Footnote continued from previous page
Footnote continued on next page Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CSI COMPUTER SPECIALISTS, INC.
AT
$1.00 NET PER SHARE
BY
INTERACTIVE SYSTEMS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON
TUESDAY, MAY 23, 2000, UNLESS THE OFFER IS EXTENDED.A SUMMARY OF THE
PRINCIPAL TERMS OF THE OFFER APPEARS ONPAGES (ii) THROUGH (iv). YOU SHOULD
READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE DECIDING WHETHER TO TENDER YOUR
SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS: (A) APPROVED OR DISAPPROVED OF THE TRANSACTION; (B) PASSED
UPON THE MERITS OR FAIRNESS OF THE TRANSACTION; OR (C) PASSED UPON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
April 26, 2000
(This page intentionally left blank)
- iv -
TABLE OF CONTENTS
Page
SUMMARY OF THE OFFER.........................................................ii
INTRODUCTION..................................................................1
SPECIAL FACTORS...............................................................2
I. BACKGROUND OF THE OFFER..............................................2
II. PURPOSE AND plans....................................................4
III. MATERIAL UNITED STATES FEDERAL INCOME TAX EFFECTS
IV. INTERESTS OF CERTAIN PERSONS.........................................5
THE OFFER.....................................................................7
1. TERMS OF THE OFFER...................................................7
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR THE COMMON SHARES.............9
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.............10
4. WITHDRAWAL RIGHTS...................................................14
5. PRICE RANGE OF THE COMMON SHARES; DIVIDENDS.........................15
6. POSSIBLE EFFECTS OF THE TENDER OFFER ON THE MARKET FOR THE COMMON SHARES;
STOCK QUOTATION.....................................................15
7. INFORMATION CONCERNING THE COMPANY..................................16
8. INFORMATION CONCERNING ISI..........................................17
9. SOURCE AND AMOUNT OF FUNDS..........................................18
10. CONDITIONS OF THE OFFER.............................................19
11. LEGAL AND REGULATORY MATTERS........................................21
12. FEES AND EXPENSES...................................................22
13. MISCELLANEOUS.......................................................23
SCHEDULE I..................................................................1-1
SUMMARY OF THE OFFER
Interactive Systems, Inc. is offering to buy all outstanding shares of
common stock (the "Common Shares") of CSI Computer Specialists, Inc. (the
"Company" or "CSI") not already owned by Mr. Donald C. Weymer,Interactive
Systems, Inc.'s founder, Chief Executive Officer, President, a Director and
98% shareholder (the "Offer"). Mr. Weymer already owns approximately 32% of
the outstanding Common Shares. The tender price is $1.00 per Common Share
in cash, less any required withholding taxes. Tendering stockholders will
not have to pay brokerage fees or commissions.
WHO IS OFFERING TO BUY MY SECURITIES?
Our name is Interactive Systems, Inc. ("ISI"). We are a national provider
of enterprise infrastructure management services. We provide information
technology outsourcing, enterprise systems management and not-for-profit
solutions to commercial and non-profit organizations. We are an affiliate
of the Company because our founder, Mr. Donald C. Weymer, is a stockholder,
officer and director of both ISI and CSI. See Section 8, pages 17 and 18
for more information.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are offering to purchase all of the outstanding Common Shares. See
"Introduction" and Section 1, pages 7 through 9 for further details.
HOW MUCH ARE YOU OFFERING TO PAY, WHAT IS THE FORM OF PAYMENT AND WILL I HAVE
TO PAY ANY FEES OR COMMISSIONS?
We are offering to pay $1.00 per Common Share, net to you, in cash. If you
are the record owner of your Common Shares and you tender your Common
Shares to us in the Offer, you will not have to pay brokerage fees or
similar expenses. If you own your Common Shares through a broker or other
nominee, and your broker tenders your Common Shares on your behalf, your
broker or nominee may charge you a fee for doing so. You should consult
your broker or nominee to determine whether any charges will apply. See
"Introduction" for further information.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 5:00 P.M., Eastern Time, on Tuesday, May 23,
2000 to tender your Common Shares in the Offer. Further, if you cannot
deliver everything that is required in order to make a valid tender by that
time, you may be able to use a guaranteed delivery procedure, which is
described later in this offer to purchase. See Section 1, pages 7 through
9, and Section 3, page 12 for further details.
CAN THE OFFER BE EXTENDED AND HOW WILL I BE NOTIFIED IF THE
OFFER IS EXTENDED?
We have the right to extend the Offer. If we decide to extend the Offer, we
will issue a press release giving the new expiration date no later than
9:00 a.m., Eastern Time, on the first business day after the previously
scheduled expiration of the Offer. See Section 1, pages 7 through 9 for
further details.
ARE THERE ANY CONDITIONS TO THE OFFER?
The Offer is conditioned on certain customary closing conditions. See
Section 10, pages 19 through 21 for further details.
HOW DO I TENDER MY COMMON SHARES?
If you wish to accept the Offer, you must do the following:
- If you are a record holder (i.e., a stock certificate has been issued to
you), you must either complete and sign the enclosed letter of transmittal
and send it with your stock certificate to the depositary for the Offer,
Continental Stock Transfer & Trust Company, or follow the procedures
described in this document for book-entry transfer. These materials must
reach the depositary before the Offer expires. Detailed instructions are
contained in the letter of transmittal and on pages 10 through 13 of this
document.
- If you are a record holder but your stock certificate is not available or
you cannot deliver it to the depositary before the offer expires, you may
be able to tender your Common Shares using the enclosed notice of
guaranteed delivery. Please call D.F. King & Co., Inc., our information
agent for the Offer, at 800-928-0153 for assistance. See page 12 for
further details.
- If you hold your Common Shares through a broker or bank, you should
instruct your broker or bank totender your Common Shares. See Section 3,
pages 10 through 13 for further details.
CAN I WITHDRAW MY PREVIOUSLY TENDERED SHARES?
If, after tendering your Common Shares in the Offer, you decide that you do
NOT want to accept the Offer, you can withdraw your Common Shares by so
instructing the depositary before the Offer expires. If you tendered by
giving instructions to a broker or bank, you must instruct the broker or
bank to arrange for the withdrawal of your Common Shares. See Section 4,
page 14 for further details.
WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE OFFER?
The Company's Board of Directors has determined that, based on the
Company's current financial condition, its inability to obtain financing
for its operations, which could result in the Company filing for
bankruptcy, recent bid prices for the Common Shares on the OTC Bulletin
Board and the Company's current book value, the Offer is in the best
interests of the Company and its stockholders, and has voted to recommend
to theCompany stockholders acceptance of the Offer. The Company's Board of
Directors recommends that Company stockholders tender their shares in the
Offer. See "Introduction" for further details.
WILL THERE BE A SUBSEQUENT OFFERING PERIOD?
- - We may give stockholders who do not tender in the Offer another opportunity to
tender at the same price in a subsequent offering period. See Section 1, page 9
for further details.
- The subsequent offering period, if any, will begin on the day we announce
that we have purchased Common Shares in the Offer and last for three to 20
business days. We may extend the subsequent offering period,but it will not
last more than 20 business days in total. See Section 1, page 9 for further
details.
- There will be no withdrawal rights in the subsequent offering period. See
Section 1, page 9 for further details.
WHAT IS THE VALUE OF MY SHARES AS OF A RECENT DATE?
- The average of the closing bid prices for Common Shares as reported on
the OTC Bulletin Board over the 20 trading days immediately prior to the
date before we publicly announced on April 26, 2000 the Offe to acquire the
Common Shares was $0.84 per Common Share. See Section 5, page 15 for
further information.
- The closing bid price for the Common Shares on the OTC
Bulletin Board was $0.72 per Common Share on April 24, 2000,
two trading days before we announced the Offer to acquire
Common Shares.
- The current book value of the Company is $1,248,485, or $0.33 per Common
Share; the current liquidation value of the Company, which is negative, is
approximately $(1.00) per Common Share; market prices of the Common Shares
over the past 90 days ranged between $0.72 and $1.00 per Common Share; and
Common Shares have only traded on 25 out of the past 60 trading days, and
during such period, the total number of Common Shares traded amounted to
less than one-half of 1%of the total outstanding Common Shares. See Section
5, page 15 for more information.
- Before deciding whether to tender, you should obtain a current market
quotation for the Common Shares.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
If you have questions about the offer or require additional information or
assistance, you can call our information agent, D.F. King & Co., Inc., at
800-928-0153.
- 29 -
To: All Holders of Shares of Common Stock of CSI Computer Specialists, Inc.
INTRODUCTION
Interactive Systems, Inc. ("ISI"), an affiliate of CSI Computer Specialists,
Inc. (the "Company"), is offering to purchase all outstanding shares of common
stock, par value $0.001 per share (the "Common Shares"), of
the Company, except those Common Shares already owned by Mr. Donald C. Weymer,
ISI's founder, Chief Executive Officer, President, a Director and 98%
shareholder, at a purchase price of $1.00 per share, net to the seller in cash
(less any required withholding taxes), without interest. The offer is being made
upon the terms and subject to the conditions set forth in this offer to purchase
and in the related letter of transmittal (which, together, constitute the
"Offer"). As used in thisdocument, the term "Offer" includes any subsequent
offering period, as described in Section 1.
Stockholders of record who hold Common Shares registered in their name and
tender the Common Shares directly to Continental Stock Transfer & Trust Company
(the "Depositary") will not be required to pay brokerage fees or commissions or,
except as described in Instruction 6 of the letter of transmittal, stock
transfer taxes on the sale of the Common Shares in the Offer. Stockholders who
hold their Common Shares through a bank or broker should check with such
institution as to whether they will be charged any service fees. However, if you
do not complete and sign the Substitute Form W-9 included in the letter
oftransmittal, you may be subject to a required backup United States federal
income tax withholding of 31% of the gross proceeds payable to you. See Section
3.We will pay all charges and expenses the Depositary and D.F. King & Co., Inc.
(the "Information Agent") incur in connection with the Offer. See Section 12.
THE COMPANY'S BOARD OF DIRECTORS HAS DETERMINED, BASED ON THE
COMPANY'S CURRENT FINANCIAL CONDITION, ITS INABILITY TO OBTAIN FINANCING FOR
ITS OPERATIONS, WHICH COULD RESULT IN THE COMPANY FILING FOR BANKRUPTCY, RECENT
BID PRICES FOR THE COMMON SHARES ON THE OTC BULLETIN BOARD (THE "OTCBB") AND THE
COMPANY'S CURRENT BOOK VALUE, THAT THE OFFER IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS, AND HAS VOTED TO RECOMMEND TO THE COMPANY
STOCKHOLDERS ACCEPTANCE OF THE OFFER. THE COMPANY'S BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS TENDER THEIR COMMON SHARES IN THE OFFER.
A copy of the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 is being mailed with this Offer. Stockholders are urged to read
the Company's Solicitation/Recommendation Statement in its entirety.
The Offer is not conditioned on any minimum number of Common Shares being
tendered. The Offer is, however, subject to certain customary terms and
conditions. See Sections 1 and 10.
To our knowledge after making reasonable inquiry, except for Mr.
Donald C. Weymer, all of the executive officers, directors or other
affiliates of the Company who hold Common Shares currently intend to tender
such
Common Shares to us in the Offer. To our knowledge, after making reasonable
inquiry, none of the executive officers and other affiliates of Company, except
those officers who serve on the Company's Board of Directors, has made a
recommendation either in support of or opposed to the transaction.
The Company has informed us that, as of April 24, 2000, there were 3,715,888
Common Shares issued and outstanding and 1,930,029 Common Shares reserved for
issuance upon the exercise of outstanding stock options and warrants.
THE OFFER IS CONDITIONED UPON THE FULFILLMENT OF THE CONDITIONS DESCRIBED IN
SECTION 10. THE INITIAL OFFERING PERIOD OF THE OFFER WILL EXPIRE AT 5:00 P.M.,
EASTERN TIME, ON TUESDAY, MAY 23, 2000, UNLESS WE EXTEND IT.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. YOU SHOULD READ THEM CAREFULLY BEFORE YOU MAKE ANY DECISION WITH
RESPECT TO THE OFFER.
SPECIAL FACTORS
I. BACKGROUND OF THE OFFER
The Company commenced operations in 1994 and has operated at a loss
every year since 1996. In 1997, in an effort to rebound from its 1996 losses,
the Company began to implement a strategy of growth and acquisition
that its Board of Directors anticipated would expand the Company's
technological expertise and customer base. As part of this strategy, the
Company acquired three computer services companies, Cintronix, Inc.
("Cintronix"), Advanced Network Systems and Phoenix Service, Inc. ("Phoenix
Service") in 1997. The Company's management had
hoped that the acquisitions of Cintronix and Advanced Network Systems would
further the Company's goal of developing regional clusters of sales and service
representatives to improve customer service and to gain greater
market penetration. The expected integration of these two acquisitions and
the projected increase in marketing and decrease in costs due to economies
of scale failed to occur during 1998. Only the Phoenix Service acquisition
provided significant expansion in growing the Company's customer base
profitably. As a result of the poor performance of the two acquisitions, in
1998 the Company took a one-time charge of approximately $1.7 million to
write down the carrying value of the acquired companies due to the
impairment of the related assets, primarily goodwill.
On May 19, 1998, the Company was notified by the Nasdaq Stock Market
that the Common Shares, which were traded on the SmallCap Market, had failed
to maintain a closing bid price greater than or equal to $1.00 per
Common Share. Although the Company was granted a temporary exception to the
minimum bid price requirement, the requirement was still not met by the end of
the exception period, August 18, 1998. The Common Shares were delisted from the
SmallCap Market on August 24, 1998.
In an effort to provide liquidity for its shareholders during this period of
financial downturn, in June 1998 the Company contacted Ferris, Baker, Watts,
Incorporated ("Ferris Baker") regarding a potential merger of the Company or
sale of all or part of the Common Shares. On June 23, 1998,after negotiations,
the Company retained Ferris Baker as its financial advisor to seek out
prospective purchasers and to assist the Company inthe negotiation of any
proposed transactions.
Over the course of the ensuing 12 months, Ferris Baker contacted 25
prospective buyers in the computer hardware industry, including Decision
One, Anacomp, STK, Amdahl and Unisys. While many of the prospective
candidates that were approached responded favorably upon initialcontact,
none of the negotiations materialized into an offer for the Common Shares
or the Company's assets.
After the termination of the contract with Ferris Baker, the Company
made further attempts from July 1999 to February 2000 to pursue transactions
that would provide its shareholders with liquidity. Discussions and
negotiations were held with Span Optics, COSI Computer Outsourcing, Anacomp, El
Camino, Strategia and VariLease,
none of which materialized into an offer for the Common Shares or the
Company's assets.
Since December 1998, the Company has had difficulty obtaining
financing to meet its short-term working capital requirements and has had to
rely on funding from affiliates. The Company was able to obtain a credit
facility, which includes a revolving line of credit, with Crestar Bank in
1997 to fund its operations. The credit facility expired in October 1998 and
continued under a forbearance agreement until May 1999, so that
Crestar Bank could reevaluate the Company's financial operations. Crestar Bank
decided not to extend the credit facility for another year. However, Crestar
Bank extended the credit line while the Company attempted to obtain
alternative financing. The Company attempted without success to establish a
new line of credit with several lenders, including IBM Credit Corporation,
FINOVA Distribution, FINOVA Special Credit Division and Sandy Spring
National Bank ("Sandy Spring"). In October 1999, Crestar Bank reduced the credit
line from $2,000,000 to $1,750,000. On March 6, 2000, Crestar Bank notified the
Company of its intention to terminate the revolving credit line by reducing the
line from $1,750,000 to $1,500,000 on March 17, 2000, and $100,000 per week
thereafter until the credit line reaches zero. The Company has informed us that
it cannot continue to operate under this financing arrangement and could face
bankruptcy if it is unable to secure alternative financing for its operations
and the repayment of the credit facility. The credit line is secured by
substantially all of the Company's assets. At April 24, 2000, there was
$1,500,000 outstanding under the credit line.
In response to the reduction of available funds under the Crestar Bank credit
facility, during fiscal years 1999 and 2000, we advanced approximately $375,000
and $595,000, respectively, to the Company to cover operating expenses. We
provided the funding to the Company at an interest rate of prime plus 1% per
annum, with principal repayable on our demand. Mr. Donald C. Weymer owns
approximately 98% of our equity securities. Mr. Weymer is our founder, Chief
Executive Officer, President and a Director. In addition, Mr. Weymer owns
approximately 32% of the Common Shares. Mr. Weymer is the Company's Chairman of
the Board of Directors, Chief Executive Officer and Secretary.
In November 1999, we began discussions with the Company to assist it
in working out the Crestar Bank credit facility. On March 30, 2000, we entered
into an amended and restated loan and security agreement with our
lender, Sandy Spring, to increase our existing line of credit, provided,
among other things, that we use a portion of the funds available to repay
the amounts due under the Company's credit facility with Crestar Bank. The
increased line of credit is secured by our assets and those of our
subsidiary, National Conversion Systems, Inc.("NCS"). It is also personally
guaranteed by Mr. Weymer. We intend to repay the amounts owed by the
Company under the Crestar Bank credit facilityupon the acceptance for
payment of all Common Shares validly tendered pursuant to the Offer.
In addition to the Offer we are making herein, we proposed to the
Company two other acquisition alternatives: a "two-step" tender offer, which
is a tender offer followed by a merger, or a merger. The Company advised us
that its Board of Directors unanimously agreed on March 24, 2000 that a tender
offer would be in the best interests of the Company and its shareholders
because (i) it would not be as costly and protracted as the
other two transactions proposed by ISI, (ii) it would enable the Company to pay
off the Crestar Bank credit facility, thereby avoiding a sale of the Company's
assets by Crestar Bank to cover the Company's indebtedness under that credit
facility, and (iii) it would provide liquidity to those Company stockholders who
want it at a time when the Company is experiencing financial difficulty. The
Company also advised us that its Board of Directors supports the Offer because
the Company's accountants, Goldstein GolubKessler, LLP, recently issued a "going
concern opinion" in connection with their report on the Company's 1999 financial
statements. Such an opinion was also issued with respect to the Company's 1998
financial statements.
We arrived at the tender price of $1.00 per Common Share in cash by taking into
consideration the following factors: (i) that the current book value of the
Company is $1,248,485, or $0.33 per Common Share; (ii) that we estimate the
current liquidation value of the Company, which is negative, to be $(1.00) per
Common Share; (iii) that market prices of the Common Shares over the past 90
days ranged between $0.72 and $1.00 per Common Share; and (iv) that Common
Shares have only traded on 25 out of the past 60 trading days, and during such
period,the total number of Common Shares traded amounted toless than one-half of
1% of the total outstanding Common Shares. See Section 5, page 15 for more
information.
II. PURPOSE and PLANS
The purpose of the Offer is to enable us and our affiliates to acquire control
of, and the entire equity interest in, the Company. Our current intention is to
retain the Common Shares that we acquire in the Offer. As discussed above in
"Background of the Offer," we have decided to make the Offer at this time in
lieu of engaging in a "two-step" tender offer and merger transaction or a merger
transaction because of the Company's need to workout its credit facility with
Crestar Bank quickly. The Offer is appropriate at this time because it will best
serve the interests of the Company and its shareholders and maximize the value
of the Company. We intend to operate the Company as a majority owned-subsidiary
if we, along with Mr. Donald C. Weymer, hold a majority of the Common Shares
upon the acceptance for payment of all Common Shares validly tendered pursuant
to the Offer. This should allow us to reduce certain of theCompany's costs and
expenses and to capitalize on certain synergies between ISI and the Company.If
all of the Company's stockholders do not tender all of their Common Shares, we
intend to evaluate whether, under the circumstances at that time, it would be in
the best interests of ISI and the Company to acquire additional Common Shares by
means of a second tender offer, merger or other transaction. Except as noted in
this Offer, the Company and ISI have no present plans that would result in any
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, or sale or transfer of a material amount of assets, involving the
Company or any subsidiary of the Company or any other material changes in the
Company's capitalization,dividend policy, corporate structure, business or
composition of its management or Board of Directors.
This Offer was not designed to be a "going private transaction" under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") because
each class of the equity securities of the Company is already held by less
than 300 holders of record. In addition, the Company has advised us that it
does not intend to file a Form 15 to terminate its registration under the
Exchange Act. Rather, the Company intends to remain a public company and to
continue to file periodic reports, and to satisfy the other requirements
under the Exchange Act, so that the Common Shares will remain listed on the
OTCBB. Under the rules of the OTCBB, the Company must remain a reporting
company under the Exchange Act in order for the Common Shares to remain
listed on the OTCBB.
III. MATERIAL UNITED STATES FEDERAL INCOME TAX EFFECTS
Your receipt of cash for the Common Shares in the Offer will be a taxable
transaction for United States federal income tax purposes and may also be a
taxable transaction under applicable state, local, foreign and other tax
laws. For United States federal income tax purposes, if you sell or
exchange your Common Shares in the Offer, you would generally recognize
gain or loss equal to the difference between the amount of cash received
and your tax basis for the Common Shares that you sold or exchanged. That
gain or loss will be capital gain or loss (assuming you hold your Common
Shares as a capital asset), and any such capital gain or loss will be long
term if, as of the date of sale or exchange, you have held the Common
Shares for more than one year or will be short term if, as of such date,
you have held the Common Shares for one year or less.
The discussion above may not be applicable to certain types of
stockholders, including stockholders who acquired the Common Shares through
the exercise of employee stock options or otherwise as
compensation,individuals who are not citizens or residents of the United
States, foreign corporations, or entities that are otherwise subject to
special tax treatment under the Internal Revenue Code of 1986, as amended
(such as insurance
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE OFFER,
INCLUDING UNITED STATES FEDERAL, STATE AND LOCAL AND FOREIGN TAX
CONSEQUENCES.
IV. INTERESTS OF CERTAIN PERSONS
BENEFICIAL OWNERSHIP OF SHARES. The following table sets forth information,
as of April 24, 2000, regarding the ownership of Common Shares by each
person known by the Company to be the beneficial owner of more than 5% of
the outstanding CommonShares, and any director or executive officer of ISI,
the Company or any of their affiliates.
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS (1)
Donald C. Weymer 1,195,000 32.16%
Chairman of the Board of Directors, Chief Executive
Officer and Secretary, CSI; and Chief Executive Officer,
President and a Director, ISI
William F. Pershin 640,000 17.21%
President and a Director, CSI
Robert V. Windley 100,000(2) 2.69%
Acting Chief Financial Officer, CSI; and Executive Vice
President and a Director, ISI
Lynn M. Weymer 65,000 1.75%
Secretary and a Director, ISI
David A. Chapp 0 0.00%
Director, CSI
All CSI and ISI directors and executive
officers as a group (5 persons) 2,000,000 53.81%
----------------
(1) Unless otherwise noted, each person has sole voting and investment
power with respect to all the Common Shares listed opposite such
person's name. Beneficial ownership and percentage of class are
calculated under Rule 13d-3 of the Exchange Act.
(2) Consists of exercisable options to purchase Common Shares.
RELATED PARTY TRANSACTIONS. Mr. Donald C. Weymer currently owns
approximately 98% of our equity securities. Mr. Weymer is our founder,
Chief Executive Officer, President and a Director. In addition, Mr.Weymer
currently owns approximately 32% of the Company's outstanding Common
Shares. Mr. Weymer is the Company's Chairman of the Board of Directors,
Chief Executive Officer and Secretary.
Mr. Robert V. Windley, our Executive Vice President and a Director, also
serves as the Company's Acting Chief Financial Officer. Mr. Windley has an
exercisable option to purchase 100,000 Common Shares.
In addition, Ms. Lynn M. Weymer, our Secretary and a Director, is the
daughter of Mr. Donald C. Weymer. Ms. Weymer beneficially owns 65,000
Common Shares.
The Company has a contract with ISI to provide computer maintenance
services. For the years ended December 31, 1999 and 1998, the Company
recognized revenue approximating $1,165,000 and $1,061,000 from
ISI,respectively, including equipment sales of $52,000 and $518,400,
respectively.
On June 30, 1999, ISI acquired for $200,000 certain assets and liabilities
of Cintronix, a wholly-owned subsidiary of the Company, including the
assumption of Cintronix's office sublease and certain employment
agreements. The book value of these assets and liabilities did not differ
materially from their purchase price. ISI also acquired the option to
purchase all of the shares of common stock of Cintronix for the sum of
$10.00 per share.
THE OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
any extension or amendment), we will purchase all the Common Shares validly
tendered and not withdrawn in accordance with the procedures set forth in
Section 4 on or prior to the Expiration
Date. The term "Expiration Date" means 5:00 P.M., Eastern Time, on Tuesday,
May 23, 2000, unless we extend the period of time for which the initial
offering period of the Offer is open, in which case the term "Expiration
Date" will mean the time and date at which the initial offering period of the
Offer, as so extended, will expire.
Upon the terms and subject to the conditions of the Offer, we will
purchase, as soon as permitted under the terms of the Offer, all the Common
Shares validly tendered and not withdrawn prior to the Expiration Date.
If, at the Expiration Date the conditions to the Offer described in Section
10 have not been satisfied or earlier waived, then we may, in our sole
discretion, extend the Expiration Date for an additional period or periods
of time by giving oral or written notice of the extension to the Depositary
and by publicly announcing the new Expiration Date. During any extension of
the initial offering period (as opposed to the subsequent offering period),
all the Common Shares previously tendered and not withdrawn will remain
subject to the Offer and subject to your right to withdraw. See Section 4.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "SEC"), we also reserve the right, in our sole discretion,
at any time or from time to time, to (a) terminate the Offer (whether or
not any of the Common Shares have previously been purchased pursuant to the
Offer) if any condition referred to in Section 10 has not been satisfied or
earlier waived or upon the occurrence of any event specified in Section 10;
and (b) waive any condition or otherwise amend the Offer in any respect, in
each case, by giving oral or written notice of the termination, waiver or
amendment to the Depositary and, other than, in the case of any waiver, by
making a public announcement thereof. We acknowledge that (a) Rule 14e-1(c)
under the Exchange Act requires us to pay the consideration offered or
return the Common Shares tendered promptly after the termination of the
Offer and (b) we may not delay the purchase of, or payment for, any of the
Common Shares upon the occurrence of any event specified in Section 10
without extending the period of time during which the Offer is open.
The rights we reserve in the preceding paragraph are in addition to our
rights pursuant to Section 10. Any extension, termination or amendment of
the Offer will be followed as promptly as practicable by a public
announcement. An announcement in the case of an extension will be made no
later than 9:00 a.m., Eastern Time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which
we may choose to make any public announcement, subject to applicable law
(including those rules under the Exchange Act that require that material
changes be promptly disseminated to holders of the Common Shares), we will
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to the Dow Jones News
Service, Reuters Newswire, Bloomberg Business News and PR Newswire.
If we make a material change in the terms of the Offer, or if we waive
a material condition to the Offer, we will extend the Offer and
disseminate additional Offer materials to the extent required by Rules
14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum
period during which a tender offer must remain open following material
changes in the terms of the offer, other than a change in price or a
change in percentage of securities sought, depends upon the facts and
circumstances, including the materiality of the changes. In the SEC's
view, a tender offer should remain open for a minimum of five business
days from the date the material change is first published, sent or
given to stockholders, and, if material changes are made with respect
to information that approaches the significance of price and the
percentage of securities sought, a minimum of ten business days may be
required to allow for adequate dissemination and investor response.
With respect to a change in price, a minimum ten business day period
from the date of the change is generally required to allow for
adequate dissemination to stockholders. Accordingly, if, prior to the
Expiration Date, we decrease the number of Common Shares being sought,
or increase or decrease the consideration offered pursuant to the
Offer, and if the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from the date that
notice of the increase or decrease is first published, sent or given
to holders of the Common Shares, we will extend the Offer at least
until the expiration of such period of ten business days. For purposes
of theOffer, a "business day" means any day other than a Saturday,
Sunday or a United States federal holiday and consists of the time
period from 12:01 a.m. through 12:00 midnight, Eastern Time.
THE OFFER IS CONDITIONED UPON THE SATISFACTION OF THE CONDITIONS SET
FORTH IN SECTION 10.
Consummation of the Offer is subject to the conditions set forth in
Section 10. We reserve the right, in accordance with applicable rules
and regulations of the SEC, to waive any or all of those conditions.
If,by the Expiration Date, any or all of those conditions have not
been satisfied, we may, in the exercise of our good faith judgment,
elect to (a) extend the Offer, and, subject to applicable withdrawal
rights, retain all of the tendered Common Shares until the expiration
of the Offer, as extended, subject to the terms of the Offer; (b)
waive all of the unsatisfied conditions, and, subject to complying
with applicable rules and regulations of the SEC, accept for payment
all of the Common Shares so tendered; or (c) terminate the Offer and
not accept for payment any of the Common Shares and return all of the
tendered Common Shares to the tendering Company stockholders. In the
event that we waive any condition set forth in Section 10, the SEC
may, if the waiver is deemed to constitute a material change to the
information previously provided to the Company stockholders,require
that the Offer remain open for an additional period of time or
that we disseminate information concerning such waiver.
The Company has provided us with its stockholder lists and security
position listings for the purpose of disseminating the Offer to
holders of the Common Shares. We will mail this offer to purchase, the
related letterof transmittal and other relevant materials to record
holders of the Common Shares, and we will furnish the materials to
brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees,appear on the
securityholder lists or, if applicable, that are listed as
participants in a clearing agency's security position listing, for
forwarding to beneficial owners of the Common Shares.
SUBSEQUENT OFFERING PERIOD. We reserve the right, in accordance with
the rules and regulations of the SEC, to provide a subsequent offering
period of three business days to 20 business days after the expiration
of the initial offering period and our purchase of the Common Shares
tendered. A subsequent offering period would give the Company
stockholders who do not tender in the initial offering period another
opportunity to tender their Common Shares and receive the same Offer
price. If we elect to provide a subsequent offering period, we will
disseminate additional Offer materials, if necessary. During the
subsequent offering period, Company stockholders will not have the
right to withdraw the Common Shares previously tendered or tendered
during the subsequent offering period.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR THE COMMON SHARES
Upon the terms and subject to the conditions of the Offer (including,
if we extend or amend the Offer, the terms and conditions of the Offer
as so extended or amended), we will purchase, by accepting for
payment, and will pay for, all of the Common Shares validly tendered
and not withdrawn (as permitted by Section 4) prior to the Expiration
Date promptly after the later of (a) the Expiration Date and (b) the
satisfaction or waiver of the conditions to the Offer set forth in
Section 10. In addition, subject to applicable rules of the SEC, we
reserve the right to delay acceptance for payment of, or payment for,
the Common Shares pending receipt of any governmental approvals set
forth in Section 11.For information with respect to approvals that we
are required to obtain prior to the completion of the Offer, see
Section 11.
In all cases, we will pay for the Common Shares purchased in the
Offer, including during the subsequent offering period, only after
timely receipt by the Depositary of (a) certificates representing the
Common Shares ("Company Certificates") or timely confirmation (a
"Book-Entry Confirmation") of the book-entry transfer of the Common
Shares into the Depositary's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3; (b) the appropriate letter of transmittal (or a
facsimile), properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined below) in
connection with a book-entry transfer; and (c) any other documents
that the letter of transmittal requires.
The term "Agent's Message" means a message transmitted by the
Book-Entry Transfer Facility to, and received by, the Depositary and forming
a part of a Book-Entry Confirmation, which states that the Book-Entry
Transfer Facility has received an express acknowledgment from the participant
in the Book-Entry Transfer Facility tendering the Common Shares that are the
subject of the Book-Entry Confirmation that the participant has received and
agrees to be bound by the terms of the letter of transmittal participant.
For purposes of the Offer, we will be deemed to have accepted for
payment, and purchased, the Common Shares validly tendered and not
withdrawn as, if and when we give oral or written notice to the
Depositary of our acceptance of the Common Shares for payment pursuant
to the Offer.In all cases, upon the terms and subject to the
conditions of the Offer, payment for the Common Shares purchased
pursuant to the Offer, including during any subsequent offering
period, will be made by deposit of the purchase price for the Common
Shares with the Depositary, which will act as agent for the tendering
Company stockholders for the purpose of receiving payment from us and
transmitting payment to the validly tendering Company stockholders.
UNDER NO CIRCUMSTANCES WILL WE PAY INTEREST ON THE PURCHASE PRICE FOR
THE COMMON SHARES, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW.
If we do not purchase any of the tendered Common Shares pursuant to
the Offer for any reason, or if you submit the Company Certificates
representing more Common Shares than you wish to tender, we will return the
Company Certificates representing the unpurchased or untendered Common Shares,
without expense to you (or, in the case of the Common Shares delivered by
book-entry transfer into the Depositary's account at the Book-Entry
Transfer Facility pursuant to the procedures set forth in Section 3,
the Common Shares will be credited to an account maintained within the
Book-Entry Transfer Facility), as promptly as practicable following
the expiration,termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, WE INCREASE THE PRICE OFFERED TO
HOLDERS OF THE COMMON SHARES IN THE OFFER, WE WILL PAY THE INCREASED
PRICE TO ALL HOLDERS OF THE COMMON SHARES THAT WE PURCHASE IN THE
OFFER, WHETHER OR NOT THE COMMON SHARES WERE TENDERED BEFORE THE
INCREASE IN PRICE.
We reserve the right to transfer or assign, in whole or from time to
time in part, to one or more of our subsidiaries or affiliates the
right to purchase all or any portion of the Common Shares tendered in
the Offer,butany such transfer or assignment will not relieve us of
our obligations under the Offer or prejudice your rights to receive
payment for the Common Shares validly tendered and accepted for
payment in the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES
VALID TENDER OF THE COMMON SHARES. Except as set forth below, in
order for you to tender the Common Shares in the Offer, the
Depositary must receive the letter of transmittal (or a facsimile
thereof), properly completed and signed, together with any
required signature guarantees or an Agent's Message in connection
with a book-entry delivery of the Common Shares and any other
documents that the letter of transmittal requires at its address
set forth on the back cover of this offer to purchase on or prior
to the Expiration Date, and either (a) you must deliver the
Company Certificates representing the tendered Common Shares to
the Depositary or you must cause your Common Shares to be
tendered pursuant to the procedure for book-entry transfer set
forth below and the Depositary must receive Book-Entry
Confirmation, in each case, on or prior to the Expiration Date,
or (b) you must comply with the guaranteed delivery procedures
set forth below.
THE METHOD OF DELIVERY OF COMPANY CERTIFICATES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR OPTION
AND SOLE RISK, AND DELIVERY WILL BE CONSIDERED MADE ONLY WHEN THE
DEPOSITARY ACTUALLY RECEIVES THE COMPANY CERTIFICATES. IF
DELIVERY IS BY MAIL, WE RECOMMEND USING REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU
SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account
with respect to the Common Shares at the Book-Entry Transfer
Facility for purposes of the Offer within two business days after
the date of the Offer. Any financial institution that is a
participant in the system of the Book-Entry Transfer Facility may
make book-entry delivery of the Common Shares by causing the
Book-Entry Transfer Facility to transfer the Common Shares into
the Depositary's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures.
However, although the Common Shares may be delivered through
book-entry transfer into theDepositary's account at a Book-Entry
Transfer Facility, the Depositary must receive the letter of
transmittal (or facsimile thereof), properly completed and
signed, with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other
required documents, at its address set forth on the back cover of
this offer to purchase on or before the Expiration Date, or you
must comply with the guaranteed delivery procedure set forth
below.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
SIGNATURE GUARANTEES. A bank, broker, dealer, credit union,
savings association or other entity that is a member in good
standing of the Securities Transfer Agents Medallion Program (an
"Eligible Institution") must guarantee signatures on all letters
of transmittal, unless the Common Shares tendered are tendered
(a) by a registered holder of the Common Shares that has not
completed either the box labeled "Special Payment
Instructions"or the box labeled "Special Delivery Instructions" on the
letter of transmittal or (b) for the account of an Eligible
Institution. See Instruction 1 of the letter of transmittal.
If the Company Certificates are registered in the name of a
person other than the signer of the letter of transmittal, or if
payment is to be made to, or Company Certificates for unpurchased
Common Shares are to be issued or returned to, a person other
than the registered holder, then the tendered Company
Certificates must be endorsed or accompanied by appropriate stock
powers, signed exactly as the name or names of theregistered
holder or holders appear on the Company Certificates, with the
signatures on the Company Certificates or stock powers guaranteed
by an Eligible Institution as provided in the letter of
transmittal. See Instructions 1 and 5 of the letter of
transmittal.
If the Company Certificates are forwarded separately to the
Depositary, a properly completed and duly executed letter of transmittal
(or manually signed facsimile) must accompany each delivery of the Company
Certificates.
GUARANTEED DELIVERY. If you want to tender your Common Shares in
the Offer and your Company Certificates are not immediately
available or time will not permit all required documents to reach
the Depositary on or before the Expiration Date or the procedures
for book-entry transfer cannot be completed on time, your Common
Shares may nevertheless be tendered if you comply with all of the
following guaranteed delivery procedures:
- your tender is made by or through an Eligible Institution;
- the Depositary receives, as described below, a properly completed
and signed Notice of Guaranteed Delivery, substantially in the
form made available by us, on or before the Expiration Date; and
- the Depositary receives the Company Certificates (or a
Book-Entry Confirmation) representing all of the tendered Common
Shares, in proper form for transfer together with a properly
completed and duly executed letter of transmittal (or manually
signed facsimile), with any required signature guarantees (or, in
the case of a book-entry transfer, an Agent's Message) and any
other documents required by the letter of transmittal within
three trading days after the date of execution of the Notice of
Guaranteed Delivery.
You may deliver the Notice of Guaranteed Delivery by hand, mail
or facsimile transmission to the Depositary. The Notice of
Guaranteed Delivery must include a guarantee by an Eligible
Institution in the form set forth in the Notice of Guaranteed
Delivery and a representation that you own the Common Shares
being tendered within the meaning of Rule 14e-4 under the
Exchange Act. Guaranteed delivery procedures are not available in
the subsequent offering period.
Notwithstanding any other provision of the Offer, we will pay for
the Common Shares only after timely receipt by the Depositary of
the Company Certificates for, or, of Book-Entry Confirmation with
respect to, the Common Shares, a properly completed and duly
executed letter of transmittal (or facsimile thereof), together
with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents
required by the appropriate letter of transmittal. Accordingly,
payment might not be made to all of the tendering stockholders at
the same time and will depend upon when the Depositary receives
the Company Certificates or Book-Entry Confirmation that the
Common Shares have been transferred into the Depositary's account
at a Book-Entry Transfer Facility.
BACKUP UNITED STATES FEDERAL INCOME TAX WITHHOLDING. Under the
backup United States federal income tax withholding laws
applicable to certain stockholders (other than certain exempt
stockholders, including, among others, all corporations and
certain foreign individuals), the Depositary may be required to
withhold 31% of the amount of any payments made to those
stockholders pursuant to the Offer. To prevent backup United
States federal income tax withholding, you must provide the
Depositary with your correct taxpayer identification number and
certify that you are not subject to backup United States federal
income tax withholding by completing the Substitute Form W-9
included in the letter of transmittal. Non-United States holders
must submit a completed Form W-8 BEN to qualify as an exempt
recipient. These forms may be obtained from the Depositary. See
Instructions 11 and 12 of the letter of transmittal.
APPOINTMENT AS PROXY. By executing the letter of transmittal, you
irrevocably appoint our designees, and each of them, as your
agents, attorneys-in-fact and proxies, with full power of
substitution in each, in the
manner set forth in the letter of transmittal, to the full extent of your
rights with respect to the Common Shares that you tender and that we accept
for payment and with respect to any and all other Common Shares and other
securities or rights issued or issuable in respect of those Common Shares on
or after the date of this
Offer. All such powers of attorney and proxies will be considered irrevocable
and coupled with an interest in the tendered Common Shares. This appointment
will be effective when we accept your Common Shares for payment in
accordance with the terms of the Offer. Upon such acceptance for payment,
all other powers of attorney and
proxies given by you with respect to your Common Shares and such other
securities or rights prior to such payment will be revoked, without further
action, and no subsequent powers of attorney and proxies may be given by you
(and, if given, will not be deemed effective). Our designees will, with
respect to the Common Shares and such
other securities and rights for which the appointment is effective, be
empowered to exercise all of your voting and other rights as they, in their
sole discretion, may deem proper at any annual or special meeting of the
Company stockholders, or any adjournment or postponement thereof, or by
consent in lieu of any such meeting or otherwise. In order for the Common
Shares to be deemed validly tendered, immediately upon the acceptance for
payment of such Common Shares, we or our designee must be able to exercise
full voting rights with respect to
such Common Shares and other securities, including voting at any meeting
of the Company stockholders.
DETERMINATION OF VALIDITY. All questions as to the form of
documents and the validity, eligibility (including time of
receipt) and acceptance for payment of any tender of the Common
Shares will be determined by us, in our sole discretion, which
determination will be final and binding on all parties. We
reserve the absolute right to reject any or all tenders
determined by us not to be in proper form or the acceptance of or
payment for which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in any
tender of the Common Shares of any particular Company
stockholder, whether or not similar defects or irregularities are
waived in the case of other Company stockholders.
No tender of the Common Shares will be deemed to have been
validly made until all defects and irregularities with respect to the
tender have been cured or waived by us. None of ISI, the Company, the
Depositary, the Information Agent or any of their respective
affiliates or assigns, or any other individual or entity will be
under any duty to give any notification of any defects or
irregularities in tenders or incur anyliability for failure to
give any such notification.
Our acceptance for payment of Common Shares tendered pursuant to any
of the procedures described above will constitute a binding agreement between
us and you upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS
Except as described in this Section 4, tenders of the Common
Shares made in the Offer are irrevocable. You may withdraw Common
Shares that you have previously tendered in the Offer at any time
on or before the Expiration Date, and, unless theretofore
accepted for payment as provided herein, you may also withdraw
the Common Shares at any time after June 25, 2000; provided,
however, you may not withdraw the Common Shares during any
subsequent offering period.
If, for any reason, acceptance for payment of any of the Common Shares
tendered in the Offer is delayed, or we are unable to accept for payment or
pay for the Common Shares tendered in the Offer, then, without
prejudice to our rights set forth in this document, the
Depositary may, nevertheless, on our behalf, retain the Common
Shares that you have tendered, and you may not withdraw your
Common Shares, except to the extent that you are entitled to and
duly exercise withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent
required by law.
In order for your withdrawal to be effective, you must timely
deliver a written or facsimile transmission notice of withdrawal to the
Depositary at the address set forth on the back cover of this offer to
purchase. Any such notice of withdrawal must specify your name, the number of
Common Shares that you want to withdraw, and (if the Company Certificates have
been tendered) the name of the registered holder of the Common
Shares as shown on the Company Certificate if different from your name. If
the Company Certificates have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Company
Certificates, you must submit the serial numbers shown on the particular
Company Certificates evidencing the Common Shares to be withdrawn and an
Eligible Institution must guarantee the signature on the notice of
withdrawal, except in the case of Common Shares tendered for the account of
an Eligible Institution. If the Common Shares have been tendered pursuant to
the procedures for book-entry transfer set forth in Section 3, the
notice of withdrawal must specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Common Shares, in which case a notice
of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the first sentence of this
paragraph. You may not rescind a withdrawal of the Common Shares.
Any Common Shares that you withdraw will be considered not
validly tendered for purposes of the Offer, but you may tender
your Common Shares again at any time before the Expiration Date
by following any of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by us, in our sole discretion,
which determination will be final and binding. None of ISI, the
Company, the Depositary, the Information Agent or any of their
respective affiliates or assigns, or any other individual or
entity will be under any duty to give any notification of any
defects or irregularities in anynotice of withdrawal or incur any
liability for failure to give any such notification.
5. PRICE RANGE OF THE COMMON SHARES; DIVIDENDS
The Common Shares are traded on the OTCBB under the symbol "CSIS."
The average of high and low bid prices on the OTCBB for the Common Shares
over the last 20 full days of trading prior to the date before ISI
publicly announced the Offer on April 26, 2000 was $0.84 per share. On April
24, 2000, two full days of trading before ISI announced the Offer, the
reported closing bid price on the OTCBB for the Common Shares was $0.72 per
share. The following table sets forth, for the periods indicated, the range of
high and low bid prices for the Common Shares on the OTCBB.
HIGH LOW
FISCAL 1998
First Quarter.................................... 1.50 0.75
Second Quarter................................... 1.06 0.56
Third Quarter.................................... 1.00 0.41
Fourth Quarter................................... 1.00 0.33
FISCAL 1999
First Quarter.................................... 0.75 0.50
Second Quarter................................... 0.88 0.44
Third Quarter.................................... 0.75 0.56
Fourth Quarter................................... 1.00 0.56
FISCAL 2000
First Quarter.................................... 1.00 0.75
Second Quarter (through April 24, 2000).......... 0.91 0.72
The Company has informed us that, as of April 24,
2000, the Common Shares were held by 54 holders of
record. The Company has never declared a cash
dividend.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON SHARES
6. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE COMMON
SHARES; STOCK QUOTATION
Our purchase of the Common Shares pursuant to the Offer could have
the following effects. The purchase of the Common Shares pursuant to the Offer
will reduce the number of Common Shares that might otherwise trade on
the OTCBB and could adversely affect the liquidity and market value of the
remaining Common Shares held by the public, as well as the availability of
quotations for the value of the Common Shares. We cannot predict whether the
reduction in the number of Common Shares would have an adverse or beneficial
effect on the market price for or marketability of the Common Shares or
whether it would cause future market prices to be greater or less than
the tender price. The availability of market quotations would depend upon the
number of holders of Common Shares remaining at such time and the interest in
maintaining a market in the Common Shares on the part of securities firms.
7. INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation. Its principal executive
offices are located at 904 Wind River Lane, Suite 100, Gaithersburg,
Maryland 20878, and its telephone number is (301) 921-8860.
The following description of the Company and its business has
been taken from the Company's Form 10-K for the fiscal year ended
December 31, 1999 (the "1999 Form 10-K"), and is qualified in its
entirety by reference to such report. The Company provides a full
range of computer hardware services, including sales and
maintenance of mainframe and mid-range computer equipment and
parts, network design and installation, computer upgrades, and
installation and de-installation of equipment. The Company
provides its services to commercial customers, agencies of
federal, state and local governments, and universities,
hospitals, and associations in the Mid-Atlantic region of the
United States, including West Virginia, Virginia, Maryland, the
District of Columbia, New Jersey, New York, Connecticut,
Pennsylvania, and in Illinois and California.
The selected financial information of the Company and its
consolidated subsidiaries set forth below has been excerpted and
derived from the 1999 Form 10-K. More comprehensive financial and
other information is included in those reports (including
management's discussion and analysis of financial condition and
results of operations) and in other reports and documents filed
by the Company with the SEC. The financial information set forth
below is qualified in its entirety by reference to the reports
and documents filed by the Company with the SEC and the financial
statements and related notes that they contain. You can examine
these reports and other documents and obtain copies of them in
the manner set forth below.
BALANCE SHEET DATA
AS AT AS AT
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
Current assets $4,096,858 $5,702,481
Noncurrent assets 656,687 1,258,499
Current liabilities 3,944,536 5,291,633
Noncurrent liabilities 0 4,474
Book value per share - basic 0.33 0.53
Book value per share - diluted 0.33 0.53
INCOME STATEMENT DATA
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
(Loss) per common share from
continuing operations - basic $(0.07) $(0.99)
(Loss) per common share from continuing
operations - diluted (0.07) (0.99)
Net (loss) per common share - basic (0.20) (0.99)
Net (loss) per common share - diluted (0.20) (0.99)
The Company files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and
copy any reports, statements or other information filed at the
SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at the SEC's public reference rooms in
New York, New York,and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
rooms. The Company's SEC filings should also be available to the
public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at
http://www.sec.gov.
Although we have no knowledge that any such information is untrue,
we take no responsibility for the accuracy or completeness of information
contained in the Offer with respect to the Company or any of its
subsidiaries or affiliates (other than ISI) or for any failure by the
Company to disclose events that may have occurred or may
affect the significance or accuracy of any such information.
8........ INFORMATION CONCERNING ISI
ISI is a Virginia corporation, whose principal executive offices
are located at 1777 North Kent Street, Arlington, Virginia 22209,
and whose telephone number is (703) 247-5443. Headquartered in
Arlington, Virginia since 1991, we are a national provider of
enterprise infrastructure management services. We provide
information technology outsourcing, enterprise systems management
and not-for-profit solutions to commercial and non-profit
organizations.
Donald C. Weymer owns approximately 98% of our equity securities
and is our founder, Chief Executive Officer, President and a
Director. In addition, Mr. Weymer owns approximately 32% of the
outstanding Common Shares and is the Company's Chairman of the
Board of Directors, Chief Executive Officer and Secretary.
We do not own any Common Shares directly. We have an option
to purchase all outstanding shares of common stock of
Cintronix, a wholly owned subsidiary of the Company.
The name, business address, citizenship, present principal
occupation and employment history for the past five years of each of our
directors and executive officers are set forth in Schedule I to this offer to
purchase.
None of ISI or, to the best knowledge of ISI, any of the persons
listed in Schedule I to this offer to purchase, has during the last five
years (a) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (b) 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, United
States federal or state securities laws or finding any violation
of such laws.
Except as set forth elsewhere in the Offer or Schedule I to this offer
to purchase: (a) neither we nor, to our knowledge, any of the persons listed
in Schedule I or any associate or majority-owned subsidiary of ours or of any
of the persons so listed, beneficially owns or has a right to acquire any of
the Common Shares or any
other equity securities of the Company; (b) neither we nor, to our knowledge,
any of the individuals or entities referred to in clause (a) above or any of
their executive officers, directors or subsidiaries has effected any
transaction in the Common Shares or any other equity securities of the
Company during the past 60 days; (c) neither we nor, to our knowledge, any of
the persons listed in Schedule I to this offer to purchase, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies, consents or
authorizations); (d) in the past two years, there have been no transactions
that would require reporting under the rules and regulations of the SEC
between us or any of our subsidiaries or, to our knowledge, any of the
persons listed in Schedule I, on the one hand, and the Company or any of its
executive officers, directors or affiliates, on the other hand; and (e) in
the past two years, there have been no contacts, negotiations or
transactions between us or any of our subsidiaries or, to our
knowledge, any of the persons listed in Schedule I, on the one
hand, and the Company or any of its subsidiaries or affiliates,
on the other hand, concerning a merger, consolidation or
acquisition, a Offer or other acquisition of securities, an
election of directors or a sale or other transfer of a material
amount of assets.
9. SOURCE AND AMOUNT OF FUNDS
We estimate that the total amount of funds required to purchase all of
the outstanding Common Shares not already held by Mr. Donald C. Weymer pursuant
to the Offer (exclusive of fees and expenses) will be approximately
$2,520,888. We intend to obtain the funds necessary to purchase the Common
Shares pursuant to the Offer and to pay related fees and expenses from an
existing line of credit we have with Sandy Spring and from our working capital.
We intend to obtain the funds necessary to purchase the Common
Shares primarily from an existing $4,000,000 line of credit under a credit
facility that ISI has with Sandy Spring. On March 30, 2000, ISI and
Sandy Spring executed an amended and restated loan and security agreement and
related promissory note to increase the line of credit from $2,000,000 to
$4,000,000, copies of which are filed as Exhibit (b)(1) to a Schedule TO,
which we have filed with the SEC, and are summarized below (the
"Security Agreement").
The Security Agreement, which expires on June 30, 2001, provides
that the funds will be available at an interest rate of 1% above
prime per annum. Interest on the line of credit will be repaid
monthly. The line of credit is the obligation of ISI and will be
jointly and severally guaranteed by Mr. Weymer. In addition, Mr.
Weymer has agreed by separate agreement with Sandy Spring to
subordinate any claims he may have against ISI regarding
indebtedness to claims arising under the Security Agreement with
Sandy Spring.
The line of credit is secured by a first lien security interest
in: all of ISI's and NCS' receivables, inventory and equipment,
and all property and funds of ISI now owned or later acquired;
(b) all of ISI's andNCS' assets for which Sandy Spring currently
has or later acquires a lien; (c) all proceeds and products of
the foregoing items; and (d) all intellectual property rights and
general intangibles.
The Security Agreement also contains terms and conditions that are
customary for credit facilities of this type, including terms that will
obligate ISI to: (a) limit its outstanding principal balance under the line
of credit to 75% of eligible accounts receivable; (b) maintain certain
ratios, including current assets to liabilities, debt to worth, and cash flow
to debt service; and (c) obtain Sandy Spring's prior written consent for
extraordinary transactions, such as the purchase of stock of another entity, a
merger or consolidation, or the acquisition of subsidiaries. Pursuant to the
written consent provisions of the Security Agreement, ISI has
obtained a consent letter from Sandy Spring authorizing the Offer and all
actions relating to, or resulting from, the Offer. The consent letter is
attached as Exhibit (b)(2) to a Schedule TO, which we have filed with the SEC.
Any additional funds that may be necessary to purchase the
Common Shares will be obtained from our working capital.
10. CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, ISI is not required
to accept for payment or (subject to any applicable rules and regulations of
the SEC) pay for, and may delay the acceptance for payment of, any of
the tendered Common Shares and may terminate or amend the Offer, unless at any
time on or after April 26, 2000 and prior to the expiration of the Offer, none
of the following conditions exists or has occurred and remains in effect:
(1) There is pending any action by any governmental entity, or
any law proposed, sought, promulgated,
enacted, entered, enforced or deemed applicable to the Offer:
- seeking to or that does prohibit or impose any material
limitations on ISI's ownership or operation (or that of any of
its subsidiaries or affiliates) of all or a material portion of
its or the Company's or any of its subsidiaries' businesses or
assets, or to compel ISI or its subsidiaries and affiliates to
dispose of or hold separate any material portion of the business
or assets of the Company or ISI and their respective
subsidiaries, in each case, taken as a whole,
- seeking to or that does make the acceptance for payment of, or
the payment for, some or all of the Common Shares illegal or
otherwise prohibiting, restricting or significantly delaying
consummation of the Offer, or seeking to obtain from the Company
or ISI any damages that are material in ISI's view in relation to
the Company and its subsidiaries taken as a whole,
- seeking to or that does impose material limitations on the
ability of ISI, or render ISI unable, to acquire or hold or to
exercise effectively all rights of ownership of the Common
Shares, including,
the right to vote any Common Shares purchased by ISI on all
matters properly presented to the Company stockholders, or
effectively to control in any material respect in ISI's view the
business,assets or operations of the Company, its subsidiaries or
ISI or any of its respective affiliates,
- seeking to or that does impose circumstances under which the
purchase or payment for some or all of the Common Shares
pursuant to the Offer could reasonably be expected to have a
material adverse effect on ISI, or
- that otherwise would reasonably be expected to have a material
adverse effect on the Company or ISI; or
(2) There has occurred any change that could reasonably be
expected to constitute a material adverse effect on the Company
or ISI; or
(3) There has occurred (A) any general suspension of trading in, or
limitation on prices for, securities on any national stock
exchange or in the over-the-counter market in the United States
for a period in
excess of 24 hours (excluding suspensions or limitations
resulting solely from physical damage or interference with
such exchanges not related to market conditions), (B) the
declaration of a
banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), (C) the
commencement of a war or other international or national
calamity,
directly or indirectly, involving the United States, (D) any
mandatory limitation by any United States governmental
authority or agency that would reasonably be expected to have
a material
adverse effect on the extension of credit by banks or other
financial institutions, or (E) in the case of any of the
foregoing, existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof; or
(4) The Offer has been terminated in accordance with its terms; or
(5) (A) The Company's Board of Directors has withdrawn, changed or
modified (including by amendment of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9) in a
manner adverse to ISI its
approval or recommendation of the Offer or has recommended an
acquisition proposal, or has adopted any resolution to effect any
of the foregoing, (B) the Company's Board of Directors has
recommended any proposal other than the Offer in respect of an
acquisition proposal, (C) the Company's Board of
Directors has continued discussions with any third party
concerning an acquisition proposal for more than ten business
days after the date of receipt of such acquisition proposal,
or (D) an
acquisition proposal that is publicly disclosed and that
contains a proposal as to price (without regard to whether such
proposal specifies a specific price or a range of potential
prices) has been
commenced, publicly proposed or communicated to the Company and
the Company's Board of Directors has not rejected such
proposal within ten business days of the earlier to occur of
(i) the
Company's receipt of such acquisition proposal and (ii) the date
such acquisition proposal first becomes publicly disclosed; or
(6) Not all consents, permits and approvals of governmental entities
and other persons have been obtained without material adverse
conditions attached and material expenses imposed on the Company
or any of its subsidiaries; or
(7) ISI shall become aware that any material contractual right of
the Company or any of its subsidiaries shall be impaired or
otherwise adversely affected as a result of the transactions
contemplated by the Offer, or any covenant, term or condition in
any of the Company's or any of its subsidiaries' instruments or
agreements that are or may be materially adverse to the value of
the Common Shares in the hands of ISI or any other affiliate of
ISI (including, without limitation, any event of default that may
ensue as a result of the consummation of the Offer, or any other
business combination or the acquisition of control of the
Company); or
(8) ISI shall have reached an agreement or understanding with the
Company providing for termination of the Offer, or ISI or any
other affiliate of ISI shall have entered into a definitive
agreement or shall have announced an agreement in principle with
the Company providing for a merger or other business combination
with the Company or the purchase of stock or assets of the
Company; which, in the sole
judgment of ISI in any such case, and regardless of the
circumstances (including any action or inaction by ISI or any
other affiliate of ISI) giving rise to any such condition, makes
it inadvisable to proceed with the Offer and/or with such
acceptance of payment or payment.
The foregoing conditions are for the sole benefit of ISI. ISI may
assert the failure of any of the conditions regardless of the
circumstances (other than any circumstance arising solely by any
action or inaction by ISI) giving rise to any such failure. The
conditions may be waived by ISI in whole or in part at any time.
The failure by ISI at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, and each
such right shall be deemed an ongoing right that may be asserted
at any time.
A public announcement may be made of a material change in, or
waiver of, such conditions. The Offer may, in certain
circumstances, be extended in connection with any such change or
waiver.
ISI acknowledges that the SEC believes that (a) if ISI is delayed
in accepting the Common Shares, it must either extend the Offer
or terminate the Offer and promptly return the Common Shares, and
(b) thecircumstances in which a delay in payment is permitted are
limited and do not include unsatisfied conditions of the Offer,
except with respect to most required regulatory approvals.
11. LEGAL AND REGULATORY MATTERS
GENERAL. Except as set forth in the Offer, based on our review of
publicly available filings by the Company with the SEC and other
information regarding the Company, we are not aware of any
licenses or regulatory permits that appear to be material to the
business of the Company and its subsidiaries, taken as a whole,
that might be adversely affected by our acquisition of the Common
Shares in the Offer. In addition, we are not aware of any
filings, approvals or other actions by or with any governmental
entity or administrative or regulatory agency that would be
required for our acquisition or ownership of the Common Shares.
Should any such approval or
other action be required, we expect to seek such approval or action, except as
described under "State Takeover Laws." Should any such approval or other action
be required, we cannot be certain that we would be able to obtain any such
approval or action without substantial conditions, or that adverse consequences
might not result to the
Company's or its subsidiaries' businesses, or that certain parts
of the Company's, ISI's or any of their respective subsidiaries'
businesses might not have to be disposed of or held separate in
order to obtain such approval or action. In that event, we may
not be required to purchase any Common Shares in the Offer. See
Section 10 for a description of the conditions to the Offer.
STATE TAKEOVER LAWS. A number of states (including Delaware, where
the Company is incorporated) have adopted takeover laws and regulations that
purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations that are incorporated in those states or that have
substantial assets, stockholders,
principal executive offices or principal places of business in
those states. To the extent that these state takeover statutes
purport to apply to the Offer, we believe that those laws
conflict with United States federal law and are an
unconstitutional burden on interstate commerce. We have not
attempted to comply with any state takeover statutes in
connection with the Offer. We reserve the right to challenge the
validity or applicability of any state law allegedly applicable
to the Offer, and nothing in the Offer nor any action that we
take in connection with the Offer is intended as a waiver of that
right. In the event that it is asserted that one or
more takeover statutes apply to the Offer, and it is not
determined by an appropriate court that the statutes in question
do not apply or are invalid as applied to the Offer, as
applicable, we may be required to file certain documents with, or
receive approvals from, the relevant state authorities, and we
might be unable to accept for payment or purchase the Common
Shares tendered in the Offer or be delayed in continuing or
consummating the Offer. In that case, we may not be obligated to
accept for purchase, or pay for, any of the Common Shares
tendered. See Section 10.
ANTITRUST. We do not believe that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, is applicable to the
acquisition of Common Shares contemplated by our offer.
MARGIN REQUIREMENTS. The Common Shares are not "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System
and, accordingly, such regulations are not applicable to our offer.
12. FEES AND EXPENSES
We have retained D.F. King & Co., Inc. as Information Agent in
connection with the Offer. The Information Agent may contact
holders of the Common Shares by mail, telephone, telex, telegraph
and personal interview and may request brokers, dealers and other
nominee stockholders to forward material relating to the
Offer to beneficial owners of the Common Shares. We will pay the Information
Agent reasonable and customary compensation for these services in addition to
reimbursing the Information Agent for its reasonable out-of-pocket
expenses. We have agreed to indemnify the Information Agent against
certain liabilities and expenses in connection with the Offer, including
certain liabilities under the United States federal securities laws.
In addition, we have retained Continental Stock Transfer & Trust
Company as the Depositary. We will pay the Depositary reasonable and
customary compensation for its services in connection with the Offer, will
reimburse the Depositary for its reasonable out-of-pocket expenses and will
indemnify the Depositary against certain liabilities and expenses,
including certain liabilities under the federal securities laws.
Except as set forth above, we will not pay any fees or
commissions to any broker, dealer or other person for soliciting
tenders of the Common Shares pursuant to the Offer. We will
reimburse brokers, dealers, commercial banks and trust companies
and other nominees, upon request, for customary clerical and
mailing expenses incurred by them in forwarding offering
materials to their customers.
ISI has paid or will be responsible for paying all other expenses
in connection with the Offer.
13. MISCELLANEOUS
We are not aware of any jurisdiction in which the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If we become aware of any valid state statute
prohibiting the making of the Offer or the acceptance of the Common Shares,
we will make a good faith
effort to comply with that state statute. If, after a good faith
effort, we cannot comply with the state statute, we will not make
the Offer to, nor will we accept tenders from or on behalf of,
the holders of the Common Shares in that state.
We have filed with the SEC a Schedule TO, together with exhibits,
furnishing certain additional information with respect to the Offer, and may
file amendments to the Schedule TO. The Schedule TO and any
exhibits or amendments may be examined and copies may be obtained
from the SEC in the same manner as described in Section 7 with
respect to information concerning the Company, except that copies
will not be available at the regional offices of the SEC.
WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION ON OUR BEHALF THAT IS NOT CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF
GIVEN OR MADE, YOU SHOULD NOT RELY ON ANY SUCH INFORMATION OR
REPRESENTATION.
Neither the delivery of the Offer nor any purchase pursuant to
the Offer will, under any circumstances, create any implication
that there has been no change in the affairs of ISI, the Company
or any of their respective subsidiaries since the date as of
which information is furnished or the date of the Offer.
INTERACTIVE SYSTEMS, INC.
April 26, 2000
I-II
I-1
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF ISI
DIRECTORS AND EXECUTIVE OFFICERS OF ISI. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director and executive officer of ISI. Unless otherwise indicated below, each
occupation set forth opposite
each individual refers to employment with ISI. The business address of each
such individual is c/o ISI, 1777 North Kent Street, Arlington, VA 22209, and
each such individual is a citizen of the United States of America.
NAME POSITION
Donald C. Weymer....... President, Chief Executive Officer and a Director
Robert V. Windley.......Executive Vice President and a Director
Lynn M. Weymer......... Secretary and a Director
Donald C. Weymer has been the President, Chief Executive Officer
and a Director of ISI since 1991. Mr. Weymer has also been the
Chief Executive Officer, Chairman of the Board of Directors and
Secretary of the Company since March 1994. He was the Chief
Financial Officer of the Company from March 1994 until October
1995.
Robert V. Windley has been an Officer and a Director of ISI since
September 1997 and the acting Chief Financial Officer of CSI
since August 1999. From August 1995 to September 1997, Mr.
Windley served as Senior Vice President of McFadden & Associates.
Prior to joining McFadden & Associates, Mr. Windley, served as a
principal at Booz-Allen & Hamilton.
Lynn M. Weymer has served as Secretary and a Directorof ISI since
1991.
I-II
Facsimile copies of letters of transmittal, properly completed
and duly executed, will be accepted. Letters of transmittal,
Company Certificates and any other required documents should be
sent or delivered by each Company stockholder or broker, dealer,
commercial bank, trust company or other nominee to the Depositary
at its address set forth below:
The Depositary for the Offer is:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By Mail By Hand By Overnight Courier
Reorganization Department Reorganization Department Reorganization Department
2 Broadway, 19th Floor 2 Broadway, 19th Floor 2 Broadway, 19th Floor
New York, NY 10004 New York, NY 10004 New York, NY 10004
By Facsimile Transmission: Telephone to Confirm Facsimile:
(212) 509-5150 (212) 845-3226
You may direct questions and requests for assistance to the
Information Agent at the addresses and telephone numbers set forth below. You
may obtain additional copies of this offer to purchase, the letter of
transmittal and other Offer materials from the Information Agent
as set forth below, and they will be furnished promptly at our
expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning
the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, NY 10005
Banks and Brokers Call Collect (212) 269-5550
All Others Call Toll Free (800) 928-0153