaser, any of the persons listed on Schedule I hereto, has had any transactions since January 1, 1995 with the Company, or any of its executive officers, directors or affiliates that would be required to be reported under the rules of the Commission. Except as set forth in this Offer to Purchase, since January 1, 1995, there have been no contacts, negotiations or transactions between Parent or Purchaser, or their respective subsidiaries, or, to the best knowledge of Parent and Purchaser, any of the persons listed on Schedule I 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. See Introduction and Sections 10 and 11. 9. SOURCE AND AMOUNT OF FUNDS. Purchaser will require approximately $70,000,000 to (i) purchase the Shares outstanding on the date hereof pursuant to the Offer and the Merger, and (ii) pay fees and expenses to be incurred in connection with the completion of the Offer and the Merger. All of the funds required to finance the foregoing will be furnished to Purchaser by Parent. Parent has entered into three separate loan agreements in order to obtain a portion of the necessary funds to consummate the Offer and the Merger. The remainder of the necessary funds will be provided by Parent from its available cash and cash equivalents, including short term investments. Pursuant to the terms of a loan agreement with IKB International S.A. (the "IKB International Loan"), Parent shall borrow Swiss francs equivalent to fifteen million four hundred thousand (15,400,000) euro (approximately US$15,500,000). Such amount under the IKB International Loan, due on January 6, 2003, shall be payable as provided below and shall accrue interest at 4.05% per annum. Interest due under the IKB International Loan shall be paid by Parent quarterly, in Swiss francs, beginning on April 5, 2000 and continuing through the term of the loan. Parent shall similarly make eight, equal quarterly payments of the principal under the IKB International Loan beginning on April 5, 2001 and continuing through the term. The IKB International Loan provides for increased interest payments should Parent fail to timely make the requisite quarterly payments and security as provided therein. Pursuant to the terms of a loan agreement between Parent and IKB Deutsche Industriebank, dated as of December 15, 1999 (the "Industriebank Loan"), Parent shall borrow ten million two hundred twenty-five thousand (10,225,000) euro (approximately US$10,300,000). Such amount under the Industriebank Loan shall be due and payable by Parent before April 5, 2000, in a single payment, and shall accrue interest at 4.75% per annum, payable by Parent in arrears on a quarterly basis. The Industriebank Loan provides for increased interest payments should Parent fail to timely make the requisite quarterly payments and security as provided therein. Pursuant to the terms of a loan agreement with the Kolenz branch of Commerzbank Aktiengesellschaft, dated as of December 8, 1999 (the "Commerzbank Loan"), Parent shall borrow up to a maximum of twenty-five million (25,000,000 DM) deutsche marks (approximately US$12,900,000). The Commerzbank Loan provides a cash credit facility which can be drawn down to the maximum amount provided above and shall accrue interest payable by Parent at 6.25% per annum for any cash draw down, and 0.5% on any unutilized portion of such credit facility from January 5, 2000 to April 30, 2000. The Commerzbank Loan contains provisions which permit the Parent, upon the satisfaction of certain preconditions, to reschedule a portion of the cash credit facility above as a loan with a three (3) year term. The Commerzbank Loan provides security in the form of a lien on certain securities and chattels of Parent in connection with all existing, future and contingent claims arising from the parties' banking relationship. 15 18 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. 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 business combination between the Company and Parent. Over the course of the next several weeks, 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 discussion 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 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 (the "Parent Board"), 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 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 Board had authorized him and Mr. Carl Mergele, the Company's Corporate Counsel, to continue exploring a possible transaction with Parent and to allow Parent to commence a preliminary 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 management 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 the November 7, 1999 discussions described below, Dr. Storey fully informed the Parent Board of the status of the discussions with the Company and 16 19 obtained suitable authorizations to proceed on behalf of Parent. Also, during this period, Mr. Reinhardt consulted fully with the supervisory board of Parent regarding the status of 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 agreement, as 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 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 the 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 transactions contemplated thereby. 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 excused themselves from the meeting, the Company Board unanimously approved (with Messrs. McGowan and Burton abstaining) the Merger Agreement and the transactions 17 20 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, including the Offer and the Merger. 11. THE MERGER AGREEMENT AND OTHER AGREEMENTS. The following is a summary of the Merger Agreement and certain related agreements. This summary is qualified in its entirety by reference to the copies of such agreements filed as exhibits to the Tender Offer Statement on Schedule 14D-1 of which this Offer to Purchase is a part. The Merger Agreement The Offer. The Merger Agreement provides that no later than five (5) Business Days after the public announcement of the execution of the Merger Agreement, Parent will cause Purchaser to, and Purchaser will, commence the Offer. The parties to the Merger Agreement have agreed in the Merger Agreement that the obligation of Purchaser to consummate the Offer, and to accept for payment and pay for the Shares tendered pursuant to the Offer, is subject to the Minimum Condition and the Offer Conditions described in Section 15 hereof. Under the Merger Agreement, each of Parent and Purchaser has expressly reserved the right, in its sole discretion, to waive any such condition and to make any other changes to the terms of the Offer provided that, without the consent of the Company, neither Parent nor Purchaser can (i) amend or waive the Minimum Condition, (ii) change the form of consideration to be paid in the Offer (other than by adding cash consideration) (iii) decrease the price per Share payable in the Offer, (iv) reduce the number of Shares to be purchased in the Offer, (v) impose additional conditions to the Offer, or (vi) amend any other condition of the Offer in a manner adverse to the holders of Shares. The Merger Agreement provides that the price per Share to be paid in the Offer will be net to the sellers in cash, without interest, subject to reduction only for any applicable withholding taxes. Under the Merger Agreement, Purchaser may, without the consent of the Company, (i) extend the Offer on one or more occasions for up to ten (10) Business Days for each such extension beyond the then-scheduled Expiration Date, if at such date any of the Offer Conditions has not been satisfied or waived, until such time as such conditions are satisfied or waived, and, at the request of the Company, Purchaser will, subject to Parent's right to terminate the Merger Agreement pursuant to Article VIII thereof, extend the Offer for additional periods up to but not later than February 28, 2000, if the only condition not satisfied or earlier waived on the then-scheduled Expiration Date is the HSR Approval condition, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer, and (iii) provided that Parent and Purchaser irrevocably waive the Offer Conditions (other than the Minimum Condition) and agree not to assert such conditions as a basis for not consummating the Offer, extend the Offer for an aggregate period of not more than ten (10) Business Days beyond the latest Expiration Date otherwise permitted under clause (i) or (ii) above if the Minimum Condition has been satisfied but there have not been tendered sufficient Shares so that the Merger could be effected without a vote of the Company's stockholders in accordance with Section 253 of the DGCL. The Merger Agreement provides that, subject to the terms of the Offer, including the Offer Conditions, Purchaser will accept for payment and pay for all Shares duly tendered at the earliest time at which it is permitted to do so under applicable law; provided that, as set forth above, Purchaser will have the right, in its sole discretion, to extend the Offer for up to ten (10) Business Days notwithstanding the prior satisfaction of the Offer Conditions, in order to attempt to satisfy the requirements of Section 253 of the DGCL. The Merger Agreement further provides that the Offer Conditions other than the Minimum Condition are solely for the benefit of Parent and Purchaser and that all Offer Conditions may be asserted by Parent and Purchaser, unless irrevocably waived, regardless of the circumstances resulting in a condition not being satisfied (except for any action or inaction by Purchaser or Parent constituting a breach of the Merger Agreement) and, except with respect to the Minimum Condition, may be waived by Parent or Purchaser, in whole or in part at any time and from time to time in their sole discretion. 18 21 Company Recommendation. The Merger Agreement provides that the Company will file with the Commission and mail to its stockholders contemporaneously with the commencement of the Offer a Solicitation/Recommendation Statement on Schedule 14D-9. The Schedule 14D-9 shall reflect the actions of the Company Board and comply in all material respects with the provisions of applicable federal securities laws. Pursuant to the Merger Agreement, the Schedule 14D-9 will contain the Company Board Recommendation (as defined below). The Company Board shall be permitted to withdraw, or modify in any manner, whether or not adverse to Parent, the Company Board Recommendation, but only if (i) the Company has complied with the terms of the Merger Agreement as summarized under the heading "No Solicitation" below, including, without limitation, the requirement that Company notify Parent promptly after its receipt of any Acquisition Proposal (as defined under the heading "No Solicitation" below), (ii) a Superior Proposal (as defined under the heading "No Solicitation" below) has been offered and not withdrawn at the time the Company Board determines to take any such action, (iii) the Company Board determines in good faith by a majority vote, on the basis of the advice of its outside legal counsel, that its fiduciary duties under applicable law require that it take such action and (iv) the Company shall have delivered to Parent four (4) Business Days' prior written notice advising Parent that it intends to take such action. The Company Board, at a meeting duly called and held, has unanimously (with Messrs. McGowan and Burton abstaining) (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are advisable and fair to and in the best interests of the holders of Shares, (ii) duly approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, prior to the execution of such agreement (such approvals being sufficient to render the restrictions of Section 203 of the DGCL inapplicable to the Merger Agreement, the Offer, the Merger and the transactions contemplated thereby),(iii) resolved to recommend that the holders of Shares accept the Offer, tender their Shares and vote to approve the Merger, and (iv) took action sufficient to render the Rights Agreement inapplicable to the Merger Agreement, the Offer and the Merger (collectively, the "Company Board Recommendation"). Directors Following the Offer. The Merger Agreement provides that, promptly upon the purchase of and payment for Shares which represent at least a majority of the outstanding Shares, Parent is entitled to designate a number of directors on the Company Board equal to the product (rounded up to the nearest whole number) of the total number of the directors on the Company Board (after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the number of Shares owned by Purchaser and its Affiliates bears to the number of Shares outstanding. The Company will, upon request of Parent, use its reasonable best efforts promptly either to increase the size of the Company Board or, at the Company's election, to secure the resignations of such number of its incumbent directors as is necessary to enable Parent's designees to be so elected or appointed to the Company Board. The Merger Agreement provides that the Company will use its reasonable best efforts to cause directors designated by Parent to constitute the same percentage as they represent on the Company Board (but in any event at least one Parent designee) (i) of each committee of the Company Board, (ii) of the board of directors of each of the Company's subsidiaries, and (iii) of each committee of each such subsidiary's board of directors, in each case to the extent permitted by applicable law. Notwithstanding the foregoing, provided that the number of directors which Parent shall have the ability to designate shall constitute a majority of the Company Board, until the Effective Time, the Company and Parent have agreed to use all reasonable best efforts to retain as members of the Company Board at least three (3) directors who are directors of the Company on the date of the Merger Agreement and who were not designated by Parent or employees of the Company or its subsidiaries (the "Independent Directors"). Following the election or appointment of Parent's designees to the Company Board and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors will be required for the Company to take action to (i) amend or terminate the Merger Agreement, (ii) exercise or waive any of the Company's rights or remedies thereunder, (iii) extend the time for performance of Parent's and Purchaser's respective obligations thereunder, or (iv) approve any other action by the Company that would reasonably be expected to affect adversely the interests of the stockholders of the Company (other than Parent, Purchaser and their Affiliates) with respect to the transactions contemplated thereby. 19 22 The Merger. The Merger Agreement provides that, subject to the terms and conditions thereof, and in accordance with the DGCL, at the Effective Time, Purchaser will be merged with and into the Company. The Merger Agreement provides that, as a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will continue as the Surviving Corporation. The name of the Surviving Corporation initially shall be SERSys Acquisition Corporation. The Merger Agreement provides that at the Effective Time, the certificate of incorporation of the Purchaser, as in effect immediately prior to the Effective Time and as attached to the Merger Agreement as Annex II, will be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein and by the DGCL. The Surviving Corporation's certificate of incorporation shall be amended to increase the authorized capital provided therein as noted under the heading "Conversion of Securities" above. At the Effective Time, the bylaws of Purchaser, as in effect immediately prior to the Effective Time and as attached to the Merger Agreement as Annex III, will be the bylaws of the Surviving Corporation until thereafter amended as provided therein and by the DGCL. The Merger Agreement further provides that, at the Effective Time, the directors and officers of Purchaser immediately prior to the Effective Time will be the directors and officers, respectively, of the Surviving Corporation following the Merger, to hold office in accordance with the Surviving Corporation's bylaws and applicable law. The Merger Agreement also provides that Parent may at any time change the method of effecting the Offer including by providing that any other subsidiary of Parent make the Offer, or effect the Merger, including by merging any direct or indirect wholly owned subsidiary of Parent with and into the Company or by merging the Company with and into any such direct or indirect wholly owned subsidiary, and the Company will cooperate in such efforts, including by entering into an appropriate amendment to the Merger Agreement; provided, however, that such other subsidiary, if any, becomes a party to, and agrees to be bound by, the terms of the Merger Agreement, and that any such actions not (a) alter or change the amount or kind of consideration to be issued to the Company's stockholders, (b) materially delay the receipt of any HSR Approval, (c) materially delay the consummation of the transactions contemplated by the Merger Agreement, or (d) adversely affect the interests of the stockholders of the Company. The parties to the Merger Agreement have also agreed to take such actions as Parent may reasonably request to provide for the merger or consolidation of subsidiaries of the Company with other subsidiaries of the Company or of Parent, to be effective at or following the Effective Time. Conversion of the Company's Securities. The Merger Agreement provides that at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Purchaser, Company or the holder of any of the following securities: (i) each Share issued and outstanding immediately prior to the Effective Time (other than (x) Shares canceled pursuant to clause (iii) below, and (y) Dissenting Shares, as defined below), will be converted into the right to receive the Merger Consideration; (ii) all of the Shares issued and outstanding immediately prior to the Effective Time will no longer be outstanding and will automatically be canceled and will cease to exist as of the Effective Time, and each Share Certificate previously representing any such Shares (other than Shares canceled pursuant to clause (iii) below) will thereafter represent solely the right to receive the Merger Consideration into which the Shares represented by such Share Certificate have been converted; and (iii) at the Effective Time, all Shares that are held by the Company as treasury stock or by Parent or any of the Company's or Parent's respective wholly owned subsidiaries will automatically be canceled and will cease to exist and no cash or other consideration will be delivered in exchange therefor. Notwithstanding anything in the Merger Agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time held by holders (if any) who have not voted in favor of the Merger and who have demanded appraisal rights with respect thereto in accordance with Section 262 of the DGCL and, as of the Effective Time, have not failed to perfect or have not effectively withdrawn or lost their rights to appraisal and payment under Section 262 of the DGCL ("Dissenting Shares") will not be converted into the right to receive the Merger Consideration. Holders of such Shares will be entitled to receive payment of the appraised value of such Dissenting Shares in accordance with the provisions of Section 262 of the DGCL, except that any Dissenting Shares held by a holder who has failed to perfect or has effectively withdrawn, or 20 23 lost its right to appraisal and payment under Section 262 of the DGCL will thereupon be deemed to have been converted into the right to receive the Merger Consideration and will no longer be considered Dissenting Shares. Under the Merger Agreement, the Company will give Parent (i) prompt notice of any written demands for appraisal of any Shares, attempted withdrawals of such demands, and any other instruments served pursuant to the DGCL received by the Company relating to stockholders' rights of appraisal, and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company will not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisals of capital stock of the Company, offer to settle or settle any such demands or approve any withdrawal of any such demands. The Merger Agreement provides that all of the shares of capital stock of Purchaser issued and outstanding immediately prior to the Effective Time will be converted into a total of one million (1,000,000) shares of the capital stock of the Surviving Corporation and, upon issuance at the Effective Time, will constitute the only issued and outstanding capital stock of the Surviving Corporation following the Effective Time. The Merger Agreement provides that, at the Effective Time, each option to purchase Shares, whether or not then vested or exercisable (each, a "Company Option"), including without limitation Company Options granted under the Company's Amended and Restated Stock Option(s) Plan, the 1998 Stock Incentive Plan and the 1993 Stock Option Plan for Non-Employee Directors (the "Company Stock Plans"), will, without any further action on the part of the holders thereof, be converted, pursuant to the terms of the Company Stock Plans, into a right to receive a payment in cash (the "Option Consideration") equal to the product of (i) the number of Shares previously subject to the Company Option and (ii) the excess, if any, of the Merger Consideration over the exercise price of each Share under the Company Option, subject to withholding taxes and without interest. As soon as practicable after the Effective Time, and in any event no more than fifteen (15) calendar days following the Effective Time, the Surviving Corporation shall instruct the Depositary to pay, and the Depositary shall pay, all amounts due as Option Consideration to the former holders of Company Options as required by the Merger Agreement. Options to purchase Common Stock issued under the Company's 1993 Employee Stock Purchase Plan (the "Stock Purchase Plan") shall be exercisable at the Exercise Date for such options (as defined in the Stock Purchase Plan) for $6.25 in cash. Representations and Warranties. The Merger Agreement contains various customary representations and warranties of the parties thereto including, without limitation, representations and warranties by the Company as to the Company's organization, standing and corporate power, subsidiaries, capitalization, authorization, board recommendation, noncontravention of any governing instruments, laws or other agreements, regulatory and other third-party consents and approvals, filings with the Commission, financial statements, undisclosed liabilities, investment securities, licenses, compliance with applicable laws, information provided in the Offer documents and Schedule 14D-9, absence of certain changes or events, legal proceedings, employee benefit plans, intellectual property, labor and employment matters, taxes, environmental matters, contracts, year 2000 matters, state takeover laws, Rights Agreement compliance, insurance and brokers. In addition, the Merger Agreement contains representations and warranties of Parent and Purchaser concerning their organization and standing, authorization, board recommendation, noncontravention of any governing instruments, laws or other agreements, regulatory and other third party consents and approvals, information provided in the Offer documents and Schedule 14D-9, funds and brokers. Interim Operations of the Company. In the Merger Agreement, the Company has agreed that, among other things, from the date of the Merger Agreement to the Effective Time, except as expressly required or permitted by the Merger Agreement, the Company will, and will cause each of its subsidiaries to, (a) conduct its business in the usual, regular and ordinary course consistent with past practice and in compliance with applicable laws, (b) use reasonable best efforts to maintain and preserve intact its business organization, employees and business relationships and retain the services of its key officers and key employees, and (c) take no action which would adversely affect or delay in any material respect the ability of either Parent or the Company to obtain any necessary approvals of any regulatory agency or other governmental entity required 21 24 for the transactions contemplated by, or to perform its covenants and agreements under, the Merger Agreement. In addition, the Merger Agreement provides that, from the date of the Merger Agreement to the Effective Time, except as expressly required or permitted thereby, the Company will not, and will not permit any of its subsidiaries, without the prior written consent of Parent, to: (a) (i) incur any indebtedness for borrowed money (other than (A) short-term indebtedness incurred (y) to refinance existing short-term indebtedness or (z) pursuant to lines of credit and credit facilities existing on the date of the Merger Agreement, (B) indebtedness incurred in an aggregate amount not exceeding $100,000, and (C) indebtedness of Company or any of its subsidiaries owed to Company or its other wholly owned subsidiaries), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or make any loan, advance or capital contribution (other than to Company or any of its wholly owned subsidiaries and other than in the ordinary course of Company's business consistent with past practice) or (ii) make or commit to make any capital expenditures in excess of $100,000 for any single capital expenditure; (b) (i) adjust, split, combine or reclassify any of its capital stock; (ii) make, declare, set aside or pay any dividend (except for dividends paid in the ordinary course of business by any wholly owned subsidiaries of Company to Company or to any other of its wholly owned subsidiaries) or make any other distribution on, or directly or indirectly (other than in connection with the surrender of Common Stock as full or partial payment of the exercise price or withholding tax in connection with the exercise of Company Options under the Company Stock Plans) redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock; (iii) grant any individual, corporation or other entity any right to acquire any shares of its capital stock or any stock appreciation or similar rights except as permitted by Section (i) of the Merger Agreement (described above); (iv) issue or authorize the issuance of, deliver, sell, transfer, pledge or otherwise encumber any additional shares of capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, other than the issuance of Company Common Stock pursuant to the exercise of Company Options disclosed to Parent as being outstanding on the date of the Merger Agreement and granted pursuant to the Company Stock Plans; or (v) enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock; (c) sell, transfer, mortgage, encumber or otherwise dispose of any significant portion of its properties or assets, including, without limitation, capital stock in any subsidiaries of Company, to any individual, corporation or other entity other than a direct or indirect wholly owned subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, except in the ordinary course of business consistent with past practice; (d) make any material investment, either by purchase of stock or other equity or debt securities, contributions to capital, property transfers, or purchase of any property or assets, of any other individual, corporation, limited partnership or other entity, other than an investment in a wholly owned subsidiary of Company existing prior to the date of the Merger Agreement; (e) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial portion of the stock or assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof; (f) acquire or agree to acquire voting or non-voting equity securities or similar ownership interests in any person (other than a subsidiary); (g) commence, undertake or engage in any new line of business; (h) enter into or terminate any significant lease, contract or agreement, or make any change in any of its existing significant leases, contracts or agreements, except in the ordinary course of business and consistent with past practices of the Company; 22 25 (i) (i) grant to any employees any restricted stock or options to purchase the Company's Common Stock, (ii) pay any bonus which is not consistent with past practice or consistent with the plans, arrangements or agreements in place prior to the date of the Merger Agreement or which, when aggregated with all of the bonuses for 1999, exceed $900,000 (other than the Company's 25% matching program for 401(k) contributions, payments pursuant to which shall not exceed $175,000), (iii) hire new executive officers or materially modify any compensation or severance package other than in the ordinary course of business and consistent with past practice, or (iv) enter into, establish, adopt or amend (except (A) as may be required by applicable law, (B) to satisfy contractual obligations existing as of the date of the Merger Agreement, or (C) as otherwise provided by the Merger Agreement) any Employee Plan, as that term is defined in the Merger Agreement, or any trust agreement (or similar arrangement) related thereto in respect of any director, officer, consultant, independent contractor, or employee of or with respect to Company or any of its subsidiaries; (j) pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction of current liabilities or obligations, in accordance with their terms, in the ordinary course of business consistent with past practice, or waive, release, grant, or transfer any rights of material value or modify or change any existing license, lease, contract or other document in any manner that would be material to Company and its subsidiaries; (k) settle or compromise any litigation (whether or not commenced prior to the date of the Merger Agreement), other than settlements or compromises of litigation where the amount paid by the Company (excluding amounts paid by insurance providers on behalf of the Company) does not exceed $50,000 for any single litigation matter or related group of litigation matters (such limit including the monetary value of any non-monetary obligations on the part of Company or any of its subsidiaries other than, in the case of litigation not involving any governmental entity or other regulatory agency, immaterial non-monetary obligations); (l) change any accounting principle used by it, except for such changes as may be required to be implemented pursuant to generally accepted accounting principles or rules and regulations of the Commission as concurred in by Company's independent auditors; (m) change any material tax election, change any annual tax accounting period, change any method of tax accounting in any material respect, file any material amended tax return, enter into any closing agreement relating to any material tax, settle any material tax claim or assessment, surrender any right to claim a material tax refund or consent to any extension or waiver of the limitations period applicable to any material tax claim or assessment except as advised by the Company's independent auditors; (n) adopt or implement any amendment to its charter or bylaws or enter into any plan of consolidation, merger or reorganization with any person other than a wholly owned subsidiary of Company; (o) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization; (p) take any action that is intended or would reasonably be expected to result in any of its representations and warranties set forth in the Merger Agreement being or becoming untrue in any material respect, or in any of the conditions to the Merger set forth under the heading "Conditions" below or the Offer Conditions not being satisfied, or in a violation of any provision of the Merger Agreement, except, in each case, as may be expressly permitted by the Merger Agreement or as may be required by applicable law; or (q) agree to, or make any commitment to, take, or authorize, any of the actions prohibited by clauses (a) through (p) above. Access to Information. The Merger Agreement provides that, upon reasonable notice and subject to applicable laws relating to the exchange of information, the Company will, and will cause its subsidiaries to, 23 26 afford to the officers, employees, accountants, counsel and other representatives of Parent reasonable access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, the Company will, and will cause its subsidiaries to, make available to Parent and its representatives (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or other federal or state laws (other than reports or documents which the Company is not permitted to disclose under applicable law), and (ii) all other information concerning its business, properties and personnel as Parent may reasonably request, in all cases so that Parent may have reasonable opportunity to make such investigations as it desires of the affairs and assets of the Company. Neither the Company nor any of its subsidiaries will be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of its customers, unreasonably interfere with the conduct of the business of the Company and its subsidiaries, jeopardize the attorney-client privilege, to the extent applicable to such materials, or contravene any law, rule, regulation, order, judgment, decree, or binding agreement entered into prior to the date of the Merger Agreement. The parties to the Merger Agreement have agreed to make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. The Merger Agreement provides that Parent will hold all information furnished by or on behalf of the Company or any of the Company's subsidiaries or representatives pursuant to the Merger Agreement in confidence to the extent required by, and in accordance with, the provisions of the Confidentiality Agreement. Reasonable Best Efforts. The Merger Agreement provides that each of the Company and Parent will, and will cause their respective subsidiaries to, use their reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on it or any of its subsidiaries with respect to the Offer and the Merger and, subject to the conditions set forth in "Conditions" below, to consummate the transactions contemplated by the Merger Agreement. The parties have agreed that such actions will include, using their respective reasonable best efforts to (i) as promptly as practicable prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all governmental entities and any other third parties which are necessary or advisable to consummate the transactions contemplated by the Merger Agreement or to prevent the termination of the Company's and its subsidiaries' contracts as a result thereof, (ii) comply fully with the terms and conditions of all such permits, consents, approvals and authorizations of all such governmental entities, (iii) lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated by the Merger Agreement, and (iv) defend any litigation seeking to enjoin, prevent or delay the consummation of the transactions contemplated by the Merger Agreement or seeking material damages. Parent and the Company have the right to review in advance and, to the extent practicable, each will consult with the other on (in each case subject to applicable laws relating to the exchange of information) all the information relating to the Company or Parent, as the case may be, and any of their respective subsidiaries, which appear in any filing made with, or written materials submitted to, any governmental entity or any other third party in connection with the transactions contemplated by the Merger Agreement. In exercising the foregoing right, each of the parties to the Merger Agreement will act reasonably and as promptly as practicable. The Company, Parent and Purchaser have agreed that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all governmental entities and other third parties necessary or advisable to consummate the transactions contemplated by the Merger Agreement and each of the parties has agreed to keep the other apprised of the status of matters relating to completion of the transactions contemplated thereby. Employee Matters. The Merger Agreement provides that the Company's Stock Purchase Plan and any other stock or option based compensation plans of the Company (other than the ITC Plan, as defined below) shall be terminated and any shares of the Company's Common Stock purchased thereunder prior to the Effective Time which continue to be held by participants under such plans at the Effective Time shall be cancelled in accordance with the procedures set forth under the heading "Conversion of Company's Securities." As provided in the Stock Purchase Plan, each option outstanding at the Effective Time shall be 24 27 exercisable at the Exercise Date (as defined in the Stock Purchase Plan) for $6.25 in cash. The Company shall use its reasonable best efforts prior to the Effective Time to obtain the consent of the holders of all Company Options outstanding under the International Telesystems Corporation Stock Option Plan (the "ITC Plan") which Company Options are not automatically convertible pursuant to the terms of the ITC Plan into the right to receive Option Consideration. After the Effective Time, Parent will take, or will cause the Company to take, all action necessary to carry out the provisions of the Stock Purchase Plan. Pursuant to the terms of the Merger Agreement, at the Effective Time, the Parent will cause the Surviving Corporation to adopt the stock option plan in substantially the form attached to the Merger Agreement as Annex IV and reserve for issuance shares equal to seventeen percent (17%) of the issued and outstanding shares of common stock of the Surviving Corporation at the Effective Time, and such plan shall have been approved by Parent as the sole stockholder of the Surviving Corporation. Exclusive Negotiations. The Merger Agreement provides that Parent and Purchaser will not, and will not permit any of their officers, directors, employees, financial or legal advisors, agents or other representatives or those of any of their respective Affiliates, from the date of the Merger Agreement until the Effective Time or such earlier time as the Merger Agreement is terminated pursuant to Article VIII thereof, directly or indirectly, to offer to purchase, solicit proposals to sell, furnish information or engage in any discussions or negotiations relating to the acquisition of all or any part of, or any interest in, or any of the assets of certain competitors of the Company (or Affiliates thereof) regardless of the form of the proposed transaction. No Solicitation. The Merger Agreement provides that, from the date of the Merger Agreement until the earlier of (x) the Effective Time, or (y) the termination of the Merger Agreement pursuant to Article VIII thereof, the Company shall not, shall not permit any of its subsidiaries to, and shall not authorize or permit any of its or their respective officers, directors, employees, representatives agents or Affiliates, directly or indirectly, to (i) solicit, initiate or knowingly encourage or take any action to facilitate or encourage any inquiries or the making of any proposal that constitutes, an Acquisition Proposal (as defined below) or (ii) participate or engage in discussions or negotiations with, or provide any information to any individual, corporation, partnership, association, trust, unincorporated organization, limited liability company or other entity or group, as defined in Section 13(d)(3) of the Exchange Act (each a, "Person"), concerning an Acquisition Proposal or which might reasonably be expected to result in an Acquisition Proposal (as such term is defined in the Merger Agreement and described below). An "Acquisition Proposal" includes any inquiry, proposal or offer from any Person (other than Parent, Purchaser or any of their Affiliates) made or submitted prior to the termination of the Merger Agreement, relating to any (i) merger, consolidation, recapitalization, liquidation or other direct or indirect business combination, involving the Company or any subsidiary, (ii) issuance or acquisition of shares of capital stock or other equity securities of the Company or any subsidiary representing 40% or more (by voting power) of the outstanding capital stock of the Company or such subsidiary (except for the issuance of shares of Common Stock pursuant to employee stock options granted under any Company Stock Plan and outstanding on the date of the Merger Agreement), (iii) tender or exchange offer that if consummated would result in any Person, together with all Affiliates thereof, beneficially owning shares of capital stock or other equity securities of the Company or any subsidiary representing 40% or more (by voting power) of the outstanding capital stock of the Company or such subsidiary, (iv) acquisition, license, assignment, purchase or other disposition of a substantial portion of the technology, business or assets of the Company or any subsidiary outside the ordinary course of business or inconsistent with past practice, or (v) other transaction of similar significance, the consummation of which would reasonably be expected to impede materially, interfere with, prevent or delay materially the consummation of the Offer, the Merger and the other transactions contemplated between the parties or which would reasonably be expected to dilute materially the benefits to Parent or Purchaser of the transactions contemplated in the Merger Agreement. The Merger Agreement requires that the Company immediately cease, and cause its subsidiaries, and its and their officers, directors, agents, representatives and advisors, to cease, any and all existing activities, discussions or negotiations with any parties conducted theretofore with respect to any of the foregoing. 25 28 The Merger Agreement further provides that, notwithstanding the limitations on solicitations and related matters described above, the Company may participate in discussions or negotiations with, or furnish information with respect to the Company pursuant to a confidentiality agreement substantially similar to the Confidentiality Agreement in effect between the Company and Parent, to any Person if and only if such Person has submitted an unsolicited written Acquisition Proposal to the Company Board and the Company Board (a) believes in good faith based on such matters as it deems relevant, including the advice of Company's financial advisor, that such Acquisition Proposal is a Superior Proposal (as defined below); (b) receives the advice of outside counsel to the Company that is reasonably competent to render such advice to the effect that taking such action is required to satisfy the fiduciary duties of the Company Board under the DGCL; and (c) determines in good faith that taking such action is required to satisfy the fiduciary duties of the Company Board under applicable Delaware law. A "Superior Proposal" means, for purposes of the Merger Agreement, any bona fide Acquisition Proposal to effect a tender offer, merger, consolidation or sale of all or substantially all of the assets or capital stock of the Company, which is on terms which the Company Board determines by a majority vote of its directors in its good faith judgment (based upon the advice of Updata or another financial advisor reasonably competent to render such advice) that the value of the consideration provided in such Acquisition Proposal exceeds the value of the consideration provided under the Merger Agreement, after taking into account all relevant factors, including the form of consideration, any conditions to such Acquisition Proposal, the timing of the closing thereof, the risk of nonconsummation, the ability of the person making the Acquisition Proposal to finance the transactions contemplated thereby and any required governmental or other consents, filings and approvals to be more favorable to the Company's stockholders than the transactions contemplated by the Merger Agreement, or any revised offer submitted by Parent that is itself a Superior Proposal, and for which financing, to the extent required, is then fully committed to the Person making such Acquisition Proposal. Pursuant to the Merger Agreement, the Company shall immediately advise Parent orally and in writing of any request for information with respect to any Acquisition Proposal, or an inquiry which could result in an Acquisition Proposal. The Company shall advise Parent of the presence of an Acquisition Proposal or inquiry, the material terms and conditions of such request, and the identity of the person making the request or Acquisition Proposal. The Company shall inform Parent on a prompt and current basis of the status and content of any discussions regarding any Acquisition Proposal with third parties, including prompt notice of any changes in the price, structure or form of the consideration or material terms of and conditions regarding the Acquisition Proposal. Under the terms of the Merger Agreement, the Company Board shall be permitted to withdraw, or modify in any manner, whether or not adverse to Parent, the Company Board Recommendation, but only if (i) the Company has complied with the limitations on solicitations and related matters contained in the Merger Agreement and described above, (ii) a Superior Proposal has been offered and not withdrawn at the time the Company Board determines to take any such action, (iii) the Company Board determines in good faith by a majority vote, on the basis of the advice of its outside legal counsel, that its fiduciary duties under applicable law require that it must take such action, and (iv) the Company shall have delivered to Parent four (4) Business Days' prior written notice advising Parent that it intends to take such action. Publicity. The Merger Agreement provides that the Company, Parent and Purchaser will consult with each other before holding any press conferences, analyst calls or other meetings or discussions and before issuing any press releases or other public announcements regarding the transactions contemplated hereby and by the Tender Agreement. The parties will provide each other the reasonable opportunity to review and comment upon any press release or other public announcement or statement with respect to the transactions contemplated by the Merger Agreement and the Tender Agreement. Except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with Nasdaq, any U.S. national securities exchange or the Frankfurt Neuer Markt, no party to the Merger Agreement shall issue any such press release or other public announcement or statement prior to such consultation. In addition, Company is required to consult with Parent regarding written communications with customers, stockholders and employees relating to the transactions contemplated by the Merger Agreement. 26 29 Directors' and Officers' Insurance and Indemnification. The Merger Agreement provides that, for a period of six (6) years from the Effective Time, the certificate of incorporation and bylaws of the Surviving Corporation will contain, to the extent permitted by law, provisions with respect to indemnification no less favorable to any Indemnified Party (as defined below) than those set forth in the Company's certificate of incorporation and bylaws on the date of the Merger Agreement. The Merger Agreement further provides that Parent will, and will cause the Surviving Corporation to, indemnify, defend and hold harmless the present and former officers and directors of the Company or any of its subsidiaries in their capacities as such (each, an "Indemnified Party") after the Effective Time against all losses, expenses, claims, damages or liabilities arising out of actions or omissions occurring on or prior to the Effective Time to the fullest extent now provided in their respective certificates of incorporation or bylaws, and permitted by applicable law. Parent has also agreed to cause the persons serving as officers and directors of the Company immediately prior to the Effective Time to be covered for a period of six (6) years from the Effective Time by the directors' and officers' liability insurance policy maintained by the Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than such policy) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event will Parent be required to expend more than 150% of the current amount expended by the Company ("the Insurance Amount") to maintain or procure such insurance coverage and further provided, that if Parent is unable to maintain or obtain the insurance described in this paragraph, Parent will use its reasonable best efforts to obtain as much comparable insurance as available for the Insurance Amount. In the event Parent, the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, the Merger Agreement requires that in each such case, to the extent necessary, proper provision will be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, assume the indemnification and insurance obligations described above. In addition, the Merger Agreement provides that such provisions are intended to benefit, and will be enforceable by, the Indemnified Parties and their respective heirs and representatives. Company Stockholders Meeting; Preparation of Proxy Statement. The Merger Agreement provides that if the approval of the Company's stockholders is required under the DGCL to consummate the Merger, (i) the Company will cause a meeting of its stockholders (the "Company Stockholders Meeting") to be duly called and held as soon as reasonably practicable after the date on which Shares are purchased by Purchaser pursuant to the Offer for the purpose of voting on the adoption of the Merger Agreement, and (ii) Parent and the Company will prepare and file with the Commission a proxy statement in definitive form relating to the Company Stockholders Meeting (the "Proxy Statement"). Each of Parent and the Company has agreed to use all reasonable efforts to resolve any comments of the Commission as promptly as practicable after such filing, and the Company will thereafter mail or deliver the Proxy Statement to its stockholders as promptly as practicable. The Company Board will (i) include in the Proxy Statement the Company Board Recommendation and (ii) use its reasonable best efforts to obtain the necessary vote in favor of the adoption of the Merger Agreement by its stockholders. Pursuant to the Merger Agreement, Parent has agreed that it will vote, or cause to be voted, at the Company Stockholders Meeting, all Shares then owned by it or by Purchaser in favor of the adoption of the Merger Agreement. Notwithstanding the above described provisions of the Merger Agreement, the Merger Agreement provides that in the event that Parent, Purchaser or any other subsidiary of Parent acquires at least 90% of the outstanding Shares, the parties will take all necessary and appropriate action, subject to applicable laws relating to exchange of information, to cause a "short-form" merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. 27 30 HSR Act. The Merger Agreement provides that each of Parent and the Company shall, if applicable, promptly make or cause to be made the filings required of such party or its Affiliates under the HSR Act with respect to the transactions contemplated thereby. Each party agrees to cooperate with the other party in connection with any such filing and in connection with resolving any investigation or other inquiry of any such agency or other governmental entity under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other Federal, state or foreign statutes, rules, regulations, orders or decrees that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, "Antitrust Laws"). Each of Parent and the Company shall use all commercially reasonable efforts to resolve such objections, if any, as may be asserted by any governmental entity with respect to the transactions contemplated by the Merger Agreement under Antitrust Laws. Each of Parent and the Company shall use all commercially reasonable efforts to take such action as may be required to cause the expiration of the notice periods under the HSR Act or other Antitrust Laws with respect to such transactions as promptly as possible after the execution of the Merger Agreement. Conditions. The Merger Agreement provides that the obligations of the Company, on the one hand, and Parent and Purchaser, on the other hand, to consummate the Merger are subject to the satisfaction (or, if permissible, waiver by the party for whose benefit such conditions exist) of the following conditions: (1) Purchaser has purchased the Shares pursuant to the Offer; (2) if required under the DGCL, the Company Stockholder Approval; (3) no order, injunction or decree issued by any court or agency of competent jurisdiction preventing the consummation of the Merger is in effect and no statute, rule, regulation, order, injunction or decree has been enacted, entered, promulgated or enforced by any governmental entity which prohibits, materially restricts or makes illegal consummation of the Merger; and (4) any applicable waiting period under the HSR Act shall have expired or been terminated. Termination. The Merger Agreement provides that it may be terminated at any time prior to the Effective Time, whether before or after approval by the Company's stockholders of the matters presented in connection with the Merger: (a) by mutual consent of Parent and Company; (b) by either Parent or the Company Board if any governmental entity which must grant the HSR Approval has denied approval of the Offer or the Merger and such denial has become final and nonappealable, or any governmental entity of competent jurisdiction shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the Merger Agreement and such order, decree, ruling or other action shall have become final and nonappealable; provided, however, that the right to terminate the Merger Agreement as described in this clause (b) shall not be available to any party whose failure to comply with the section "Reasonable Best Efforts" above or any other provision of the Merger Agreement has been a primary cause of such action; (c) (i) by the Company Board, if, prior to the purchase of any Shares by Purchaser pursuant to the Offer, Parent breaches any of its representations, covenants or agreements contained in the Merger Agreement (A) such that any of the Offer Conditions would not be satisfied, and (B) such breach either cannot be cured or is not cured prior to the earlier of (x) ten (10) days after Company has furnished Parent with written notice of such breach and (y) two (2) Business Days prior to the date on which the Offer is then scheduled to expire; or (ii) by Parent, if, prior to the purchase of any Shares by Purchaser pursuant to the Offer, Company breaches any of its representations, covenants or agreements contained in the Merger Agreement (A) such that any of the Offer Conditions would not be satisfied, and (B) such breach either cannot be cured or is not cured prior to the earlier of (x) ten (10) days after Parent has furnished Company with written notice of such breach and (y) two (2) Business Days prior to the date on which the Offer is then scheduled to expire; (d) by Parent, if, prior to the purchase of any Shares by Purchaser pursuant to the Offer, Company or the Company Board shall have (i) withdrawn, modified, amended or materially qualified in any respect adverse to Parent the Company Board Recommendation, (ii) failed to mail the Schedule 14D-9 as 28 31 required under the Merger Agreement to its stockholders, or failed to include in the Schedule 14D-9 the Company Board Recommendation, (iii) entered into a definitive or binding agreement with respect to a Superior Proposal, (iv) in response to the commencement of any tender offer or exchange offer for 40% or more of the outstanding shares of Company Common Stock, or the public announcement or disclosure of any other Acquisition Proposal, or the commencement of negotiations or discussions with any third party regarding an Acquisition Proposal in accordance with the "No Solicitation" section hereof, failed, fully and unconditionally, to recommend publicly rejection of such tender or exchange offer or reject such other Acquisition Proposal (and publicly announce such rejection, in the case of Acquisition Proposals which have been publicly disclosed or become publicly known) within five (5) Business Days of such commencement, announcement or disclosure, or (v) resolved to do any of the foregoing; (e) by either Parent or the Company Board if (i) the Offer expires or terminates in accordance with its terms without the purchase of any Shares or (ii) Purchaser shall not have purchased Shares under the Offer prior to February 28, 2000; provided, however, that the right to terminate the Merger Agreement under this clause (e) shall not be available to any party to the extent that such party's failure to comply with the section regarding "Reasonable Best Efforts" or any other provision of the Merger Agreement has resulted in the failure of any of the Offer Conditions; or (f) by the Company, if (i) prior to the acceptance for payment of any Shares pursuant to the Offer, (ii) the Company is in compliance with its obligations as described under the heading "No Solicitation," (iii) the Company Board shall have withdrawn or modified in a manner adverse to Parent the Company Board Recommendation, (iv) the Company Board authorizes the Company, subject to complying with the terms of the Merger Agreement, to enter into a definitive agreement concerning a transaction that constitutes a Superior Proposal and the Company notifies Parent in writing that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice, (v) Parent does not make, within four (4) Business Days of receipt of the Company's written notification of its intention to enter into a definitive agreement for a Superior Proposal, an offer that the Company Board determines, in good faith after consultation with its financial advisors, is at least as favorable, from a financial point of view, to the stockholders of the Company as the Superior Proposal, and (vi) the Company agrees to pay the fees required to be paid as described under the heading "Effect of Termination" below. The Company agrees (x) that it will not enter into a binding agreement referred to in clause (iv) above until at least the fifth Business Day after it has provided the notice to Parent required hereby and (y) to notify Parent promptly if its intention to enter into the written agreement referred to in its notification shall change at any time after giving such notification. Effect of Termination. The Merger Agreement provides that in the event of the termination of the Merger Agreement as described above, written notice will forthwith be given to the other party or parties specifying the provision pursuant to which such termination is made. At such time, the Merger Agreement will forthwith become null and void, and there will be no liability on the part of Parent, Purchaser, the Company or any of their respective subsidiaries or any of the officers or directors of any of them, except that (i) among others, the second paragraph under the section "Access to Information" above and the provisions described in this paragraph will survive any termination of the Merger Agreement, (ii) notwithstanding anything to the contrary contained in the Merger Agreement, neither Parent nor the Company will be relieved or released from any liabilities or damages arising out of its willful breach of any provision of the Merger Agreement, and (iii) the Company will pay to Parent the Termination Fee (as defined below), if applicable, in accordance with the terms of the Merger Agreement described below. In the event that the Merger Agreement is terminated (other than pursuant to paragraphs (a), (b) or (c)(i) under the heading "Termination" above) subsequent to the receipt of an Superior Proposal, and the Company within nine (9) months of the date of the Merger Agreement, enters a definitive agreement with respect to, or consummates, such Superior Proposal, the Company shall pay to Parent within five (5) days following the execution of a definitive agreement with respect to such Superior Proposal an amount equal to $3,000,000 (the "Termination Fee"). If the Company wrongfully fails to pay Parent timely any amounts due as a Termination Fee, the Company shall pay all reasonable costs and expenses (including reasonable legal fees and expenses) incurred by Parent in connection with any action or proceeding (including the filing of any 29 32 lawsuit) taken by Parent to collect such unpaid amounts, together with interest on such unpaid amounts at the publicly announced prime lending rate as published in the Wall Street Journal from the date such amounts were required to be paid until the date actually received by Parent. Expenses. The Merger Agreement provides that, except as expressly otherwise provided therein, all costs and expenses incurred in connection with the Merger Agreement and the consummation of the transactions contemplated thereby will be paid by the party incurring such expenses. Amendment and Modification. The Merger Agreement provides that, subject to compliance with applicable law, such agreement may be amended in writing by the parties thereto, by action taken or authorized by their respective boards of directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company; provided, however, that after any such approval by the stockholders of the Company, there may not be, without further approval of such stockholders, any amendment of the Merger Agreement which changes the amount or the form of the consideration to be delivered to the holders of Shares thereunder other than as contemplated by the Merger Agreement. Extension; Waiver. The Merger Agreement provides that at any time prior to the Effective Time, the parties thereto, by action taken or authorized by their respective boards of directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties thereto, (ii) waive any inaccuracies in the representations and warranties contained therein or in any document delivered pursuant thereto and (iii) waive compliance with any of the agreements or conditions contained therein; provided, however, that after any approval by the stockholders of the Company, there may not be, without further approval of such stockholders, any extension or waiver of the Merger Agreement or any portion thereof which reduces the amount or changes the form of the consideration to be delivered to the holders of Shares thereunder other than as contemplated by the Merger Agreement. Any agreement on the part of a party to the Merger Agreement to any such extension or waiver will be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Tender Agreement Concurrently with the execution and delivery of the Merger Agreement, Parent entered into the Tender Agreement with all directors and executive officers of the Company (each, a "Management Stockholder" and, together, the "Management Stockholders") who together beneficially own 1,697,700 issued and outstanding Shares (including vested Company Options and Company Options vesting within sixty (60) days of the date of the Merger Agreement), representing approximately 11.5% of the issued and outstanding Shares as of the date hereof (the "Existing Shares" and, together with any other Shares of capital stock or other voting securities of the Company or any of its subsidiaries beneficially owned by them and any such shares of capital stock or other voting securities acquired, directly or indirectly, after the date of the Tender Agreement and prior to the termination thereof, whether upon the exercise of options, conversion of convertible securities or otherwise, the "Subject Shares"). Pursuant to the Tender Agreement, each of the Management Stockholders has agreed, among other things, to tender validly his or her Subject Shares to Purchaser pursuant to the Offer within ten (10) Business Days of the commencement thereof, and, once tendered not to withdraw or permit to be withdrawn any such Subject Shares. Additionally, pursuant to the Tender Agreement, each of the Management Stockholders has agreed that, during the term of the Tender Agreement, at any Company Stockholder Meeting, however called, such Management Stockholder will appear, in person or by proxy, or otherwise cause his or her Subject Shares to be counted as present thereat for purposes of establishing a quorum, and each such Management Stockholder will vote (or cause to be voted) or act by written consent with respect to all of the Subject Shares that are beneficially owned by such Management Stockholder or its Affiliates or as to which such Management Stockholder has, directly or indirectly, the right to vote or direct the voting, (a) in favor of adoption and approval of the Merger Agreement and the Merger and the approval of the terms thereof and each of the other actions contemplated by the Merger Agreement and the Tender Agreement, and any other action requested 30 33 by Parent in furtherance thereof, (b) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement or of any Management Stockholder contained in the Tender Agreement, (c) against any Acquisition Proposal made by any person other than Parent or any of its subsidiaries and (d) against any other action, agreement or transaction (other than the Merger Agreement and the transactions contemplated thereby) that is intended, or could reasonably be expected, to impede, interfere or be inconsistent with, delay, postpone, discourage or materially adversely affect the Offer or the Merger or the performance by each of the Management Stockholders of its obligations under the Tender Agreement, including, but not limited to: (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries (other than the Offer and the Merger); (ii) a sale, lease or transfer of a material amount of assets of the Company or any of its subsidiaries or a reorganization, recapitalization or liquidation of the Company or any of its subsidiaries; (iii) a material change in the policies or management of the Company; (iv) an election of new members to the Company Board, except where the vote is cast in favor of the nominees of a majority of the existing directors; (v) any material change in the present capitalization or dividend policy of the Company or any amendment or other change to the Company's certificate of incorporation; or (vi) any other material change in the Company's personnel, corporate structure or business. Pursuant to the Tender Agreement, each Management Stockholder has also agreed that it will not enter into any voting or other agreement or understanding with any person or entity or grant a proxy or power of attorney with respect to the Subject Shares prior to the termination of the Tender Agreement or vote or give instructions in any manner inconsistent with clauses (a), (b) or (c) of the preceding paragraph. Each Management Stockholder has also agreed, during the term of the Tender Agreement, not to, and not to permit any of its Affiliates to, vote or execute any written consent in lieu of a stockholders meeting or vote, if such consent or vote by the stockholders of the Company would be inconsistent with, impede or frustrate the purposes of the other covenants of such Management Stockholder as described above. The Tender Agreement provides that each Management Stockholder, during the term of the Tender Agreement, will not (i) sell, transfer, pledge, encumber, grant, assign or otherwise dispose of, enforce any redemption agreement with the Company or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, pledge, encumbrance, grant, assignment or other disposition of, record or beneficial ownership of any of the Subject Shares or any interest in any of the foregoing, except to Parent, (ii) grant any proxies or powers of attorney, deposit any Subject Shares into a voting trust or enter into a voting agreement with respect to any Subject Shares, or any interest in any of the Subject Shares, except to Parent or (iii) take any action that would make any representation or warranty of such Management Stockholder contained therein untrue or incorrect or have the effect of preventing or disabling such Management Stockholder from performing such Management Stockholder's obligations under the Tender Agreement, or that would otherwise hinder or delay Parent from acquiring a majority of the outstanding Shares, determined on a fully diluted basis. The Tender Agreement also provides that each Management Stockholder, except with respect to Parent and its Affiliates, during the term of the Tender Agreement, will not, and will not permit any of its Affiliates or any director, officer, employee consultant, agent, advisor or representative of such Management Stockholder or any of its Affiliates (collectively, the "Representatives"), to initiate, solicit or encourage, directly or indirectly, any inquiries or the making of any proposal with respect to any matter described in the preceding paragraph or any Acquisition Proposal with respect to the Company or any of its subsidiaries, participate in any negotiations concerning, or provide to any other person any information or data relating to the Company or any of its subsidiaries for the purpose of, or have any discussions with any person relating to, or cooperate with or assist or participate in, or facilitate, any inquiries or the making of any proposal which constitutes, or would reasonably be expected to lead to, any effort or attempt by any other person to seek to effect any matter described in the preceding paragraph or any Acquisition Proposal with respect to the Company or any of its subsidiaries, or agree to or endorse any or release any third party from any obligation under any existing standstill agreement or arrangement relating to any such Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement such an Acquisition Proposal. Each Management Stockholder has also 31 34 agreed immediately to cease and cause to be terminated any existing activities, discussions or negotiations with any parties that would violate this paragraph or the immediately preceding paragraph. Pursuant to the Tender Agreement, each Management Stockholder has agreed, during the term of the Tender Agreement, to notify Parent promptly of (i) the number of any additional Shares and the number and type of any other Shares acquired by such Management Stockholder, if any, and (ii) any inquiries or proposals that are received by, any such information that is requested from, or any such negotiations or discussions that are sought to be initiated or continued with, such Management Stockholder with respect to any matter described above. Each Management Stockholder has also agreed to consent to the termination of the Company Stock Plans and the Stock Purchase Plan and the conversion of interests under such plans as contemplated by the Merger Agreement. Employment Agreements with Certain Officers. In connection with the Merger Agreement, the Purchaser has entered into employment agreements with each of James E. McGowan and Frederick C. Foley that become effective upon the consummation of the Offer. Pursuant to the terms of his employment agreement (the "McGowan Employment Agreement"), Mr. McGowan has agreed to serve as the Surviving Corporation's President and Chief Executive Officer, on a full-time basis, for the period commencing on the date the Offer is consummated and ending on December 31, 2001, unless such term is extended or terminated as provided therein. Under the terms of the McGowan Employment Agreement, Mr. McGowan shall receive an annual salary of $325,000 and be eligible to receive stock options and an annual bonus not to exceed fifty percent (50%) of his annual salary, and an additional fifty percent (50%) of his salary for exceptional performance according to criteria set by the board of directors of the Surviving Corporation each year. Under the McGowan Employment Agreement, Mr. McGowan is entitled to certain payments upon termination. If Mr. McGowan's employment is terminated by the Surviving Corporation for any reason other than for "cause" (as such term is defined in the McGowan Employment Agreement) or by Mr. McGowan for "good reason" (as such term is defined in the McGowan Employment Agreement) the Surviving Corporation shall (A) pay to Mr. McGowan (i) if such termination occurs before January 1, 2001, one hundred percent (100%) of his annual salary for the remainder of the term of the McGowan Employment Agreement, equal to at least twelve (12) months, and (ii) if such termination occurs after January 1, 2001, 100% of his annual salary, with such amounts payable in equal installments over a three (3) month period commencing on the date of termination; and (B) make available to Mr. McGowan for a period of twelve (12) months following such termination, the sickness, health and disability insurance programs to which Mr. McGowan would have been entitled under the McGowan Employment Agreement if he had remained in the employ of the Surviving Corporation for a twelve (12) month period. If Mr. McGowan's employment is terminated by the Surviving Corporation for "cause," or by Mr. McGowan by resignation without "good reason," or upon the death or due to Mr. McGowan's "total disability" (as defined in the McGowan Employment Agreement), then the Surviving Corporation shall have no further liability to Mr. McGowan under the McGowan Employment Agreement with respect to periods following the date of such termination, except (1) the salary which has accrued through the date of termination, which amount shall be paid by the Surviving Corporation within thirty (30) days of such termination; and (2) such other benefits as may be required to be provided by the Surviving Corporation under the provisions of applicable law. Under the McGowan Employment Agreement, Mr. McGowan has agreed to be bound by certain restrictive covenants which limit his ability to compete with or to interfere with the Surviving Corporation for a period of one (1) year after the termination of his employment. Pursuant to the terms of his employment agreement (the "Foley Employment Agreement"), Mr. Foley has agreed to serve as the Surviving Corporation's Senior Vice Present -- Finance, Treasurer and Chief Financial Officer, on a full-time basis, for the period commencing on the date the Offer is consummated and 32 35 ending on December 31, 2001, unless such term is extended or terminated as provided therein. Under the terms of the Foley Employment Agreement, Mr. Foley shall receive an annual salary of $200,000 and be eligible to receive stock options and an annual bonus not to exceed thirty-five percent (35%) of his annual salary, calculated against a sliding scale of seventy-five percent (75%) to one hundred fifty percent (150%), depending on Mr. Foley's performance and according to criteria set by the chief executive officer or the compensation committee of the board of directors of the Surviving Corporation each year. Under the Foley Employment Agreement, Mr. Foley is entitled to certain payments upon termination. If Mr. Foley's employment is terminated by the Surviving Corporation for any reason other than for "cause" (as such term is defined in the Foley Employment Agreement) or by Mr. Foley for "good reason" (as such term is defined in the Foley Employment Agreement) the Surviving Corporation shall (A) pay to Mr. Foley (i) if such termination occurs before January 1, 2001, one hundred percent (100%) of his annual salary for the remainder of the term of the Foley Employment Agreement, equal to at least twelve (12) months, and (ii) if such termination occurs after January 1, 2001, 100% of his annual salary, with such amounts payable in equal installments over a three (3) month period commencing on the date of termination; and (B) make available to Mr. Foley for a period of twelve (12) months following such termination, the sickness, health and disability insurance programs to which Mr. Foley would have been entitled under the Foley Employment Agreement if he had remained in the employ of the Surviving Corporation for a twelve-month period. If Mr. Foley's employment is terminated by the Surviving Corporation for "cause," or by Mr. Foley by resignation without "good reason," or upon the death or due to Mr. Foley's "total disability" (as defined in the Foley Employment Agreement), then the Surviving Corporation shall have no further liability to Mr. Foley under the Foley Employment Agreement with respect to periods following the date of such termination, except (1) the salary which has accrued through the date of termination, which amount shall be paid by the Surviving Corporation within thirty (30) days of such termination; and (2) such other benefits as may be required to be provided by the Surviving Corporation under the provisions of applicable law. Under the Foley Employment Agreement, Mr. Foley has agreed to be bound by certain restrictive covenants which limit his ability to compete with or to interfere with the Surviving Corporation for a period of one (1) year after the termination of his employment. The McGowan Employment Agreement and the Foley Employment Agreement provide that the Surviving Corporation will grant Messrs. McGowan and Foley options to acquire 50,000 and 10,000 shares, respectively, of the Surviving Corporation's common stock at an exercise price of $69.20 per share (equivalent to the price per share to be paid by Parent for the Shares). Under the stock option grant agreements to be executed between the Messrs. McGowan and Foley and the Surviving Corporation at the Effective Time, fifty percent (50%) of the options will vest on the first anniversary of the grant date and the remainder will vest on the second anniversary of the grant date. All of the options will vest immediately upon the consummation of an initial public offering of the Surviving Corporation's common stock. Mr. McGowan's options will vest immediately if he is terminated without "cause" or if he terminates his employment with the Surviving Corporation for "good reason." In addition, Parent has agreed to grant Mr. Foley, at the Effective Time, options to acquire 5,000 shares of Parent's common stock at an exercise price equal to 60% of the fair market value of those shares on or about December 31, 1999. Stockholders Agreement Concurrently with the execution and delivery of the Merger Agreement, Parent and Purchaser entered into a stockholders agreement (each a "Stockholders Agreement" and collectively, the "Stockholders Agreements") with each of Messrs. Foley and McGowan (each a "Stockholder" for purposes of this section). Pursuant to each of the Stockholders Agreements, the term "Stock" includes, any and all shares of common stock of the Surviving Corporation that are issued (now or in the future) pursuant to the rights of the Stockholder under the grant agreements attached as exhibits to each of the McGowan Employment Agreement and the Foley Employment Agreement and under any other grant agreement issued under the Surviving Corporation stock option plan and all other shares of common stock or other equity securities of the Surviving Corporation or any successor corporation which may be issued thereafter to the Stockholder in 33 36 consequence of his ownership of such common stock of the Surviving Corporation as the result of the exchange or reclassification of shares, corporate reorganization, or any form of recapitalization, consolidation, merger, share split, share dividend, or similar event. Call Rights of the Corporation. Pursuant to each of the Stockholders Agreements, for a period of three hundred sixty-five (365) days following the death of the Stockholder or the termination of employment of the Stockholder with the Surviving Corporation for any reason, the Surviving Corporation shall have an option to purchase all or any of the authorized, issued and outstanding shares of Stock, at the price and upon the terms described below. Call Rights upon an Involuntary Transfer. If any portion of the Stockholder's shares of Stock are attached or taken in execution, or if the Stockholder applies for the benefit of, or files a case under, any provision of the federal bankruptcy law or any other law relating to insolvency or relief of debtors, or if a case or proceeding is brought against the Stockholder under any provision of the federal bankruptcy law or any other law relating to insolvency or relief of debtors which is not dismissed within sixty (60) days after the commencement thereof, or if the Stockholder makes an assignment for the benefit of creditors, or if any portion of the Stockholder's Stock is made subject to charging order, or if any portion of the Stockholder's Stock is transferred pursuant to a divorce decree (each such event shall be referred to as an "Involuntary Transfer"), such Stockholder (the "Insolvent Stockholder") shall give immediate written notice of the Involuntary Transfer to the Surviving Corporation and the Surviving Corporation shall have the option to purchase any or all of the shares of Stock of the Insolvent Stockholder at the price and upon the terms described below. Call Rights of the Parent. If a public offering of the common stock of the Surviving Corporation that requires registration under the Securities Act of 1933, as amended (the "Act"), has not been consummated by January 1, 2005, the Parent shall have an option for a period of three hundred sixty five (365) days beginning thereon to purchase the Stock from the Stockholder at the price and upon the terms described below. Put Rights of the Stockholder. If, at January 1, 2003, (i) the fair market value of the Stock is more than twice the price established by the Merger Agreement and (ii) Parent has not within the preceding 120 days issued a public statement, which is still applicable at such date, describing the firm intention to cause a public offering of the common stock of the Surviving Corporation that requires registration under the Act ("an IPO of the common stock") before December 30, 2003, the Stockholder shall have an option for a period of three hundred sixty five (365) days beginning on January 1, 2003, to sell the Stock to the Parent at the price and upon the terms described below. If (i) at January 1, 2004, the fair market value of the Stock is more than twice the price established by the Merger Agreement, (ii) the put rights described above did not arise solely because Parent issued a public statement prior to January 1, 2003 of its intention to cause an IPO of the Common Stock before December 30, 2003, and (iii) an IPO of the Common Stock does not in fact occur prior to December 30, 2003, the Stockholder shall have an option for a period of three hundred sixty-five (365) days beginning on January 1, 2004, to sell the Stock to the Parent at the price and upon the terms described below. If an IPO of the Common Stock has not been consummated by January 1, 2005, the Stockholder shall have an option for a period of three hundred sixty five (365) days beginning thereon to sell the Stock to the Parent at the price and upon the terms described below. Notwithstanding anything to the contrary in the grant agreements of the Stockholders and provided the stock options issued under such grant agreements have not previously terminated or expired, the Stockholder shall be permitted to exercise the vested portion of such stock options in December 2004, conditional upon the Stockholder receiving sufficient consideration from the Parent pursuant to the exercise of such put rights effective as of January 1, 2005, with which to pay the exercise price under such portion of the stock option issued under the grant agreements. The Stockholder may specify in the notice of exercise pursuant to the preceding sentence that the exercise price is to be paid from the proceeds of the sale to the Parent of the respective portion of the Stock purchased pursuant to such exercise. 34 37 Purchase Price of Stock. The purchase price of the Stock payable under the Stockholder Agreements shall be the fair market value of such Stock as of the "Disposition Date." The Disposition Date is the date on which Parent, the Surviving Corporation or the Stockholder, as applicable, exercises the respective option to purchase shares of Stock. For all purposes herein, the fair market value of the Stock shall be the value as established by an appraisal of the Purchaser by an appraisal firm that is selected by and mutually agreeable to the chief executive officer of the Surviving Corporation and Parent. Such appraisals shall not take into account any minority or liquidity discounts. At the Surviving Corporation's expense, such appraiser shall conduct an appraisal of the Surviving Corporation within four months after each of January 1, 2003, January 1, 2004, and January 1, 2005, in order to assist in facilitating exercise of the call and put rights described above, and as of such other dates as are necessary to establish the value of the Stock on a Disposition Date. Notwithstanding anything to the contrary herein, the appraisals conducted on each of January 1, 2003, January 1, 2004, and January 1, 2005, shall apply for purposes of determining the fair market value of the Stock that applies to the exercise of the put rights described above, respectively, regardless of when the put rights are exercised during the respective calendar year. Voluntary Transfers of Stock. Each of the Stockholders agreed that, during his lifetime, he will not transfer any of his shares of Stock, except (i) upon the conditions set forth below; or (ii) with the prior written consent of the Surviving Corporation. In the event that the Stockholder receives a bona fide offer from an independent third party capable of consummating such a sale to purchase all or any of the authorized, issued and outstanding shares of Stock then registered in such Stockholder's name, such Stockholder shall first offer in writing (the "Stockholder's Offer") to sell such shares of Stock (the "Offered Stock") to the Surviving Corporation at the price and on the terms of which such selling Stockholder proposes to transfer the Offered Stock to the proposed third party transferee. The Stockholder's Offer shall set forth (i) the number of shares of the Offered Stock, (ii) the name and address of the proposed transferee, (iii) the amount of consideration to be received by the selling Stockholder, and (iv) the method of proposed payment. The Surviving Corporation shall have the option to acquire all or any of the Offered Stock at the price and upon the terms provided in the Stockholder's Offer. The Surviving Corporation shall have the right to exercise its option for a period of thirty (30) days following its receipt of the Stockholder's Offer by notifying the selling Stockholder in writing of its intention to purchase at Closing (as such term is defined in the Stockholders Agreements) all or any of the Offered Stock on the same terms and conditions set forth in the Stockholder's Offer. In the event that (i) a Stockholder elects to transfer all or a portion of his shares of Stock; (ii) the Stockholder strictly complies with the Stockholders Agreement; (iii) the Purchaser fails to purchase all of such shares of Offered Stock; and (iv) the Stockholder who desires to transfer such shares of Stock complies with the terms of the Stockholders Agreement, then any such shares of Stock which are not so purchased by the Purchaser may be sold by the selling Stockholder to the third party named in the Stockholder's Offer within a period of ninety (90) days after the expiration of the thirty (30) day period provided above. Such Offered Stock may be transferred to the third party named in the Stockholder's Offer provided that such shares are sold at the price and on the terms set forth in the Stockholder's Offer. Any Offered Stock not actually sold or transferred to such third party by the selling Stockholder within such ninety (90) day period at the price and on the terms set forth in the Stockholder's Offer shall remain subject to all of the provisions of the Stockholders Agreement. The restrictions set forth in the preceding paragraphs do not apply to Stock of a Stockholder sold or otherwise transferred in connection with (i) the closing of an underwritten public offering by the Surviving Corporation of its Stock or any other securities pursuant to an effective registration statement under the Act, (ii) a sale of the Surviving Corporation as a result of which more than fifty percent (50%) of the total number of outstanding shares of its common stock is sold, exchanged, conveyed, or otherwise transferred to a third party in one or a series of related transactions, or (iii) a merger or consolidation of the Surviving Corporation as a result of which the holders of its common stock (immediately prior to such merger or consolidation) hold less than fifty percent (50%) of the surviving or new entity, as the case may be. Drag Along Rights. If at any time the holder(s) of a majority of the shares of common stock of the Surviving Corporation desire to sell, exchange, convey, or otherwise transfer, in one or a series of related transactions to an independent third party in a bona fide arms length transaction, all of the outstanding shares 35 38 of common stock of the Surviving Corporation ("Selling Stockholder(s)") for consideration which the Selling Stockholders in good faith believe in their sole discretion to be adequate consideration for such shares, then the Selling Stockholder(s) may require the Stockholder to sell, exchange, convey, or otherwise transfer, and the Stockholder agrees to sell, exchange, convey, or otherwise transfer all of the shares of Stock at the same price per share of common stock (as set forth below) and on the same terms and conditions, as received by the Selling Stockholder(s) from the independent third party for the same class of shares. The Stockholder's obligation to sell, exchange, convey or otherwise transfer the Stock under such provisions is subject to the requirements that (i) the Selling Stockholder(s) shall give notice to the Stockholder of such sale, exchange, conveyance, or transfer at least 30 days prior to the proposed date of such event, specifying the price and terms upon which shares of common stock are to be sold, exchanged, conveyed, or transferred, and the proposed date of such event, and (ii) upon the consummation of said sale, exchange, conveyance, or transfer, the Stockholder will receive the same form and amount of consideration per share of common stock as received by the Selling Stockholder(s) for the same class of shares, or, if the Selling Stockholder(s) are given an option as to the form and amount of consideration to be received, the Stockholder will be given the same option. Tag Along Rights. If at any time, in any transaction or transactions, the Parent desires to sell, exchange, convey, or otherwise transfer any shares of common stock of the Surviving Corporation owned by it, then the Parent shall give notice of such intent to the Stockholder at least fifteen (15) days prior to the proposed date of such sale. Such notice shall specify the number of shares and the terms, including price, upon which such shares of common stock are to be sold, exchanged, conveyed, or otherwise transferred and the proposed date of such sale, exchange, conveyance, or transfer. The Stockholder may elect to participate in such sale by giving notice to the Parent at least ten (10) days prior to the date of the proposed sale. Such notice from the Stockholder shall specify the number of shares of common stock which it proposes to sell. If the Stockholder elects to participate in such sale, and gives timely notice of such election, then the Parent shall not effect such sale unless either (i) the proposed purchaser of such shares offers to purchase from the Stockholder, at the same time and on the same terms (including price) as shares of common stock that are being purchased from the Parent, that number of shares of common stock owned by the Stockholder which bears the same proportion to the total number of shares of Stock which he beneficially owns, as the number of shares of Stock being sold by the Parent bears to the total number of shares of Stock owned by the Parent, or (ii) to the extent the proposed purchaser is unwilling to purchase shares of the Stockholders' common stock as calculated above, then the number of shares of the Stockholders' common stock as so calculated, and the number of shares of Stock of the Parent as otherwise to be sold, shall each be reduced proportionately to equal the total number of shares to be purchased by the proposed purchaser, who will thereupon offer to purchase the number of shares of the Stockholders' common stock as so calculated at the same time and on the same terms (including price) as the number of shares of common stock to be sold by the Parent, as recalculated pursuant to this paragraph. The tag along provisions do not apply to (i) any pledge of common stock by the Parent made pursuant to a bona fide loan transaction or (ii) any sale of the shares of common stock to the public pursuant to a registration statement filed under the Act. Market Stand-Off Agreement. Each of the Stockholders agreed that he will not, to the extent reasonably requested by the Surviving Corporation and an underwriter of common stock (or other securities) of the Surviving Corporation, sell or otherwise transfer or dispose (other than to donees who agree to be similarly bound) of any Stock during the one hundred eighty (180)-day period following the effective date of a registration statement of the Surviving Corporation filed under the Act provided, however, that such agreement shall be applicable only to the first such registration statement of the Surviving Corporation which covers shares (or securities) to be sold on its behalf to the public in an underwritten public offering. Such agreement shall be in writing in a form satisfactory to the Surviving Corporation and such underwriter. In order to enforce the foregoing covenant, the Purchaser may impose stop-transfer instructions with respect to the Stock of the Surviving Corporation (and the shares or securities of every other person subject to the foregoing restriction) until the end of such one hundred eighty (180)-day period. 36 39 12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER. Purpose. The purpose of the Offer and the Merger is to acquire the entire equity interest in, and control of, the Company. The Offer is being made pursuant to the Merger Agreement. As soon as practicable following consummation of the Offer and after satisfaction or waiver of all conditions to the Merger set forth in the Merger Agreement, Parent intends to acquire the remaining equity interest in the Company not acquired in the Offer by consummating the Merger. Plans for the Company. Parent will continue to evaluate and review the Company and its business, assets, corporate structure, capitalization, operations, properties, policies, management and personnel with a view towards determining how optimally to realize potential benefits arising from the combination of the operations of the Company with those of Parent. Such evaluation and review is ongoing and is not expected to be completed until after the consummation of the Offer and the Merger. If, as and to the extent that Purchaser acquires control of the Company, Parent and Purchaser will complete such evaluation and review of the Company and will determine what, if any, changes would be desirable in light of the circumstances which then exist. Such changes could include, among other things, changes in the Company's business, corporate structure, certificate of incorporation, bylaws, capitalization or management or involve consolidating and streamlining certain operations, reorganizing other businesses and operations and entering into new lines of business. Except as described in this Offer to Purchase, neither Parent nor Purchaser has any present plans or proposals that would relate to or result in an extraordinary corporate transaction such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries or a sale or other transfer of a material amount of assets of the Company or any of its subsidiaries, any material change in the capitalization or dividend policy of the Company or any other material change in the Company's corporate structure or business or the composition of the Company Board or management. Vote Required to Approve the Merger. The Company Board has approved the Merger Agreement in accordance with the DGCL. If required for approval of the Merger, the Company has agreed, subject to the satisfaction of the conditions to the Merger set forth in the Merger Agreement, in accordance with and subject to the DGCL, duly to convene the Company Stockholders Meeting as promptly as practicable following the purchase of Shares pursuant to the Offer for the purpose of voting on the adoption of the Merger Agreement. If stockholder approval is required, the Merger Agreement must generally be approved by the vote of the holders of a majority of the outstanding Shares. As a result, if the Minimum Condition is satisfied, Purchaser will have the power to approve the Merger Agreement without the affirmative vote of any other stockholder. The Offer is conditioned upon the Minimum Condition being satisfied. The Merger Agreement provides that, notwithstanding the foregoing, in the event Purchaser acquires at least 90% of the Shares outstanding (determined on a fully diluted basis) in the Offer, Parent, Purchaser and the Company agree to take all necessary and appropriate action to effect a "short-form" merger and cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. 37 40 This Offer to Purchase does not constitute a solicitation of a proxy, consent or authorization for or with respect to the annual meeting or any special meeting of the Company's stockholders or any action in lieu thereof. Any such solicitation which Purchaser may make will be made only by means of proxy materials in compliance with the requirements of Section 14(a) of the Exchange Act. Appraisal Rights. Stockholders do not have appraisal rights as a result of the Offer. However, if the Merger is consummated, stockholders of the Company at the time of the Merger who do not vote in favor of, or consent to the Merger and who comply with all statutory requirements will have the right under the DGCL to demand appraisal of, and receive payment in cash of the fair value of, their Shares outstanding immediately prior to the Effective Time in accordance with Section 262 of the DGCL. Under the DGCL, stockholders who properly demand appraisal and otherwise comply with the applicable statutory procedures will be entitled to a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash. Any such judicial determination of the fair value of such Shares could be based upon considerations other than or in addition to the price paid in the Offer and the Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. However, in Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that, in the context of a two-step cash merger, "to the extent that value has been added following a change in majority control before cash-out, it is still value attributable to the going concern," to be considered in the appraisal process. As a consequence, stockholders should recognize that the fair value so determined in any appraisal proceeding could be equal to, higher or lower than the price per Share paid pursuant to the Offer or the consideration per Share to be paid in the Merger. THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF DELAWARE LAW. THE FOREGOING DESCRIPTION OF CERTAIN PROVISIONS OF THE DGCL IS NOT NECESSARILY COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DGCL. Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger following the purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire any remaining Shares. Rule 13e-3 should not be applicable to the Merger if the Merger is consummated within one (1) year after the expiration or termination of the Offer and the price paid in the Merger is not less than the per Share price paid pursuant to the Offer. However, in the event that Purchaser is deemed to have acquired control of the Company pursuant to the Offer and the Merger is consummated more than one (1) year after completion of the Offer or an alternative acquisition transaction is effected pursuant to which stockholders of the Company receive consideration less than or in a different form from that paid pursuant to the Offer, in either case at a time when the Shares are still registered under the Exchange Act, Purchaser may be required to comply with Rule 13e-3. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger or such alternative transaction and the consideration offered to minority stockholders in the Merger or such alternative transaction, be filed with the Commission and disclosed to stockholders prior to consummation of the Merger or such alternative transaction. The purchase of a substantial number of Shares pursuant to the Offer may result in the Company being able to terminate its Exchange Act registration. See Section 14. If such registration were terminated, Rule 13e-3 would be inapplicable to any such future Merger or such alternative transaction. 38 41 13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the date of the Merger Agreement, split, combine or otherwise change the Shares or its capitalization, or disclose that it has taken any such action, then without prejudice to Purchaser's rights as described in Section 15, Purchaser may make such adjustments to the purchase price and other terms of the Offer as it deems appropriate to reflect such split, combination or other change. If, on or after the date of the Merger Agreement (except as contemplated thereby), the Company should declare or pay any cash or stock dividend or other distribution on, or issue any right with respect to, the Shares that is payable or distributable to stockholders of record on a date prior to the transfer to the name of Purchaser or the nominee or transferee of Purchaser on the Company's stock transfer records of such Shares that are purchased pursuant to the Offer then, without prejudice to Purchaser's rights as described in Section 15, (i) the purchase price payable per Share by Purchaser pursuant to the Offer will be reduced to the extent any such dividend or distribution is payable in cash and is not paid to, or at the direction of, Purchaser, and (ii) any non-cash dividend, distribution (including additional Shares) or right received and held by a tendering stockholder will be required to be promptly remitted and transferred by the tendering stockholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance or appropriate assurance thereof, Purchaser will, subject to applicable law, be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. 14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION. Nasdaq Quotation. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares. This could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the Nasdaq National Market for continued listing. If the Shares no longer meet the requirements of the Nasdaq National Market for continued listing and the listing of the Shares is discontinued, the market for the Shares would be adversely affected. If the Nasdaq National Market were to delist the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market therefor and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of the Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be higher or lower than the Merger Consideration to be paid in the Offer. Exchange Act Registration. The Shares are currently registered under the Exchange Act. The purchase of Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Exchange Act. Registration of the Shares may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange or Nasdaq and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of the Shares. Deregistration would also make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with Company stockholders meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable. Furthermore, Affiliates of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of the securities pursuant to Rule 144 under the Securities Act. 39 42 Margin Securities. The Shares are currently "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 such Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to the conditions that at the expiration of the Offer (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer, that number of Shares, which, together with any other Shares beneficially owned by Parent or its wholly owned subsidiaries, constitute satisfaction of the Minimum Condition, (ii) the HSR Approval condition shall have been satisfied, and (iii) any other approvals or consents of third parties required to consummate the transactions contemplated by the Merger Agreement (including the Offer and the Merger), shall have been obtained and shall remain in full force and effect, Purchaser shall not be required to accept for payment or, subject to applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), purchase or pay for any Shares tendered pursuant to the Offer, may postpone the acceptance for payment of Shares tendered and subject to the terms and conditions of the Merger Agreement may terminate the Offer if, at any time on or after the date of the Merger Agreement and at or before the time of payment for any such Shares, any of the following conditions shall have occurred and shall have not been cured: (a) (x) the representations and warranties of Company set forth in the Merger Agreement, shall not have been true and correct in all respects as of the date of the Merger Agreement, or shall not be true and correct in all respects as of the Expiration Date as though made at and as of the Expiration Date (except to the extent that such representations and warranties speak as of another date which shall be required to be true and correct as of such date) except where the failure to be true and correct would not, individually or in the aggregate, have a Company Material Adverse Effect (as such term is defined in the Merger Agreement) (ignoring for purposes of this section all materiality or Material Adverse Effect qualifiers contained in such representations and warranties) or prevent the consummation of the Offer, or (y) Company shall have breached in any material respect any of its material covenants or obligations contained in the Merger Agreement; (b) there shall have been any action or proceeding taken or instituted and pending, or any statute, rule, regulation, judgment, order, injunction or decree promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger, or any other action taken, proposed or threatened, by any domestic or foreign federal or state governmental, regulatory or administrative agency or authority or court or legislative body or commission which has or would reasonably be expected to have the effect of (i) making the purchase of, or payment for, some or all of the Shares by Parent or Purchaser or their Affiliates pursuant to the Offer or the Merger illegal, (ii) otherwise directly or indirectly preventing the making or consummation of the Offer, or the consummation of the Merger, (iii) prohibiting the ownership or operation by Parent or any of its subsidiaries of all or any material portion of the business or assets of Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, (iv) imposing material limitations on the ability of Parent, Purchaser or any of Parent's Affiliates effectively to acquire or hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any such Shares acquired or owned by Parent or Purchaser or any of their Affiliates on all matters properly presented to the stockholders of Company, including, without limitation, the adoption of the Merger Agreement or the right to vote any shares of capital stock of any Company subsidiary, (v) requiring divestiture by Parent or Purchaser or any of their Affiliates of any Shares or 40 43 (vi) materially adversely affecting the business, financial condition, prospects or results of operations of the Company and its Subsidiaries taken as a whole; (c) there shall have occurred after the execution of the Merger Agreement (i) any general suspension in, or limitation on, or material adverse decline in prices for securities on the New York Stock Exchange or Nasdaq, (ii) any material adverse change or any condition, event or development involving a prospective material adverse change in United States or German currency exchange rates or a suspension of, or limitation on the markets therefor, resulting in an increase of 20% or more in the cost to Parent of the Merger Consideration, (iii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States that would prevent (or delay) the consummation of the Offer, or (v) in the case of any of the foregoing existing at the time of commencement of the Offer, material acceleration or worsening thereof; (d) there shall have occurred any change in the business, properties assets, liabilities, capitalization, stockholders equity, financial condition, operations, results of operations or prospects of Company or any of its Subsidiaries, that (i) was not disclosed in the Company's disclosure schedules delivered to Parent and Purchaser in connection with the Merger or in the Management's Discussion and Analysis of Financial Condition and Results of Operations, Company, Business or Financial Statements sections of the Company Reports filed prior to the date of the Merger Agreement (other than information contained under any "Risk Factor," "Cautionary Statements" or "Factors Affecting Future Results" heading contained therein) and (ii) that would reasonably be expected to have a Company Material Adverse Effect or materially adversely affect (or delay) the consummation of the Offer; (e) (A) the Company Board or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Purchaser the Company Board Recommendation, or approved or recommended any Acquisition Proposal or other acquisition of Common Stock other than the Offer and the Merger, (B) any such corporation, partnership, other entity or person shall have entered into a definitive agreement or any agreement in principle with the Company with respect to a tender offer or exchange offer for any Common Stock or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries or (C) the Company Board or any committee thereof shall have resolved to do any of the foregoing; (f) the Company Board shall have failed to take all action necessary to render the rights issued pursuant to the Rights Agreement inapplicable to the Merger Agreement, the Offer, the Merger and the transactions contemplated thereby; or (g) the Merger Agreement shall have been terminated by Company, Parent or Purchaser in accordance with its terms. The foregoing conditions (other than the Minimum Condition) are for the sole benefit of Parent and its Affiliates and may be asserted by Parent or its Affiliates regardless of the circumstances giving rise to such condition. The foregoing conditions (other than the Minimum Condition) may be waived by Parent or Purchaser in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Purchaser at any time to exercise any of their rights in connection with the foregoing conditions shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. General. Except as set forth below, neither Purchaser nor Parent is aware of any licenses or other regulatory permits that appear to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein and by the Merger Agreement, or of any filings, approvals or other actions by or with any domestic (federal or state), foreign governmental authority or 41 44 administrative or regulatory agency that would be required prior to the acquisition of Shares by Purchaser pursuant to the Offer as contemplated herein. Should any such approval or other action be required, it is Parent's present intention to seek such approval or action. There can be no assurance that any such approval or other action, if needed, would be obtained. Antitrust. Under the provisions of the HSR Act applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a fifteen (15) calendar day waiting period following the filing by Parent of a Premerger Notification and Report Form with respect to the Offer, unless Parent or the Company receives a request for additional information or documentary material from the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") or unless early termination of the waiting period is granted. Parent and the Company expect to file Notification and Report Forms promptly with respect to the Offer. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent or the Company concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent or the Company with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent and the Company. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant government agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. Expiration or termination of the applicable waiting period under the HSR Act is a condition to the Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. The Merger would not require an additional filing under the HSR Act if the Purchaser owns 50% or more of the outstanding Shares at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's acquisition of Shares pursuant to the Offer, 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 purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company or its subsidiaries or Parent or its 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 such a challenge is made, of the result thereof. State Takeover Laws. A number of states have adopted takeover laws and regulations which purport to varying degrees to be applicable to attempts to acquire securities of corporations which are incorporated in such states or which have or whose business operations have substantial economic effects in such states, or which have substantial assets, security holders, principal executive offices or principal places of business therein. In 1982, the Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds the Illinois Business Takeovers Act, which as a matter of state securities law made takeovers of corporations meeting certain requirements more difficult, and the reasoning in such decision is likely to apply to certain other state takeover statutes. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that, as a matter of corporate law, and in particular, those laws concerning corporate governance, a state may constitutionally disqualify an acquiror of "Control Shares" (ones representing ownership in excess of certain voting power thresholds: e.g., 20%, 33% or 50%) of a corporation incorporated in its state and meeting certain other jurisdictional requirements from exercising voting power with respect to those shares without the approval of a majority of the disinterested stockholders. In BNS Inc. v. Koppers Co., the United States District Court for the District of Delaware upheld the constitutionality of Section 203 of the DGCL, finding that it did not impermissibly impede interstate commerce in violation of the commerce clause of the United States Constitution. 42 45 In the Merger Agreement, the Company represents that the Company Board has taken all actions necessary to render the provisions of Section 203 of the DGCL inapplicable to the Merger Agreement, the Offer, the Merger, and the Tender Agreement. Except as described herein, Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer, Purchaser might be unable to accept for payment or purchase Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In such case, Purchaser may not be obligated to accept for purchase or pay for, any Shares tendered. See Section 15. 17. FEES AND EXPENSES. Purchaser has retained D. F. King & Co., Inc. to act as the Information Agent and American Stock Transfer & Trust Company to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, electronic mail, telecopy, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward the Offer materials to beneficial owners. The Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. Purchaser and Parent have also agreed to indemnify the Information Agent and the Depositary against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer (other than to the Information Agent and the Depositary). Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to and tenders will not be accepted from or on behalf of the holders of Shares in such state. Purchaser and Parent have filed with the Commission a Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed a Schedule 14D-9 with the Commission pursuant to Rule 14d-9 under the Exchange Act, setting forth its Company Board Recommendation with respect to the Offer and the Merger and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the offices of the Commission (except that they will not be available at the regional offices of the Commission) in the manner set forth in Section 8 of this Offer to Purchase. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. SERSYS ACQUISITION CORPORATION December 23, 1999 43 46 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name and current principal occupation or employment of each member of the Supervisory Board and the Board of Managing Directors and of each executive officer of Parent. Unless otherwise indicated, all occupations, offices or positions of employment listed opposite an individual's name were held by such individual during the last five (5) years. Unless otherwise indicated, the business address of each such director and executive officer is c/o SER (USA), Inc., 7200 Wisconsin Avenue, Suite 1001, Bethesda, MD 20814. Unless otherwise indicated, all such directors listed below are citizens of Germany.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- -------------------------------------------------- SUPERVISORY BOARD Roland H. Paule, Chairman Managing Partner of Paule & Partner GbR since April 1996. Hans-Jurgen Heiser Managing Director of Salomon Brothers Kapitalanlagegesellschaft mbH since January 1990. Irmgard Penning Executive Vice President of SER Systeme AG since April 1998; Finance Manager of SER Systeme AG from June 1997 to March 1998; Finance Manager of Reinhardt GmbH from May 1997 to October 1998. Helmut Kroll System Support for SER Systeme AG since January 1995; Network Administrator of Nissan Bank GmbH from January 1995 to November 1995. BOARD OF MANAGING DIRECTORS Gert J. Reinhardt Chief Executive Officer of SER Systeme AG since October 1984. Dr. Philip A. Storey* Executive Vice President of SER Systeme AG since December 1997; Vice President of SER Systeme AG June 1997 to December 1997; President of Plasmon Data Systems, Inc. December 1994 to June 1997. Irmgard Penning Executive Vice President of SER Systeme AG since April 1998; Finance Manager of SER Systeme AG from June 1997 to March 1998; Finance Manager of Reinhardt GmbH from May 1997 to October 1998.
- --------------- * Dr. Storey is a citizen of the United Kingdom. 2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets forth the name and current principal occupation or employment of the sole director and executive officer of Purchaser. Unless otherwise indicated, all occupations, offices or positions of employment listed opposite an individual's name were held by such individual during the last five (5) years. Unless otherwise indicated, the business address of such director and executive officer is SERSys Acquisition Corporation, 7200 Wisconsin Avenue, Suite 1001, Bethesda, MD 20814. The director listed below is a citizen of the United Kingdom.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS ---- -------------------------------------------------- Dr. Philip A. Storey Executive Vice President of SER Systeme AG since December 1997; Vice President of SER Systeme AG June 1997 to December 1997; President of Plasmon Data Systems, Inc. December 1994 to June 1997.
S-1 47 Facsimiles of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, Shares Certificates and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: The Depositary for the Offer is: AMERICAN STOCK TRANSFER & TRUST COMPANY By Mail: By Hand or Overnight Delivery: 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor New York, NY 10005 New York, NY 10005 Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission (for Eligible Institutions Only): (718) 234-5001 Confirm Receipt of Facsimile by Telephone Only: (718) 921-8200 For Information Call: (718) 921-8200 Any questions and requests for assistance may be directed to the Information Agent at its telephone number and address. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent. You may also contact your broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 ALL OTHERS CALL TOLL FREE: (800) 994-3227 EX-99.A.2 3 FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. PURSUANT TO THE OFFER TO PURCHASE, DATED DECEMBER 23, 1999, BY SERSYS ACQUISITION CORPORATION, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF SER SYSTEME AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 24, 2000, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: AMERICAN STOCK TRANSFER & TRUST COMPANY By Mail: By Hand or Overnight Delivery: 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor New York, NY 10005 New York, NY 10005 Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission Confirm Receipt of Facsimile For Information Call: (for Eligible Institutions by Telephone Only: (718) 921-8200 Only): (718) 921-8200 (718) 234-5001
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR, WITH SIGNATURE GUARANTEE IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. SEE INSTRUCTION 1. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used, either if certificates for Shares (as defined below) ("Share Certificates") are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase, as referred to below) is utilized, if tenders of Shares are to be made by book-entry transfer into the account of American Stock Transfer & Trust Company, as Depositary (the "Depositary"), at The Depository Trust Company (the "Book-Entry Transfer Facility" or "DTC") pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders." Holders of Shares whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 2 - -------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------------------- NAME(S) & ADDRESS(ES) OF REGISTERED HOLDERS(S) SHARE CERTIFICATE(S) AND SHARE(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS TENDERED (ATTACH ADDITIONAL NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S)) SIGNED LIST IF NECESSARY) - ---------------------------------------------------------------------------------------------------------------- TOTAL NUMBER SHARE OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** --------------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------------- Total Shares - ---------------------------------------------------------------------------------------------------------------- * Need not be completed by Book-Entry Stockholders. ** 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 SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH 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: DTC Account Number: Transaction Code Number: [ ] CHECK HERE IF 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 that Guaranteed Delivery: DTC Account Number: Transaction Code Number: 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to SERSys Acquisition Corporation, a Delaware corporation ("Purchaser") that is an indirect (through SER (USA), Inc. ("SER USA")) wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent "), the above-described shares of Common Stock, par value $0.01 per share, and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997, between EIS International, Inc., a Delaware corporation (the "Company") and BankBoston N.A., as amended (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), of the Company, at a purchase price of $6.25 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 23, 1999 (the "Offer to Purchase") and in this Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"), receipt of which is hereby acknowledged. The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates the right to purchase all or any portion of the Shares tendered pursuant to the Offer. 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, Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all dividends, distributions, rights, other Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect of such Shares on or after December 17, 1999 and prior to the transfer to the name of Purchaser (or a nominee or transferee of Purchaser) on the Company's stock transfer records of the Shares tendered herewith (collectively, "Distributions"), and irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact and proxy of the undersigned with respect to such Shares (and any Distributions) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) deliver the Share Certificates representing such Shares (and any Distributions) or transfer ownership of such Shares (and any Distributions) on the account books maintained by the Book-Entry Transfer Facility, together in either case with appropriate evidences of transfer and authenticity, to the Depositary for the account of or to the order of Purchaser, (b) present such Shares (and any Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distributions), all in accordance with the terms and subject to the conditions of the Offer. The undersigned stockholder irrevocably appoints designees of Purchaser as such undersigned's agents, attorneys-in-fact and proxies, with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (and any Distributions). All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior attorneys, proxies and consents given by such stockholder with respect to such Shares (and any Distribution) will be revoked without further action, and no subsequent powers of attorney and proxies may be given or any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of Purchaser will, with respect to the Shares (and Distributions) for which such appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting, or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares and all Distributions including voting at any meeting of stockholders or by written consent in lieu of any such meeting. The undersigned hereby represents and warrants that (a) the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions), and (b) when the Shares 4 are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title to the Shares (and any Distributions), free and clear of all liens, restrictions, charges and encumbrances, and the same will not be subject to any adverse claim and will not have been transferred to Purchaser in violation of any contractual or other restriction on the transfer thereof. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of Purchaser any and all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer and, pending such remittance or appropriate assurance thereof, Purchaser will, subject to applicable law, be entitled to all rights and privileges as owner of any such Distribution and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall not be affected by and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tenders of 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 Purchaser pursuant to the Offer, may also be withdrawn at any time after February 20, 2000. See Section 4 of the Offer to Purchase. The undersigned understands that tenders of Shares pursuant to any 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 Purchaser upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representation that the undersigned owns the Shares being tendered. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or issue or return any Share Certificate(s) for Shares not tendered or not accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated herein under "Special Delivery Instructions," please mail the check for the purchase price and/or any Share Certificate(s) for Shares not tendered or not accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or any Share Certificate(s) for Shares not tendered or accepted for payment in the name of, and deliver such check and/or such Share Certificates to, the person or persons so indicated. Unless otherwise indicated herein under "Special Payment 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 Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name(s) of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares so tendered. [ ] CHECK HERE IF ANY SHARE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 11. Number of Shares represented by lost, stolen or destroyed Share Certificates: 5 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Share Certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned or if Shares tendered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than that designated above. Issue [ ] Check [ ] Certificate(s) to: Name: ---------------------------------------------------------- (PLEASE PRINT) Address: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- (INCLUDE ZIP CODE) - --------------------------------------------------------------- (TAX ID OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9) [ ] Credit Shares tendered by book-entry transfer that are not accepted for payment to DTC to the account set forth below: - ------------------------------------------------------ (DTC ACCOUNT NO.) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown above. Mail [ ] Check [ ] Certificate(s) to: Name: ---------------------------------------------------------- (PLEASE PRINT) Address: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- (INCLUDE ZIP CODE) - --------------------------------------------------------------- (TAX ID OR SOCIAL SECURITY NO.) (SEE SUBSTITUTE FORM W-9) 6 SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) OF HOLDER(S) Dated: ------------------------------------------------ (Must be signed by the registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s): - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title): ----------------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Telephone Number (including Area Code): Tax Identification or Social Security No.: GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature: ----------------------------------------------------------- Name: --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Name of Firm: ------------------------------------------------------------------- Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Telephone Number (including Area Code): ----------------------------------------- Dated: ------------------------------------------------------------------ 7 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) of Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith, unless such holder(s) has/have completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions," or (b) if such Shares are tendered for the account of a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended) (each of the foregoing being referred to as 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 stockholders either if Share Certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing tendered Shares, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Stockholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (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 made available by Purchaser, must be received by the Depositary on or prior to the Expiration Date; and (iii) the Share Certificate(s) (or a Book-Entry Confirmation) representing all tendered Shares in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three (3) Nasdaq Stock Market trading days after the date of execution of such Notice of Guaranteed Delivery. If Share Certificates are forwarded separately in multiple deliveries to the Depositary, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) must accompany each such delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF 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 stockholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 8 3. Inadequate Space. If the space provided herein is inadequate, the Share Certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 4. Partial Tenders. (Not Applicable to Book-Entry Stockholders.) If fewer than all the Shares evidenced by any Share Certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such cases, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share 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 exactly with the name(s) as written on the face of the Share Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned 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 Share Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Share Certificates. If this Letter of Transmittal or any Share Certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of their authority so to 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 Share Certificates or separate stock powers are required unless payment is to be made to, or Share Certificates for Shares not tendered or not purchased are to be issued in the name of, a person or persons other than the registered holder(s). In the latter case, signatures on such Share 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 Share Certificate(s) listed, the Share Certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate(s). Signatures on such Share 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 any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if Share Certificate(s) for Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered Share Certificate(s) 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 person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or an exemption therefrom is submitted. Except as otherwise provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificate(s) listed in this Letter of Transmittal. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or Share Certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the person(s) signing this Letter of Transmittal or if a check and/or such Share Certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal must be completed. A Book-Entry Stockholder may request that Shares not accepted for payment be credited to such 9 account maintained at the Book-Entry Transfer Facility as such Book-Entry Stockholder may designate under "Special Payment Instructions." If no such instructions are given, such Shares not accepted for payment will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. Waiver Of Conditions. Subject to the terms and conditions of the Merger Agreement (as defined in the Offer to Purchase), the conditions of the Offer (other than the Minimum Condition, as defined in the Offer to Purchase) may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion. 9. 31% Backup Withholding; Substitute Form W-9. Under U.S. federal income tax law, a stockholder who tenders Shares pursuant to the Offer is required to provide the Depositary with his or her correct taxpayer identification number ("TIN") on Substitute Form W-9 and to certify that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN). If such stockholder is an individual, the TIN is his or her social security number. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments that are made to such stockholder with respect to Shares pursuant to the Offer may be subject to backup withholding (See below.) A stockholder who does not have a TIN may check the box in Part 3 of the Substitute Form W-9 if the stockholder has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. If the box is checked, payments made will be subject to backup withholding unless the stockholder has furnished the Depositary with his or her TIN within sixty (60) days. A stockholder who checks the box in Part 3 in lieu of furnishing his or her TIN should furnish the Depositary with his, her or its TIN as soon as it is received. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding requirements. In order for a foreign individual to qualify as an exempt recipient, that stockholder must submit a statement, signed under penalty of perjury, attesting to that individual's exempt status. (Form W-8.) Forms for such statements can be obtained from the Depositary. Stockholders are urged to consult their own tax advisors to determine whether they are exempt from these backup withholding and reporting requirements. If backup withholding applies, the Depositary is required to withhold 31% of any payments to be made to the stockholder. 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 by filing a tax return with the Internal Revenue Service. The Depositary cannot refund amounts withheld by reason of backup withholding. 10. Requests For Assistance or Additional Copies. Questions or requests for assistance may be directed to the Information Agent at its address and telephone number set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 11. Lost, Destroyed or Stolen Certificates. If any Share Certificate has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the Share Certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed Share Certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. 10 IMPORTANT TAX INFORMATION Under federal income tax law, a United States stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct TIN on Substitute Form W-9. If such stockholder is an individual, the TIN is his or her social security number. If a tendering stockholder is subject to backup withholding, he or she must cross out item (2) of the Certification box on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain stockholders (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 stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. Copies of Form W-8 are available from the Depositary. Exempt stockholders, other than foreign individuals, should furnish their TIN, write "Exempt" on the face of 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 stockholder. 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. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of his or her correct TIN by completing the Substitute Form W-9 certifying that the TIN provided on the Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN). PURPOSE OF FORM W-8 To prevent backup withholding on payments that are made to a foreign stockholder with respect to Shares purchased pursuant to the Offer, the foreign stockholder is required to submit an executed Form W-8 to the Depositary. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder 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 the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future, the stockholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I, the Depositary will withhold 31% on all payments of the purchase price. 11 - ------------------------------------------------------------------------------------------------------------------------- PAYOR'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY - ------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number OR RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Employer Identification Number FORM W-9 ---------------------------------------- ------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY For Payees exempt from backup withholding, see the PART 3 -- INTERNAL REVENUE SERVICE attached Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete Awaiting TIN [ ] as instructed therein. PART 2 -- 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 because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------ PAYOR'S REQUEST FOR TAXPAYER CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by IDENTIFICATION NUMBER (TIN) the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). SIGN HERE: 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. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld. Signature: Date: ----------------------------------------- ------------ 12 The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 ALL OTHERS CALL TOLL FREE: (800) 994-3227 DECEMBER 23, 1999 EX-99.A.3 4 FORM OF NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT (a)(3) NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. As set forth in Section 3 of the Offer to Purchase described below, this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available or the certificates for Shares and all other required documents cannot be delivered to the Depositary (identified below) on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This form may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution (as defined in Section 3 of the Offer to Purchase). The Depositary for the Offer is: AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail: By Hand or Overnight Delivery: 40 Wall Street, 46th Floor 40 Wall Street, 46th Floor New York, NY 10005 New York, NY 10005 Attn: Reorganization Department Attn: Reorganization Department
By Facsimile Transmission (for Eligible Institutions Only): (718) 234-5001 Confirm Receipt of Facsimile by Telephone Only: (718) 921-8200 For Information Call: (718) 921-8200 ------------------------ DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION 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 Ladies and Gentlemen: The undersigned hereby tenders to SERSys Acquisition Corporation, a Delaware corporation that is an indirect (through SER (USA), Inc.) wholly owned subsidiary of SER Systeme AG, a German corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 23, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of common stock, par value $0.01 per share (the "Common Stock"), and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997, between EIS International, Inc., a Delaware corporation (the "Company") and BankBoston N.A., as amended (such Rights, together with the Common Stock are collectively referred to as the "Shares"), of the Company, indicated below pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. SIGN HERE: ---------------------------- Number of Shares: -------------------------------------------------------------- Certificate Number(s) (If Available): ------------------------------------------ Check box if Shares will be tendered by book-entry transfer: [ ] The Depository Trust Company Account Number: ----------------------------------- Dated: ------------------------------------------------------------------------- Name(s) of Record Holder(s): --------------------------------------------------- - ------------------------------------------------------------------------------- (PLEASE PRINT) Address(es): ------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Telephone Number(s) ----------------------------------------------------------- (INCLUDING AREA CODE(S)) Signature(s): ------------------------------------------------------------------ - ------------------------------------------------------------------------------- 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature Program (MSP) or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended), (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 the certificates evidencing all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares, in either case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three (3) Nasdaq Stock Market trading days after the date hereof. The Eligible Institution that completes this form must communicate this guarantee to the Depositary and must deliver the Letter of Transmittal and Share Certificates to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. Name of Firm: ------------------------------------------------------------------ Authorized Signature: ---------------------------------------------------------- Address: ----------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Title: ------------------------------------------------------------------------- Name: --------------------------------------------------------------------------- (PLEASE PRINT OR TYPE) Telephone Number (Including Area Code): ---------------------------------------- Dated: ____________________ (a) NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A.4 5 FORM OF LETTER FROM THE INFORMATION AGENT 1 EXHIBIT (a)(4) D.F. KING & CO., INC. OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. AT $6.25 NET PER SHARE BY SERSYS ACQUISITION CORPORATION AN INDIRECT WHOLLY OWNED SUBSIDIARY OF SER SYSTEME AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 24, 2000 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. DECEMBER 23, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been engaged to act as Information Agent in connection with the Offer by SERSys Acquisition Corporation, a Delaware corporation ("Purchaser") that is an indirect (through SER (USA), Inc. ("SER USA") wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent"), to purchase for cash all of the outstanding shares of common stock, par value $0.01 per share (the "Common Stock"), and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997, between EIS International, Inc., a Delaware corporation (the "Company") and BankBoston N.A., as amended, (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), of the Company, at a purchase price of $6.25 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated December 23, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary (as defined below) on or prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. 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. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. The Offer to Purchase, dated December 23, 1999; 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; 2 3. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if Share Certificates are not immediately available or if such certificates and all other required documents cannot be delivered to American Stock Transfer & Trust Company (the "Depositary") on or prior to the Expiration Date or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. The Letter to Stockholders of the Company from the President and Chief Executive Officer of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9; 5. A form of Letter to Clients 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; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. A return envelope addressed to American Stock Transfer & Trust Company, as Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 24, 2000, UNLESS THE OFFER IS EXTENDED. Upon the terms and subject to the satisfaction or waiver (where applicable) of the conditions of the Offer, Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered on or prior to the Expiration Date promptly after the Expiration Date. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, tendered Shares if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Share Certificates or timely confirmation of a book-entry transfer of such Shares, if such procedure is available, into the Depositary's account at a Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to the procedures set forth in Section 2 of the Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or an Agent's Message (as defined in the Offer to Purchase) and (iii) any other documents required by the Letter of Transmittal. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which constitutes more than 50% of the voting power (determined on a fully diluted basis) on the date of purchase, of all securities of the Company entitled to vote generally in the election of directors or in a merger, and (2) the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act") applicable to the purchase of the Shares pursuant to the Offer having expired or been terminated (the "HSR Approval"). The Offer is also subject to certain other terms and conditions as disclosed in Sections 15 of the Offer to Purchase. The Board of Directors of the Company has unanimously (with Messrs. McGowan and Burton abstaining) approved the Merger Agreement (as defined below) and the transactions contemplated thereby, including the Offer and the Merger (each as defined below), determined that the terms of the Offer and the Merger are advisable and fair to, and in the best interests of, the holders of Shares, and recommends that the holders of Shares tender their Shares to Purchaser pursuant to the Offer. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of December 17, 1999 (as it may be amended or supplemented from time to time, the "Merger Agreement"), among Parent, Purchaser, and the Company. The Merger Agreement provides, among other things, for the making of the Offer by Purchaser, and further provides that, following the completion of the Offer, upon the terms and subject to the conditions of 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"). Following the effective time of the Merger (the "Effective Time"), the Company will continue as the surviving corporation 3 and become a wholly owned subsidiary of SER USA and an indirect wholly owned subsidiary of Parent, and the separate corporate existence of Purchaser will cease. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than (1) Shares held by the Company as treasury stock or by Parent, Purchaser or any other direct or indirect wholly owned subsidiary of Parent or the Company, which will be canceled and (2) Shares, if any, held by stockholders who have properly exercised appraisal rights under Section 262 of the DGCL) will, by virtue of the Merger and without any action on the part of the holders of the Shares, be converted into the right to receive in cash the per Share price paid in the Offer, payable to the holder thereof, without interest, upon surrender of the Share Certificate formerly representing such Share, less any required withholding taxes. In order to take advantage of the Offer, (1) a duly executed and properly completed Letter of Transmittal (or a facsimile thereof) and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and other required documents should be sent to the Depositary, and (2) either Share Certificate(s) representing the tendered Shares should be delivered to the Depositary or such Shares should be tendered by book-entry transfer and a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares should be delivered to the Depositary, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. Holders of Shares whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior the Expiration Date of the Offer, or who cannot complete the procedure for delivery by book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Purchaser will not pay any commissions or fees to any broker, dealer or other person (other than the Depositary and the Information Agent (as described in the Offer to Purchase)) for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser also will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, 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 the Information Agent or the undersigned, at the respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent. Very truly yours, D.F. KING & CO., INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF PURCHASER, PARENT, SER USA, THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.A.5 6 FORM OF LETTER TO CLIENTS 1 EXHIBIT (a)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. AT $6.25 NET PER SHARE BY SERSYS ACQUISITION CORPORATION, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF SER SYSTEME AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 24, 2000, UNLESS THE OFFER IS EXTENDED. DECEMBER 23, 1999 To Our Clients: Enclosed for your consideration is an Offer to Purchase dated December 23, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal, relating to an offer by SERSys Acquisition Corporation, a Delaware corporation ("Purchaser") that is an indirect (through SER (USA), Inc.) ("SER USA")) wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent"), to purchase all of the outstanding shares of Common Stock, par value $0.01 per share and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $0.01 per share, pursuant to that certain Rights Agreement, dated as of May 16, 1997 between EIS International, Inc., a Delaware corporation (the "Company") and BankBoston N.A., as amended, (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), of the Company, at a purchase price of $6.25 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to American Stock Transfer & Trust Company, the Depositary, on or prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedure for delivery by book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US 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 LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The Offer price is $6.25 per Share, net to the seller in cash. 2. The Offer is being made for all of the outstanding Shares. 3. The Board of Directors of the Company has unanimously (with Messrs. McGowan and Burton abstaining) approved Merger Agreement (as defined below) and the transactions contemplated thereby, including the Offer and the Merger (as defined below), determined that the terms of the 2 Offer and the Merger are advisable and fair to, and in the best interests of, the holders of Shares and recommends that the holders of the Shares accept the Offer and tender their Shares. 4. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of December 23, 1999 (as it may be amended or supplemented from time to time, the "Merger Agreement"), among Parent, Purchaser, and the Company. The Merger Agreement provides, among other things, for the making of the Offer by Purchaser, and further provides that, following the completion of the Offer, upon the terms and subject to the conditions of 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"). Following the effective time of the Merger (the "Effective Time"), the Company will continue as the surviving corporation and become a wholly owned subsidiary of SER USA and an indirect wholly owned subsidiary of Parent, and the separate corporate existence of Purchaser will cease. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than (1) Shares held by the Company as treasury stock or by Parent, Purchaser or any other direct or indirect wholly owned subsidiary of Parent or the Company, which will be canceled and (2) Shares, if any, held by stockholders who have properly exercised appraisal rights under Section 262 of the DGCL) will, by virtue of the Merger and without any action on the part of the holders of the Shares, be converted into the right to receive in cash the per Share price paid in the Offer, payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such Share, less any required withholding taxes. 5. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on January 24, 2000, unless the Offer is extended. 6. Tendering stockholders 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 Shares pursuant to the Offer. 7. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the Expiration Date a number of shares which constitutes more than 50% of the voting power (determined on a fully diluted basis) on the date of purchase, of all of the securities of the Company entitled to vote generally in the election of directors or in a merger, and (2) the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act") applicable to the purchase of the Shares pursuant to the Offer having expired or been terminated (the "HSR Approval"). The Offer is also subject to certain other terms and conditions as more fully disclosed in Sections 15 of the Offer to Purchase. The Offer is being made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to and tenders will not be accepted from or on behalf of the holders of Shares in such state. In any jurisdiction where the securities, "blue sky" or other laws require the Offer to be made by a licensed broker dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. IF YOU WISH TO HAVE US TENDER ANY OR ALL OF THE SHARES HELD BY US FOR YOUR ACCOUNT, PLEASE INSTRUCT US BY COMPLETING, EXECUTING AND RETURNING TO US THE INSTRUCTION FORM CONTAINED IN THIS LETTER. IF YOU AUTHORIZE A TENDER OF YOUR SHARES, ALL SUCH SHARES WILL BE TENDERED UNLESS OTHERWISE SPECIFIED IN SUCH INSTRUCTION FORM. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF ON OR PRIOR TO THE EXPIRATION OF THE OFFER. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. AT $6.25 PER SHARE BY SERSYS ACQUISITION CORPORATION The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated December 23, 1999 (the "Offer to Purchase") and the related Letter of Transmittal pursuant to an offer by Sersys Acquisition corporation, a Delaware corporation that is an indirect wholly owned subsidiary of SER Systeme AG, a German corporation, to purchase all of the outstanding shares of Common Stock, par value $0.01 per share, together with their associated rights to purchase Series A Preferred Stock, par value $0.01 per share (collectively, the "Shares"), of EIS International, Inc., a Delaware corporation. This will instruct you to tender 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 to Purchase and in the related Letter of Transmittal furnished to the undersigned. Number of Shares to be Tendered* SIGN HERE: - ------------------------------------ -------------------------------------------------------- Account Number: ---------------- -------------------------------------------------------- SIGNATURE(S) Dated: ---------------------------- PLEASE PRINT NAME(S): -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- ADDRESS: -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- Telephone Number(s) (including Area Code): -------------------------------------------------------- TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER
- --------------- * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. EX-99.A.6 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID # 1 EXHIBIT (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE (YOU) TO GIVE THE PAYOR -- 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 payor. All "Section" references are to the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue Service.
- --------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF -- - --------------------------------------------------------- 1. Individual The individual 2. Two or more individuals The actual owner of (joint account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint The actual owner of account) the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gifts to Minors Act) 5. Adult and minor (joint The adult, or if the account) minor is the only contributor, the minor(4) a. The usual revocable The grantor- savings trust account trustee(1) (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under state law - --------------------------------------------------------- - --------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF -- - --------------------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, estate, or The legal entity(4) pension trust 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization account 10. Partnership The partnership 11. A broker or registered The broker or nominee nominee 12. Account with the Department The public entity 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 your 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 taxpayer identification 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 do not have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, at the local Social Security Administration office, or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM, and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under section 501(a), an individual retirement account (IRA), or a custodial account under Section 403(b)(7), if the account satisfies the requirements of Section 401(f)(7). - The United States or a state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly owned agency or instrumentality of any one or more of the foregoing. - An international organization or any agency or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - 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. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest generally exempt from backup withholding include: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more 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. - Mortgage interest paid to you. Certain payments, other than payments of interest, dividends, and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see Sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N. Exempt payees described above must file Form W-9 or a substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYOR. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART 2 OF THE FORM, AND RETURN TO THE PAYOR IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS. ALSO SIGN AND DATE THE FORM. PRIVACY ACT NOTICE -- Section 6109 requires you to provide your correct taxpayer identification number to payors, who must report the payments to the IRS. The IRS uses the number for identification purposes and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payors must be given the numbers whether or not recipients are required to file tax returns. Payors 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 payor. Certain penalties may also apply. PENALTIES (1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail to furnish your taxpayer identification number to a payor, 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) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully 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.7 8 SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(7) 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 solely by the Offer to Purchase dated December 23, 1999, and the related Letter of Transmittal, and any amendments or supplements thereto, and is being made to all holders of Shares. Purchaser (as defined below) is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer, Purchaser will make a good faith effort to comply with such statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to and tenders will not be accepted from or on behalf of the holders of Shares in such state. In any jurisdiction where the securities, "blue sky" or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF EIS INTERNATIONAL, INC. AT $6.25 NET PER SHARE BY SERSYS ACQUISITION CORPORATION, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF SER SYSTEME AG THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 24, 2000, UNLESS THE OFFER IS EXTENDED. SHARES THAT ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. SERSys Acquisition Corporation, a Delaware corporation ("Purchaser") that is an indirect (through SER (USA), Inc. ("SER USA")) wholly owned subsidiary of SER Systeme AG, a German corporation ("Parent"), hereby offers to purchase all of the outstanding shares of Common Stock, par value $0.01 per share and their associated rights (the "Rights") to purchase Series A Preferred Stock, par value $.01, pursuant to that certain Rights Agreement, dated as of May 16, 1997 between EIS International, Inc., a Delaware corporation (the "Company"), and BankBoston N.A., as amended, (the "Rights Agreement") (such Rights, together with the Common Stock, are collectively referred to herein as the "Shares"), of the Company, at a purchase price of $6.25 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 23, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER A NUMBER OF SHARES WHICH CONSTITUTES MORE THAN 50% OF THE VOTING POWER (DETERMINED ON A FULLY DILUTED BASIS) ON THE DATE OF PURCHASE, OF ALL OF THE SECURITIES OF THE COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER, AND (2) THE STATUTORY WAITING PERIOD, UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT") APPLICABLE TO THE PURCHASE OF THE SHARES PURSUANT TO THE OFFER HAVING EXPIRED 2 OR BEEN TERMINATED (THE "HSR APPROVAL"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS AS DISCLOSED IN SECTION 15 OF THE OFFER TO PURCHASE. THE OFFER IS NOT CONDITIONED ON SECURING FINANCING. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. As promptly as practicable following consummation of the Offer and after satisfaction or waiver of all conditions to the Merger (as defined below) set forth in the Merger Agreement (as defined below), Purchaser intends to acquire the remaining equity interest in the Company not acquired in the Offer by consummating the Merger. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of December 17, 1999 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, for the making of the Offer by Purchaser, and further provides that, following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement and in accordance with the Delaware General Corporation Law ("DGCL"), Purchaser will be merged with and into the Company (the "Merger"). Following the effective time of the Merger (the "Effective Time"), 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, and the separate corporate existence of Purchaser will cease. At the Effective Time, each Share issued and outstanding immediately prior to the Effective Time (other than (1) Shares held by the Company as treasury stock or by Parent, Purchaser or any other wholly owned direct or indirect subsidiary of Parent or the Company, which will be canceled and (2) Shares, if any, held by stockholders who have properly exercised appraisal rights under Section 262 of the DGCL) will, by virtue of the Merger and without any action on the part of the holders of the Shares, be converted into the right to receive in cash the per Share price paid in the Offer, payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such Share, less any required withholding taxes. The Merger Agreement is more fully described in Section 11 of the Offer to Purchase. Parent has entered into a Tender and Voting Agreement dated as of December 17, 1999 (the "Tender Agreement") with certain officer and director stockholders of the Company (the "Management Stockholders") holding in the aggregate 1,697,700 Shares (including vested Company Options (as such term is defined in the Offer to Purchase) and Company Options that will vest within sixty (60) days of the date of the Merger Agreement), representing approximately 11.5% of the issued and outstanding Shares. Pursuant to the Tender Agreement, each Management Stockholder has agreed, provided the Merger Agreement has not been terminated, to tender to Purchaser all Shares beneficially owned by such Management Stockholder, agreed to vote such Shares in favor of approval of the Merger Agreement and the transactions contemplated thereby and granted an irrevocable proxy to Parent with respect to such Shares. THE BOARD OF DIRECTORS OF THE COMPANY HAS 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 TERMS OF THE OFFER AND THE MERGER ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to American Stock Transfer & Trust Company (the "Depositary") of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for 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 tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to stockholders whose Shares have been accepted for payment. Under no circumstances will interest on the purchase price for Shares be paid by Purchaser, regardless of any extension of the Offer or any delay in making such payment. 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 (i) certificates representing such Shares, or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as such term is defined in the Offer to Purchase) pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature 3 guarantees, or an Agent's Message (as such term is defined in the Offer to Purchase) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE OF THE SHARES ACCEPTED FOR PAYMENT, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), each of Parent and Purchaser reserves the right to waive any or all conditions to the Offer (other than the Minimum Condition) and to make any other changes in the terms and conditions of the Offer. Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the Commission if, by the Expiration Date, any or all of the conditions to the Offer have not been satisfied, Purchaser reserves the right (but will not be obligated) to (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) waive such unsatisfied conditions (other than the Minimum Condition) and purchase all Shares validly tendered or (iii) extend the Offer and, subject to the terms of the Offer (including the rights of stockholders to withdraw their Shares), retain the Shares which have been tendered, until the termination of the Offer, as extended. Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the Commission, Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 15 of the Offer to Purchase have occurred or have been determined by Purchaser to have occurred, to (i) extend the period of time during which the Offer is open and thereby postpone acceptance for payment of, and payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer in any respect permitted by the Merger Agreement by giving oral or written notice of such amendment to the Depositary. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof to be made no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering stockholder to withdraw such stockholder's Shares. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, January 24, 2000, unless and until the Purchaser, in its sole discretion (but subject to the terms and conditions of the Merger Agreement), has extended the period during which the Offer is open, in which event the term "Expiration Date" means the latest time and date at which the Offer, as so extended by the Purchaser, will expire. Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares, whether or not Purchaser exercises its right to extend the Offer. Tenders of Shares made pursuant to the Offer are irrevocable, except 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 by Purchaser pursuant to the Offer, may also be withdrawn at any time after February 20, 2000. 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 notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates for the Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of the certificates, the serial numbers shown on such certificates must be submitted to the Depositary and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution (as such term is 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 procedure for book-entry transfer 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 (and otherwise comply with the Book-Entry Transfer Facility's procedures), in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the second sentence of this paragraph. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 of the Offer to Purchase. All questions as to the form and validity (including 4 time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, and any such determination will be final and binding. None of Purchaser, Parent, any of their affiliates or assigns, 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. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by Purchaser to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH 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 as set forth below. Requests for copies of the Offer to Purchase and the related Letter of Transmittal and all other tender offer materials may be directed to the Information Agent and copies will be furnished promptly at Purchaser's expense. Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 ALL OTHERS CALL TOLL FREE: (800) 994-3227 December 23, 1999 EX-99.A.8 9 JOINT PRESS RELEASE 1 Exhibit (a)(8) MONDAY, DECEMBER 20, 1999 JOINT PRESS RELEASE EIS INTERNATIONAL, INC. TO BE ACQUIRED BY SER SYSTEME AG HERNDON, Va., Dec. 20, 1999 / -- EIS International, Inc. (Nasdaq: EISI), a leading provider of call center technology, and SER Systeme AG (Frankfurt Neuer Markt: SES), Europe's largest supplier of document management systems and workflow solutions, today jointly announced the signing of a definitive agreement under which an SER subsidiary will make a tender offer to acquire all of EIS' outstanding shares of common stock at $6.25 per share. The value of the transaction is approximately $69 million and is expected to close during the first quarter of 2000, subject to EIS shareholder and regulatory approvals. "This transaction brings together two complementary organizations," said James E. McGowan, EIS President and CEO. "EIS has strong telephony technology that complements the Internet and process automation technologies of SER." Mr. McGowan also stated, "Current customers will continue to be critical to EIS' success, and we plan to enhance and support our current advanced solutions for outbound, inbound, and blended applications for the call center industry. EIS will continue operating out of its Virginia offices with existing management." Under the agreement, SER will begin a tender offer for all of the Company's outstanding common stock on or before Thursday, December 23, 1999. The tender offer is expected to close at the end of January 2000 and will be followed by a merger of a subsidiary of SER into EIS. As a result of the merger, EIS will become a wholly owned subsidiary of SER. EIS shareholders would receive $6.25 per share in cash for their shares in the merger. About EIS EIS International, Inc., headquartered in Herndon, Virginia, is a leading provider of systems, software, and services for the call center industry. With approximately 77,000 workstations in 1,300 locations worldwide, EIS provides systems for telemarketing, customer service, fund-raising, market research, and collections. EIS systems increase productivity, enhance operational efficiency, and improve agent effectiveness in contact centers. Additional information about EIS is available by calling 800-274-5676, via email at info@eisi.com, or by visiting the company's web site at http://www.eisi.com . 2 About SER SER, headquartered in Neustadt/Wied, Germany, is Europe's largest supplier of document management systems and workflow solutions. The company has 1,100 employees worldwide, with strong direct sales and support organizations in the U.S., Germany, the U.K., France, Austria, and Switzerland. Additional information is available on the company's web site at http://www.ser.com. Cautionary Statement This release may contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created thereby. All statements included herein regarding the proposed transaction with SER, EIS' financial position, business strategy and plans, objectives for future operations, market and industry conditions, new business and other market opportunities, product development, and market acceptance of new and existing products and technology -- other than statements of historical facts -- are "forward-looking statements." While those statements reflect EIS' reasonable assumptions, based upon management's beliefs and information currently available to it, EIS can give no assurance that such statements will prove correct. Those statements reflect the current risk, uncertainties, and assumptions related to certain factors including, without limitation, the ability of SER and EIS to satisfy the conditions precedent to the closing of the tender offer included in the agreement, competitive factors, general economic conditions, marketplace fluctuations, customer relations, technological change, product introductions and acceptance, distribution networks, changes in industry practices, one-time events, and other factors described herein and under the heading "Factors Affecting Future Results" in EIS' quarterly reports on Form 10-Q and its annual report on Form 10-K. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, EIS may experience material fluctuations in future quarterly and annual operating results that may vary materially from those described herein and that could materially and adversely affect its business, financial condition, operating results, and stock price. EIS may not update its forward-looking statements. EX-99.B.1 10 LETTER AGREEMENT DATED DECEMBER 16, 1999 1 Exhibit (b)(1) Mr. Gert J. Reinhardt IKB INTERNATIONAL SER Systeme AG Societe Anonyme Innovationspark Rahms D-53577 Neustadt Germany December 16, 1999 Dear Sirs, Following our mutual discussions we herewith offer you the following CHF- fixed-rate credit (IN 1): Debtor: SER Systeme AG Produkte und Anwendungen der Datenverarbeitung D-53577 Neustadt Credit amount: Swiss Francs to the equivalent of EUR 15,400,000.00 (in words: Euro fifteen million four hundred thousand) The EUR/CHFdrawing rate will be determined bindingly based on the reference quotation of the public banks in Frankfurt (Reuter's page "EUROFX/1") 2 bank working days prior to payout and you will be informed about the same. Interest rate: 4.05 % p.a. from the day of payout until 06.01.2003 Payout ratio: 100% Utilization of the credit: The credit is used to co-finance the purchase price of the company: EIS International, Inc. 555 Herndon Parkway 556 Herndon Virginia 20170, U.S.A.; Redemption: in eight equal quarterly rates in Swiss Francs on 1/05, 4/05, 7/05, and 10/05, respectively, of each year, beginning on 4/05/01 and ending on 1/06/03. We will inform you about the amounts of redemption separately after payout. 2 Payment of interest: quarterly, supplementary on 1/05, 4/05,7/05 and on 10/05 of each year, starting on 4/05/00 and ending on 1/06/03; interest has to be paid at the end of each interest period in Swiss Francs; Method of interest calculation: Euro-method (elapsed calendar days divided by 360 days); Accounting connection: Payments to us may please be directed to our account at UBS AG, CH-Zurich, account No. 230-60798.05Q in Swiss Francs. Further you have the possibility to carry out EUR/CHF cash bargains or futures tradings with us for the settlement of the interest and amounts for redemption. After the completion of such a currency exchange transaction with us you have the possibility to take part in our cost-free debit transfer order collection by signing and returning the enclosed direct debiting authorization. Damages for delayed payment: For all amounts which do not reach us on the due date we will charge interest amounting to the respective Bank Rate of Schweizer Nationalbank plus 5% p.a. or, in case of an order for currency exchange transactions or the enclosed direct debiting authorization amounting to the respective basic interest rate according to Section 1 of the Bank Rate Transitional Act plus 5% p.a. Allowance for basic agreement: We grant this credit in allowance for the basic agreement of IKB Deutsche Industriebank AG, Dusseldorf dated 12/08/99; Security: The security for our commitment as well as that of IKB Deutsche Industriebank AG, Dusseldorf and Berlin, thereafter referred to as 'IKB', including the currency risk in connection with the CHF-credit is: a negative/positive declaration according to the enclosed draft. No further securities are intended. This willingness depends on the condition that you have not offered further securities to other creditors. If you grant securities to other creditors, we will also be conceded securities which are acceptable to us. 3 Trust obligation: The securities are held in trust and are administrated by IKB for us. Payout procedure: The payout of the credit takes place as soon as the following documents are available to IKB: declaration of agreement on the enclosed copy of this letter; negative/positive declaration according to the enclosed draft; Purchase contract with EIS International, Inc., Virginia, USA, which should not result in any reservations from our side; Interim figures which are not older than 5 months and which do not show a deterioration of the credit status. Applicable law: Federal Republic of Germany; Further parts of the contract: Our enclosed 'general terms and conditions'; Our advice on currency risks of this financing includes the enclosed indicative break-even-analysis which we will be glad to supply in the respective current version at the time of payout and on request. The information brochure which has to be legally binding signed bearing the title 'Important information about loss risks with futures tradings'. Place of jurisdiction: The courts of local jurisdiction Compulsory registration: We wish to point out your obligation of registration according to Section 26 of the foreign trade and payments act and Section 59 and possibly Section 62 of the foreign trade and payments order (payment and stock report on claims and obligations. The LZB (clearing bank) which is responsible for you will inform you about the formalities of registration and will provide you with the necessary forms and documents with explanations. Obligation of information, For the duration of our business connection right of inspection and you will provide us with your annual balance examination: sheet with profit and loss account and will permit us the inspection of your business records and your firm. If the completion of an annual financial statement is 4 delayed, you will supply us with the preliminary figures. Reservation period: Our obligation of payment ends if the conditions for payout are not met by 2/29/00; Commission for appropriation: 0.375% p.m. on all credit amounts which are not paid out beginning from 1/05/00; Acceptance: by signing and returning the copy of this letter within two weeks. We are happy to help you with this credit. Yours faithfully IKB International /s/ Illegible Enclosures Important information: We kindly request you to direct all correspondence concerning the securities directly to our branch with the following address: IKB Deutsche Industriebank AG Niederlassung Hessen, Rheinland Pfalz, Saarland Postfach 90 05 64 D-60445 Frankfurt/Main EX-99.B.2 11 LETTER AGREEMENT DATED DECEMBER 15, 1999 1 Exhibit (b)(2) The Board of Management IKB Deutsche Industriebank SER Systeme AG Innovationspark Rahms D-53577 Neustadt/Wied December 15, 1999 Dear Sirs, Following our discussions, we are pleased to offer you a credit (Credit 4) as follows: Nominal amount of credit EUR 10,225,000.00 Disbursement rate 100% Interest rate 4.75% p.a. Method of computing interest 360 days divided by 360 Interest payment date Payable quarterly in arrears by 15 March, 15 June, 15 September and 15 December of each year Repayment of principal By 5 April 2000 in one sum. Prolongation We are prepared to prolong the credit beyond 5 April 2000 for periods of at least 3 months each. We would submit proposals in good time on the conditions, which would then apply (discount, interest and repayment terms), whereby we are tentatively proceeding on a term up to 30 November 2000. Compensation for late payment On sums not received by us on time, we will charge interest at the base rate valid at such time pursuant to Section 1 Discount Rate Transition Act plus 5% p.a. Validity of disbursement commitment Our disbursement commitment will lapse if the preconditions for disbursement are not fulfilled by 28 February 2000. Granting under our commitment in We are granting this credit within the principle scope of our commitment in principle of 8 December 1999. Application of the credit The credit is to be put towards funding the purchase price for 2 the company: EIS International, Inc. 555 Herndon Parkway, Herndon Virginia 20170, USA Security for our overall commitment Negative/positive declaration as per the and that of IKB International attached draft. Luxembourg Other security is not envisaged. Our willingness to grant this credit is subject to the proviso that you have also not given any other security to other lenders. Should you give securities to other lenders, we shall also be given securities of our choice. Preconditions for disbursement Disbursement of the credit will be effected as soon as we are in possession of: Declaration of consent as per the attached draft; Negative/positive declaration as per the attached draft; Purchase agreement with EIS International, Inc., with which we must be fully satisfied; Interim figures which must be not more than 5 months old and which do not indicate any deterioration in creditworthiness. Additionally, your existing credit with us, Credit 2, with a current value of EUR 10,225,837.62, must have been repaid. Other contractual documents Our attached "General Terms and Conditions." Duties of information Right to inspect and view During the term of our business relationship, you will regularly provide us with your annual financial statements and consolidated accounts and the audit report if necessary and allow us to inspect your business records and accounts and to view your premises. Should there be a delay in preparing your annual financial statements, you will initially provide us with your provisional figures. Acceptance By 21 December 1999 using the attached declaration of consent. We look forward to being able to assist your investments with this credit. IKB Deutsche Industriebank AG /s/DELHEY /s/ POHLMANN Delhey Pohlmann EX-99.B.3 12 LETTER AGREEMENT DATED DECEMBER 8, 1999 1 EXHIBIT (b)(3) [COMMERZBANK letterhead] Company Management SER Systeme AG Produkte und Anwendungen der Datenverarbeitung SER Systems Engineering GmbH SER Software Engineering GmbH Innovationspark Rahms 53577 Neustadt/Wied December 8, 1999 Dear Sir or Madam, With reference to the conversations held with you, we are pleased to confirm the agreements made. As discussed, we shall make a cash credit facility available to you to co-finance the acquisition of the company "EIS International Inc., Herndon, Virginia/USA" (hereinafter named "EIS") in the amount of DM 25,000,000.00 (in words: twenty five million Deutsche Mark) under your liability as joint and several debtors according to Section 421 of the German Civil Code, limited until April 30, 2000. As agreed, the credit facility will be utilised by SER Systeme AG Produkte und Anwendungen der Datenverarbeitung, Neustadt/Wied. You will be liable to us as joint and several debtors for all utilisations under this credit facility, without our being obliged to report to you any limit overdrafts or account balances. On your request, we are prepared any time to inform you of the balances in all credit accounts. Currently and until further notice, we charge you 6.25% interest p.a. on each drawdown for utilizations on current account, for which you will receive monthly closing statements. In addition, we shall charge a commitment fee of 0.5% p.a. on the unutilized portion of this credit facility for the period from January 5, 2000 to April 30, 2000. We are gladly prepared to extend to you cash advances under the above-mentioned cash credit facility. The term and the conditions will be agreed with you separately in each case. On this occasion, we point out that cash advances are traded two days in advance according to the European market practice. 2 Blatt - 2 - zum Brief vom 8. Dezember 1999 Our credit confirmation is subject to the following conditions: 1. The due diligence report has been submitted to us only in draft form to date. The final report may not include any further risks. 2. You will undertake irrevocably to use these credit balances maintained by EIS for the respective repayment of the interim loans. 3. Exclusion of any liability or warranties whatsoever by SER, for instance towards the existing shareholders or the staff of EIS, beyond the payment of the purchase price. 4. You will undertake not to sell the shares in EIS without giving us prior notice thereof and obtaining our express consent thereto, or not to dispose thereof otherwise. At the request of Commerzbank AG which shall be permissible at all times, you will further undertake to pledge all rights and claims to the shares to which you are entitled. Subject to unchanged financial circumstances, we already agree today to reschedule the above-mentioned cash credit facility for DM 13 million with a term of 3 years, if the following preconditions are met: - - Submission of the annual accounts of all three borrowers, SER Group and EIS as of December 31, 1999, at least in provisional form. In this connection we assume that no restructuring losses are expected from the acquisition of EIS and that favourable balance sheet and income figures will be further shown. - - Submission of balance sheet and profitability plans for the SER Group, both under inclusion of and for EIS alone, which evidence a continuing positive development. - - Submission of the final acquisition agreement for the purpose of having it checked by our own specialized departments. In addition, the following shall be deemed agreed for the duration of the credit relationship: - - You will treat us pari passu with other lenders granting credits with equal terms as regards the provision of credit collateral and the agreement of special credit conditions. - - The consolidated equity of the SER Group does not fall below a ratio of at least 20% in the consolidated total assets. The ratio is calculated as follows: 3 Blatt - 3 - zum Brief vom 8. Dezember 1999 consolidated equity of the SER Group (= nominal capital + capital reserves + other revenue reserves + net income ./. net loss + profits carried forward ./. loss carried forward) + shareholder loans ./. goodwill ./. claims on shareholders ---------------------------- total assets ./. goodwill ./. claims on shareholders The ratios are calculated based on the balance sheets as of December 31 of each year which are to be submitted by April 30 of the following year. If the above-mentioned obligations or ratios are not complied with or attained, or if the result of the calculation of the ratio is not notified to the bank, or not notified to the bank in due time, or if the obligation is not complied with, the bank will set a date to remedy this breach, if a remedy appears possible at short notice. Otherwise, and if the date so set expires without result, the bank shall be entitled to terminate the credit facility and to declare the outstanding balance due for immediate repayment without a notice period. Independently of the term of these credits, this financial covenant shall apply also to the cash credit facility for DM 10 million confirmed by our letter dd. October 30, 1998. In addition, our General Business Conditions shall apply in the January 1998 version which is enclosed herewith. Other assets shall be liable to us as pledge as per no. 14 of our General Business Conditions. With respect to your being year 2000 compliant, we would kindly ask you to make the following confirmation: "We confirm that our computer systems (both hardware and software) and other equipment, appliances and installations which (may) contain electronic parts have been listed in detail and checked as to their year 2000 compliance. For this purpose we have also obtained - to the extent feasible - the statements of the producers regarding the year 2000 compliance of their products. We further confirm to you that we completed all required conversion activities and all required tests (including integration tests, system tests and future tests) by September 30, 1999 and that we asked all our important suppliers, customers and business partners about their year 2000 compliance by September 30, 1999. We undertake that, by December 31, 1999 at the latest, we shall have prepared and tested contingency plans for the event of disruption or defective function of our essential systems and business processes, and, for the period directly following the turn of the year, we shall have 4 Blatt - 4 - zum Brief vom 8. Dezember 1999 taken corresponding precautions so that any occurring disruptions or defects can be immediately recognized, examined and remedied." With reference to the provisions of the German Banking Act, we would ask you to keep us informed of the financial situation of your company group promptly and provide us with your annual accounts and auditor's reports as soon as they have been completed. Under the requirements of the Federal Banking Supervisory Office we must reserve the right to terminate credits, should any borrowers fail to comply with their disclosure obligation. This shall not affect our rights of termination which result from our "General Business Conditions" or any other agreement. In conclusion, we ask you to consent to the disclosure of information in connection with our refinancing. If the credit claims arising from this agreement (including any future cash advances) are transferred or pledged by the bank to a central bank or other credit institution (hereinafter generally named refinancing institution) in connection with its own refinancing or used for refinancing purposes by means of another legal instrument, the borrowers agree in such cases that the bank may disclose their names and addresses to the refinancing institution, in addition to the other information required (e.g. credit amount, maturity, (partial) repayments and renewals). Please confirm your agreement to the contents of this letter and the receipt of our "General Business Conditions" in the January 1998 version by signing the enclosed copy hereof in a legally binding manner and returning it to us. We are pleased to be able to make this credit facility available to you and hope to continue our pleasant cooperation. Yours sincerely, C O M M E R Z B A N K Aktiengesellschaft Koblenz Branch /s/ SCHNUR /s/ ADAM (Schnur) (Adam) We declare that we agree to the contents of this letter in all its parts. At the same time we acknowledge the receipt of your "General Business Conditions" in the January 1998 version. We 5 Blatt - 5 - zum Brief vom 8. Dezember 1999 further authorise Commerzbank AG to inspect any public registers (commercial register, land register, etc.) which may concern us. We also give the above declaration concerning the millenium change and consent to the disclosure of information in connection with the refinancing. ................................... ................................... Place/date (SER Systeme AG Produkte und Anwendungen der Datenverarbeitung) ................................... ................................... Place/date (SER Systems Engineering GmbH) ................................... ................................... Place/date (SER Software Engineering GmbH) EX-99.C.1 13 AGREEMENT AND PLAN OF MERGER DATED DECEMBER 17,'99 1 EXHIBIT (c)(1) AGREEMENT AND PLAN OF MERGER by and among SER SYSTEME AG SERSYS ACQUISITION CORPORATION and EIS INTERNATIONAL, INC. Dated as of December 17, 1999 2 TABLE OF CONTENTS
Page ---- ARTICLE I THE OFFER AND THE MERGER..................................................1 1.1 The Offer................................................................1 1.2 Company Action...........................................................3 1.3 Directors................................................................3 1.4 The Merger...............................................................4 1.5 Closing..................................................................5 1.6 Effective Time...........................................................5 1.7 Effects of the Merger....................................................5 1.8 Conversion of Company Common Stock.......................................5 1.9 Options..................................................................6 1.10 Certificate of Incorporation.............................................6 1.11 Bylaws...................................................................6 1.12 Directors and Officers of Surviving Corporation..........................7 1.13 Alternate Transaction Structures, Etc....................................7 ARTICLE II EXCHANGE OF SHARES.......................................................7 2.1 Establishment of Exchange Fund...........................................7 2.2 Exchange of Shares.......................................................7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY...............................9 3.1 Corporate Organization...................................................9 3.2 Capitalization..........................................................10 3.3 Authority; No Violation.................................................11 3.4 Consents and Approvals..................................................12 3.5 Regulatory Reports......................................................12 3.6 Broker's Fees...........................................................12 3.7 Absence of Certain Changes or Events....................................13 3.8 Legal Proceedings.......................................................13 3.9 Taxes and Tax Returns...................................................13 3.10 ERISA and Employee Matters..............................................14 3.11 SEC Reports.............................................................17 3.12 Financial Statements....................................................17 3.13 Licenses; Compliance with Applicable Law................................17 3.14 Certain Contracts.......................................................17 3.15 [Reserved]..............................................................18 3.16 Investment Securities...................................................18 3.17 [Reserved]..............................................................18 3.18 Undisclosed Liabilities.................................................18 3.19 Environmental Liability.................................................18 3.20 Information Supplied....................................................19 3.21 State Takeover Laws; Rights Agreement...................................19 3.22 Insurance...............................................................19
i 3 3.23 Year 2000 Compliance....................................................19 3.24 Intellectual Property...................................................20 3.25 Opinion of the Company's Financial Advisor..............................22 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........................22 4.1 Corporate Organization..................................................22 4.2 Authority; No Violation.................................................23 4.3 Consents and Approvals..................................................23 4.4 Broker's Fees...........................................................24 4.5 Funds...................................................................24 4.6 Information Supplied....................................................24 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS................................24 5.1 Conduct of Company Businesses Prior to the Effective Time...............24 5.2 Forbearances of Company.................................................24 ARTICLE VI ADDITIONAL AGREEMENTS...................................................27 6.1 Company Stockholders Meeting; Preparation of Proxy Statement............27 6.2 Reasonable Best Efforts.................................................27 6.3 Access to Information...................................................28 6.4 Indemnification; Directors' and Officers' Insurance.....................29 6.5 Employee Benefits.......................................................29 6.6 Advice of Changes.......................................................30 6.7 Exclusive Negotiations..................................................30 6.8 No Solicitation.........................................................30 6.8 Publicity...............................................................32 6.9 State Takeover Statutes.................................................32 6.10 Payment of Bonuses......................................................32 ARTICLE VII CONDITIONS PRECEDENT...................................................33 7.1 Conditions to Each Party's Obligation To Effect the Merger..............33 ARTICLE VIII TERMINATION AND AMENDMENT.............................................34 8.1 Termination.............................................................34 8.2 Effect of Termination...................................................35 8.3 Amendment...............................................................36 8.4 Extension; Waiver.......................................................36 ARTICLE IX GENERAL PROVISIONS......................................................36 9.1 Nonsurvival of Representations, Warranties and Agreements...............36 9.2 Expenses................................................................36 9.3 Notices.................................................................37 9.4 Interpretation..........................................................38
ii 4 9.5 Counterparts............................................................38 9.6 Entire Agreement........................................................38 9.7 Governing Law, Jurisdiction and Venue...................................38 9.8 Severability............................................................38 9.9 Assignment; Third Party Beneficiaries...................................38 9.10 Enforcement.............................................................39 Annex I - Conditions of the Offer Annex II - Certificate if Incorporation of Surviving Corporation Annex III - Bylaws of Surviving Corporation Annex IV - Stock Option Plan
iii 5 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, dated as of December 17, 1999 (this "Agreement") is entered into by and among SER SYSTEME AG, a German corporation ("Parent"), SERSYS ACQUISITION CORPORATION ("Sub"), a Delaware corporation that is a wholly owned subsidiary of SER (USA), INC. ("SER USA"), a Delaware corporation that is a wholly owned subsidiary of Parent, and EIS INTERNATIONAL, INC., a Delaware corporation ("Company"). WHEREAS, the respective Boards of Directors of Parent, Sub and Company have determined that the Offer (as defined in Section 1.1) and (ii) the merger of Sub with and into Company (the "Merger") following the consummation of the Offer, with Company as the surviving corporation (the "Surviving Corporation"), each upon the terms and subject to the conditions set forth in this Agreement, are advisable and fair to, and in the best interests of, their respective stockholders; WHEREAS, as an inducement and condition to Parent and Sub entering into this Agreement, and concurrently with the execution of this Agreement, certain entities, individuals, directors and executive officers of Company are executing and delivering to Parent a Tender and Voting Agreement (the "Support Agreement") dated as of the date hereof, which provides, among other things that such parties agree to tender their shares of Company Common Stock in the Offer and, to vote such shares in favor of the Merger and the approval and adoption of this Agreement; WHEREAS, as an inducement and condition to Parent and Sub entering into this Agreement, and concurrently with the execution of this Agreement, James E. McGowan and Frederick C. Foley are each executing and delivering to Parent an employment agreement dated as of the date hereof and to be effective from and after the consummation of the Offer; and WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Offer and the Merger and also to prescribe certain conditions therefor. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I THE OFFER AND THE MERGER 1.1 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1, Parent shall cause Sub to, and Sub shall, as soon as practicable after the date hereof, but in any event within five (5) business days after the public announcement of the execution hereof, commence (within the meaning of Rule 14d-2(a) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), a tender offer (the "Offer") for all of the issued and outstanding shares of common stock, par value $0.01 per share, of Company (the "Company Common Stock") at a price of $6.25 per share (the "Per Share Price"), net to the sellers in cash, subject to the conditions set forth in Annex I hereto and incorporated herein by reference (the "Offer Conditions") including the Minimum Condition (as defined therein). (b) The Offer shall be made by means of an offer to purchase which shall contain as conditions only the Offer Conditions and, subject to the next succeeding sentence, shall otherwise contain, and be consistent with, the terms and conditions of the Offer as described in this Agreement. Each of Sub and Parent expressly 6 reserves the right, in its sole discretion, to waive any such condition and make any other changes to the terms of the Offer; provided, that, without the consent of Company, neither Parent nor Sub shall amend or waive the Minimum Condition, change the form of consideration to be paid in the Offer, decrease the Per Share Price or the number of shares of Company Common Stock sought, impose additional conditions to the Offer, or amend any other condition of the Offer in any manner adverse to the holders of the shares of Company Common Stock. The Per Share Price shall be net to the sellers in cash, without interest, subject to reduction only for any applicable withholding taxes. Notwithstanding the foregoing, Sub may, without the consent of Company, (i) extend the Offer on one or more occasions for up to ten (10) business days for each such extension beyond the then-scheduled expiration date (the initial scheduled expiration date being twenty (20) business days following commencement of the Offer), if at the then-scheduled expiration date of the Offer any of the conditions to Sub's obligation to accept for payment and pay for the shares of Company Common Stock shall not be satisfied or waived, but not later than February 28, 2000, until such time as such conditions are satisfied or waived, and, at the request of Company, Sub shall, subject to Parent's right to terminate this Agreement pursuant to Article VIII, extend the Offer for additional periods ending up to, but not later than, February 28, 2000, if the only condition not satisfied or earlier waived on the then-scheduled expiration date is the HSR Approval Condition (as defined in Annex I hereto), (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer and (iii) provided that Parent and Sub irrevocably waive the conditions, other than the Minimum Condition, to the Offer set forth in Annex I and agree not to assert such conditions as a basis for not consummating the Offer, extend the Offer for an aggregate period of not more than ten (10) business days beyond the latest expiration date that would otherwise be permitted under clause (i) or (ii) of this sentence if the Minimum Condition shall have been satisfied but there shall not have been tendered sufficient shares of Company Common Stock so that the Merger could be effected without a vote of Company's stockholders in accordance with Section 253 of the Delaware General Corporation Law (the "DGCL"). Subject to the terms of the Offer, including the Offer Conditions, Sub shall accept for payment and pay for all shares of Company Common Stock duly tendered, and not withdrawn, at the earliest time at which it is permitted to do so under applicable law; provided, that, as set forth above, Sub shall have the right, in its sole discretion, to extend the Offer for up to ten (10) business days notwithstanding the prior satisfaction or waiver of the Offer Conditions, in order to attempt to permit the tender of sufficient shares of Company Common Stock to effect the Merger pursuant to Section 253 of the DGCL. It is agreed that the Offer Conditions other than the Minimum Condition are solely for the benefit of Parent and Sub and that all Offer Conditions may be asserted by Parent or Sub, unless irrevocably waived, regardless of the circumstances resulting in a condition not being satisfied (except for any action or inaction by Sub or Parent constituting a breach of this Agreement) and, except with respect to the Minimum Condition, may be waived by Parent or Sub, in whole or in part at any time and from time to time, in their sole discretion. (c) As soon as practicable on the date of commencement of the Offer (within the meaning of Rule 14d-2(a) under the Exchange Act), Parent and Sub, with the cooperation of, and subject to the prior review thereof by, Company, shall file with the SEC a Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer that will contain or will incorporate by reference the Offer (or portions thereof) and forms of the related letter of transmittal and summary advertisement (which documents, together with any supplements or amendments thereto, and together with the Schedule 14D-1, are referred to herein collectively as the "Offer Documents"). Each of Parent, Sub and Company, with respect to information supplied by it for use in the Offer Documents, agrees promptly to correct the Offer Documents if and to the extent that any of them shall have become false or misleading in any material respect or any event occurs which should be set forth in an amendment or supplement to the Offer Documents, and Sub shall take all steps necessary to cause the Offer Documents as so corrected or supplemented to be filed with the SEC and such Offer Documents as so corrected to be disseminated to holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given the reasonable 2 7 opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC. Parent and Sub shall provide promptly the Company and its counsel with a copy of any written comments or telephonic notification of any oral comments Parent or Sub may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof. Parent and Sub shall use their reasonable best efforts to provide the Company and counsel with a reasonable opportunity to participate in all nonconfidential and substantive communications with the SEC and its staff, including any nonconfidential and substantive meetings and telephone conferences, relating to the Offer or this Agreement. (d) Parent shall provide to Sub all funds reasonably necessary to consummate the Offer, the Merger and any other transactions contemplated by this Agreement. 1.2 Company Action. (a) Subject to Section 1.2(b) below, Company hereby consents to the inclusion in the Offer Documents of the Company Board Recommendation (as defined in Section 3.21). (b) On the same day Parent and Sub first file the Schedule 14D-1 with the SEC, Company shall file with the SEC and mail to its stockholders a Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") which shall comply in all material respects with the provisions of applicable federal securities laws. Each of Company, Parent and Sub, with respect to information supplied by it for use in the Schedule 14D-9, agrees promptly to correct the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and Company shall take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and mailed to holders of shares of Company Common Stock to the extent required by applicable federal securities laws. The Schedule 14D-9 shall contain the Company Board Recommendation recommending that the holders of shares of Company Common Stock accept the Offer, which recommendation shall not be withdrawn, amended, modified or materially qualified in a manner adverse to Parent (nor shall the Board of Directors of Company publicly announce its intention to do so) except pursuant to Section 6.8(g) hereof. The Parent and its counsel shall be given the reasonable opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC. Company shall provide promptly the Parent and its counsel with a copy of any written comments or telephonic notification of any oral comments Parent or Sub may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt thereof. Company shall use its reasonable best efforts to provide Parent and its counsel with a reasonable opportunity to participate in all nonconfidential and substantive communications with the SEC and its staff, including any nonconfidential and substantive meetings and telephone conferences, relating to the 14D-9. (c) Company shall promptly furnish, or cause its transfer agent to furnish, to Parent or Sub a list of the record holders of shares of Company Common Stock and their addresses, as well as mailing labels containing the names and addresses of the record holders of such shares, lists of any non-objecting beneficial owners of such shares and lists of securities positions of such shares held in stock depositories, each as of the most recent practicable date, and shall furnish Parent or Sub with such additional information, including updated lists of holders of such shares, mailing labels and lists of securities positions, and other assistance as Parent, Sub or their agents may reasonably request for the purpose of disseminating the Offer Documents and communicating with the record and beneficial holders of shares of Company Common Stock with respect thereto. 1.3 Directors. (a) Promptly upon the purchase of and payment for shares of Company Common Stock by Sub which represent at least a majority of the shares of Company Common Stock then outstanding, Parent shall be entitled to designate a number of directors on the Board of Directors of Company equal to the product (rounded up to the nearest whole number) of the total number of the directors on such Board (after giving effect to the directors 3 8 elected pursuant to this sentence) multiplied by the percentage that such number of shares owned by Sub and its Affiliates (as defined in Rule 12b-2 of the regulations promulgated under the Exchange Act, "Affiliates") bears to the number of shares of Company Common Stock outstanding. Company shall, to the extent permitted under its Certificate of Incorporation and Bylaws, designate such directors for election to such class of the Company's Board of Directors standing for election on the furthest date from the date of such nomination. Company's obligations under this Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Parent or Sub will supply Company with, and be solely responsible for, any information with respect to either of them and their nominees, officers, directors and Affiliates required by Section 14(f) and Rule 14f-1. Upon receipt of such information from Parent or Sub, Company shall include in the Schedule 14D-9 (as an annex or otherwise) or a separate Rule 14f-1 information statement mailed to stockholders of Company promptly after the commencement of the Offer the information required by Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected to the Board of Directors of Company. (b) At the time specified in the first sentence of Section 1.3(a), Company shall, upon request of Parent, use its reasonable best efforts promptly either to increase the size of the Board of Directors of Company or, at Company's election, secure the resignations of such number of its incumbent directors as is necessary to enable Parent's designees pursuant to Section 1.3(a) to be so elected or appointed to Company's Board of Directors, and shall cause Parent's designees to be so elected or appointed. Company will use its reasonable best efforts to cause directors designated by Parent to constitute the same percentage as their percentage on the full Board (i) of each committee of its Board of Directors, (ii) of the board of directors of each of its Subsidiaries (as defined in Section 3.1) and (iii) of each committee of each such board, to the extent applicable, provided that in any event, at least one (1) Parent designee shall be designated to serve on each such Board or committee. Notwithstanding the foregoing, provided that the number of directors which the Parent shall have the ability to designate shall constitute a majority of the board of directors, until the Effective Time (as defined in Section 1.6), Company and Parent shall use reasonable best efforts to retain as members of Company's Board of Directors at least three (3) directors who are directors of Company on the date hereof and who are not designated by Parent or employees of Company or its Subsidiaries (the "Independent Directors"); provided that in the event that the number of Independent Directors shall be reduced below three for any reason whatsoever (other than to allow the Parent the ability to designate a majority of the members of the board of directors), 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 Directors for purposes of this Agreement. (c) Notwithstanding anything in this Agreement to the contrary, following the election or appointment of Parent's designees to Company's Board of Directors and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors shall be required for Company to take action to (i) amend or terminate this Agreement, (ii) exercise or waive any of Company's rights or remedies hereunder, (iii) extend the time for performance of Parent's and Sub's respective obligations hereunder, or (iv) approve any other action by Company that would reasonably be expected to affect adversely the interests of the stockholders of Company (other than Parent, Sub and their Affiliates) with respect to the transactions contemplated hereby. 1.4 The Merger. Subject to the terms and conditions of this Agreement, in accordance with the DGCL, at the Effective Time (as defined in Section 1.6), Sub shall merge with and into Company. Company shall be the Surviving Corporation in the Merger, and shall continue its corporate existence under the laws of the State of Delaware. Upon consummation of the Merger, the separate corporate existence of Sub shall terminate and the name of the Surviving Corporation shall initially be SERSYS Acquisition Corporation. 4 9 1.5 Closing. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 8.1, the closing of the Merger (the "Closing") will take place at 10:00 a.m., Washington, D.C. time, on the second (2nd) business day after satisfaction or waiver of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date (as defined below), but subject to satisfaction or waiver of such conditions on the Closing Date) set forth in Article VII (the "Closing Date"), at the offices of Venable, Baetjer, Howard & Civiletti, LLP, 1201 New York Ave, N.W., Suite 1000, Washington, D.C. 20005, unless another date, time or place is agreed to in writing by the parties hereto. Each of the parties undertakes to use its reasonable best efforts to ensure that the Merger occurs as soon as practicable following the date on which Sub consummates the Offer. 1.6 Effective Time. Upon the Closing, the parties shall file a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger shall have been duly filed with the Secretary of State of the State of Delaware, or at such later time as is agreed by Parent and Company and specified in the Certificate of Merger (the time the Merger becomes effective being the "Effective Time"). 1.7 Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in Sections 259, 260 and 261 of the DGCL. 1.8 Conversion of Company Common Stock. At the Effective Time by virtue of the Merger and without any action on the part of Parent, Sub, Company or the holder of any of the following securities: (a) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (x) shares of Company Common Stock canceled pursuant to Section 1.8(c), and (y) Dissenting Shares, as defined in Section 1.8(d)) together with the associated right, if any, to purchase Series A Shares or other securities of the Company pursuant to the Rights Agreement, dated as of May 16, 1997 between Company and BankBoston N.A. as rights agent thereunder (the "Rights Agreement") shall be converted into the right to receive cash in an amount equal to the Per Share Price or any higher per share price as may be paid in the Offer, payable to the holder thereof, without interest thereon (the "Merger Consideration"). (b) All of the shares of Company Common Stock issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be canceled and shall cease to exist as of the Effective Time, and each certificate (each a "Common Certificate") previously representing any such shares of Company Common Stock (other than shares canceled pursuant to Section 1.8(c) and Dissenting Shares) shall thereafter represent solely the right to receive the Merger Consideration into which the shares of Company Common Stock represented by such Common Certificate have been converted pursuant to this Section 1.8. (c) All shares of Company Common Stock that are held by Company as treasury stock or by any of Company's wholly owned Subsidiaries shall automatically be canceled and shall cease to exist and no cash or other consideration shall be delivered in exchange therefor. (d) Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time held by holders (if any) who have not voted in favor of the Merger or consented thereto in writing and who have demanded appraisal rights with respect thereto in accordance with Section 262 of the DGCL and, as of the Effective Time, have not failed to perfect or have not effectively withdrawn or lost their rights to appraisal and payment under Section 262 of the DGCL ("Dissenting 5 10 Shares") shall not be converted into the right to receive the Merger Consideration as described in Section 1.8(a), but holders of such shares shall be entitled to receive payment of the appraised value of such Dissenting Shares in accordance with the provisions of such Section 262, except that any Dissenting Shares held by a holder who shall have failed to perfect or shall have effectively withdrawn or lost its right to appraisal and payment under Section 262 of the DGCL shall thereupon be deemed to have been converted into the right to receive the Merger Consideration and shall no longer be considered Dissenting Shares. Company shall give Parent (i) prompt notice of any written demands for appraisal of any shares, attempted withdrawals of such demands, and any other instruments served pursuant to the DGCL received by Company relating to stockholders' rights of appraisal and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisals of capital stock of Company, offer to settle or settle any such demands or approve any withdrawal of any such demands. (e) All of the shares of capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into a total of 1,000,000 shares of the capital stock of the Surviving Corporation, with such shares to be issued at the Effective Time, and shall constitute the only issued and outstanding capital stock of the Surviving Corporation following the Effective Time. 1.9 Options. At the Effective Time, each then outstanding option to purchase Company Common Stock, whether or not then vested or exercisable, (each a "Company Option") including without limitation such Company Options granted under the Company's Amended and Restated Stock Option(s) Plan, the 1998 Stock Incentive Plan and the 1993 Stock Option Plan for Non-Employee Directors ( each a "Company Stock Plan" and collectively, the "Company Stock Plans") shall be converted pursuant to the terms of the Company Stock Plan into a right to receive a payment in cash (the "Option Consideration") equal to the product of (i) the number of shares previously subject to the Company Option and (ii) the excess, if any, of the Merger Consideration over the exercise price of each share of Company Common Stock under the Company Option, subject to withholding taxes and without interest. As soon as practicable after the Effective Time, and in any event no more than fifteen (15) calendar days following the Effective Time, the Surviving Corporation shall instruct the Exchange Agent (as defined in Section 2.1) to pay, and the Exchange Agent shall so pay, all amounts due as Option Consideration to the former holders of Company Options as required by this Agreement. Notwithstanding the foregoing, the Parent, Merger Sub and Company acknowledge that there are 7,666 Company Options outstanding under the International Telesystems Corporation ("ITC") Stock Option Plan (the "ITC Plan") which was assumed by the Company in connection with its acquisition of ITC on November 30, 1993) which are not automatically convertible pursuant to the terms of the ITC Plan into the right to receive Option Consideration. The treatment of options under the ITC Plan and the 1993 Employee Stock Purchase Plan ("Stock Purchase Plan") shall be pursuant to section 6.5 hereof. 1.10 Certificate of Incorporation. Subject to the terms and conditions of this Agreement, at the Effective Time, the Certificate of Incorporation of Sub, substantially in the form attached hereto as Annex II (provided that such plan shall be amended to increase the number of authorized shares required to adopt the stock option plan pursuant to Section 6.5(b) of this Agreement), shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein and by the DGCL. 1.11 Bylaws. Subject to the terms and conditions of this Agreement, at the Effective Time, the Bylaws of Sub, substantially in the form attached hereto as Annex III, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided therein and by the DGCL. 6 11 1.12 Directors and Officers of Surviving Corporation. At the Effective Time, the directors and officers of Sub immediately prior to the Effective Time shall be the directors and officers, respectively, of the Surviving Corporation following the Merger, to hold office in accordance with the Surviving Corporation's Bylaws and applicable law. 1.13 Alternate Transaction Structures, Etc. The parties agree that Parent may at any time change the method of effecting the Offer, including by providing that any other Subsidiary of Parent shall make the Offer, or effect the Merger by merging any direct or indirect wholly owned Subsidiary of Parent with and into Company, or by merging Company with and into such direct or indirect wholly owned Subsidiary, and Company shall cooperate in such efforts, including by entering into any appropriate amendment(s) to this Agreement; provided, however, that such other Subsidiary, if any, shall become a party to, and shall agree to be bound by, the terms of this Agreement, and that any such actions shall not (a) alter or change the amount or kind of consideration to be issued to holders of Company Common Stock as provided for in this Agreement, or (b) materially delay the receipt of any HSR Approval (as defined in Annex I hereto) or the consummation of the transactions contemplated by this Agreement or otherwise adversely affect the interests of the stockholders of the Company (other than Parent, Sub and their affiliates) with respect to the transactions contemplated by this Agreement. The parties also agree to take such actions as Parent may reasonably request to provide for the merger or consolidation of Subsidiaries of Company with other Subsidiaries of Company or of Parent, to be effective at or following the Effective Time. ARTICLE II EXCHANGE OF SHARES 2.1 Establishment of Exchange Fund. Prior to the Effective Time, Parent shall designate a bank or trust company, to act as exchange agent (the "Exchange Agent") for the payment of the Merger Consideration (including any and all Option Consideration). At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of the holders of certificates representing the Shares (the "Common Certificates"), for exchange in accordance with this Article II, cash (such cash being hereinafter referred to as the "Exchange Fund") to be paid pursuant to Section 2.2(a) in exchange for outstanding shares of Company Common Stock and cancellation of the Company Options pursuant to Section 1.9. 2.2 Exchange of Shares. (a) Within ten (10) days after the Effective Time, the Exchange Agent shall mail to each holder of record as of the Effective Time of one or more Common Certificates (other than with respect to shares of Company Common Stock canceled pursuant to Section 1.8(c)) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Common Certificates shall pass, only upon delivery of the Common Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Common Certificates in exchange for the Merger Consideration. Upon proper surrender of a Common Certificate for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal, duly executed, covering such Common Certificate, the holder of such Common Certificate shall be entitled to receive in exchange therefor a check representing the amount of the Merger Consideration, and the Common Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on the Merger Consideration payable to holders of Common Certificates. As soon as practicable after the Effective Time, and the cancellation of such Company Options pursuant to Section 1.9, the Exchange Agent shall provide for payment by check of the Option Consideration to such former holders of Company Options cancelled pursuant to Section 1.9. No interest will be paid or accrued on the Option Consideration payable to the former holders of Company Options. 7 12 (b) If the payment of the Merger Consideration is to be made to a person other than the registered holder of the Common Certificate surrendered in exchange therefor, it shall be a condition to the payment thereof that the Common Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance, delivery or payment of such Merger Consideration to any person other than the registered holder of the Common Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (c) After the Effective Time, there shall be no transfers on the stock transfer books of Company of the shares of Company Common Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Common Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be canceled and exchanged for the applicable Merger Consideration as provided in this Article II. (d) Any portion of the Exchange Fund that remains unclaimed by the stockholders of Company on or after the six (6) month anniversary of the Effective Time shall be paid to Parent. Any stockholders of Company who have not theretofore complied with this Article II shall thereafter look only to Parent for payment of the Merger Consideration, without any interest thereon. Notwithstanding the foregoing, none of the Surviving Corporation, Parent, the Exchange Agent or any other person shall be liable to any former holder of shares of Company Common Stock for any Merger Consideration delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (e) In the event any Common Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Common Certificate to be lost, stolen or destroyed and, if reasonably required by Parent, the posting by such person of a bond in such amount as Parent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Common Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Common Certificate the Merger Consideration. (f) All cash paid upon the surrender of the Common Certificates and the Rights associated therewith under the Rights Agreement and the cancellation of the Company Options in accordance with the terms of Articles I and II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of the Company Common Stock theretofore represented by such Common Certificates and the Company Options; subject, however, to the Surviving Corporation's obligation, with respect to shares of Company Common Stock outstanding immediately prior to the Effective Time, to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Company on such shares of Company Common Stock prior to the date of this Agreement and which remain unpaid at the Effective Time. (g) The Exchange Agent shall invest the Exchange Fund as directed by Parent. Any interest and other income resulting from such investments shall be paid to Parent. 8 13 ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY Company hereby represents and warrants to Parent and Sub, except as set forth in the Company disclosure schedule delivered to Parent concurrently herewith (the "Company Disclosure Schedule"), as follows: 3.1 Corporate Organization. (a) Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Company has all requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and in good standing in each jurisdiction (whether federal, state, local or foreign), in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary except where failure to be so qualified or in good standing would not have a Company Material Adverse Effect (as defined below) on the Company. As used in this Agreement, (i) the term "Subsidiary" when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, (x) of which such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interests in such partnership), or (y) a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or other body 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, and (ii) the term "Company Material Adverse Effect" means, a material adverse effect on the business, assets, liabilities, financial condition or results of operations of the Company and its Subsidiaries taken as a whole as of the date of this Agreement (other than any change, event, occurrence or effect (A) disclosed in the Company Disclosure Schedule or in the Management's Discussion and Analysis of Financial Condition and Results of Operations, Company, Business or Financial Statements Sections of the Company Reports filed prior to the date hereof (other than information contained under any "Risk Factor," "Cautionary Statements" or "Factors Affecting Future Results" heading contained therein) or (B) relating to (x) the United States or global economy or securities markets in general, (y) the contact center industry and not specifically relating to the Company or (z) this Agreement or the transactions contemplated hereby or the announcement thereof) or on the ability of the Company to perform its obligations under and to consummate the transactions contemplated by this Agreement on a timely basis. Section 3.1(a) of the Company Disclosure Schedule contains true and complete copies of the Certificate of Incorporation and Bylaws of Company, as in effect as of the date of this Agreement. Such organizational documents are in full force and effect and other than the Rights Agreement no other organizational documents are applicable to or binding upon Company. Company is not in violation of any of the provisions of its Certificate of Incorporation or Bylaws. (b) Part I of Section 3.1(b) of the Company Disclosure Schedule sets forth a complete and correct list of all of Company's Subsidiaries (each a "Company Subsidiary" and collectively the "Company Subsidiaries") and indicates, as to each such Subsidiary the extent to which each Subsidiary is owned by the Company and other Persons. There are no issued and outstanding options, warrants, stock appreciation rights, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock or other equity securities of each such Subsidiary, nor any contracts, commitments, understandings or arrangements by which such Subsidiary may become bound to issue additional shares of its capital stock or other equity securities, or options, warrants, scrip on rights to purchase, acquire, subscribe to, calls on or commitments for any shares of its capital stock or other equity securities and the identity of the parties to any such agreements or arrangements. All of the outstanding shares of capital stock or other securities evidencing 9 14 ownership of the Company Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable with no personal liability attaching to the ownership thereof and such shares or other securities are owned by Company or its wholly-owned Subsidiaries except as noted on the Company Disclosure Schedule free and clear of any lien, claim, charge, option, encumbrance, mortgage, pledge or security interest (a "Lien") with respect thereto. Except where to be so, or have such, would not have a Company Material Adverse Effect, each Company Subsidiary (i) is a duly organized and validly existing corporation, partnership or limited liability company or other legal entity under the laws of its jurisdiction of organization, (ii) is duly licensed or qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified, and (iii) has all requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted. Except for the ownership interests in its Subsidiaries disclosed in Part I of Section 3.1(b) of the Company Disclosure Schedule, Company does not own, directly or indirectly, any capital stock or other ownership interest, and does not have any option or similar right to acquire any equity or other ownership interest, in any entity. The Company and its Subsidiaries do not hold any partnership, joint venture and similar investments, including, without limitation, all such investments in which any Company employee or Affiliate serves as a director. Company has provided to Parent a complete and accurate copy of all such partnership, joint venture or similar agreements to which Company or any Company Subsidiary is a party. Except as disclosed on Section 3.1(b) of the Company Disclosure Schedule, neither Company nor any Company Subsidiary is subject to any obligation or requirement to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any entity. (c) Except as required by law, neither the Certificate of Incorporation nor the Bylaws of the Company contains any provision that would require a vote of the Company's stockholders in excess of a majority of the outstanding shares of Company Common Stock in order to approve the Merger in accordance with the terms of this Agreement. 3.2 Capitalization. The authorized capital stock of Company consists of 2,000,000 shares of preferred stock, $.10 par value per share, 15,000,000 shares of Company Common Stock, of which, as of the date of this Agreement, 10,593,869 shares were issued and outstanding. All of the issued and outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid, non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. The shares of Company Common Stock which are issuable upon exercise of Company Options have been duly authorized and reserved for issuance and, if and when issued pursuant to the terms thereof, will be validly issued, fully paid and non-assessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. Part I of Section 3.2 of the Company Disclosure Schedule sets forth, in each case as of the date of this Agreement, (i) the number of shares of Company Common Stock that were reserved for issuance upon the exercise of authorized but unissued stock options pursuant to the Company Stock Plans, and (ii) the number of shares of Company Common Stock issuable upon the exercise of outstanding Company Options pursuant to the Company Stock Plans. Except as set forth in Part I of Section 3.2 of the Company Disclosure Schedule, no other shares of Company Common Stock or other equity or voting securities of Company were outstanding or reserved for issuance as of the date of this Agreement. Part II of Section 3.2 of the Company Disclosure Schedule sets forth a list, as of the date of this Agreement, of the holders of Company Options, the date of grant of each Company Option granted and outstanding, the number of shares subject to each such option, the expiration date of each such option, the vesting schedule of each such option and the price at which each such option may be exercised under the applicable Company Stock Plan. Except as set forth in Part III of Section 3.2 of the Company Disclosure Schedule, the Company has not (i) issued any shares of its capital stock or other equity or voting securities or any securities convertible into or exercisable or exchangeable for any shares of its capital stock or other equity or voting securities, other than shares of Company Common Stock issued upon the exercise or conversion of Company Options outstanding 10 15 as of the date hereof, or (ii) taken any actions which would cause an antidilution adjustment under any outstanding options of Company. There are no outstanding bonds, debentures, notes or other indebtedness or other securities of Company having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) on any matters on which stockholders of Company may vote. Except as set forth above, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Company or any of its Subsidiaries is a party or by which any of them is bound obligating Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares or shares of capital stock or other equity or voting securities of Company or of any of its Subsidiaries or obligating Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. There are no outstanding contractual obligations, commitments, understandings or arrangements of Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Company or any of its Subsidiaries, other than in connection with the surrender of Company Common Stock as full or partial payment of the exercise price or withholding tax in connection with the exercise of Company Options under the Company Stock Plans. Except as set forth above, there are no agreements or arrangements pursuant to which Company is or could be required to register shares of Company Common Stock or other securities under the Securities Act of 1933, as amended (the "Securities Act"), or other agreements or arrangements with or among any security holders of Company with respect to securities of Company. Except as set forth above, there are no voting, sale, transfer or other similar agreements to which Company or any of its Subsidiaries is a party with respect to the capital stock of Company or its Subsidiaries or any other securities of Company or its Subsidiaries which are convertible or exchangeable into or exercisable for shares of the capital stock of Company or its Subsidiaries. None of the shares of Company Common Stock are held, directly or indirectly, by any of the Company Subsidiaries. Each purchase by the Company or any Subsidiary of any shares of the Company's capital stock has been made in compliance with applicable securities laws and any rules and regulations promulgated thereunder, and no such purchase by the Company has occurred since September 20, 1999. 3.3 Authority; No Violation. (a) Company has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Company. Except for the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon in connection with the Merger (the "Company Stockholder Approval") as may be required under DGCL and as contemplated by this Agreement, no other corporate proceedings on the part of Company and no other votes or consents of any holders of Company securities are necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Company and (assuming due authorization, execution and delivery by Parent and Sub) constitutes the valid and binding obligation of Company, enforceable against Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). (b) Except as set forth in Section 3.3(b) of the Company Disclosure Schedule, none of the execution and delivery of this Agreement by Company, the consummation by Company of the transactions contemplated hereby, or compliance by Company with any of the terms or provisions hereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of Company or any Company Subsidiary or (ii) assuming that the consents and approvals referred to in Section 3.4 are duly obtained (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Company or any of its Subsidiaries or any of their 11 16 respective properties or assets, or (B) violate, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by or rights or obligations under, or result in the creation of any Lien upon any of the respective properties or assets of Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, permit, concession, franchise, license, lease, agreement, contract, or other instrument or obligation to which Company or any of its Subsidiaries is a party, or by which they or any of their respective properties, assets or business activities may be bound or affected except, with respect to either (A) or (B), as would not have a Company Material Adverse Effect. 3.4 Consents and Approvals. Except for (i) the filing of any required applications or notices with other applicable federal, state or foreign governmental agencies or authorities as set forth in Section 3.4 of the Company Disclosure Schedule and approval of such applications and notices (the "Additional Regulatory Approvals"), (ii) the filing with the SEC of a proxy statement, if any, in definitive form relating to the meeting of Company's stockholders to be held in connection with the Merger and as contemplated by this Agreement (the "Proxy Statement"), (iii) the filing with the SEC of the Offer Documents and the Schedule 14D-9, (iv) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, (v) the expiration of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (vi) the Company Stockholder Approval, and (vii) the filing with the SEC of such reports under the Exchange Act, as may be required in connection with the execution and delivery of this Agreement and the transactions contemplated by this Agreement, no consents or approvals of or filings or registrations with any court, administrative agency or commission or other governmental or regulatory authority or instrumentality (each a "Governmental Entity"), are necessary in connection with the execution and delivery by Company of this Agreement and the consummation by Company of the transactions contemplated by this Agreement. Company has no reason to believe that the HSR Approval (as defined in Annex I hereto) will not be obtained on a timely basis. 3.5 Regulatory Reports. Except as disclosed in Section 3.5 of the Company Disclosure Schedule, or where failure to do so would not have a Company Material Adverse Effect, Company and each of its Subsidiaries have timely filed all regulatory reports, schedules, forms, registrations and other documents, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1997 with any federal, state or foreign Governmental Entity (collectively, with the SEC and the Nasdaq Stock Market ("Nasdaq"), "Regulatory Agencies"), and have paid all fees and assessments due and payable in connection therewith. Except as disclosed in Section 3.5 of the Company Disclosure Schedule, and for normal examinations conducted by a Regulatory Agency in the regular course of the business of Company and its Subsidiaries, to the knowledge of Company, no Regulatory Agency has initiated any proceeding or investigation into the business or operations of Company or any of its Subsidiaries since January 1, 1997. Except as set forth in Section 3.5 of the Company Disclosure Schedule, there is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Company or any of its Subsidiaries except for violations, criticisms or exceptions that would not have a Company Material Adverse Effect. 3.6 Broker's Fees. Except for the employment of and payments to Updata Capital, Inc. and Innovative Software Engineering Practices, Inc. described in Section 3.6 of the Company Disclosure Schedule, none of Company, any Company Subsidiary or any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the transactions contemplated by this Agreement. 12 17 3.7 Absence of Certain Changes or Events. (a) Except as set forth in Section 3.7(a) of the Company Disclosure Schedule or as disclosed in the Company Reports (as defined herein) filed prior to the date hereof, since September 30, 1999, no event, change or circumstance has occurred which has had, or would reasonably be expected to result in, individually or in the aggregate, a Company Material Adverse Effect. (b) Since September 30, 1999, other than actions that are not reasonably expected to have a Company Material Adverse Effect, Company and its Subsidiaries have carried on their respective businesses only in the ordinary and usual course consistent with their past practices. (c) Except as disclosed in Section 3.7(c) of the Company Disclosure Schedule, or as disclosed in the Company Reports (as defined herein) filed prior to the date hereof, since September 30, 1999, there has not occurred any event which, if it had taken place following the execution of this Agreement, would not have been permitted by Section 5.2 without the prior consent of Parent. 3.8 Legal Proceedings. Except as set forth in Section 3.8 of the Company Disclosure Schedule, there are no suits, actions, counterclaims, proceedings (whether judicial, arbitral, administrative or other) or governmental, or regulatory investigations pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries except as would not have a Company Material Adverse Effect. There is not any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Company or any of its Subsidiaries. 3.9 Taxes and Tax Returns. Except as set forth in Section 3.9 of the Company Disclosure Schedule: (a) Company and each of its Subsidiaries, and any consolidated, combined or unitary group for tax purposes of which Company or any of its Subsidiaries is or has been a member, has timely and accurately filed all Tax Returns (as defined below) required to be filed by it in the manner provided by law and all such Tax Returns are true, correct and complete in all material respects. Company and each of its Subsidiaries has paid all Taxes (as defined below) due and payable whether or not shown on a Tax Return to be due, other than Taxes which are being contested in good faith and for which an adequate reserve has been provided in accordance with generally accepted accounting principles ("GAAP"). None of the Company and its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return and no claim has been made by any Taxing authority in a jurisdiction where any of Company or its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. (b) Except as set forth in Section 3.9 of the Company Disclosure Schedule, there are no audits or disputes pending, or claims asserted, for Taxes (as defined below) upon Company (or any of its predecessors) or any of its Subsidiaries (or any of their respective predecessors). No closing agreements, private letter rulings, technical advice memoranda or similar agreements or rulings have been entered into or issued by any Taxing authority with respect to Company or any of its Subsidiaries that have a continuing material impact on any Taxes. The Company has delivered to Parent correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of the Company and its Subsidiaries since December 31, 1994. Except as set forth in Section 3.9 of the Company Disclosure Schedule, none of the Company and its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. None of the Company and its Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). Section 3.9 of the Company Disclosure Schedule sets forth the amount of any net operating loss, net capital 13 18 loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company or Subsidiary. (c) All Taxes required to have been withheld have properly and accurately been withheld by Company and its Subsidiaries from their employees' compensation in compliance with the tax withholding provisions of applicable federal, state and local laws and have been paid over to the appropriate taxing authorities when due, except where the failure to do so would not have a Company Material Adverse Effect. (d) There are no Tax liens upon any property or assets of Company or any of its Subsidiaries except liens for Taxes not yet due and payable. (e) None of Company and its Subsidiaries has filed a consent under Code Section 341(f) concerning collapsible corporations. None of Company and its Subsidiaries has been required to include any amount in income from any adjustment pursuant to section 481 of the Code (or any similar provision of state, local or foreign tax law) by reason of a voluntary change in accounting method initiated by Company or any of its Subsidiaries, and to the knowledge of the Company, the Internal Revenue Service has not initiated or proposed any such adjustment or change in accounting method. (f) Neither Company nor any of its Subsidiaries (i) has been a member of an affiliated group filing consolidated federal income tax return (other than a group the common parent of which was or is the Company), (ii) is a party to a Tax allocation or Tax sharing agreement (other than an agreement solely among members of a group the common parent of which is Company), or (iii) has any liability for the Taxes of any person (other than any of Company or its Subsidiaries) including, but not limited to, (x) under Treasury Regulation section 1.1502-6 (or any similar provision of state, local or foreign law), (y) as a transferee or successor or (z) by contract. For purposes of this Agreement, "Taxes" shall mean any taxes of any kind, including but not limited to those on or measured by or referred to as income, gross receipts, capital, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority, domestic or foreign. For purposes of this Agreement, "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes, including any schedule or attachment thereto or amendment thereof. 3.10 ERISA and Employee Matters. An "Employee Plan" is: (i)(A) each "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder ("ERISA")), whether or not such plan is, or is intended to be, qualified under Section 401(a) of the Code and whether or not such plan is subject to Title I of ERISA, (B) each employment, collective bargaining, severance, compensation upon reduction in hours, change in control, change in employment category, or similar event, or similar contract or arrangement (whether or not written), and (C) each plan, policy, fund, program, contract or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock or equity options, other stock or equity related rights, other forms of incentive or deferred compensation, paid time off (including, but not limited to, holiday pay, sick leave, vacation, leave of absence, or disability), other fringe benefits (including, but not limited to, company cars, relocation assistance, free or reduced cost products or services, service awards, tuition payments, or reimbursement for scholarships), insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, life or accidental death or dismemberment benefits, 14 19 workers' compensation, supplemental unemployment benefits, severance benefits, or post-employment or retirement benefits that (ii)(A) is, or has been at any time within the last five (5) years, maintained, administered or contributed to by Company, any of its Subsidiaries, or any entity which, together with Company or any of its Subsidiaries, would be treated as a single employer under Section 414 of the Code (each such entity, an "ERISA Affiliate") and (B) covers or covered any current or former employee, consultant, independent contractor or director of or with respect to Company or any of its Subsidiaries (each, an "Employee Plan"). (b) Company has supplied to Parent a true and correct copy of: all of the Employee Plans, and any amendments thereto (or if no written plan document exists, a written description thereof); (2) the summary plan description and any material employee communication which describes the terms or operation of the Employee Plans; (3) all trust agreements, insurance contracts or other funding arrangements related to the Employee Plans; (4) the most recent annual report (Form 5500)(including the accountant's report) for the Employee Plans; (5) the most recent actuarial valuation; and (6) any collective bargaining agreement or other contract requiring or providing for contributions to an Employee Plan. (c) Except as set forth in Section 3.10(c) of the Company Disclosure Schedule, none of Company, any of its Subsidiaries or any ERISA Affiliate has at any time during the last six years (i) maintained or contributed to any plan subject to Title IV of ERISA or Section 412 of the Code, (ii) been required to contribute to any multiemployer plan (as defined in Section 3(37) of ERISA), or (iii) incurred any current or projected liability in respect of post-employment or post-retirement health, medical or life insurance benefits for current, former or retired employees of Company or any of its Subsidiaries, except as required to avoid an excise tax under Section 4980B of the Code. (d) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has been so qualified in form and operation during the period since its adoption; each trust created under any such Plan is exempt from tax under Section 501(a) of the Code and has been so exempt since its creation. Company has made available to Parent a true and correct copy of the most recent determination letter issued by the Internal Revenue Service relating to each such Employee Plan and any subsequent determination letters issued with respect to Employee Plan amendments. Each Employee Plan has been maintained in compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code and has been maintained in good standing with applicable regulatory authorities, and is not "top-heavy." (e) There has been no amendment to, written interpretation of or announcement (whether or not written) by Company or any of its Subsidiaries or ERISA Affiliates relating to, or any change in employee participation or coverage under, any Employee Plan that would increase the expense of maintaining such Employee Plan above the level of the expense incurred in respect thereof for the most recent fiscal year ended prior to the date hereof. There have been no material changes in the financial condition of the Employee Plans from that stated in the annual report (as described in Section 103 of ERISA) most recently filed, as applicable, for each Employee Plan. (f) With respect to any Employee Plan that is unfunded, Company has adequately provided for, and its financial statements accurately reflect (in accordance with GAAP), the amount of all accrued benefits and obligations under such Employee Plan. (g) Except as set forth in Section 3.10(g) of the Company Disclosure Schedule, there is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of Company or any of 15 20 its Subsidiaries that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 162 or 280G of the Code. (h) Except as provided in this Agreement or as set forth in Section 3.10(h) of the Company Disclosure Schedule, (i) no employee or former employee of Company or any of its Subsidiaries will become entitled to any bonus, retirement, severance, job security or similar benefit or enhancement thereof (including acceleration of vesting or exercise of an incentive award) as a result of the transactions contemplated by this Agreement, and (ii) any Company Stock Plan may be terminated by the Company in accordance with this Agreement without the consent of such Plan's participants except for such consents required by Regulatory Agencies. (i) Except as set forth in Section 3.10(i) of the Company Disclosure Schedule, no Employee Plan is maintained outside the jurisdiction of the United States, or covers any employee residing or working outside the United States. (j) Except as would not have a Company Material Adverse Effect, there are no actions, lawsuits, arbitrations, audits, inquires, investigations, proceedings or claims (other than routine claims for benefits made in the ordinary course and qualified domestic relations or medical child support orders) pending or, to the knowledge of the Company, threatened with respect to any Employee Plan or the operation thereof (whether brought or threatened to be brought by or against a participant or beneficiary, a trustee, a plan administrator, Company or any director, officer or employee thereof and including matters pending before or threatened by the Internal Revenue Service, United States Department of Labor, or other governmental agency), and Company does not have knowledge of any facts which could give rise to any such action, lawsuit, arbitration, audit, inquiry, investigation, proceeding or claim. (k) Labor and Employment Matters. (i) None of Company or any of its Subsidiaries is the subject of any suit, action or proceeding which is pending or, to the knowledge of the Company, threatened, asserting that the Company or any of its Subsidiaries has committed an unfair labor practice or seeking to compel the Company or any of its Subsidiaries to bargain with any labor organization as to wages and conditions of employment, in any such case; (ii) no strike or other labor dispute involving the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, threatened, and, to the knowledge of the Company, there is no activity involving any employees of the Company or any of its Subsidiaries seeking to certify a collective bargaining unit or engaging in any other organizational activity; (iii) except where such noncompliance would not have a Company Material Adverse Effect, the Company and each of its Subsidiaries is and has been, to the knowledge of the Company, in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including, without limitation, any such laws respecting minimum wage and overtime payments, employment discrimination, civil rights, workers' compensation, family and medical leave, administration of leave, rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, the Immigration Reform and Control Act, occupational safety and health requirements, collective bargaining, the Worker Adjustment and Retraining Notification Act and the payment of social security and similar taxes; and (iv) no person has, to the knowledge of the Company, asserted or threatened to assert that the Company or any of its Subsidiaries is liable for any arrears in wages or taxes or damages, penalties, or other relief, equitable or otherwise, for failure to comply with any of the foregoing, except where such claims would not have a Company Material Adverse Effect. 3.11 SEC Reports. Company has made available to Parent an accurate and complete copy of each (a) final registration statement, prospectus, report, schedule, form and definitive proxy statement filed since November 1, 1996 by Company with the SEC pursuant to the Securities Act or the Exchange Act (collectively, and in each case 16 21 including all exhibits and schedules thereto and documents incorporated by reference therein, the "Company Reports"), and (b) communication mailed by Company to its stockholders since November 1, 1996. As of their respective dates of filing or mailing, as the case may be, each Company Report and each such communication complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company Report or communication, and as of such dates no such Company Report or communication (including any and all financial statements included therein) contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Since November 1, 1996, Company and each of its Subsidiaries has filed all reports and other documents required to be filed by them under the Securities Act and the Exchange Act on a timely basis. 3.12 Financial Statements. Each of the consolidated financial statements (including the notes thereto) included in the Company Reports complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Company and its Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. The books and records of Company and its Subsidiaries have been, and are being, maintained in all respects in accordance with GAAP and any other applicable legal and accounting requirements. 3.13 Licenses; Compliance with Applicable Law. (a) Except as set forth in Section 3.13(a) of the Company Disclosure Schedule, Company and its Subsidiaries (i) hold, and have been and are in compliance with, all permits, licenses, exemptions, orders and approvals ("Permits") of all Governmental Entities necessary for the operation of their respective businesses, and (ii) the transfer of such permits upon the Effective Time shall not limit, restrict or cause the termination such Permits at the Effective Time, except with respect to both (i) and (ii) above as would not have a Company Material Adverse Effect, and there are no proceedings pending or, to the knowledge of Company, threatened or contemplated by any Governmental Entity seeking to terminate, revoke or limit any such permit, license, exemption, order or approval, nor, to the knowledge of Company, do adequate grounds exist for any such action by any Governmental Entity. (b) To the knowledge of the Company, none of Company, any of its Subsidiaries or the conduct of any of their respective businesses is in default or violation of, any statutes, laws, regulations, ordinances, permits, rules, judgments, orders, decrees or arbitration awards of any Governmental Entity applicable to Company or any of its Subsidiaries or by which its or any of their respective properties are bound or affected. 3.14 Certain Contracts. Except as set forth in Section 3.14 of the Company Disclosure Schedule or as expressly permitted by Section 5.2, neither Company nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors, executive officers or key employees, or with any consultants involving the payment of $150,000 or more per annum, (ii) which is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) that has not been filed as an exhibit to or incorporated by reference in the Company Reports, (iii) which limits in any way the ability of Company or any of its Subsidiaries to compete in any line of business, in any geographic area or with any person, or which requires referrals of any business or requires Company or any of its affiliates to make available investment opportunities to any person on a priority, equal or exclusive basis, (iv) with or to a labor union or guild (including any collective bargaining agreement), (v) any of the benefits of which will be materially increased, or the vesting of the benefits of which will be 17 22 materially accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this (other than those agreements and arrangements disclosed in Section 3.11 of the Company Disclosure Schedule), or (vi) which would prohibit or materially delay the consummation of any of the transactions contemplated by this Agreement. Company has previously made available to Parent complete and accurate copies of all Company Contracts (as defined below). Each contract, arrangement, commitment or understanding of the type described in this Section 3.14, whether or not set forth in Section 3.14 of the Company Disclosure Schedule, is referred to herein as a "Company Contract," and neither Company nor any of its Subsidiaries knows of, or has received notice of, any violation or default of the above by any of the other parties thereto. All contracts, agreements, arrangements or understandings of any kind between any Affiliate of Company (other than any wholly owned Subsidiary of Company), on the one hand, and Company or any Subsidiary of Company, on the other hand, are on terms no less favorable to Company or to such Subsidiary of Company than would be obtained with an unaffiliated third party on an arm's length basis. 3.15 [RESERVED]. 3.16 Investment Securities. Each of Company and its Subsidiaries has good and marketable title to all securities held by it, free and clear of any Lien, except to the extent such securities are pledged in the ordinary course of business consistent with prudent business practices to secure obligations of Company or any of its Subsidiaries. Such securities are valued on the books of Company in accordance with GAAP. 3.17 [RESERVED] 3.18 Undisclosed Liabilities. Except for (i) those liabilities that are fully reflected or reserved for in the consolidated balance sheet of Company included in its Quarterly Report on Form 10-Q for the three-month period ended September 30, 1999, as filed with the SEC, (ii) liabilities disclosed in Section 3.18 of the Company Disclosure Schedule, (iii) liabilities incurred since September 30, 1999 in the ordinary course of business consistent with past practice, and (iv) liabilities or obligations that would not have, individually or in the aggregate, a Company Material Adverse Effect, at September 30, 1999, neither Company nor any of its Subsidiaries had, and since such date none of them has incurred, any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise) that would be required to be reflected in Company's financial statements in accordance with GAAP. 3.19 Environmental Liability. There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably result in the imposition, on Company or any of its Subsidiaries of any liability or obligation arising under common law or under any local, state or federal environmental statute, regulation or ordinance including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or, to the Company's knowledge, threatened against Company or any of its Subsidiaries which could result in a Company Material Adverse Effect. To the knowledge of Company, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation. 3.20 Information Supplied. None of the information supplied or to be supplied by Company for inclusion or incorporation by reference in the Offer Documents or the Schedule 14D-9 will, at the time such documents are filed with the SEC or distributed to Company's stockholders, or at the consummation of the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Schedule 18 23 14D-9 will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder. No representation is made by Company with respect to statements made or incorporated by reference in the Offer Documents or the Schedule 14D-9, based on information supplied by Parent or Sub in writing for inclusion or incorporation by reference in such documents. Company shall promptly inform Parent of the discovery of any information which should be set forth in a corrected Schedule 14D-9 or a supplement to the Offer Documents. 3.21 State Takeover Laws; Rights Agreement. (a) The Board of Directors of Company, at a meeting duly called and held, at which a quorum was present, has unanimously (the "Company Board Recommendation") (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and fair to and in the best interests of the holders of shares of Company Common Stock, (ii) duly approved and adopted this Agreement and approved the transactions contemplated hereby, including the Merger and the Offer, in each case prior to the execution of such agreement (such approvals being sufficient to render the restrictions of Section 203 of the DGCL inapplicable to this Agreement, the Offer and the Merger and the transactions contemplated hereby and thereby) and (iii) resolved to recommend that the holders of shares of Company Common Stock accept the Offer, tender their shares of Company Common Stock pursuant thereto and vote to approve and adopt this Agreement (to the extent required by applicable law) provided that, subject to Section 6.8 hereof, the Board of Directors of the Company may withdraw, modify or amend such recommendation consistent with Section 6.8(g) hereof. (b) The Board of Directors of Company, at a meeting duly called and held in connection with its authorization and approval noted above has taken all action necessary to render the rights issued pursuant to the Rights Agreement inapplicable to this Agreement, the Offer, the Merger and the transactions contemplated thereby. 3.22 Insurance. Company and its Subsidiaries maintain insurance policies and performance bonds on their respective properties and assets, and with respect to their employees and operations, with reputable insurance carriers, and such insurance policies provide coverage for risks incident to the business of Company and its Subsidiaries and their respective properties and assets and are in character and amount which the Company reasonably considers to be reasonable and customary for persons engaged in similar businesses as the Company. Company and its Subsidiaries are not in default under any of their insurance policies and have paid all premiums owed thereunder since January 1, 1999, and no claims for coverage thereunder have been denied, except where being in default or failing to pay such premiums would not have a material adverse effect on the coverage provided by such policies and the Company. 3.23 Year 2000 Compliance. The occurrence of the year 2000 will not affect the Company's computer hardware, software, databases, systems and other computer equipment (collectively, "Computer Equipment") in a manner that would have a Company Material Adverse Effect and no material expenditures in excess of currently budgeted items will be required in order to cause such Computer Equipment to operate properly following the change of the year 1999 to 2000. The Company's Year 2000 Readiness Disclosure Statement provided to Parent and the Company's customers contains an accurate assessment of the Company's Year 2000 compliance program. 3.24 Intellectual Property. The Company has provided to Parent true and complete copies of all United States and foreign (a) patents and patent applications; (b) trademark registrations (including Internet domain registrations) and applications and material unregistered trademarks; (c) copyright registrations and applications. (b) The Company has provided Parent access to its records and files containing all written license agreements which involve aggregate payments or receipts in excess of $100,000 granting any right to use or practice any rights under any Intellectual Property (as defined below), whether the Company or any of its Subsidiaries is the licensee or 19 24 licensor thereunder, and any assignments, consents, forbearances to sue, judgments, orders, settlements or similar obligations relating to any Intellectual Property to which the Company or any of its Subsidiaries is a party or otherwise bound (other than off-the-shelf or other mass-market software applications programs) (collectively, the "License Agreements"). Except as would not have a Company Material Adverse Effect, the License Agreements are valid and binding obligations of Company or its Subsidiaries, enforceable in accordance with their terms, and, to the Company's knowledge, there exists no event or condition which will result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default by the Company or its Subsidiaries under any such License Agreement. "Intellectual Property" shall mean " trademarks, service marks, trade names, URLs and Internet domain names and applications therefor (and all interest therein), designs, slogans and general intangibles of like nature, patents (including any registrations, continuations, continuations in part, renewals and applications for any of the foregoing); copyrights (including any registrations and applications for any of the foregoing); computer programs and other computer software; databases; technology, trade secrets and other confidential information, know-how, proprietary technology, processes, formulae, algorithms, models, user interfaces, customer lists, inventions, source codes and object codes and methodologies, architecture, structure, display screens, layouts, development tools, instructions, templates, marketing materials, inventions, trade dress, logos and designs and all documentation and media constituting, describing or relating to the foregoing (collectively, "Trade Secrets"), used in or necessary for the conduct of Company's and each of its Subsidiaries' business as currently conducted or contemplated to be conducted. (c) No material royalties, honoraria or other fees are payable to any third parties for the use of or right to use any Intellectual Property except pursuant to the License Agreements. (d) Except as has not had, nor is reasonably likely to have, a Company Material Adverse Effect, and except as set forth in Section 3.24(d) of the Company Disclosure Schedule: (i) the Company or its Subsidiaries exclusively own, free and clear of all Liens, all owned Intellectual Property, and have a valid, enforceable right to use all of the Intellectual Property licensed by the Company from third parties; (ii) the Company has taken reasonable steps to protect the owned Intellectual Property; (iii) to the knowledge of the Company, the conduct of the Company's and its Subsidiaries' businesses as currently conducted does not infringe upon any Intellectual Property rights of or controlled by any third party; (iv) there is no litigation pending, or to the Company's knowledge, threatened (A) alleging that the Company's activities or the conduct of its businesses or that of any of its Subsidiaries infringes upon, violates, or constitutes the unauthorized use of the Intellectual Property rights of any third party or (B) challenging the ownership, use, validity or enforceability of any Intellectual Property; (v) to the knowledge of the Company, no third party is misappropriating, infringing, diluting, or violating any Intellectual Property owned by the Company or any of its Subsidiaries and no such claims have been brought against any third party by the Company or any of its Subsidiaries; and (vi) the consummation of the transactions contemplated hereby will not result in the loss or impairment of the Company's or any of its Subsidiaries' right to own or use any of the 20 25 Intellectual Property listed on Sections 3.24(a) and (b) of the Company Disclosure Schedule, nor will they require the consent of any Governmental Entity or third party in respect of any such Intellectual Property. (e) Section 3.24(e)(i) of the Company Disclosure Schedule lists all material Software contained in products, sold, licensed, leased or otherwise distributed to third parties by the Company or any of its Subsidiaries (other than off-the-shelf or mass-market software applications programs). Section 3.24(e)(ii) of the Company Disclosure Schedule lists all Software material to the business of Company (other than off-the-shelf or other mass-market software applications programs) that is owned, licensed to or by the Company or any of its Subsidiaries, leased to or by the Company or any of its Subsidiaries, or otherwise used by the Company or any of its Subsidiaries, and not included under Section 3.24(d)(i) of the Company Disclosure Schedule. The Software set forth in Sections 3.24(e)(i) and (ii) of the Company Disclosure Schedule which the Company or any of its Subsidiaries purports to own and that is or could reasonably be expected to be material to the conduct of the business of the Company, was either developed (i) by employees of Company or any of its Subsidiaries within the scope of their employment; (ii) by independent contractors who have assigned their rights to Company or any of its Subsidiaries pursuant to enforceable written agreements or by operation of law; or (iii) has otherwise been rightfully assigned to the Company or one of its Subsidiaries. For purposes of Section 3.24(e) and (h), "Software" means any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, (iv) all documentation, including user manuals and training materials, relating to any of the foregoing. (f) All of the Company's registered trademarks and material unregistered trademarks have been in continuous use by the Company or its Subsidiaries except where failure to be in such continuous use would not have a Company Material Adverse Effect. To the knowledge of the Company, there has been no prior use of such trademarks by any third party which would confer upon said third party superior rights in such trademarks; and the registered trademarks have been continuously used in the form appearing in, and in connection with the goods and services listed in, their respective registration certificates or identified in their respective pending applications. (g) The Company has taken reasonable steps in accordance with normal industry practice to protect the Company's rights in Trade Secrets of the Company. Without limiting the foregoing, the Company (A) has a policy of requiring employees, consultants and contractors with access to such Trade Secrets to execute proprietary information, confidentiality and assignment agreements substantially consistent with the Company's standard forms thereof (complete and current copies of which have been delivered to the Parent), (B) has requested that all existing employees sign such agreements and (C) has required all employees hired since November 30, 1998 to sign such an agreement. To the knowledge of the Company, except as subject to confidentiality agreements or confidentiality provisions in other agreements, there has been no material disclosure of any Company or Subsidiary confidential information or Trade Secrets. Section 3.24(g) of the Company Disclosure Schedule, sets forth a list of all current employees and employees who have been employed by the Company subsequent to January 1, 1998, consultants and contractors with access to Trade Secrets who have not executed proprietary information, confidentiality and assignment agreements. (h) Except as would not have a Company Material Adverse Effect, all Software owned by the Company or any of its Subsidiaries operates and runs in a manner adequate to operate the business of the Company as presently conducted, and, to the knowledge of the Company conforms to the specifications thereof. The Company has or at the Effective Time will have all material documentation relating to use, maintenance and operation of the material Software used in the conduct of business of the Company to the extent such documentation exists. 21 26 3.25 Opinion of the Company's Financial Advisor. The Board of Directors of the Company has received a written opinion from Updata Capital, Inc. (addressed to such Board) to the effect that, as of the date of such opinion, the consideration to be received in the Offer and the Merger by the holders of Company Common Stock is fair to such holders (other than Parent and Sub) from a financial point of view. 3.26 Disclosure. Disclosure in any of the documents set forth on Section 3.26 of the Company Disclosure Schedule that would reasonably put Parent or Sub on notice of an item required to be listed under any heading in the Company Disclosure Schedule or an exception to any of the Company's representations and warranties will be deemed to have been disclosed under the appropriate heading of the Company Disclosure Schedule. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and, with respect to Sections 4.1 and 4.2, Sub, hereby represent and warrant to Company that: 4.1 Corporate Organization. Parent is a corporation duly organized, validly existing and in good standing under the laws of Germany. Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Parent and Sub has all requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary except where failure to be so qualified or in good standing would not have a Parent Material Adverse Effect (as defined below). The term "Parent Material Adverse Effect" means a material adverse effect on the business, assets, liabilities, financial condition or results of operations of the Parent and its Subsidiaries taken as a whole as of the date of this Agreement (other than any change, event, occurrence or effect relating to (x) the United States or global economy or securities markets in general, (y) the document and data storage management industry and not specifically relating to the Parent or (z) this Agreement or the transactions contemplated hereby or the announcement thereof) or on the ability of the Parent to perform its obligations under and to consummate the transactions contemplated by this Agreement on a timely basis. Parent owns all of the issued and outstanding capital stock of Sub and all such capital stock has been validly issued, is fully paid and nonassessable and is owned by Parent free and clear of all Liens. 4.2 Authority; No Violation. (a) Each of Parent and Sub has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Sub and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of each of Parent and Sub and by Parent in its capacity as sole stockholder of Sub. No other corporate proceedings on the part of Parent or Sub and no other votes or consents of any holders of Parent securities are necessary on the part of Parent or Sub to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Sub and (assuming due authorization, execution and delivery by Company) constitutes a valid and binding obligation of Parent and Sub, enforceable against each of them in accordance with its respective terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). 22 27 (b) None of the execution and delivery of this Agreement by Parent or Sub, or the consummation by Parent or Sub of the transactions contemplated hereby, or compliance by Parent or Sub with any of the terms or provisions hereof will (i) violate any provision of the Certificate of Incorporation or Bylaws of Parent or Sub, as applicable, or (ii) assuming that the consents and approvals referred to in Section 4.3 are duly obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, or (B) violate, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by or rights or obligations under, or result in the creation of any Lien upon any of the respective properties or assets of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, permit, concession, franchise, license, lease, agreement, contract, or other instrument or obligation to which Parent or any of its Subsidiaries is a party, or by which they or any of their respective properties, assets or business activities may be bound or affected, except with respect to either (A) or (B), as would not have a Parent Material Adverse Effect. 4.3 Consents and Approvals. Except for (i) the filing with the SEC of the Proxy Statement, as may be required under applicable law, (ii) the filing with the SEC of the Offer Documents and the Schedule 14D-9, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, (iv) the expiration of any applicable waiting period under the HSR Act, (v) the Company Stockholder Approval, and (vi) the filing with the SEC of such reports under the Exchange Act as may be required in connection with the execution and delivery of this Agreement and the transactions contemplated hereby, no consents or approvals of or filings or registrations with any Governmental Entity, or of or with any third party, are necessary in connection with the execution and delivery by Parent of this Agreement and the consummation by Parent of the transactions contemplated hereby. Parent has no reason to believe that the HSR Approval will not be obtained on a timely basis. 4.4 Broker's Fees. Except for Broadview International, LLC, neither Parent nor any Parent Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with the transactions contemplated by this Agreement. Parent is solely liable for the fees of Broadview International, LLC. 4.5 Funds. Either Parent or Sub has, or will have prior to the consummation of the Offer, and will have at the Effective Time, sufficient funds available to satisfy the obligation to pay for shares of Company Common Stock in the Offer, to pay the Option Consideration and to pay Merger Consideration in the Merger. 4.6 Information Supplied. None of the information supplied or to be supplied by Parent for inclusion or incorporation by reference in the Offer Documents or the Schedule 14D-9 will, at the time such documents are filed with the SEC or distributed to Company's stockholders, or at the consummation of the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, except that no representation is made by Parent with respect to statements made or incorporated by reference therein based on information supplied by Company for inclusion or incorporation by reference in such documents. Parent shall promptly inform Company of the discovery by it or Sub of any information which should be set forth in a corrected Schedule 14D-9 or a supplement to the Offer Documents or any Proxy Statement. 23 28 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1 Conduct of Company Businesses Prior to the Effective Time. During the period from the date of this Agreement to the Effective Time, except as expressly required or permitted by this Agreement, Company shall, and shall cause each of its Subsidiaries to, (a) conduct its business in the usual, regular and ordinary course consistent with past practice and in compliance with applicable laws, (b) use reasonable best efforts to maintain and preserve intact its business organization, employees and business relationships and retain the services of its key officers and key employees and (c) take no action which would adversely affect or delay in any material respect the ability of either Parent or Company to obtain any necessary approvals of any Regulatory Agency or other Governmental Entity required for the transactions contemplated hereby or to perform its covenants and agreements under this Agreement. 5.2 Forbearances of Company. During the period from the date of this Agreement to the Effective Time, except as set forth in Section 5.2 of the Company Disclosure Schedule and except as expressly required or permitted by this Agreement, Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent: (a) (i) incur any indebtedness for borrowed money (other than (A) short-term indebtedness incurred (y) to refinance existing short-term indebtedness or (z) pursuant to lines of credit and credit facilities existing on the date of this Agreement, (B) indebtedness incurred in an aggregate amount not exceeding $100,000, and (C) indebtedness of Company or any of its Subsidiaries owed to Company or any of its other wholly owned Subsidiaries), assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or make any loan, advance or capital contribution (other than to Company or any of its wholly-owned Subsidiaries and other than in the ordinary course of Company's business consistent with past practice) or (ii) make or commit to make any capital expenditures in excess of $100,000 for any single capital expenditure; (b) (i) adjust, split, combine or reclassify any of its capital stock; (ii) make, declare, set aside or pay any dividend (except for dividends paid in the ordinary course of business by any wholly-owned Subsidiaries of Company to Company or to any other of its wholly-owned Subsidiaries) or make any other distribution on, or directly or indirectly (other than in connection with the surrender of Company Common Stock as full or partial payment of the exercise price or withholding tax in connection with the exercise of Company Options under the Company Stock Plans) redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock; (iii) grant any individual, corporation or other entity any right to acquire any shares of its capital stock or any stock appreciation or similar rights except as permitted by Section 5.2(i); (iv) issue or authorize the issuance of, deliver, sell, transfer, pledge or otherwise encumber any additional shares of capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, other than the issuance of Company Common Stock pursuant to the exercise of stock options disclosed in Section 3.2 of the Company Disclosure Schedule as being outstanding on the date of this Agreement and granted pursuant to the Company Stock Plans; or (v) enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock; 24 29 (c) sell, transfer, mortgage, encumber or otherwise dispose of any significant portion of its properties or assets, including, without limitation, capital stock in any Subsidiaries of Company, to any individual, corporation or other entity other than a direct or indirect wholly owned Subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, except in the ordinary course of business consistent with past practice; (d) make any material investment, either by purchase of stock or other equity or debt securities, contributions to capital, property transfers, or purchase of any property or assets, of any other individual, corporation, limited partnership or other entity, other than an investment in a wholly owned Subsidiary of Company existing prior to the date hereof; (e) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial portion of the stock or assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof; (f) acquire or agree to acquire voting or non-voting equity securities or similar ownership interests in any person (other than a Subsidiary); (g) commence, undertake or engage in any new line of business; (h) enter into or terminate any significant lease, contract or agreement, or make any change in any of its existing significant leases, contracts or agreements, except in the ordinary course of business and consistent with the past practices of the Company; (i) (i) grant to any employees any restricted stock or options to purchase the Company's common stock, (ii) pay any bonus which is not consistent with past practices or consistent with the plans, arrangements or agreements in place prior to the date hereof or which, when aggregated with all of the bonuses for 1999, exceed $900,000, (other than the Company's 25% matching program for 401K contributions, payments pursuant to which shall not exceed $175,000), (iii) hire new executive officers or materially modify any compensation or severance package other than in the ordinary course of business and consistent with past practice, or (iv) enter into, establish, adopt or amend (except (A) as may be required by applicable law, (B) to satisfy contractual obligations existing as of the date of this Agreement or (C) as otherwise provided by this Agreement) any Employee Plan, as that term is defined in Section 3.10(a) of this Agreement, or any trust agreement (or similar arrangement) related thereto in respect of any director, officer, consultant, independent contractor, or employee of or with respect to Company or any of its Subsidiaries; (j) pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction of current liabilities or obligations, in accordance with their terms, in the ordinary course of business consistent with past practice, or waive, release, grant, or transfer any rights of material value or modify or change any existing license, lease, contract or other document in any manner that would be material to Company and its Subsidiaries; (k) settle or compromise any litigation (whether or not commenced prior to the date of this Agreement), other than settlements or compromises of litigation where the amount paid by the Company (excluding amounts paid by insurance providers on behalf of the Company) does not exceed $50,000 for any 25 30 single litigation matter or related group of litigation matters (such limit including the monetary value of any non-monetary obligations on the part of Company or any of its Subsidiaries other than, in the case of litigation not involving any Governmental Entity or other Regulatory Agency, immaterial non-monetary obligations); (l) change any accounting principle used by it, except for such changes as may be required to be implemented pursuant to generally accepted accounting principles or rules and regulations of the SEC as concurred in by Company's independent auditors; (m) change any material Tax election, change any annual Tax accounting period, change any method of Tax accounting in any material respect, file any material amended Tax return, enter into any closing agreement relating to any material Tax, settle any material Tax claim or assessment, surrender any right to claim a material Tax refund or consent to any extension or waiver of the limitations period applicable to any material Tax claim or assessment except as advised by the Company's independent auditors; (n) adopt or implement any amendment to its charter or bylaws or enter into any plan of consolidation, merger or reorganization with any person other than a wholly-owned Subsidiary of Company; (o) [RESERVED]. (p) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization; (q) take any action that is intended or would reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect, or in any of the conditions to the Merger set forth in Article VII or to the Offer set forth in Annex I not being satisfied or in a violation of any provision of this Agreement, except, in each case, as may be expressly permitted by this Agreement or as may be required by applicable law; or (r) agree to, or make any commitment to, take, or authorize, any of the actions prohibited by this Section 5.2. ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Company Stockholders Meeting; Preparation of Proxy Statement. (a) If Company Stockholder Approval is required under the DGCL to consummate the Merger, (i) Company shall cause a meeting of its stockholders (the "Company Stockholders Meeting") to be duly called and held as soon as reasonably practicable after the date on which shares of Company Common Stock are purchased by Sub pursuant to the Offer for the purpose of voting on the adoption of this Agreement, and (ii) Parent and Company shall prepare and file with the SEC the Proxy Statement. Each of Parent and Company shall use all reasonable efforts to resolve any comments of the SEC as promptly as practicable after such filing, and Company shall thereafter mail or deliver the Proxy Statement to its stockholders as promptly as practicable. The Board of Directors of Company shall (i) include in the Proxy Statement the Company Board Recommendation and (ii) use its reasonable best efforts to obtain 26 31 the necessary vote in favor of the adoption of this Agreement by its stockholders. Subject to the fiduciary duties of the Board of Directors as advised by outside counsel, following the consummation of the Offer, the Board of Directors of Company shall not withdraw, amend, modify or materially qualify in a manner adverse to Parent the Company Board Recommendation (or announce publicly its intention to do so). (b) Parent agrees that it will vote, or cause to be voted, at the Company Stockholders Meeting, all shares of Company Common Stock then owned by it or Sub in favor of the adoption of this Agreement. (c) Notwithstanding this Section 6.1, in the event that Parent, Sub or any other Subsidiary of Parent shall acquire at least 90% of the outstanding shares of each class of capital stock of Company, the parties hereto agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of stockholders of Company, in accordance with Section 253 of the DGCL, in each case subject to applicable laws relating to exchange of information. 6.2 Reasonable Best Efforts. (a) Each of Parent and Company shall, and shall cause their respective Subsidiaries and Affiliates to, use their reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or any of its Subsidiaries or Affiliates with respect to the Offer and the Merger and, subject to the conditions set forth in Article VII hereof, to consummate the transactions contemplated by this Agreement. (b) The parties hereto shall cooperate with each other and use their reasonable best efforts to as promptly as practicable prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all Governmental Entities and any other third parties which are necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Offer and the Merger) or to prevent the termination of Company's and its Subsidiaries' contracts as a result thereof, to comply fully with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities, to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, and to defend any litigation seeking to enjoin, prevent or delay the consummation of the transactions contemplated hereby or seek material damages. Parent and Company shall have the right to review in advance and, to the extent practicable, each will consult with the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to Company or Parent, as the case may be, and any of their respective Subsidiaries, which appear in any filing made with, or written materials submitted to, any Governmental Entity or any other third party in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all Governmental Entities and other third parties necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby. (c) Parent and Company shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Offer Documents, the Schedule 14D-9 or the Proxy Statement or any other statement, filing, notice or application made by or on behalf of Parent, Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Offer, the Merger and the other transactions contemplated by this Agreement. 27 32 6.3 Access to Information. (a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, Company shall, and shall cause its Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of Parent, reasonable access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, Company shall, and shall cause its Subsidiaries to, provide to Parent and such representatives (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or other federal or state laws (other than reports or documents which Company is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as Parent may reasonably request, in all cases so that Parent or its representatives, as the case may be, may have reasonable opportunity to make such investigations as it desires of the affairs and assets of Company. Neither Company nor any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would (i) violate or prejudice the rights of its customers, (ii) interfere unreasonably with the conduct of the business of the Company and its Subsidiaries, (iii) jeopardize the attorney-client privilege to the extent applicable to the Company's or any of its Subsidiary's materials, or (iv) contravene any law, rule, regulation, order, judgment, decree or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (b) Parent shall hold all information furnished by or on behalf of Company or any of Company's Subsidiaries or representatives in confidence, to the extent required by, and in accordance with, the provisions of the confidentiality agreement, dated October 15, 1999 between Parent and Company (the "Confidentiality Agreement"). (c) No investigation by Parent or its representatives shall affect the representations and warranties of Company set forth herein. 6.4 Indemnification; Directors' and Officers' Insurance. (a) For a period of six (6) years after the Effective Time, the Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain, to the extent permitted by law, provisions with respect to indemnification that are no less favorable to the Indemnified Party (as defined below) then set forth in the Certificate of Incorporation and Bylaws of Company on the date hereof. (b) Parent shall, and shall cause the Surviving Corporation to, indemnify, defend and hold harmless the present and former officers and directors of Company or any of Company's Subsidiaries in their capacities as such (each an "Indemnified Party") after the Effective Time against all losses, expenses, claims, damages or liabilities arising out of actions or omissions occurring on or prior to the Effective Time to the fullest extent now provided in their respective Certificates of Incorporation or Bylaws, and as permitted by applicable law. (c) Parent shall cause the persons serving as officers and directors of Company immediately prior to the Effective Time to be covered for a period of six years from the Effective Time by the directors' and officers' liability insurance policy maintained by Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous than such policy) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event shall Parent be required to expend more than 150% of the current amount expended by Company (the "Insurance Amount") to maintain or procure insurance coverage pursuant hereto and further provided, that if Parent is unable to maintain or obtain the insurance called for by this Section 6.4(c), 28 33 Parent shall use its reasonable best efforts to obtain as much comparable insurance as available for the Insurance Amount. (d) In the event Parent, the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, assume the obligations set forth in this section. (e) The provisions of this Section 6.4 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives. 6.5 Employee Benefits. (a)The Company Stock Plans and the 1993 Employee Stock Purchase Plan of the Company (the "Stock Purchase Plan"), and any other stock or option based compensation plans of the Company, shall be terminated prior to the Closing Date and any shares of Company Common Stock purchased thereunder prior to the Closing Date which continue to be held by participants under such plans at the Effective Time shall be cancelled in accordance with the procedures set forth in Section 1.8(b) of this Agreement. As provided in the Stock Purchase Plan, each option outstanding thereunder at the Effective Time shall be exercisable at the Exercise Date (as defined in the Stock Purchase Plan) for $6.25 in cash. After the Effective Time, Parent will take, or will cause the Company to take, all action necessary to carry out the provisions of Section 16 and 19 of the Stock Purchase Plan. The Company shall use its reasonable best efforts prior to the Effective Time to obtain the consent of the holders of all Company Options outstanding under the ITC Plan to the conversion of such options into the right to receive the Option Consideration in exchange therefor at the Effective Time. Section 3.2 of the Company Disclosure Schedule includes a complete and accurate list of such holders. (b) At the Effective Time, the Parent will cause the Surviving Corporation to adopt the stock option plan in substantially the form attached hereto as Annex IV and reserve for issuance shares equal to 17% of the issued and outstanding shares of Common Stock of the Surviving Corporation at the Effective Time, and such plan shall have been approved by Parent as the sole stockholder of the Surviving Corporation. 6.6 Advice of Changes. Parent and Company shall promptly advise the other party of any change or event having or reasonably likely to have a Company Material Adverse Effect or Parent Material Adverse Effect, as the case may be, on it or which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations or warranties or covenants contained herein; provided, however, that the delivery of any notice pursuant to this Section 6.6 shall not limit or otherwise affect the remedies available hereunder to any party receiving such notice. 6.7 Exclusive Negotiations. Parent and Sub undertake and agree that they will not, and will not permit any of their officers, directors, employees, financial or legal advisors, agents or other representatives or those of any of its Affiliates to, after the date of this Agreement, and until the Effective Time or such earlier time as this Agreement is terminated pursuant to Article VIII, directly or indirectly, offer to purchase, solicit proposals to sell, furnish information or engage in any discussions or negotiations relating to the acquisition of all or any part of, or any interest in, or any of the assets of Davox Corporation, E-share Technologies, Inc., E-share.com, Inc., Melita International Corporation (or affiliates thereof) regardless of the form of the proposed transaction. 29 34 6.8 No Solicitation. (a) From the date of this Agreement until the earlier of (x) the Effective Time, or (y) the termination of this Agreement pursuant to Article VIII hereof, the Company shall not, shall not permit any of its Subsidiaries to, and shall not authorize or permit any of its or their respective officers, directors, employees, representatives, agents or Affiliates, directly or indirectly, to: (i) solicit, initiate or knowingly encourage or take any action to facilitate or encourage any inquiries or the making of any proposal that constitutes, an Acquisition Proposal (as defined below); or (ii) participate or engage in discussions or negotiations with, or provide any information to any individual, corporation, partnership, association, trust, unincorporated organization, limited liability company or other entity or group, as defined in Section 13(d)(3) of the Exchange Act (each a, "Person") concerning an Acquisition Proposal or which might reasonably be expected to result in an Acquisition Proposal. (b) Acquisition Proposal. For purposes of this Agreement, the term "Acquisition Proposal" shall mean any inquiry, proposal or offer from any Person (other than Parent, Sub or any of their Affiliates, including, but not limited to any subsidiary created in order to consummate the Merger) made or submitted prior to the termination of this Agreement, relating to any merger, consolidation, recapitalization, liquidation or other direct or indirect business combination, involving the Company or any Subsidiary or the issuance or acquisition of shares of capital stock or other equity securities of the Company or any Subsidiary representing 40% or more (by voting power) of the outstanding capital stock of the Company or such Subsidiary (except for the issuance of shares of Common Stock pursuant to employee stock options granted under any Company Stock Plan and outstanding on the date of this Agreement) or any tender or exchange offer that if consummated would result in any Person, together with all Affiliates thereof, beneficially owning shares of capital stock or other equity securities of the Company or any Subsidiary representing 40% or more (by voting power) of the outstanding capital stock of the Company or such Subsidiary, or the acquisition, license, assignment, purchase or other disposition of a substantial portion of the technology, business or assets of the Company or any Subsidiary outside the ordinary course of business or inconsistent with past practice, or any other transaction of similar significance, the consummation of which would reasonably be expected to impede materially, to interfere with, to prevent or to delay materially the consummation of the Offer, the Merger and such other transactions contemplated between the parties or which would reasonably be expected to dilute materially the benefits to Parent or Sub of the transactions contemplated hereby. (c) Termination of Negotiation with Persons. The Company shall immediately cease and cause to be terminated and shall cause its Affiliates and Subsidiaries and its or their respective officers, directors, employees, representatives or agents, to terminate all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that would reasonably be expected to lead to, an Acquisition Proposal. (d) Unsolicited Acquisition Proposals. Notwithstanding the foregoing, the Company may participate in discussions or negotiations with, or furnish information with respect to the Company pursuant to a confidentiality agreement substantially similar to the Confidentiality Agreement in effect between the Company and Parent, to any Person if and only if such Person has submitted an unsolicited written Acquisition Proposal to the Board of Directors of the Company and such Board of Directors: (i) believes in good faith based on such matters as it deems relevant, including the advice of Company's financial advisor, that such Acquisition Proposal is a Superior Proposal (as defined below); 30 35 (ii) receives the advice of Hunton & Williams or other outside counsel to the Company that is reasonably competent to render such advice, to the effect that taking such action is required to satisfy the fiduciary duties of such Board of Directors under DGCL; and (iii) determines in good faith that taking such action is required to satisfy the fiduciary duties of the Company's Board of Directors under applicable Delaware Law. (e) Superior Proposal. For purposes of this Agreement, the term "Superior Proposal" means any bona fide Acquisition Proposal to effect a tender offer, merger, consolidation or sale of all or substantially all of the assets or capital stock of the Company, which is on terms which the Board of Directors of the Company determines by a majority vote of its directors in its good faith judgment (based upon the advice of Updata Capital, Inc. or other a financial advisor reasonably competent to render such advice that the value of the consideration provided in such Acquisition Proposal exceeds the value of the consideration provided hereunder, after taking into account all relevant factors, including, the form of consideration, any conditions to such Acquisition Proposal, the timing of the closing thereof, the risk of nonconsummation, the ability of the person making the Acquisition Proposal to finance the transaction contemplated thereby and any required governmental or other consents, filings and approvals) to be more favorable to the Company's stockholders than the transactions contemplated by this Agreement, or any revised offer submitted by Parent that is itself a Superior Proposal, and for which financing, to the extent required, is then fully committed to the Person making such Acquisition Proposal. (f) Notice to Parent in connection with Acquisition Proposal. Company shall immediately advise Parent orally and in writing of any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the person making the same. The Company shall inform Parent on a prompt and current basis of the status and content of any discussions regarding any Acquisition Proposal with a third party and as promptly as practicable of any change in the price, structure or form of the consideration or material terms of and conditions regarding the Acquisition Proposal. (g) Board Recommendation. The Board of Directors of the Company shall be permitted to withdraw, or modify in any manner, whether or not adverse to Parent, the Company Board Recommendation, but only if (i) the Company has complied with the terms of this Section 6.8, including, without limitation, the requirement that it notify Parent promptly after its receipt of any Acquisition Proposal, (ii) a Superior Proposal has been offered and not withdrawn at the time the Company's Board of Directors determines to take any such action, (iii) the Company's Board of Directors determines in good faith by a majority vote, on the basis of the advice of its outside legal counsel, that its fiduciary duties under applicable law so require that it must take such action and (iv) the Company shall have delivered to Parent four business days' prior written notice advising Parent that it intends to take such action. 6.9 Publicity. Company, on the one hand, and Parent and Sub, on the other hand, will consult with each other before holding any press conferences, analyst calls or other meetings or discussions and before issuing any press releases or other public announcements or statements regarding the transactions contemplated hereby and by the Support Agreement. The parties will provide each other the reasonable opportunity to review and comment upon any press release or other public announcement or statement with respect to the transactions contemplated by this Agreement and the Support Agreement, including the Offer and the Merger, and shall not issue any such press release or other public announcement or statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with Nasdaq, any U.S. national securities exchange or the German Neuer Market Exchange. The parties agree that the initial press release or releases to be issued with respect 31 36 to the transactions contemplated by this Agreement shall be mutually agreed upon prior to the issuance thereof. In addition, Company shall, and shall cause its Subsidiaries to consult with Parent regarding written communications with customers, stockholders and employees relating to the transactions contemplated hereby. 6.10 State Takeover Statutes. Each party will take all steps necessary to exempt (or continue the exemption of) the Offer, the Merger and the other transactions contemplated hereby and by the Support Agreement from any applicable state takeover law (including Section 203 of the DGCL), as now or hereafter in effect. 6.11 Payment of Bonuses. Company has delivered to Parent a copy of all Company's bonus plans or programs in effect prior to the date of this Agreement. Subject to Section 5.2(i) hereof, Parent and Sub agree to cause the Company to comply with all terms and conditions of the Company's bonus plans or programs in effect prior to the date of this Agreement and to make all payments pursuant to such plans or programs for periods prior to the Effective Time. 6.12 HSR Act Filings. (a) Each of Parent and the Company shall, if applicable, (i) promptly make or cause to be made the filings required of such party or any of its subsidiaries under the HSR Act with respect to the transactions contemplated by this Agreement, (ii) comply at the earliest practicable date with any request under the HSR Act for additional information, documents, or other material received by such party or any of its subsidiaries from the Federal Trade Commission or the Department of Justice or any other Governmental Entity in respect of such filings or such transactions, and (iii) cooperate with the other party in connection with any such filing and in connection with resolving any investigation or other inquiry of any such agency or other Governmental Entity under any Antitrust Laws (defined below) with respect to any such filing or any such transaction. Each party shall promptly inform the other party of any communication with, and any proposed understanding, undertaking, or agreement with, any Governmental Entity regarding any such filings or any such transaction. (b) Each of Parent and the Company shall use all commercially reasonable efforts to resolve such objections, if any, as may be asserted by any Governmental Entity with respect to the transactions contemplated by this Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other Federal, state or foreign statutes, rules, regulations, orders or decrees that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, "Antitrust Laws"). In connection therewith, if any administrative or judicial action or proceeding is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as violative of any Antitrust Law, and, if by mutual agreement, Parent and the Company decide that litigation is in their best interests, each of Parent and the Company shall cooperate and use all reasonable efforts vigorously to contest and resist any such action or proceeding and to have vacated, lifted, reversed, or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of any such transaction. Each of Parent and the Company shall use all commercially reasonable efforts to take such action as may be required to cause the expiration of the notice periods under the HSR Act or other Antitrust Laws with respect to such transactions as promptly as possible after the execution of this Agreement. 32 37 ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Consummation of the Offer. Sub shall have purchased all shares of Company Common Stock duly tendered pursuant to the Offer. (b) Company Stockholder Approval. If required under the DGCL, the Company Stockholder Approval shall have been obtained. (c) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, materially restricts or makes illegal consummation of the Merger. (d) HSR Act. Any applicable waiting period under the HSR Act shall have expired or been terminated. ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the stockholders of Company of the matters presented in connection with the Merger: (a) by mutual consent of Parent and Company; (b) by either Parent or the Board of Directors of Company if any Governmental Entity which must grant the HSR Approval has denied approval of the Offer or the Merger and such denial has become final and nonappealable, or any Governmental Entity of competent jurisdiction shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; provided, however, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party whose failure to comply with Section 6.2 or any other provision of this Agreement has been a primary cause of such action; (c) (i) by the Board of Directors of Company, if, prior to the purchase of any shares of Company Common Stock by Sub pursuant to the Offer, Parent breaches any of its representations, covenants or agreements contained in this Agreement (A) such that any of the conditions set forth in Annex I would not be 33 38 satisfied, and (B) such breach either cannot be cured or is not cured prior to the earlier of (x) ten (10) days after Company has furnished Parent with written notice of such breach and (y) two (2) business days prior to the date on which the Offer is then scheduled to expire; or (ii) by Parent, if, prior to the purchase of any shares of Company Common Stock by Sub pursuant to the Offer, Company breaches any of its representations, covenants or agreements contained in this Agreement (A) such that any of the conditions set forth in Annex I would not be satisfied, and (B) such breach either cannot be cured or is not cured prior to the earlier of (x) ten (10) days after Parent has furnished Company with written notice of such breach and (y) two (2) business days prior to the date on which the Offer is then scheduled to expire; (d) by Parent, if, prior to the purchase of any shares of Company Common Stock by Sub pursuant to the Offer, Company or its Board of Directors shall have (i) withdrawn, modified, amended or materially qualified in any respect adverse to Parent the Company Board Recommendation, (ii) failed to mail the Schedule 14D-9 as required by Section 1.2(b) to its stockholders, or failed to include in the Schedule 14D-9 the Company Board Recommendation, (iii) entered into a definitive or binding agreement with respect to a Superior Proposal, (iv) in response to the commencement of any tender offer or exchange offer for 40% or more of the outstanding shares of Company Common Stock, or the public announcement or disclosure of any other Acquisition Proposal (as defined in Section 6.8 hereof), or the commencement of negotiations or discussions with any third party regarding an Acquisition Proposal in accordance with the terms of Section 6.8, failed, fully and unconditionally, to recommend publicly rejection of such tender or exchange offer or reject such other Acquisition Proposal (and publicly announce such rejection, in the case of Acquisition Proposals which have been publicly disclosed or become publicly known) within five business days of such commencement, announcement or disclosure, or (v) resolved to do any of the foregoing; or (e) by either Parent or the Board of Directors of Company if (i) the Offer expires or terminates in accordance with the terms hereof without the purchase of any shares of Company Common Stock thereunder or (ii) Sub shall not have purchased Shares under the Offer prior to February 28, 2000; provided, however, that the right to terminate this Agreement under this Section 8.1(e) shall not be available to any party to the extent that such party's failure to comply with Section 6.2 or any other provision of this Agreement has resulted in the failure of any of the conditions set forth on Annex I hereto. (f) by the Company, if (i) prior to the acceptance for payment of any shares of Company Common Stock pursuant to the Offer, (ii) the Company is in compliance with Section 6.8, (iii) the Board of Directors of the Company shall have withdrawn or modified in a manner adverse to Parent the Company Board Recommendation, (iv) the Board of Directors of the Company authorizes the Company, subject to complying with the terms of this Agreement, to enter into a definitive agreement concerning a transaction that constitutes a Superior Proposal and the Company notifies Parent in writing that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice, (v) Parent does not make, within four business days of receipt of the Company's written notification of its intention to enter into a definitive agreement for a Superior Proposal, an offer that the Board of Directors of the Company determines, in good faith after consultation with its financial advisors, is at least as favorable, from a financial point of view, to the stockholders of the Company as the Superior Proposal and (vi) the Company agrees to pay the fees required to be paid pursuant to Section 8.2(b) hereof. The Company agrees (x) that it will not enter into a binding agreement referred to in clause (iv) above until at least the fifth business day after it has provided the notice to Parent required hereby and (y) to notify Parent promptly if its intention to enter into the written agreement referred to in its notification shall change at any time after giving such notification. 34 39 8.2 Effect of Termination. (a) In the event of termination of this Agreement by either Parent or Company as provided in Section 8.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become void and have no effect, and none of Parent, Company, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that (i) Section 6.3(b), this Section 8.2 and Article IX shall survive any termination of this Agreement, (ii) notwithstanding anything to the contrary contained in this Agreement, neither Parent nor Company shall be relieved or released from any liabilities or damages arising out of its intentional breach of any provision of this Agreement, and (iii) Company shall pay to Parent the Termination Fee (as defined below), if applicable, in accordance with this Section 8.2. (b) In the event that this Agreement is terminated (other than pursuant to Section 8.1(a), 8.1(b), or 8.1(c)(i), subsequent to the receipt of a Superior Proposal, and Company within nine (9) months of the date hereof enters a definitive agreement with respect to, or consummates, such Superior Proposal, Company shall pay to Parent by wire transfer of immediately available funds to an account designated by Parent within five days subsequent to the execution of a definitive agreement with respect to such Superior Proposal an amount equal to $3 million (the "Termination Fee"). (c) If Company wrongfully fails to pay Parent any amounts due to Parent under this Section 8.2 within the time periods specified herein, Company shall pay all reasonable costs and expenses (including reasonable legal fees and expenses) incurred by Parent in connection with any action or proceeding (including the filing of any lawsuit) taken by Parent to collect such unpaid amounts, together with interest on such unpaid amounts at the publicly announced prime lending rate as published in the Wall Street Journal from the date such amounts were required to be paid until the date actually received by Parent. 8.3 Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Company; provided, however, that after any approval of the transactions contemplated by this Agreement by the stockholders of Company, there may not be, without further approval of such stockholders, any amendment of this Agreement which changes the amount or the form of the consideration to be delivered to the holders of Company Common Stock hereunder other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of the transactions contemplated by this Agreement by the stockholders of Company, there may not be, without further approval of such stockholders, any extension or waiver of this Agreement or any portion thereof which reduces the amount or changes the form of the consideration to be delivered to the holders of Company Common Stock hereunder other than as contemplated by this Agreement. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 35 40 ARTICLE IX GENERAL PROVISIONS 9.1 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than pursuant to the Support Agreement, which shall terminate in accordance with its terms) shall survive the Effective Time, except for those covenants and agreements contained herein and therein which by their terms apply in whole or in part after the Effective Time. 9.2 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense; provided, however, that the costs and expenses of printing and mailing the Offer Documents, the Schedule 14D-9 and the Proxy Statement, and all filing and other fees paid to the SEC in connection with the Offer and the Merger, shall be borne equally by Parent and Company. 9.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent, to: Gert J. Reinhardt SER Systeme AG Innovationspark Rahms D-53577 Neustadt/Wied Germany Fax number: 011 49 2683 984299 Philip Storey SER Systeme AG 9943 Lawyers Road Vienna, VA 22181 Fax number: (703) 319-3665 with a copy to: John L. Sullivan, III Venable, Baetjer and Howard, LLP 2010 Corporate Ridge Suite 400 McLean, VA 22102 Fax number: 703 821 8949 36 41 (b) if to Company, to: James McGowan EIS International, Inc., 555 Herndon Parkway Herndon, VA 20170 Fax number: 703 326 8320 with a copy to: Randall S. Parks Hunton & Williams 951 East Byrd Street Richmond, VA 23219 Fax number: 804 788 8218 9.4 Interpretation. When a reference is made in this Agreement to Sections or Schedules, such reference shall be to a Section of or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." No provision of this Agreement shall be construed to require Company, Parent or any of their respective Subsidiaries or affiliates to take any action which would violate any applicable law, rule or regulation. The recitals set forth in this Agreement are incorporated into this Agreement by reference and made a part hereof. 9.5 Counterparts. This Agreement may be executed in counterparts, each of which, when so executed and delivered, shall constitute an original, and all of which counterparts, taken together, shall constitute one and the same instrument, with the same effect as if all signatures were on the same instrument. 9.6 Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof other than the Support Agreement, the Confidentiality Agreement dated October 15, 1999, and Article 2 of the Non-Solicitation and Standstill Agreement dated November 17, 1999 between Parent and Company. 9.7 Governing Law, Jurisdiction and Venue. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Virginia. Each party to this Agreement: (a) agrees that any legal action or proceeding under this Agreement shall be brought in the United States District Court for the Eastern District of Virginia sitting in Alexandria, Virginia; or if such court does not have jurisdiction over a particular matter, in the appropriate state court of the Commonwealth of Virginia; (b) irrevocably submits to the jurisdiction of such courts; (c) agrees not to assert any claim or defense that it is not personally subject to the jurisdiction of such courts, that any such forums are not convenient or the venues thereof are improper, or that this Agreement or the subject matter hereof may not be enforced in such courts; and (d) agrees to accept service of process on it by certified or registered mail or by any other method authorized by law. 37 42 9.8 Severability. If any term or provision of this Agreement, or the application thereof to any person(s) or in any circumstance(s) is found by a court of competent jurisdiction to be invalid, illegal or unenforceable, for any reason, in any jurisdiction, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby and thereby is not affected in any manner materially adverse to any party to this Agreement. Upon such a determination that any term(s) or other provision(s) is or are invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify such Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. In the event that such modification is not possible or is not achieved for any reason, then the term(s) or provision(s) found invalid, illegal or incapable of being enforced such term(s) or provision(s) shall be deemed to be deleted or excluded from the affected Agreement as if never included therein to the extent that such deemed deletion or exclusion does not affect the economic or legal substance of the transactions contemplated in a manner materially adverse to any party to this Agreement. 9.9 Assignment; Third Party Beneficiaries. Subject to Section 1.13, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 6.5, this Agreement (including the documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 9.10 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. 38 43 IN WITNESS WHEREOF, Parent, Sub and Company have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. SER SYSTEME AG By: /s/ GERT J. REINHARDT -------------------------- Name: Gert J. Reinhardt Title: Chief Executive Officer SERSYS ACQUISITION CORPORATION By: /s/ DR. PHILIP A. STOREY -------------------------- Name: Dr. Philip A. Storey Title: President EIS INTERNATIONAL, INC. By: /s/ JAMES E. McGOWAN -------------------------- Name: James E. McGowan Title: President and Chief Executive Officer 44 ANNEX I CONDITIONS OF THE OFFER The capitalized terms used in this Annex I have the meanings set forth in the attached Agreement, except that the term "Merger Agreement" shall be deemed to refer to the attached Agreement. Notwithstanding any other provisions of the Offer, and in addition to the conditions that at the expiration of the Offer (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer a number of shares of Company Common Stock which, together with any other shares beneficially owned by Parent or its wholly-owned Subsidiaries, constitute more than 50% of the voting power (determined on a fully-diluted basis) on the date of purchase of all the securities of Company entitled to vote generally in the election of directors or in a merger (the "Minimum Condition"), (ii) the applicable waiting period under the HSR Act (the "HSR Approval") shall have expired or been terminated (the expiration of such waiting period being referred to as the "HSR Approval Condition"), and (iii) any other approvals or consents of third parties required to consummate the transactions contemplated by the Merger Agreement (including the Offer and the Merger), shall have been obtained and shall remain in full force and effect, Sub shall not be required to accept for payment, or subject to applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), purchase or pay for any shares tendered pursuant to the Offer, may postpone the acceptance for payment of shares tendered, and subject to the terms and conditions of the Merger Agreement may terminate the Offer, if at any time on or after the date of the Merger Agreement and at or before the time of payment for any such shares any of the following conditions shall have occurred and shall have not been cured: (a) (x) the representations and warranties of Company set forth in the Merger Agreement, shall not have been true and correct in all respects as of the date of the Merger Agreement, or shall not be true and correct in all respects as of the expiration of the Offer as though made at and as of the expiration of the Offer (except to the extent that such representations and warranties speak as of another date which shall be required to be true and correct as of such date) except where the failure to be true and correct would not, individually or in the aggregate, have a Company Material Adverse Effect (ignoring for purposes of this section all materiality or Material Adverse Effect qualifiers contained in such representations and warranties) or prevent the consummation of the Offer, or (y) Company shall have breached in any material respect any of its material covenants or obligations contained in the Merger Agreement; (b) there shall have been any action or proceeding taken or instituted and pending, or any statute, rule, regulation, judgment, order, injunction or decree promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Merger, or any other action taken, proposed or threatened, by any domestic or foreign federal or state governmental, regulatory or administrative agency or authority or court or legislative body or commission which has or would reasonably be expected to have the effect of (i) making the purchase of, or payment for, some or all of the shares of Company Common Stock by Parent or Sub or their Affiliates pursuant to the Offer or the Merger illegal, (ii) otherwise directly or indirectly preventing the making or consummation of the Offer, or the consummation of the Merger, (iii) prohibiting the ownership or operation by Parent or any of its Subsidiaries of all or any material portion of the business or assets of Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, (iv) imposing material limitations on the ability of Parent, Sub or any of Parent's Affiliates effectively to acquire or hold or to exercise full rights of ownership of the shares of Company Common Stock, including, without limitation, the right to vote any such shares acquired or owned by Parent or Sub or any of their Affiliates on all matters properly presented to the stockholders of Company, including, without limitation, the adoption of the Merger Agreement or the right to vote any shares of capital stock of any Company Subsidiary, (v) requiring divestiture by Parent or 45 Sub or any of their Affiliates of any shares of Company Common Stock or (vi) materially adversely affecting the business, financial condition, prospects or results of operations of the Company and its Subsidiaries taken as a whole; or (c) there shall have occurred after the execution of this Agreement (i) any general suspension in, or limitation on, or material adverse decline in prices for securities on the New York Stock Exchange or Nasdaq, (ii) any material adverse change or any condition, event or development involving a prospective material adverse change in United States or German currency exchange rates or a suspension of, or limitation on the markets therefor, resulting in an increase of 20% or more in the cost to Parent of the Merger Consideration (iii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iv) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States that would prevent (or delay) the consummation of the Offer, or (v) in the case of any of the foregoing existing at the time of commencement of the Offer, material acceleration or worsening thereof; (d) there shall have occurred any change in the business, properties assets, liabilities, capitalization, stockholders equity, financial condition, operations, results of operations or prospects of Company or any of its Subsidiaries, that (i) was not disclosed in the Company Disclosure Schedule or in the Management's Discussion and Analysis of Financial Condition and Results of Operations, Company, Business or Financial Statements Sections of the Company Reports filed prior to the date hereof (other than information contained under any "Risk Factor," "Cautionary Statements" or "Factors Affecting Future Results" heading contained therein) and (ii) that would reasonably be expected to have a Company Material Adverse Effect or materially adversely affect (or delay) the consummation of the Offer; (e) (A) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified in a manner adverse to Parent or Sub the Company Board Recommendation, or approved or recommended any Acquisition Proposal or other acquisition of Company Common Stock other than the Offer and the Merger, (B) any such corporation, partnership, other entity or person shall have entered into a definitive agreement or any agreement in principle with the Company with respect to a tender offer or exchange offer for any Company Common Stock or a merger, consolidation or other business combination with or involving the Company or any of its Subsidiaries or (C) the Board of Directors of the Company or any committee thereof shall have resolved to do any of the foregoing; or (f) the Company's Board of Directors shall have failed to take all action necessary to render the rights issued pursuant to the Rights Agreement inapplicable to this Agreement, the Offer, the Merger and the transactions contemplated thereby; or (g) this Agreement shall have been terminated by Company, Parent or Sub in accordance with its terms. The foregoing conditions (other than the Minimum Condition) are for the sole benefit of Parent and its Affiliates and may be asserted by Parent or its Affiliates regardless of the circumstances giving rise to such condition. The foregoing conditions (other than the Minimum Condition) may be waived by Parent in whole or in part at any time and from time to time in its sole discretion. The failure by Parent at any time to exercise any of its rights in connection with the foregoing conditions shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and 2 46 circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 3 EX-99.C.2 14 TENDER AND VOTING AGREEMENT DATED 12/17/1999 1 Exhibit (c)(2) TENDER AND VOTING AGREEMENT This TENDER AND VOTING AGREEMENT, dated as of December 17, 1999 (this "Agreement"), is entered into by and between SER SYSTEME AG, a German corporation ("Parent"), and each stockholder of EIS INTERNATIONAL, INC., a Delaware corporation ("Company"), whose name and signature are set forth on the signature page(s) hereof (collectively, the "Stockholders" and, individually, a "Stockholder"). WHEREAS, Company, Parent and Sersys Acquisition Corporation ("Sub"), a Delaware corporation that is a wholly owned subsidiary of SER (USA), Inc., a Delaware corporation that is a wholly owned subsidiary of Parent, are, concurrently with the execution hereof, entering into an Agreement and Plan of Merger, dated as of December 17, 1999 (the "Merger Agreement"), pursuant to which Sub will make an offer to purchase (the "Offer") all of the issued and outstanding shares of common stock, par value $0.01 per share, of Company (the "Company Common Stock"), at a price of $6.25 per share, net in cash, the consummation of which will be followed by the merger of Sub with and into Company, with Company being the surviving corporation (the "Merger"); WHEREAS, each Stockholder is the record and/or beneficial owner (for purposes of this Agreement, "beneficial owner" and correlatives having the meaning set forth in Rule 13d-3 under the Exchange Act) of that number of shares of Company Common Stock set forth opposite his or her name on Schedule I hereto and incorporated herein by reference (collectively, the "Existing Shares" and, with respect to any Stockholder, the "Stockholder's Existing Shares"); WHEREAS, each of the parties hereto desires to enter into this Agreement to provide for, among other things, (1) the obligation of each Stockholder to tender, or cause the record holder of all such Stockholder's Existing Shares, together with all other shares of capital stock or other voting securities of Company with respect to which such Stockholder has beneficial ownership as of the date of this Agreement and any shares of capital stock or other voting securities of Company, beneficial ownership of which is directly or indirectly acquired by such Stockholder after the date hereof (including, without limitation, shares received pursuant to any stock splits, stock dividends or distributions, shares acquired by purchase or upon the exercise, conversion or exchange of any option, warrant or convertible security or otherwise, and shares or any voting securities of Company received pursuant to any change in the capital stock of Company by reason of any recapitalization, merger, reorganization, consolidation, combination, exchange of shares or the like (collectively, the "Shares" and with respect to any Stockholder, the "Stockholder's Shares") to tender such Stockholder's Shares (collectively, the "Tender Shares" and with respect to any Stockholder, the "Stockholder's Tender Shares") in the Offer, (2) the obligation of each Stockholder to 2 vote such Stockholder's Shares, or to cause the record holder of the Stockholder's Shares to vote, such Shares (collectively, the "Voting Shares" and with respect to any Stockholder, the "Stockholder's Voting Shares") in the manner specified herein and (3) certain restrictions on the sale or the transfer of record and beneficial ownership, by any Stockholder, of any such Stockholder's Shares; and WHEREAS, each Stockholder acknowledges that Parent is entering into the Merger Agreement in reliance on the representations, warranties, covenants and other agreements of such Stockholder set forth in this Agreement and that the Parent would not enter into the Merger Agreement if such Stockholder did not enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Merger Agreement, and intending to be legally bound hereby, Parent and each Stockholder severally agree as follows: 1. Incorporation by Reference; Defined Terms. The Recitals set forth above are incorporated into this Agreement by reference and made a part hereof. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Merger Agreement. 2. Agreement to Tender. Subject to the terms of this Agreement and provided this Agreement is not terminated pursuant to Section 20 hereof, each Stockholder hereby agrees to validly tender, or cause the record owner to validly tender, all of such Stockholder's Tender Shares pursuant to and in accordance with the terms of the Offer within ten (10) business days of the commencement thereof and, once tendered, not to withdraw or permit to be withdrawn any Shares therefrom unless the Offer has expired and not been extended or been terminated without the purchase of any shares as so permitted in the Merger Agreement. 3. Agreement to Vote. Each Stockholder hereby agrees that, from and after the date hereof and until the Termination Date (as defined in Section 20), such Stockholder shall (i) appear at each and any meeting of the stockholders of the Company, however called, in person or by proxy, or otherwise shall cause all such Stockholder's Voting Shares, or Shares as to which such Stockholder has, directly or indirectly, the right to vote or direct the voting, to be counted as present thereat for purposes of establishing a quorum, and (ii) at each such meeting or in connection with any written consent of the stockholders of Company, such Stockholder shall vote (or cause to be voted) or act by written consent with respect to all such Stockholder's Voting Shares or Shares as to which such Stockholder has, directly or indirectly, the right to vote or direct the voting, (a) in favor of adoption and approval of the Merger Agreement and the Merger and the approval of the terms thereof and each of the other actions contemplated by the Merger Agreement and this Agreement, and any other action requested by Parent in furtherance thereof; (b) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of 2 3 Company contained in the Merger Agreement or of any Stockholder contained in this Agreement; (c) against any Acquisition Proposal made by any person (for purposes of this Agreement, "person" having the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act) other than Parent or any of its Subsidiaries; and (d) against any other action, agreement or transaction (other than the Merger Agreement and the transactions contemplated thereby) that is intended, or could reasonably be expected, to impede, or interfere or be inconsistent with, delay, postpone, discourage or materially adversely affect the Offer or the Merger or the performance by each of the Stockholders of such Stockholder's obligations under this Agreement, including, but not limited to: (i) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving Company or its Subsidiaries (other than the Offer and the Merger); (ii) a sale, lease or transfer of a material amount of assets of Company or any of its Subsidiaries (other than in the ordinary course of business) or a reorganization, recapitalization or liquidation of Company or any of its Subsidiaries; (iii) a material change in the policies or management of Company; (iv) an election of new members to the board of directors of Company, except where the vote is cast in favor of the candidates nominated by a majority of the existing directors; (v) any material change in the capitalization or dividend policy of Company as in effect on the date hereof or any amendment or other change to Company's certificate of incorporation as in effect on such date; or (vi) any other material change in Company's personnel, corporate structure or business. Each Stockholder hereby agrees not to enter into any voting or other agreement or understanding with any person or entity or grant a proxy or power of attorney with respect to any Shares prior to the Termination Date (other than a proxy or power of attorney to an officer of Company that may be exercised solely in accordance with this Section 3 and except as provided in Section 4 below) or vote or give instructions in any manner inconsistent with clauses (a), (b) or (c) of the preceding sentence. Each Stockholder hereby agrees, during the period commencing on the date hereof and ending on the Termination Date, not to, and not to permit any of its affiliates (for purposes of this Agreement, "affiliate" has the definition set forth in Rule 12b-2 of the Exchange Act) to, vote or execute any written consent in lieu of a stockholders meeting, if such consent or vote by the stockholders of Company would be inconsistent with, impede or frustrate the purposes of the other covenants of such Stockholder pursuant to this Agreement including, without limitation, the purposes and covenants of this Section 3. The provisions of this Agreement, including but not limited to this Section 3, should not be construed to prevent a Stockholder, acting in his capacity as a director of the Company, from exercising his fiduciary duties as a director, including with respect to the matters set forth in Section 6.7(g) of the Merger Agreement. 4. PROXY. SUBJECT TO SECTION 20 HEREOF, EACH STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS, GERT J. REINHARDT AND PHILIP A. STOREY, IN THEIR RESPECTIVE CAPACITIES AS OFFICERS OF PARENT, AND ANY INDIVIDUAL (S) WHO SHALL HEREAFTER SUCCEED TO THE CORPORATE OFFICE OF EITHER SUCH OFFICER OF PARENT, AND ANY OTHER PERSON(S) DESIGNATED IN WRITING BY PARENT, EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER'S PROXY AND ATTORNEY-IN-FACT 3 4 (WITH FULL POWER OF SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT ON MATTERS REFERRED TO IN, AND IN ACCORDANCE WITH, SECTION 3 HEREOF, WITH RESPECT TO SUCH STOCKHOLDER'S SHARES. THIS PROXY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE. SUCH STOCKHOLDER WILL TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS PARENT MAY DEEM NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY SUCH STOCKHOLDER WITH RESPECT TO SUCH SHARES. NOTWITHSTANDING THE FOREGOING, NEITHER PARENT NOR ANY OF THE AFORENAMED PROXIES SHALL EXERCISE THE POWERS SET FORTH IN THIS SECTION 4 UNLESS AND UNTIL THE HSR APPROVAL CONDITION HAS BEEN SATISFIED. 5. Representations and Warranties of Parent. Parent represents and warrants to each Stockholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of Germany. (b) Parent has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by Parent's Board of Directors and no other corporate proceedings on the part of Parent are necessary to authorize the execution and delivery of this Agreement by Parent and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and (assuming the valid authorization, execution and delivery of this Agreement by each Stockholder) is a valid and binding obligation of Parent, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (c) The execution and delivery of this Agreement by Parent do not, and the performance of this Agreement by Parent will not, (i) violate the certificate of incorporation or by-laws of Parent, (ii) violate any law, rule, regulation or order applicable to Parent or by which any of its properties is bound, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of any Lien on the properties or assets of Parent pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent is a party or by which Parent or any of its properties is bound, except those that would not reasonably be expected to impair materially the ability of Parent to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis. 4 5 6. Representations and Warranties of the Stockholders. Each Stockholder represents and warrants to Parent as follows: (a) If such Stockholder is a corporation, limited liability company, partnership or trust (i) such Stockholder has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization and (ii) such Stockholder has all necessary corporate authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, and the execution, delivery and performance of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of such Stockholder. (b) This Agreement has been duly executed and delivered by such Stockholder and (assuming the valid authorization, execution and delivery of this Agreement by Parent) is a valid and binding obligation of such Stockholder, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (c) The execution and delivery of this Agreement by such Stockholder do not, and the performance of this Agreement by such Stockholder will not, (i) if such Stockholder is a corporation, limited liability company, partnership or trust, violate the certificate of incorporation or by-laws, or other organizational documents, of such Stockholder, (ii) violate any law, rule, regulation or order applicable to such Stockholder or by which any of its properties is bound, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of any Lien on the properties or assets of such Stockholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which such Stockholder is a party or by which such Stockholder or any of its properties is bound, except for those that would not result in the imposition of a Lien on such Stockholder's Shares and would not reasonably be expected to materially impair the ability of such Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis. (d) The execution and delivery of this Agreement by such Stockholder do not, and the performance by such Stockholder of its obligations hereunder will not, require such Stockholder to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity. 5 6 (e) There is no suit, action, investigation or proceeding pending or, to the knowledge of such Stockholder, threatened against such Stockholder at law or in equity before or by any Governmental Entity that would reasonably be expected to materially impair the ability of such Stockholder to perform its obligations hereunder on a timely basis, and there is no agreement, commitment or law to which such Stockholder is subject that would reasonably be expected to impair materially the ability of such Stockholder to perform its obligations hereunder on a timely basis. (f) Such Stockholder's Existing Shares are owned beneficially and of record by such Stockholder except as indicated on Schedule I. Such Stockholder's Existing Shares constitute all of the shares of Company Common Stock owned of record or beneficially by such Stockholder. All of such Existing Shares are issued and outstanding and, except as indicated on Schedule I, such Stockholder does not own, of record or beneficially, any warrants, options, convertible securities or other rights to acquire any shares of Company Common Stock. Such Stockholder has not appointed or granted any proxy which is still effective with respect to any Shares other than as provided in this Agreement. Except as indicated on Schedule I, such Stockholder has sole voting power and sole power of disposition with respect to all of such Stockholder's Existing Shares, and there are no restrictions on such Stockholder's rights of disposition pertaining thereto. 7. Agreements of the Stockholders. (a) Each Stockholder hereby agrees, while this Agreement is in effect, and except as expressly contemplated hereby or by the Merger Agreement, not to (i) sell, transfer, pledge, encumber, grant, assign or otherwise dispose of, enforce any redemption agreement with Company or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale, transfer, pledge, encumbrance, grant, assignment or other disposition of, record or beneficial ownership of any of the Shares or any interest in any of the foregoing, except to Parent, (ii) grant any proxies or powers of attorney, deposit any Shares into a voting trust or enter into a voting agreement with respect to any Shares, or any interest in any of the Shares, except to Parent or (iii) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholder from performing such Stockholder's obligations under this Agreement, or that would otherwise hinder or delay Parent from acquiring a majority of the outstanding Company Common Stock, determined on a fully diluted basis. (b) Each Stockholder hereby agrees, while this Agreement is in effect, and except with respect to Parent and its affiliates and except for actions that, if taken by the Company, would be permitted pursuant to the Merger Agreement, such Stockholder shall not, and shall not permit any of its affiliates or any director, officer, employee consultant, agent, advisor or representative of such Stockholder or any of its affiliates (collectively, the "Representatives") to initiate, solicit or knowingly encourage, 6 7 directly or indirectly, any inquiries or the making of any proposal with respect to any matter described in Section 7(a) hereof or any Acquisition Proposal, participate in any negotiations concerning, or provide to any other person any information or data relating to Company or any of its Subsidiaries for the purpose of, or have any discussions with any person relating to, or cooperate with or assist or participate in, or facilitate, any inquiries or the making of any proposal which constitutes, or would reasonably be expected to lead to, any effort or attempt by any other person to seek to effect any matter described in Section 7(a) hereof or any Acquisition Proposal with respect to Company or any of its Subsidiaries, or agree to or endorse any or release any third party from any obligation under any existing standstill agreement or arrangement relating to any such Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement such an Acquisition Proposal. Each Stockholder agrees immediately to cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore by it that would violate Section 7(a) or 7(b) hereof, and will take the necessary steps promptly to inform its Representatives of the obligations undertaken by such Stockholder in this Section 7. (c) Each Stockholder hereby agrees, while this Agreement is in effect, to notify Parent promptly of (i) the number of any additional shares of Company Common Stock and the number and type of any other Shares acquired by such Stockholder, after the date hereof and (ii) any inquiries or proposals that are received by, any information that is requested from, or any negotiations or discussions that are sought to be initiated or continued with, such Stockholder with respect to any matter described in Section 7(a) or Section 7(b). (d) Each Stockholder consents to the termination of the Company Stock Plans and the Stock Purchase Plan (all as defined in the Merger Agreement) and the conversion of interests under such plans pursuant to Sections 1.9 and 6.5 of the Merger Agreement. 8. Record Ownership. Each Stockholder agrees to use its reasonable best efforts such that within ten (10) business days after receiving a request therefor from Parent, such Stockholder will no longer hold any Shares in "street name" or in the name of any nominee. 9. Further Assurances. From time to time, at the request of Parent, on the one hand, and any Stockholder, on the other, each Stockholder or the Company, as the case may be, without further consideration, shall execute and deliver such additional documents and take all such further action as may be necessary or desirable, in the reasonable discretion of the party making the request, to consummate and make effective, as expeditiously as reasonably practicable, the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, none of the parties hereto shall enter into an agreement or arrangement (or alter, amend or terminate any existing agreement or arrangement) if such action would materially impair the ability of such party to effectuate, carry out or comply with all the terms of this Agreement. 7 8 10. Survival. None of the representations, warranties, covenants and agreements of the parties herein shall survive beyond the Termination Date. 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (1) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (2) on the first (1st) business day following the date of dispatch if delivered by a recognized next-day courier service, or (3) on the tenth (10th) business day following the date of dispatch if mailed by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be given the party at its address stated on the signature page(s) of this Agreement or at any other address as the Company or a Stockholder may specify for this purpose by notice to the Stockholders or the Company, as the case may be, pursuant to this Section 11. 12. No Waivers. No failure or delay by any party in exercising any right, power or privilege under this Agreement or any other agreements, instruments and other documents executed and delivered by each Stockholder in connection with this Agreement (collectively, the "Support Documents") shall operate as a waiver of that right, power or privilege. A single or partial exercise of any right, power or privilege shall not preclude any other or further exercise of that right, power or privilege or the exercise of any other right, power or privilege. The rights and remedies provided in the Support Documents shall be cumulative and not exclusive of any rights or remedies provided by law. 13. Amendments, Etc. No amendment, modification, termination or waiver of any provision of any Support Document, and no consent to any departure by any Stockholder or Parent from any provision of any Support Document, shall be effective unless it shall be in writing and signed and delivered by each Stockholder and Parent, and then it shall be effective only in the specific instance and for the specific purpose for which it is given. 14. Successors and Assigns; Third Party Beneficiaries. (a) No party shall assign any of its rights or remedies or delegate any of its obligations or liabilities, in whole or in part, under any Support Document. Any assignment or delegation in contravention of this Section 14 shall be void ab initio and shall not relieve the assigning or delegating party of any obligation under any Support Document. (b) The provisions of each Support Document shall be binding upon and inure solely to the benefit of the parties hereto and their respective permitted heirs, executors, legal representatives, successors and assigns, and no other person. 15. Governing Law. This Agreement and each other Support Document, and all rights, remedies, liabilities, powers and duties of the parties hereto and 8 9 thereto, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to the principles of conflicts of laws thereof. 16. Severability of Provisions. If any one or more of the terms or other provisions of any Support Document, or the application thereof to any person(s) or in any circumstance(s) is found by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced, for any reason, all other terms and provisions of such Support Document and of each other Support Document shall nevertheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby and thereby is not affected in any manner materially adverse to any party to this Agreement. Upon such a determination that any term(s) or other provision(s) is or are invalid, illegal or incapable of being enforced, the parties to the affected Support Document shall negotiate in good faith to modify such Support Document so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. In the event that such modification is not possible or is not achieved for any reason, then the term(s) or provision(s) found invalid, illegal or incapable of being enforced shall be deemed to be deleted or excluded from the affected Support Agreement as if never included therein to the extent that such deemed deletion or exclusion does not affect the economic or legal substance of the transactions contemplated in a manner materially adverse to any party to this Agreement. 17. Headings and References. Article and section headings in any Support Document are included for only for the convenience of reference of the parties, do not constitute a part of the Support Document for any other purpose and shall not be used in the construction of any Support Document or any provision thereof. References to articles and sections in any Support Document are references to the sections of the Support Document in which such reference appears, unless the context shall require otherwise. Any term used in any Support Agreement in the singular shall extend to and include the plural, any term used in the plural shall extend to and include the singular and any term used in either gender or the neuter shall extend to and include the other gender or be neutral, unless the context otherwise requires. The use in this Agreement of the word "include" or "including," when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. 18. Entire Agreement. The Support Documents (including the Merger Agreement to the extent referenced herein) embody the entire agreement and understanding of each of the parties hereto with respect to the subject matter thereof, and 9 10 supersede all other written or oral prior agreements or understandings, with respect to such subject matter. 19. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of any Support Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Company, on the one hand, and the Stockholders, on the other hand, hall be entitled to an injunction or injunctions to prevent breaches of the Support Agreements and to enforce specifically the terms and provisions of the Support Agreements in any federal court sitting in the Commonwealth of Virginia or Virginia State court, this being in addition to any other remedy to which such party are entitled at law or in equity. 20. Termination. This Agreement and the proxy set forth in Section 4 shall terminate upon the earliest of the following dates (such date is referred to herein as the "Termination Date"): (i) the date on which the Merger Agreement is terminated in accordance with Article VIII thereof; (ii) the date on which Parent terminates this Agreement upon written notice to each of the Stockholders, which termination may be effected by Parent at any time, in its sole discretion; and (iii) the Effective Time. 21. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original, and all of which counterparts, taken together, shall constitute one and the same instrument, with the same effect as if all signatures were on the same instrument. 10 11 IN WITNESS WHEREOF, Parent and each of the undersigned Stockholders have caused this Agreement to be duly executed as of the day and year first above written. SER SYSTEME AG By: /s/ GERT J. REINHARDT --------------------- Name: Gert J. Reinhardt Title: Chief Executive Officer STOCKHOLDERS /s/ JAMES E. McGOWAN ------------------------ (Signature) James E. McGowan ------------------------ (Print Name) Address: Foxwood Lane Bluemount, VA 20135 /s/ ROBERT M. JESURUM ------------------------ (Signature) Robert M. Jesurum ------------------------ (Print Name) Address: 11 Harborview Drive Rye, NH 03870 /s/ CHARLES W. McCALL ------------------------ (Signature) Charles W. McCall ------------------------ (Print Name) Address: Illegible 11 12 /s/ JOHN F. BURTON ------------------------ (Signature) John F. Burton ------------------------ (Print Name) Address: P.O. Box 850 McLean, VA 22101 /s/ PETER B. FOREMAN ------------------------ (Signature) Peter B. Foreman ------------------------ (Print Name) Address: /s/ KENT M. KLINEMAN ------------------------ (Signature) Kent M. Klineman ------------------------ (Print Name) Address: 1720 Ave. of the Americas NY, NY /s/ ROBERT J. CRESCI ------------------------ (Signature) Robert J. Cresci ------------------------ (Print Name) Address: 12 13 /s/ FREDERICK C. FOLEY ------------------------ (Signature) Frederick C. Foley ------------------------ (Print Name) Address: 1414 Esplanade Ct. Apt 448 Reston, VA 20194 /s/ EDWARD J. SARKISIAN ------------------------ (Signature) Edward J. Sarkisian ------------------------ (Print Name) Address: 6507 Rock Crystal Dr. Clifton, VA 20124 /s/ JONATHAN M. WINEBERG ------------------------ (Signature) Jonathan M. Wineberg ------------------------ (Print Name) Address: 17676 Artist View Ct. Round Hill, VA 20141 13 EX-99.C.3 15 EMPLOYMENT AGREEMENT B/WEEN PURCHASER & MCGOWAN 1 Exhibit (c)(3) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, dated as of December 17, 1999 between SERSys Acquisition Corporation, a Delaware corporation (the "Company," which term shall refer to EIS International, Inc. ("EIS") after the Effective Time, as defined below), and James E. McGowan (the "Executive"). In consideration of the mutual covenants and representations herein contained and the mutual benefits derived herefrom, the parties, intending to be legally bound, covenant and agree as follows: 1. PURPOSE. The Company is engaged in the business of software solutions (the "Business"). The Company has entered into an Agreement and Plan of Merger dated as of the date hereof (the "Merger Agreement"), pursuant to which the Company shall merge with and into EIS International, Inc., following the completion of the tender offer described in the Merger Agreement (the "Tender Offer"). The Company wishes to employ the Executive, and the Executive has agreed to be employed by the Company, on the terms and conditions herein provided, to be effective at the Effective Time of the Merger (as defined in the Merger Agreement). If, after consummation of the Tender Offer, the Effective Time does not occur promptly as contemplated by the Merger Agreement, the Company shall cause EIS to enter into an employment agreement with Executive, and Executive agrees to enter into such employment agreement, on terms identical to those contained herein and each shall take such other actions as shall be necessary to provide Executive and EIS with all of the benefits contemplated by this Agreement, including, without limitation, preparing and executing additional agreements in place of those contemplated by this Agreement. 2. FULL-TIME EMPLOYMENT OF EXECUTIVE - DUTIES AND STATUS. (a) The Company hereby engages the Executive as a full-time executive employee to hold the office of President and Chief Executive Officer, and shall nominate him for election to the board of directors of the Company, for the period (the "Employment Period") specified in Section 4(a) hereof with such duties and responsibilities as Executive has performed in the past for EIS International, Inc., and the Executive accepts such employment, on the terms and conditions set forth in this Agreement. Throughout the Employment Period, the Executive shall faithfully exercise such authority and perform such executive duties as are commensurate with the authority and duties of Chief Executive Officer of the Company. Executive shall perform such duties in the same fashion, at the same locations, and with the same general amount of travel, as has historically been the case in connection with Executive's prior work for the Business. (b) Throughout the Employment Period, the Executive shall devote his full business time and efforts to the business of the Company and will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or corporation which competes, conflicts or interferes with the performance of his duties hereunder in any way, excepting that (i) the Executive shall be 2 entitled to accept such additional office or offices to which he may be appointed by the Company, provided that the performance of the duties of such office or offices shall generally be consistent with the scope of the duties provided for in Section 2(a) hereof and (ii) subject to the provisions of Section 5 hereof and the approval of the Board of Directors of the Company, the Executive will be permitted to serve as a director of one or more corporations not affiliated with the Company. (c) The Executive agrees to execute the Employee Proprietary Information and Inventions Agreement (the "Proprietary Rights Agreement"), attached hereto as EXHIBIT A, and to comply with the provisions thereof. The Executive understands that both entering into and complying with the terms of the Proprietary Rights Agreement is a condition to the Executive's continued employment with the Company and that Executive's material breach of his obligations under Sections 1 and 2 of the Proprietary Rights Agreement will, if not cured within thirty (30) days after written notice of such breach is delivered by the Company to Executive, constitute "cause" for purposes of this Agreement. The Executive further represents and warrants that his employment by the Company, and the performance by the Executive of his duties hereunder, will not violate any of the terms and conditions of any agreement with any previous employer. 3. COMPENSATION AND GENERAL BENEFITS. As full compensation for his services to the Company, the Executive shall, during the Employment Period, be compensated as follows: (a) The Company shall pay to the Executive a salary (the "Salary") based upon a per annum rate of three hundred and twenty-five thousand dollars ($325,000.00). The Salary shall be payable in periodic equal installments on a monthly basis, less such sums as may be required to be deducted or withheld under applicable provisions of federal, state and local law. In addition to salary, the Executive shall be eligible for bonuses. A bonus up to but not exceeding fifty percent (50%) of the Salary per calendar year shall be payable in the case of good performance. Furthermore, an additional bonus up to but not exceeding fifty percent (50%) of the Salary per calendar year shall be payable in the case of exceptional performance. The objectives to achieve such bonuses will be defined by the compensation committee of the board before January 15 of the relevant year. The total compensation shall be increased after December 30, 2001 and the salary and bonuses shall be reviewed as part of the total increase in compensation. (b) Throughout the Employment Period and to the extent commensurate with the Executive's level of responsibility within the Company, the Executive shall be entitled to participate in such pension, profit sharing, bonus or incentive compensation, incentive, group and individual disability, group and individual life, survivor income, sickness, accident, dental, medical and health benefits and other 2 3 plans of the Company or additional benefit programs, which may be established by the Company for its executive officers, as and to the extent any such benefit programs, plans and arrangements are or may from time to time be in effect, to the extent that the Executive is eligible to participate in such plans under the terms of such plans. Notwithstanding the above, the Executive shall be entitled to participate in the stock option plan that shall be adopted by the Company at the Effective Time in the form attached hereto as Exhibit B at levels commensurate with his position in the Company and with industry practices generally (with such plan to be registered under the Securities Act of 1933 on Form S-8 as soon as practicable following the initial public offering of the Company's common stock, subject to the discretion of the managing underwriter of such offering), and the Company shall retain the existing life insurance policy on Executive. The Company shall enter into the Stock Option Grant Agreement and the Stockholders Agreement in the form attached hereto as Exhibits C and D effective as of the Effective Time. The Stock Option Agreement shall provide for the issuance to Executive of options to acquire shares of the Company's common stock equal to 5% of the number of shares issued and outstanding immediately following the Effective Time. The Company shall take all action necessary to authorize such number of shares for issuance. The death benefit of such policy shall be payable to any beneficiary as designated by the Executive. (c) The Company shall reimburse the Executive from time to time for all reasonable and customary business expenses incurred by him in the performance of his duties hereunder, provided that the Executive shall submit vouchers and other supporting data to substantiate the amount of said expenses in accordance with Company policy from time to time in effect. (d) Throughout the Employment Period, the Executive shall be entitled to four (4) weeks of annual vacation. In addition, Executive shall be entitled to leave of absence and leave for illness or temporary disability in accordance with the policies of the Company in effect from time to time for its executive officers or, if more generous, the policy in effect for its employees generally. Vacation leave and leave of absence, if taken by the Executive, shall be taken at such times as are reasonably acceptable to the Company. Any leave on account of illness or temporary disability which is short of Total Disability (as defined in Section 4(c)(ii) hereof) shall not constitute a breach by the Executive of his agreements hereunder even though leave on account of a Total Disability may be deemed to result in a termination of the Employment Period under the applicable provisions of this Agreement. (e) If the Company purchases and maintains at any time during the term of this Agreement one or more life insurance policies on the life of the Executive, in addition to any policies purchased pursuant to Section 3(b) hereof, in whatever amount or amounts which the Company deems desirable, the Company shall be the beneficiary of such policy or policies and the Executive shall cooperate with the Company and submit to such reasonable medical examinations as are necessary to enable the Company to purchase and maintain in full force and effect such additional insurance policy or policies. 3 4 (f) During the term of this Agreement, the Company shall pay to the Executive an automobile allowance of $600 per month. 4. EMPLOYMENT PERIOD. (a) Duration. The Employment Period shall commence on the date of this Agreement and shall continue until the close of business on December 30, 2001, unless earlier terminated for "cause" (as defined in Section 4(c)(i) hereof). Thereafter, the Employment Period shall continue until the earlier of (i) termination by the Company without "cause", or (ii) termination of this Agreement by the Company for "cause" (as defined in Section 4(c)(i) hereof), or (iii) the Executive's resignation for "good reason" (as defined in Section 4(c)(iii)), or (iv) the Executive's resignation without "good reason", provided that the Executive provides no less than three (3) months notice to the Company of such resignation, or (v) the death or Total Disability of the Executive. (b) Payments Upon Termination. (i) Except as otherwise provided herein, if the Executive's employment is terminated by the Company for any reason other than "cause" (as defined in Section 4(c)(i) hereof), or by the Executive for "good reason" (as defined in Section 4(c)(iii) hereof), at any time during the Employment Period, the Company shall pay to, or provide at the Company's expense for, as the case may be, the Executive: (A) (i)if such termination occurs before January 1, 2001, 100% of his Salary for the remainder of the term of this Agreement, equal to at least 12 months and (ii) if such termination occurs after January 1, 2001, 100% of his annual Salary, with such amounts payable in equal installments over a three (3) month period commencing on the date of termination; and (B) for a period of twelve (12) months following such termination, the sickness, health and disability insurance programs to which he would have been entitled under this Agreement if he had remained in the employ of the Company for such twelve-month period. (ii) If the Executive's employment is terminated (A) by the Company for "cause", or (B) by the Executive by resignation without "good reason", or (C) upon the death or due to the "Total Disability" (as defined in Section 4(c)(ii) hereof) of the Executive, then the Company shall have no further liability to the Executive hereunder with respect to periods following the date of such termination, except (1) for the Salary which has accrued through the date of termination, which amounts shall be paid by the Company within thirty (30) days of such termination; and (2) for such other benefits as may be required to be provided by the Company under the provisions of applicable law. 4 5 (c) Definitions. When used in this Agreement, the words "cause", "Total Disability" and "good reason" shall have the respective meanings set forth below: (i) The term "cause" means: (A) the Executive's failure to devote his full business time and efforts to the business of the Company as required by Section 2(b) after reasonable notice to the Executive by the Board specifying such failure and providing the Executive with a reasonable opportunity to cure such failure given the context of the circumstances, (B) the Executive's material breach of the covenants or agreements contained in Sections 1 and 2 of the Proprietary Rights Agreement, if not cured within thirty (30) days after written notice of such breach is delivered by the Company to Executive, (C) the commission by Executive of an intentional tort causing material loss or damage to the Company, (D) the commission by Executive of any crime or act of fraud or material dishonesty against Company and/or its subsidiaries and affiliates causing material loss or damage to the Company, or (E) the commission by Executive of any serious felony (not involving motor vehicles) evidencing moral turpitude. Notwithstanding the foregoing, or anything else in this Agreement to the contrary, no termination by Company of Executive's employment hereunder for Cause shall occur, and Executive's full salary and benefits shall continue, until the existence of Cause (or other reason for termination permitted hereunder) is finally determined by final and binding adjudication pursuant to an arbitration proceeding taking place in the Northern Virginia area under the then applicable rules of the American Arbitration Association. Both parties consent to such arbitration as the required method of dispute resolution with respect to such issues. (ii) To the extent permitted by applicable law, the term "Total Disability" means total disability as defined in the Company's group and individual disability plans, if any. If the Company does not have in existence such plans, then "Total Disability" shall mean: (y) The inability to perform the duties required hereunder for a continuous period of six (6) months during the Employment Period due to "mental incompetence" or "physical disability" as hereinafter defined. The Executive shall be considered to be mentally incompetent and/or physically disabled: (A) if he is under a legal decree of incompetency (the date of such decree being deemed the date on which such mental incompetence occurred for purposes of this Section 4(c)); or (B) because of a "Medical Determination of Mental and/or Physical Disability." A Medical Determination of Mental and/or Physical Disability shall mean the written determination by: (1) the physician regularly attending the Executive, and (2) a physician selected by the Company, that because of a medically determinable mental and/or physical disability the Executive is unable to perform each of the essential functions of the Executive, and such mental and/or physical disability is determined or reasonably expected to last twelve (12) months or longer after the date of determination, based on medically available information. If the two physicians do not agree, they shall jointly choose a third consulting physician and the written opinion of the majority of these three (3) physicians shall be conclusive as to such mental and/or physical disability and shall be binding on 5 6 the parties. The date of any written opinion which is conclusive as to the mental and/or physical disability shall be deemed the date on which such mental and/or physical disability commenced for purposes of this Section 4(c), if the written opinion concludes that the Executive is mentally and/or physically disabled. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive consents to any such examinations which are relevant to a determination of whether he is mentally and/or physically disabled, and which is required by any two (2) of the aforesaid physicians, and to furnish such medical information as may be reasonably requested, and to waive any applicable physician patient privilege that may arise because of such examination. All physicians selected hereunder shall be Board-certified in the specialty most closely related to the nature of the mental and/or physical disability alleged to exist. (z) For purposes of determining whether the Executive is mentally incompetent or physically disabled for the continuous six (6) month period specified in this Section 4(c), such disability shall be deemed to continue from the date of any legal decree of incompetency, or written opinion which is conclusive as to the mental and/or physical disability, through the date the legal decree expires or is otherwise revoked or removed, or the date on which the mental and/or physical disability has ceased, as the case may be, as set forth in a written opinion prepared by the physicians described in this Section 4(c) pursuant to the procedures provided herein. (iii) The term "resignation for good reason" or "good reason" means any of the following: (A) the failure of the Company within ten (10) days written notice by the Executive to the Board to make any payment due to the Executive hereunder; (B) without the express written consent of the Executive, any change by the Company in the Executive's function, duties, or responsibilities not generally consistent with those contemplated in Section 2 hereof, which is not rescinded within thirty (30) days after the Executive has given the Board written notice of such change which notice specifies in detail the change; (C) any decrease in the Executive's base salary, life or disability insurance coverage or benefits payable to the Executive or to which he is entitled other than a decrease in benefits which is part of a general decrease in benefits provided or payable to officers and other salaried employees of the Company; (D) any material failure (other than a failure to make payments) by the Company to comply with any of the provisions of this Agreement, which change or failure, as the case may be, continues unremedied for thirty (30) days after Executive has given the Board written notice of such change or failure which notice specifies in detail the change or failure, as the case may be; 6 7 (E) upon (i) any sale, exchange or other disposition of substantially all of the Company's assets or over 50% of its Common Stock; or (ii) any merger, share exchange, consolidation or other reorganization or business combination in which the Company is not the surviving or continuing corporation, or in which the Company's stockholders become entitled to receive cash, securities of the Company other than voting common stock, or securities of another issuer; (F) upon the Executive's assignment to an office of the Company located more than twenty-five (25) miles from its existing facility in Herndon, Virginia; and (G) Executive's failure to be elected to, or his removal from, the Board of Directors. (d) Disparaging Remarks. Throughout the Employment Period and during any period subsequent to the termination of the Employment Period during which the Executive receives any form of compensation from the Company, each of the Company and the Executive covenants to not make any disparaging remarks concerning the other, its or his operations, or its or his attorneys, relatives, employees, officers or directors to any persons either publicly or in private whether or not such disparaging remarks may be found to adversely affect the Executive or the Company, its employees, officers, or directors, as the case may be. 5. AGREEMENT NOT TO COMPETE OR HIRE THE COMPANY'S EMPLOYEES AFTER TERMINATION. (a) The Executive agrees with the Company that the services that the Executive shall render during the Employment Period are unique, special and of extraordinary character and that the Company shall be substantially dependent upon such services to develop and market its products and to earn a profit. Accordingly, in consideration for employment by the Company and compensation and other benefits, during the Employment Period, and for a period of one (1) year after the Executive's employment is terminated (the "Restricted Period"), the Executive shall not directly or indirectly compete or interfere with the Company (or any division, subsidiary or other affiliate of the Company) in the provision of, development of, or marketing of the Business. (b) The term "compete" as used herein means to engage directly or indirectly either as a proprietor, partner, employee, agent, consultant, director, officer, stockholder or in any other capacity or manner whatsoever. The phrase "interfere with" includes, but is not limited to, soliciting or selling services or products which provide similar functions to any of the Company's services or products to any current or potential customer of the Company (it being understood that the Company refers to EIS(as the surviving corporation of the Merger, and not SER Systeme AG). The 7 8 provisions of this Section shall not prevent the Executive from investing any assets in securities of any corporation provided that such investments do not, directly or indirectly, result in the Executive, family members and other affiliates, collectively (i) owning beneficially at any time five percent (5%) or more of the equity securities of any corporation engaged in a business competitive with the Company, or (ii) otherwise being able to control or actively participate in the business decisions of such competing business. (c) The Executive agrees not to employ or call upon any employee of the Company during the Restricted Period with the intent of enticing the employee away or out of the employ of the Company for any reason whatsoever. (d) The provisions of this Section 5 shall be enforced to the fullest extent permissible under the laws and public policies applied to each jurisdiction which enforcement is sought. If any particular provision or portion of this Section shall be adjudicated to be invalid or unenforceable, this Section shall be deemed amended to interpret such provision or portion thereof so adjudicated to be invalid or unenforceable to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable, such amendment to apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. 6. NOTICES. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company. 7. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be effective as of the date hereof and shall be binding upon and inure to the benefit of, the parties and their respective heirs, successors, assigns, and personal representatives, as the case may be. The Executive may not assign any rights or duties under this Agreement. The Company may not assign this Agreement, or its rights hereunder, except to a successor of the Company. As used herein, the successors of the Company shall include, but not be limited to, any successor by way of merger, consolidation, sale of all or substantially all of the assets, or similar reorganization or change in control. 8. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of the Executive and the Company with respect to the subject matter hereof and supersede any and all prior understandings written or oral. This Agreement may not be changed, modified or discharged orally, but only by an instrument in writing signed by the parties. 9. ENFORCEABILITY. This Agreement has been duly authorized, executed and delivered and constitutes the valid and binding obligations of the parties hereto, enforceable in accordance with its terms. The undertakings herein shall not be construed as any limitation upon the remedies either party might, in the absence of this Agreement, 8 9 have at law or in equity for any wrongs of the other party. 10. GOVERNING LAW. The validity and construction of this Agreement or any of its provisions shall be determined under the internal laws of the Commonwealth of Virginia, without giving effect to its conflicts of laws provisions, and without regard to its place of execution or its place of performance. The parties irrevocably consent and agree to the exclusive jurisdiction of the courts of the Commonwealth of Virginia and the Federal courts of the United States of America located in the Commonwealth of Virginia. 11. SEVERABILITY. If any one or more of the terms or provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect or in the event that any one or more of the provisions of this Agreement operated or would prospectively operate to invalidate this Agreement, then and in either of those events, such provision or provisions only shall be deemed null and void and shall not affect any other provision of this Agreement and the remaining provisions of this Agreement shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby. 12. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one Agreement. 13. AMENDMENTS AND WAIVERS. This Agreement may, to the maximum extent permitted by applicable law, be amended by the parties, which amendment shall be set forth in an instrument executed by all of the parties. Any term, provision or condition of this Agreement (other than as prohibited by applicable law) may be waived in writing at any time by the party which is entitled to the benefits thereof. No waiver by either party of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the either party of any right under this Agreement shall be construed as a waiver of any other right. 9 10 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date first above written. For the Company: By the Executive: By: /s/ DR. PHILIP A. STOREY /s/ JAMES E. McGOWAN -------------------------- ---------------------------- Title: President -------------------------- During the Employment Term, SER Systeme AG agrees to vote, or cause to be voted, all of voting shares of the Company beneficially owned by it from time to time for the election of Executive to the Board of Directors and against any proposal to remove Executive from the Board of Directors, and for any amendment to the Company's Certificate of Incorporation necessary for the adoption by the Company of the Stock Option Plan and the issuance of the options referred to in Section 3(b) of this Agreement. For SER Systeme AG: By: /s/ GERT J. REINHARDT ----------------------------- Title: Chief Executive Officer --------------------------- 10 11 SERSYS ACQUISITION CORPORATION STOCK OPTION PLAN STOCK OPTION GRANT AGREEMENT This Grant Agreement (the "Agreement") is entered into this day of __________ 2000, by and between SERSys Acquisition Corporation (the "Corporation"), a Delaware corporation, and James E. McGowan ("Grantee"). Grantee and the Corporation agree that, until such time as securities issuable pursuant to the Plan become registered under the Securities Act of 1933, the grant of options hereunder and the purchase and sale of Common Stock upon exercise thereof are intended to comply with the exemption from registration provided by Rule 701 of the Securities Act of 1933 and each party hereto shall use his or its best efforts to comply with such Rule 701. To the extent that an exemption from registration under the Securities Act provided by Rule 701 is unavailable, the grant of options hereunder and the sale of Common Stock upon exercise thereof are intended to be exempt from registration under the Securities Act in reliance upon the private offering exemption contained in Section 4(2) of the Securities Act, or other available exemption. ARTICLE 1 GRANT OF OPTION SECTION 1.1 GRANT OF OPTIONS. Subject to the provisions of the Agreement, and pursuant to the provisions of the SERSys Acquisition Corporation Stock Option Plan (the "Plan"), Corporation hereby grants to Grantee, as of the Grant Date specified in Attachment A, a Stock Option (the "Option") of the type stated in Attachment A to purchase all or any part of the number and class of shares of Common Stock set forth on Attachment A at the exercise price per share ("Option Price") set forth on Attachment A. SECTION 1.2 TERM OF OPTIONS. Unless the Option granted pursuant to Section 1.1 terminates earlier pursuant to other provisions of the Agreement, including the expiration date specified in Attachment A, the Option shall expire on the day prior to the tenth (10th) anniversary of its Grant Date. ARTICLE 2 VESTING SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, Grantee shall become vested on the dates specified on Attachment A in a portion of the Option with respect to a percentage or number of the underlying shares in accordance with the vesting schedule specified on Attachment A; provided that Grantee shall have been in the continuous employ of or affiliation (as a consultant or director) with the Corporation from the Grant Date through any such date. 12 ARTICLE 3 EXERCISE OF OPTION SECTION 3.1 EXERCISABILITY OF OPTION. No portion of the Option granted to Grantee shall be exercisable by Grantee prior to the time such portion of the Option has vested. SECTION 3.2 MANNER OF EXERCISE. The Option may be exercised, in whole or in part, by delivering written notice to the Committee in the form attached hereto as Attachment B or in such other form as the Committee may require from time to time. Such notice shall specify the number of shares of Common Stock subject to the Option as to which the Option is being exercised, and shall be accompanied by full payment of the Option Price of the shares of Common Stock as to which the Option is being exercised. Payment of the Option Price shall be made in cash (or cash equivalents acceptable to the Committee in the Committee's discretion). In the Committee's sole and absolute discretion, the Committee may authorize payment of the Option Price to be made, in whole or in part, by such other means as the Committee may prescribe. The Option may be exercised only in multiples of whole shares and no partial shares shall be issued. SECTION 3.3 ISSUANCE OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon exercise of the Option, in whole or in part, in accordance with the terms of the Agreement and upon payment of the Option Price for the shares of Common Stock as to which the Option is exercised, the Corporation shall issue to Grantee or, in the event of Grantee's death, to Grantee's executor, personal representative or the person to whom the Option shall have been transferred by will or the laws of descent and distribution, as the case may be, the number of shares of Common Stock so paid for, in the form of fully paid and nonassessable Common Stock. The stock certificates for any shares of Common Stock issued hereunder shall, unless such shares are registered or an exemption from registration is available under applicable federal and state law, bear a legend restricting transferability of such shares. ARTICLE 4 TERMINATION OF EMPLOYMENT SECTION 4.1 UNVESTED PORTION. Unless the Option has earlier terminated pursuant to the provisions of this Agreement, the unvested portion of the Option shall terminate upon termination of Grantee's employment or affiliation (as a consultant or director) with the Corporation for any reason. SECTION 4.2 TERMINATION OF EMPLOYMENT OR AFFILIATION FOR REASON OTHER THAN DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, the Option granted to Grantee shall terminate in its entirety, regardless of whether the Option is vested in whole or in part, six (6) months after the date Grantee is no longer employed by, nor affiliated (as a consultant or director) with, the Corporation for any reason other than Grantee's death or Disability. Notwithstanding the foregoing, the Option granted to Grantee shall terminate in its entirety, regardless of whether the Option is vested in whole or in part, upon the termination of the Grantee's employment or affiliation (as a consultant or director) 2 13 with the Corporation by resignation or by the Corporation for "cause". If Grantee is a party to a written employment agreement with the Corporation which contains a definition of "cause", "termination for cause" or any other similar term or phrase, whether such Grantee is terminated for "cause" pursuant to this Section 4.2 shall be determined according to the terms of and in a manner consistent with the provisions of such written employment agreement. If Grantee is not party to such a written employment agreement with the Corporation, then for purposes of this Section 4.2, "cause" shall mean the failure by the Grantee to perform his or her duties as assigned by the Corporation in a reasonable manner; any act by the Grantee of dishonesty or bad faith with respect to the Corporation; chronic addiction to alcohol, drugs or other similar substances affecting the Grantee's work performance; or the commission by the Grantee of any act, misdemeanor, or crime reflecting unfavorably upon the Grantee or the Corporation. The good faith determination by the Committee of whether the Grantee's employment was terminated by the Corporation for "cause" pursuant to the preceding sentence shall be final and binding for all purposes hereunder. SECTION 4.3 UPON GRANTEE'S DEATH. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, upon Grantee's death Grantee's executor, personal representative or the person to whom the Option shall have been transferred by will or the laws of descent and distribution, as the case may be, may exercise all or any part of the vested portion of the Option, provided such exercise occurs within twelve (12) months after the date Grantee dies, but not later than the end of the stated term of the Option. SECTION 4.4 TERMINATION OF EMPLOYMENT OR AFFILIATION BY REASON OF DISABILITY. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, in the event that Grantee ceases, by reason of Disability, to be an employee of or affiliated (as a consultant or director) with the Corporation, the vested portion of the Option may be exercised in whole or in part at any time within twelve (12) months after the date of Disability, but not later than the end of the stated term of the Option. For purposes of this Agreement, Disability shall be as defined in Code Section 22(e)(3) and shall be determined by the Committee, with its determination on the matter being final and binding. ARTICLE 5 MISCELLANEOUS SECTION 5.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the Agreement shall be construed as a contract of employment between the Corporation (or an affiliate) and Grantee, or as a contractual right of Grantee to continue in the employ of the Corporation or an affiliate, or as a limitation of the right of the Corporation or an affiliate to discharge Grantee at any time. SECTION 5.2 NO RIGHTS OF STOCKHOLDER. Grantee shall not have any of the rights of a stockholder with respect to the shares of Common Stock that may be issued upon the exercise of the Option until such shares of Common Stock have been issued to him upon the due exercise of the Option. 3 14 SECTION 5.3 NOTICE OF DISQUALIFYING DISPOSITION. If Grantee makes a disposition (as that term is defined in Section 424(c) of the Code) of any shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option within two (2) years of the Grant Date or within one (1) year after the shares of Common Stock are transferred to Grantee, Grantee shall notify the Committee of such disposition in writing. SECTION 5.4 WITHHOLDING OF TAXES. The Corporation or any affiliate shall have the right to deduct from any compensation or any other payment of any kind (including withholding the issuance of shares of Common Stock) due Grantee the amount of any federal, state or local taxes required by law to be withheld as the result of the exercise of the Option or the disposition (as that term is defined in Section 424(c) of the Code) of shares of Common Stock acquired pursuant to the exercise of the Option; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Committee may require Grantee to make a cash payment to the Corporation or an affiliate equal to the amount required to be withheld. If Grantee does not make such payment when requested, the Corporation may refuse to issue any Common Stock certificate under the Plan until arrangements satisfactory to the Committee for such payment have been made. SECTION 5.5 NONTRANSFERABILITY OF OPTION. The Option shall be nontransferable otherwise than by will or the laws of descent and distribution. During the lifetime of Grantee, the Option may be exercised only by Grantee or, during the period Grantee is under a legal disability, by Grantee's guardian or legal representative. SECTION 5.6 AGREEMENT SUBJECT TO CHARTER AND BYLAWS. This Agreement is subject to the Charter and Bylaws of the Corporation in effect as of the date hereof, and any applicable Federal or state laws, rules or regulations, including without limitation, the laws, rules, and regulations of the State of Delaware. SECTION 5.7 GENDER. As used herein the masculine shall include the feminine as the circumstances may require. SECTION 5.8 HEADINGS. The headings in the Agreement are for reference purposes only and shall not affect the meaning or interpretation of the Agreement. SECTION 5.9 NOTICES. All notices and other communications made or given pursuant to the Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to Grantee at the address contained in the records of the Corporation, or addressed to the Committee, care of the Corporation for the attention of its Secretary at its principal office or, if the receiving party consents in advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties. SECTION 5.10 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the entire agreement between the parties with respect to the subject matter contained herein and may not be 4 15 modified, except as provided in the Plan or in a written document signed by each of the parties hereto. SECTION 5.11 CONFORMITY WITH PLAN. This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan, which is incorporated herein by reference. Unless stated otherwise herein, capitalized terms in this Agreement shall have the same meaning as defined in the Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. In the event of any ambiguity in the Agreement or any matters as to which the Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan and Grant Agreements related thereto, (ii) prescribe, amend and rescind rules and regulations relating to the Plan, and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan. The Grantee acknowledges by signing this Agreement that he or she has received and reviewed a copy of the Plan. IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first above written. ATTEST: SERSYS ACQUISITION CORPORATION By: - ------------------------ --------------------------------------- WITNESS: GRANTEE - ------------------------ ------------------------------------------ 5 16 ATTACHMENT A STOCK OPTION GRANTED TO JAMES E. MCGOWAN TYPE OF OPTION: ISO TO THE MAXIMUM EXTENT PERMITTED BY LAW WITH ANY EXCESS CONSTITUTING A NONQUALIFIED STOCK OPTION. GRANT DATE: EFFECTIVE TIME NUMBER AND CLASS OF SHARES: 50,000 SHARES OF COMMON STOCK EXERCISE PRICE PER SHARE: $69.20 PER SHARE EXPIRATION DATE: The Option shall expire on January 1, 2005, if a public offering of the Common Stock that requires registration under the Securities Act (an "IPO") has not been consummated by that date. If an IPO of the Common Stock has been consummated by January 1, 2005, the Option shall not expire until the 10th anniversary of the Grant Date. VESTING SCHEDULE: A. Regular Vesting. The Option shall be vested as to: 1. 50% of the underlying shares subject to the Option on the first anniversary of the Grant Date; and an additional 2. 50% of the underlying shares subject to the Option on the second anniversary of the Grant Date. B. Accelerated Vesting. The Option shall become vested as to 100% of the underlying shares subject to the Option in the event of the following: 1. A termination by the Corporation without "cause" or by the Grantee for "good reason," as defined in Section 4 of the Employment Agreement between the Company and Grantee of even date herewith, of Grantee's employment or affiliation (as a consultant or director) with the Corporation. 2. The consummation of an IPO of the Common Stock. 17 ATTACHMENT B EXERCISE FORM SERSys Acquisition Corporation [Address] [Address] Gentlemen: 1. Exercise of Stock Option. I hereby exercise the [Insert Type] ______________Stock Option (the "Stock Option") granted to me on ____________________, 199____, by SERSys Acquisition Corporation (the "Corporation"), subject to all the terms and provisions thereof and of the SERSys Acquisition Corporation Stock Option Plan (the "Plan"), and notify you of my desire to purchase ____________ shares (the "Shares") of Common Stock of the Corporation at a price of $___________ per share pursuant to the exercise of said Stock Option. 2. Information about the Corporation. I am aware of the Corporation's business affairs and financial condition and have acquired sufficient information about the Corporation to reach an informed and knowledgeable decision to acquire the Shares. 3. Tax Consequences. I am not relying upon the Corporation for any tax advice in connection with this option exercise, but rather am relying on my own personal tax advisors in connection with the exercise of the Stock Option and any subsequent disposition of the Shares. 4. Tax Withholding. I understand that, in the case of a nonqualified stock option, I must submit upon demand from the Corporation an amount in cash or cash equivalents sufficient to satisfy any federal, state or local tax withholding applicable to this Stock Option exercise, in addition to the purchase price enclosed, or make such other arrangements for such tax withholding that are satisfactory to the Corporation, in its sole discretion, in order for this exercise to be effective. 5. Unregistered Shares. The following shall apply in the event the Shares purchased herein are not registered under the Securities Exchange Act of 1933, as amended: (a) I am acquiring the Shares for my own account for investment with no present intention of dividing my interest with others or of reselling or otherwise disposing of any of the Shares. (b) The Shares are being issued without registration under the Securities Act of 1933, as amended (the "Act"), in reliance upon the exemption provided by Section 3(b) of the Act for employee benefit plans, contained in Rule 701 promulgated thereunder, or in lieu thereof 18 upon the private offering exemption contained in Section 4(2) of the Act, and such reliance is based in part on the above representation. (c) Since the Shares have not been registered under the Act, they must be held indefinitely until an exemption from the registration requirements of the Act is available or they are subsequently registered, in which event the representation in Paragraph (a) hereof shall terminate. As a condition to any transfer of the Shares, I understand that the Corporation will require an opinion of counsel satisfactory to the Corporation to the effect that such transfer does not require registration under the Act or any state securities law. (d) The issuer is not obligated to comply with the registration requirements of the Act or with the requirements for an exemption under Regulation A under the Act for my benefit. (e) The certificates for the shares to be issued to me shall contain appropriate legends to reflect the restrictions on transferability imposed by the Act. Total Amount Enclosed: $ ---------- Date: ------------------------ --------------------------------------------- (Optionee) Received by SERSys Acquisition Corporation On: , 19 ------------------------- ------ By: ----------------------------------- 8 EX-99.C.4 16 EMPLOYMENT AGREEMENT B/WEEN PURCHASER & FOLEY 1 Exhibit (c)(4) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, dated as of December 17, 1999 between SERSys Acquisition Corporation, a Delaware corporation (the "Company," which term shall refer to EIS International, Inc. ("EIS") after the Effective Time, as defined below), and Frederick C. Foley (the "Executive"). In consideration of the mutual covenants and representations herein contained and the mutual benefits derived herefrom, the parties, intending to be legally bound, covenant and agree as follows: 1. PURPOSE. The Company is engaged in the business of software solutions (the "Business"). The Company has entered into an Agreement and Plan of Merger dated as of the date hereof (the "Merger Agreement"), pursuant to which the Company shall merge with and into EIS International, Inc., following the completion of the tender offer described in the Merger Agreement (the "Tender Offer"). The Company wishes to employ the Executive, and the Executive has agreed to be employed by the Company, on the terms and conditions herein provided, to be effective at the Effective Time of the Merger (as defined in the Merger Agreement). If, after consummation of the Tender Offer, the Effective Time does not occur promptly as contemplated by the Merger Agreement, the Company shall cause EIS to enter into an employment agreement with Executive, and Executive agrees to enter into such employment agreement, on terms identical to those contained herein and each shall take such other actions as shall be necessary to provide Executive and EIS with all of the benefits contemplated by this Agreement, including, without limitation, preparing and executing additional agreements in place of those contemplated by this Agreement. 2. FULL-TIME EMPLOYMENT OF EXECUTIVE - DUTIES AND STATUS. (a) The Company hereby engages the Executive as a full-time executive employee to hold the office of Senior Vice President - Finance, Treasurer and Chief Financial Officer for the period (the "Employment Period") specified in Section 4(a) hereof with such duties and responsibilities as Executive has performed in the past for EIS International, Inc, and the Executive accepts such employment, on the terms and conditions set forth in this Agreement. Throughout the Employment Period, the Executive shall faithfully exercise such authority and perform such executive duties as are commensurate with the authority and duties of his office. Executive shall perform such duties in the same fashion, at the same locations, and with the same general amount of travel, as has historically been the case in connection with Executive's prior work for the Business. (b) Throughout the Employment Period, the Executive shall devote his full business time and efforts to the business of the Company and will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or corporation which competes, conflicts or interferes with the performance of his duties hereunder in any way, excepting that (i) the Executive shall be 2 entitled to accept such additional office or offices to which he may be appointed by the Company, provided that the performance of the duties of such office or offices shall generally be consistent with the scope of the duties provided for in Section 2(a) hereof and (ii) subject to the provisions of Section 5 hereof and the approval of the Board of Directors of the Company, the Executive will be permitted to serve as a director of one or more corporations not affiliated with the Company. (c) The Executive agrees to execute the Employee Proprietary Information and Inventions Agreement (the "Proprietary Rights Agreement"), attached hereto as EXHIBIT A, and to comply with the provisions thereof. The Executive understands that both entering into and complying with the terms of the Proprietary Rights Agreement is a condition to the Executive's continued employment with the Company and that Executive's material breach of his obligations under Sections 1 and 2 of the Proprietary Rights Agreement will, if not cured within thirty (30) days after written notice of such breach is delivered by the Company to Executive, constitute "cause" for purposes of this Agreement. The Executive further represents and warrants that his employment by the Company, and the performance by the Executive of his duties hereunder, will not violate any of the terms and conditions of any agreement with any previous employer. 3. COMPENSATION AND GENERAL BENEFITS. As full compensation for his services to the Company, the Executive shall, during the Employment Period, be compensated as follows: (a) The Company shall pay to the Executive a salary (the "Salary") based upon a per annum rate of Two Hundred Thousand dollars ($200,000). The Salary shall be payable in periodic equal installments on a monthly basis, less such sums as may be required to be deducted or withheld under applicable provisions of federal, state and local law. In addition to salary, the Executive shall be eligible for bonuses. The bonus amount shall be determined on a base of 35% of Executive's salary calculated against a sliding scale of 75% to 150% depending on the Executive's performance. The objectives to achieve such bonus will be defined by the Chief Executive Officer or compensation committee of the board before January 15 of the relevant year. The total compensation shall be increased after December 30, 2000 and the salary and bonuses shall be reviewed as part of the total increase in compensation. (b) Throughout the Employment Period and to the extent commensurate with the Executive's level of responsibility within the Company, the Executive shall be entitled to participate in such pension, profit sharing, bonus or incentive compensation, incentive, group and individual disability, group and individual life, survivor income, sickness, accident, dental, medical and health benefits and other plans of the Company or additional benefit programs, which may be established by the 2 3 Company for its executive officers, as and to the extent any such benefit programs, plans and arrangements are or may from time to time be in effect, to the extent that the Executive is eligible to participate in such plans under the terms of such plans. Notwithstanding the above, the Executive shall be entitled to participate in the stock option plan that shall be adopted by the Company at the Effective Time in the form attached hereto as Exhibit B at levels commensurate with his position in the Company and with industry practices generally (with such plan to be registered under the Securities Act of 1933 on Form S-8 as soon as practicable following the initial public offering of the Company's common stock, subject to the discretion of the managing underwriter of such offering), and the Company shall retain the existing life insurance policy on Executive. The Company shall enter into the Stock Option Grant Agreement and the Stockholders Agreement in the form attached hereto as Exhibits C and D effective as of the Effective Time. The Stock Option Agreement shall provide for the issuance to Executive of options to acquire shares of the Company's common stock equal to one percent (1%) of the number of shares issued and outstanding immediately following the Effective Time. The Company shall take all action necessary to authorize such number of shares for issuance. The death benefit of such policy shall be payable to any beneficiary as designated by the Executive. (c) The Company shall reimburse the Executive from time to time for all reasonable and customary business expenses incurred by him in the performance of his duties hereunder, provided that the Executive shall submit vouchers and other supporting data to substantiate the amount of said expenses in accordance with Company policy from time to time in effect. (d) Throughout the Employment Period, the Executive shall be entitled to four (4) weeks of annual vacation. In addition, Executive shall be entitled to leave of absence and leave for illness or temporary disability in accordance with the policies of the Company in effect from time to time for its executive officers or, if more generous, the policy in effect for its employees generally. Vacation leave and leave of absence, if taken by the Executive, shall be taken at such times as are reasonably acceptable to the Company. Any leave on account of illness or temporary disability which is short of Total Disability (as defined in Section 4(c)(ii) hereof) shall not constitute a breach by the Executive of his agreements hereunder even though leave on account of a Total Disability may be deemed to result in a termination of the Employment Period under the applicable provisions of this Agreement. (e) If the Company purchases and maintains at any time during the term of this Agreement one or more life insurance policies on the life of the Executive, in addition to any policies purchased pursuant to Section 3(b) hereof, in whatever amount or amounts which the Company deems desirable, the Company shall be the beneficiary of such policy or policies and the Executive shall cooperate with the Company and submit to such reasonable medical examinations as are necessary to enable the Company to purchase and maintain in full force and effect such additional insurance policy or policies. 3 4 (f) During the term of this Agreement, the Company shall pay to the executive an automobile allowance of six hundred dollars ($600.00) per month. 4. EMPLOYMENT PERIOD. (a) Duration. The Employment Period shall commence on the date of this Agreement and shall continue until the close of business on December 30, 2001, unless earlier terminated for "cause" (as defined in Section 4(c)(i) hereof). Thereafter, the Employment Period shall continue until the earlier of (i) termination by the Company without "cause", or (ii) termination of this Agreement by the Company for "cause" (as defined in Section 4(c)(i) hereof), or (iii) the Executive's resignation for "good reason" (as defined in Section 4(c)(iii)), or (iv) the Executive's resignation without "good reason", provided that the Executive provides no less than three (3) months notice to the Company of such resignation, or (v) the death or Total Disability of the Executive. (b) Payments Upon Termination. (i) Except as otherwise provided herein, if the Executive's employment is terminated by the Company for any reason other than "cause" (as defined in Section 4(c)(i) hereof), or by the Executive for "good reason" (as defined in Section 4(c)(iii) hereof), at any time during the Employment Period, the Company shall pay to, or provide at the Company's expense for, as the case may be, the Executive: (A) (i)if such termination occurs before January 1, 2001, 100% of his Salary for the remainder of the term of this Agreement, equal to at least twelve (12) months and (ii) if such termination occurs after January 1, 2001, 100% of his annual Salary, with such amounts payable in equal installments over a three (3) month period commencing on the date of termination; and (B) for a period of twelve (12) months following such termination, the sickness, health and disability insurance programs to which he would have been entitled under this Agreement if he had remained in the employ of the Company for such twelve-month period. (ii) If the Executive's employment is terminated (A) by the Company for "cause", or (B) by the Executive by resignation without "good reason", or (C) upon the death or due to the "Total Disability" (as defined in Section 4(c)(ii) hereof) of the Executive, then the Company shall have no further liability to the Executive hereunder with respect to periods following the date of such termination, except (1) for the Salary which has accrued through the date of termination, which amounts shall be paid by the Company within thirty (30) days of such termination; and (2) for such other benefits as may be required to be provided by the Company under the provisions of applicable law. 4 5 (c) Definitions. When used in this Agreement, the words "cause", "Total Disability" and "good reason" shall have the respective meanings set forth below: (i) The term "cause" means: (A) the Executive's failure to devote his full business time and efforts to the business of the Company as required by Section 2(b) after reasonable notice to the Executive by the Board specifying such failure and providing the Executive with a reasonable opportunity to cure such failure given the context of the circumstances, (B) the Executive's material breach of the covenants or agreements contained in Sections 1 and 2 of the Proprietary Rights Agreement, if not cured within thirty (30) days after written notice of such breach is delivered by the Company to Executive, (C) the commission by Executive of an intentional tort causing material loss or damage to the Company, (D) the commission by Executive of any crime or act of fraud or material dishonesty against Company and/or its subsidiaries and affiliates causing material loss or damage to the Company, or (E) the commission by Executive of any serious felony (not involving motor vehicles) evidencing moral turpitude. Notwithstanding the foregoing, or anything else in this Agreement to the contrary, no termination by Company of Executive's employment hereunder for Cause shall occur, and Executive's full salary and benefits shall continue, until the existence of Cause (or other reason for termination permitted hereunder) is finally determined by final and binding adjudication pursuant to an arbitration proceeding taking place in the Northern Virginia area under the then applicable rules of the American Arbitration Association. Both parties consent to such arbitration as the required method of dispute resolution with respect to such issues. (ii) To the extent permitted by applicable law, the term "Total Disability" means total disability as defined in the Company's group and individual disability plans, if any. If the Company does not have in existence such plans, then Total Disability shall mean: (y) The inability to perform the duties required hereunder for a continuous period of six (6) months during the Employment Period due to "mental incompetence" or "physical disability" as hereinafter defined. The Executive shall be considered to be mentally incompetent and/or physically disabled: (A) if he is under a legal decree of incompetency (the date of such decree being deemed the date on which such mental incompetence occurred for purposes of this Section 4(c)); or (B) because of a "Medical Determination of Mental and/or Physical Disability." A Medical Determination of Mental and/or Physical Disability shall mean the written determination by: (1) the physician regularly attending the Executive, and (2) a physician selected by the Company, that because of a medically determinable mental and/or physical disability the Executive is unable to perform each of the essential functions of the Executive, and such mental and/or physical disability is determined or reasonably expected to last twelve (12) months or longer after the date of determination, based on medically available information. If the two physicians do not agree, they shall jointly choose a third consulting physician and the written opinion of the majority of these three (3) physicians shall be conclusive as to such mental and/or physical disability and shall be binding on 5 6 the parties. The date of any written opinion which is conclusive as to the mental and/or physical disability shall be deemed the date on which such mental and/or physical disability commenced for purposes of this Section 4(c), if the written opinion concludes that the Executive is mentally and/or physically disabled. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive consents to any such examinations which are relevant to a determination of whether he is mentally and/or physically disabled, and which is required by any two (2) of the aforesaid physicians, and to furnish such medical information as may be reasonably requested, and to waive any applicable physician patient privilege that may arise because of such examination. All physicians selected hereunder shall be Board-certified in the specialty most closely related to the nature of the mental and/or physical disability alleged to exist. (z) For purposes of determining whether the Executive is mentally incompetent or physically disabled for the continuous six (6) month period specified in this Section 4(c), such disability shall be deemed to continue from the date of any legal decree of incompetency, or written opinion which is conclusive as to the mental and/or physical disability, through the date the legal decree expires or is otherwise revoked or removed, or the date on which the mental and/or physical disability has ceased, as the case may be, as set forth in a written opinion prepared by the physicians described in this Section 4(c) pursuant to the procedures provided herein. (iii) The term "resignation for good reason" or "good reason" means any of the following: (A) the failure of the Company within ten (10) days written notice by the Executive to the Board to make any payment due to the Executive hereunder; (B) without the express written consent of the Executive, any change by the Company in the Executive's function, duties, or responsibilities not generally consistent with those contemplated in Section 2 hereof, which is not rescinded within thirty (30) days after the Executive has given the Board written notice of such change which notice specifies in detail the change; (C) any decrease in the Executive's base salary, life or disability insurance coverage or benefits payable to the Executive or to which he is entitled other than a decrease in benefits which is part of a general decrease in benefits provided or payable to officers and other salaried employees of the Company; (D) any material failure (other than a failure to make payments) by the Company to comply with any of the provisions of this Agreement, which change or failure, as the case may be, continues unremedied for thirty (30) days after Executive has given the Board written notice of such change or failure which notice specifies in detail the change or failure, as the case may be; 6 7 (E) upon (i) any sale, exchange or other disposition of substantially all of the Company's assets or over 50% of its Common Stock; or (ii) any merger, share exchange, consolidation or other reorganization or business combination in which the Company is not the surviving or continuing corporation, or in which the Company's stockholders become entitled to receive cash, securities of the Company other than voting common stock, or securities of another issuer; (F) upon the Executive's assignment to an office of the Company located more than twenty-five (25) miles from its existing facility in Herndon, Virginia; and (G) Executive's failure to be elected to, or his removal from, the Board of Directors. (d) Disparaging Remarks. Throughout the Employment Period and during any period subsequent to the termination of the Employment Period during which the Executive receives any form of compensation from the Company, each of the Company and the Executive covenants to not make any disparaging remarks concerning the other, its or his operations, or its or his attorneys, relatives, employees, officers or directors to any persons either publicly or in private whether or not such disparaging remarks may be found to adversely affect the Executive or the Company, its employees, officers, or directors, as the case may be. 5. AGREEMENT NOT TO COMPETE OR HIRE THE COMPANY'S EMPLOYEES AFTER TERMINATION. (a) The Executive agrees with the Company that the services that the Executive shall render during the Employment Period are unique, special and of extraordinary character and that the Company shall be substantially dependent upon such services to develop and market its products and to earn a profit. Accordingly, in consideration for employment by the Company and compensation and other benefits, during the Employment Period, and for a period of one (1) year after the Executive's employment is terminated (the "Restricted Period"), the Executive shall not directly or indirectly compete or interfere with the Company (or any division, subsidiary or other affiliate of the Company) in the provision of, development of, or marketing of the Business. (b) The term "compete" as used herein means to engage directly or indirectly either as a proprietor, partner, employee, agent, consultant, director, officer, stockholder or in any other capacity or manner whatsoever. The phrase "interfere with" includes, but is not limited to, soliciting or selling services or products which provide similar functions to any of the Company's services or products to any current or potential customer of the Company (it being understood that the Company refers to EIS, as the surviving corporation of the Merger, and not SER Systeme AG). The 7 8 provisions of this Section shall not prevent the Executive from investing any assets in securities of any corporation provided that such investments do not, directly or indirectly, result in the Executive, family members and other affiliates, collectively (i) owning beneficially at any time five percent (5%) or more of the equity securities of any corporation engaged in a business competitive with the Company, or (ii) otherwise being able to control or actively participate in the business decisions of such competing business. (c) The Executive agrees not to employ or call upon any employee of the Company during the Restricted Period with the intent of enticing the employee away or out of the employ of the Company for any reason whatsoever. (d) The provisions of this Section 5 shall be enforced to the fullest extent permissible under the laws and public policies applied to each jurisdiction which enforcement is sought. If any particular provision or portion of this Section shall be adjudicated to be invalid or unenforceable, this Section shall be deemed amended to interpret such provision or portion thereof so adjudicated to be invalid or unenforceable to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable, such amendment to apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. 6. NOTICES. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company. 7. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be effective as of the date hereof and shall be binding upon and inure to the benefit of, the parties and their respective heirs, successors, assigns, and personal representatives, as the case may be. The Executive may not assign any rights or duties under this Agreement. The Company may not assign this Agreement, or its rights hereunder, except to a successor of the Company. As used herein, the successors of the Company shall include, but not be limited to, any successor by way of merger, consolidation, sale of all or substantially all of the assets, or similar reorganization or change in control. 8. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of the Executive and the Company with respect to the subject matter hereof and supersede any and all prior understandings written or oral. This Agreement may not be changed, modified or discharged orally, but only by an instrument in writing signed by the parties. 9. ENFORCEABILITY. This Agreement has been duly authorized, executed and delivered and constitutes the valid and binding obligations of the parties hereto, enforceable in accordance with its terms. The undertakings herein shall not be construed as any limitation upon the remedies either party might, in the absence of this Agreement, 8 9 have at law or in equity for any wrongs of the other party. 10. GOVERNING LAW. The validity and construction of this Agreement or any of its provisions shall be determined under the internal laws of the Commonwealth of Virginia, without giving effect to its conflicts of laws provisions, and without regard to its place of execution or its place of performance. The parties irrevocably consent and agree to the exclusive jurisdiction of the courts of the Commonwealth of Virginia and the Federal courts of the United States of America located in the Commonwealth of Virginia. 11. SEVERABILITY. If any one or more of the terms or provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part, or in any respect or in the event that any one or more of the provisions of this Agreement operated or would prospectively operate to invalidate this Agreement, then and in either of those events, such provision or provisions only shall be deemed null and void and shall not affect any other provision of this Agreement and the remaining provisions of this Agreement shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby. 12. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one Agreement. 13. AMENDMENTS AND WAIVERS. This Agreement may, to the maximum extent permitted by applicable law, be amended by the parties, which amendment shall be set forth in an instrument executed by all of the parties. Any term, provision or condition of this Agreement (other than as prohibited by applicable law) may be waived in writing at any time by the party which is entitled to the benefits thereof. No waiver by either party of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the either party of any right under this Agreement shall be construed as a waiver of any other right. 9 10 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the date first above written. For the Company: By the Executive: By: /s/ DR. PHILIP A. STOREY /s/ FREDERICK C. FOLEY ------------------------ ------------------------ Title: PRESIDENT ------------------------ During the Employment Term, SER Systeme AG agrees to vote, or cause to be voted, all of voting shares of the Company beneficially owned by it from time to time for any amendment to the Company's Certificate of Incorporation necessary for the adoption by the Company of the Stock Option Plan and the issuance of the options referred to in Section 3(b) of this Agreement. For SER Systeme AG: By: /s/ GERT J. REINHARDT ---------------------- Title: CHIEF EXECUTIVE OFFICER ------------------- 464626 10 11 SERSYS ACQUISITION CORPORATION STOCK OPTION PLAN STOCK OPTION GRANT AGREEMENT This Grant Agreement (the "Agreement") is entered into this day of __________ 2000, by and between SERSys Acquisition Corporation (the "Corporation"), a Delaware corporation, and Frederick C. Foley ("Grantee"). Grantee and the Corporation agree that, until such time as securities issuable pursuant to the Plan become registered under the Securities Act of 1933, the grant of options hereunder and the purchase and sale of Common Stock upon exercise thereof are intended to comply with the exemption from registration provided by Rule 701 of the Securities Act of 1933 and each party hereto shall use his or its best efforts to comply with such Rule 701. To the extent that an exemption from registration under the Securities Act provided by Rule 701 is unavailable, the grant of options hereunder and the sale of Common Stock upon exercise thereof are intended to be exempt from registration under the Securities Act in reliance upon the private offering exemption contained in Section 4(2) of the Securities Act, or other available exemption. ARTICLE 1 GRANT OF OPTION SECTION 1.1 GRANT OF OPTIONS. Subject to the provisions of the Agreement, and pursuant to the provisions of the SERSys Acquisition Corporation Stock Option Plan (the "Plan"), Corporation hereby grants to Grantee, as of the Grant Date specified in Attachment A, a Stock Option (the "Option") of the type stated in Attachment A to purchase all or any part of the number and class of shares of Common Stock set forth on Attachment A at the exercise price per share ("Option Price") set forth on Attachment A. SECTION 1.2 TERM OF OPTIONS. Unless the Option granted pursuant to Section 1.1 terminates earlier pursuant to other provisions of the Agreement, including the expiration date specified in Attachment A, the Option shall expire on the day prior to the tenth (10th) anniversary of its Grant Date. ARTICLE 2 VESTING SECTION 2.1 VESTING SCHEDULE. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, Grantee shall become vested on the dates specified on Attachment A in a portion of the Option with respect to a percentage or number of the underlying shares in accordance with the vesting schedule specified on Attachment A; provided that Grantee shall have been in the continuous employ of or affiliation (as a consultant or director) with the Corporation from the Grant Date through any such date. 12 ARTICLE 3 EXERCISE OF OPTION SECTION 3.1 EXERCISABILITY OF OPTION. No portion of the Option granted to Grantee shall be exercisable by Grantee prior to the time such portion of the Option has vested. SECTION 3.2 MANNER OF EXERCISE. The Option may be exercised, in whole or in part, by delivering written notice to the Committee in the form attached hereto as Attachment B or in such other form as the Committee may require from time to time. Such notice shall specify the number of shares of Common Stock subject to the Option as to which the Option is being exercised, and shall be accompanied by full payment of the Option Price of the shares of Common Stock as to which the Option is being exercised. Payment of the Option Price shall be made in cash (or cash equivalents acceptable to the Committee in the Committee's discretion). In the Committee's sole and absolute discretion, the Committee may authorize payment of the Option Price to be made, in whole or in part, by such other means as the Committee may prescribe. The Option may be exercised only in multiples of whole shares and no partial shares shall be issued. SECTION 3.3 ISSUANCE OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon exercise of the Option, in whole or in part, in accordance with the terms of the Agreement and upon payment of the Option Price for the shares of Common Stock as to which the Option is exercised, the Corporation shall issue to Grantee or, in the event of Grantee's death, to Grantee's executor, personal representative or the person to whom the Option shall have been transferred by will or the laws of descent and distribution, as the case may be, the number of shares of Common Stock so paid for, in the form of fully paid and nonassessable Common Stock. The stock certificates for any shares of Common Stock issued hereunder shall, unless such shares are registered or an exemption from registration is available under applicable federal and state law, bear a legend restricting transferability of such shares. ARTICLE 4 TERMINATION OF EMPLOYMENT SECTION 4.1 UNVESTED PORTION. Unless the Option has earlier terminated pursuant to the provisions of this Agreement, the unvested portion of the Option shall terminate upon termination of Grantee's employment or affiliation (as a consultant or director) with the Corporation for any reason. SECTION 4.2 TERMINATION OF EMPLOYMENT OR AFFILIATION FOR REASON OTHER THAN DEATH OR DISABILITY. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, the Option granted to Grantee shall terminate in its entirety, regardless of whether the Option is vested in whole or in part, six (6) months after the date Grantee is no longer employed by, nor affiliated (as a consultant or director) with, the Corporation for 2 13 any reason other than Grantee's death or Disability. Notwithstanding the foregoing, the Option granted to Grantee shall terminate in its entirety, regardless of whether the Option is vested in whole or in part, upon the termination of the Grantee's employment or affiliation (as a consultant or director) with the Corporation by resignation or by the Corporation for "cause". If Grantee is a party to a written employment agreement with the Corporation which contains a definition of "cause", "termination for cause" or any other similar term or phrase, whether such Grantee is terminated for "cause" pursuant to this Section 4.2 shall be determined according to the terms of and in a manner consistent with the provisions of such written employment agreement. If Grantee is not party to such a written employment agreement with the Corporation, then for purposes of this Section 4.2, "cause" shall mean the failure by the Grantee to perform his or her duties as assigned by the Corporation in a reasonable manner; any act by the Grantee of dishonesty or bad faith with respect to the Corporation; chronic addiction to alcohol, drugs or other similar substances affecting the Grantee's work performance; or the commission by the Grantee of any act, misdemeanor, or crime reflecting unfavorably upon the Grantee or the Corporation. The good faith determination by the Committee of whether the Grantee's employment was terminated by the Corporation for "cause" pursuant to the preceding sentence shall be final and binding for all purposes hereunder. SECTION 4.3 UPON GRANTEE'S DEATH. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, upon Grantee's death Grantee's executor, personal representative or the person to whom the Option shall have been transferred by will or the laws of descent and distribution, as the case may be, may exercise all or any part of the vested portion of the Option, provided such exercise occurs within twelve (12) months after the date Grantee dies, but not later than the end of the stated term of the Option. SECTION 4.4 TERMINATION OF EMPLOYMENT OR AFFILIATION BY REASON OF DISABILITY. Unless the Option has earlier terminated pursuant to the provisions of the Agreement, in the event that Grantee ceases, by reason of Disability, to be an employee of or affiliated (as a consultant or director) with the Corporation, the vested portion of the Option may be exercised in whole or in part at any time within twelve (12) months after the date of Disability, but not later than the end of the stated term of the Option. For purposes of this Agreement, Disability shall be as defined in Code Section 22(e)(3) and shall be determined by the Committee, with its determination on the matter being final and binding. ARTICLE 5 MISCELLANEOUS SECTION 5.1 NON-GUARANTEE OF EMPLOYMENT. Nothing in the Plan or the Agreement shall be construed as a contract of employment between the Corporation (or an affiliate) and Grantee, or as a contractual right of Grantee to continue in the employ of the Corporation or an affiliate, or as a limitation of the right of the Corporation or an affiliate to discharge Grantee at any time. 3 14 SECTION 5.2 NO RIGHTS OF STOCKHOLDER. Grantee shall not have any of the rights of a stockholder with respect to the shares of Common Stock that may be issued upon the exercise of the Option until such shares of Common Stock have been issued to him upon the due exercise of the Option. SECTION 5.3 NOTICE OF DISQUALIFYING DISPOSITION. If Grantee makes a disposition (as that term is defined in Section 424(c) of the Code) of any shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option within two (2) years of the Grant Date or within one (1) year after the shares of Common Stock are transferred to Grantee, Grantee shall notify the Committee of such disposition in writing. SECTION 5.4 WITHHOLDING OF TAXES. The Corporation or any affiliate shall have the right to deduct from any compensation or any other payment of any kind (including withholding the issuance of shares of Common Stock) due Grantee the amount of any federal, state or local taxes required by law to be withheld as the result of the exercise of the Option or the disposition (as that term is defined in Section 424(c) of the Code) of shares of Common Stock acquired pursuant to the exercise of the Option; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Committee may require Grantee to make a cash payment to the Corporation or an affiliate equal to the amount required to be withheld. If Grantee does not make such payment when requested, the Corporation may refuse to issue any Common Stock certificate under the Plan until arrangements satisfactory to the Committee for such payment have been made. SECTION 5.5 NONTRANSFERABILITY OF OPTION. The Option shall be nontransferable otherwise than by will or the laws of descent and distribution. During the lifetime of Grantee, the Option may be exercised only by Grantee or, during the period Grantee is under a legal disability, by Grantee's guardian or legal representative. SECTION 5.6 AGREEMENT SUBJECT TO CHARTER AND BYLAWS. This Agreement is subject to the Charter and Bylaws of the Corporation in effect as of the date hereof, and any applicable Federal or state laws, rules or regulations, including without limitation, the laws, rules, and regulations of the State of Delaware. SECTION 5.7 GENDER. As used herein the masculine shall include the feminine as the circumstances may require. SECTION 5.8 HEADINGS. The headings in the Agreement are for reference purposes only and shall not affect the meaning or interpretation of the Agreement. SECTION 5.9 NOTICES. All notices and other communications made or given pursuant to the Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to Grantee at the address contained in the records of the Corporation, or addressed to the Committee, care of the Corporation for the attention of its Secretary at its principal office or, if the receiving party consents in 4 15 advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties. SECTION 5.10 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the entire agreement between the parties with respect to the subject matter contained herein and may not be modified, except as provided in the Plan or in a written document signed by each of the parties hereto. SECTION 5.11 CONFORMITY WITH PLAN. This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan, which is incorporated herein by reference. Unless stated otherwise herein, capitalized terms in this Agreement shall have the same meaning as defined in the Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. In the event of any ambiguity in the Agreement or any matters as to which the Agreement is silent, the Plan shall govern including, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to (i) interpret the Plan and Grant Agreements related thereto, (ii) prescribe, amend and rescind rules and regulations relating to the Plan, and (iii) make all other determinations deemed necessary or advisable for the administration of the Plan. The Grantee acknowledges by signing this Agreement that he or she has received and reviewed a copy of the Plan. IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first above written. ATTEST: SERSYS ACQUISITION CORPORATION By: - ------------------------ ------------------------------------ WITNESS: GRANTEE - ------------------------ --------------------------------------- 5 16 ATTACHMENT A STOCK OPTION GRANTED TO FREDERICK C. FOLEY TYPE OF OPTION: ISO TO THE MAXIMUM EXTENT PERMITTED BY LAW WITH ANY EXCESS CONSTITUTING A NONQUALIFIED STOCK OPTION. GRANT DATE: EFFECTIVE TIME NUMBER AND CLASS OF SHARES: 10,000 SHARES OF COMMON STOCK EXERCISE PRICE PER SHARE: $69.20 PER SHARE EXPIRATION DATE: The Option shall expire on January 1, 2005, if a public offering of the Common Stock that requires registration under the Securities Act (an "IPO") has not been consummated by that date. If an IPO of the Common Stock has been consummated by January 1, 2005, the Option shall not expire until the 10th anniversary of the Grant Date. VESTING SCHEDULE: A. Regular Vesting. The Option shall be vested as to: 1. 50% of the underlying shares subject to the Option on the first anniversary of the Grant Date; and an additional 2. 50% of the underlying shares subject to the Option on the second anniversary of the Grant Date. B. Accelerated Vesting. The Option shall become vested as to 100% of the underlying shares subject to the Option in the event of the consummation of an IPO of the Common Stock. 17 ATTACHMENT B EXERCISE FORM SERSys Acquisition Corporation [Address] [Address] Gentlemen: 1. Exercise of Stock Option. I hereby exercise the [Insert Type] ______________Stock Option (the "Stock Option") granted to me on ____________________, 199____, by SERSys Acquisition Corporation (the "Corporation"), subject to all the terms and provisions thereof and of the SERSys Acquisition Corporation Stock Option Plan (the "Plan"), and notify you of my desire to purchase ____________ shares (the "Shares") of Common Stock of the Corporation at a price of $___________ per share pursuant to the exercise of said Stock Option. 2. Information about the Corporation. I am aware of the Corporation's business affairs and financial condition and have acquired sufficient information about the Corporation to reach an informed and knowledgeable decision to acquire the Shares. 3. Tax Consequences. I am not relying upon the Corporation for any tax advice in connection with this option exercise, but rather am relying on my own personal tax advisors in connection with the exercise of the Stock Option and any subsequent disposition of the Shares. 4. Tax Withholding. I understand that, in the case of a nonqualified stock option, I must submit upon demand from the Corporation an amount in cash or cash equivalents sufficient to satisfy any federal, state or local tax withholding applicable to this Stock Option exercise, in addition to the purchase price enclosed, or make such other arrangements for such tax withholding that are satisfactory to the Corporation, in its sole discretion, in order for this exercise to be effective. 5. Unregistered Shares. The following shall apply in the event the Shares purchased herein are not registered under the Securities Exchange Act of 1933, as amended: (a) I am acquiring the Shares for my own account for investment with no present intention of dividing my interest with others or of reselling or otherwise disposing of any of the Shares. (b) The Shares are being issued without registration under the Securities Act of 1933, as amended (the "Act"), in reliance upon the exemption provided by Section 18 3(b) of the Act for employee benefit plans, contained in Rule 701 promulgated thereunder, or in lieu thereof upon the private offering exemption contained in Section 4(2) of the Act, and such reliance is based in part on the above representation. (c) Since the Shares have not been registered under the Act, they must be held indefinitely until an exemption from the registration requirements of the Act is available or they are subsequently registered, in which event the representation in Paragraph (a) hereof shall terminate. As a condition to any transfer of the Shares, I understand that the Corporation will require an opinion of counsel satisfactory to the Corporation to the effect that such transfer does not require registration under the Act or any state securities law. (d) The issuer is not obligated to comply with the registration requirements of the Act or with the requirements for an exemption under Regulation A under the Act for my benefit. (e) The certificates for the shares to be issued to me shall contain appropriate legends to reflect the restrictions on transferability imposed by the Act. Total Amount Enclosed: $ ---------- Date: ------------------------ ------------------------------------------- (Optionee) Received by SERSys Acquisition Corporation On: , 19 ------------------------- ------ By: ----------------------------------- 8 EX-99.C.5 17 CONFIDENTIAL MUTUAL NON-DISCLOSURE AGREEMENT 1 Exhibit(c)(5) CONFIDENTIAL MUTUAL NON-DISCLOSURE AGREEMENT This Agreement is entered into effective as of the 15 day of October, 1999 by and between SER Systeme AG, a German corporation ("SER") and EIS International, Inc., a Delaware corporation ("EIS"). WHEREAS, in order to enable the parties to evaluate the merits of a possible business transaction between them (the "Transaction"), each party may furnish to the other certain information. NOW, THEREFORE, to induce EIS and SER to disclose such information, the parties agree as follows: 1. Each party agrees that all information disclosed by a party (the "Disclosing Party"), including without limitation information acquired by the other party (the "Receiving Party") from Disclosing Party's employees or upon inspection of Disclosing Party's property, relating (without limitation) to Disclosing Party's products, designs, business opportunities, plans (business, marketing or otherwise), strategies, budgets, finance, customer lists, contracts, research and development, software programs, trade secrets, know-how, techniques, inventions, processes, distribution methods, schematics and personnel disclosed to Disclosing Party by third parties, shall be considered "Confidential Information". 2. Confidential Information shall not include information which recipient is able to prove by documentary evidence (a) is now or subsequently becomes generally known or available by publication, commercial or otherwise, through no fault of the Receiving Party, (b) was known by the recipient at the time of the disclosure or was independently developed by the Receiving Party without the use of any Confidential Information, or (c) must be disclosed pursuant to applicable legal disclosure requirements or legal process. Confidential Information shall also not include information that the parties agree in writing may be disclosed by Receiving Party. 3. The Receiving Party expressly agrees not to use the Confidential Information for purposes other than those necessary to consider whether to enter into a Transaction and shall strictly limit its disclosure to such of its employees, directors and advisors having a need to know such information, which parties shall be advised that such information is Confidential Information and subject to the terms of this Agreement. Except as set forth herein, the Receiving Party shall hold all information received in confidence and not sell, assign, transfer, release or otherwise disclose the Confidential Information, or material derived therefrom, to any third party, or to its other employees, officers, directors, shareholders, agents or consultants. Notwithstanding the termination of this Agreement for any reason, the Receiving Party shall not use the Confidential Information for purposes of competing with the Disclosing Party. 1 2 4. Except as must be disclosed pursuant to applicable legal disclosure requirements or legal process, neither party nor any of its respective representatives may, without the prior written consent of the other party, disclose to any person (other than to its employees, directors and advisors having a need to know such information) that the parties have exchanged confidential information, are engaged in negotiations for a Transaction, or the proposed terms of a Transaction (collectively, the "Negotiations") until such information has been disclosed by an appropriate legal filing and/or press release mutually agreed upon by SER and EIS. Each party shall undertake all necessary and reasonable steps to ensure that the Negotiations remain secret and confidential. 5. In the event that the Receiving Party or anyone to whom the Receiving Party transmits the Disclosing Party's Confidential Information pursuant to this Agreement becomes legally compelled to disclose all or any portion of the Disclosing Party's Confidential Information or to disclose the existence of Negotiations, the Receiving Party will provide the Disclosing Party with prompt notice thereof, so that the Disclosing Party may seek a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained, the Receiving Party or the recipient of such Disclosing Party's Confidential Information will furnish only that portion of the Disclosing Party's Confidential Information or aspect of the Negotiations which is legally required to be disclosed and the Receiving Party, upon the written request of the Disclosing Party, will exercise its reasonable efforts to obtain reliable assurances that confidential treatment will be afforded such portion of the Disclosing Party's Confidential Information. 6. The Receiving Party shall immediately notify the Disclosing Party in writing of any unauthorized use or disclosure of the Confidential Information or the Negotiations, and shall provide a detailed description of the circumstances of the disclosure and the parties involved, and shall cooperate in any reasonable efforts to limit or respond to such disclosure. 7. The Receiving Party agrees that all Confidential Information provided by the Disclosing Party shall remain the property of the Disclosing Party and no license or other rights in the Confidential Information is granted hereby. The Receiving Party will not disclose the existence, content and/or substance of any of the Confidential Information to any third party; nor develop, manufacture, produce and/or distribute any software product(s) derived from or which otherwise use any of the Confidential Information. The Disclosing Party agrees to return (and have any third party to who it supplied the Confidential Information return) to the Receiving Party, immediately upon notification by the Disclosing Party in writing, all Confidential Information, including but not limited to all computer programs, documentation, notes, plans, drawings, and copies or reproductions thereof, in any form or medium whatsoever, and not to retain any copies thereof. 8. The Receiving Party will, to the maximum extent permitted by applicable law, refrain from disassembling or decompiling software, or otherwise attempting to reverse engineer the design and function of any of the Confidential Information. The Receiving Party will not remove any copyright notice, trademark notice and/or other proprietary legend or indication of confidentiality set forth on or contained in any of the Confidential Information. 2 3 9. The parties agree that any product, plan, strategy or other thing or concept jointly developed as a result of, or during, the Negotiations, shall be the joint property of both parties hereto. Neither party shall use, license or otherwise exploit such jointly developed item(s) without the express prior written consent of the other party hereto, which consent shall not be unreasonably withheld or delayed. Notwithstanding the above, any product, plan, strategy or other thing or concept that a party can prove was known by the recipient at the time of the development with the other party or was independently developed shall not be considered a jointly developed item(s). 10. Each party hereby acknowledges that unauthorized disclosure or use of Confidential Information or the Negotiations could cause irreparable harm and significant injury, the extent of which may be difficult to ascertain. Accordingly, each party agrees that each party shall have the right to seek and obtain immediate injunctive relief from breaches of this Agreement, in addition to any other rights and remedies each party may have. 11. Although the Disclosing Party shall endeavor to provide the other party with information relevant for an evaluation of a Transaction, the Disclosing Party and its advisors have not made, and will not make, any representation or warranty, express or implied, as to the accuracy or completeness of the information being provided. Any and all such representations and warranties shall be only as specifically set forth in a definitive agreement, if one is hereafter executed and delivered in connection with a Transaction. 12. Without the written consent of the other party, neither party nor its affiliates shall not solicit for employment, nor shall it employ or retain or enter into any contract for the provision of personal services during the two (2) year period commencing on the date hereof any person who is employed by the other party as of the date hereof. 13. The Receiving Party agrees to indemnify and hold the Disclosing Party harmless from and against all claims, losses, liabilities, damages, expenses and costs (including, without limitation, reasonable fees for attorneys, expert witnesses and court costs) which result from a breach or threatened breach of this Agreement by the Receiving Party. 14. (a) This Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Virginia, excluding its choice of law rules, and the courts of Fairfax County (if under State law) or the Eastern District of Virginia (if under Federal law) shall have exclusive jurisdiction and venue of such actions; (b) the prevailing party, as determined by the court, in any action between the parties arising from this Agreement shall be entitled to recover, in addition to any other relief awarded, its costs and expenses incurred in any such proceeding, including reasonable fees for attorneys, expert witnesses and court costs; (c) the Receiving Party's rights under this Agreement may not be assigned to any third party without the Disclosing Party's prior written consent and any attempted or purported assignment of this Agreement without such party's consent shall be void; and (d) this Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous negotiations, discussions and understandings of the parties. 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above. SER SYSTEME AG EIS INTERNATIONAL, INC. By: /s/ DR. PHILLIP A. STOREY By: /s/ JAMES E. MCGOWAN ------------------------- ------------------------- Name: Dr. Phillip A. Storey Name: James E. MCGOWAN Title: VORSTAND (EXEC. VP) Title: Pres/CEO 4 EX-99.C.6 18 STOCKHOLDERS AGREEMENT AMONG PARENT,PURCH,MCGOWAN 1 EXHIBIT (c)(6) STOCK OPTION PLAN STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT, executed this 17th day of December, 1999, by and among SER Systeme AG, a German Corporation (the "Parent"), SERSys Acquisition Corporation, a Delaware corporation (the "Corporation") which is a wholly owned subsidiary of SER (USA), Inc., a Delaware Corporation which is wholly owned by the Parent, and James E. McGowan (the "Stockholder"). As used in this Agreement, the term "Stockholder" shall include the permitted successors, assigns, transferees (whether by sale, gift, or other disposition), heirs, and personal representatives of the Stockholder. WHEREAS, shares, or option(s) to acquire shares, of the Common Stock of the Corporation have been issued to the Stockholder pursuant to a grant agreement executed this date issued under a Corporation stock option plan (the "Grant Agreement"); and WHEREAS, the Parent, the Corporation and the Stockholder desire to assure continuity and to perpetuate harmony in the Corporation's management, policies and operations; and WHEREAS, the Stockholder desires to facilitate the prompt liquidation of his Stock in the event of his death, or, if necessary, during his lifetime; and WHEREAS, the Parent, the Corporation and the Stockholder deem it in their best interests to impose certain restrictions and obligations on themselves in order to effectuate their foregoing purposes. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as follows: 1. RECITALS. The foregoing recitals and statements are made a part of this Agreement. 2. PURCHASE AND SALE OF THE STOCK. (a) Stock Covered. Except as otherwise provided herein, all of the provisions of this Agreement shall apply to, and the term "Stock" shall include, any and all shares of Common Stock of the Corporation that are issued (now or in the future) pursuant to the rights of the Stockholder under the Grant Agreement and under any other grant agreement issued under the same Corporation stock option plan and all other shares of common stock or other equity securities of the Corporation or any successor corporation which may be issued hereafter to the Stockholder in consequence of his ownership of such Common Stock of the Corporation as the result of the exchange or reclassification of shares, corporate reorganization, or any form of recapitalization, consolidation, merger, share split, share dividend, or similar event. 2 (b) Purchase and Sale. The Parent and the Corporation agree to purchase and redeem, and the Stockholder agrees to sell and transfer, in the manner and upon the terms provided in this Agreement, the shares of Stock of the Corporation. No purchase, sale, gift, endorsement, assignment, transfer, pledge, encumbrance or other disposition, whether voluntary, involuntary or by operation of law, including, without limitation, any transfer pursuant to a divorce decree, (hereinafter collectively referred to as "Transfer") of any shares of Stock of the Stockholder shall be valid and binding except as provided in, and in accordance with, the terms and conditions of this Agreement. 3. CALL RIGHTS OF THE CORPORATION. (a) For a period of three hundred sixty-five (365) days following the death of the Stockholder or the termination of employment of the Stockholder with the Corporation for any reason, the Corporation shall have an option to purchase all or any of the authorized, issued and outstanding shares of Stock, at the price and upon the terms provided in Sections 7 and 8 of this Agreement. The Stockholder hereby agrees that in the event the Corporation exercises its option pursuant to this Section 3(a), the Stockholder and/or his personal representative shall be bound to take any and all action necessary to enable the Corporation to purchase said Stock in accordance with this Agreement. (b) If, for any reason, the Corporation (pursuant to Section 3(a)) does not purchase all of the authorized, issued and outstanding shares of Stock, such shares of Stock not purchased shall continue to be subject to the terms and conditions of this Agreement. 4. CALL RIGHTS UPON AN INVOLUNTARY TRANSFER. (a) If any portion of the Stockholder's shares of Stock are attached or taken in execution, or if the Stockholder applies for the benefit of, or files a case under, any provision of the federal bankruptcy law or any other law relating to insolvency or relief of debtors, or if a case or proceeding is brought against the Stockholder under any provision of the federal bankruptcy law or any other law relating to insolvency or relief of debtors which is not dismissed within sixty (60) days after the commencement thereof, or if the Stockholder makes an assignment for the benefit of creditors, or if any portion of the Stockholder's shares of Stock are made subject to charging order, or if any portion of the Stockholder's shares of Stock are transferred pursuant to a divorce decree (each such event shall be referred to as an "Involuntary Transfer"), such Stockholder (the "Insolvent Stockholder") shall give immediate written notice of the Involuntary Transfer to the Corporation and the Corporation shall have the option to purchase any or all of the shares of Stock of the Insolvent Stockholder at the price and upon the terms provided in Sections 7 and 8 in accordance with the provisions of this Section 4. (b) The Corporation shall have the option, exercisable upon written notice to the Insolvent Stockholder, for a period of one hundred twenty (120) days following receipt by the Corporation of the written notice of such Involuntary Transfer, to acquire all or any of the shares of Stock of the Insolvent Stockholder which are subject to such Involuntary Transfer. -2- 3 (c) If the Corporation has actual knowledge of an Insolvent Stockholder's Involuntary Transfer, the Corporation shall give written notice to such effect to the Insolvent Stockholder, and giving such written notice shall constitute the Insolvent Stockholder's giving written notice to the Corporation for purposes of this Section 4. (d) The Corporation shall settle with an assignee, trustee in bankruptcy, attaching court or officer or successor in interest holding shares of Stock received in an Involuntary Transfer by taking any or all such shares in execution and paying to them the purchase price for each share as provided in Section 7, but not exceeding the Insolvent Stockholder's indebtedness and proper items of expense. The balance of the value of such shares of Stock shall be distributable to the Insolvent Stockholder in accordance with the provisions of Section 8. 5. CALL RIGHTS OF THE PARENT. (a) If a public offering of the Common Stock of the Corporation that requires registration under the Securities Act of 1933 has not been consummated by January 1, 2005, the Parent shall have an option for a period of three hundred sixty five (365) days beginning thereon to purchase the Stock from the Stockholder at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Stockholder hereby agrees that in the event the Parent exercises its option pursuant to this Section 5(a), the Stockholder and/or his personal representative shall be bound to take any and all action necessary to enable the Parent to purchase said Stock in accordance with this Agreement. (b) If, for any reason, the Parent does not exercise the option provided under Section 5(a), such shares of Stock not purchased shall continue to be subject to the terms and conditions of this Agreement. 6. PUT RIGHTS OF THE STOCKHOLDER. (a) If, at January 1, 2003, (i) the fair market value of the Stock is more than twice the price established by the Merger Agreement by and among SER Systeme AG, SERSYS Acquisition Corporation and EIS International, Inc., dated as of December 17, 1999, and (ii) Parent has not within the preceding 120 days issued a public statement, which is still applicable at such date, describing the firm intention to cause a public offering of the Common Stock of the Corporation that requires registration under the Securities Act of 1933 ("an IPO of the Common Stock") before December 30, 2003, the Stockholder shall have an option for a period of three hundred sixty five (365) days beginning on January 1, 2003, to sell the Stock to the Parent at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Parent hereby agrees that in the event the Stockholder exercises his option pursuant to this Section 6(a), the Parent shall be bound to take any and all action necessary to enable the Stockholder to sell said Stock to Parent and to enable Parent to purchase said Stock. (b) If (i) at January 1, 2004, the fair market value of the Stock is more than twice the price established by the Merger Agreement by and among SER Systems AG, SERSYS -3- 4 Acquisition Corporation and EIS International, Inc., dated as of December 17, 1999, (ii) the Put Rights under Section 6(a) did not arise solely because Parent issued a public statement prior to January 1, 2003 of its intention to cause an IPO of the Common Stock before December 30, 2003, and (iii) an IPO of the Common Stock does not in fact occur prior to December 30, 2003, the Stockholder shall have an option for a period of three hundred sixty-five (365) days beginning on January 1, 2004, to sell the Stock to the Parent at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Parent hereby agrees that in the event the Stockholder exercises his option pursuant to this Section 6(b), the Parent shall be bound to take any and all action necessary to enable the Stockholder to sell said Stock to Parent and to enable Parent to purchase said Stock. (c) If an IPO of the Common Stock has not been consummated by January 1, 2005, the Stockholder shall have an option for a period of three hundred sixty five (365) days beginning thereon to sell the Stock to the Parent at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Parent hereby agrees that in the event the Stockholder exercises his option pursuant to this Section 6(c), the Parent shall be bound to take any and all action necessary to enable the Stockholder to sell said Stock to Parent and to enable Parent to purchase said Stock. Notwithstanding anything to the contrary in the Grant Agreement, provided the stock option issued under the Grant Agreement has not previously terminated or expired, the Grantee shall be permitted to exercise the vested portion of such stock option in December 2004, conditional upon the Grantee receiving sufficient consideration from the Parent pursuant to the exercise of the Put Rights under this Section 6(c) effective as of January 1, 2005, with which to pay the exercise price under such portion of the stock option issued under the Grant Agreement. The Stockholder may specify in the notice of exercise pursuant to the preceding sentence that the exercise price is to be paid from the proceeds of the sale to the Parent of the respective portion of the Stock purchased pursuant to such exercise. (d) If, for any reason, the Stockholder does not exercise the options provided under Sections 6(a), 6(b) or 6(c), such shares of Stock not purchased shall continue to be subject to the terms and conditions of this Agreement. 7. PURCHASE PRICE OF STOCK. (a) Agreement of Parties. The purchase price of the Stock payable under Sections 3, 4, 5 and 6 shall be the fair market value of such Stock as of the "Disposition Date". The Disposition Date is the date on which the Parent, the Corporation or the Stockholder, as applicable, exercises the respective option to purchase shares of Stock. (b) Fair Market Value. For all purposes herein, the fair market value of the Stock shall be the value as established by an appraisal of the Corporation by an appraisal firm that is selected by and mutually agreeable to the Chief Executive Officer of the Corporation and the Parent. Such appraisals shall not take into account any minority or liquidity discounts. At the Corporation's expense such appraiser shall conduct an appraisal of the Corporation within four months after each of January 1, 2003, January 1, 2004, and January 1, 2005, in order to assist in facilitating exercise of the Call and Put Rights in Sections 5 and 6, and as of such other dates as -4- 5 are necessary to establish the value of the Stock on a Disposition Date. Notwithstanding anything to the contrary herein, the appraisals conducted on each of January 1, 2003, January 1, 2004, and January 1, 2005, shall apply for purposes of determining the fair market value of the Stock that applies to the exercise of the Put Rights in Section 6(a), 6(b) and 6(c), respectively, regardless of when the Put Rights are exercised during the respective calendar year. 8. PAYMENT OF PURCHASE PRICE. The payment of the purchase price for the shares of Stock as determined pursuant to Section 7 or 9(b), as applicable, shall be made as follows: (a) Cash Portion. In the event of any transfer pursuant to Sections 3, 4, 5 and 6 hereof, the total purchase price of the Stock shall be paid by check by the Parent or the Corporation, as applicable, at the Closing Date, as defined in Section 8(d) hereof. In the event of any purchase by the Corporation pursuant to Section 9(b) hereof, the purchase price shall be paid on the terms set forth in the Stockholder's Offer. (b) Debt Due From Stockholder. Any debt due by the Stockholder to the Corporation shall be payable according to its terms, as shall any debt due by the Corporation to the Stockholder; except, however, that, regardless of the terms of any such debt due by the Stockholder to the Corporation (including without limitation any unpaid portion of the exercise price under the exercised portion of the respective grant agreement under the Plan pursuant to which the Stock was issued and any unpaid tax withholding due as the result of such exercise), any cash payment due under Section 8(a) with respect to the purchase of the Stock shall, instead of being paid to the Stockholder, be first applied to the discharge of any such indebtedness, until all such indebtedness is fully discharged. (c) Involuntary Transfers. The Corporation shall settle with an assignee, trustee in bankruptcy, attaching court or officer or successor in interest holding Stock received in an Involuntary Transfer by taking any or all such Stock in execution and paying to them the purchase price for each share of such Stock as provided in this Section 8, but not exceeding the Stockholder's indebtedness and proper items of expense. The balance of the value of such Stock, if any, shall be distributable to the Stockholder in accordance with the provisions of this Section 8. (d) Closing. Closing on the sale of any shares of Stock sold pursuant to this Agreement shall, unless otherwise agreed to in writing by the parties, be held at the principal place of business of the Corporation thirty (30) days from the date of the last to occur of (i) the date of notice to the other party by the Parent, the Corporation or the Stockholder, as applicable, that an option is being exercised hereunder to purchase the Stock or (ii) if applicable, the receipt by the Stockholder, the Corporation and/or the Parent, as applicable, of the determination of the fair market value of the Stock as provided in Section 7(b) hereof (the "Closing Date"). At the Closing, upon payment of the purchase price, the certificates representing the Stock to be purchased and sold hereunder shall be delivered by the Stockholder to the Corporation or the Parent, as applicable, appropriately endorsed in blank for transfer. If the certificates representing any shares of Stock to be so transferred have not been surrendered by the Stockholder, all rights -5- 6 of the holder thereof with respect to said Stock (including voting rights) nonetheless shall cease and terminate. 9. VOLUNTARY TRANSFERS OF STOCK. (a) The Stockholder agrees that, during his lifetime, he will not Transfer any of his shares of Stock, except (i) upon the conditions set forth in this Section 9; or (ii) with the prior written consent of the Corporation. (b) Offer From Third Party. In the event that the Stockholder receives a bona fide offer from an independent third party capable of consummating such a sale to purchase all or any of the authorized, issued and outstanding shares of Stock then registered in such Stockholder's name, such Stockholder shall first offer in writing (the "Stockholder's Offer") to sell such shares of Stock (the "Offered Stock") to the Corporation at the price and on the terms of which such selling Stockholder proposes to transfer the Offered Stock to the proposed third party transferee. The Stockholder's Offer shall set forth (i) the number of shares of the Offered Stock, (ii) the name and address of the proposed transferee, (iii) the amount of consideration to be received by the selling Stockholder, and (iv) the method of proposed payment. The Corporation shall have the option to acquire all or any of the shares of Offered Stock at the price and upon the terms provided in the Stockholder's Offer. The Corporation shall have the right to exercise its option for a period of thirty (30) days following its receipt of the Stockholder's Offer by notifying the selling Stockholder in writing of its intention to purchase at Closing (as defined in Section 8(d) hereof) all or any shares of the Offered Stock on the same terms and conditions set forth in the Stockholder's Offer. (c) Transfers to Third Parties. In the event that (i) a Stockholder elects to transfer all or a portion of his shares of Stock; (ii) said Stockholder strictly complies with the provisions of Section 9(b); (iii) the Corporation fails to purchase all of such shares of Offered Stock; and (iv) the Stockholder who desires to transfer such shares of Stock complies with the terms of this Section 9(c), then any such shares of Stock which are not so purchased by the Corporation may be sold by the selling Stockholder to the third party named in the Stockholder's Offer within a period of ninety (90) days after the expiration of the thirty (30) day period provided in Section 9(b). Such shares of Offered Stock may be transferred to the third party named in the Stockholder's Offer provided that such shares are sold at the price and on the terms set forth in the Stockholder's Offer. Any shares of Offered Stock not actually sold or transferred to such third party by the selling Stockholder within such ninety (90) day period at the price and on the terms set forth in the Stockholder's Offer shall remain subject to all of the provisions of this Agreement. (d) Sale of Corporation. Notwithstanding the provisions of this Section 9 to the contrary, the restrictions set forth in this Section 9 shall not apply to shares of a Stockholder sold or otherwise transferred in connection with (i) the closing of an underwritten public offering by the Corporation of its Stock or any other securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, (ii) a sale of the Corporation as a result of which more than fifty percent (50%) of the total number of outstanding shares of its Common Stock is -6- 7 sold, exchanged, conveyed, or otherwise transferred to a third party in one or a series of related transactions, or (iii) a merger or consolidation of the Corporation as a result of which the holders of its Common Stock (immediately prior to such merger or consolidation) hold less than fifty percent (50%) of the surviving or new entity, as the case may be. 10. DRAG ALONG RIGHTS (a) Generally. If at any time the holder(s) of a majority of the shares of Common Stock of the Corporation desire to sell, exchange, convey, or otherwise transfer, in one or a series of related transactions to an independent third party in a bona fide arms length transaction, all of the outstanding shares of Common Stock of the Corporation ("Selling Stockholder(s)") for consideration which the Selling Stockholders in good faith believe in their sole discretion to be adequate consideration for such shares, then the Selling Stockholder(s) may require the Stockholder to sell, exchange, convey, or otherwise transfer, and the Stockholder agrees to sell, exchange, convey, or otherwise transfer all of the shares of Stock at the same price per share of Common Stock (as set forth below) and on the same terms and conditions, as received by the Selling Stockholder(s) from the independent third party for the same class of shares. (b) Conditions to Obligation. The Stockholder's obligation to sell, exchange, convey or otherwise transfer the Stock under the provisions of this Section 10 is subject to the requirements that (i) the Selling Stockholder(s) shall give notice to the Stockholder of such sale, exchange, conveyance, or transfer at least 30 days prior to the proposed date of such event, specifying the price and terms upon which shares of Common Stock are to be sold, exchanged, conveyed, or transferred, and the proposed date of such event, and (ii) upon the consummation of said sale, exchange, conveyance, or transfer, the Stockholder will receive the same form and amount of consideration per share of Common Stock as received by the Selling Stockholder(s) for the same class of shares, or, if the Selling Stockholder(s) are given an option as to the form and amount of consideration to be received, the Stockholder will be given the same option. 11. TAG ALONG RIGHTS. (a) Notice. If at any time, in any transaction or transactions, the Parent desires to sell, exchange, convey, or otherwise transfer any shares of Common Stock owned by it, then the Parent shall give notice of such intent to the Stockholder at least fifteen (15) days prior to the proposed date of such sale. Such notice shall specify the number of shares and the terms, including price, upon which such shares of Common Stock are to be sold, exchanged, conveyed, or otherwise transferred and the proposed date of such sale, exchange, conveyance, or transfer. (b) Participation. The Stockholder may elect to participate in such sale by giving notice to the Parent at least ten (10) days prior to the date of the proposed sale. Such notice from the Stockholder shall specify the number of shares of Common Stock which it proposes to sell. If the Stockholder elects to participate in such sale, and gives timely notice of such election, then the Parent shall not effect such sale unless either (i) the proposed purchaser of such shares offers to purchase from the Stockholder, at the same time and on the same terms -7- 8 (including price) as shares of Common Stock that are being purchased from the Parent, that number of shares of Common Stock owned by the Stockholder which bears the same proportion to the total number of shares of Stock which he/she beneficially owns, as the number of shares of Stock being sold by the Parent bears to the total number of shares of Stock owned by the Parent, or (ii) to the extent the proposed purchaser is unwilling to purchase shares of the Stockholders' Common Stock as calculated in Section 11(b)(i) hereof, then the number of shares of the Stockholders' Common Stock as so calculated, and the number of shares of Stock of the Parent as otherwise to be sold, shall each be reduced proportionately to equal the total number of shares to be purchased by the proposed purchaser, who will thereupon offer to purchase the number of shares of the Stockholders' Common Stock as so calculated at the same time and on the same terms (including price) as the number of shares of Common Stock to be sold by the Parent, as recalculated pursuant to this Section 11(b)(ii). (c) Exempt Transfers. Notwithstanding the foregoing, the provisions of this Section 11 shall not apply to (i) any pledge of Common Stock by the Parent made pursuant to a bona fide loan transaction or (ii) any sale of the shares of Common Stock to the public pursuant to a registration statement filed under the Securities Act of 1933. 12. MARKET STAND-OFF AGREEMENT. The Stockholder hereby agrees that he or she shall not, to the extent reasonably requested by the Corporation and an underwriter of Common Stock (or other securities) of the Corporation, sell or otherwise transfer or dispose (other than to donees who agree to be similarly bound) of any Stock during the one hundred eighty (180)-day period following the effective date of a registration statement of the Corporation filed under the Securities Act of 1933; provided, however, that such agreement shall be applicable only to the first such registration statement of the Corporation which covers shares (or securities) to be sold on its behalf to the public in an underwritten public offering. Such agreement shall be in writing in a form satisfactory to the Corporation and such underwriter. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to the Stock of the Stockholder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such one hundred eighty (180)-day period. 13. SEVERABILITY. It is the express intention of the parties that the agreements contained herein shall have the widest application possible. If any agreement contained herein is found by a court having jurisdiction to be unreasonable in scope or character, the agreement shall not be rendered unenforceable thereby, but rather the scope or character of such agreement shall be deemed reduced or modified with retroactive effect to render such agreement reasonable and such agreement shall be enforced as thus modified. If the court having jurisdiction will not review the agreement, then the parties shall mutually agree to a revision having an effect as close as permitted by law to the provision declared unenforceable. The parties further agree that in the event a court having jurisdiction determines, despite the express intent of the parties, that any portion of any covenant or agreement contained herein is not enforceable, the remaining provisions of this Agreement shall nonetheless remain valid and enforceable. -8- 9 14. ENDORSEMENT OF CERTIFICATE. Upon the execution of this Agreement, each certificate of shares of Stock of the Corporation registered in the name of the Stockholder and subject hereto shall be endorsed by the Secretary of the Corporation as follows: "This certificate is transferable only upon compliance with the provisions of a restrictive Stockholders Agreement by and among SERSys Acquisition Corporation and the stockholder, a copy of which is on file in the office of the Secretary of the Corporation and is available upon request of the stockholder without charge." 15. TERM. Anything contained herein to the contrary notwithstanding, this Agreement shall terminate, and all rights and obligations hereunder shall cease upon the occurrence of any of the following events: (a) The written agreement of each of the then parties hereto; (b) The cessation of the Corporation's business; (c) The bankruptcy, liquidation, receivership, or dissolution of, or assignment for the benefit of creditors by, the Corporation; or (d) Except as to Section 12 hereof, the consummation of an initial public offering of the Corporation's Common Stock pursuant to the filing of an effective registration statement with the U.S. Securities and Exchange Commission. 16. NOTICES. All notices, offers, acceptances, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified or registered mail to the Stockholder, at his address on the Corporation records, and to the Corporation and/or the Parent at the Corporation's principal place of business. Any party hereto may change his or its address for notice by giving notice thereof in the manner hereinabove provided. 17. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and may be amended, modified or canceled only by written agreement of the parties hereto. 18. SUCCESSORS. This Agreement shall be binding upon, and inure to the benefit of, and shall be enforceable by, the heirs, successors, assigns, and personal representatives of the parties hereto. 19. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the state of Delaware without regard to principles of conflict of laws. In case any term of this Agreement shall be held invalid, illegal or unenforceable in whole or in part, neither the validity of the remaining part of such term nor the validity of the remaining terms of this Agreement shall in any way be affected thereby. Each of the parties agrees that he -9- 10 will consent to and approve any amendments of the Charter or By-Laws of the Corporation which may be necessary or advisable in order to conform any of the provisions of this Agreement or any amendments hereto to the applicable laws of the state of Delaware as now or hereafter enacted, including, without limitation, the Delaware Corporation Law. The Stockholder further agrees to execute and deliver such documents as may be necessary in order to implement the provisions of the preceding sentence. 20 SPECIFIC PERFORMANCE. Because the shares of Stock cannot be readily purchased or sold in the open market, irreparable damage would result in the event this Agreement is not specifically enforced. Therefore, the rights to, or obligations of, the Parent, the Corporation and the Stockholder shall be enforceable in a court by a decree of specific performance, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies, and all other remedies provided for in this Agreement, shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. 21. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original and all of which taken together shall constitute one and the same instrument. 22. GENDER. The use of the singular shall include the plural, and the use of the masculine gender shall include the feminine and neutral genders and vice versa. IN WITNESS WHEREOF, the parties have executed this agreement the day and year first above written. ATTEST: SERSYS ACQUISITION CORPORATION /s/ PAULA R. SULLIVAN By: /s/ DR. PHILIP A. STOREY - -------------------------- -------------------------------------- Name: Dr. Philip A. Storey ----------------------------------- Title: President ----------------------------------- WITNESS: STOCKHOLDER: /s/ PAULA R. SULLIVAN /s/ JAMES E MCGOWAN - -------------------------- ----------------------------------------- Name: James E McGowan -10- EX-99.C.7 19 STOCKHOLDERS AGREEMENT AMONG PARENT,PURCH,FOLEY 1 EXHIBIT (c)(7) STOCK OPTION PLAN STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT, executed this 17th day of December, 1999, by and among SER Systeme AG, a German Corporation (the "Parent"), SERSys Acquisition Corporation, a Delaware corporation (the "Corporation") which is a wholly owned subsidiary of SER (USA), Inc., a Delaware Corporation which is wholly owned by the Parent, and Frederick C. Foley (the "Stockholder"). As used in this Agreement, the term "Stockholder" shall include the permitted successors, assigns, transferees (whether by sale, gift, or other disposition), heirs, and personal representatives of the Stockholder. WHEREAS, shares, or option(s) to acquire shares, of the Common Stock of the Corporation have been issued to the Stockholder pursuant to a grant agreement executed this date issued under a Corporation stock option plan (the "Grant Agreement"); and WHEREAS, the Parent, the Corporation and the Stockholder desire to assure continuity and to perpetuate harmony in the Corporation's management, policies and operations; and WHEREAS, the Stockholder desires to facilitate the prompt liquidation of his Stock in the event of his death, or, if necessary, during his lifetime; and WHEREAS, the Parent, the Corporation and the Stockholder deem it in their best interests to impose certain restrictions and obligations on themselves in order to effectuate their foregoing purposes. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as follows: 1. RECITALS. The foregoing recitals and statements are made a part of this Agreement. 2. PURCHASE AND SALE OF THE STOCK. (a) Stock Covered. Except as otherwise provided herein, all of the provisions of this Agreement shall apply to, and the term "Stock" shall include, any and all shares of Common Stock of the Corporation that are issued (now or in the future) pursuant to the rights of the Stockholder under the Grant Agreement and under any other grant agreement issued under the same Corporation stock option plan and all other shares of common stock or other equity securities of the Corporation or any successor corporation which may be issued hereafter to the Stockholder in consequence of his ownership of such Common Stock of the Corporation as the result of the exchange or reclassification of shares, corporate reorganization, or any form of recapitalization, consolidation, merger, share split, share dividend, or similar event. 2 (b) Purchase and Sale. The Parent and the Corporation agree to purchase and redeem, and the Stockholder agrees to sell and transfer, in the manner and upon the terms provided in this Agreement, the shares of Stock of the Corporation. No purchase, sale, gift, endorsement, assignment, transfer, pledge, encumbrance or other disposition, whether voluntary, involuntary or by operation of law, including, without limitation, any transfer pursuant to a divorce decree, (hereinafter collectively referred to as "Transfer") of any shares of Stock of the Stockholder shall be valid and binding except as provided in, and in accordance with, the terms and conditions of this Agreement. 3. CALL RIGHTS OF THE CORPORATION. (a) For a period of three hundred sixty-five (365) days following the death of the Stockholder or the termination of employment of the Stockholder with the Corporation for any reason, the Corporation shall have an option to purchase all or any of the authorized, issued and outstanding shares of Stock, at the price and upon the terms provided in Sections 7 and 8 of this Agreement. The Stockholder hereby agrees that in the event the Corporation exercises its option pursuant to this Section 3(a), the Stockholder and/or his personal representative shall be bound to take any and all action necessary to enable the Corporation to purchase said Stock in accordance with this Agreement. (b) If, for any reason, the Corporation (pursuant to Section 3(a)) does not purchase all of the authorized, issued and outstanding shares of Stock, such shares of Stock not purchased shall continue to be subject to the terms and conditions of this Agreement. 4. CALL RIGHTS UPON AN INVOLUNTARY TRANSFER. (a) If any portion of the Stockholder's shares of Stock are attached or taken in execution, or if the Stockholder applies for the benefit of, or files a case under, any provision of the federal bankruptcy law or any other law relating to insolvency or relief of debtors, or if a case or proceeding is brought against the Stockholder under any provision of the federal bankruptcy law or any other law relating to insolvency or relief of debtors which is not dismissed within sixty (60) days after the commencement thereof, or if the Stockholder makes an assignment for the benefit of creditors, or if any portion of the Stockholder's shares of Stock are made subject to charging order, or if any portion of the Stockholder's shares of Stock are transferred pursuant to a divorce decree (each such event shall be referred to as an "Involuntary Transfer"), such Stockholder (the "Insolvent Stockholder") shall give immediate written notice of the Involuntary Transfer to the Corporation and the Corporation shall have the option to purchase any or all of the shares of Stock of the Insolvent Stockholder at the price and upon the terms provided in Sections 7 and 8 in accordance with the provisions of this Section 4. (b) The Corporation shall have the option, exercisable upon written notice to the Insolvent Stockholder, for a period of one hundred twenty (120) days following receipt by the Corporation of the written notice of such Involuntary Transfer, to acquire all or any of the shares of Stock of the Insolvent Stockholder which are subject to such Involuntary Transfer. -2- 3 (c) If the Corporation has actual knowledge of an Insolvent Stockholder's Involuntary Transfer, the Corporation shall give written notice to such effect to the Insolvent Stockholder, and giving such written notice shall constitute the Insolvent Stockholder's giving written notice to the Corporation for purposes of this Section 4. (d) The Corporation shall settle with an assignee, trustee in bankruptcy, attaching court or officer or successor in interest holding shares of Stock received in an Involuntary Transfer by taking any or all such shares in execution and paying to them the purchase price for each share as provided in Section 7, but not exceeding the Insolvent Stockholder's indebtedness and proper items of expense. The balance of the value of such shares of Stock shall be distributable to the Insolvent Stockholder in accordance with the provisions of Section 8. 5. CALL RIGHTS OF THE PARENT. (a) If a public offering of the Common Stock of the Corporation that requires registration under the Securities Act of 1933 has not been consummated by January 1, 2005, the Parent shall have an option for a period of three hundred sixty five (365) days beginning thereon to purchase the Stock from the Stockholder at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Stockholder hereby agrees that in the event the Parent exercises its option pursuant to this Section 5(a), the Stockholder and/or his personal representative shall be bound to take any and all action necessary to enable the Parent to purchase said Stock in accordance with this Agreement. (b) If, for any reason, the Parent does not exercise the option provided under Section 5(a), such shares of Stock not purchased shall continue to be subject to the terms and conditions of this Agreement. 6. PUT RIGHTS OF THE STOCKHOLDER. (a) If, at January 1, 2003, (i) the fair market value of the Stock is more than twice the price established by the Merger Agreement by and among SER Systeme AG, SERSYS Acquisition Corporation and EIS International, Inc., dated as of December 17, 1999 and (ii) Parent has not within the preceding 120 days issued a public statement, which is still applicable at such date, describing the firm intention to cause a public offering of the Common Stock of the Corporation that requires registration under the Securities Act of 1933 ("an IPO of the Common Stock") before December 30, 2003, the Stockholder shall have an option for a period of three hundred sixty five (365) days beginning on January 1, 2003, to sell the Stock to the Parent at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Parent hereby agrees that in the event the Stockholder exercises his option pursuant to this Section 6(a), the Parent shall be bound to take any and all action necessary to enable the Stockholder to sell said Stock to Parent and to enable Parent to purchase said Stock. (b) If (i) at January 1, 2004, the fair market value of the Stock is more than twice the price established by the Merger Agreement by and among SER Systems AG, SERSYS -3- 4 Acquisition Corporation and EIS International, Inc., dated as of December 17, 1999, (ii) the Put Rights under Section 6(a) did not arise solely because Parent issued a public statement prior to January 1, 2003 of its intention to cause an IPO of the Common Stock before December 30, 2003, and (iii) an IPO of the Common Stock does not in fact occur prior to December 30, 2003, the Stockholder shall have an option for a period of three hundred sixty-five (365) days beginning on January 1, 2004, to sell the Stock to the Parent at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Parent hereby agrees that in the event the Stockholder exercises his option pursuant to this Section 6(b), the Parent shall be bound to take any and all action necessary to enable the Stockholder to sell said Stock to Parent and to enable Parent to purchase said Stock. (c) If an IPO of the Common Stock has not been consummated by January 1, 2005, the Stockholder shall have an option for a period of three hundred sixty five (365) days beginning thereon to sell the Stock to the Parent at the price and upon the terms provided in Sections 7 and 8 of this agreement. The Parent hereby agrees that in the event the Stockholder exercises his option pursuant to this Section 6(c), the Parent shall be bound to take any and all action necessary to enable the Stockholder to sell said Stock to Parent and to enable Parent to purchase said Stock. Notwithstanding anything to the contrary in the Grant Agreement, provided the stock option issued under the Grant Agreement has not previously terminated or expired, the Grantee shall be permitted to exercise the vested portion of such stock option in December 2004, conditional upon the Grantee receiving sufficient consideration from the Parent pursuant to the exercise of the Put Rights under this Section 6(c) effective as of January 1, 2005, with which to pay the exercise price under such portion of the stock option issued under the Grant Agreement. The Stockholder may specify in the notice of exercise pursuant to the preceding sentence that the exercise price is to be paid from the proceeds of the sale to the Parent of the respective portion of the Stock purchased pursuant to such exercise. (d) If, for any reason, the Stockholder does not exercise the options provided under Sections 6(a), 6(b) or 6(c), such shares of Stock not purchased shall continue to be subject to the terms and conditions of this Agreement. 7. PURCHASE PRICE OF STOCK. (a) Agreement of Parties. The purchase price of the Stock payable under Sections 3, 4, 5 and 6 shall be the fair market value of such Stock as of the "Disposition Date". The Disposition Date is the date on which the Parent, the Corporation or the Stockholder, as applicable, exercises the respective option to purchase shares of Stock. (b) Fair Market Value. For all purposes herein, the fair market value of the Stock shall be the value as established by an appraisal of the Corporation by an appraisal firm that is selected by and mutually agreeable to the Chief Executive Officer of the Corporation and the Parent. Such appraisals shall not take into account any minority or liquidity discounts. At the Corporation's expense such appraiser shall conduct an appraisal of the Corporation within four months after each of January 1, 2003, January 1, 2004, and January 1, 2005, in order to assist in facilitating exercise of the Call and Put Rights in Sections 5 and 6, and as of such other dates as -4- 5 are necessary to establish the value of the Stock on a Disposition Date. Notwithstanding anything to the contrary herein, the appraisals conducted on each of January 1, 2003, January 1, 2004, and January 1, 2005, shall apply for purposes of determining the fair market value of the Stock that applies to the exercise of the Put Rights in Section 6(a), 6(b) and 6(c), respectively, regardless of when the Put Rights are exercised during the respective calendar year. 8. PAYMENT OF PURCHASE PRICE. The payment of the purchase price for the shares of Stock as determined pursuant to Section 7 or 9(b), as applicable, shall be made as follows: (a) Cash Portion. In the event of any transfer pursuant to Sections 3, 4, 5 and 6 hereof, the total purchase price of the Stock shall be paid by check by the Parent or the Corporation, as applicable, at the Closing Date, as defined in Section 8(d) hereof. In the event of any purchase by the Corporation pursuant to Section 9(b) hereof, the purchase price shall be paid on the terms set forth in the Stockholder's Offer. (b) Debt Due From Stockholder. Any debt due by the Stockholder to the Corporation shall be payable according to its terms, as shall any debt due by the Corporation to the Stockholder; except, however, that, regardless of the terms of any such debt due by the Stockholder to the Corporation (including without limitation any unpaid portion of the exercise price under the exercised portion of the respective grant agreement under the Plan pursuant to which the Stock was issued and any unpaid tax withholding due as the result of such exercise), any cash payment due under Section 8(a) with respect to the purchase of the Stock shall, instead of being paid to the Stockholder, be first applied to the discharge of any such indebtedness, until all such indebtedness is fully discharged. (c) Involuntary Transfers. The Corporation shall settle with an assignee, trustee in bankruptcy, attaching court or officer or successor in interest holding Stock received in an Involuntary Transfer by taking any or all such Stock in execution and paying to them the purchase price for each share of such Stock as provided in this Section 8, but not exceeding the Stockholder's indebtedness and proper items of expense. The balance of the value of such Stock, if any, shall be distributable to the Stockholder in accordance with the provisions of this Section 8. (d) Closing. Closing on the sale of any shares of Stock sold pursuant to this Agreement shall, unless otherwise agreed to in writing by the parties, be held at the principal place of business of the Corporation thirty (30) days from the date of the last to occur of (i) the date of notice to the other party by the Parent, the Corporation or the Stockholder, as applicable, that an option is being exercised hereunder to purchase the Stock or (ii) if applicable, the receipt by the Stockholder, the Corporation and/or the Parent, as applicable, of the determination of the fair market value of the Stock as provided in Section 7(b) hereof (the "Closing Date"). At the Closing, upon payment of the purchase price, the certificates representing the Stock to be purchased and sold hereunder shall be delivered by the Stockholder to the Corporation or the Parent, as applicable, appropriately endorsed in blank for transfer. If the certificates representing any shares of Stock to be so transferred have not been surrendered by the Stockholder, all rights -5- 6 of the holder thereof with respect to said Stock (including voting rights) nonetheless shall cease and terminate. 9. VOLUNTARY TRANSFERS OF STOCK. (a) The Stockholder agrees that, during his lifetime, he will not Transfer any of his shares of Stock, except (i) upon the conditions set forth in this Section 9; or (ii) with the prior written consent of the Corporation. (b) Offer From Third Party. In the event that the Stockholder receives a bona fide offer from an independent third party capable of consummating such a sale to purchase all or any of the authorized, issued and outstanding shares of Stock then registered in such Stockholder's name, such Stockholder shall first offer in writing (the "Stockholder's Offer") to sell such shares of Stock (the "Offered Stock") to the Corporation at the price and on the terms of which such selling Stockholder proposes to transfer the Offered Stock to the proposed third party transferee. The Stockholder's Offer shall set forth (i) the number of shares of the Offered Stock, (ii) the name and address of the proposed transferee, (iii) the amount of consideration to be received by the selling Stockholder, and (iv) the method of proposed payment. The Corporation shall have the option to acquire all or any of the shares of Offered Stock at the price and upon the terms provided in the Stockholder's Offer. The Corporation shall have the right to exercise its option for a period of thirty (30) days following its receipt of the Stockholder's Offer by notifying the selling Stockholder in writing of its intention to purchase at Closing (as defined in Section 8(d) hereof) all or any shares of the Offered Stock on the same terms and conditions set forth in the Stockholder's Offer. (c) Transfers to Third Parties. In the event that (i) a Stockholder elects to transfer all or a portion of his shares of Stock; (ii) said Stockholder strictly complies with the provisions of Section 9(b); (iii) the Corporation fails to purchase all of such shares of Offered Stock; and (iv) the Stockholder who desires to transfer such shares of Stock complies with the terms of this Section 9(c), then any such shares of Stock which are not so purchased by the Corporation may be sold by the selling Stockholder to the third party named in the Stockholder's Offer within a period of ninety (90) days after the expiration of the thirty (30) day period provided in Section 9(b). Such shares of Offered Stock may be transferred to the third party named in the Stockholder's Offer provided that such shares are sold at the price and on the terms set forth in the Stockholder's Offer. Any shares of Offered Stock not actually sold or transferred to such third party by the selling Stockholder within such ninety (90) day period at the price and on the terms set forth in the Stockholder's Offer shall remain subject to all of the provisions of this Agreement. (d) Sale of Corporation. Notwithstanding the provisions of this Section 9 to the contrary, the restrictions set forth in this Section 9 shall not apply to shares of a Stockholder sold or otherwise transferred in connection with (i) the closing of an underwritten public offering by the Corporation of its Stock or any other securities pursuant to an effective registration statement under the Securities Act of 1933, as amended, (ii) a sale of the Corporation as a result of which more than fifty percent (50%) of the total number of outstanding shares of its Common Stock is -6- 7 sold, exchanged, conveyed, or otherwise transferred to a third party in one or a series of related transactions, or (iii) a merger or consolidation of the Corporation as a result of which the holders of its Common Stock (immediately prior to such merger or consolidation) hold less than fifty percent (50%) of the surviving or new entity, as the case may be. 10. DRAG ALONG RIGHTS (a) Generally. If at any time the holder(s) of a majority of the shares of Common Stock of the Corporation desire to sell, exchange, convey, or otherwise transfer, in one or a series of related transactions to an independent third party in a bona fide arms length transaction, all of the outstanding shares of Common Stock of the Corporation ("Selling Stockholder(s)") for consideration which the Selling Stockholders in good faith believe in their sole discretion to be adequate consideration for such shares, then the Selling Stockholder(s) may require the Stockholder to sell, exchange, convey, or otherwise transfer, and the Stockholder agrees to sell, exchange, convey, or otherwise transfer all of the shares of Stock at the same price per share of Common Stock (as set forth below) and on the same terms and conditions, as received by the Selling Stockholder(s) from the independent third party for the same class of shares. (b) Conditions to Obligation. The Stockholder's obligation to sell, exchange, convey or otherwise transfer the Stock under the provisions of this Section 10 is subject to the requirements that (i) the Selling Stockholder(s) shall give notice to the Stockholder of such sale, exchange, conveyance, or transfer at least 30 days prior to the proposed date of such event, specifying the price and terms upon which shares of Common Stock are to be sold, exchanged, conveyed, or transferred, and the proposed date of such event, and (ii) upon the consummation of said sale, exchange, conveyance, or transfer, the Stockholder will receive the same form and amount of consideration per share of Common Stock as received by the Selling Stockholder(s) for the same class of shares, or, if the Selling Stockholder(s) are given an option as to the form and amount of consideration to be received, the Stockholder will be given the same option. 11. TAG ALONG RIGHTS. (a) Notice. If at any time, in any transaction or transactions, the Parent desires to sell, exchange, convey, or otherwise transfer any shares of Common Stock owned by it, then the Parent shall give notice of such intent to the Stockholder at least fifteen (15) days prior to the proposed date of such sale. Such notice shall specify the number of shares and the terms, including price, upon which such shares of Common Stock are to be sold, exchanged, conveyed, or otherwise transferred and the proposed date of such sale, exchange, conveyance, or transfer. (b) Participation. The Stockholder may elect to participate in such sale by giving notice to the Parent at least ten (10) days prior to the date of the proposed sale. Such notice from the Stockholder shall specify the number of shares of Common Stock which it proposes to sell. If the Stockholder elects to participate in such sale, and gives timely notice of such election, then the Parent shall not effect such sale unless either (i) the proposed purchaser of such shares offers to purchase from the Stockholder, at the same time and on the same terms -7- 8 (including price) as shares of Common Stock that are being purchased from the Parent, that number of shares of Common Stock owned by the Stockholder which bears the same proportion to the total number of shares of Stock which he/she beneficially owns, as the number of shares of Stock being sold by the Parent bears to the total number of shares of Stock owned by the Parent, or (ii) to the extent the proposed purchaser is unwilling to purchase shares of the Stockholders' Common Stock as calculated in Section 11(b)(i) hereof, then the number of shares of the Stockholders' Common Stock as so calculated, and the number of shares of Stock of the Parent as otherwise to be sold, shall each be reduced proportionately to equal the total number of shares to be purchased by the proposed purchaser, who will thereupon offer to purchase the number of shares of the Stockholders' Common Stock as so calculated at the same time and on the same terms (including price) as the number of shares of Common Stock to be sold by the Parent, as recalculated pursuant to this Section 11(b)(ii). (c) Exempt Transfers. Notwithstanding the foregoing, the provisions of this Section 11 shall not apply to (i) any pledge of Common Stock by the Parent made pursuant to a bona fide loan transaction or (ii) any sale of the shares of Common Stock to the public pursuant to a registration statement filed under the Securities Act of 1933. 12. MARKET STAND-OFF AGREEMENT. The Stockholder hereby agrees that he or she shall not, to the extent reasonably requested by the Corporation and an underwriter of Common Stock (or other securities) of the Corporation, sell or otherwise transfer or dispose (other than to donees who agree to be similarly bound) of any Stock during the one hundred eighty (180)-day period following the effective date of a registration statement of the Corporation filed under the Securities Act of 1933; provided, however, that such agreement shall be applicable only to the first such registration statement of the Corporation which covers shares (or securities) to be sold on its behalf to the public in an underwritten public offering. Such agreement shall be in writing in a form satisfactory to the Corporation and such underwriter. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to the Stock of the Stockholder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such one hundred eighty (180)-day period. 13. SEVERABILITY. It is the express intention of the parties that the agreements contained herein shall have the widest application possible. If any agreement contained herein is found by a court having jurisdiction to be unreasonable in scope or character, the agreement shall not be rendered unenforceable thereby, but rather the scope or character of such agreement shall be deemed reduced or modified with retroactive effect to render such agreement reasonable and such agreement shall be enforced as thus modified. If the court having jurisdiction will not review the agreement, then the parties shall mutually agree to a revision having an effect as close as permitted by law to the provision declared unenforceable. The parties further agree that in the event a court having jurisdiction determines, despite the express intent of the parties, that any portion of any covenant or agreement contained herein is not enforceable, the remaining provisions of this Agreement shall nonetheless remain valid and enforceable. -8- 9 14. ENDORSEMENT OF CERTIFICATE. Upon the execution of this Agreement, each certificate of shares of Stock of the Corporation registered in the name of the Stockholder and subject hereto shall be endorsed by the Secretary of the Corporation as follows: "This certificate is transferable only upon compliance with the provisions of a restrictive Stockholders Agreement by and among SERSys Acquisition Corporation and the stockholder, a copy of which is on file in the office of the Secretary of the Corporation and is available upon request of the stockholder without charge." 15. TERM. Anything contained herein to the contrary notwithstanding, this Agreement shall terminate, and all rights and obligations hereunder shall cease upon the occurrence of any of the following events: (a) The written agreement of each of the then parties hereto; (b) The cessation of the Corporation's business; (c) The bankruptcy, liquidation, receivership, or dissolution of, or assignment for the benefit of creditors by, the Corporation; or (d) Except as to Section 12 hereof, the consummation of an initial public offering of the Corporation's Common Stock pursuant to the filing of an effective registration statement with the U.S. Securities and Exchange Commission. 16. NOTICES. All notices, offers, acceptances, requests and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed by certified or registered mail to the Stockholder, at his address on the Corporation records, and to the Corporation and/or the Parent at the Corporation's principal place of business. Any party hereto may change his or its address for notice by giving notice thereof in the manner hereinabove provided. 17. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and may be amended, modified or canceled only by written agreement of the parties hereto. 18. SUCCESSORS. This Agreement shall be binding upon, and inure to the benefit of, and shall be enforceable by, the heirs, successors, assigns, and personal representatives of the parties hereto. 19. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the state of Delaware without regard to principles of conflict of laws. In case any term of this Agreement shall be held invalid, illegal or unenforceable in whole or in part, neither the validity of the remaining part of such term nor the validity of the remaining terms of this Agreement shall in any way be affected thereby. Each of the parties agrees that he -9- 10 will consent to and approve any amendments of the Charter or By-Laws of the Corporation which may be necessary or advisable in order to conform any of the provisions of this Agreement or any amendments hereto to the applicable laws of the state of Delaware as now or hereafter enacted, including, without limitation, the Delaware Corporation Law. The Stockholder further agrees to execute and deliver such documents as may be necessary in order to implement the provisions of the preceding sentence. 20 SPECIFIC PERFORMANCE. Because the shares of Stock cannot be readily purchased or sold in the open market, irreparable damage would result in the event this Agreement is not specifically enforced. Therefore, the rights to, or obligations of, the Parent, the Corporation and the Stockholder shall be enforceable in a court by a decree of specific performance, and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies, and all other remedies provided for in this Agreement, shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. 21. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered an original and all of which taken together shall constitute one and the same instrument. 22. GENDER. The use of the singular shall include the plural, and the use of the masculine gender shall include the feminine and neutral genders and vice versa. IN WITNESS WHEREOF, the parties have executed this agreement the day and year first above written. ATTEST: SERSYS ACQUISITION CORPORATION /s/ JAMES E. McGOWAN By: /s/ DR. PHILIP A. STOREY - -------------------------- --------------------------------------- Name: Dr. Philip A. Storey ------------------------------------ Title: President ------------------------------------ WITNESS: STOCKHOLDER: /s/ JAMES E. McGOWAN /s/ FREDERICK C. FOLEY - -------------------------- ------------------------------------------ Name: Frederick C. Foley -10- EX-99.C.8 20 FORM OF STOCK OPTION PLAN OF PURCHASE 1 EXHIBIT (c)(8) FORM OF SERSYS ACQUISITION CORPORATION STOCK OPTION PLAN 1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS SERSys Acquisition Corporation hereby establishes the SERSys Acquisition Corporation Stock Option Plan (the "Plan"). The purpose of the Plan is to promote the long-term growth and profitability of SERSys Acquisition Corporation (the "Corporation") by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the Corporation, and (ii) enabling the Corporation to attract, retain and reward the best available persons for positions of substantial responsibility. The Plan permits the granting of stock options (including nonqualified stock options and incentive stock options qualifying under Section 422 of the Code) and stock appreciation rights (including free-standing, tandem and limited stock appreciation rights) or any combination of the foregoing (collectively, "Awards"). The Plan is a compensatory benefit plan within the meaning of Rule 701 under the Securities Act of 1933 (the "Securities Act"). Except to the extent any other exemption from the Securities Act is expressly relied upon in connection with any agreement entered into pursuant to the Plan or the securities issuable hereunder are registered under the Securities Act, the issuance of Common Stock pursuant to the Plan is intended to qualify for the exemption from registration under the Securities Act provided by Rule 701. To the extent that an exemption from registration under the Securities Act provided by Rule 701 is unavailable, all unregistered offers and sales of Awards and shares of Common Stock issuable upon exercise of an Award are intended to be exempt from registration under the Securities Act in reliance upon the private offering exemption contained in Section 4(2) of the Securities Act, or other available exemption, and the Plan shall be so administered. 2. DEFINITIONS Under this Plan, except where the context otherwise indicates, the following definitions apply: (a) "Board" shall mean the Board of Directors of the Corporation. (b) "Change in Control" shall mean: (i) any sale, exchange or other disposition of substantially all of the Corporation's assets or over 50% of its Common Stock; or (ii) any merger, share exchange, consolidation or other reorganization or business combination in which the Corporation is not the surviving or continuing corporation, or in which the Corporation's stockholders become entitled to receive cash, securities of the Corporation other than voting common stock, or securities of another issuer. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder. 2 (d) "Committee" shall mean the Board or committee of Board members appointed pursuant to Section 3 of the Plan to administer the Plan. (e) "Common Stock" shall mean shares of the Corporation's common stock. (f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (g) "Fair Market Value" of a share of the Corporation's Common Stock for any purpose on a particular date shall be determined in a manner such as the Committee shall in good faith determine to be appropriate. (h) "Grant Agreement" shall mean a written agreement between the Corporation and a grantee memorializing the terms and conditions of an Award granted pursuant to the Plan. (i) "Grant Date" shall mean the date on which the Committee formally acts to grant an Award to a grantee or such other date as the Committee shall so designate at the time of taking such formal action. (j) "Parent" shall mean a corporation, whether now or hereafter existing, within the meaning of the definition of "parent corporation" provided in Section 424(e) of the Code, or any successor thereto of similar import. (k) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act on the effective date of the Plan, or any successor provision prescribing conditions necessary to exempt the issuance of securities under the Plan (and further transactions in such securities) from Section 16(b) of the Exchange Act. (l) "Subsidiary" and "subsidiaries" shall mean only a corporation or corporations, whether now or hereafter existing, within the meaning of the definition of "subsidiary corporation" provided in Section 424(f) of the Code, or any successor thereto of similar import. 3. ADMINISTRATION (a) Procedure. The Plan shall be administered by the Board. In the alternative, subsequent to the date the Common Stock or any other capital stock of the Corporation becomes registered under Section 12 of the Exchange Act, the Board may appoint a Committee consisting of not less than two (2) members of the Board to administer the Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and, thereafter, directly administer the Plan. In the event that the Board is the administrator of the Plan in lieu of a Committee, the term "Committee" as used herein shall be deemed to mean the Board. Members of the Board or Committee who are either eligible for Awards or have been granted Awards may vote on any matters affecting the administration of the Plan or the 2 3 grant of Awards pursuant to the Plan, except that no such member shall act upon the granting of an Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board or the Committee during which action is taken with respect to the granting of an Award to him or her. The Committee shall meet at such times and places and upon such notice as it may determine. A majority of the Committee shall constitute a quorum. Any acts by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Additionally, any acts reduced to writing or approved in writing by all of the members of the Committee shall be valid acts of the Committee. (b) Procedure After Registration of Common Stock. Upon and after the point in time that the Common Stock or any other capital stock of the Corporation becomes registered under Section 12 of the Exchange Act, the Board shall take all action necessary to cause the Plan to be administered in accordance with the then effective provisions of Rule 16b-3, provided that any amendment to the Plan required for compliance with such provisions shall be made in accordance with Section 11 of the Plan. (c) Powers of the Committee. The Committee shall have all the powers vested in it by the terms of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for granting Awards. The Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of the Plan, including, but not limited to, the authority to: (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted, (ii) determine the types of Awards to be granted, (iii) determine the number of shares to be covered by or used for reference purposes for each Award, (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate, (v) modify, extend or renew outstanding Awards, accept the surrender of outstanding Awards and substitute new Awards, provided that no such action shall be taken with respect to any outstanding Award which would adversely affect the grantee without the grantee's consent, and (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of an Award following termination of any grantee's employment. 3 4 The Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable and to interpret same, all within the Committee's sole and absolute discretion. (d) Limited Liability. To the maximum extent permitted by law, no member of the Board or Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder. (e) Indemnification. To the maximum extent permitted by law, the members of the Board and Committee shall be indemnified by the Corporation in respect of all their activities under the Plan. (f) Effect of Committee's Decision. All actions taken and decisions and determinations made by the Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder shall be in the Committee's sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Corporation, its stockholders, any participants in the Plan and any other employee of the Corporation, and their respective successors in interest. 4. SHARES AVAILABLE FOR THE PLAN; MAXIMUM AWARDS Subject to adjustments as provided in Section 10 of the Plan, the shares of stock that may be delivered or purchased or used for reference purposes (with respect to stock appreciation rights) under the Plan, including with respect to incentive stock options intended to qualify under Section 422 of the Code, shall not exceed an aggregate of 170,000 shares of Common Stock of the Corporation and the Corporation shall reserve said number of shares of Common Stock for issuance pursuant to the Plan. If any Award, or portion of an Award, under the Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares, the shares subject to such Award shall thereafter be available for further Awards under the Plan. 5. PARTICIPATION Participation in the Plan shall be open to all employees, officers, directors and consultants of the Corporation, or of any Parent or Subsidiary of the Corporation, as may be selected by the Committee from time to time. Notwithstanding the foregoing, participation in the Plan with respect to Awards of incentive stock options shall be limited to employees of the Corporation, or of any Parent or Subsidiary of the Corporation. Awards may be granted to such eligible persons and for or with respect to such number of shares of Common Stock as the Committee shall determine, subject to the limitations in Section 4 of the Plan. A grant of any type of Award made in any one year to an eligible person shall neither guarantee nor preclude a further grant of that or any other type of Award to such person in that year or subsequent years. 6. STOCK OPTIONS 4 5 Subject to the other applicable provisions of the Plan, the Committee may from time to time grant to eligible participants nonqualified stock options or incentive stock options as that term is defined in Section 422 of the Code. The stock options granted shall be subject to the following terms and conditions. (a) Grant of Option. The grant of a stock option shall be evidenced by a Grant Agreement, executed by the Corporation and the grantee, stating the number of shares of Common Stock subject to the stock option evidenced thereby and the terms and conditions of such stock option, in such form as the Committee may from time to time determine. (b) Price. The price per share payable upon the exercise of each stock option ("exercise price") shall be determined by the Committee. (c) Payment. Stock options may be exercised in whole or in part by payment of the exercise price of the shares to be acquired in accordance with the provisions of the Grant Agreement, and/or such rules and regulations as the Committee may have prescribed, and/or such determinations, orders, or decisions as the Committee may have made. Payment may be made in cash (or cash equivalents acceptable to the Committee) or, unless otherwise determined by the Committee, in shares of Common Stock or a combination of cash and shares of Common Stock, or by such other means as the Committee may prescribe. The Fair Market Value of shares of Common Stock delivered on exercise of stock options shall be determined as of the date of exercise. Shares of Common Stock delivered in payment of the exercise price may be previously owned shares or, if approved by the Committee, shares acquired upon exercise of the stock option. Any fractional share will be paid in cash. The Corporation may make or guarantee loans to grantees to assist grantees in exercising stock options and satisfying any related withholding tax obligations. If the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Committee, subject to such limitations as it may determine, shall, to the extent practicable, authorize payment of the exercise price, in whole or in part, by delivery of a properly executed exercise notice, together with irrevocable instructions, to: (i) a brokerage firm designated by the Corporation to deliver promptly to the Corporation the aggregate amount of sale or loan proceeds to pay the exercise price and any withholding tax obligations that may arise in connection with the exercise, and (ii) the Corporation to deliver the certificates for such purchased shares directly to such brokerage firm. (d) Terms of Options. The term during which each stock option may be exercised shall be determined by the Committee; provided, however, that in no event shall a stock option be exercisable more than ten years from the date it is granted. Prior to the exercise of the stock option and delivery of the shares certificates represented thereby, the grantee shall have none of the rights of a stockholder with respect to any shares represented by an outstanding stock option. (e) Restrictions on Incentive Stock Options. Incentive Stock Options granted under the Plan shall comply in all respects with Code Section 422 and, as such, shall meet the following additional requirements. 5 6 (i) Grant Date. An incentive stock option must be granted within 10 years of the earlier of the Plan's adoption by the Board of Directors or approval by the Corporation's shareholders. (ii) Exercise Price and Term. The exercise price of an incentive stock option shall not be less than 100% of the Fair Market Value of the shares on the date the stock option is granted and the term of the stock option shall not exceed ten years. Also, the exercise price of any incentive stock option granted to a grantee who owns (within the meaning of Section 422(b)(6) of the Code, after the application of the attribution rules in Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of shares of the Corporation or its Parent or Subsidiary corporations (within the meaning of Sections 422 and 424 of the Code) shall be not less than 110% of the Fair Market Value of the Common Stock on the grant date and the term of such stock option shall not exceed five years. (iii) Maximum Grant. The aggregate Fair Market Value (determined as of the Grant Date) of shares of Common Stock with respect to which all incentive stock options first become exercisable by any grantee in any calendar year under this or any other plan of the Corporation and its Parent and Subsidiary corporations may not exceed $100,000 or such other amount as may be permitted from time to time under Section 422 of the Code. To the extent that such aggregate Fair Market Value shall exceed $100,000, or other applicable amount, such stock options shall be treated as nonqualified stock options. In such case, the Corporation may designate the shares of Common Stock that are to be treated as stock acquired pursuant to the exercise of an incentive stock option by issuing a separate certificate for such shares and identifying the certificate as incentive stock option shares in the stock transfer records of the Corporation. (iv) Grantee. Incentive stock options shall only be issued to employees of the Corporation, or of a Parent or Subsidiary of the Corporation. (v) Designation. No stock option shall be an incentive stock option unless so designated by the Committee at the time of grant or in the Grant Agreement evidencing such stock option. (vi) Stockholder Approval. No stock option issued under the Plan shall be an incentive stock option unless the Plan is approved by the shareholders of the Corporation within 12 months of its adoption by the Board in accordance with the Bylaws and Articles of the Corporation and governing law relating to such matters. (f) Other Terms and Conditions. Stock options may contain such other provisions, not inconsistent with the provisions of the Plan, as the Committee shall determine appropriate from time to time. 7. STOCK APPRECIATION RIGHTS (a) Award of Stock Appreciation Rights. Subject to the other applicable provisions of the Plan, the Committee may at any time and from time to time grant stock appreciation rights 6 7 ("SARs") to eligible participants, either on a free-standing basis (without regard to or in addition to the grant of a stock option) or on a tandem basis (related to the grant of an underlying stock option), as it determines. SARs granted in tandem with or in addition to a stock option may be granted either at the same time as the stock option or at a later time; provided, however, that a tandem SAR shall not be granted with respect to any outstanding incentive stock option Award without the consent of the grantee. SARs shall be evidenced by Grant Agreements, executed by the Corporation and the grantee, stating the number of shares of Common Stock subject to the SAR evidenced thereby and the terms and conditions of such SAR, in such form as the Committee may from time to time determine. The term during which each SAR may be exercised shall be determined by the Committee. In no event shall a SAR be exercisable more than ten years from the date it is granted. The grantee shall have none of the rights of a stockholder with respect to any shares of Common Stock represented by a SAR. (b) Restrictions of Tandem SARs. No incentive stock option may be surrendered in connection with the exercise of a tandem SAR unless the Fair Market Value of the Common Stock subject to the incentive stock option is greater than the exercise price for such incentive stock option. SARs granted in tandem with stock options shall be exercisable only to the same extent and subject to the same conditions as the stock options related thereto are exercisable. The Committee may, in its discretion, prescribe additional conditions to the exercise of any such tandem SAR. (c) Amount of Payment Upon Exercise of SARs. A SAR shall entitle the grantee to receive, subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one share of Common Stock over (B) the base price per share specified in the Grant Agreement, times (ii) the number of shares specified by the SAR, or portion thereof, which is exercised. In the case of exercise of a tandem SAR, such payment shall be made in exchange for the surrender of the unexercised related stock option (or any portion or portions thereof which the grantee from time to time determines to surrender for this purpose). (d) Form of Payment Upon Exercise of SARs. Payment by the Corporation of the amount receivable upon any exercise of a SAR may be made by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as determined in the sole discretion of the Committee from time to time. If upon settlement of the exercise of a SAR a grantee is to receive a portion of such payment in shares of Common Stock, the number of shares shall be determined by dividing such portion by the Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be used for such payment and the Committee shall determine whether cash shall be given in lieu of such fractional shares or whether such fractional shares shall be eliminated. 8. WITHHOLDING OF TAXES The Corporation may require, as a condition to the grant of any Award under the Plan or exercise pursuant to such Award or to the delivery of certificates for shares issued or payments of cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter collectively referred to as a "taxable event"), that the grantee pay to the Corporation, in cash or, unless otherwise 7 8 determined by the Corporation, in shares of Common Stock, including shares acquired upon grant of the Award or exercise of the Award, valued at Fair Market Value on the date as of which the withholding tax liability is determined, any federal, state or local taxes of any kind required by law to be withheld with respect to any taxable event under the Plan. The Corporation, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any taxable event under the Plan, or to retain or sell without notice a sufficient number of the shares to be issued to such grantee to cover any such taxes. 9. TRANSFERABILITY No Award granted under the Plan shall be transferable by a grantee otherwise than by will or the laws of descent and distribution. Unless otherwise determined by the Committee in accord with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the grantee, only by the grantee or, during the period the grantee is under a legal disability, by the grantee's guardian or legal representative. 10. ADJUSTMENTS; BUSINESS COMBINATIONS In the event of a reclassification, recapitalization, stock split, stock dividend, combination of shares, or other similar event, subsequent to the effective date of the Plan, the maximum number and kind of shares reserved for issuance or with respect to which Awards may be granted under the Plan as provided in Section 4 shall be adjusted to reflect such event, and the Committee shall make such adjustments as it in good faith deems appropriate and equitable to effectuate the purposes of this Plan and to protect the grantees of Awards in the number, kind and price of shares covered by outstanding Awards made under the Plan, and in any other matters which relate to Awards and which are affected by the changes in the Common Stock referred to above. In the event of any proposed Change in Control subsequent to the effective date of the Plan, the Committee shall take such action as it in good faith deems appropriate and equitable to effectuate the purposes of this Plan and to protect the grantees of Awards, which action may include, but without limitation, any one or more of the following: (i) acceleration or change of the exercise and/or expiration dates of any Award to require that exercise be made, if at all, prior to the Change of Control; (ii) cancellation of any Award upon payment to the holder in cash of the Fair Market Value of the Common Stock subject to such Award as of the date of (and, to the extent applicable, as established for purposes of) the Change in Control, less the aggregate exercise price, if any, of the Award; and (iii) in any case where equity securities of another entity are proposed to be delivered in exchange for or with respect to Common Stock of the Corporation, arrangements to have such other entity replace the Awards granted hereunder with awards with respect to such other securities, with appropriate adjustments in the number of shares subject to, and the exercise prices under, the award. In the event the Corporation dissolves and liquidates (other than pursuant to a plan of merger or reorganization), then notwithstanding any restrictions on exercise set forth in this Plan or any Grant Agreement, or other agreement evidencing a stock option or stock appreciation 8 9 right: (i) each grantee shall have the right to exercise his stock option or stock appreciation right at any time up to ten (10) days prior to the effective date of such liquidation and dissolution; and (ii) the Committee may make arrangements with the grantees for the payment of appropriate consideration to them for the cancellation and surrender of any stock option or stock appreciation right that is so canceled or surrendered at any time up to ten (10) days prior to the effective date of such liquidation and dissolution. The Committee shall establish a different period (and different conditions) for such exercise, delivery, cancellation, or surrender if the Committe deems such action to be necessary to avoid subjecting the grantee to liability under Section 16(b) of the Exchange Act. Any stock option or stock appreciation right not so exercised, canceled, or surrendered shall terminate on the last day for exercise prior to such effective date. 11. TERMINATION AND MODIFICATION OF THE PLAN The Board, without further approval of the stockholders, may modify or terminate the Plan or any portion thereof at any time, except that no modification shall become effective without prior approval of the stockholders of the Corporation to increase the number of shares of Common Stock subject to the Plan or if stockholder approval is necessary to comply with any tax or regulatory requirement or rule of any exchange or Nasdaq System upon which the Common Stock is listed or quoted (including for this purpose stockholder approval that is required for continued compliance with Rule 16b-3 or stockholder approval that is required to enable the Committee to grant incentive stock options pursuant to the Plan). The Committee shall be authorized to make minor or administrative modifications to the Plan as well as modifications to the Plan that may be dictated by requirements of federal or state laws applicable to the Corporation or that may be authorized or made desirable by such laws. The Committee may amend or modify the grant of any outstanding Award in any manner to the extent that the Committee would have had the authority to make such Award as so modified or amended. No modification or termination may be made that would materially adversely affect any Award previously made under the Plan without the approval of the grantee. 12. NON-GUARANTEE OF EMPLOYMENT Nothing in the Plan or in any Grant Agreement thereunder shall confer any right on an employee to continue in the employ of the Corporation or shall interfere in any way with the right of the Corporation to terminate an employee at any time. 13. TERMINATION OF EMPLOYMENT For purposes of maintaining a grantee's continuous status as an employee and accrual of rights under any Award, transfer of an employee among the Corporation and the Corporation's Parent or Subsidiaries shall not be considered a termination of employment. Nor shall it be considered a termination of employment for such purposes if an employee is placed on military or sick leave or such other leave of absence which is considered as continuing intact the employment relationship; in such a case, the employment relationship shall be continued until the date when an employee's right to reemployment shall no longer be guaranteed either by law or contract. 9 10 14. WRITTEN AGREEMENT Each Grant Agreement entered into between the Corporation and a grantee with respect to an Award granted under the Plan shall incorporate the terms of this Plan and shall contain such provisions, consistent with the provisions of the Plan, as may be established by the Committee. 15. NON-UNIFORM DETERMINATIONS The Committee's determinations under the Plan (including without limitation determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. 16. LIMITATION ON BENEFITS With respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 17. COMPLIANCE WITH SECURITIES LAW The Corporation may require that a grantee, as a condition to exercise of an Award, and as a condition to the delivery of any share certificate, provide to the Corporation, at the time of each such exercise and each such delivery, a written representation that the shares of Common Stock being acquired shall be acquired by the grantee solely for investment and will not be sold or transferred without registration or the availability of an exemption from registration under the Securities Act and applicable state securities laws. The Corporation may also require that a grantee submit other written representations which will permit the Corporation to comply with federal and applicable state securities laws in connection with the issuance of the Common Stock, including representations as to the knowledge and experience in financial and business matters of the grantee and the grantee's ability to bear the economic risk of the grantee's investment. The Corporation may require that the grantee obtain a "purchaser representative" as that term is defined in applicable federal and state securities laws. The stock certificates for any shares of Common Stock issued pursuant to this Plan may bear a legend restricting transferability of the shares of Common Stock unless such shares are registered or an exemption from registration is available under the Securities Act and applicable state securities laws. The Corporation may notify its transfer agent to stop any transfer of shares of Common Stock not made in compliance with these restrictions. Common Stock shall not be issued with respect to an Award granted under the Plan unless the exercise of such Award and the issuance and delivery of share certificates for such Common Stock pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any national securities exchange or Nasdaq System upon which the Common Stock may then be listed or quoted, and shall be further subject to the approval of counsel for the Corporation with respect to such compliance to the extent such approval is sought by the Committee. 10 11 18. GOVERNING LAW The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Board or Committee relating to the Plan or such Grant Agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the State of Delaware without regard to its conflict of laws rules and principles. 19. PLAN SUBJECT TO ARTICLES AND BY-LAWS This Plan is subject to the Articles and By-Laws of the Corporation, as they may be amended from time to time. 20. EFFECTIVE DATE; TERMINATION DATE The Plan is effective as of the Effective Time, as defined in the Agreement and Plan of Reorganization, dated as of December __, 1999, by and among SER Systeme AG, SERSys Acquisition Corporation and EIS International, Inc. No Award shall be granted under the Plan after the close of business on the day immediately preceding the tenth anniversary of the effective date of the Plan. Subject to other applicable provisions of the Plan, all Awards made under the Plan prior to such termination of the Plan shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards. Date Approved by the Board: -------------------------------- Date Approved by the Shareholders: ------------------------- 11 -----END PRIVACY-ENHANCED MESSAGE-----