UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION
STATEMENT
UNDER SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
eTelecare Global Solutions,
Inc.
(Name of Subject
Company)
eTelecare Global Solutions,
Inc.
(Name of Persons Filing
Statement)
Common Shares and
American Depositary Shares (each representing one Common
Share)
(Title of Class of
Securities)
CUSIP No. 29759R102
(CUSIP Number of Class of
Securities)
John R. Harris
President and Chief Executive Officer
eTelecare Global Solutions, Inc.
31st Floor CyberOne Building, Eastwood City, Cyberpark,
Libis, Quezon City 1110
Philippines
+63 (2) 916 5670
(Name, Address, and Telephone
Number of Person Authorized
to Receive Notices and
Communications on Behalf of the Persons Filing
Statement)
With Copies to:
Jorge A. del Calvo, Esq.
James J. Masetti, Esq.
Pillsbury Winthrop Shaw Pittman LLP
2475 Hanover Street
Palo Alto, CA 94304
(650) 233-4500
o
Check
the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
TABLE OF CONTENTS
|
|
Item 1.
|
Subject
eTelecare Information.
|
(a)
Name and Address.
The name of the
subject company to which this Solicitation/Recommendation
Statement on
Schedule 14D-9,
together with any Exhibits or Annexes hereto (this
Schedule 14D-9
),
relates is eTelecare Global Solutions, Inc., a Philippine
corporation (the
Company
or
eTelecare
). The address of the principal
executive offices of eTelecare is 31st Floor CyberOne
Building, Eastwood City, Cyberpark, Libis, Quezon City 1110
Philippines. The telephone number for eTelecare at that address
is +63 (2) 916 5670.
(b)
Securities.
The title of the class of
equity securities to which this
Schedule 14D-9
relates is the common shares, par value PhP2.00 per share, of
eTelecare (the
Common Shares
) and American
Depositary Shares, each representing one Common Share
(
ADSs
and together with Common Shares, the
Shares
). As of the close of business on
September 30, 2008, there were 29,646,239 Common Shares
issued and outstanding, including 10,557,821 Common Shares
underlying outstanding ADSs.
|
|
Item 2.
|
Identity
and Background of Filing Person.
|
(a)
Name and Address.
The name, business
address and business telephone number of eTelecare, which is the
person filing this
Schedule 14D-9,
are set forth in Item 1(a) above.
(b)
Tender Offer.
This
Schedule 14D-9
relates to a tender offer by EGS Acquisition Co LLC, a Delaware
limited liability company (
Purchaser
),
jointly owned by affiliates of Providence Equity Partners Inc.,
a Delaware corporation (
Providence
) and Ayala
Corporation, a Philippine corporation
(
Ayala
), disclosed in a Tender Offer
Statement on Schedule TO dated November 10, 2008 (as
may be amended or supplemented from time to time, the
Schedule TO
), and its offer to purchase
all the issued and outstanding Shares at a price of $9.00 in
cash per Common Share and $9.00 in cash per ADS (the
Offer Price
), and upon the terms and subject
to the conditions specified in the Offer to Purchase, dated
November 10, 2008 (as may be amended or supplemented from
time to time, the
Offer to Purchase
) and the
related Application to Sell Common Shares and ADS Letter of
Transmittal (collectively, and as may be amended or supplemented
from time to time, the
Acceptance Forms
,
which, together with the Offer to Purchase, constitute the
Offer
). The Offer Price is payable in cash,
without interest thereon and less any required taxes or costs
the Purchaser, the Company or any paying agent may be required
to deduct or withhold in accordance with applicable law or
rules, including payment of any stock transaction taxes,
brokers commissions and other fees customarily for the
account of a seller in connection with the crossing
of the Common Shares on the Philippine Stock Exchange, Inc.
Additional charges or fees may be applied by individual brokers
or nominees.
The Offer is being made in connection with an Acquisition
Agreement, dated as of September 19, 2008, by and between
eTelecare and the Purchaser (as such agreement may be amended
from time to time, the
Acquisition
Agreement
). A copy of the Acquisition Agreement is
filed as Exhibit (e)(1) hereto and is incorporated herein by
reference.
As set forth in the Schedule TO, the address of the
principal executive offices of the Purchaser is 50 Kennedy
Plaza, 18th Floor, Providence, Rhode Island 02903. The
telephone number at that address is
(401) 751-0536.
|
|
Item 3.
|
Past
Contacts, Transactions, Negotiations and
Agreements.
|
Except as set forth below in this Item 3 or Item 4,
including in the Information Statement of eTelecare attached to
this
Schedule 14D-9
as
Annex I
hereto, which is incorporated by
reference herein (the
Information Statement
),
as of the date hereof, there are no material agreements,
arrangements or understandings or any actual or potential
conflicts of interest between eTelecare or its affiliates and:
(1) its executive officers, directors or affiliates; or
(2) the Purchaser or its respective managers or affiliates.
The Information Statement is being furnished to eTelecares
stockholders pursuant to Section 14(f) of the Securities
Exchange Act of 1934, as amended (the
Exchange
Act
), and
Rule 14f-1
promulgated under the Exchange Act in connection with the right
of the Purchaser pursuant to the Acquisition Agreement to
designate persons to the board of directors of eTelecare (the
eTelecare Board
) following the payment of the
Shares pursuant to and subject to the conditions of the Offer
(such time hereinafter referred to as the
Payment
Date
).
2
Arrangements
with Executive Officers and Directors of eTelecare.
Certain members of management and the eTelecare Board may be
deemed to have interests in the transactions contemplated by the
Acquisition Agreement that are different from or in addition to
their interests as eTelecare stockholders generally. The
eTelecare Board was aware of these interests and considered
them, among other matters, in approving the Acquisition
Agreement and the transactions contemplated thereby. Alfredo I.
Ayala, a member of the eTelecare Board, is also a managing
director of Ayala. He may have interests in the Offer that are
different from or in addition to the interests of the other
stockholders of eTelecare generally and, as a result, recused
himself from all eTelecare Board deliberations regarding the
Acquisition Agreement.
The following is a discussion of all known material agreements,
arrangements, understandings and any actual or potential
conflicts of interest between eTelecare, its executive officers,
directors and affiliates that relate to the Offer. Additional
material agreements, arrangements, understandings and actual or
potential conflicts of interest between eTelecare, its executive
officers, directors and affiliates that are unrelated to the
Offer are discussed in the Information Statement.
Director
and Officer Indemnification
eTelecares bylaws provide that eTelecare is required to
indemnify every director, his heirs, executors and
administrators against all costs and expenses reasonably
incurred by such person in connection with any civil, criminal,
administrative or investigative action, suit or proceeding
(other than an action by eTelecare) to which he may be, or is,
made a party by reason of his being or having been an eTelecare
director, except in relation to matters as to which he is
finally adjudged in such action, suit or proceeding to be liable
for gross negligence or misconduct.
In addition, the Acquisition Agreement provides that, starting
from the Payment Date, eTelecare will indemnify each of
eTelecares and its subsidiaries present and former
directors and officers against any costs, expenses, judgments,
fines, losses, claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or
investigation, arising out of or related to such persons
service as a director or officer at or prior to the Payment
Date, to the fullest extent permitted under applicable laws.
Pursuant to terms of the Acquisition Agreement, as of the date
the Purchaser accepts the Shares (such time hereinafter referred
to as the
Acceptance Date
), eTelecare will
purchase directors and officers liability insurance
(or, at the Purchasers election, purchase a
run-off or tail policy) (the
D&O Insurance
) that will provide
coverage for eTelecares directors and officers for a
period of six years after the Acceptance Date which provides the
same coverage as the D&O Insurance provided by eTelecare
for its directors and officers; provided, however, eTelecare
will not be required to expend per year of coverage more than
300% of the amount currently expended by eTelecare per year of
coverage as of the date of the Acquisition Agreement (the
Maximum Amount
) to maintain or procure
insurance coverage pursuant to the Acquisition Agreement. If
notwithstanding the use of commercially reasonable efforts to do
so, eTelecare is unable to maintain or obtain the insurance
called for by the Acquisition Agreement, eTelecare will obtain
as much comparable insurance as available for the Maximum
Amount. Each present and former director and officer of
eTelecare and its subsidiaries may be required to make
reasonable application and provide reasonable and customary
representations and warranties to applicable insurance carriers
for the purpose of obtaining such insurance.
The Acquisition Agreement provides that for six years after the
Acceptance Date, eTelecare will maintain in effect any
indemnification provision set forth in the Articles of
Incorporation providing for indemnification of each present and
former director and officer of eTelecare and its subsidiaries
with respect to facts and circumstances occurring at or prior to
the Acceptance Date to the fullest extent permitted under the
Corporation Code of the Philippines (the
Philippine
Corporation Code
).
If eTelecare or any of its successors or assigns
(i) consolidates with or merges into any other person and
will not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person,
then, and in each such case, proper provisions will be made so
that the successors and assigns of eTelecare, as the case may
be, shall assume all of the obligations of eTelecare with
respect to the indemnification of its officers and directors and
the D&O Insurance described above.
3
Equity Awards.
Immediately prior to and
subject to the time the Purchaser accepts for payment all Shares
validly tendered and not validly withdrawn pursuant to the Offer
(the
Acceptance Time
), all outstanding and
unexercised options (whether vested or unvested) under each of
eTelecares Amended and Restated 2006 Stock Incentive Plan
and Amended and Restated Key Employees Stock Option Plan
(the
Company Stock Plans
) will be cancelled
and will entitle the holder to receive from eTelecare in
exchange an amount in cash equal to the product of (1) the
number of Shares subject to such option and (2) the excess
amount, if any, of the Offer Price, over the exercise price per
Share subject to such option, without interest, less any
required withholding or other taxes.
The following table indicates the number of options held by
eTelecares executive officers and directors on
September 30, 2008, the weighted average exercise prices of
those options and the approximate amounts that eTelecares
executive officers and directors will receive in settlement of
their respective options if the Offer is consummated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Total
|
|
|
Average
|
|
|
Total Amount
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
to be Received
|
|
Executive Officer/Director
|
|
(1)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Gary Fernandes
|
|
|
40,990
|
|
|
|
8.60
|
|
|
|
16,396
|
|
John R. Harris
|
|
|
791,250
|
|
|
|
6.00
|
|
|
|
2,373,750
|
|
J. Michael Dodson
|
|
|
135,000
|
|
|
|
5.00
|
|
|
|
540,000
|
|
Glenn J. Dispenziere
|
|
|
75,000
|
|
|
|
5.00
|
|
|
|
300,000
|
|
David F. Palmer II
|
|
|
|
|
|
|
|
|
|
|
|
|
Alfredo I. Ayala
|
|
|
428,750
|
|
|
|
3.03
|
|
|
|
2,559,638
|
|
Jaime G. del Rosario
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard N. Hamlin
|
|
|
|
|
|
|
|
|
|
|
|
|
John-Paul Ho
|
|
|
6,250
|
|
|
|
8.00
|
|
|
|
6,250
|
|
Rafael LL. Reyes
|
|
|
10,000
|
|
|
|
8.00
|
|
|
|
10,000
|
|
|
|
|
(1)
|
|
Does not include the value of options whose exercise price does
not exceed the Offer Price as such options will be cancelled
without payment of any consideration to the holder.
|
Immediately prior to and subject to the Acceptance Time, each
award of eTelecares restricted stock units will be
cancelled and will represent the right to receive from eTelecare
in exchange an amount in cash equal to the product of
(1) the number of Shares underlying such award of
restricted stock units of eTelecare and (2) the Offer
Price, less any required withholding or other taxes.
The following table indicates, as of September 30, 2008,
those restricted stock units of eTelecare and the approximate
amounts that eTelecares executive officers and directors
will receive in settlement of their respective restricted stock
units of eTelecare if the Offer is consummated.
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Amount to
|
|
|
|
Restricted
|
|
|
be Received
|
|
Executive Officer/Director
|
|
Stock
|
|
|
($)
|
|
|
Gary Fernandes
|
|
|
45,148
|
|
|
|
406,332
|
|
John R. Harris
|
|
|
90,208
|
|
|
|
811,872
|
|
J. Michael Dodson
|
|
|
48,119
|
|
|
|
433,071
|
|
Glenn J. Dispenziere
|
|
|
25,962
|
|
|
|
233,658
|
|
David F. Palmer II
|
|
|
35,000
|
|
|
|
315,000
|
|
Alfredo I. Ayala
|
|
|
9,508
|
|
|
|
85,572
|
|
Jaime G. del Rosario
|
|
|
12,666
|
|
|
|
113,994
|
|
Richard N. Hamlin
|
|
|
21,988
|
|
|
|
197,892
|
|
John-Paul Ho
|
|
|
9,508
|
|
|
|
85,572
|
|
Rafael LL. Reyes
|
|
|
9,508
|
|
|
|
85,572
|
|
4
Under the terms of eTelecares Deferred Compensation Plan,
the full value of each participants account balances will
become immediately vested and payable upon the successful
completion of the Offer. As of September 30, 2008, Messers.
Dispenziere, Harris and Palmer each had a vested balance in the
Deferred Compensation Plan of $5,362, $23,153 and $6,706,
respectively.
Information
Statement
Certain agreements, arrangements or understandings between
eTelecare or its affiliates and certain of its directors,
executive officers and affiliates are described in the
Information Statement.
Agreements
between eTelecare, the Purchaser and Affiliates.
Acquisition
Agreement
The summary of the Acquisition Agreement contained in
Section 13 of the Offer to Purchase and the description of
the conditions of the Offer contained in Section 14 of the
Offer to Purchase are incorporated herein by reference. Such
summary and description are qualified in their entirety by
reference to the Acquisition Agreement filed as Exhibit (e)(1)
hereto and the First Amendment to the Acquisition Agreement
filed as Exhibit (e)(2) hereto, both of which are
incorporated herein by reference.
Tender
and Support Agreements
In connection with the Acquisition Agreement, Crimson Velocity
Fund, L.P., Crimson Asia Capital L.P., Crimson Investment LTD.,
AIG Asian Opportunity Fund LP, Philippine American Life and
General Insurance Company, NewBridge International Investment
Ltd., a wholly-owned indirect subsidiary of Ayala
(
NewBridge
), J. Michael Dodson, Gary
Fernandes, John R. Harris, John-Paul Ho, Rafael LL. Reyes, Jamie
G. del Rosario and certain other stockholders entered into
tender and support agreements dated September 19, 2008 with
the Purchaser (the
Support Agreements
),
pursuant to which, among other things, such holders have agreed
to tender all Shares they beneficially own in the Offer, which
represented approximately 64.8% of the outstanding Shares as of
September 30, 2008.
NewBridge entered into the support agreement in the form
attached hereto as Exhibit (e)(4), while the other stockholders
entered into the form of support agreement attached hereto as
Exhibit (e)(3), each of which is incorporated herein by
reference.
Standstill
Agreement
eTelecare also entered into a Standstill Agreement with
NewBridge dated September 19, 2008 (the
Standstill
Agreement
) in the form attached hereto as Exhibit
(e)(5), which would place certain restrictions on the actions of
NewBridge and its affiliates in the event that the Acquisition
Agreement is terminated without the Offer having been completed.
Pursuant to the Standstill Agreement, if the Acquisition
Agreement is terminated without the Offer having been completed,
NewBridge and its affiliates shall be prohibited, subject to
certain specified exceptions, acting along or in concert with
others, from (i) directly or indirectly acquiring in excess
of 32% of the outstanding Shares; (ii) publicly offering,
seeking or proposing any merger, consolidation, business
combination transaction, tender offer or exchange offer for at
least 50% of the outstanding Shares; or (iii) seeking to
nominate or elect more than two out of seven directors of the
Company. Depending upon the circumstances of the termination of
the Acquisition Agreement, (i) the duration of the
standstill ranges from six months to 18 months to three
years and (ii) in the case of a standstill of
18 months or three years, following the expiration of the
standstill, during an additional period of six months or two
years, respectively, NewBridge and its affiliates shall not
acquire or agree to acquire Shares in excess of 32% of the
outstanding Shares without notifying the Company of such intent
not less than 25 business days prior thereto and, at the option
of the Company, being restricted from making any such
acquisition for an additional six-month period. During the
standstill period and any additional period as described above,
NewBridge has agreed that, if the board of directors of the
Company and the holders of a majority of the outstanding Shares
approve a merger, consolidation, business combination
transaction, tender offer or exchange offer for at least 50% of
the outstanding Shares with a party other than NewBridge,
NewBridge and its affiliates who hold Shares will (i) vote
any Shares they have acquired in excess of the
6,392,550 Shares that NewBridge currently
5
owns in favor of such transaction or (ii) sell or transfer
any such excess Shares to the Purchaser in such transaction on
the same terms and conditions as all other stockholders of the
Company. NewBridge at all times would be permitted to vote or
dispose of the 6,392,550 Shares it currently owns in its
sole discretion.
Nondisclosure
Agreements
On June 11, 2008, NewBridge and eTelecare entered into a
nondisclosure agreement (the
NewBridge Nondisclosure
Agreement
). Under the terms of the NewBridge
Nondisclosure Agreement, NewBridge and eTelecare agreed to
furnish the other party, on a confidential basis, with certain
information concerning their respective businesses in connection
with the evaluation of a possible business combination or change
in control transaction.
A copy of the NewBridge Nondisclosure Agreement is filed as
Exhibit (e)(6) thereto and is incorporated herein by reference.
On June 11, 2008, Providence Equity Asia Limited
(
Providence Equity Asia
) and eTelecare
entered into a nondisclosure agreement (the
Providence
Nondisclosure Agreement
). Under the terms of the
Providence Nondisclosure Agreement, Providence Equity Asia and
eTelecare agreed to furnish the other party, on a confidential
basis, with certain information concerning their respective
businesses in connection with the evaluation of a possible
business combination or change in control transaction. In
addition, Providence Equity Asia agreed to certain restrictions
with respect to eTelecare or the Shares for a period of the
earlier of (i) 18 months following the date of the
Providence Nondisclosure Agreement and (ii) the execution
of a definition agreement with respect to a possible transaction.
A copy of the Providence Nondisclosure Agreement is filed as
Exhibit (e)(7) thereto and is incorporated herein by reference.
Limited
Guarantees
eTelecare has entered into separate limited guarantees with each
of Providence Equity Partners VI International L.P. and
NewBridge (each a
Guarantor
) attached hereto
as Exhibits (e)(8) and (e)(9), respectively, and incorporated
herein by reference (the
Limited Guarantees
),
whereby each Guarantor guarantees the payment of 50% of the
termination fee if such fee shall become payable by the
Purchaser under the terms of the Acquisition Agreement.
The foregoing descriptions of the Support Agreements, Standstill
Agreement, Nondisclosure Agreements and Limited Guarantees do
not purport to be complete and are qualified in their entirety
by reference to the Support Agreements, Standstill Agreement,
Nondisclosure Agreement and the Limited Guarantees, which are
filed hereto as exhibits and incorporated herein by reference.
|
|
Item 4.
|
The
Solicitation or Recommendation.
|
Recommendation.
At a meeting held on September 18, 2008, the eTelecare
Board unanimously, with the exception of
Mr. Alfredo I. Ayala, a director of the Company and a
managing director of Ayala, who may have interests in the Offer
that are different from or in addition to the interests of the
other stockholders of the Company generally and as a result,
recused himself from all eTelecare Board deliberations regarding
the Acquisition Agreement:
(1) determined that the Acquisition Agreement, the Offer
and the other transactions contemplated by the Acquisition
Agreement are advisable and fair and in the best interests of
the Company and its stockholders;
(2) determined that it is in the best interests of
eTelecares stockholders that eTelecare enter into the
Acquisition Agreement and consummate the transactions
contemplated by the Acquisition Agreement on the terms and
subject to the conditions set forth in the Acquisition Agreement;
(3) approved and adopted the Acquisition Agreement, the
Offer and the other transactions contemplated by the Acquisition
Agreement;
(4) authorized the execution and delivery of the
Acquisition Agreement; and
6
(5) recommended that eTelecares stockholders accept
the Offer and tender their Shares pursuant to the Offer.
Accordingly, the eTelecare Board unanimously, with the
exception of Mr. Alfredo I. Ayala, a director of the
Company and a managing director of Ayala, who recused himself
from all of the eTelecare Board deliberations regarding the
Acquisition Agreement, recommends that the holders of Shares
accept the Offer and tender their Shares pursuant to the
Offer.
Background and Reasons for the Recommendation.
Background
of the Transaction
The eTelecare Board and management periodically review and
assess the various business trends and competitive factors of
its business, including its resources, cost structure, services
portfolio and overall market conditions. Additionally,
eTelecares management periodically discuss with the
eTelecare Board a variety of alternatives, including, among
other things, strategies to grow eTelecares business
organically, redeploy cash on its balance sheet, pursue
potential strategic acquisitions and dispositions, as well as a
possible sale of eTelecare.
Given the different time zones applicable to various parties
discussed below, the actual dates described below may differ
slightly depending on the location of the parties referenced.
eTelecare does not believe such differences are material to the
discussion contained below.
In November 2007, NewBridge purchased shares of eTelecare
capital stock, which together with Shares already owned by
NewBridge, resulted in NewBridge owning approximately 21.6% of
the outstanding capital stock of eTelecare. NewBridge is a
wholly owned subsidiary of LiveIt Investments Limited
(
LiveIt
), which in turn is a wholly owned
indirect subsidiary of Ayala. NewBridge was established by
LiveIt to act as its holding company for its investment in
eTelecare. Ayala, on behalf of itself and NewBridge, had
previously disclosed in Amendment No. 1 to
Schedule 13D filed by Ayala with the SEC on
November 20, 2007 that, among other things, Ayala intended,
depending on market and other conditions, to consider acquiring
additional Shares and thereby increase its beneficial ownership
interest to 20% of the total outstanding Shares on a fully
diluted basis (or approximately 22% of the total outstanding
Shares) in order to, among other things, allow Ayala as the
ultimate parent company of NewBridge, to account for the Shares
it owned under the equity method of accounting. Mr. Alfredo
I. Ayala is the chief executive officer of LiveIt.
Mr. Ayala has been a member of the eTelecare Board since
February 2000 and also served as eTelecares chief
executive officer from February 2004 to March 2006.
In late 2007, in light of eTelecares stock price, average
daily trading volume and the accumulation of shares by
NewBridge, the eTelecare Board began to consider stockholder
value protective measures in an effort to protect minority
stockholders against an acquisition of a controlling interest of
eTelecare outside of a negotiated change in control transaction,
including but not limited to the potential adoption of a
stockholder rights plan and a request that current significant
stockholders enter into a standstill agreement. The e Telecare
Board ultimately concluded not to adopt any additional
stockholder value protective measures in light of the current
status of Philippine law and no standstill agreement was
executed.
On January 18, 2008, eTelecares Chairman of the
Board, Gary Fernandes, Chief Executive Officer and director,
John Harris, and Chief Financial Officer, Michael Dodson, met
telephonically with representatives from Pillsbury Winthrop Shaw
Pittman LLP (
Pillsbury
), eTelecares
outside legal counsel, to discuss the implications should
NewBridge acquire additional shares of eTelecares capital
stock, including the potential consequences such an acquisition
of shares would have on the other stockholders of eTelecare and
potential actions that could be taken by other significant
stockholders of eTelecare in response to any such additional
acquisition of shares.
On February 13, 2008, Providence and eTelecare held an
introductory meeting in Manila, Philippines, involving
Mr. Harris, Mr. Rafael LL. Reyes, a member of the
eTelecare Board, and representatives of Providence and N.M.
Rothchild & Sons (Singapore) Limited, as financial
advisor to Purchaser, where Providence discussed its preliminary
interest in exploring a possible transaction with eTelecare. The
following day, Providence met with Mr. Ayala and other
representatives of Ayala in Manila to discuss the meeting with
eTelecare and to have a preliminary discussion about whether
there was sufficient common interest between Providence and
Ayala to consider further the possibility of jointly making an
offer to acquire eTelecare. The parties agreed that neither one
7
had sufficient information about the other or their respective
interest in eTelecare to make any decisions, but they agreed to
explore the possibility further and to continue their
discussions from time to time.
In February 2008, Mr. Ayala informed certain members of the
eTelecare Board of NewBridges interest in acquiring up to,
but less than, 35% of the outstanding shares of eTelecare on a
fully diluted basis. At that time, NewBridge held approximately
22% of the outstanding capital stock of eTelecare. Pursuant to
certain provisions of the Philippine Corporations Code, the
approval of a stockholder who holds more than 33.3% of a
companys outstanding capital stock is required before
certain corporate actions can be taken, including a sale of a
company or the amendment of a companys articles of
incorporation. The eTelecare Board considered the implications
of the acquisition by NewBridge of more than 33.3% of
eTelecares outstanding capital stock, including but not
limited to the rights and potential loss in value of the shares
held by the other stockholders. Also, around this time, the
daily trading volume of eTelecares ADSs on the NASDAQ
Stock Market (
NASDAQ
) was very low (in
January 2008, the average daily trading volume was approximately
39,900 ADSs on the NASDAQ). In light of this lack of liquidity,
the eTelecare Board was also concerned about the potential
resulting impact on eTelecares stock price if a large or
other stockholder elected to liquidate its position in response
to NewBridges accumulation and the resulting potential
reduction in the public float (resulting in less liquidity)
implicated by this potential further concentration in share
ownership.
On February 26, 2008, the eTelecare Board held a special
meeting with Mr. Ayala voluntarily recusing himself from
attendance at the meeting. Representatives from Pillsbury were
also in attendance. The eTelecare Board discussed the possible
purchase of shares by NewBridge and the consequences such an
acquisition of shares would have on the value and rights of
shares held by other stockholders of eTelecare. The eTelecare
Board also approved the engagement of financial advisors to
explore the strategic alternatives available to eTelecare,
including but not limited to a sale of the company.
On February 27, 2008, Mr. Fernandes informed
Mr. Ayala that, at a special meeting of the eTelecare Board
held on February 26, 2008, the eTelecare Board approved the
engagement of financial advisors to explore the strategic
alternatives available to eTelecare, including but not limited
to a sale of the company. Mr. Fernandes also informed
Mr. Ayala that the eTelecare Board had determined, based on
the advice of United States and Philippine counsel, that this
confidential action taken by the eTelecare Board was material,
non-public information and, accordingly, under eTelecares
insider trading policy, the trading window for eTelecare
insiders was closed. In Mr. Ayalas case, under
eTelecares insider trading policy, this restriction also
applied to NewBridge.
On March 13, 2008, Mr. Alexander Evans, a Managing
Director of Providence, held a preliminary meeting with
Mr. Harris in New York. The purpose of the meeting was for
eTelecare to become more familiar with Providence. Prior to the
March 13, 2008 meeting, Mr. Harris had only met with
Providences representatives in Asia and had requested a
meeting with Providences representatives in the United
States.
On March 22, 2008, a routine meeting of the eTelecare Board
was held. During a discussion regarding the potential
acquisition of shares by NewBridge, and with Mr. Ayala
voluntarily recusing himself from this discussion, the eTelecare
Board approved the establishment of a Strategic Committee,
consisting of independent directors
Mr. Fernandes (as Chairman of the Committee), Jaime del
Rosario and Richard Hamlin (the
Strategic
Committee
). The purpose of the Strategic Committee was
to evaluate and make recommendations to the eTelecare Board
regarding the strategic alternatives of eTelecare, including but
not limited to a sale or merger of eTelecare. The Strategic
Committee was charged with overseeing and coordinating the
process under which strategic alternatives were to be evaluated,
which process was to include communications with potential
strategic partners and their representatives as well as the
management of eTelecares financial advisors, legal counsel
and other consultants used to evaluate strategic alternatives.
Morgan Stanley & Co. Incorporated (
Morgan
Stanley
) has served as eTelecares financial
advisor since 2006, providing underwriting and other financial
advisory services from time to time. In late March 2008, at the
direction of the eTelecare Board, with Mr. Ayala not
participating in this decision, and the Strategic Committee,
representatives of eTelecare contacted Morgan Stanley and
requested that it serve as the financial advisor to eTelecare.
Morgan Stanley accepted the engagement and commenced advising
the eTelecare Board and the Strategic Committee on the process
under which strategic alternatives were to be evaluated and the
evaluation of any such alternatives.
8
On April 21, 2008, a conference call was held during which
Mr. Reyes informed certain directors of eTelecare, with
representatives of Pillsbury and Morgan Stanley participating in
the discussion, that he had received an unsolicited verbal
indication of interest from Company A to acquire up to 100% (and
a minimum of 66.7%) of eTelecares outstanding equity at a
price of $11 per share, or in the alternative, a merger.
Mr. Reyes also indicated that Company A was prepared to
communicate this indication of interest to the eTelecare Board.
On April 21, 2008, a meeting of the eTelecare Board was
held telephonically, with representatives of Pillsbury and
Morgan Stanley participating in the discussion, to discuss the
indication of interest from Company A. Mr. Ayala
voluntarily recused himself from this meeting.
On April 23, 2008, Company A contacted Mr. Fernandes
by telephone to discuss the proposed strategic transaction and
indicated the seriousness of the offer as well as the
willingness to discuss a possible merger of each partys
assets as a part of the potential transaction.
On May 5, 2008, Company A delivered a written indication of
interest describing its offer to acquire up to 100% (but not
less than 67%) of the outstanding shares of eTelecare for an
all-cash purchase price of between $11.00 and $12.00 per share.
Company A also requested that eTelecare enter into a period of
exclusivity for 60 days during which Company A would
conduct further due diligence and definitive transaction
documents could be negotiated by the parties. Company A further
indicated that it was unwilling to participate in an auction or
other comparable bidding process and would withdraw its written
indication of interest if it concluded that eTelecare was
engaged, or intended to engage, in such a process.
On May 7, 2008, the Strategic Committee of eTelecare held a
telephonic meeting, with representatives of Pillsbury and Morgan
Stanley in attendance, to discuss Company As indication of
interest and request for exclusivity. Mr. Harris also
participated in this meeting. The Strategic Committee discussed
whether and to what extent eTelecare should approach alternative
potential buyers or other strategic partners in exploring
strategic alternatives. Morgan Stanley also expressed its views
as to the likelihood of engaging such potential bidders under
then current market conditions. The Strategic Committee received
additional input from Morgan Stanley from a financial
perspective and Pillsbury from a legal perspective and concluded
under the current circumstances that it would focus the process
on communicating with Company A and exploring strategic
alternatives with NewBridge, including continuing to discuss a
standstill agreement or soliciting interest from NewBridge in
acquiring eTelecare.
On May 8, 2008, eTelecare sent a letter to Company A
proposing an in-person meeting to discuss a potential strategic
transaction and requesting that Company A execute a
nondisclosure agreement due to the highly sensitive nature of
the confidential information that would potentially be shared
between the two parties.
On May 12, 2008, Mr. Fernandes spoke with
Mr. Ayala advising him that if NewBridge was interested in
making an offer for eTelecare that it should do so promptly.
Mr. Fernandes also had a telephone conversation with a
representative (Julie Richardson) of Providence, in which
Providence indicated its interest in making an offer for
eTelecare. Mr. Ayala had previously expressed to
Mr. Fernandes that Providence may be interested in
exploring a strategic transaction with eTelecare.
Mr. Fernandes invited Mr. Ayala and Providence to
submit an indication of interest for the purchase of eTelecare
or other strategic transaction.
On May 13, 2008, the financial advisors of Company A sent
an email to Mr. Fernandes requesting an opportunity for
Company A to meet with certain large stockholders of eTelecare.
Mr. Fernandes rejected this request, but indicated that
eTelecare would consider the request at an appropriate time.
On May 14, 2008, eTelecare issued its earnings release for
the first quarter of 2008. In its release, eTelecare provided
guidance for the full fiscal year of 2008 of projected revenue
between $300 and $310 million, operating income between $16
and $19 million and earnings per fully diluted share of
$0.50 to $0.60.
On May 15, 2008, Mr. Fernandes spoke by telephone with
Mr. Ayala about NewBridges potential interest in
entering into a strategic transaction with eTelecare.
Company A entered into a nondisclosure agreement, containing a
standstill provision, with eTelecare with an effective date of
May 16, 2008. Following execution of the nondisclosure
agreement, representatives of eTelecare began discussions with
representatives of Company A regarding the scope and timing of
its diligence review and
9
began making due diligence information available to Company A.
Representatives of eTelecare had discussions from time to time
with, and provided information to, Company A from May 16,
2008 through September 18, 2008.
On May 20, 2008, the Strategic Committee engaged Romulo
Mabanta Buenaventura Sayoc & de los Angeles
(
Romulo
), to serve as its Philippine legal
counsel and advise the eTelecare Board.
On May 23, 2008, Mr. Fernandes spoke by telephone with
Company A. Company A expressed that it was proceeding with
internal discussions to obtain full approval to move forward
with a transaction with eTelecare. Company A requested
additional diligence materials. Mr. Fernandes indicated
that representatives from Morgan Stanley would be contacting
Company As financial advisors to discuss the diligence
process and also indicated that eTelecares legal advisors
were available to discuss potential transaction structures with
Company As legal advisors.
On May 23, 2008, representatives from Morgan Stanley spoke
by telephone with representatives of Providence, during which
Providence expressed an interest in submitting to eTelecare a
non-binding, preliminary indication of interest to acquire up to
100% of eTelecares outstanding stock for a price per share
between $9.00 and $10.00 and requested a period of exclusivity
in which to conduct due diligence to confirm its offer price.
On June 4, 2008, representatives of Morgan Stanley spoke by
telephone with Company As financial advisors and discussed
the process moving forward for both financial advisor teams.
Company A requested additional diligence materials.
On June 4, 2008, representatives of Morgan Stanley spoke by
telephone with representatives from Providence. Morgan Stanley
informed Providence that it would be required to enter into a
nondisclosure agreement with eTelecare, which agreement would
include a standstill provision. Providence indicated its
willingness to enter into such an agreement. Morgan Stanley also
indicated that to the extent NewBridge was interested in
partnering with Providence, eTelecares expectation would
be that NewBridge would enter into the same nondisclosure
agreement containing a standstill provision. Providence
indicated that it would speak with NewBridge about the request.
Providence entered into a nondisclosure agreement, including a
standstill provision, with eTelecare with an effective date of
June 11, 2008. NewBridge entered into a nondisclosure
agreement, which did not include a standstill agreement, with
eTelecare with an effective date of June 11, 2008.
NewBridge advised at this time that it would not be directly
participating in negotiations with eTelecare regarding a
strategic transaction, but wanted access to confidential
information of eTelecare should NewBridge proceed in either
partnering with Providence or another party or otherwise
entering into a strategic transaction with eTelecare. Following
execution of these nondisclosure agreements, representatives of
eTelecare began separate discussions with representatives of
Providence and NewBridge regarding the scope and timing of each
partys diligence review and began making due diligence
information available to Providence and NewBridge.
Representatives of eTelecare had discussions from time to time
with, and provided diligence information to, Providence and
NewBridge from June 11, 2008 through September 18,
2008.
On June 12 and 13, 2008, representatives of eTelecare,
Providence, Ayala and Morgan Stanley met in Los Angeles,
California, during which eTelecare made presentations regarding
its recent business results and financial performance, strategic
plans, goals and prospects in order to facilitate the
exploration of the possible acquisition of eTelecare by
Providence and Ayala.
On June 16, 2008, Mr. Fernandes spoke by telephone
with representatives of Company A, during which Company A
communicated that it remained fully committed to the potential
transaction. Company A suggested that the parties meet in person
to discuss the logistics of the potential transaction.
Mr. Fernandes agreed to have both sides financial
advisors arrange for such a meeting.
On June 19, 2008, Mr. Harris met with
Ms. Richardson, Mr. Davis Noell, a vice president of
Providence, and Mr. Ayala in New York City to further
discuss the possibility of Providences and Ayalas
respective interest in eTelecare and their respective views on
eTelecares future prospects.
On June 25, 2008, Ms. Richardson and Mr. Noell of
Providence verbally communicated to Morgan Stanley
Providences preliminary proposal to acquire eTelecare in
an all cash transaction for $10.00 per share, subject to
customary legal, business and accounting due diligence,
negotiation of a mutually satisfactory acquisition
10
agreement, and Providences desire to have a co-investor
participating in the proposed transaction. This proposal was
confirmed by Providence in a letter submitted to Morgan Stanley
on June 26, 2008.
On July 1, 2008 through July 3, 2008, representatives
of eTelecare met with representatives of Company A in
Scottsdale, Arizona, during which Company A conducted due
diligence on eTelecare. Following this meeting, Company A
highlighted the importance of understanding eTelecares
second quarter performance and its updated outlook for the
remainder of the year before proceeding with the acquisition
offer.
On July 2, 2008, a meeting of the Strategic Committee was
held with Mr. Harris, Mr. Dodson, and representatives
from Morgan Stanley, Pillsbury and Romulo participating in the
discussion. Morgan Stanley provided an update on discussions
with Company A and Providence.
On July 7, 2008, representatives of Morgan Stanley
communicated to Ms. Richardson and Mr. Noell of
Providence that eTelecare was interested in pursuing
Providences acquisition proposal as outlined in its
preliminary proposal and agreed to set up in-depth due diligence
meetings and calls between eTelecare and Providence and their
respective advisors.
On July 10, 2008, representatives of eTelecares
management, Pillsbury and Weil, Gotshal & Manges LLP
(
Weil, Gotshal
), Providences United
States legal counsel, met telephonically to discuss proposed
transaction structures.
On July 11, 2008, members of eTelecares management
held a telephonic meeting with representatives of Weil, Gotshal
during which Weil, Gotshal conducted due diligence on eTelecare.
Representatives of Morgan Stanley and Pillsbury also
participated in the meeting.
On July 16, 2008 and July 17, 2008, representatives of
eTelecare met with representatives of Providence and NewBridge
in Scottsdale, Arizona during which Providence and NewBridge
conducted due diligence on eTelecare and discussed possible
transaction structures.
On July 18, 2008, representatives of eTelecares
management, Pillsbury, Weil, Gotshal and Providences
Philippine advisors met telephonically to discuss possible
transaction structure.
On July 22, 2008, representatives of eTelecares
management, Pillsbury, Romulo, Weil, Gotshal and Sycip Salazar
Hernandez & Gatmaitan (
Sycip
),
Providences Philippine legal counsel, met telephonically
to discuss possible transaction structures and the documentation
contemplated by these structures.
On July 23, 2008, representatives of Romulo and Sycip met
telephonically to further discuss possible transaction
structures.
On July 28, 2008, representatives of Romulo and Sycip met
with the Philippines Securities and Exchange Commission
(
PSEC
) and the Philippine Stock Exchange
(
PSE
) on a confidential basis, without
disclosing the identity of the parties, to discuss potential
transaction structures. From time to time thereafter, Romulo and
Sycip met confidentially with the PSEC to discuss potential
transaction structures.
On July 29, 2008, a meeting of the eTelecare Board was held
telephonically to discuss eTelecares performance in the
second quarter of 2008, its preliminary outlook for the
remainder of 2008 and the status of negotiations with Providence
and Company A. Mr. Ayala voluntarily recused himself from
the portion of the meeting in which the eTelecare Board
discussed the status of strategic discussions. Representatives
of Morgan Stanley and Pillsbury participated in the meeting.
Morgan Stanley provided an update on its discussions with the
financial advisors of Company A and with Providence and also
provided a general update on the capital markets. Pillsbury
provided an update on its discussions with Company As
legal advisors relating to the proposed structure of the
transaction. In light of eTelecares status as a Philippine
corporation and its dual listing of ADSs on the NASDAQ in the
United States and common shares on the PSE in the
Philippines, the structure of any strategic transaction was
likely to be complex. As a result, a considerable amount of time
was spent considering the possible transaction structures and
evaluating the consequences these structures might have on
eTelecares stockholders.
During due diligence conference calls held between July 29 and
31, 2008, Providence and Ayala were informed of eTelecares
revised full year forecast for fiscal year 2008. Providence
conveyed to eTelecare that such
11
revised forecast would negatively affect its valuation of
eTelecare and consequently reduce the offer price for eTelecare.
On July 30, 2008, representatives of Pillsbury and Weil,
Gotshal met telephonically to discuss possible transaction
structures and related documentation.
On July 30, 2008, representatives of Morgan Stanley met
telephonically with Company As financial advisors to
discuss Company As diligence review.
On August 5, 2008, Providence informed representatives of
Morgan Stanley that due to updated financial due diligence
information provided by eTelecare, the offer price set out in
Providences preliminary proposal would be lowered, but
that Providence and Ayala remained interested in continuing
their due diligence and pursuing the acquisition of eTelecare.
At this time, Providence did not indicate a revised offer price
but informed representatives of Morgan Stanley that a revised
offer would be contingent upon Providences completion of
their due diligence. Morgan Stanley indicated that eTelecare
remained interested in a potential transaction and that
Providence and Ayala should continue their due diligence.
On August 8, 2008, Mr. Harris met with a
representative of Company A regarding the status of discussions
between eTelecare and Company A and the progress of Company
As due diligence review.
During early August 2008, Providence and Ayala continued with
their due diligence, and Providence informed Morgan Stanley that
a revised offer would be forthcoming.
On August 9, 2008, representatives of Pillsbury and Weil,
Gotshal met telephonically to discuss proposed transaction
structures and related documentation. During this meeting,
Pillsbury and Weil, Gotshal preliminarily agreed on a possible
structure, from a legal perspective, for the transaction
contemplated by Providence.
On August 13, 2008, eTelecare issued its earnings release
for the second quarter of 2008. In its release, eTelecare
reiterated its revenue guidance for the full fiscal year of 2008
of projected revenue between $300 and $310 million, while
revising its guidance with respect to operating income to be
between $9 and $11 million (down from between $16 and
$19 million) and earnings per fully diluted share of $0.30
to $0.36 (down from $0.50 to $0.60).
On August 18, 2008, Pillsbury delivered a proposed draft of
the Acquisition Agreement to Weil, Gotshal.
On August 19, 2008, Company A delivered a revised
indication of interest with an offer to purchase 100% of
eTelecares outstanding shares for an all-in value of
equity plus equity equivalents in the range of $233 million
to $262 million, with the assumption that net working
capital at the time of document execution is at least
$56 million. Company A also reiterated its request that
eTelecare enter into an exclusivity agreement, which would have
prohibited eTelecare from taking any action to solicit or
participate in any negotiations or discussions with any third
party related to an acquisition of eTelecare for a period of
60 days.
On August 20, 2008, a meeting of the Strategic Committee
was held telephonically to discuss Company As revised
indication of interest and its request for exclusivity.
Mr. Harris and representatives of Morgan Stanley,
Pillsbury and Romulo participated in the meeting. Morgan Stanley
advised that the revised indication of interest from Company A
should be clarified by Company A as it currently implied an
offer that was substantially lower than Company As prior
indication of interest.
On August 26, 2008, representatives of Providence met
telephonically with representatives of Morgan Stanley to discuss
Providences offer, including a revised offer price of
$8.25 per share based on updated financial due diligence and
other information eTelecare had recently provided to Providence.
Following this discussion, representatives from Morgan Stanley
informed the Strategic Committee of Providences revised
offer price and met telephonically with Mr. Fernandes to
discuss the revised offer. Following this discussion,
representatives of Morgan Stanley contacted representatives of
Providence by telephone to advise them that Providences
revised offer was insufficient, and that eTelecare would only
entertain a higher bid. In subsequent conversations that
occurred on August 26, 2008, Providence indicated to
representatives of Morgan Stanley that it agreed to increase its
offer price to $8.50 per share, subject to confirmatory due
diligence.
12
On August 26, 2008, representatives of Pillsbury and Weil,
Gotshal met telephonically to discuss Providences initial
comments to the material terms of the Acquisition Agreement.
On August 26, 2008, a meeting of the eTelecare Board was
held telephonically. Mr. Ayala voluntarily recused himself
from the portion of the meeting in which the eTelecare Board
discussed the status of negotiations with Company A and
Providence. Representatives of Morgan Stanley, Pillsbury and
Romulo participated in the meeting.
On August 27, 2008, at the direction of the eTelecare
Board, representatives of Morgan Stanley communicated
eTelecares initial response on the material terms of
Company As indication of interest to the financial
advisors of Company A.
On August 27, 2008, Pillsbury delivered a draft of the
proposed Acquisition Agreement to Company A.
On August 27, 2008, during a call between Mr. Harris
and Mr. Noell of Providence, Mr. Harris indicated that
Providences revised offer of $8.50 per share was still too
low and needed to be increased. Mr. Harris also requested
that Providence submit a
mark-up
to
the Acquisition Agreement so that the eTelecare Board could
analyze any material issues.
On August 28, 2008, Company A sent an email to
Mr. Harris and Mr. Fernandes proposing that eTelecare
sign an exclusivity agreement with Company A that would provide
for a period of exclusivity of 40 days.
On August 28, 2008, in a telephone conversation with
representatives of Morgan Stanley, Company As financial
advisor confirmed Company As current offer was to purchase
the outstanding shares of eTelecare for $9.00 per share, subject
to confirmatory due diligence.
On August 29, 2008, representatives of Pillsbury and
Company As legal counsel met telephonically to discuss
proposed transaction structures and timing.
On August 29, 2008, Weil, Gotshal delivered comments to the
Acquisition Agreement to Pillsbury. Among other comments to the
Acquisition Agreement, Weil, Gotshal, on behalf of Providence,
requested that at least 90% of the outstanding shares of
eTelecare agree to accept the tender offer from Providence as a
minimum condition to Providence being required to accept any
shares tendered and to consummate the transactions contemplated
by the Acquisition Agreement.
The minimum tender condition was a key provision for eTelecare,
because it directly impacted the amount of certainty eTelecare
would have that any tender offer launched would ultimately be
consummated. In other words, the lower the minimum tender
condition threshold, the greater the certainty that such
threshold could be achieved. However, in order for a potential
buyer to acquire sufficient control of eTelecare and be able to
direct certain significant corporate actions following the
completion of the tender offer, such as a merger or other change
in control transaction, it would need to hold at least 66.67% of
the outstanding shares of eTelecare on a fully diluted basis.
This is a result of the Philippine Corporation Code requiring
approval of at least 66.67% of the outstanding shares in order
to accomplish certain significant corporate actions, such as a
merger or amendment of a companys articles of
incorporation. The request for a minimum tender condition of 90%
by Providence was to ensure that it would acquire the desired
control under Philippine law as well as to better support its
efforts to take eTelecare private and delist its ADSs from the
NASDAQ and delist its Common Shares from the PSE following
consummation of the tender offer. For example, under applicable
PSE regulations, in order for the Common Shares to be delisted
from the PSE, at least 95% of the Shares outstanding must be
held by a single holder, including any Shares held by parties
acting in concert with such holder. While each party had an
interest in ensuring the successful completion of a tender
offer, both Company A and Providence were equally focused on
ensuring their corporate objectives for the transaction could be
accomplished once the tender offer had been completed. At the
same time, the eTelecare Board was focused on achieving as much
deal certainty as possible, and therefore, was generally
interested in lowering the minimum tender condition.
In its response, Providence also removed entirely from the
proposed Acquisition Agreement the fiduciary out provision,
which was a proposal by eTelecare to allow the eTelecare Board
to pursue an alternative transaction if eTelecare received
another offer to be acquired after the execution of a definitive
agreement with Providence and if the eTelecare Board determined,
upon advice from legal counsel, that it was necessary to pursue
such alternative offer in order to discharge its fiduciary
duties.
13
On August 31, 2008, representatives of Pillsbury and
Company As legal counsel met telephonically to discuss
proposed transaction structures, timing and the Acquisition
Agreement.
On September 1, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the status of discussions
with Providence and Company A. Mr. Harris and
representatives of Morgan Stanley and Pillsbury participated in
this meeting.
On September 2, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the status of discussions
with Providence and Company A. Mr. Harris, John-Paul Ho, a
director of eTelecare, Mr. Reyes and representatives from
Morgan Stanley, Pillsbury and Romulo participated in this
meeting. The Strategic Committee reviewed and compared the
current proposals from Company A and Providence, including the
offered price per share of $9.00 and minimum tender condition of
66.67% from Company A and an offer of $8.50 per share and a
minimum tender condition of 90% from Providence. At this time,
it was the Strategic Committees understanding that
NewBridge, a holder of approximately 22% of the outstanding
shares of eTelecare, would not agree to sell its shares at the
price currently being offered by Company A, but might support
Providences offer, and this understanding was taken into
account in evaluating the relative risks to closing each offer.
On September 2, 2008, Company A sent an email to
Mr. Harris, Mr. Fernandes, Morgan Stanley and
Pillsbury informing them that Company As financial
advisors would be in touch with Morgan Stanley to discuss the
project timelines and due diligence activities and that Company
As legal counsel would be in touch with Pillsbury
regarding the draft Acquisition Agreement and exclusivity
agreement. Company A emphasized the need for eTelecare to enter
into the proposed exclusivity agreement by September 8,
2008 as well as the need to have stockholder support agreements
in place before Company A would sign an Acquisition Agreement.
On September 2, 2008, representatives of Providence and
Morgan Stanley held a conference call, during which Morgan
Stanley noted there were outstanding issues between the parties,
the most significant of which was the offer price, which
eTelecare believed was insufficient.
On September 3, 2008, Mr. Fernandes sent an email to
Company A highlighting the importance that both sides agree upon
the structure of the proposed transaction, including material
terms thereof, and that such agreement would need to be reached
before an exclusivity agreement could be executed by eTelecare.
On September 4, 2008, Mr. Harris spoke by telephone
with a representative of Providence to discuss material terms of
Providences indication of interest.
On September 4, 2008, Company A sent an email to
Mr. Fernandes and Mr. Harris reiterating the
criticality of its request that eTelecare enter into an
exclusivity agreement with Company A by September 8, 2008.
On September 5, 2008, representatives of Pillsbury spoke by
telephone with Company As legal counsel and discussed the
structure of the proposed transaction, the request by Company A
that stockholder support agreements for certain stockholders be
obtained and the request by Company A for an exclusivity
agreement with eTelecare.
On September 5, 2008, representatives of Morgan Stanley
spoke by telephone with Providence regarding the current status
of Providences indication of interest and discussed the
outstanding issues.
On September 5, 2008, Mr. Harris spoke by telephone to
Mr. Ayala, who requested a response from eTelecare to
Providences response draft of the Acquisition Agreement.
On September 5, 2008, representatives of Pillsbury spoke by
telephone with Company As legal counsel discussing the
terms of the Acquisition Agreement.
On September 7, 2008, representatives of Morgan Stanley
spoke by telephone with Company As financial advisor about
the proposed structure and terms of the transaction. During this
conversation, Company As financial advisor confirmed an
agreement on the fundamental transaction structure. On the issue
of stockholder support agreements, Company As financial
advisor expressed the need to have Morgan Stanleys
assistance in identifying which stockholders to approach and
what general groups to target. Company As financial
advisor also indicated that a 90% minimum tender condition was
currently proposed by Company A, which was a change from Company
As prior offer, and Morgan Stanley indicated that such a
condition would not be accepted by eTelecare. Company As
financial advisor then emphasized that an exclusivity agreement
was very important to Company A, and
14
Morgan Stanley responded that agreement upon transaction
structure and material terms of the transaction was a
precondition to an exclusivity agreement being signed. Company
As financial advisor informed Morgan Stanley that the due
diligence process was proceeding smoothly, but Morgan Stanley
expressed concerns over the amount of time requested by Company
A to complete its due diligence efforts.
On September 7, 2008, Mr. Fernandes sent an email to
Company A informing it that once major transaction issues were
resolved, eTelecare would be able to move quickly on an
exclusivity agreement.
On September 7, 2008, Pillsbury spoke by telephone to
Company As legal counsel whereby both parties discussed
potential minimum tender conditions and the potential to obtain
commitments from eTelecares largest stockholders,
including Crimson Ventures and NewBridge, to tender their shares
under a support agreement with Company A.
On September 8, 2008, Pillsbury delivered comments to the
exclusivity agreement to Company As legal counsel.
On September 8, 2008, on behalf of Company A, Company
As legal counsel delivered to Pillsbury comments to the
Acquisition Agreement and an initial draft of a proposed form of
stockholder support agreement. Among other issues, Company A
requested a minimum tender condition of 66.67% of outstanding
shares and included a
top-up
option exercisable in Company As discretion if more than
50% but less than 66.67% of the outstanding shares agreed to
accept the tender offer, such that the
top-up
option could be exercised by Company A to allow it to reach the
minimum tender condition of owning 66.67% of the outstanding
shares after completion of the tender offer and exercise of such
option.
On September 8, 2008, Company A sent an email to
Mr. Harris indicating it believed all material issues on
the draft Acquisition Agreement had been resolved by its team.
Company A expressed its desire to have the exclusivity agreement
signed no later than September 10, 2008.
On September 8, 2008, representatives from Morgan Stanley
informed Providence that eTelecare was not willing to provide a
revised draft of the Acquisition Agreement unless Providence
increased its offer. However, later that day, eTelecare agreed
that it would instruct Pillsbury to discuss the Acquisition
Agreement and outstanding issues with Weil, Gotshal, which
conversation took place on September 9, 2008.
On September 9, 2008, Company A sent an email to
Mr. Fernandes requesting an update on the status of the
exclusivity agreement.
On September 9, 2008, Pillsbury spoke with Weil, Gotshal to
discuss transaction structure, terms of the Acquisition
Agreement and status of proposed commitment letters from
Providence and others.
On September 10, 2008, Mr. Fernandes sent an email to
Company A updating him on the status of the draft Acquisition
Agreement and stating that he would provide a further update
following the meeting of the Strategic Committee on
September 11, 2008.
On September 11, 2008, Mr. Fernandes spoke by
telephone to Providence, whereby Providence increased its prior
offer of $8.50 per share to $9.00 per share, if eTelecare could
be in a position to sign the Acquisition Agreement by
September 15, 2008. Providence also indicated that Ayala
was in support of this offer. Providence indicated that the two
material issues that still needed to be addressed were the
termination provisions of the stockholder support agreements and
the minimum tender condition threshold. At this time, Providence
proposed a minimum tender condition that at least 80% of the
outstanding shares agree to the tender offer. Providence
reiterated this proposal to Mr. Harris and to
representatives of Morgan Stanley on that same day.
On September 11, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the terms of
Providences offer and Company As offer.
Mr. Reyes, Mr. Ho, Mr. Harris and representatives
from Morgan Stanley, Pillsbury and Romulo participated in this
meeting. The Strategic Committee reviewed and compared the two
current proposals, including the current offer of $9.00 per
shares and minimum tender condition of 66.67% from Company A and
the current offer of $9.00 per share and minimum tender
condition of 80% from Providence. In addition, the offers were
notably different in that Company As offer provided for a
fiduciary out exercisable by the eTelecare Board under certain
circumstances if eTelecare received a proposal superior to
Company As current
15
offer. Under such circumstances, the Acquisition Agreement could
be terminated by eTelecare and the stockholder support
agreements would concurrently be terminated. Providences
offer similarly provided for a fiduciary out exercisable by the
eTelecare Board upon receipt of a superior proposal, subject to
the terms and conditions set forth in the Acquisition Agreement.
In contrast, however, Providence required that the stockholder
support agreements continue to be in effect following an
exercise by the eTelecare Board of its fiduciary out, thus still
providing Providence the means to acquire a substantial portion
of the outstanding shares of eTelecare in the face of a superior
proposal. The Strategic Committee discussed the other
differences between the offers.
On September 11, 2008 through September 19, 2008,
Pillsbury, Romulo, Sycip and Weil, Gotshal continued to
negotiate the unresolved issues related to the Acquisition
Agreement between eTelecare and Providence. During this same
time period, Pillsbury, Romulo and Company As legal
advisors continued to negotiate the unresolved issues related to
the Acquisition Agreement between eTelecare and Company A.
On September 12, 2008, Mr. Fernandes spoke by
telephone to Providence, whereby Mr. Fernandes communicated
the transaction terms that the Strategic Committee viewed as
critical to eTelecare, including the inclusion of a fiduciary
out both at the corporate level and in the support agreements,
the minimum tender condition and the structure and amount of the
break-up
fee.
On September 12, 2008, Mr. Fernandes sent an email to
Company A and requested that Company A provide assurance that
the value offered would not change under the proposed
exclusivity period of 40 days and that the minimum tender
condition be reduced from 67% to 51%. At this time, the
Strategic Committees understanding continued to be that
NewBridge would not agree to sell its shares representing 22% of
the outstanding capital stock of eTelecare at the current price
being offered by Company A; and therefore, it felt that Company
As minimum tender condition of 66.67% provided a
significant degree of uncertainty to closing the Company A
tender offer.
On September 12, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the current status of the
transaction negotiations with Providence and Company A.
Mr. Harris, Mr. Reyes and representatives from Morgan
Stanley, Pillsbury and Romulo participated in the discussion.
On September 12, 2008, Pillsbury delivered to Weil, Gotshal
a revised draft of the Acquisition Agreement. Weil, Gotshal
delivered to Pillsbury forms of the equity commitment letter,
limited guarantee and support agreement that would be entered
into in connection with the proposed Acquisition Agreement.
On September 13, 2008, Company A sent an email to
Mr. Fernandes indicating that the proposed exclusivity
agreement as drafted would expire upon a lowering of the offer
price and communicated that Company A was prepared to consider
lowering its minimum tender condition to 51% so long as the
Acquisition Agreement provided for an option in favor of Company
A to purchase the remaining authorized, but unissued, share
capital of eTelecare.
On September 14, 2008, Mr. Fernandes spoke by
telephone to Company A and emphasized that the principle
concerns for the eTelecare Board were to exercise its fiduciary
duty to deliver to eTelecares stockholders a transaction
that combined the highest value with the highest degree of
certainty and that such a transaction would close at the
indicated value. Company A agreed to reconsider the material
open issues between the parties. At the request of Company A,
Mr. Fernandes followed this phone conversation with an
email to Company A summarizing the position of eTelecare.
On September 14, 2008, representatives of Morgan Stanley
spoke telephonically with Providence and communicated the
primary concerns of the eTelecare Board regarding the remaining
open issues between the parties, which included the minimum
tender condition threshold and the termination provisions of the
stockholder support agreements.
On September 15, 2008, Company A informed
Mr. Fernandes that it would agree to reduce its minimum
tender condition to 51% of the outstanding shares.
On September 15, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the status of negotiations
with Company A and Providence. Mr. Harris, Mr. Ho and
representatives from Morgan Stanley, Pillsbury and Romulo
participated in this discussion. The Strategic Committee
reviewed and compared the terms of each offer.
16
On September 15, 2008, Mr. Fernandes sent an email to
Company A, indicating that the Strategic Committee had
authorized eTelecare to continue to negotiate with Company A on
substantially the terms previously discussed, including an offer
price of $9.00 per share and a minimum tender condition of 51%
of the outstanding shares, but that Company A must be in a
position to execute a definitive agreement as quickly as
possible, but no later than September 19, 2008.
On September 15, 2008, Company A sent an email to
Mr. Harris inviting him to attend a special meeting of the
Board of Directors of Company A in order to discuss the
potential combined business operations following a successful
transaction. It was contemplated that this meeting would provide
the necessary approvals for Company A to execute a definitive
agreement no later than September 19, 2008.
On September 16, 2008, Mr. Fernandes and Providence
had several communications, during which Mr. Fernandes
conveyed the material open issues from eTelecares
perspective to the current terms of the offer made by Providence
and informed Providence that the eTelecare Board would convene a
special meeting on the evening (United States Eastern Daylight
Time) of September 18, 2008 and make a decision regarding
Providences proposal and another bidders proposal.
On September 16, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the status of negotiations
with Company A and Providence. Representatives from Morgan
Stanley and Pillsbury participated in this discussion.
On September 16, 2008, Mr. Fernandes met
telephonically with Mr. Ayala to discuss the current open
issues between Providence and eTelecare. Mr. Fernandes
conveyed the material open issues from eTelecares
perspective, including the offer price, the minimum tender
condition threshold and the termination provisions of the
stockholder support agreements.
On September 16, 2008, representatives of eTelecare
discussed the status of negotiations with Company A and
Providence with certain large stockholders of eTelecare in an
effort to determine if these stockholders would agree to enter
into support agreements for either offer. These discussions were
conducted under nondisclosure agreements with each stockholder.
Discussions with certain large stockholders continued until
September 18, 2008.
On September 17, 2008, Mr. Fernandes conveyed to
Mr. Ayala that if NewBridge or its affiliates was
partnering with Providence in making a bid for eTelecare, it was
eTelecares expectation that NewBridge would enter into a
standstill agreement to be effective upon execution of an
Acquisition Agreement with Providence.
On September 17, 2008, Company As legal counsel
delivered comments to the Acquisition Agreement to Pillsbury.
On September 17, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the current status of
negotiations with Company A and Providence. Mr. Harris and
representatives from Morgan Stanley, Pillsbury and Romulo
participated in this meeting.
On September 17, 2008, Mr. Fernandes spoke by
telephone with Company A and requested Company A to consider
whether it was able to improve its offer and reiterated the
importance of executing a definitive Acquisition Agreement as
quickly as possible and no later than September 19, 2008.
Prior to the eTelecare Board meeting on September 18, 2008,
Mr. Ayala called Mr. Fernandes to confirm that Ayala
would be jointly pursuing with Providence the acquisition of
eTelecare and to inform him that they were prepared to modify
Providences original proposal on two key points:
(i) to reduce the minimum tender condition to 66.67% of the
outstanding shares on a fully diluted basis and (ii) to
provide the termination provisions in the stockholder support
agreements that had been requested by eTelecare. Providence also
called Morgan Stanley to convey the same message. Providence
representatives also spoke with Mr. Harris to confirm the
intention of Providence and Ayala to make the joint offer and to
update him on the revised terms. Providence also asked for, and
received, Mr. Harriss permission to contact key
customers as part of its due diligence.
On September 18, 2008, Company A sent emails to
Mr. Harris and Mr. Fernandes informing them that
Company A would not be able to proceed with its offer on the
timeline requested by eTelecare, but invited eTelecare to
continue discussions if the eTelecare Board did not proceed with
a transaction with another party in the near term.
17
On September 18, 2008, a meeting of the Strategic Committee
was held telephonically to discuss the proposed transaction and
recent events relating to Company A and Providence.
Mr. Harris and representatives of Morgan Stanley,
Pillsbury and Romulo were also in attendance at this meeting.
Mr. Fernandes provided an overview of the status of
discussions with Company A and Providence. Representatives from
Pillsbury reviewed the material terms of the Acquisition
Agreement with Providence. The members of the Strategic
Committee discussed the transaction with Providence and the
other alternatives available to eTelecare, including but not
limited to delaying the process in order to continue discussions
with Company A, exploring the possibility of engaging in
discussions with other potential bidders and continuing to
operate as a standalone business. After its discussion, the
Strategic Committee unanimously resolved to recommend to the
eTelecare Board to approve the transaction with Providence.
On September 18, 2008, a special meeting of the eTelecare
Board was held telephonically, with formal notice to all
directors, to consider a proposed strategic transaction.
Mr. Ayala voluntarily recused himself from this meeting.
Michael Dodson, eTelecares Chief Financial Officer, and
representatives from Morgan Stanley, Pillsbury, Romulo and
Picazo Buyco Tan Fider & Santos
(
Picazo
), eTelecares regular outside
corporate counsel in the Philippines, participated in the
meeting. Gemma Santos of Picazo served as eTelecares
corporate secretary and performed this role during the meeting.
The directors, other than Mr. Ayala, received materials
from eTelecares management, Morgan Stanley and Pillsbury
prior to the meeting, which included an updated analysis on the
current status of eTelecares business and financial
condition, a copy of the Acquisition Agreement proposed to be
entered into with Providence, a summary of the material terms of
that Acquisition Agreement and an updated financial analysis
from Morgan Stanley. At the meeting, Mr. Dodson provided an
update to the eTelecare Board about eTelecares business,
financial condition and outlook. Representatives of Pillsbury
and Morgan Stanley provided an overview of the negotiation
process with Company A and Providence and the current status of
those negotiations. The eTelecare Board discussed, with Morgan
Stanleys input, other strategic alternatives available to
eTelecare, including but not limited to delaying the process in
order to continue discussions with Company A, exploring the
possibility of engaging in discussions with other potential
bidders and continuing to operate as a standalone business.
Representatives from Romulo advised the eTelecare Board on its
fiduciary duties in connection with the consideration of this
transaction under Philippine law. Ms. Santos concurred with
the presentation by Romulo of the fiduciary duties of the
directors under Philippine law. There was also a discussion of
fiduciary duties under U.S. law, which discussion was led
by representatives of Pillsbury, during which the eTelecare
Board took note of what the fiduciary duties would be in
connection with the consideration of this transaction if
U.S. law was assumed to apply. During this discussion
regarding fiduciary duties, representatives from Morgan Stanley
left the meeting. After representatives from Morgan Stanley
rejoined the meeting, Morgan Stanley discussed with the
eTelecare Board the financial aspects of the transaction. Morgan
Stanley also delivered its opinion orally that, as of
September 18, 2008 and based upon and subject to the
various considerations, assumptions, qualifications, limitations
and other matters as set forth in the opinion (a written copy of
which was subsequently delivered and is attached to this
Schedule 14D-9
as
Annex II
), the consideration to be received by
holders of eTelecares common shares and American
Depositary Shares pursuant to the Acquisition Agreement was
fair, from a financial point of view, to such holders (other
than the Purchaser and its affiliates, including NewBridge). The
eTelecare Board meeting then adjourned in order for the
Compensation Committee of eTelecare to meet. After the
Compensation Committee meeting was completed, the meeting of the
eTelecare Board reconvened. Representatives from Pillsbury
advised the eTelecare Board of the various interests of
directors and officers of eTelecare in the transaction and of
the material terms of the substantially final draft of the
Acquisition Agreement with Providence. Representatives from
Romulo discussed the unique aspects of Philippine law for a
transaction of this type, including certain tax and other costs
that may be incurred by the stockholders. Mr. Fernandes
then reported on the recommendation of the Strategic Committee.
The eTelecare Board then had further discussion of the factors
relating to the acquisition. See discussion of the material
factors considered by the eTelecare Board under Reasons
for Recommendation below. After its discussion, the
eTelecare Board members present at the meeting, with
Mr. Ayala having voluntarily recused himself from the
meeting and not present to vote, unanimously approved the
transaction and determined that the Acquisition Agreement and
the tender offer and the other transactions contemplated by the
Acquisition Agreement were advisable and fair and in the best
interests of eTelecare and its stockholders.
Following the eTelecare Board meeting on September 18,
2008, Mr. Fernandes called Ms. Richardson of
Providence indicating that the eTelecare Board had authorized
eTelecare to proceed in finalizing the revised offer
18
from Providence and Ayala and that the parties would work
towards signing the Acquisition Agreement on the following day.
On September 18, 2008 and September 19, 2008,
representatives from eTelecare, NewBridge, Pillsbury, Romulo and
Davis Polk negotiated a standstill agreement between NewBridge
and eTelecare. Representatives of eTelecare, Pillsbury,
Providence and Weil, Gotshal finalized the terms of the
Acquisition Agreement, stockholder support agreements, limited
guarantees and commitment letters.
On September 19, 2008, certain stockholders of eTelecare
entered into support agreements with the Purchaser. On this same
date, eTelecare and the Purchaser executed the Acquisition
Agreement and on that same day, prior to the opening of the
NASDAQ, the parties announced the Acquisition Agreement and the
tender offer contemplated thereby.
Reasons
for Recommendation
In evaluating the Acquisition Agreement and the other
transactions contemplated thereby, including the Offer, and
recommending that the eTelecare stockholders accept the Offer
and tender their Shares to the Purchaser pursuant to the Offer,
the eTelecare Board consulted with eTelecares senior
management, legal counsel and financial advisor. The following
discussion includes all material reasons and factors considered
by the eTelecare Board in making its recommendation, but is not,
and is not intended to be, exhaustive:
|
|
|
|
|
the current and historical financial condition, results of
operations, business and prospects of eTelecare as well as
eTelecares financial plan and prospects if it were to
remain an independent company. The eTelecare Board discussed
eTelecares current financial plan, including the risks
associated with achieving and executing upon eTelecares
business plan, as well as the general risks of market conditions
that could reduce eTelecares stock price. The eTelecare
Board considered that the holders of Shares would continue to be
subject to the risks and uncertainties of eTelecares
financial plan, operations and prospects unless the Shares were
acquired for cash;
|
|
|
|
the possibility that NewBridge would acquire a controlling
interest in eTelecare without paying a premium for such interest
and the possible resulting impact to eTelecares stock
price and liquidity for its stockholders;
|
|
|
|
the $9.00 per Share price to be paid in cash would provide
eTelecare stockholders with the opportunity to receive a premium
over the market price of the Shares. The eTelecare Board
reviewed the historical market prices, volatility and trading
information with respect to the Shares;
|
|
|
|
the relationship of the Offer Price to the historical trading
prices of the Shares and the consideration to be received by
eTelecare stockholders in the Offer as compared to premiums in
other comparable acquisition transactions;
|
|
|
|
the form of consideration to be paid to holders of Shares in the
Offer and the certainty of value of such cash consideration;
|
|
|
|
the certainty that the holders of at least 66.67% of the
outstanding Shares on a fully diluted basis would tender their
Shares to satisfy the minimum tender condition;
|
|
|
|
the anticipated timing of the consummation of the transactions
contemplated by the Acquisition Agreement, and the structure of
the transaction as a tender offer for all the issued and
outstanding Shares, which should allow stockholders to receive
the transaction consideration in a relatively short time frame;
|
|
|
|
the business reputation of Ayala and Providence and its
management and the substantial financial resources of Ayala and
funds affiliated with Providence and, by extension, the
Purchaser, which the eTelecare Board believed supported the
conclusion that an acquisition transaction with Ayala,
Providence and the Purchaser could be completed relatively
quickly and in an orderly manner;
|
|
|
|
the financial analyses and opinion of Morgan Stanley delivered
orally to the eTelecare Board and subsequently confirmed in
writing to the effect that, as of September 18, 2008, and
based upon and subject to the various considerations,
assumptions, qualification, limitations and other matters set
forth therein, the
|
19
|
|
|
|
|
consideration to be received by holders of Shares pursuant to
the Acquisition Agreement was fair, from a financial point of
view, to such holders (other than the Purchaser and its
affiliates, including NewBridge). The full text of the written
opinion of Morgan Stanley, dated September 18, 2008, which
sets forth the various assumptions made, procedures followed,
matters considered and limitations on the review undertaken in
connection with the opinion, is attached as
Annex II
hereto and is incorporated herein by reference.
Morgan Stanley provided its opinion for the information and
assistance of the eTelecare Board in connection with its
consideration of the Offer. Morgan Stanleys opinion is not
a recommendation as to whether or not any holder of Shares
should tender such Shares in connection with the Offer or take
any other action. For a further discussion of Morgan
Stanleys opinion, see Opinion of Morgan
Stanley & Co. Incorporated below;
|
|
|
|
|
|
the provisions of the Acquisition Agreement, including the
respective representations, warranties and covenants and
termination rights of the parties and termination fees payable
by eTelecare and the Purchaser. In particular:
|
|
|
|
|
|
No Financing Condition.
The eTelecare Board
considered the representation of the Purchaser that it has
access to sufficient cash resources to pay the amounts required
to be paid under the Acquisition Agreement and the Offer is not
subject to a financing condition.
|
|
|
|
Ability to Respond to Certain Unsolicited Acquisition
Proposals.
While eTelecare is prohibited from
soliciting any Acquisition Proposal (as defined in the
Acquisition Agreement) or participating in any discussions or
negotiations regarding an Acquisition Proposal, the Acquisition
Agreement does permit, with respect to any third party that has
made a bona fide, unsolicited, written Acquisition Proposal that
the eTelecare Board determines in good faith, after consultation
with its outside legal and financial advisors, constitutes, or
would be reasonably expected to lead to, a Superior Proposal (as
defined in the Acquisition Agreement), and subject to certain
other procedural requirements, the eTelecare Board (1) to
furnish information with respect to eTelecare and its
subsidiaries pursuant to a confidentiality agreement to a person
making a Superior Proposal and (2) to participate in
discussions or negotiations with the person making a Superior
Proposal regarding the Superior Proposal, subject to the terms
of the Acquisition Agreement.
|
|
|
|
C
hange in Recommendation/Termination Right to Accept Superior
Proposals.
At any time prior to the Expiration
Date, if eTelecare receives a Superior Proposal, which the
eTelecare Board determines in good faith and subject to certain
procedural requirements, the eTelecare Board may withhold,
withdraw, qualify or modify its recommendation or declaration of
advisability of the Acquisition Agreement or Offer, and
terminate the Acquisition Agreement to enter into a definitive
agreement with respect to such Superior Proposal, after
consultation with its outside legal counsel and financial
advisor, if the failure to withdraw or change its recommendation
would be inconsistent with its fiduciary duties to
eTelecares stockholders. In order for the eTelecare Board
to withdraw its recommendation in connection with a Superior
Proposal, the eTelecare Board must first provide the Purchaser
with a right to match the Superior Proposal. In order for the
eTelecare Board to accept the Superior Proposal, it must provide
notice of the Superior Proposal to the Purchaser and if
requested by the Purchaser negotiate in good faith to make
changes to the Acquisition Agreement. Following a change in
recommendation, eTelecare must concurrently pay the Purchaser
the Termination Fee (as defined in the Acquisition Agreement).
|
|
|
|
Termination Fee.
The eTelecare Board was of
the view that the termination fee payable by eTelecare to the
Purchaser, if the Acquisition Agreement is terminated for
reasons discussed in the Acquisition Agreement, was comparable
to termination fees in transactions of a similar size and was
reasonable. The eTelecare Board also viewed the termination fee
payable by the Purchaser if the Acquisition Agreement is
terminated by the Purchaser for reasons discussed in the
Acquisition Agreement as reasonable under those circumstances.
In addition, the eTelecare Board considered the Limited
Guarantees provided by NewBridge and Providence Equity Partners
VI International L.P. (Providence VI) guarantying
the payment of any Purchaser termination fee.
|
|
|
|
Conditions to the Consummation of the Offer; Likelihood of
Closing.
The eTelecare Board considered the
reasonable likelihood of the consummation of the transactions
contemplated by the Acquisition
|
20
|
|
|
|
|
Agreement in light of the conditions to the Purchasers
obligations to accept for payment and pay for the Shares
tendered pursuant to the Offer and the Acquisition Agreement.
|
|
|
|
|
|
Exemptive Relief from the United States Securities and
Exchange Commission and Philippine Securities and Exchange
Commission.
The eTelecare Board considered the
reasonable likelihood of the consummation of the transactions
contemplated by the Acquisition Agreement in light of receiving
exemptive relief from compliance with the rules promulgated
under the Securities and Exchange Act of 1934, as amended, and
the rules and regulations promulgated under The Securities
Regulation Code of the Philippines.
|
|
|
|
|
|
the possible strategic alternatives in light of the fact that
the eTelecare Board negotiated an alternative proposal from a
third party, considered soliciting proposals from other third
parties and whether parties other than the Purchaser would be
willing or capable of entering into a transaction with eTelecare
that would provide value to eTelecare stockholders superior to
the cash price to be paid pursuant to the Offer, on
substantially similar or better terms and with a substantially
similar or increased likelihood of consummating such alternative
transaction;
|
|
|
|
the results of the process that the eTelecare Board has
conducted, with the assistance of eTelecare management and
advisors, to evaluate strategic alternatives. The eTelecare
Board also considered the ability of other bidders to make, and
the likelihood that other bidders would make, a proposal to
acquire the Shares at a higher price. Based on the results of
that process, the eTelecare Board believed that the
consideration obtained was the highest that was reasonably
attainable; and
|
|
|
|
the material terms of the Acquisition Agreement, taken as a
whole, were as favorable as those found in comparable
acquisition transactions.
|
In the course of its deliberations, the eTelecare Board also
considered a variety of risks and other countervailing factors
related to entering into the Acquisition Agreement and the
transaction, including:
|
|
|
|
|
the potential elimination of the opportunity for stockholders to
participate in any future growth and profits of eTelecare,
including the potential for a higher stock price;
|
|
|
|
the potential limitations on eTelecares pursuit of
business opportunities due to pre-closing covenants in the
Acquisition Agreement whereby eTelecare agreed that it will
carry on its business in the ordinary course of business
consistent with past practice and, subject to specified
exceptions, will not take a number of actions related to the
conduct of its business without the prior written consent of the
Purchaser;
|
|
|
|
the possibility that the transactions contemplated by the
Acquisition Agreement may not be consummated due to the failure
to satisfy the closing conditions;
|
|
|
|
the effect of public announcement of the Acquisition Agreement,
including effects on eTelecares sales, operating results
and stock price, and eTelecares ability to attract and
retain key management and sales and marketing personnel;
|
|
|
|
the regulatory approvals and third party consents that may be
required to consummate the Offer and the prospects for receiving
any such approvals and consents, if necessary; and
|
|
|
|
the interests of the officers, directors and other affiliates of
eTelecare in the Offer, including the matters described under
Item 3 Past Contacts, Transactions,
Negotiations and Agreements beginning on page 2 of this
Schedule 14D-9
and the impact of the Offer on eTelecares stockholders and
employees.
|
The foregoing discussion of the information and factors
considered by the eTelecare Board is intended to be illustrative
and not exhaustive, but includes the material reasons and
factors considered. In view of the wide variety of reasons and
factors considered, the eTelecare Board did not find it
practical to, and did not, quantify or otherwise assign relative
weights to the specified factors considered in reaching its
determinations or the reasons for such determinations.
Individual directors may have given differing weights to
different factors or may have had different reasons for their
ultimate determination. In addition, the eTelecare Board did not
reach any specific conclusion with respect to any of the factors
or reasons considered. Instead, the eTelecare Board conducted an
overall analysis of the
21
factors and reasons described above and determined that, in the
aggregate, the potential benefits considered outweighed the
potential risks or possible negative consequences of the Offer.
Financial
Projections
eTelecare does not, as a matter of course, publicly disclose
projections as to its future financial performance. During its
consideration of strategic alternatives, as described in
Background of the Merger,
eTelecare
provided Morgan Stanley with financial forecasts of
eTelecares operating performance for fiscal years 2008
through 2012 prepared by the management of eTelecare in August
2008, which we refer to as the Management
Projections. The Management Projections were provided to
Morgan Stanley for use in connection with its financial
analysis, as summarized in Opinion of Morgan
Stanley & Co. Incorporated.
In compiling the Management Projections, eTelecares
management took into account historical performance, combined
with estimates regarding revenues, operating margin, interest
rates and capital spending. Although the Management Projections
are presented with numerical specificity, the Management
Projections reflect numerous assumptions and estimates as to
future events made by eTelecares management that
eTelelcares management believed were reasonable at the
time the Management Projections were prepared. However, this
information is not fact and should not be relied upon as being
necessarily indicative of actual future results. In addition,
factors such as industry performance, the market for
eTelecares services, the competitive environment, and
general business, economic, regulatory, market and financial
conditions, all of which are difficult to predict and beyond the
control of eTelecares management, may cause the Management
Projections or the underlying assumptions not to be reflective
of actual future results. In addition, these Management
Projections do not take into account any circumstances or events
occurring after the date that they were prepared and,
accordingly, do not give effect to the Offer or any changes to
eTelecares operations or strategy that may be implemented
after completion of the Offer. As a result, there can be no
assurance that the Management Projections will be realized, and
actual results may be materially better or worse than those
contained in the Management Projections. The inclusion of this
information should not be regarded as an indication that
eTelecare, the Purchaser, Morgan Stanley or any other recipient
of this information considered, or now considers, the Management
Projections to be predictive of actual future results.
Except to the extent required by applicable federal securities
laws, eTelecare has not, does not intend and expressly disclaims
any responsibility to, update or otherwise revise the Management
Projections to reflect circumstances existing after the date
when prepared or to reflect the occurrence of future events even
in the event that any of the assumptions underlying the
Management Projections are shown to be in error. eTelecare has
neither updated or revised nor intends to update or otherwise
revise the Management Projections to reflect circumstances
existing since the preparations thereof or to reflect the
occurrence of unspecified events even in the event that any or
all of the underlying assumptions are shown to be in error.
22
The Management Projections were not prepared with a view to
compliance with the published guidelines of the SEC or the
guidelines established by the American Institute of Certified
Public Accountants regarding projections or forecasts. The
Management Projections do not purport to present operations or
financial condition in accordance with accounting principles
generally accepted in the United States. eTelecares
independent accountants have not examined, compiled or otherwise
applied procedures to the Management Projections and,
accordingly, do not express an opinion or any other form of
assurance with respect to the Management Projections. The
Management Projections constitute forward-looking statements.
Investors should consider the risks and uncertainties in the
eTelecares business that may affect future performance,
including those that are discussed under
Item 8 Additional Information
Forward-Looking Statements below. The Management
Projections included the following information:
Management
Projections
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008E
|
|
|
2009E
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
Revenue
|
|
$
|
311.2
|
|
|
$
|
389.7
|
|
|
$
|
448.2
|
|
|
$
|
515.4
|
|
|
$
|
592.7
|
|
Total Costs and Expenses
|
|
|
299.8
|
|
|
|
365.7
|
|
|
|
418.8
|
|
|
|
477.5
|
|
|
|
545.0
|
|
Income from Operations
|
|
|
11.4
|
|
|
|
24.0
|
|
|
|
29.4
|
|
|
|
37.9
|
|
|
|
47.8
|
|
Total Other Expenses (Income)
|
|
|
(0.3
|
)
|
|
|
(0.6
|
)
|
|
|
(2.0
|
)
|
|
|
(2.0
|
)
|
|
|
(2.0
|
)
|
Provision for Income Tax
|
|
|
1.3
|
|
|
|
2.9
|
|
|
|
3.9
|
|
|
|
5.4
|
|
|
|
7.1
|
|
Net Income (Loss)
|
|
|
10.4
|
|
|
|
21.6
|
|
|
|
27.5
|
|
|
|
34.5
|
|
|
|
42.6
|
|
Earnings per shares
|
|
|
0.45
|
*
|
|
|
0.67
|
|
|
|
0.83
|
|
|
|
1.03
|
|
|
|
1.25
|
|
EBITDA
|
|
|
38.0
|
*
|
|
|
50.0
|
|
|
|
59.1
|
|
|
|
71.8
|
|
|
|
86.4
|
|
|
|
|
*
|
|
Adjusted to remove the impact of $3.9 million related to
$3.9 million for non-recurring expenses.
|
Reconciliation
of Non-GAAP Presentation
The Companys financial projections include a projection of
the Companys EBITDA. EBITDA, as defined by the Company, is
net income before interest, taxes, depreciation, and
amortization. EBITDA is not a financial measurement prepared in
accordance with generally accepted accounting principles in the
United States (
GAAP
).
Accordingly, EBITDA should not be considered as a substitute for
net income or other income or cash flow data prepared in
accordance with GAAP. Because EBITDA excludes some, but not all,
items that affect net income and may vary among companies, the
EBITDA presented by the Company may not be comparable to
similarly titled measures of other companies. A reconciliation
of the differences between EBITDA and net income is set forth
below. In addition, Managements Projections for 2008
included an adjustment to remove the impact of $3.9 million
related to non-recurring expenses from EBITDA. A reconciliation
of adjusted EBITDA is included below. The Company did not
provide Purchaser with this reconciliation in connection with
Purchasers due diligence review of the Company or
Morgans Stanley as its financial advisor. This
reconciliation is included in this document pursuant to SEC
requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008E
|
|
|
2009E
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
|
|
|
|
(In millions, except per share data)
|
|
|
|
|
|
Net Income
|
|
|
10.4
|
|
|
|
21.6
|
|
|
|
27.5
|
|
|
|
34.5
|
|
|
|
42.6
|
|
Depreciation and amortization
|
|
|
22.7
|
|
|
|
26.0
|
|
|
|
29.7
|
|
|
|
33.9
|
|
|
|
38.7
|
|
Interest Income
|
|
|
(0.3
|
)
|
|
|
(0.6
|
)
|
|
|
(2.0
|
)
|
|
|
(2.0
|
)
|
|
|
(2.0
|
)
|
Income Taxes
|
|
|
1.3
|
|
|
|
2.9
|
|
|
|
3.9
|
|
|
|
5.4
|
|
|
|
7.1
|
|
EBITDA
|
|
|
34.1
|
|
|
|
49.9
|
|
|
|
59.1
|
|
|
|
71.8
|
|
|
|
86.4
|
|
Non-recurring item adjustment
|
|
|
3.9
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Adjusted EBITDA
|
|
|
38.0
|
|
|
|
50.0
|
|
|
|
59.1
|
|
|
|
71.8
|
|
|
|
86.4
|
|
23
A reconciliation of GAAP adjusted earnings per share for 2008
and Management Projections for 2008 which included an
adjustment to remove the impact of $3.9 million related to
non-recurring expenses is set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment:
|
|
|
|
|
|
|
Diluted Earnings
|
|
|
Non-Reoccurring
|
|
|
Adjusted Diluted
|
|
|
|
Per Share
|
|
|
Expenses
|
|
|
Earnings per Share
|
|
|
|
(In millions, except per share data)
|
|
|
Net income
|
|
$
|
10.4
|
|
|
$
|
3.9
|
|
|
$
|
14.4
|
|
Weighted average diluted shares
|
|
|
31.5
|
|
|
|
31.5
|
|
|
|
31.5
|
|
Diluted earnings per share
|
|
$
|
0.33
|
|
|
$
|
0.12
|
|
|
$
|
0.45
|
|
Opinion
of Morgan Stanley & Co. Incorporated
eTelecare retained Morgan Stanley to provide it with financial
advisory services and a financial opinion in connection with a
possible merger, sale or other business combination. eTelecare
selected Morgan Stanley to act as its financial advisor based on
Morgan Stanleys qualifications, expertise and reputation
and its knowledge of the business and affairs of eTelecare. At
the meeting of the eTelecare Board on September 18, 2008,
Morgan Stanley rendered its oral opinion, subsequently confirmed
by delivery of a written opinion dated September 18, 2008,
that as of such date, based upon and subject to the various
considerations, assumptions, qualifications, limitations and
other matters set forth in the opinion, the consideration to be
received by holders of eTelecares Shares pursuant to the
Acquisition Agreement was fair from a financial point of view to
such holders (other than the Purchaser and its affiliates,
including NewBridge).
The full text of Morgan Stanleys written opinion, dated
as of September 18, 2008, which sets forth, among other
things, the assumptions made, procedures followed, matters
considered and limitations on the scope of review undertaken by
Morgan Stanley in rendering its opinion, is attached hereto as
Annex II
to this
Schedule 14D-9.
We urge you to read the entire opinion carefully. Morgan
Stanleys opinion is directed to eTelecares Board,
addresses only the fairness from a financial point of view of
the consideration pursuant to the Acquisition Agreement to
holders of Shares (other than the Purchaser and its affiliates,
including NewBridge), and does not address any other aspect of
the transaction or constitute a recommendation to any holder of
Shares as to whether to accept the transaction or take any other
action. The summary of Morgan Stanleys opinion set forth
in this
Schedule 14D-9
is qualified by reference to the full text of the opinion.
In connection with rendering its opinion, Morgan Stanley, among
other things:
|
|
|
|
|
reviewed certain publicly available financial statements and
other business and financial information of eTelecare;
|
|
|
|
reviewed certain internal financial statements and other
financial and operating data concerning eTelecare;
|
|
|
|
reviewed certain financial projections prepared by the
management of eTelecare;
|
|
|
|
discussed the past and current operations and financial
condition and the prospects of eTelecare with senior executives
of eTelecare;
|
|
|
|
reviewed the reported prices and trading activity for the Shares;
|
|
|
|
compared the financial performance of eTelecare and the prices
and trading activity of the Shares with that of certain other
publicly-traded companies comparable with eTelecare and their
securities;
|
|
|
|
reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
|
|
|
|
participated in discussions and negotiations among
representatives of eTelecare and Providence;
|
|
|
|
reviewed the Acquisition Agreement, the drafts of the equity
commitment letters from Providence substantially in the form of
the drafts dated September 18, 2008 (the
Commitment Letters
) and certain related
documents; and
|
|
|
|
performed such other analyses and considered such other factors
as Morgan Stanley deemed appropriate.
|
Morgan Stanley assumed and relied upon, without independent
verification, the accuracy and completeness of the information
that was publicly available or supplied or otherwise made
available to Morgan Stanley by eTelecare and formed a
substantial basis for its opinion. With respect to the financial
projections, Morgan Stanley assumed that they had been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of
24
the management of eTelecare of the future financial performance
of eTelecare. In addition, Morgan Stanley assumed that the
transaction will be consummated in accordance with the terms set
forth in the Acquisition Agreement without any waiver, amendment
or delay of any terms or conditions and that the Purchaser will
obtain financing in accordance with the terms set forth in the
Commitment Letters. Morgan Stanley assumed that in connection
with the receipt of all the necessary governmental, regulatory
or other approvals and consents required for the proposed
transaction, no delays, limitations, conditions or restrictions
will be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived in the proposed
transaction. Morgan Stanley is not a legal, tax or
regulatory advisor. Morgan Stanley is a financial advisor only
and relied upon, without independent verification, the
assessment of eTelecare and its legal, tax, or regulatory
advisors with respect to legal, tax or regulatory matters.
Morgan Stanley expressed no opinion with respect to the fairness
of the amount or nature of the compensation to any of
eTelecares officers, directors or employees, or any class
of such persons, relative to the consideration to be received by
the holders of the Shares in the transaction. Morgan Stanley did
not make any independent valuation or appraisal of the assets or
liabilities of eTelecare, nor was Morgan Stanley furnished with
any such appraisals. Morgan Stanleys opinion was
necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available
to it as of September 18, 2008. Events occurring after
September 18, 2008 may affect Morgan Stanleys
opinion and the assumptions used in preparing it, and Morgan
Stanley did not assume any obligation to update, revise or
reaffirm its opinion.
In arriving at its opinion, Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with
respect to an acquisition, business combination or other
extraordinary transaction, involving eTelecare.
The following is a summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion. These summaries of
financial analyses include information presented in tabular
format. In order to fully understand the financial analyses used
by Morgan Stanley, the tables must be read together with the
text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
Historical
Trading Range Analysis
Morgan Stanley performed a trading range analysis with respect
to the historical prices of the ADSs. Morgan Stanley
reviewed the range of closing prices of the ADSs for the
one-year period ending on September 18, 2008, and the
implied premium based on the consideration per share of $9.00
and observed the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied
|
|
|
|
|
|
|
Transaction
|
|
Period Ending September 18, 2008
|
|
Price
|
|
|
Premium
|
|
|
Current Unaffected Price (9/15/2008)
|
|
$
|
4.56
|
|
|
|
97
|
%
|
1 Week Average
|
|
$
|
4.76
|
|
|
|
89
|
%
|
1 Month Average
|
|
$
|
5.09
|
|
|
|
77
|
%
|
3 Months Average
|
|
$
|
5.54
|
|
|
|
62
|
%
|
6 Months Average
|
|
$
|
6.00
|
|
|
|
50
|
%
|
12 Months Average
|
|
$
|
7.36
|
|
|
|
22
|
%
|
Average Since IPO
|
|
$
|
9.64
|
|
|
|
(7
|
)%
|
LTM High (9/24/07)
|
|
$
|
11.20
|
|
|
|
(20
|
)%
|
LTM Low (9/9/08)
|
|
$
|
4.13
|
|
|
|
118
|
%
|
Morgan Stanley noted that the consideration per share of $9.00
reflected a 97% premium to eTelecares unaffected closing
price of $4.56 on September 15, 2008.
Equity
Research Analysts Price Targets
Morgan Stanley reviewed and analyzed future public market
trading price targets for the ADSs prepared and published by
equity research analysts. These targets reflect each
analysts estimate of the future public market trading
price of the ADSs and are not discounted to reflect present
values. The range of undiscounted equity analyst price targets
for eTelecare was $6.00 to $11.00. When discounted at a cost of
equity of 14%, the range of equity analyst price targets for
eTelecare was $5.25 to $9.75.
25
Morgan Stanley noted that the consideration per share to be
received by holders of the Shares pursuant to the Acquisition
Agreement was $9.00 per share.
The public market trading price targets published by the equity
research analysts do not necessarily reflect current market
trading prices for the Shares and these estimates are subject to
uncertainties, including the future financial performance of
eTelecare and future financial market conditions.
Comparable
Companies Trading Analysis
Morgan Stanley reviewed and compared certain financial
information for eTelecare with publicly available Wall Street
estimates (the
Wall Street Estimates
) for
three categories of companies that shared similar business
characteristics to eTelecare. The comparable companies used in
this analysis are as follows:
U.S.
Peers
|
|
|
|
|
APAC Customer Services
|
|
|
|
Convergys
|
|
|
|
ICT Group
|
|
|
|
Startek
|
|
|
|
Sykes Enterprises
|
|
|
|
TeleTech Holdings
|
European
Peers
|
|
|
|
|
Teleperformance
|
|
|
|
Transcom
|
Philippines
Peers
|
|
|
|
|
Paxys
|
|
|
|
PeopleSupport
|
|
|
|
Philippine Long Distance Telephone Company
|
For purposes of the comparable companies analysis, Morgan
Stanley analyzed the following statistics of each of these
companies for comparative purposes:
|
|
|
|
|
the ratio of aggregate value, defined as market value plus total
debt, preferred stock and minority interest less unrestricted
cash and liquid securities, to estimated earnings before
interest, taxes, depreciation, amortization and certain one-time
add backs (
EBITDA
) for calendar year 2008
(based on Wall Street Estimates and management
projections); and
|
|
|
|
the ratio of price to estimated earnings per share for calendar
year 2009 (based on Wall Street Estimates and management
projections).
|
Based on the analysis of the relevant metrics for each of the
comparable companies, Morgan Stanley selected representative
ranges of financial multiples of the comparable companies and
applied these ranges of multiples to
26
the relevant financial statistic for eTelecare. Based on
eTelecares current outstanding Shares and stock options,
Morgan Stanley estimated the implied value per Share as of
September 18, 2008 as follows:
|
|
|
|
|
|
|
Comparable Company
|
|
|
|
|
Representative
|
|
Implied Value
|
Wall Street Estimates
|
|
Multiple Range
|
|
per Share
|
|
Aggregate Value to Estimated 2008 EBITDA
|
|
3.5× - 5.5×
|
|
$5.00 - $7.50
|
Price to Estimated 2009 Earnings Per Share
|
|
8.0× - 12.0×
|
|
$5.00 - $7.75
|
|
|
|
|
|
|
|
|
|
|
Management Projections
|
|
|
|
|
|
Aggregate Value to Estimated 2008 EBITDA
|
|
3.5× - 5.5×
|
|
$5.50 - $8.00
|
Price to Estimated 2009 Earnings Per Share
|
|
8.0× - 12.0×
|
|
$5.25 - $8.00
|
Morgan Stanley noted that the consideration per share to be
received by holders of Shares pursuant to the Acquisition
Agreement was $9.00 per share.
No company utilized in the comparable company analysis is
identical to eTelecare. In evaluating comparable companies,
Morgan Stanley made judgments and assumptions with regard to
industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond
eTelecares control, such as the impact of competition on
eTelecares businesses and the industry generally, industry
growth and the absence of any material adverse change in the
financial condition and prospects of eTelecare or the industry
or in the financial markets in general. Mathematical analysis
(such as determining the average or median) is not in itself a
meaningful method of using peer group data.
Discounted
Cash Flow Analysis
Morgan Stanley calculated a range of equity values per share for
eTelecare based on a discounted cash flow analysis. Morgan
Stanley performed a discounted cash flow analysis on eTelecare
using both management projections and Wall Street Estimates
through 2012. Morgan Stanley calculated the net present value of
free cash flows for eTelecare for the years 2008 through 2012
and calculated terminal values in the year 2012 based on a
perpetuity growth rate ranging from 2.0% to 4.0%. These values
were discounted to present values at a discount rate ranging
from 13.0% to 15.0%, then combined to result in a range of
implied per share prices of $6.75 to $8.75 per share for
Wall Street Estimates and $8.25 to $11.00 for management
projections.
Morgan Stanley noted that the consideration per share to be
received by holders of Shares pursuant to the Acquisition
Agreement was $9.00 per share.
Precedent
Transactions Analysis
Morgan Stanley performed a precedent transactions analysis,
comparing the premia and multiples paid in selected transactions
that share some characteristics with eTelecare and the
transaction. Morgan Stanley compared publicly-available
statistics for nine selected announced services transactions
occurring since May 2006, in which the transaction values were
between $100 million and $5 billion. The following is
a list of these transactions:
Selected
Precedent Transactions (Target/Acquiror)
|
|
|
|
|
West
Corporation/Thomas
H. Lee Partners, L.P. and Quadrangle Group LLC
|
|
|
|
SPI Technologies,
Inc./Philippine
Long Distance Telephone Co.
|
|
|
|
NCO Group
Inc./One
Equity Partners LLC
|
|
|
|
Minacs Worldwide,
Inc./TransWorks
Information Services Ltd.
|
|
|
|
SITEL
Corp./ClientLogic
Corporation
|
|
|
|
Zavata,
Inc./Apollo
Health Street Ltd.
|
|
|
|
Stream/Global
BPO Services Corporation
|
27
|
|
|
|
|
PeopleSupport
Inc./IPVG
Corp.
|
|
|
|
PeopleSupport
Inc./Aegis
BPO Services Ltd.
|
For each selected precedent transaction noted above, Morgan
Stanley noted the following financial statistic where available:
(1) implied premium to acquired companies closing
share price one trading day prior to announcement and
(2) the ratio of the aggregate value to last twelve months
EBITDA. Based on the analysis of the relevant metrics for each
transaction noted above, Morgan Stanley selected representative
ranges of implied premia and multiples of the transactions and
applied these ranges to the relevant eTelecare financial
statistic. The following table summarizes Morgan Stanleys
analysis:
|
|
|
|
|
|
|
Representative
|
|
|
Precedent Transaction Financial Statistic
|
|
Range
|
|
Implied Price
|
|
Premium to
1-Day
Prior
Closing Share Price
|
|
20% - 40%
|
|
$6.00 - $7.00
|
Aggregate Value to Last Twelve Months EBITDA
|
|
6.5× - 8.0×
|
|
$8.00 - $9.50
|
Morgan Stanley noted that the consideration per share to be
received by holders of Shares pursuant to the Acquisition
Agreement was $9.00 per share.
No company or transaction utilized in the precedent transactions
analysis is identical to eTelecare, or the transaction. In
evaluating the precedent transactions, Morgan Stanley made
judgments and assumptions with regard to general business,
market and financial conditions and other matters, which are
beyond the control of eTelecare, such as the impact of
competition on the business of eTelecare or the industry
generally, industry growth and the absence of any material
adverse change in the financial condition of eTelecare, the
industry or in the financial markets in general, which could
affect the public trading value of the companies and the
aggregate value of the transactions to which they are being
compared.
Theoretical
Leveraged Buyout Analysis
Morgan Stanley also analyzed eTelecare from the perspective of a
potential purchaser that was primarily a financial buyer that
would effect a leveraged buyout of eTelecare using a debt
capital structure consistent with the acquisition. Morgan
Stanley, based on its experience, assumed 3.0x total debt to
EBITDA leverage ratio to apply to 2007 EBITDA of
$37.9 million. Based on its experience, Morgan Stanley
assumed that a financial sponsor would value its eTelecare
investment in 2012 at an aggregate value range that represented
a multiple of
6.5x-7.5x
forecasted 2012 EBITDA. Morgan Stanley added eTelecares
forecasted calendar year 2012 cash balance and subtracted
eTelecares forecasted 2012 debt outstanding to calculate
eTelecares calendar year 2012 equity value range. Based on
eTelecares assumed calendar year 2012 equity value range
and Morgan Stanleys assumption, based on its experience,
that financial sponsors would likely target
5-year
internal rates of return of approximately 20% to 30% using
either the Wall Street Estimates or management projections,
Morgan Stanley derived a range of implied values per share that
a financial sponsor might be willing to pay to acquire
eTelecare. These ranges are detailed below:
|
|
|
|
|
|
|
Internal Rate of
|
|
|
Leveraged Buyout Analysis Forecast Case
|
|
Return Range
|
|
Implied Price
|
|
Wall Street Estimates
|
|
20% - 30%
|
|
$6.25 - $8.75
|
Management Projections
|
|
20% - 30%
|
|
$7.25 - $10.25
|
Morgan Stanley noted that the consideration per share to be
received by holders of Shares pursuant to the Acquisition
Agreement was $9.00 per share.
In connection with the review of the transaction by the
eTelecare Board, Morgan Stanley performed a variety of financial
and comparative analyses for purposes of rendering its opinion.
The preparation of a financial opinion is a complex process and
is not necessarily susceptible to a partial analysis or summary
description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did
not attribute any particular weight to any analysis or factor it
considered. Morgan Stanley believes that selecting any portion
of its analyses, without considering all analyses as a whole,
would create an incomplete view of the process underlying its
analyses and opinion. In addition, Morgan Stanley may have given
various analyses and factors more or less weight than other
analyses and factors, and may have deemed various assumptions
more or less probable than other
28
assumptions. As a result, the ranges of valuations resulting
from any particular analysis described above should not be taken
to be Morgan Stanleys view of the actual value of
eTelecare. In performing its analyses, Morgan Stanley made
numerous assumptions with respect to industry performance,
general business and economic conditions and other matters. Many
of these assumptions are beyond the control of eTelecare. Any
estimates contained in Morgan Stanleys analyses are
not necessarily indicative of future results or actual values,
which may be significantly more or less favorable than those
suggested by such estimates.
Morgan Stanley conducted the analyses described above solely as
part of its analysis of the fairness of the consideration
pursuant to the Acquisition Agreement from a financial point of
view to holders of Shares and in connection with the delivery of
its opinion dated September 18, 2008 to the eTelecare
Board. These analyses do not purport to be appraisals or to
reflect the prices at which the Shares might actually trade.
The consideration was determined through arms-length
negotiations between eTelecare and the Purchaser and was
approved by the eTelecare Board. Morgan Stanley provided advice
to the eTelecare Board during these negotiations. Morgan Stanley
did not, however, recommend any specific consideration to
eTelecare or the eTelecare Board or that any specific
consideration constituted the only appropriate consideration for
the transaction.
Morgan Stanleys opinion and its presentation to the
eTelecare Board was one of many factors taken into consideration
by the eTelecare Board in deciding to approve, adopt and
authorize the Acquisition Agreement. Consequently, the analyses
as described above should not be viewed as determinative of the
opinion of the eTelecare Board with respect to the consideration
or whether the eTelecare Board would have been willing to agree
to a different consideration. Morgan Stanleys opinion was
approved by a committee of Morgan Stanley investment banking and
other professionals in accordance with its customary practice.
The eTelecare Board retained Morgan Stanley based upon Morgan
Stanleys qualifications, experience and expertise. Morgan
Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking
and financial advisory business, is continuously engaged in the
valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate,
estate and other purposes. In the ordinary course of Morgan
Stanleys securities underwriting, trading and brokerage,
foreign exchange, commodities and derivatives trading, prime
brokerage, investment management and financing and financial
services activities, Morgan Stanley, its affiliates, directors
and officers may at any time invest on a principal basis or
manage funds that invest, hold long or short positions, trade or
otherwise structure and effect transactions, for its own account
or for the account of customers, in the equity or debt
securities or loans of eTelecare, Providence or affiliates of
Providence or Ayala or its affiliates. In the two years prior to
the date of its opinion, Morgan Stanley and its affiliates have
provided financial advisory and financing services for eTelecare
and certain affiliates of Purchaser and have received fees for
the rendering of these services.
Under the terms of its engagement letter, Morgan Stanley
provided eTelecare with financial advisory services and a
financial opinion in connection with the transaction, and
eTelecare agreed to pay Morgan Stanley a customary fee, a
significant portion of which is contingent upon completion of
the transaction. eTelecare has also agreed to reimburse Morgan
Stanley for its expenses incurred in performing its services. In
addition, eTelecare has agreed to indemnify Morgan Stanley and
its affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Morgan Stanley or
any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws,
related to or arising out of Morgan Stanleys engagement.
Intent to
Tender.
To eTelecares knowledge after reasonable inquiry, all of
eTelecares executive officers and directors that own
Shares currently intend to tender or cause to be tendered all
Shares held of record or beneficially owned by them pursuant to
the Offer (other than Shares for which such holder does not have
discretionary authority).
The foregoing does not include any Shares over which, or with
respect to which, any such executive officers and directors acts
in a fiduciary or representative capacity or is subject to the
instructions of a third party with respect to such tender.
29
|
|
Item 5.
|
Person/Assets,
Retained, Employed, Compensated or Used.
|
eTelecare retained Morgan Stanley as it financial advisor in
connection with a potential sale, merger, business combination
or other similar transaction of eTelecare pursuant to an
engagement letter dated July 17, 2006, which was
subsequently amended on March 24, 2008. Pursuant to the
engagement letter, eTelecare agreed to pay Morgan Stanley
customary fees including (i) a Strategic Advisory
Fee payable upon execution of the amendment of the
engagement letter, (ii) an announcement fee payable on the
announcement of a transaction and credited against the
transaction fee, and (iii) a transaction fee payable upon
the closing of the transaction. In addition, eTelecare has
agreed to reimburse Morgan Stanley for certain expenses and to
indemnify Morgan Stanley and certain related parties for certain
liabilities and other items arising out of or related to its
engagement.
Morgan Stanley is a global financial services firm engaged in
the securities, investment management and individual wealth
management services. In the ordinary course of Morgan
Stanleys securities underwriting, trading and brokerage,
foreign exchange, commodities and derivatives trading, prime
brokerage, investment management and financing and financial
services activities, Morgan Stanley, its affiliates, directors
and officers may at any time invest on a principal basis or
manage funds that invest, hold long or short positions, trade or
otherwise structure and effect transactions, for its own account
or for the account of customers, in the equity or debt
securities or loans of eTelecare, Providence or affiliates of
Providence or Ayala or its affiliates. In the two years prior to
the date of its opinion, Morgan Stanley and its affiliates have
provided financial advisory and financing services for eTelecare
and certain affiliates of Purchaser and have received fees for
the rendering of these services.
|
|
Item 6.
|
Interest
in Securities of eTelecare.
|
No transactions in the Shares have been effected during the past
60 days prior to the date of this
Schedule 14D-9
by eTelecare or, to the best of eTelecares knowledge, by
any executive officer, director, affiliate or subsidiary of
eTelecare.
|
|
Item 7.
|
Purposes
of the Transaction and Plans or Proposals.
|
(a) Except as indicated in Items 3 and 4 above, no
negotiations are being undertaken or are underway by eTelecare
in response to the Offer which relate to a tender offer or other
acquisition of eTelecares securities by eTelecare, any
subsidiary of eTelecare or any other person.
(b) Except as indicated in Items 3 and 4 above, no
negotiations are being undertaken or are underway by eTelecare
in response to the Offer that relate to, or would result in,
(1) any extraordinary transaction, such as a merger,
reorganization or liquidation, involving eTelecare or any
subsidiary of eTelecare, (2) any purchase, sale or transfer
of a material amount of assets by eTelecare or any subsidiary of
eTelecare, or (3) any material change in the present
dividend rate or policy, or indebtedness or capitalization of
eTelecare.
(c) Except as indicated in Items 3 and 4 above, there
are no transactions, resolutions of the eTelecare Board,
agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the
matters referred to in this Item 7.
|
|
Item 8.
|
Additional
Information.
|
Information
Statement
The Information Statement attached as
Annex I
hereto
is being furnished in connection with the possible designation
by the Purchaser, pursuant to the Acquisition Agreement, of
certain persons to the eTelecare Board. Such persons, if
appointed, will constitute a majority of the eTelecare directors.
30
Antitrust
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR
Act
), and the related rules and regulations, certain
acquisition transactions may not be consummated until specified
information and documentary material has been furnished for
review by the Federal Trade Commission (the
FTC
) and the Antitrust Division of the
Department of Justice (the
Antitrust
Division
) and certain waiting period requirements have
been satisfied. These requirements apply to the Purchasers
acquisition of the Shares in the Offer.
Under the HSR Act, the purchase of Shares in the Offer may not
be completed until the expiration of a
15-calendar
day waiting period (or the next business day if the 15th day
falls on a weekend day or holiday) following the filing by the
Purchaser of certain required information and documentary
material concerning the Offer with the FTC and the Antitrust
Division, unless the waiting period is earlier terminated by the
FTC and the Antitrust Division. Providence Equity
Partners VI International L.P., filed a Premerger
Notification and Report Form under the HSR Act with the FTC and
the Antitrust Division in connection with the Purchasers
purchase of Shares in the Offer on October 29, 2008, and
the required waiting period with respect to the Offer will
expire at 11:59 p.m., New York City time, on
November 13, 2008, unless earlier terminated by the FTC and
the Antitrust Division or the parties receive a request for
additional information and documentary material prior to that
time. If, at the end of the 15-calendar day waiting period,
either the FTC or the Antitrust Division issues a request for
additional information and documentary material from the
parties, the waiting period with respect to the Offer would be
extended for an additional period of 10 calendar days following
the date of substantial compliance by Providence VI with
that request. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the HSR
Act rules. After that time, the waiting period may be extended
only by court order or with the Purchasers consent. The
FTC or the Antitrust Division may terminate the additional
10-calendar day waiting period before its expiration. In
practice, complying with a request for additional information
and documentary material can take a significant period of time.
The HSR Act requires that eTelecare file a Notification and
Report Form with the FTC and the Antitrust Division regarding
the Offer within 10 days of the filing by
Providence VI. On October 29, 2008, eTelecare
submitted its HSR Act filing with the FTC and the Antitrust
Division.
The FTC and the Antitrust Division may scrutinize the legality
under the antitrust laws of transactions such as the
Purchasers acquisition of Shares in the Offer. At any time
before or after the purchase of Shares by the Purchaser, the FTC
or the Antitrust Division could take any action under the
antitrust laws that it either considers necessary or desirable
in the public interest, including seeking to enjoin the purchase
of Shares in the Offer, the divestiture of Shares purchased in
the Offer or the divestiture of substantial assets of the
Purchaser, eTelecare or any of their respective subsidiaries or
affiliates. Private parties as well as state attorneys general
may also bring legal actions under the antitrust laws under
certain circumstances.
eTelecare is not aware of any other material government or
regulatory approvals that need to be obtained, or waiting
periods with which it needs to comply, to complete the Offer.
eTelecare and the Purchaser are analyzing the applicability of
any additional foreign antitrust, competition or similar laws,
and currently intend to take such action as may be necessary.
Based upon an examination of publicly available information
relating to the businesses in which the Purchaser and its
affiliates, and eTelecare are engaged, eTelecare believes that
the Purchasers purchase of Shares in the Offer should not
violate the applicable antitrust laws. Nevertheless, eTelecare
cannot be certain that a challenge to the Offer on antitrust
grounds will not be made, or, if such challenge is made, what
the result will be.
Affiliates of Ayala, Providence VI and the Company conduct
operations in a large number of jurisdictions throughout the
world, where antitrust filings or approvals may be required or
advisable in connection with the completion of the Offer, and it
cannot be ruled out that any foreign antitrust authority might
seek to require remedial undertakings.
Forward-Looking
Statements
Certain of the information contained in this
Schedule 14D-9
should be considered forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995 which is subject to a number of risks and
uncertainties. These are statements that relate to future events
and include, but are not limited to,
31
eTelecares financial projections. Forward-looking
statements are subject to risks and uncertainties that could
cause actual results to differ materially from those discussed
in these forward-looking statements. These risks and
uncertainties include, but are not limited to, eTelecares
ability to manage growth, intense competition in the industry
including those factors which may affect eTelecares cost
advantage, wage increases, eTelecares ability to attract
and retain customer service associates and other highly skilled
professionals, client concentration, the underlying success of
eTelecares clients and the resulting impact of any adverse
developments in eTelecares clients business
including adverse litigation results as well as other risks
detailed from time to time in eTelecares SEC filings,
including those described in the Risk Factors
section in eTelecares quarterly report on
Form 10-Q
filed with the U.S. SEC on August 13, 2008. In
addition, there can be no assurance, among other things, that
the Purchaser will acquire the Shares. eTelecare does not assume
any obligation to update such estimates to update these
forward-looking statements or changes in other factors affecting
such estimates other than as required by law.
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(a)(1)(i)
|
|
Offer to Purchase, dated November 10, 2008.*+
|
(a)(1)(ii)
|
|
Form of Application to Sell Common Shares.*+
|
(a)(1)(iii)
|
|
Form of ADS Letter of Transmittal including Substitute
Form W-9
and Guidelines for Certification of Taxpayer Identification
Number (TIN) on Substitute
Form W-9.*+
|
(a)(1)(iv)
|
|
Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*+
|
(a)(1)(v)
|
|
Form of Letter to Clients Regarding Holders of American
Depositary Shares.*+
|
(a)(1)(vi)
|
|
Form of Letter to Holders of Common Shares, dated
November 10, 2008.*+
|
(a)(1)(viii)
|
|
Form of Newspaper Advertisement as published in
The Wall
Street Journal
on November 10, 2008.*
|
(a)(1)(ix)
|
|
Form of Newspaper Advertisement, to be published in the
Philippine Daily Inquirer and Philippine Star on
November 10, 2008, November 11, 2008, and
November 12, 2008.*
|
(a)(1)(x)
|
|
Press Release, dated November 10, 2008.*
|
(a)(1)(xi)
|
|
Joint Press Release, dated September 19, 2008 (incorporated
by reference to the
Schedule 14D-9
filed by eTelecare Global Solutions, Inc. on September 19,
2008).
|
(a)(1)(xii)
|
|
Press Release, dated September 22, 2008 (incorporated by
reference to the
Schedule 14D-9
filed by eTelecare Global Solutions, Inc. on September 22,
2008).
|
(a)(1)(xiii)
|
|
Intention to Commence the Offer Announcement, dated
November 7, 2008, as published in the Philippine Daily
Inquirer and Philippine Star on November 7, 2008
(incorporated by reference to the
Schedule TO-C
filed by the Purchaser on November 7, 2008).
|
(a)(1)(xiv)
|
|
Philippine SEC
Form 19-1
(and Exhibits).*
|
(c)
|
|
Opinion of Morgan Stanley & Co. Incorporated to the
Board of Directors of eTelecare Global Solutions, Inc., dated
September 18, 2008 (incorporated by reference to
Annex II attached to this
Schedule 14D-9).
|
(e)(1)
|
|
Acquisition Agreement by and between eTelecare Global Solutions,
Inc. and EGS Acquisition Co LLC, dated September 19, 2008
(incorporated by reference to Exhibit 2.1 attached to the
Current Report on
Form 8-K
filed by eTelecare Global Solutions, Inc. on September 23,
2008).
|
(e)(2)
|
|
First Amendment to Acquisition Agreement by and between
eTelecare Global Solutions, Inc. and EGS Acquisition Co LLC,
dated November 9, 2008.
|
(e)(3)
|
|
Form of Tender and Support Agreement (incorporated by reference
to Exhibit 99.1 attached to the Current Report on
Form 8-K
filed by eTelecare Global Solutions, Inc. on September 23,
2008).
|
(e)(4)
|
|
Tender and Support Agreement between EGS Acquisition Co LLC and
NewBridge International Investment Ltd., dated
September 19, 2008 (incorporated by reference to
Exhibit 7.03 attached to the Schedule 13D/A filed by
Ayala Corporation on September 22, 2008).
|
(e)(5)
|
|
Standstill Agreement between eTelecare Global Solutions, Inc.
and NewBridge International Investment Ltd., dated
September 19, 2008 (incorporated by reference to
Exhibit 7.06 attached to the Schedule 13D/A filed by
Ayala Corporation on September 22, 2008).
|
(e)(6)
|
|
Nondisclosure Agreement between eTelecare Global Solutions, Inc.
and NewBridge International Investment Ltd., dated June 11,
2008.
|
32
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
(e)(7)
|
|
Nondisclosure Agreement between eTelecare Global Solutions, Inc.
and Providence Equity Asia Limited, dated June 11, 2008.
|
(e)(8)
|
|
Limited Guarantee by Providence Equity Partners VI
International L.P., in favor of eTelecare Global Solutions,
Inc., dated September 19, 2008 (incorporated by reference
to Exhibit I attached to the Schedule 13D filed by EGS
Acquisition Co LLC on September 29, 2008).
|
(e)(9)
|
|
Limited Guarantee by Newbridge International Investment Ltd., in
favor of eTelecare Global Solutions, Inc., dated
September 19, 2008 (incorporated by reference to
Exhibit 7.05 attached to the Schedule 13D/A filed by
Ayala Corporation on September 22, 2008).
|
|
|
|
*
|
|
Incorporated by reference to the Schedule TO filed by the
Purchaser on November 10, 2008.
|
|
+
|
|
Included in materials mailed to United States stockholders of
eTelecare Global Solutions, Inc.
|
|
|
|
Included in material mailed to
non-United
States stockholders of eTelecare Global Solutions, Inc.
|
33
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
eTelecare Global Solutions, Inc.
John R. Harris
Chief Executive Officer
Date: November 10, 2008
34
ANNEX I
ETELECARE
GLOBAL SOLUTIONS, INC.
31
ST
FLOOR CYBERONE BUILDING
EASTWOOD CITY, CYBERPARK,
LIBIS, QUEZON CITY 1110
PHILIPPINES
63
(2) 916-5670
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14f-1
THEREUNDER
This Information Statement is being mailed on or about
November 11, 2008 to holders of record of common shares,
par value PhP 2.00 per share (the
Common
Shares
) and Common Shares evidenced by American
Depositary Shares, each representing one Common Share
(
ADSs
and together with Common Shares, the
Shares
), of eTelecare Global Solutions, Inc.,
a Philippines corporation (
eTelecare
), as
part of the Solicitation/Recommendation Statement on
Schedule 14D-9
(the
Schedule 14D-9
)
of eTelecare with respect to the tender offer by EGS Acquisition
Co LLC., a Delaware limited liability company
(
EGS
or the
Purchaser
),
for all of the issued and outstanding Shares. Capitalized terms
used and not otherwise defined herein shall have the meaning set
forth in the
Schedule 14D-9.
Unless the context indicates otherwise, in this Information
Statement, we use the terms us, we and
our to refer to eTelecare.
You are receiving this Information Statement in connection with
the possible appointment of persons designated by the Purchaser
to at least a majority of the seats on the Board of Directors of
eTelecare (the
eTelecare Board
). Such
designation is to be made pursuant to an Acquisition Agreement,
dated as of September 19, 2008, as such may be amended or
supplemented from time to time (the
Acquisition
Agreement
), by and between the Purchaser and eTelecare.
Pursuant to the Acquisition Agreement, the Purchaser commenced a
cash tender offer on November 10, 2008, to purchase all of
the Shares, at a price per Share of $9.00, (the
Offer
Price
) upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated November 10, 2008
(as may be amended or supplemented from time to time, the
Offer to Purchase
) and the related
Application to Sell Common Shares and ADS Letter of Transmittal
(collectively and may be as amended or supplemented from time to
time, the
Acceptance Forms
, which, together
with the Offer to Purchase constitute the
Offer
). The Offer Price is payable in cash,
without interest thereon and less any required taxes or costs
the Purchaser, the Company or any paying agent may be required
to deduct or withhold in accordance with applicable law or
rules, including payment of any stock transaction taxes,
brokers commissions and other fees customarily for the
account of a seller in connection with the crossing
of the Common Shares on the Philippine Stock Exchange, Inc.
Additional charges or fees may be applied by individual brokers
or nominees.
The Offer will expire at 2:00 p.m. Philippines time,
1:00 a.m. New York City time, on December 11,
2008, unless extended, subject to Philippine Securities and
Exchange Commission (the
Philippine SEC
)
approval and the terms of the Acquisition Agreement, at which
time if all conditions to the Offer have been satisfied or
waived, the Purchaser will purchase Shares validly tendered
pursuant to the Offer and not properly withdrawn. Copies of the
Offer to Purchase and the accompanying Acceptance Forms have
been mailed with the
Schedule 14D-9
to eTelecare stockholders and are filed as exhibits to the
Schedule 14D-9
filed by us with the Securities and Exchange Commission on
November 10, 2008.
RIGHT TO
DESIGNATE DIRECTORS
The Acquisition Agreement provides that promptly upon the
acceptance for payment of, and payment by the Purchaser for, at
least 66.67% of the total number of outstanding Shares, on a
fully diluted basis, after giving effect to the exercise,
conversion or termination of all options, warrants, rights and
securities exercisable or convertible into or for Shares
pursuant to the Offer, the Purchaser shall be entitled to
designate for appointment or election such number of members of
the eTelecare Board as will give the Purchaser, subject to
compliance with Section 14(f) of the Securities Exchange
Act of 1934, as amended (the
Exchange Act
),
representation equal to at least that number
I-1
of directors, rounded up to the next whole number, which is the
product of (1) the total number of directors (giving effect
to any increase in the number of members of the eTelecare Board
as a result of the appointment of the Purchasers
designees) multiplied by (2) the percentage that
(A) such aggregate number of Shares beneficially owned by
the Purchaser or its Affiliates bears to (B) the total
number of Shares then outstanding (including all Shares that are
accepted for payment pursuant to the Offer, but excluding any
shares held by Company and its Subsidiaries), and we shall, at
such time, cause such designees to be so appointed. As a result,
the Purchaser will have the ability to designate at least a
majority of the eTelecare Board following the closing of the
Offer.
This Information Statement is required by Section 14(f) of
the Exchange Act and
Rule 14f-1
thereunder in connection with the appointment of the
Purchasers designees to the eTelecare Board.
You are urged to read this Information Statement carefully. You
are not, however, required to take any action.
The information contained in this Information Statement
(including information herein incorporated by reference)
concerning the Purchaser and the Purchasers designees has
been furnished to us by the Purchaser, and we assume no
responsibility for the accuracy or completeness of such
information.
PURCHASER
DESIGNEES
The Purchasers designees for the eTelecare Board are set
forth below. The following information, prepared from
information furnished to us by Purchaser, sets forth the name,
age and principal occupation as of September 30, 2008,
along with the business experience for the past five years, with
respect to each individual who may be designated by the
Purchaser as one of its designees.
The Purchaser has also informed us that each of the individuals
below is a citizen of the United States, except that Alfredo I.
Ayala and Ginaflor C. Oris are citizens of the Philippines, and
has consented to act as a director of eTelecare if so appointed
or elected. Unless otherwise indicated below, the business
address of each such person is 31st Floor CyberOne
Building, Eastwood City, Cyberpark, Libis, Quezon City 1110,
Philippines.
Julie Richardson
, 45, has been a Managing Director of an
affiliate of Providence, Providence Equity LLC
(
Providence Equity
), since 2003 and currently
leads its New York office. Ms. Richardson is currently a
director of Open Solutions Inc., SunGard Data Systems Inc. and
US Investigations Services, Inc. Prior to joining Providence
Equity in 2003, Ms. Richardson served as Vice Chairman of
JP Morgans investment banking division and Chairman of its
Telecom, Media and Technology group. Prior to joining JP Morgan
in 1998, Ms. Richardson was a Managing Director at Merrill
Lynch, where she worked for more than 11 years. She
received a Bachelor of Business Administration from the
University of Wisconsin-Madison, and spent a year studying
finance at the Stanford Graduate School of Business.
Ms. Richardson serves on the Deans Advisory Board of
the University of
Wisconsin-Madison.
The business address of Ms. Richardson is Lever House 390
Park Avenue, 4th Floor, New York, NY 10022.
R. Davis Noell
, 29, joined Providence in 2003 and has
been a Vice President of Providence Equity since January of
2008. He is currently based in Providences New York
office. Prior to joining Providence in 2003, Mr. Noell had
been an Analyst in Deutsche Bank AGs Media Investment
Banking group. Mr. Noell received a Bachelor of Arts with
honors from the University of North Carolina at Chapel Hill. The
business address of Mr. Noell is Lever House 390 Park
Avenue, 4th Floor, New York, NY 10022.
Alfredo I. Ayala
,47, has served as Chief Executive
Officer of LiveIt Solutions, Inc., a subsidiary of Ayala
Corporation, which invests in the business process outsourcing
sector since June 2006. Since May 2006, Mr. Ayala has
served as a Managing Director of Ayala Corporation, a holding
company with investments in real estate, financial services,
automotive, telecommunications, electronics and information
technology, water infrastructure development and management, and
international operations. Mr. Ayala has served as a
director of eTelecare since February 2000. Mr. Ayala also
served as Chairman of the board of eTelecare from February 2000
to December 31, 2007. From February 2004 to March 2006,
Mr. Ayala also served as chief executive officer of
eTelecare. From 1998 to 2004, Mr. Ayala served as Chairman
of SPI Technologies, Inc., a business process outsourcing firm
in Asia. Mr. Ayala holds a B.A. in development studies and
economics from Brown University and an M.B.A. from the
I-2
Harvard Business School. The business address of Mr. Ayala
is Ayala Corporation, 32/F Tower One & Exchange Plaza,
Ayala Avenue, Makati City, Philippines 1226.
Ginaflor C. Oris
, 41, has been the Chief Financial
Officer of Ayala Corporations AC Capital Division since
January 2007. She has concurrently been the Chief Financial
Officer and Treasurer of Azalea Technology Investments, Inc and
LiveIt Solutions, Inc., and the Chief Financial Officer of
LiveIt Investments Limited. Ms. Oris joined Ayala
Corporation in July 1994 as a trainee under the Bank of the
Philippine Islands Bank Officer Development Program. She
holds a B.S. Mathematics major in Computer Science from the
Ateneo de Manila University and a Master in Business Management
from the Asian Institute of Management. Ms. Oris is a
Chartered Financial Analyst. The business address of
Ms. Oris is Ayala Corporation, 32/F Tower One &
Exchange Plaza, Ayala Avenue, Makati City, Philippines 1226.
CERTAIN
INFORMATION CONCERNING ETELECARE
Our authorized capital stock consists of 65,000,000 Common
Shares, par value 2 Philippine Pesos ($0.04 U.S.) per share. As
of September 30, 2008, there were 29,646,239 Common Shares
outstanding, including 10,557,821 Common Shares underlying ADSs.
Our Common Shares constitute the only class of voting securities
of eTelecare outstanding that is entitled to vote at a meeting
of stockholders of eTelecare. Each Common Share entitles the
record holder to one vote on each matter submitted to a vote of
the stockholders. Holders of our ADSs have the right under the
deposit agreement to instruct the Depositary to exercise the
voting rights for the Common Shares underlying the ADSs.
I-3
DIRECTORS
AND EXECUTIVE OFFICERS OF ETELECARE
The following tables set forth the name, age and present
principal occupation or employment, and material occupations,
positions, offices or employments held within the past five
years, of each director and executive officer of the Company as
of September 30, 2008. The principal place of business of
the Company and, unless otherwise indicated below, the business
address of each director and executive officer, is eTelecare
Global Solutions, Inc., 31st Floor CyberOne Building,
Eastwood City, Cyberpark, Libis, Quezon City 1110 Philippines.
The Companys telephone number at that address is +63
(2) 916 5670. None of the Company or its directors or
executive officers has, during the past five years,
(1) been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or (2) been a
party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of
any violation of federal or state securities laws.
Each of the individuals below is a citizen of the United States,
except that Alfredo I. Ayala, Jamie G. del Rosario and Rafael
LL. Reyes are citizens of the Philippines.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
|
Gary Fernandes(1)(2)(3)
|
|
|
65
|
|
|
Chairman of the Board of Directors
|
John R. Harris
|
|
|
59
|
|
|
President, Chief Executive Officer and Director
|
J. Michael Dodson
|
|
|
47
|
|
|
Senior Vice President and Chief Financial Officer
|
Glenn J. Dispenziere
|
|
|
46
|
|
|
Senior Vice President, Sales and Marketing
|
David F. Palmer II
|
|
|
40
|
|
|
Senior Vice President, Global Operations
|
Alfredo I. Ayala
|
|
|
47
|
|
|
Director
|
Jaime G. del Rosario(1)(3)
|
|
|
63
|
|
|
Director
|
Richard N. Hamlin(1)(2)
|
|
|
61
|
|
|
Director
|
John-Paul Ho(3)
|
|
|
48
|
|
|
Director
|
Rafael LL. Reyes(2)
|
|
|
40
|
|
|
Director
|
|
|
|
(1)
|
|
Member of the Audit Committee
|
(2)
|
|
Member of the Compensation Committee
|
(3)
|
|
Member of the Nominating and Corporate Governance Committee
|
Gary J. Fernandes
has served as our chairman of the board
since December 2007 and as a director since March 2007.
Since 1999, he has served as chairman of FLF Investments, a
family business involved with the acquisition and management of
commercial real estate properties and other assets. Since his
retirement as vice chairman from Electronic Data Systems
Corporation in 1998, he founded Convergent Partners, a venture
capital fund focusing on buyouts of technology-enabled
companies. In addition, from 2000 to 2001, Mr. Fernandes
served as chairman and chief executive officer of
GroceryWorks.com, an internet grocery fulfillment company.
Mr. Fernandes serves on the board of directors of
Blockbuster, Inc., Computer Associates International, Inc. and
BancTec. Mr. Fernandes holds a B.A. in broadfield social
science education from Baylor University.
John R. Harris
has served as our president and chief
executive officer since March 2006. From November 2003 to
January 2004, Mr. Harris served as chief executive officer
of Seven Worldwide Inc., a business process outsourcing company.
From 2002 to 2003, Mr. Harris served as chief executive
officer of Delinea Corporation, a business process outsourcing
company. From 2000 to 2002, Mr. Harris served as chief
executive officer of Exolink Corporation, a technology company.
From 1973 to 1999, Mr. Harris held a variety of positions,
including group vice president and corporate officer of
Electronic Data Systems Corporation, or EDS, a provider of IT
and BPO services. Mr. Harris currently serves on the board
of directors of Answerthink Consulting, Inc., a business and
technology consulting firm, Inventive Health and Premier Global
Services. Mr. Harris holds a B.B.A. and a M.B.A. from
West Georgia University.
J. Michael Dodson
has served as our senior vice
president and chief financial officer since December 2005. From
May 2003 to November 2005, Mr. Dodson served as senior
vice-president of administration and chief financial officer of
Electro Scientific Industries, Inc. a supplier of innovative
production laser systems for
I-4
microengineering applications. From July 1999 to December 2002,
Mr. Dodson served as chief financial officer of
SpeedFam-IPEC, Inc., a developer of precision cleaning equipment
and machines. Mr. Dodson holds a B.B.A. in accounting and
information systems analysis and design from the University of
Wisconsin-Madison.
Glenn J. Dispenziere
has served as our senior vice
president of sales and marketing since December 2005. From 2003
to 2005, Mr. Dispenziere served as vice president of
strategic sales and business development at Witness Systems,
Inc., a call center/CRM software provider. From 1997 to 2003,
Mr. Dispenziere served as a partner at Accenture, a
consulting company, where he specialized in CRM and call
centers. Mr. Dispenziere holds a B.S. in mechanical
engineering from Lehigh University and an M.B.A. in marketing
and finance from the College of William & Mary.
David F. Palmer II
has served as our senior vice
president, global operations since August 2007. Prior to his
appointment, Mr. Palmer served as eTelecares Vice
President, US Operations. From August 1994 to December 2006,
Mr. Palmer served in various operational positions with
America Online Inc., including, most recently, Senior Vice
President-International Operations and Global Outsourcing.
Alfredo I. Ayala
has served as a director since February
2000. Mr. Ayala also served as our chairman of the board
from February 2000 to December 31, 2007. From February 2004
to March 2006, Mr. Ayala also served as our chief executive
officer. Since June 2006, Mr. Ayala has served as chief
executive officer of LiveIt Solutions, Inc., a subsidiary of
Ayala Corporation, which invests in the business process
outsourcing sector. Since May 2006, Mr. Ayala has served as
a managing director of Ayala Corporation, a holding company with
investments in real estate, financial services, automotive,
telecommunications, electronics and information technology,
water infrastructure development and management, and
international operations. From 1998 to 2004, Mr. Ayala
served as chairman of SPI Technologies, Inc., a business process
outsourcing firm in Asia. Mr. Ayala holds a B.A. in
development studies and economics from Brown University and an
M.B.A. from the Harvard Business School.
Jaime G. del Rosario
has served as a director since
October 2007. From 1994 to his retirement in September 2002,
Jaime del Rosario served as the president and managing director
of the Philippine operations of Accenture Ltd., formerly known
as Andersen Consulting. Mr. del Rosario has an undergraduate
degree in Industrial Engineering from the University of the
Philippines and a Masters Degree in Computer Science from
the Asian Institute of Technology in Bangkok, Thailand.
Richard N. Hamlin
has served as one of our directors
since March 2007. Since August 2003, Mr. Hamlin has served
as private consultant and investor. From July 2002 to September
2003, he served as the chief financial officer of CommerceQuest,
Inc., a business process management software company. From
January 2000 to June 2000, Mr. Hamlin served as a partner
of KPMG Consulting. Mr. Hamlin served as an audit partner
of KPMG from 1979 until January 2000, including service on
KPMGs board of directors from 1994 to 1998.
Mr. Hamlin currently serves on the board of directors of
Answerthink Consulting, Inc., a business and technology
consulting firm, and serves as the trustee and chairman on the
board of directors of Dakota, Minnesota and Eastern Railroad, a
U.S. regional railroad headquartered in South Dakota.
Mr. Hamlin holds a B.S. degree in accounting from Florida
State University.
John-Paul Ho
has served as a director since August 2006.
Mr. Ho founded Crimson Investment, an international private
equity firm, and has served as a partner since 1993. Mr. Ho
holds a B.S. in engineering and applied sciences from Harvard
University and an M.B.A. from Harvard Business School.
Rafael LL. Reyes
has served as a director since February
2004. Since June 1998, Mr. Reyes has served as Southeast
Asia director/vice president of AIG Investment Corp. (Asia), a
private equity investment management firm. From January 2000 to
February 2004, Mr. Reyes served as a director of SPI
Technologies, Inc., a BPO and
IT-enabled
services company. Mr. Reyes holds a B.S. in Industrial
Engineering and Engineering Management and an M.S. in Industrial
Engineering from Stanford University.
THE BOARD
OF DIRECTORS AND BOARD COMMITTEES
The eTelecare Board currently consists of seven members. Each of
Messrs. del Rosario, Fernandes, Hamlin, Ho and Reyes is an
independent director as defined by the NASDAQ Stock Market
listing standards set forth in Rule 4200(a)(15) adopted by
the Financial Industry Regulatory Authority.
I-5
Our directors are elected annually to serve until the next
annual meeting of stockholders, until their successors are duly
elected and qualified or until their earlier death, resignation,
disqualification or removal. With limited exceptions, the
eTelecare Board is required to have a majority of independent
directors at all times. Vacancies on the board can be filled by
resolution of the eTelecare Board if the remaining directors
still constitute a quorum.
Corporate
Governance
We currently comply with the Sarbanes-Oxley Act of 2002 and the
rules and regulations of the SEC adopted thereunder as well as
the rules of the NASDAQ Global Market. If we are still a
publicly listed company, we will be required to comply with
Section 404 of the Sarbanes Oxley Act of 2002 beginning in
2008. The eTelecare Board periodically evaluates our corporate
governance principles and policies.
The eTelecare Board has adopted a code of business conduct that
applies to each of our directors, officers and employees. The
code addresses various topics, including:
|
|
|
|
|
compliance with laws, rules and regulations;
|
|
|
|
conflicts of interest;
|
|
|
|
insider trading;
|
|
|
|
corporate opportunities;
|
|
|
|
competition and fair dealing;
|
|
|
|
health and safety;
|
|
|
|
record keeping;
|
|
|
|
confidentiality;
|
|
|
|
protection and proper use of company assets; and
|
|
|
|
payments to government personnel.
|
The eTelecare Board has also adopted a code of ethics for senior
executive officers applicable to our chief executive officer,
president, chief financial officer and other key management
employees addressing ethical issues. The code of business
conduct and the code of ethics are posted on our website at
http://www.etelecare.com
under the heading of Corporate Governance.
The eTelecare Board held seven meetings during 2007. All
directors attended at least 75% of the aggregate number of
meetings of the eTelecare Board and of the committees on which
such directors serve. In 2007, five of our directors attended
the annual meeting of stockholders.
The eTelecare Board has appointed an Audit Committee, a
Compensation Committee, a Nominating and Corporate Governance
Committee and a Strategic Committee. The eTelecare Board has
determined that each director who serves on the Audit Committee,
Compensation Committee, Nominating and Corporate Governance
Committee and Strategic Committee is independent, as
that term is defined by applicable listing standards of The
NASDAQ Stock Market and Securities and Exchange Commission
rules. The eTelecare Board has approved a charter for each of
these committees that can be found on our website at
http://www.etelecare.com
under the Corporate Governance heading.
Audit Committee.
We have a
separately-designated standing audit committee established in
accordance with the Exchange Act. Our Audit Committee provides
assistance to the eTelecare Board in fulfilling its legal and
fiduciary obligations in matters involving our accounting,
auditing, financial reporting, internal control and legal
compliance functions by approving the services performed by our
independent accountants and reviewing their reports regarding
our accounting practices and systems of internal accounting
controls. Our Audit Committee also oversees the audit efforts of
our independent accountants and takes those actions as it deems
necessary to satisfy itself that the accountants are independent
of management. Additionally, our Audit Committee provides
oversight to our internal audit function including review of
significant reports issued by our internal audit department and
managements responses to such reports. Our Audit Committee
currently consists of Messrs. del Rosario, Fernandes
I-6
and Hamlin, each of whom is a non-management member of the
eTelecare Board. Mr. Hamlin is our audit committee
financial expert as currently defined under Securities and
Exchange Commission rules. Our audit committee held seven
meetings during 2007.
Compensation Committee.
Our Compensation
Committee determines our general compensation policies and the
compensation provided to our directors and officers. Our
Compensation Committee also reviews and determines bonuses for
our officers and other employees. In addition, the compensation
committee reviews and determines equity-based compensation for
our directors, officers, employees and consultants and
administers our stock option plans. The current members of our
Compensation Committee are Messrs. Fernandes, Hamlin and
Reyes, each of whom is a non-management member of the eTelecare
Board. Our Compensation Committee held eight meetings during
2007.
Nominating and Corporate Governance
Committee.
Our Nominating and Corporate
Governance Committee is responsible for making recommendations
to the eTelecare Board regarding candidates for directorships
and the size and composition of the board. In addition, Our
Nominating and Corporate Governance Committee is responsible for
overseeing our corporate governance guidelines and reporting and
making recommendations to the board concerning corporate
governance matters. The current members of our Nominating and
Corporate Governance Committee are Messrs. del Rosario,
Fernandes and Ho. We believe that the composition of our
Nominating and Corporate Governance Committee meets the criteria
for independence under the applicable requirements of the
Sarbanes-Oxley Act of 2002, the current rules of the NASDAQ
Global Market and the Securities and Exchange Commission rules
and regulations pursuant to the initial public offering phase-in
provisions provided in the current rules of the NASDAQ Global
Market. Mr. Ho does not currently qualify as an independent
director as defined by the NASDAQ Global Market. Our Nominating
and Corporate Governance Committee held one meeting during 2007.
Strategic Committee.
Our Strategic Committee
evaluates and makes recommendations to the eTelecare Board
regarding strategic alternatives of eTelecare, including but not
limited to a sale or merger of eTelecare. The Strategic
Committee is charged with overseeing and coordinating the
process under which strategic alternatives are to be evaluated,
which process includes communications with potential strategic
partners and their representatives as well as the management of
eTelecares financial advisors, legal counsel and other
consultants used to evaluate strategic alternatives. The current
members of our Strategic Committee are Messrs. Fernandes,
Rosario and Hamlin, each of whom is a non-management member of
our Board of Directors. Our Strategic Committee held no meetings
during 2007.
Director
Nomination Process
Our Nominating and Corporate Governance Committee, among its
other duties, recommends potential directors when vacancies
arise on the eTelecare Board. The eTelecare Board nominates
directors for election at each annual meeting and elects new
directors to fill vacancies.
A stockholder who wishes to suggest a prospective nominee for
the eTelecare Board should notify our Corporate Secretary in
writing with any supporting material the stockholder considers
appropriate. Our Bylaws provide that all nominations for
election of directors by the stockholders are required to be
submitted in writing to the Corporate Secretary and be received
at our principal place of business at least ten working days
before the date of the regular or special meeting of
stockholders for the purpose of electing directors.
Stockholder
Communications
The eTelecare Board has a process for stockholders and other
interested persons to send communications to directors. If you
wish to communicate with the eTelecare Board as a whole or to
non-management directors, you may send your communication in
writing to: Corporate Secretary, eTelecare Global Solutions,
Inc., 31st Floor CyberOne Building, Eastwood City,
Cyberpark, Libis, Quezon City 1110, Philippines. You must
include your name and address in the written communication and
indicate whether you are a stockholder or other interested
person of eTelecare. We will review any communication received
from a stockholder or other interested person, and all material
communications from stockholders or other interested persons
will be forwarded to the appropriate director or directors or
committee of the eTelecare Board based on the subject matter.
I-7
Director
Compensation
The following table sets forth information regarding
compensation for services rendered to eTelecare during the year
ended December 31, 2007 by our non-employee directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
Paid in
|
|
|
Awards ($)
|
|
|
Compensation ($)
|
|
|
|
|
Name
|
|
Cash(1)
|
|
|
(2)(3)
|
|
|
(4)
|
|
|
Total ($)
|
|
|
Gary Fernandes
|
|
|
72,000
|
|
|
|
37,692
|
|
|
|
|
|
|
|
109,692
|
|
Alfredo I. Ayala
|
|
|
48,125
|
|
|
|
37,692
|
|
|
|
776
|
|
|
|
86,593
|
|
Jaime G. del Rosario
|
|
|
4,000
|
|
|
|
11,035
|
|
|
|
|
|
|
|
15,035
|
|
Richard N. Hamlin
|
|
|
77,000
|
|
|
|
37,692
|
|
|
|
|
|
|
|
114,692
|
|
John-Paul Ho
|
|
|
39,000
|
|
|
|
37,692
|
|
|
|
|
|
|
|
76,692
|
|
Rafael LL. Reyes
|
|
|
44,000
|
|
|
|
37,692
|
|
|
|
|
|
|
|
81,692
|
|
|
|
|
(1)
|
|
Directors were paid $1,000 for each board meeting and $1,000 for
each committee meeting they attended as well as an annual
retainer fee.
|
|
(2)
|
|
Amounts listed in this column represent the compensation expense
of stock awards recognized by eTelecare, before forfeitures,
under FAS 123R for the 2007 fiscal year, rather than
amounts paid to or realized by the named individual. Please
refer to Note 14 to our consolidated financial statements
for the underlying assumptions for this expense. As of
December 31, 2007, Messrs. Fernandes, Ayala, Hamlin,
Ho and Reyes each held 3,704 of restricted stock units, of which
1,852 were vested and Mr. del Rosario held 5,010 of restricted
stock units, of which none were vested.
|
|
(3)
|
|
As of December 31, 2007, Mr. Fernandes held options to
purchase 40,990 Shares, which vest as to every month until
January 1, 2011, Mr. Ho held options to purchase
6,260 Shares, which are fully vested and Mr. Reyes
held options to purchase 10,000 Shares, which are fully
vested.
|
|
(4)
|
|
Amount represents life insurance premiums paid by eTelecare.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of
September 30, 2008 about the number of Shares beneficially
owned by:
|
|
|
|
|
each person known to us to be the beneficial owner of more than
5% of our Shares;
|
|
|
|
each of our named executive officers;
|
|
|
|
each of our directors; and
|
|
|
|
all of our directors and executive officers as a group.
|
Unless otherwise noted below, the address of each beneficial
owner listed in the table is:
c/o eTelecare
Global Solutions, Inc., 31st Floor CyberOne Building,
Eastwood City, Cyberpark, Libis, Quezon City 1110, Philippines.
We have determined beneficial ownership in accordance with the
rules of the Securities and Exchange Commission. Except as
indicated by the footnotes below, we believe, based on the
information furnished to us, that the persons and entities named
in the table below have sole voting and investment power with
respect to all Shares that they beneficially own, subject to
applicable community property laws.
Applicable percentage ownership of Shares beneficially owned is
based on 29,646,239 Shares outstanding on
September 30, 2008, which includes 10,557,821 Common Shares
underlying outstanding ADSs . In computing the number of Shares
beneficially owned by a person and the percentage ownership of
that person, we have deemed outstanding Shares subject to
options and restricted stock units held by that person that are
currently exercisable or exercisable within 60 days of
September 30, 2008. We have not deemed these shares
outstanding, however, for the purpose of computing the
percentage ownership of any other person.
I-8
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
Name and Address of Beneficial Owner
|
|
Number
|
|
|
%
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
A. Soriano Corporation(1)
|
|
|
1,883,966
|
|
|
|
6.4
|
%
|
Derek Holley(2)
|
|
|
2,422,819
|
|
|
|
8.0
|
%
|
Entities affiliated with American International Group(3)
|
|
|
2,457,832
|
|
|
|
8.3
|
%
|
Entities affiliated with Crimson(4)
|
|
|
5,609,646
|
|
|
|
18.9
|
%
|
James W. Franke(5)
|
|
|
2,803,473
|
|
|
|
9.2
|
%
|
NewBridge International Investment Ltd.(6)
|
|
|
6,392,550
|
|
|
|
21.6
|
%
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Gary Fernandes(7)
|
|
|
39,666
|
|
|
|
*
|
|
John R. Harris(8)
|
|
|
568,757
|
|
|
|
1.9
|
%
|
J. Michael Dodson(9)
|
|
|
99,661
|
|
|
|
*
|
|
Glenn J. Dispenziere(10)
|
|
|
44,750
|
|
|
|
*
|
|
David F. Palmer II(11)
|
|
|
50,250
|
|
|
|
*
|
|
Alfredo I. Ayala(12)
|
|
|
6,828,557
|
|
|
|
22.7
|
%
|
Jaime G. del Rosario(13)
|
|
|
8,839
|
|
|
|
*
|
|
Richard N. Hamlin(14)
|
|
|
26,229
|
|
|
|
*
|
|
John-Paul Ho(15)
|
|
|
5,621,576
|
|
|
|
19.0
|
%
|
Rafael LL. Reyes(16)
|
|
|
17,256
|
|
|
|
*
|
|
All executive officers and directors as a group
(10 persons)
(17)
|
|
|
13,305,541
|
|
|
|
44.9
|
%
|
|
|
|
*
|
|
Represents beneficial ownership of less than 1%.
|
|
|
|
Pursuant to the Support Agreement, the stockholder listed has
agreed to tender all Shares beneficially owned in the Offer.
|
|
(1)
|
|
According to a Schedule 13D filed on October 1, 2008,
all shares are held by A. Soriano Corporation, a Philippine
corporation. The principal address of A. Soriano Corporation is:
c/o A.
Soriano Corporation,
7
th
Floor,
Pacific Start Building, Sen. Gil J. Puyat Avenue corner Makati
Avenue, Makati City, Philippines. A. Soriano Corporation has
sole voting and dispositive power over these Shares.
|
|
(2)
|
|
Includes 1,126,722 Shares held by Integrated Telecom LLC,
of which Mr. Holley is a member and manager.
Mr. Holley shares beneficial ownership and voting and
dispositive power over the Shares with James Franke. Either
Mr. Franke or Mr. Holley may represent the
1,126,722 Shares registered in the name of Integrated
Telecom LLC. Mr. Holley disclaims beneficial ownership of
such Shares except to the extent of their pecuniary interests
therein. Also includes 670,600 Shares subject to options
that are immediately exercisable.
|
|
(3)
|
|
According to a Schedule 13D jointly filed on
September 29, 2008, such amount includes
2,457,832 Shares held by American International Group,
Inc., Philippine American Life and General Insurance Company,
AIG Life Holdings (International) LLC, American International
Reinsurance Company, Ltd., American International Assurance
Company (Bermuda) Limited, AIG Global Investment Corp. (Asia)
Ltd., AIG Asian Opportunity Fund LP and AIG Asian
Opportunity G.P., L.L.C. (collectively, the
AIG
Group
). American International Group, Inc. owns
substantially all of the voting securities of Philippine
American Life and General Insurance Company, a corporation
organized under the laws of the Republic of the Philippines, and
wholly owns AIG Life Holdings (International) LLC, a limited
liability company organized under the laws of the State of
Delaware. AIG Life Holdings (International) LLC wholly owns
American International Reinsurance Company, Ltd., a limited
liability company organized under the laws of Bermuda, which, in
turn, wholly owns American International Assurance Company
(Bermuda) Limited, a limited liability company organized under
the laws of Bermuda, which, in turn, owns AIG Global Investment
Corp. (Asia) Ltd., a limited liability company organized under
the laws of Bermuda. AIG Global Investment Corp. (Asia) Ltd.
owns substantially all of the voting securities of AIG Asian
Opportunity G.P., L.L.C., a limited liability company
|
I-9
|
|
|
|
|
organized under the laws of the Cayman Islands. AIG Asian
Opportunity G.P., L.L.C. is general partner of AIG Asian
Opportunity Fund LP, a limited partnership organized under
the laws of the Cayman Islands. The principal office of American
International Group, Inc. and AIG Life Holdings (International)
L.L.C. is 70 Pine Street, New York, New York 10270. The
principal office of Philippine American Life and General
Insurance Company is
23
rd
Floor, Philamlife Tower, 8767 Paseo de Roxas, Makati City,
Philippines 1226. The principal office of American International
Reinsurance Company, Ltd. is American International Building,
29 Richmond Road, Hamilton, HM 08, Bermuda. The principal
office of American International Assurance Company (Bermuda)
Limited and AIG Global Investment Corp. (Asia) Ltd. is AIG
Tower, No. 1 Connaught Road, Central, Hong Kong. The
principal office of AIG Asian Opportunity G.P., L.L.C. and AIG
Asian Opportunity Fund LP is
c/o Maples
and Calder, P.O. Box 309, Ugland House, South Church
Street, Grand Cayman, Cayman Islands. Each entity in the AIG
Group shares voting and dispositive power over these Shares.
|
|
(4)
|
|
According to an Amendment to Schedule 13D jointly filed on
October 2, 2008, such amount includes 2,499,152 Shares
held by Crimson Velocity Fund L.P., 2,181,044 Shares
held by Crimson Asia Capital L.P. and 929,450 Shares held
by Crimson Investment Ltd. Mr. Ho, one of our directors, is
the director of Crimson Capital Management Ltd. which is the
General Partner for Crimson Investment Ltd. and Crimson Asia
Capital L.P. Mr. Ho is also the director of Crimson
Velocity Management L.P. which is the General Partner for
Crimson Velocity Fund L.P. Crimson Velocity Fund L.P.
has sole voting and dispositive power over
2,499,152 Shares. Crimson Asia Capital L.P. has sole voting
and dispositive power over 2,181,044 Shares. Crimson
Investment Ltd. has sole voting and dispositive power over
929,450 Shares. Mr. Ho disclaims beneficial ownership
of the Shares owned by Crimson Velocity Fund L.P., Crimson
Asia Capital L.P. and Crimson Investment Ltd. except to the
extent of his pecuniary interest therein. The address for each
of these entities is:
c/o 13/
F, No. 109, Min Sheng E. Road, SEC 3, Taipei 105, Taiwan,
ROC.
|
|
(5)
|
|
Includes 1,006,151 Shares held in trust by the James and
Michelle Franke Family Trust. Also includes
1,126,722 Shares held by Integrated Telecom LLC, of which
Mr. Holley is a member and manager. Mr. Holley shares
beneficial ownership and voting and dispositive power over the
Shares with Mr. Franke. Either Mr. Franke or
Mr. Holley may represent the 1,126,722 Shares
registered in the name of Integrated Telecom LLC.
Mr. Holley disclaims beneficial ownership of such Shares
except to the extent of their pecuniary interests therein. Also
includes 670,600 Shares subject to options that are
immediately exercisable.
|
|
(6)
|
|
The principal address for NewBridge International Investment
Ltd. is
33
rd
Floor Tower One Exchange Plaza, Ayala Avenue, Makati City,
Philippines 1226. Mr. Ayala, one of our directors, shares
voting and dispositive power over these shares with Renato
Marzan and Ricardo Lacinto. Messrs. Ayala, Marzan and
Lacinto disclaim beneficial ownership of these shares except to
the extent of their pecuniary interest therein.
|
|
(7)
|
|
Includes 8,700 Shares subject to options that are
exercisable within 60 days of September 30, 2008 and
21,613 Shares subject to restricted share units that are
exercisable within 60 days of September 30, 2008.
|
|
(8)
|
|
Includes 514,165 Shares subject to options that are
exercisable within 60 days of September 30, 2008 and
11,100 Shares subject to restricted share units that are
exercisable within 60 days of September 30, 2008.
|
|
(9)
|
|
Includes 45,000 Shares subject to options that are
exercisable within 60 days of September 30, 2008 and
7,400 Shares subject to restricted share units that are
exercisable within 60 days of September 30, 2008.
|
|
(10)
|
|
Includes 43,750 Shares subject to options that are
exercisable within 60 days of September 30, 2008.
|
|
(11)
|
|
Includes 50,000 Shares subject to options that are
exercisable within 60 days of September 30, 2008.
|
|
(12)
|
|
Includes 6,392,550 Shares purchased and held by Ayala
Corporation through NewBridge International Investment Ltd.
Mr. Ayala disclaims beneficial ownership of these Shares
except to the extent of his pecuniary interest therein. Also
includes, 428,750 Shares subject to options that are
immediately exercisable and 5,680 Shares subject to
restricted share units that are exercisable within 60 days
of September 30, 2008.
|
|
(13)
|
|
Includes 8,838 Shares subject to restricted share units
that are exercisable within 60 days of September 30,
2008.
|
|
(14)
|
|
Includes 16,876 Shares subject to restricted share units
that are exercisable within 60 days of September 30,
2008.
|
I-10
|
|
|
(15)
|
|
According to an Amendment to Schedule 13D jointly filed on
October 2, 2008, such amount includes 2,499,152 Shares
held by Crimson Velocity Fund L.P., 2,181,044 Shares
held by Crimson Asia Capital L.P. and 929,450 Shares held
by Crimson Investment Ltd. Mr. Ho, one of our directors, is
the director of Crimson Capital Management Ltd. which is the
General Partner for Crimson Investment Ltd. and Crimson Asia
Capital L.P. Mr. Ho is also the director of Crimson
Velocity Management L.P. which is the General Partner for
Crimson Velocity Fund L.P. Crimson Velocity Fund L.P.
has sole voting and dispositive power over
2,499,152 Shares. Crimson Asia Capital L.P. has sole voting
and dispositive power over 2,181,044 Shares. Crimson
Investment Ltd. has sole voting and dispositive power over
929,450 Shares. The address for each of these entities is:
c/o 13/
F, No. 109, Min Sheng E. Road, SEC 3, Taipei 105, Taiwan,
ROC. Also includes, 6,250 Shares subject to options that
are immediately exercisable and 5,680 Shares subject to
restricted share units that are exercisable within 60 days
of September 30, 2008.
|
|
(16)
|
|
Includes 10,000 Shares subject to options that are
exercisable within 60 days of September 30, 2008 and
5,680 Shares subject to restricted share units that are
exercisable within 60 days of September 30, 2008.
|
|
(17)
|
|
Includes 1,106,615 Shares subject to options that are
exercisable within 60 days of September 30, 2008 and
82,867 restricted share units that are exercisable within
60 days of September 30, 2008.
|
None of our stockholders has different voting rights from other
stockholders. As of September 24, 2008, there were
approximately 670 holders of our Common Shares.
EXECUTIVE
COMPENSATION AND OTHER INFORMATION
CONCERNING EXECUTIVE OFFICERS
Compensation
Discussion and Analysis
eTelecare
Philosophy on Compensation
The goal of our executive compensation program is to create
long-term value for our stockholders. We design our compensation
programs for our executive officers to serve the following
purposes:
|
|
|
|
|
to reward them for short- and long-term financial and operating
performance and leadership excellence;
|
|
|
|
to align their interests with those of our stockholders; and
|
|
|
|
to encourage them to remain with us for the long-term.
|
Each of our compensation program elements fulfills one or more
of the performance, alignment and retention objectives.
We seek to attract, retain and motivate executives by offering
total compensation that is competitive within the market in
which we compete for executive and managerial talent. We believe
this market is broader than the business process outsourcing
market related to voice and non-voice based customer care
services. Therefore, we review the compensation practices,
programs and levels of our direct competitors as well as those
of other
business-to-business
service and product providers that we believe appropriately
represent the broader talent pool from which we compete for
talent.
Establishing
Compensation Opportunities
Our Compensation Committee is responsible for determining our
executive compensation programs. To that end, our Compensation
Committee reviews and approves corporate goals and objectives
relevant to the compensation of our executive officers and works
with management and an independent consultant, retained by the
Compensation Committee, to establish our executive compensation
programs.
In May 2007, the Compensation Committee retained Lyons,
Benenson & Company, an independent compensation
consulting firm, to assist in formalizing our compensation
philosophy and developing the structure and elements of our
executive compensation programs to be consistent with our
comparable public company peer group. This compensation
consulting firm helps us to identify and maintain a selected
group of peer companies which we refer to when establishing
executive compensation programs. In 2007, we determined the
companies that
I-11
would be included in our peer group in determining our 2008
compensation elements and amount: Accenture LTD, APAC Customer
Services, Inc., Business Objects SA, Clayton Holdings, Inc.,
Electronic Data Systems, First Consulting Group, Fiserv, Inc.,
Huron Consulting Group, Inc., ICT Group, Inc., inVentiv Health,
Inc., Jack Henry & Associates, Inc., JDA Software,
Inc., LECG Corporation, Pegasystems Inc., PeopleSupport, Inc.,
Portfolio Recovery Associates, Inc., Sapient Corporation, Sykes
Enterprises, Inc., and TeleTech Holdings, Inc. We intend to
review this peer group annually with our consulting firm to
determine its appropriateness.
We use market comparisons as one factor in making compensation
decisions. Other factors considered in making individual
executive compensation decisions include individual contribution
and performance, reporting structure, the balance of
compensation levels of our other officers in similar and more
senior positions, leadership and growth potential, as well as
the complexity, difficulty, scope and impact of role and
responsibilities. In making decisions on the type and amount of
compensation for each executive officer, we focus on both
current pay and the opportunity for future compensation. We are
strongly committed to the principles inherent in the concept of
paying for performance. Our annual incentive program provides
for higher than average compensation for performance that
exceeds expectations.
Compensation
Components
Our executive compensation program consists of base salary,
annual bonus, long-term equity incentive compensation and other
benefits. These compensation components are described in more
detail below.
Base
Salary
The purpose of base salary is to provide a fixed element of
compensation that reflects job responsibilities, value to us and
individual performance within the context of market
competitiveness.
Salaries for each of our named executive officers are determined
by the Compensation Committee based on a variety of factors,
including the:
|
|
|
|
|
Nature and responsibility of the position and, to the extent
available, salaries paid to persons in comparable positions at
comparable companies;
|
|
|
|
Expertise of the individual executive;
|
|
|
|
Competitiveness of the market for the executives
services; and
|
|
|
|
Recommendations of the Chief Executive Officer, except in the
case of his own compensation.
|
Salaries are reviewed annually, but are not automatically
increased. This approach is consistent with our intent of
offering total compensation opportunities that are driven by the
achievement of performance objectives.
In 2007, the base salaries paid to our executive officers
reflected the base salary agreed upon with each executive
officer at the start of his employment with us. In 2007, we did
not undergo a formal review of base salaries. In April 2007, we
stopped paying on behalf of our executive officers the full
amount of the premiums related to certain health, dental and
visions insurance benefits. As a result, we adjusted their base
salaries in an amount equal to the
out-of-pocket
costs such executive officer would incur to pay the premiums.
In September 2007, the Compensation Committee approved the base
salary for David Palmer, then Vice President,
U.S. Operations, in connection with his new role as our
Senior Vice President, Global Operations, which was effective as
of August 13, 2007, the date of Mr. Palmers
appointment.
In January 2008, our Compensation Committee met to review the
base salaries of our executive officers for 2008. The
Compensation Committee considered base salary data from our
selected peer companies as well as individual performance. As a
result of this review, our Compensation Committee decided to
increase our executive officers base salaries for 2008.
Our Chief Executive Officer received a base salary increase of
21% in order to align our Chief Executive Officers current
base salary with our selected peer companies and based on a
favorable evaluation of individual and company performance for
2007. The other increases ranged from 3% to 13% of each
executive officers 2007 base salary. These increases
reflected individual performance assessments as well as current
compensation market conditions.
I-12
Incentive
Bonus Plan
Our compensation program provides for annual bonuses that are
linked to performance. The objective of the program is to
compensate individuals based on the achievement of specific
goals that are intended to correlate closely with the growth of
stockholder value.
The incentive bonuses of our executive officers are based on a
mix of overall company financial performance and individual
objectives. At the outset of the fiscal year, our Compensation
Committee sets overall company financial performance measures
and goals for the year and the target bonus levels for each
individual. After the end of the fiscal year, our Compensation
Committee measures the actual individual and company-wide
performance relative to the predetermined goals to determine the
appropriate adjustment to the bonus and takes into account other
performance considerations related to unforeseen events during
the year.
2007
Incentive Bonus Plan
In 2007, our executive officers were eligible to receive a cash
bonus upon the achievement of predetermined company and
individual performance metrics. If the minimum financial
performance criteria was not met, no cash bonus was payable. The
2007 incentive plan allows for a participant to earn an above
target bonus payment for performance that exceeds expectations.
In 2007, our Chief Executive Officers incentive bonus was
based 90% on our attainment of certain financial metrics and 10%
on the attainment of individual performance metrics. The
incentive bonus of our other executive officers was based upon
our attainment of certain financial and individual performance
metrics as detailed in the table below. The performance metrics
for each executive officer varied based upon their position and
responsibility within eTelecare. Other than our Chief Executive
Officer, each executive officers achievement of these
performance metrics and amount payable as a result thereof were
evaluated and decided quarterly. Our Chief Executive
Officers incentive bonus is determined on the basis of
full year performance.
The following table reflects the portion of the 2007 award that
was based on eTelecare and individual performance and the bonus
amounts payable to each of our named executive officers if the
performance criteria were met:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of Award Based On:
|
|
|
|
|
|
|
eTelecare
|
|
|
|
|
|
Amount Earned if
|
|
|
|
Financial
|
|
|
Individual
|
|
|
Target Achievement
|
|
|
|
Performance
|
|
|
Performance
|
|
|
Criteria Met
|
|
|
Chief Executive Officer
|
|
|
90
|
%
|
|
|
10
|
%
|
|
$
|
175,807
|
|
Senior Vice President and Chief Financial Officer
|
|
|
25
|
|
|
|
75
|
|
|
|
160,068
|
|
Senior Vice President, Sales and Marketing
|
|
|
25
|
|
|
|
75
|
|
|
|
206,779
|
|
Senior Vice President, Global Shared Services
|
|
|
30
|
|
|
|
70
|
|
|
|
88,307
|
|
Senior Vice President, Global Operations (Current)
|
|
|
30
|
|
|
|
70
|
|
|
|
106,250
|
|
Senior Vice President, Global Operations (Former)
|
|
|
30
|
|
|
|
70
|
|
|
|
115,890
|
|
In 2007, upon the recommendation of our Chief Executive Officer,
the Compensation Committee awarded our Senior Vice President and
Chief Financial Officer, our Senior Vice President, Global
Shared Services and our former Senior Vice President, Global
Operations a one time special cash performance bonus that was
equal to 10% of such individuals base salary. The
Compensation Committee awarded this bonus in light of such
officers contribution to eTelecares strong financial
performance in 2006. The Compensation Committee intends to pay
cash bonuses in the future in connection with an annual plan
adopted at the start of each year but may consider one time
bonus payments to the extent extraordinary company or individual
performance is achieved.
2008
Incentive Plan
In December 2007, we approved a 2008 annual cash incentive plan
effective on January 1, 2008 pursuant to which our
executive officers are eligible to receive a cash bonus based
upon the achievement of certain eTelecare and individual
specific performance goals for 2008. Our Compensation Committee
established these target percentages in an effort to align our
executive officers annual bonus with our selected peer
companies identified
I-13
above. The actual cash bonus amounts payable can range from no
bonus if certain minimum performance criteria are not met to
150% of the target bonus to the extent performance goals are
exceeded. The table below outlines the bonus opportunities of
our executive officers upon the achievement of certain
performance levels and the portion of each award that is to be
based on eTelecare performance and individual performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of Award Based On:
|
|
|
|
Target Bonus as
|
|
|
eTelecare
|
|
|
|
|
|
|
a Percentage of
|
|
|
Financial
|
|
|
Individual
|
|
Position
|
|
Base Salary
|
|
|
Performance
|
|
|
Performance
|
|
|
Chief Executive Officer
|
|
|
100
|
|
|
|
100
|
%
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
60
|
|
|
|
80
|
%
|
|
|
20
|
%
|
Senior Vice President, Sales and Marketing
|
|
|
100
|
|
|
|
50
|
%
|
|
|
50
|
%
|
Senior Vice President, Global Operations
|
|
|
60
|
|
|
|
80
|
%
|
|
|
20
|
%
|
We believe our executive officers are likely to achieve
the threshold performance levels that will make them eligible to
receive a cash bonus for performance in 2008. We believe the
performance levels required to meet the target bonus level are
challenging but achievable if we achieve our financial plan for
2008.
Under our 2008 annual cash incentive plan, the Compensation
Committee has discretion as to whether annual bonuses for our
executive officers will be paid in cash, restricted stock,
restricted stock units or a combination thereof. The
Compensation Committee also retains discretion to reduce the
actual incentive bonus amount to be paid, or determine no bonus
amount should be paid to, any named executive officer. The
Compensation Committee does not have the discretion to increase
bonuses under the plan for any of the named executive officers.
However, the Compensation Committee may determine to grant
bonuses outside of the incentive bonus plan for extraordinary
performance.
Long-Term
Equity Incentive Program
The Compensation Committee administers equity-based incentive
awards, such as stock option grants, that are made to our
executive officers under our 2006 Stock Incentive Plan. The
Compensation Committee believes that by providing those persons
who have substantial responsibility for our management and
growth with an opportunity to increase their ownership of our
stock, the interests of our stockholders and executive officers
will be closely aligned. Additionally, equity compensation
provides an important retention tool for key executives to the
extent that stock options and other equity awards are subject to
vesting over extended periods of time and provide for only a
limited exercise period following termination of employment. The
number and type of equity awards under our long-term equity
incentive program is determined based on an evaluation of
competitive factors in conjunction with total compensation
provided to executive officers and the goals of the compensation
program described above.
Historically, we have relied primarily on stock options to
provide long-term incentive compensation. In the future, we
expect to continue using stock options, but may also increase
our use of grants of restricted stock, restricted stock units or
equity awards with performance-based vesting. We further expect
that most equity award grants will be made in recognition of the
achievement of outstanding performance, but there may be
instances in which we grant equity awards to serve our goal of
retaining certain executive officers over the long-term or to
attract new talent.
In 2007, we did not grant stock options to any of our executive
officers. In May 2007, the Compensation Committee granted our
Chief Executive Officer and Chief Financial Officer 22,200 and
14,800 restricted stock units, respectively, that vest quarterly
over two years. The Compensation Committee made these grants in
recognition of these officers efforts in the completion of
our initial public offering.
Deferred
Compensation Plans
The Compensation Committee approved a Deferred Compensation Plan
for members of the eTelecare Board, executives, and other highly
compensated members of management located in the United States.
This Plan allows eligible participants to defer the receipt of
wages or cash retainer and for employee participants to receive
matching funds. Matching dollars will vest over a four year
period at a rate of 25% per year and are capped at 3% of
earnings a
I-14
year, up to $230,000 in 2008. The matching contributions paid
under our 401(k) Plan are included when calculating the maximum
matching payments to be made under our Deferred Compensation
Plan.
Post-employment/Change
in Control Payments
Our executive officers are parties to employment agreements and
offer letters. These employment agreements and offer letters
provide for severance payments and acceleration of vesting of
equity-based awards upon termination of employment under the
circumstances described below under
Change-in-Control
Arrangements. Our change in control arrangements provide
important protection to our named executive officers and we
believe are consistent with the practices of our peer companies
and appropriate for attraction and retention of executive
talent. In 2007, we paid our Senior Vice President, Global
Operations $61,129 in severance payments in connection with his
termination of employment. Such payments were not payable under
the terms of his
change-in-control
agreement. They were made as a result of negotiations between
the parties in connection with his departure from eTelecare.
We have no current plans to make changes to any employment
agreements or offer letters, except as required by law or as
required to clarify the benefits to which our executive officers
are entitled. These agreements are designed both to attract
executives as we compete for talented employees in a marketplace
where such protections are routinely offered and to retain
executives and provide continuity of management in the event of
an actual or threatened change in control. As circumstances
change, we may amend employment arrangements if we deem it to be
in our best interest and the interests of our stockholders.
Other
Supplemental Benefits
With limited exceptions, we provide benefits to our executive
officers that are similar to those benefits provided to our
full-time employees, such as medical, dental and vision care
insurance coverage, and our 401(k) and life and disability
insurance programs. These benefits are designed to provide our
executive officers and eligible employees a competitive total
compensation package that enables us to attract and retain
qualified personnel. In addition, we have in the past, paid
relocation expenses of our executive officers and we may pay
such expenses in the future to attract new talent.
I-15
2007
Summary Compensation Table
The following table sets forth information regarding
compensation for services rendered to eTelecare during the year
ended December 31, 2007 by our named executive officers who
received annual compensation exceeding $100,000 during such
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards ($)
|
|
|
Awards ($)
|
|
|
Compensation
|
|
|
Compensation
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
(1)
|
|
|
(1)
|
|
|
($)
|
|
|
($)
|
|
|
Total ($)
|
|
|
John R. Harris
Chief Executive
Officer & Director
|
|
|
2007
|
|
|
|
351,180
|
|
|
|
|
|
|
|
110,211
|
|
|
|
327,403
|
|
|
|
119,021
|
|
|
|
4,366
|
(3)
|
|
|
912,181
|
|
J. Michael Dodson
Senior Vice President and Chief Financial Officer
|
|
|
2007
|
|
|
|
264,955
|
|
|
|
26,000
|
|
|
|
73,474
|
|
|
|
20,530
|
|
|
|
88,512
|
|
|
|
2,941
|
(2)
|
|
|
476,412
|
|
Glenn J. Dispenziere
Senior Vice President, Sales and Marketing
|
|
|
2007
|
|
|
|
204,954
|
|
|
|
|
|
|
|
|
|
|
|
73,959
|
|
|
|
160,277
|
|
|
|
1,569
|
(2)
|
|
|
440,759
|
|
David F. Palmer II
Senior Vice President, Global Operations
|
|
|
2007
|
|
|
|
247,115
|
|
|
|
|
|
|
|
|
|
|
|
212,149
|
|
|
|
55,685
|
|
|
|
48,561
|
(3)
|
|
|
563,510
|
|
Vivek Padmanabhan(4)
Senior Vice President, Global Shared Services
|
|
|
2007
|
|
|
|
176,180
|
|
|
|
17,500
|
|
|
|
|
|
|
|
53,436
|
|
|
|
48,678
|
|
|
|
170(2
|
)
|
|
|
295,964
|
|
Einar Seadler(5)
Senior Vice President, Global Operations
|
|
|
2007
|
|
|
|
158,638
|
|
|
|
22,500
|
|
|
|
|
|
|
|
161,505
|
|
|
|
31,669
|
|
|
|
152,207
|
(6)
|
|
|
526,519
|
|
|
|
|
(1)
|
|
Amounts listed in this column represent the compensation expense
of option awards recognized by eTelecare, before forfeitures,
under FAS 123R for the 2007 fiscal year, rather than
amounts paid to or realized by the named individual, and
includes expense recognized for awards granted prior to 2007.
Please refer to Note 14 to our consolidated financial statements
for the underlying assumptions for this expense. There can be no
assurance that options will be exercised (in which case no value
will be realized by the individual) or that the value on
exercise will approximate the compensation expense recognized by
eTelecare.
|
|
(2)
|
|
Represents life insurance premiums paid by us.
|
|
(3)
|
|
Represents life insurance premiums paid by us in the amounts of
$3,044 and $166 for Messrs. Harris and Palmer,
respectively. Also represents amounts reimbursed for relocation
costs of $1,322 and $48,395 for Messrs. Harris and Palmer,
respectively.
|
|
(4)
|
|
Mr. Padmanabhan resigned in January 2008.
|
|
(5)
|
|
Mr. Seadler resigned in August 2007.
|
|
(6)
|
|
Other compensation represents severance payments of $61,129 paid
in 2007 and the remainder of which will be paid in 2008. The
amount also includes life insurance premiums paid by us of $659.
|
Change-in-Control
Arrangements
The following summarizes our
change-in-control
arrangements with our named executive officers. The Compensation
Committee may in its discretion revise, amend or add to these
benefits if it deems advisable.
John
Harris
Subject to the terms and conditions of the
change-of-control
agreements, if at any time within twenty-four months after a
change in control of us, Mr. Harris terminates his
employment for Good Reason (as defined below) or we terminate
Mr. Harris employment for any reason other than for
Cause (as defined below) or as a result of death
I-16
or permanent disability, and he signs and does not revoke a
standard release of claims with us, then Mr. Harris is
entitled to the following severance benefits:
|
|
|
|
|
Severance Payments.
Mr. Harris will be
paid severance in a single lump sum an amount in cash equal to
two times the higher of (a) his annual base salary prior to
termination or (b) his annual base salary prior to the
change in control of us.
|
|
|
|
Accelerated Vesting.
One hundred percent of
the unvested shares subject to all of Mr. Harris
outstanding rights to purchase or receive our Common Shares
(including, without limitation, through awards of stock options,
restricted stock units or similar awards) will immediately vest
as of the date of termination and will remain exercisable for a
period of twelve months after the date of termination.
|
|
|
|
Continued Health Benefits.
For twenty-four
months after date of termination, Mr. Harris and his
dependants will receive life, medical, long-term disability and
dental insurance benefits from us.
|
We believe that structuring Mr. Harris severance
benefits in this fashion encourages his retention, rewards him
for his individual contribution, loyalty, teamwork and
integrity, and motivates him to achieve returns for our
stockholders.
J. Michael
Dodson
Mr. Dodsons change in control agreement provides for
the same severance and change in control agreements as John
Harris. Please see the description above.
Glen
Dispenziere
If at any time within twelve months after a change in control of
us, Mr. Dispenziere terminates his employment for Good
Reason or we terminate Mr. Dispenziere for any reason other
than for Cause or as a result of death or permanent disability,
and Mr. Dispenziere signs and does not revoke a standard
release of claims with us, then he is entitled to the following
severance benefits:
|
|
|
|
|
Severance Payments in a single lump sum an amount in cash equal
to one times the higher of (a) his annual base salary prior
to termination or (b) his annual base salary prior to the
change in control of us.
|
|
|
|
One hundred percent of the unvested shares subject to all of his
outstanding rights to purchase or receive our Common Shares
(including, without limitation, through awards of stock options,
restricted stock units or similar awards) will immediately vest
as of the date of termination and will remain exercisable for a
period of twelve months after the date of termination.
|
|
|
|
For twelve months after his date of termination,
Mr. Dispenziere and his dependants will receive life,
medical, long-term disability and dental insurance benefits from
us.
|
David
Palmer
Mr. Palmers change in control agreement provides for
the same severance and change in control agreements as Glen
Dispenziere. Please see the description above.
Definitions
of Cause and Good Reason
Cause
means (a) intentional and material
dishonesty in the performance of executives duties for the
Company; (b) conduct (including conviction of or plea of
nolo contendere to a felony) which has a direct and material
adverse effect on the Company or its reputation;
(c) continued failure to perform the material duties of
executives position or comply with executives
obligations under any agreement with the Company, including the
Companys Proprietary Information and Confidentiality
Agreement, after receipt of written notice identifying the
failure in performance or compliance with specificity, if
executive does not remedy that failure within 10 business days
of receipt of written notice form the Company, which notice will
state that failure to remedy such failure may result in
termination for Cause; or (d) an incurable material breach
of the Companys Proprietary Information and
I-17
Confidentiality Agreement, including without limitation theft or
other misappropriation of the Companys proprietary
information.
Good Reason
means, without executives
express written consent: (i) a material diminution in
executives authorities, duties or responsibilities;
(ii) a material reduction of executives base
compensation; (iii) a material diminution in the budget, if
any, over which executive retains authority; (iv) the
relocation of executives principal place of employment by
more than 50 miles (or 30 miles for Mr. Dodson
only); or (v) the failure of the Company to obtain the
assumption of the material terms of the executives
employment agreement by any successor to the Company.
Potential
Payments Upon Termination and Change in Control
The consummation of the Offer will represent a change in control
under the
change-of-control
agreements described above. For Messrs. Harris and Dodson,
following the consummation of the Offer, the benefits described
in their respective
change-of-control
agreements will become payable if, within twenty-four months,
such executive terminates his employment for Good Reason or we
terminate his employment for any reason other than for Cause or
as a result of death or permanent disability, and such executive
signs and does not revoke a standard release of claims with us.
For Messrs. Dispenziere and Palmer, following the
consummation of the Offer, the benefits described in their
respective
change-of-control
agreements will become payable if, within twelve months, such
executive is terminated for Good Reason or terminated by us for
any reason other than for Cause or as a result of death or
permanent disability, and such executive signs and does not
revoke a standard release of claims with us.
The executive will then receive the benefits as set forth below
(assuming, hypothetically, that all executives listed below were
terminated by us without Cause upon a change in control of us on
September 30, 2008), together with the supplemental
benefits described above.
|
|
|
|
|
|
|
|
|
|
|
Termination Upon a
|
|
|
|
|
|
Change in Control
|
|
|
|
|
|
Without Cause or With
|
|
|
|
|
|
Death/Disability
|
|
Name
|
|
Benefit
|
|
($)
|
|
|
John R. Harris
|
|
Salary
|
|
|
850,000
|
|
|
|
Option and Restricted
Stock Unit
acceleration(1)
|
|
|
1,484,249
|
|
|
|
Benefits continuation
|
|
|
8,813
|
|
|
|
Total value
|
|
|
2,343,062
|
|
J. Michael Dodson
|
|
Salary
|
|
|
550,000
|
|
|
|
Option and Restricted Stock Unit acceleration(1)
|
|
|
797,047
|
|
|
|
Benefits continuation
|
|
|
21,179
|
|
|
|
Total value
|
|
|
1,368,226
|
|
Glenn J. Dispenziere
|
|
Salary
|
|
|
225,000
|
|
|
|
Option and Restricted Stock Unit acceleration(1)
|
|
|
338,600
|
|
|
|
Benefits continuation
|
|
|
10,460
|
|
|
|
Total value
|
|
|
574,060
|
|
David F. Palmer II
|
|
Salary
|
|
|
260,000
|
|
|
|
Option and Restricted Stock Unit
acceleration(1)
|
|
|
290,150
|
|
|
|
Benefits continuation
|
|
|
10,551
|
|
|
|
Total value
|
|
|
560,701
|
|
|
|
|
(1)
|
|
Represents the aggregate value of the accelerated vesting of the
executive officers unvested stock options and restricted
stock units. This value was calculated based upon the closing
price of our common stock on September 30, 2008 ($8.29).
|
I-18
2007
Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
or Base
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payments
|
|
|
Number of
|
|
|
Number of
|
|
|
Price of
|
|
|
Value of
|
|
|
|
|
|
|
under Non-Equity Incentive
|
|
|
Shares of
|
|
|
Options
|
|
|
Option
|
|
|
Stock
|
|
|
|
|
|
|
Plan Awards(1)(2)
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Options and
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Securities
|
|
|
($/Sh)
|
|
|
Awards ($)
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)(3)
|
|
|
(#)(4)
|
|
|
(5)
|
|
|
(6)
|
|
|
John R. Harris
|
|
|
5/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,200
|
|
|
|
|
|
|
|
|
|
|
|
110,211
|
|
|
|
|
|
|
|
|
87,904
|
|
|
|
175,807
|
|
|
|
263,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Michael Dodson
|
|
|
5/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,800
|
|
|
|
|
|
|
|
|
|
|
|
73,474
|
|
|
|
|
|
|
|
|
80,034
|
|
|
|
160,068
|
|
|
|
200,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn J. Dispenziere
|
|
|
|
|
|
|
103,390
|
|
|
|
206,779
|
|
|
|
413,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David F. Palmer II
|
|
|
1/15/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
11.00
|
|
|
|
150,000
|
|
|
|
|
9/19/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
10.49
|
|
|
|
941,573
|
|
|
|
|
|
|
|
|
53,125
|
|
|
|
106,250
|
|
|
|
159,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vivek Padmanabhan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Einar Seadler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The target incentive amounts shown in this column reflect our
2007 incentive bonus awards originally provided under the annual
incentive plan for 2007 and represent the pre-established target
awards as a percentage of base salary for the 2007 fiscal year,
with the potential for actual awards under the plan to either
exceed or be less than such funding target depending upon
pre-determined performance criteria. Actual award amounts are
not guaranteed and are determined at the discretion of the
Compensation Committee. For additional information, please refer
to the Compensation Discussion and Analysis section.
|
|
(2)
|
|
The threshold illustrates the smallest payout that can be made
if all of the pre-established performance objectives are
achieved at the minimum achievement level. If the threshold
level of performance is not met, no amounts will be payable
under the 2007 annual incentive plan. The target is the payout
that can be made if the pre-established performance objectives
have been achieved at the target achievement level. The maximum
is the greatest payout that can be made if the pre-established
maximum performance objectives are achieved or exceeded at the
outperform achievement levels.
|
|
(3)
|
|
Restricted stock units vest as to 12.5% of the total number of
shares each quarter beginning August 16, 2007.
|
|
(4)
|
|
Options listed vest as to 25% of the total number of shares on
each anniversary date beginning one year after the grant date.
|
|
(5)
|
|
Represents the exercise price for the stock options granted,
which is equal to the closing price ADSs on the Grant Date.
|
|
(6)
|
|
This column shows the full Grant Date fair value we would
expense in our financial statements over the vesting period per
FAS 123(R) removing the service-based vesting forfeiture
assumption. The fair value is calculated using a Black-Scholes
valuation methodology according to FAS 123(R). Please refer
to footnote 14 of our financial statements contained in this
report regarding valuation assumptions.
|
I-19
2007
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding outstanding
equity-based awards, including the potential dollar amounts
realizable with respect to each award.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
Number of
|
|
|
Market Value of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
|
|
|
Shares or Units
|
|
|
Shares or Units of
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Price
|
|
|
Option Expiration
|
|
|
of Stock that
|
|
|
Stock that have
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
have not Vested
|
|
|
not Vested ($)(1)
|
|
|
John R. Harris
|
|
|
323,671
|
|
|
|
467,579
|
(2)
|
|
|
6.00
|
|
|
|
3/6/2011
|
|
|
|
16,650
|
|
|
|
139,028
|
(4)
|
J. Michael Dodson
|
|
|
45,000
|
|
|
|
90,000
|
(3)
|
|
|
5.00
|
|
|
|
12/8/2010
|
|
|
|
11,100
|
|
|
|
92,685
|
(4)
|
Glenn J. Dispenziere
|
|
|
37,500
|
|
|
|
37,500
|
(3)
|
|
|
5.00
|
|
|
|
12/5/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
(3)
|
|
|
11.00
|
|
|
|
12/8/2016
|
|
|
|
|
|
|
|
|
|
David F. Palmer II
|
|
|
|
|
|
|
50,000
|
(3)
|
|
|
11.00
|
|
|
|
1/15/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(3)
|
|
|
10.49
|
|
|
|
9/19/2017
|
|
|
|
|
|
|
|
|
|
Vivek Padmanabhan
|
|
|
7,500
|
|
|
|
2,500
|
(3)
|
|
|
4.00
|
|
|
|
1/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
5,000
|
(3)
|
|
|
4.00
|
|
|
|
7/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
(3)
|
|
|
11.00
|
|
|
|
12/8/2016
|
|
|
|
|
|
|
|
|
|
Einar Seadler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Market value calculated using the closing price of our ADSs on
December 28, 2007.
|
|
(2)
|
|
Vests ratably every month until March 6, 2010, subject to
the named executive officers continued employment with us.
|
|
(3)
|
|
Vests ratably starting with the first anniversary of the option
and each year anniversary thereafter, subject to the named
executive officers continued employment with us.
|
|
(4)
|
|
Vests ratably every quarter until May 16, 2009, subject to
the named executive officers continued employment with us.
|
2007
Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Value
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Realized on
|
|
|
Shares
|
|
|
Value Realized
|
|
|
|
Acquired on
|
|
|
Exercise ($)
|
|
|
Acquired on
|
|
|
on Vesting ($)
|
|
Name
|
|
Exercise (#)
|
|
|
(1)
|
|
|
Vesting (#)
|
|
|
(2)
|
|
|
John R. Harris
|
|
|
40,000
|
|
|
|
192,800
|
|
|
|
5,550
|
|
|
|
54,917
|
|
J. Michael Dodson
|
|
|
45,000
|
|
|
|
261,900
|
|
|
|
3,700
|
|
|
|
36,612
|
|
Glenn J. Dispenziere
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David F. Palmer II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vivek Padmanabhan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Einar Seadler
|
|
|
175,000
|
|
|
|
1,252,500
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents the difference between the exercise price and the
fair market value of the Common Shares the date of exercise.
|
|
(2)
|
|
Represents the difference between the exercise price and the
fair market value of the Common Shares on the date of vesting.
|
I-20
COMPENSATION
COMMITTEE REPORT
The following report has been submitted by the Compensation
Committee of our Board of Directors:
The Compensation Committee of our Board of Directors has
reviewed and discussed the Compensation Discussion and Analysis
with management. Based on this review and discussion, the
Compensation Committee recommended to our Board of Directors
that the Compensation Discussion and Analysis be included in
this Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, as filed with
the Securities and Exchange Commission.*
The foregoing report was submitted by the Compensation Committee
of the Board of Directors and shall not be deemed to be
soliciting material or to be filed with
the Commission or subject to Regulation 14A promulgated by
the Commission or Section 18 of the Securities Exchange Act
of 1934.*
Gary J. Fernandes
Richard N. Hamlin
Rafael LI Reyes
Compensation
Committee Interlocks and Insider Participation
No member of our Compensation Committee was at any time during
fiscal 2007 one of our officers or employees. None of our
executive officers serves as a member of the Board of Directors
or Compensation Committee of any entity that has one or more
executive officers serving as a member of our Board of Directors
or Compensation Committee.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the year ended December 31, 2007, there were no
transactions between eTelecare and its directors, executive
officers and any holder of five percent or more of our Common
Shares that are required to be disclosed pursuant to
Item 404 of
Regulation S-K
promulgated under the Securities Exchange Act of 1934, as
amended.
Policies
and Procedures for Approving Related Party
Transactions
It is our policy that all employees, officers and directors must
avoid any activity that is or has the appearance of conflicting
with the interests of eTelecare. This policy is included in our
Code of Business Conduct. We conduct a review of all related
party transactions for potential conflict of interest situations
on an ongoing basis and all such transactions relating to
executive officers and directors must be approved by the
independent and disinterested members of our board of directors
or an independent and disinterested committee of the board.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Rule 3a12-3(b)
of the Securities Exchange Act of 1934 exempts from
Section 16 securities registered under the Exchange Act by
foreign private issuers that are eligible to use
Form 20-F.
As a result our executive officers and directors, and persons
who own more than 10% of our securities are not required to
comply with the reporting requirements under Section 16(a).
* Refers to Annual
Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 14, 2008.
I-21
ANNEX
II
September 18,
2008
Board of Directors
eTelecare Global Solutions, Inc.
31st Floor CyberOne Building
Eastwood City, Cyberpark
Libis, Philippines 1110
Members of the Board:
We understand that eTelecare Global Solutions, Inc.
(eTelecare or the Company) and EGS
Acquisition Co LLC (the Buyer) propose to enter into
an Acquisition Agreement, substantially in the form of the draft
dated September 18, 2008 (the Acquisition
Agreement), which provides, among other things, for the
commencement by the Buyer of a tender offer (the Tender
Offer) for all outstanding common shares, par value
PhP2.00 per share (the Company Common Stock) and all
outstanding American Depositary Shares (the
ADSs and together with the Company Common
Stock, the Company Shares), of the Company for $9.00
per Company Share in cash. The terms and conditions of the
Tender Offer are more fully set forth in the Acquisition
Agreement. We further understand that approximately 22% of the
outstanding shares of the Company Shares are owned by Newbridge
International Investment Ltd. (Newbridge), an
affiliate of the Buyer.
You have asked for our opinion as to whether the consideration
to be received by the holders of the Company Shares pursuant to
the Acquisition Agreement is fair from a financial point of view
to such holders of the Company Shares (other than the Buyer and
its affiliates, including Newbridge).
For purposes of the opinion set forth herein, we have:
(i) Reviewed certain publicly available financial
statements and other business and financial information of the
Company;
(ii) Reviewed certain internal financial statements and
other financial and operating data concerning the Company;
(iii) Reviewed certain financial projections prepared by
the management of the Company;
(iv) Discussed the past and current operations and
financial condition and the prospects of the Company with senior
executives of the Company;
(v) Reviewed the reported prices and trading activity for
the Company Shares;
(vi) Compared the financial performance of the Company and
the prices and trading activity of the Company Shares with that
of certain other publicly-traded companies comparable with the
Company and their securities;
(vii) Reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(viii) Participated in discussions and negotiations among
representatives of the Company and the Buyer;
(ix) Reviewed the Acquisition Agreement, the draft
commitment letters from Newbridge and Providence Equity Partners
VI International L.P. substantially in the form of the drafts
dated September 18, 2008 (the Commitment
Letters) and certain related documents; and
(x) Performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the information
that was publicly available or supplied or otherwise made
available to us by the Company and formed a substantial basis
for our opinion. With respect to the financial projections, we
have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the management of
II-1
the Company of the future financial performance of the Company.
In addition, we have assumed that the transaction will be
consummated in accordance with the terms set forth in the
Acquisition Agreement without any waiver, amendment or delay of
any terms or conditions and that the Buyer will obtain financing
in accordance with the terms set forth in the Commitment
Letters. Morgan Stanley has assumed that in connection with the
receipt of all the necessary governmental, regulatory or other
approvals and consents required for the proposed transaction, no
delays, limitations, conditions or restrictions will be imposed
that would have a material adverse effect on the contemplated
benefits expected to be derived in the proposed transaction. We
are not legal, tax, or regulatory advisors. We are financial
advisors only and have relied upon, without independent
verification, the assessment of the Company and its legal, tax
or regulatory advisors with respect to legal, tax or regulatory
matters. We express no opinion with respect to the fairness of
the amount or nature of the compensation to any of the
Companys officers, directors or employees, or any class of
such persons, relative to the consideration to be received by
the holders of the Company Shares in the transaction. We have
not made any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any
such appraisals. Our opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Events
occurring after the date hereof may affect this opinion and the
assumptions used in preparing it, and we do not assume any
obligation to update, revise or reaffirm this opinion.
In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any party with respect to the
acquisition, business combination or other extraordinary
transaction, involving the Company.
We have acted as financial advisor to the Board of Directors of
the Company in connection with this transaction and will receive
a fee for our services, a significant portion of which is
contingent upon the closing of the transaction. In the two years
prior to the date hereof, we have provided financial advisory
and financing services for certain affiliates of the Buyer and
the Company and have received fees in connection with such
services.
Please note that Morgan Stanley is a global financial services
firm engaged in the securities, investment management and
individual wealth management businesses. Our securities business
is engaged in securities underwriting, trading and brokerage
activities, foreign exchange, commodities and derivatives
trading, prime brokerage, as well as providing investment
banking, financing and financial advisory services. Morgan
Stanley, its affiliates, directors and officers may at any time
invest on a principal basis or manage funds that invest, hold
long or short positions, finance positions, and may trade or
otherwise structure and effect transactions, for their own
account or the accounts of its customers, in debt or equity
securities or loans of the Buyer and its affiliates and the
Company, or any other company, or any currency or commodity,
that may be involved in this transaction, or any related
derivative instrument.
This opinion has been approved by a committee of Morgan Stanley
investment banking and other professionals in accordance with
our customary practice. This opinion is for the information of
the Board of Directors and may not be used for any other purpose
without our prior written consent, except that a copy of this
opinion may be included in its entirety in any filing the
Company is required to make with the Securities and Exchange
Commission and the Philippine Securities and Exchange Commission
in connection with this transaction. In addition, Morgan Stanley
expresses no opinion or recommendation as to whether the holders
of the Company Shares should tender such shares in connection
with the transaction.
Based on and subject to the foregoing, we are of the opinion on
the date hereof that the consideration to be received by the
holders of the Company Shares pursuant to the Acquisition
Agreement is fair from a financial point of view to the holders
of such Company Shares (other than the Buyer and its affiliates,
including Newbridge).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
Edward A. Smith
Managing Director
II-2
Etelecare Global Solutions ADS (MM) (NASDAQ:ETEL)
Historical Stock Chart
From Jul 2024 to Aug 2024
Etelecare Global Solutions ADS (MM) (NASDAQ:ETEL)
Historical Stock Chart
From Aug 2023 to Aug 2024