Exhibit (a)(4)
FROM: Andrew Zimmerman, Chief Executive Officer
SUBJECT: OFFER TO EXCHANGE OPTIONS
DATE: SEPTEMBER 19, 2002
Some of our outstanding options, whether or not they are currently
exercisable, have exercise prices that are significantly higher than the current
market price of our shares. We believe these options do not provide adequate
incentives because of their high exercise prices. To remedy this, the Board of
Directors has adopted resolutions offering to all eligible employees who hold
stock options with exercise prices per share greater than or equal to $0.80 the
opportunity to exchange their outstanding stock options for options exercisable
at the lesser of (1) $0.24 or (2) the fair market value of our stock on October
18, 2002. However, employees who are subject to tax in the Netherlands may elect
to have the exercise price of their new option be either (1) the lesser of $0.24
or the fair market value of our stock on October 18, 2002 or (2) the fair market
value of our stock on October 18, 2002. We have structured the offer to provide
this election to employees who are subject to tax in the Netherlands to give
them the opportunity to avoid potentially adverse Dutch tax consequences that do
not apply to other Predictive employees.
Predictive Systems, Inc. ("Predictive," also referenced herein as
"Company," "us," "we" and "our") is making the offer upon the terms and
conditions described in (1) the Offer to Exchange Certain Outstanding Options
for New Options (the "Offer to Exchange"); (2) this memorandum; (3) the Election
Form; and (4) the Notice to Withdraw from the Offer. Together, these make up the
"offer." Please read these documents carefully before you make any decisions
regarding the offer. This offer expires at midnight, Eastern Time, on October
17, 2002.
If you elect to participate in this exchange, your eligible unexercised
stock options will be cancelled on October 18, 2002 and a new option (a "New
Option") will be granted to you on the same day. It is an all or nothing offer,
so if you elect to participate, you must elect to cancel all of your options
that have an exercise price at or above $0.80 per share. In exchange for all of
your eligible options except the "Regranted Options," which are any options with
an exercise price of $1.55, $2.90 or $17.75 per share, you will receive one (1)
share for each share that you elect to exchange. You will not receive any New
Options in exchange for the Regranted Options; however, the Regranted Options
must be tendered and cancelled in order to participate in the exchange at all.
If you elect to participate in this exchange and you submit your
election form, during the election period you may monitor the fair market value
of our common stock to determine the degree to which you will benefit from this
offer. Should you decide after submitting your election form that you do not
wish to participate in the offer, you may withdraw from the offer for any
reason, or for no reason at all, until midnight, Eastern Time, on October 17,
2002. If you are subject to tax in the Netherlands and you desire to change your
decision with regards to the exercise price of your New Option after you submit
your election form, you may withdraw from the offer and submit a new election
form indicating your revised choice of exercise price until midnight, Eastern
Time, on October 17, 2002.
Certain terms of the New Option (such as the vesting schedule) will be
different from the options you hold now, so please read all of the offer
documents carefully. There must be strict adherence to the following rules and
terms:
ELIGIBILITY
You may participate if you are an employee of Predictive or one of
Predictive's subsidiaries as of the date the offer commences and remain an
employee through the date on which the tendered options are cancelled, but only
if you reside and work in one of the following countries: the United States,
Germany, the Netherlands or the United Kingdom. However, non-employee directors
are not eligible to participate. If, for any reason, you are no longer an
employee of Predictive as of that date, we will not accept your tender of
options. Any options you tendered will not be cancelled as a result of the offer
and will remain intact and exercisable for the time period and to the extent set
forth in your option agreement.
THE NEW OPTIONS
1. All grants cancelled pursuant to this offer are eligible to be exchanged
for New Options, except the Regranted Options. Regranted Options will be
cancelled but will not be exchanged for New Options.
2. All New Options will be granted under the 1999 Stock Incentive Plan, as
amended.
3. The New Option will be priced at the lesser of (1) $0.24 or (2) the fair
market value of our common stock on the day it is granted, which is defined
as the closing sales price of our common stock on the Nasdaq National
Market, or any other securities quotation system or any stock exchange on
which our shares are then quoted or listed, on the date of grant. However,
if you are subject to tax in the Netherlands, you may elect to have the
exercise price of your New Option be either (1) the lesser of $0.24 or the
fair market value of our stock on the day it is granted or (2) the fair
market value of our stock on the day it is granted. We will grant the New
Option on the same day that we cancel your old options, which will be the
first business day after the expiration of the offer. We expect to cancel
old options and grant New Options on October 18, 2002, unless we have to
change the date because the offer is extended beyond its original
expiration date. We cannot predict the exercise price of the New Option,
but we can guarantee that the exercise price will not be higher than $0.24
per share (unless you are subject to tax in the Netherlands, in which case
you might have a different exercise price as a result of your election).
For example, if Predictive's stock appreciates to $0.45 per share when the
new grants are made, your replacement option will have an exercise price of
$0.24 per share. Alternatively, if Predictive's stock has a value of $0.15
per share on the grant date of the New Options, your replacement option
will have an exercise price of $0.15 per share.
4. Each New Option will vest in accordance with a new 4 year vesting schedule,
which will begin on the date the New Option is granted. The New Options
will vest in 48 equal monthly installments. However, the vesting period
will be accelerated based on your years of service with Predictive measured
from the date we cancel the options as follows:
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Years of Service Months Vested Immediately
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4+ years 15 months
3-4 years 12 months
2-3 years 9 months
1-2 years 6 months
0-1 year 3 months
Since your New Option will be subject to this new vesting schedule, if your
employment terminates for any reason, you may not have the opportunity to
exercise as many of your New Option shares as you would have been able to
exercise under your old options, since your New Options may not be as fully
vested. As a result, you may not receive as much, or any, benefit from your
New Option as you would have received if you had retained your old options.
5. Regranted Options, which are any options with an exercise price of $1.55,
$2.90 or $17.75 per share, will be cancelled but will not be replaced with
New Options. All other cancelled grants will be replaced with a New Option
on the same day your old options are cancelled. We expect to cancel old
options and grant New Options on October 18, 2002, unless we have to change
the date because the offer is extended beyond its original expiration date.
6. If your employment with the Company terminates voluntarily OR involuntarily
prior to October 18, 2002, you will not receive a New Option because we
will not accept your tender of options. Any options you tendered will not
be cancelled as a result of the offer and will remain intact and
exercisable for the time period and to the extent set forth in your option
agreement. Unless expressly provided in your employment agreement or by the
laws of the country in which you reside and work, your employment with
Predictive will remain "at will" and can be terminated by you or Predictive
at any time, with or without cause or notice.
7. All other rules of the 1999 Stock Incentive Plan, as amended, will be
applied, and your New Option will be subject to a new stock option
agreement between you and us.
ELIGIBLE GRANTS AND OPTION CANCELLATION RULES
1. Only options with exercise prices at or above $0.80 per share are eligible
for this offer, and if you elect to participate, you must include all your
unexercised options with exercise prices at or above $0.80 per share in
your election (including Regranted Options, for which you will receive
nothing in exchange). The entire unexercised portion of these grants will
be cancelled.
2. If you are an eligible employee, you can elect to participate in this offer
and have your eligible options cancelled in exchange for New Options if
your election for exchange is received by midnight, Eastern Time on October
17, 2002 or, if we have extended the offering period, by the new expiration
of the offer. This deadline will be strictly enforced, so please keep it in
mind.
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3. We will cancel options we accept for exchange on the first business day
after the expiration of the offer. We expect this cancellation date to be
October 18, 2002. We will grant the New Options on the same day.
4. Once your old options are cancelled, you lose all rights to them.
THIS OFFER IS NOT A GUARANTY OF EMPLOYMENT FOR ANY PERIOD. UNLESS
EXPRESSLY PROVIDED IN YOUR EMPLOYMENT AGREEMENT OR APPLICABLE LAWS OF A NON-U.S.
JURISDICTION, YOUR EMPLOYMENT WITH THE COMPANY REMAINS "AT WILL" AND MAY BE
TERMINATED AT ANY TIME BY EITHER YOU OR THE COMPANY, WITH OR WITHOUT CAUSE OR
NOTICE.
All eligible option holders who wish to participate in this option
exchange must complete a Predictive Systems, Inc. Offer to Exchange Options
Election Form ("Election Form") and hand deliver or fax a signed copy to Kristin
Chubbuck at fax number (212) 719-5595 or at Predictive Systems, Inc., 19 West
44th Street, 9th Floor, New York, New York 10036, telephone number: (212)
659-3743 by October 17, 2002, no later than midnight, Eastern Time.
You are required to make your election to "accept" the exchange
agreement and identify the option grant(s) being cancelled if you wish to
participate.
Predictive intends to e-mail a confirmation of receipt to you within
two (2) business days of receiving your Election Form. This will merely be a
confirmation that we have received your Election Form; your options will not be
cancelled until October 18, 2002, which is the first business day following the
expiration of the Offer. If you have not received such a confirmation of
receipt, it is your responsibility to ensure that Kristin Chubbuck has received
your Election Form.
IF YOUR ELECTION IS RECEIVED AFTER MIDNIGHT, EASTERN TIME ON OCTOBER
17, 2002, IT WILL NOT BE ACCEPTED AND YOU WILL BE CONSIDERED TO HAVE DECLINED TO
ACCEPT THE EXCHANGE OFFER.
Attached to this e-mail, you are also receiving a more detailed
document, entitled the Offer to Exchange Certain Outstanding Options for New
Options (generally referred to as the "Offer to Exchange"), explaining the
program in greater detail, along with an Election Form, a Notice to Withdraw
from the Offer and a copy of the Predictive Systems, Inc. 1999 Stock Incentive
Plan Prospectus. The information contained in (1) the Offer to Exchange; (2)
this memorandum; (3) the Election Form; and (4) the Notice to Withdraw from the
Offer together constitutes the entire offer and we strongly urge you to read
these documents carefully and to consult your own legal and tax advisors before
deciding whether or not to participate.
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