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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE TO
Tender Offer Statement Under Section 14(D)(1)
Or 13(E)(1) of the Securities Exchange Act of 1934
CSI COMPUTER SPECIALISTS, INC.
(Name of Subject Company)
-----------------------
Csi Computer Specialists, Inc.
(Name of Filing Person -- Offeror)
Common Stock, Par Value $0.001 Per Share
(Title of Classes of Securities)
12631103
(CUSIP Number of Class of Securities)
-----------------------
Robert V. Windley
CSI Computer Specialists, Inc.
904 Wind River Lane, Suite 100
Gaithersburg, Maryland 63101
(301) 921-8860
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of the person filing statement)
-----------------------
With a copy to:
Denise R. Brown, Esq.
Shaw Pittman
2300 N Street, N.W.
Washington, DC 20037
(202) 663-8000
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$2,520,888 $504.18
* Estimated for purposes of calculating the amount of filing fee only. The
amount assumes the purchase of 2,520,888 shares of common stock, par value
$0.001 per share (the "Common Shares"), at a price per Common Share of $1.00
cash. Such number of Common Shares represents the fully diluted number of
Common Shares outstanding as of April 24, 2000, less the number of Common
Shares already beneficially owned by Mr. Donald C. Weymer, Interactive
Systems, Inc.'s Chief Executive Officer, President, a Director and 98%
shareholder.
[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: None. Filing Party: Not Applicable
Form or Registration No.: Not applicable. Date Filed: Not applicable.
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment
reporting the results of the tender offer: [ ]
<PAGE>
- 4 -
This Tender Offer Statement on Schedule TO is filed by Interactive
Systems, Inc. ("ISI"), an affiliate of CSI Computer Specialists, Inc. The
Schedule TO relates to the offer by ISI to purchase all outstanding
shares of Common Stock, par value $0.001 per share (the "Common Shares"),
of CSI Computer Specialists, Inc. (the "Company") at $1.00 per Common
Share, net to the seller in cash (less any required withholding taxes),
upon the terms and subject to the conditions set forth in the offer to
purchase (the "Offer to Purchase") and in the related letter of
transmittal (the "Letter of Transmittal," which together with the Offer
to Purchase, as amended or supplemented from time to time, collectively
constitute the "Offer"), attached hereto as Exhibits (a)(1) and (a)(2),
respectively. The information set forth in the Offer is incorporated
herein by reference with respect to Items 1-9, 11 and 13 of Schedule TO.
ITEM 10. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
ISI believes that its financial statements are immaterial to a decision
as to whether to tender Common Shares in the Offer because (a) the only
consideration offered for the Common Shares is cash; (b) the Offer is not
subject to any financing condition; and (c) the Offer is for all of the
outstanding Common Shares not already owned by Mr. Donald C. Weymer, the
founder, Chief Executive Officer, President, a Director and 98%
shareholder of ISI.
ITEM 12. EXHIBITS.
(a)(1) Offer to Purchase dated April 26, 2000.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Text of press release jointly issued by ISI and the
Company dated April 26, 2000.
(a)(7) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(b)(1) Amended and Restated Loan and Security Agreement between
ISI and Sandy Spring National Bank, for $4,000,000 Line
of Credit, dated March 30, 2000, and Related Promissory
Note.
(b)(2) Letter of Consent between ISI and Sandy Spring National Bank,
dated April 24, 2000.
(g) None.
(h) None.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
INTERACTIVE SYSTEMS, INC.
By /s/ DONALD C. WEYMER
Name: Donald C. Weymer
Title: President and Chief Executive Officer
Dated: April 26, 2000
<PAGE>
EXHIBIT INDEX
(a)(1) Offer to Purchase dated April 26, 2000.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Text of press release jointly issued by ISI and the
Company dated April 26, 2000.
(a)(7) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(b)(1) Amended and Restated Loan and Security Agreement between
ISI and Sandy Spring National Bank, for $4,000,000 Line
of Credit, dated March 30, 2000, and Related Promissory
Note.
(b)(2) Letter of Consent between ISI and Sandy Spring National Bank,
dated April 24, 2000.
(g) None.
(h) None.
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
<PAGE>
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<PAGE>
- 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
<PAGE>
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.
<PAGE>
- 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.
<PAGE>
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
<PAGE>
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.
<PAGE>
I-II
<PAGE>
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
Footnote continued from previous page
Footnote continued on next page
EXHIBIT (a)(2)
Letter of Transmittal
To Tender Shares of Common Stock
of
CSI Computer Specialists, Inc.
Pursuant to the Offer to Purchase, Dated April 26, 2000
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.
- --------------------------------------------------------------------------------
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
Facsimile Transmission Number:
(212) 509-5150
Confirm Receipt of Facsimile by Telephone:
(212) 845-3226
Delivery of this instrument to an address, or transmission of instructions
via facsimile, other than as set forth above does not constitute a valid
delivery. The instructions accompanying this Letter of Transmittal should be
read carefully before this Letter of Transmittal is completed.
This Letter of Transmittal is to be completed by stockholders of CSI
Computer Specialists, Inc., a Delaware corporation, either if certificates
("Share Certificates") representing shares of Common Stock, par value $0.001 per
share (the "Common Shares"), are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase) is utilized, if delivery of the
Common Shares is to be made by book-entry transfer to an account maintained by
Continental Stock Transfer & Trust Company (the "Depositary") at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in Section 3, "Procedures for Accepting the Offer and Tendering
Shares," of the Offer to Purchase dated April 26, 2000 (the "Offer to
Purchase"). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary on or prior to the expiration date of the Offer or who are unable to
complete the procedure for book-entry transfer prior to the expiration date of
the Offer may nevertheless tender their Common Shares pursuant to the guaranteed
delivery procedures set forth in Section 3, "Procedures for Accepting the Offer
and Tendering Shares," in the Offer to Purchase. See Instruction 2 below.
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMON SHARES TENDERED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) and address(es) of registered holder(s)share certificate(s) and share(s)
(Please fill in, if blank, exactly as tendered (attach additional
name(s) appear(s) on certificate(s)) signed list if necessary)
- -------------------------------- -----------------------------------------------
- ----------------------------------------- ------------------- ------------------
Total Number of
Common Share Common Shares Number of
Certificate(s) Represented by Common Shares
Number(s)* Certificate(s)* Tendered**
- --------------------- ------------------ ------------------- ------------------
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- ---------------------- ------------------ ------------------- ------------------
Total Common
Shares
- -------------------- ------------------ ------------------- ------------------
- --------------------------------------------------------------------------------
* Certificate numbers are not required if tender is made by book-entry transfer.
** If you desire to tender fewer than all Common Shares represented by a
certificate listed above, please indicate in this column the number of Common
Shares you wish to tender. Otherwise, all Common Shares represented by such
certificate will be deemed to have been tendered. See Instruction 4.
- -------------------------------------------------------------------------------
CHECK HERE IF COMMON SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution Check Box of Book-Entry Transfer Facility:
DTC
Provide Account Number and Transaction Code Number:
Account Number
Transaction Code Number
CHECK HERE IF COMMON SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY
AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH
NOTICE OF GUARANTEED
DELIVERY.
Name(s) of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
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NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Interactive Systems, Inc., a Virginia
corporation (the "Purchaser"), the above-described shares of Common Stock, par
value $0.001 per share (the "Common Shares"), of CSI Computer Specialists, Inc.,
a Delaware corporation (the "Company"), pursuant to the Purchaser's offer to
purchase all outstanding Common Shares at $1.00 per Common Share, net to the
seller in cash (less any required withholding taxes), without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated April 26, 2000 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this letter of transmittal (the "Letter of Transmittal,"
which together with the Offer to Purchase, as amended or supplemented from time
to time, collectively constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Common Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all the Common Shares that are being
tendered hereby and all dividends, distributions (including, without limitation,
distributions of additional Common Shares) and rights declared, paid or
distributed in respect of such Common Shares on or after April 26, 2000
(collectively, "Distributions") and irrevocably appoints Continental Stock
Transfer & Trust Company (the "Depositary") the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Common Shares and all
Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
certificates representing Common Shares ("Share Certificates") and all
Distributions, or transfer ownership of such Common Shares and all Distributions
on the account books maintained by the Book-Entry Transfer Facility, together,
in either case, with all accompanying evidences of transfer and authenticity, to
or upon the order of the Purchaser; (ii) present such Common Shares and all
Distributions for transfer on the books of the Company; and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Common Shares and all Distributions, all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints designees of the Purchaser as
agent, attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to vote in such manner as such attorney and proxy or his or her
substitute shall, in his or her sole discretion, deem proper and otherwise act
(by written consent or otherwise) with respect to all the Common Shares tendered
herewith and which have been accepted for payment by the Purchaser prior to the
time of such vote or other action and all Common Shares and other securities
issued in Distributions in respect of such Common Shares which the undersigned
is entitled to vote at any meeting of stockholders of the Company (whether
annual or special and whether or not an adjourned or postponed meeting) or
consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Common Shares tendered herewith, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Common Shares by the Purchaser in accordance with
the terms of the Offer. Such acceptance for payment shall revoke all other
proxies and powers of attorney granted by the undersigned at any time with
respect to such Common Shares (and all Common Shares and other securities issued
in Distributions in respect of such Common Shares), and no subsequent proxy or
power of attorney shall be given or written consent executed (and if given or
executed, shall not be effective) by the undersigned with respect thereto. The
undersigned understands that, in order for the Common Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance of such Common
Shares for payment the Purchaser or its designee must be able to exercise full
voting, consent and other rights with respect to such Common Shares and other
securities, including, without limitation, voting at any meeting of the
Company's stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Common Shares
tendered herewith and all Distributions, and that when such Common Shares are
accepted for payment by the Purchaser, the Purchaser will acquire good,
marketable and unencumbered title thereto and to all Distributions, free and
clear of all liens, restrictions, charges and encumbrances, and that none of
such Common Shares or Distributions will be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Common Shares tendered
herewith and all Distributions. In addition, the undersigned shall remit and
transfer promptly to the Depositary for the account of the Purchaser all
Distributions in respect of the Common Shares tendered hereby and accepted for
payment, accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, the Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and may
withhold the entire purchase price of the Common Shares tendered hereby and
accepted for payment, or deduct from such purchase price, the amount or value of
such Distribution as determined by the Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable. See
Section 4 in the Offer to Purchase.
The undersigned understands that tenders of Common Shares pursuant to any
one of the procedures described in Section 3, "Procedures for Accepting the
Offer and Tendering Shares," of the Offer to Purchase and in the instructions
hereto will constitute the undersigned's acceptance of the terms and conditions
of the Offer. The Purchaser's acceptance of such Common Shares for payment will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. Without limiting the
foregoing, if the price to be paid in the Offer is amended in accordance with
the Offer, the price to be paid to the undersigned will be the amended price
notwithstanding the fact that a different price is stated in this Letter of
Transmittal. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, the Purchaser may not be required to accept for
payment any of the Common Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Common
Shares purchased, and return all Share Certificates not purchased or not
tendered in the name(s) of the registered holder(s) appearing above in the box
entitled "Description of Common Shares Tendered." Similarly, unless otherwise
indicated in the box entitled "Special Delivery Instructions," please mail the
check for the purchase price of all Common Shares purchased and all Share
Certificates not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above in
the box entitled "Description of Common Shares Tendered." In the event that the
boxes entitled "Special Payment Instructions" and "Special Delivery
Instructions" are both completed, please issue the check for the purchase price
of all Common Shares purchased and return all Share Certificates not purchased
or not tendered in the name(s) of, and mail such check and Share Certificates
to, the person(s) so indicated. Unless otherwise indicated herein in the box
entitled "Special Payment Instructions," please credit any Common Shares
tendered hereby and delivered by book-entry transfer, but which are not
purchased, by crediting the account at the Book-Entry Transfer Facility. The
undersigned recognizes that the Purchaser has no obligation, pursuant to the
Special Payment Instructions, to transfer any Common Shares from the name of the
registered holder(s) thereof if the Purchaser does not purchase any of the
Common Shares tendered herewith.
The undersigned understands that the Purchaser reserves the right to
transfer or assign, in whole at any time, or in part from time to time, to one
or more of its affiliates, the right to purchase all or any portion of the
Common Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Common Shares validly tendered and accepted for payment pursuant to the
Offer.
CHECK HERE IF ANY OF THE SHARE CERTIFICATES REPRESENTING COMMON SHARES THAT
YOU OWN HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 9.
Number of Common Shares represented by the lost or destroyed Share Certificates:
<PAGE>
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SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See
Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if Share Certificates not
tendered or not purchased and/or the check for the
purchase price of the Common Shares purchased are to be
issued in the name of and sent to someone other than
the undersigned, or if Common Shares tendered by
book-entry transfer which are not purchased are to be
returned by credit to an account maintained at the
Book-Entry Transfer Facility other than the account
indicated above.
Issue Check Certificate(s) to:
Name:
(Please Print)
Address:
(Include Zip Code)
(Tax Identification or Social Security No.)
(See Substitute Form W-9 Included Herein)
Credit unpurchased Common Shares tendered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
(Account Number)
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To be completed ONLY if Share Certificates not
tendered or not purchased and/or the check for the
purchase price of the Common Shares purchased are to
be sent to someone other than the undersigned, or to
the undersigned at an address other than that shown
above.
Mail Check Certificate(s) to:
Name:
(Please Print)
Address:
(Include Zip Code)
(Tax Identification or Social Security No.)
(See Substitute Form W-9 Included Herein)
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<PAGE>
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SIGN HERE
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AND PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
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Signature(s) of Holder(s)
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Dated: , 2000
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(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by Share Certificate(s) and documents transmitted
herewith. If a signature is by an officer on behalf of a corporation or by an
executor, administrator, trustee, guardian, attorney-in-fact, agent or other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instructions 1 and 5.)
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Name(s)
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(Please Type or Print)
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Capacity (full title)
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Address
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(Include Zip Code)
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Area Code and Telephone Number
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Taxpayer Identification or Social Security No.
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COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
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GUARANTEE OF SIGNATURE(S)
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(SEE INSTRUCTIONS 1 AND 5)
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FOR USE BY FINANCIAL INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE IN SPACE BELOW.
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Authorized Signature
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Name
(Please Type or Print)
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Title
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Name of Firm
Address
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(Include Zip Code)
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Dated: , 2000
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<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
To complete the Letter of Transmittal, you must do the following:
- - Fill in the box entitled "Description of Common Shares Being Tendered."
- - Sign and date the Letter of Transmittal in the box entitled "Sign Here."
- - Fill in and sign in the box entitled "Substitute Form W-9."
In completing the Letter of Transmittal, you may (but are not required to)
also do the following:
- - If you want the payment for any Common Shares purchased issued in the
name of another person, complete the box entitled
"Special Payment Instructions."
- - If you want any certificate for Common Shares not tendered or
Common Shares not purchased issued in the name of another person,
complete the box entitled "Special Payment Instructions."
- - If you want any payment for Common Shares or certificate for
Common Shares not tendered or purchased delivered to an address
other than that appearing under your signature, complete the box
entitled "Special Delivery Instructions."
If you complete the box entitled "Special Payment Instructions" or "Special
Delivery Instructions," you must have your signature guaranteed by an Eligible
Institution (as defined in Instruction 1 below) unless the Letter of Transmittal
is signed by an Eligible Institution.
1. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal
is required (i) if this Letter of Transmittal is signed by the registered
holder(s) of the Common Shares (which term, for purposes of this document, shall
include any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Common Shares) tendered herewith,
unless such holder has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on this Letter
of Transmittal, or (ii) if such Common Shares are tendered for the account of a
firm that is a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (each being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is used, if Common
Shares are to be delivered by book-entry transfer pursuant to the procedure set
forth in Section 3, "Procedures for Accepting the Offer and Tendering Shares,"
of the Offer to Purchase. Share Certificates representing all physically
tendered Common Shares, or confirmation of a book-entry transfer, if such
procedure is available, into the Depositary's account at the Book-Entry Transfer
Facility ("Book-Entry Confirmation") of all Common Shares delivered by
book-entry transfer together with a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), or an Agent's Message in the case of
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at its address set forth herein
prior to the expiration date of the Offer. If Share Certificates are forwarded
to the Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary on or before the expiration date of the Offer or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Common Shares pursuant to the guaranteed delivery procedure described in
Section 3, "Procedures for Accepting the Offer and Tendering Shares," of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Purchaser, must be received by the Depositary on or before the expiration date
of the Offer; and (iii) the Share Certificates representing all physically
delivered Common Shares in proper form for transfer by delivery, or Book-Entry
Confirmation of all Common Shares delivered by book-entry transfer, in each case
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message), and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as described in Section 3, "Procedures for Accepting the Offer and Tendering
Shares," of the Offer to Purchase.
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 the
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 such participant has received
this Letter of Transmittal and agrees to be bound by the terms of this Letter of
Transmittal and that the Purchaser may enforce such agreement against such
participant.
The method of delivery of this Letter of Transmittal, Share Certificates
and all other required documents, including delivery through the Book-Entry
Transfer Facility, is at the option and risk of the tendering stockholder, and
the delivery will be deemed made only when actually received by the Depositary
(including, in the case of a book-entry transfer, by Book-Entry Confirmation).
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Common Shares will be purchased. By execution of this Letter of
Transmittal (or facsimile hereof), all tendering stockholders waive any right to
receive any notice of the acceptance of their Common Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of Common
Shares Tendered" is inadequate, the certificate numbers, the number of Common
Shares represented by such Share Certificates and the number of Common Shares
tendered should be listed on a separate schedule and attached hereto.
4. Partial Tenders (Not Applicable to Stockholders Who Tender by Book-Entry
Transfer). If fewer than all of the Common Shares represented by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Common Shares which are to be tendered under "Number of Common
Shares Tendered" in the box entitled "Description of Common Shares Tendered." In
such cases, a new certificate representing the remainder of the Common Shares
that were represented by the Share Certificates delivered to the Depositary
herewith will be sent to each person signing this Letter of Transmittal, unless
otherwise provided in the box entitled "Special Delivery Instructions" herein,
as soon as practicable after the expiration or termination of the Offer. All
Common Shares represented by Share Certificates delivered to the Depositary will
be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this
Letter of Transmittal is signed by the registered holder(s) of the Common Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Common Shares without
alteration, enlargement or any other change whatsoever.
If any Common Share tendered hereby is owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Common Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Common Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Common Shares tendered hereby, no endorsements of Share Certificates or separate
stock powers are required, unless payment is to be made to, or Share
Certificates not tendered or not purchased are to be issued in the name of, a
person other than the registered holder(s), in which case, the Share
Certificate(s) representing the Common Shares tendered hereby must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Common Shares tendered hereby, the Share
Certificate(s) representing the Common Shares tendered hereby must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of such person's authority to so act must be submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, the
Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Common Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price of any Common Shares purchased is to be
made to, or Share Certificate(s) representing Common Shares not tendered or
accepted for payment are to be issued in the name of, a person other than the
registered holder(s), the amount of any stock transfer taxes (whether imposed on
the registered holder(s), such other person or otherwise) payable on account of
the transfer to such other person will be deducted from the purchase price of
such Common Shares purchased, unless evidence satisfactory to the Purchaser of
the payment of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Share Certificates representing the
Common Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase price
of any Common Shares tendered herewith is to be issued, or Share Certificate(s)
representing Common Shares not tendered or not purchased are to be issued, in
the name of a person other than the person(s) signing this Letter of Transmittal
or if such check or any such Share Certificate is to be sent to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal but at an address other than that shown in
the box entitled "Description of Common Shares Tendered" herein, the appropriate
boxes in this Letter of Transmittal must be completed. Stockholders delivering
Common Shares tendered herewith by book-entry transfer may request that Common
Shares not purchased be credited to the account maintained at the Book-Entry
Transfer Facility as such stockholder may designate in the box entitled "Special
Payment Instructions" herein. If no such instructions are given, all such Common
Shares not purchased will be returned by crediting the same account at the
Book-Entry Transfer Facility as the account from which such Common Shares were
delivered.
8. Waiver of Conditions. The conditions of the Offer may be waived, in whole or
in part, by the Purchaser, in its sole discretion, at any time and from time to
time, in the case of any Common Shares tendered. See Section 10 of the Offer to
Purchase.
9. Lost, Destroyed or Stolen Certificates. If any certificate(s) representing
Common Shares has been lost, destroyed or stolen, the stockholder should
promptly contact Continental Stock Transfer & Trust Company, which is the
Company's transfer agent and the Depositary, by calling (212) 845-3226. The
stockholder will then be instructed as to the steps that must be taken in order
to replace the certificate(s). This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost, destroyed or stolen
certificates have been followed.
10. Questions and Requests for Assistance or Additional Copies. Questions and
requests for assistance may be directed to the Information Agent at its address
or telephone number set forth below. Additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
11. Substitute Form W-9. Each tendering stockholder is required to provide the
Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of Federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
a $200 penalty imposed by the Internal Revenue Service and to 31% Federal income
tax withholding on the payment of the purchase price of all Common Shares
purchased from such stockholder. If the tendering stockholder has not been
issued a TIN and has applied for one or intends to apply for one in the near
future, such stockholder should write "Applied For" in the space provided for
the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute
Form W-9 and the Certificate of Awaiting Taxpayer Identification Number. If
"Applied For" is written in Part I and the Depositary is not provided with a TIN
within 60 days, the Depositary will withhold 31% on all payments of the purchase
price to such stockholder until a TIN is provided to the Depositary. Each
foreign stockholder must complete and submit Form W-8 in order to be exempt from
the 31% Federal income tax backup withholding due on payments with respect to
the Common Shares.
12. Non-United States Holders. Non-United States holders must submit a completed
IRS W-8BEN in order to qualify as an exempt recipient. IRS Form W-8BEN may be
obtained by contacting the Depositary at its address on the face of this Letter
of Transmittal.
Important: This Letter of Transmittal (or manually signed facsimile
thereof), together with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, and
either Share Certificates for tendered Common Shares or confirmation of
book-entry transfer must be received by the Depositary, in each case prior to
the expiration date of the Offer, which is 5:00 P.M., Eastern Time, on Tuesday,
May 23, 2000 (unless otherwise extended), or the tendering stockholder must
comply with the procedures for guaranteed delivery.
<PAGE>
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a stockholder whose tendered Common
Shares are accepted for payment is required by law to provide the Depositary (as
payer) with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $200 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to Common Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a Form W-8BEN, signed under penalties of
perjury, attesting to such individual's exempt status. A Form W-8BEN can be
obtained from the Depositary. Exempt stockholders should furnish their TIN,
check the box and write "Exempt" in Part II of the Substitute Form W-9, and
sign, date and return the Substitute Form W-9 to the Depositary. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions. A stockholder should consult
his or her tax advisor as to such stockholder's qualification for an exemption
from backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the Federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Common Shares purchased pursuant to the Offer, the stockholder
is required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Common
Shares tendered hereby. If the Common Shares are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering stockholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, the stockholder should write "Applied For" in the
space provided for the TIN in Part I, and sign and date the Substitute Form W-9
and the Certificate of Awaiting Taxpayer Identification Number. If "Applied For"
is written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of all payments of the purchase price to
such stockholder until a TIN is provided to the Depositary.
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TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(See Instruction 11)
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PAYOR'S NAME: CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS DEPOSITARY
- --------------------------------------------------------------------------------
- ------------------------------------- ---------------------------------------
SUBSTITUTE Part 1 - Please provide your TIN in Social Security Number OR
the box at right and certify by Employer Identification Number
signing and dating below. If
awaiting TIN, write "Applied For".
FORM W-9
Department of the Treasury
Internal Revenue Service
Payor's Request for Taxpayer
Identification Number (TIN)
- -------------------------------------- -------------------------------------- --
- -------------------------------------- -----------------------------------------
Part 2 - For Payees exempt from Backup Part 3 -
Withholding--Check the box if you are NOT
subject to backup withholding. Awaiting TIN
- -------------------------------------- -----------------------------------------
- -------------------------------------- -----------------------------------------
Part 4 - Certification - Under penalties of perjury, i certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup
withholding because: (a) I am exempt
from backup withholding, or (b) I
have not been notified by the
Internal Revenue Service (IRS) that
I am subject to backup withholding
as a result of a failure to report
all interest or dividends, or (c)
the IRS has notified me that I am no
longer subject to backup
withholding.
Certification Instructions - You must
cross out item 2 above if you have been
notified by the IRS that you are
currently subject to backup withholding
because you have failed to report all
interest and dividends on your tax
return. However, if, after being notified
by the IRS that you were subject to
backup withholding, you received another
notification from the IRS that you are no
longer subject to backup withholding, do
not cross out item 2.
Signature: Date:
Name:
(Please Print)
- -------------------------------------- -----------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
IN ADDITION, FAILURE TO PROVIDE SUCH INFORMATION MAY RESULT IN A
PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED
FOR" INSTEAD OF A TIN IN THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me,
and either (a) I have mailed or delivered an application to
receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or
deliver an application in the near future. I understand that if I
do not provide a taxpayer identification
number by the time of payment, 31% of all reportable payments
made to me will be withheld until I provide a number.
----------------------------------------------------------------
- --------------------------------------------------------------------------
Signature: Date:
- ------------------------------------------------------------------------------
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Common Shares and any
other required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at its address set forth on the first page.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be directed
to the Information Agent at its telephone number and location listed below, and
will be furnished at the Purchaser's 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
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 928-0153
Footnote continued from previous page
Footnote continued on next page
EXHIBIT (a)(3)
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
of
CSI Computer Specialists, Inc.
by
Interactive Systems, Inc.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery (or one substantially in the form
hereof) must be used to accept the Offer (as defined herein) if (a) certificates
representing shares of Common Stock, par value $0.001 per share (the "Common
Shares"), of CSI Computer Specialists, Inc., a Delaware corporation ("Share
Certificates"), are not immediately available; (b) time will not permit all
required documents to reach Continental Stock Transfer & Trust Company (the
"Depositary"), on or prior to the Expiration Date (as defined in the Offer to
Purchase) of the Offer; or (c) the procedure for book-entry transfer, as set
forth in the Offer to Purchase, cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by
facsimile transmission to the Depositary. See Section 3, "Procedures for
Accepting the Offer and Tendering Shares," of the Offer to Purchase.
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
Facsimile Transmission Number:
(212) 509-5150
Confirm Receipt of Facsimile by Telephone:
(212) 845-3226
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX IN THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Interactive Systems, Inc., a Virginia
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated April 26, 2000 (the "Offer to Purchase"), and the related
letter of transmittal (the "Letter of Transmittal," which together with the
Offer to Purchase, as amended or supplemented from time to time, collectively
constitute the "Offer"), receipt of each of which is hereby acknowledged, the
number of Common Shares indicated below pursuant to the guaranteed delivery
procedures set forth in Section 3, "Procedures for Accepting the Offer and
Tendering Shares," of the Offer to Purchase:
Signature(s)
Name(s)
(Please Type or Print)
Address
Zip Code
Area Code and Tel. No(s).
Number of Common Shares
Certificate Nos. (If Available)
(Check box if Common Shares will be tendered by book-entry
transfer) The Depository Trust Company
Dated
- --------------------------------------------------------------------------------
<PAGE>
GUARANTEE
- ----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
- ----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------
- -------------------------------------------------------------------
The undersigned, 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"), hereby guarantees delivery
to the Depositary, at its address set forth above, of Share Certificates
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of Common Shares into the Depositary's account at The Depository Trust
Company, in either case together with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee, or an Agent's Message (as defined in the Offer to
Purchase), and any other documents required by the Letter of Transmittal, within
three trading days after the date of execution of this Notice of Guaranteed
Delivery.
- -----------------------------------------------------------------------------
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and Share
Certificates to the Depositary within the time period indicated herein. Failure
to do so may result in financial loss to such Eligible Institution.
- --------------------------------------------------------------------------------
Name of Firm
- -------------------------------------------------------------------------------
Authorized Signature
Name
- -----------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------
Title
- --------------------------------------------------------------------------------
Address
Zip Code
Area Code and Tel. No.
Dated
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
Footnote continued from previous page
Footnote continued on next page
EXHIBIT (a)(4)
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.
- --------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We are asking you to contact your clients for whom you hold shares of
Common Stock, par value $0.001 per share (the "Common Shares"), of CSI Computer
Specialists, Inc., a Delaware corporation (the "Company"). Please bring to their
attention as promptly as possible the offer being made by Interactive Systems,
Inc. (the "Purchaser") to purchase all of the outstanding Common Shares at a
purchase price of $1.00 per Common Share, net to the seller in cash (less any
required withholding taxes), without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated April 26,
2000 (the "Offer to Purchase") and in the related letter of transmittal (the
"Letter of Transmittal," which, together with the Offer to Purchase, as amended
or supplemented from time to time, collectively constitute the "Offer") enclosed
herewith.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Common Shares registered in your name or in the name
of your nominee.
The Board of Directors of the Company has determined that, based on the
Company's current financial condition, its inability to obtain financing for its
operations, 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 the Company
stockholders acceptance of the Offer. The Board of Directors of the Company
recommends that the Company's stockholders tender their Common Shares pursuant
to the Offer.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated April 26, 2000.
2. The Letter of Transmittal for your use to tender Common Shares and for
the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Common Shares.
3. A printed form of letter which may be sent to your clients for whose
accounts you hold Common Shares registered in your name or in the name
of your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if certificates for Common Shares ("Share Certificates") and all
other required documents are not immediately available or cannot be
delivered to Continental Stock Transfer & Trust Company (the
"Depositary") by the Expiration Date (as defined in the Offer to
Purchase) or if the procedure for book-entry transfer cannot be
completed by the Expiration Date.
5. A letter to stockholders from William F. Pershin, President of the
Company, accompanied by the Company's Solicitation/Recommendation
Statement on Schedule 14D-9.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
Your prompt action is requested. We urge you to contact your clients as
promptly as possible. Please note that the Offer and withdrawal rights will
expire at 5:00 P.M., Eastern Time, on Tuesday, May 23, 2000, unless the Offer is
extended.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal and any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry delivery of
Common Shares, and any other required documents should be sent to the Depositary
and either Share Certificates representing the tendered Common Shares should be
delivered to the Depositary, or Common Shares should be tendered by book-entry
transfer into the Depositary's account maintained at the Book Entry Transfer
Facility (as described in the Offer to Purchase), all in accordance with the
instructions set forth in the Offer.
If holders of Common Shares wish to tender, but it is impracticable for
them to forward their Share Certificates or other required documents on or prior
to the Expiration Date or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures specified in Section 3, "Procedures for Accepting the Offer and
Tendering Shares," of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Depositary and the Information Agent) for
soliciting tenders of Common Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary clerical and mailing expenses
incurred by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Common Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed material may be obtained from, the
Information Agent at its address and telephone number set forth on the back
cover of the Offer to Purchase.
Very truly yours,
Interactive Systems, Inc.
Nothing contained herein or in the enclosed documents shall constitute you
or any other person the agent of the Purchaser, the Company, the Depositary or
the Information Agent, or any affiliate of any of them, or authorize you or any
other person to make any statement or use any document on behalf of any of them
in connection with the Offer other than the enclosed documents and the
statements contained therein.
Footnote continued from previous page
Footnote continued on next page
EXHIBIT (a)(5)
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
- -------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated April 26,
2000 (the "Offer to Purchase"), and the related letter of transmittal (the
"Letter of Transmittal," which together with the Offer to Purchase, as amended
or supplemented from time to time, collectively constitute the "Offer") relating
to the offer by Interactive Systems, Inc., a Virginia corporation (the
"Purchaser"), to purchase all outstanding shares of Common Stock, par value
$0.001 per share (the "Common Shares"), of CSI Computer Specialists, Inc., a
Delaware corporation (the "Company"), at a purchase price of $1.00 per Common
Share, net to the seller in cash (less any required withholding taxes), without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer. Holders of Common Shares whose certificates for such Common Shares (the
"Share Certificates") are not immediately available, or who cannot deliver their
Share Certificates and all other required documents to Continental Stock
Transfer & Trust Company (the "Depositary") on or prior to the Expiration Date
(as defined in the Offer to Purchase), or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Common Shares according
to the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
WE ARE THE HOLDER OF RECORD OF COMMON SHARES HELD BY US FOR YOUR ACCOUNT. A
TENDER OF SUCH COMMON SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER COMMON SHARES HELD BY
US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all Common Shares held by us for your account
pursuant to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $1.00 per Common Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
2. The Offer is being made for all outstanding Common Shares not already
owned by Donald C. Weymer, the Purchaser's founder, Chief Executive
Officer, President, a Director and 98% shareholder.
3. The Board of Directors of the Company has determined that, based on the
Company's current financial condition, its inability to obtain
financing for its operations, 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 the Company stockholders acceptance of the
Offer. The Board of Directors of the Company recommends that the
Company's stockholders tender their Common Shares pursuant to the
Offer.
4. The Offer is subject to certain customary closing conditions set forth
in the Offer to Purchase. See Section 10, "Conditions of the Offer," of
the Offer to Purchase.
5. Any stock transfer taxes applicable to the sale of Common Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except
as otherwise provided in Instruction 6 of the Letter of Transmittal.
6. The Offer and withdrawal rights will expire at 5:00 P.M., Eastern Time,
on Tuesday, May 23, 2000, unless the Offer is extended.
7. Payment for Common Shares purchased pursuant to the Offer will
in all cases be made only after timely receipt by the Depositary
of (a) Share Certificates or timely confirmation of the
book-entry transfer of such Common Shares into the account
maintained by the Depositary at The Depository Trust Company,
pursuant to the procedures set forth in Section 3, "Procedures
for Accepting the Offer and Tendering Shares," of the Offer to
Purchase, (b) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature
guarantees or an Agent's Message (as defined in the Offer to
Purchase), in connection with a book-entry delivery, and (c) any
other documents required by the Letter of Transmittal.
Accordingly, payment may not be made to all tendering
stockholders at the same time, depending upon when Share
Certificates or confirmations of book-entry transfer of such
Common Shares into the Depositary's account at a Book-Entry
Transfer Facility are actually received by the Depositary.
If you wish to have us tender any or all of the Common Shares held by us
for your account, please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth on the last page of this letter.
If you authorize the tender of your Common Shares, all such Common Shares will
be tendered unless otherwise specified on the last page of this letter. An
envelope to return your instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD
BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF
PRIOR TO THE EXPIRATION OF THE OFFER.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of the Common Shares pursuant thereto,
the Purchaser will make a good faith effort to comply with such statute or seek
to have such statute declared inapplicable to the Offer. If, after such good
faith effort, the Purchaser cannot comply with such state statute, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) holders
of Common Shares in such state.
<PAGE>
Instructions With Respect to the Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
CSI Computer Specialists, Inc.
by
Interactive Systems, Inc.
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer
to Purchase, dated April 26, 2000 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer") in connection with the offer by Interactive Systems, Inc., a Virginia
corporation (the "Purchaser"), to purchase all outstanding shares of Common
Stock, par value $0.001 per share (the "Common Shares"), of CSI Computer
Specialists, Inc., a Delaware corporation, at a purchase price of $1.00 per
Common Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase.
This will instruct you to tender to the Purchaser the number of Common
Shares indicated below (or if no number is indicated below, all Common Shares)
which are held by you for the account of the undersigned, upon the terms and
subject to the conditions set forth in the Offer.
Number of Common Shares
to Be Tendered: Common Shares*
SIGN HERE
Signature(s)
Please print name(s)
Address
Area Code & Telephone Number
Tax Identification and
Social Security Number(s)
* Unless otherwise indicated, it will be assumed that all Common Shares held
by us for your account are to be tendered.
Footnote continued from previous page
Footnote continued on next page
EXHIBIT (a)(6)
Interactive Systems, Inc. Mails Tender Offer for CSI Computer Specialists, Inc.
Common Stock for $1.00 Per Share in Cash
Arlington, Virginia and Gaithersburg, Maryland, April 26, 2000 --
Interactive Systems, Inc. ("ISI") and CSI Computer Specialists, Inc. (OTCBB:
CSIS) today announced that ISI has mailed an Offer to Purchase all of the issued
and outstanding shares of Common Stock (the "Common Shares") of CSI Computer
Specialists, Inc. not already owned by Donald C. Weymer, ISI's founder, Chief
Executive Officer, President, a Director and majority shareholder, at a purchase
price of $1.00 per share in cash. ISI's Offer is subject to customary closing
conditions. The Offer is open for acceptance until 5:00 p.m., Eastern Time, on
May 23, 2000, unless extended or withdrawn.
The $1.00 per Common Share cash consideration offered represents an
approximately 39% premium to the closing price of $0.72 per share on April 24,
2000, the last trading day before this announcement. The Board of Directors of
CSI Computer Specialists, Inc. 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 and the Company's current book value,
that the tender offer is in the best interests of the Company and it
shareholders, and has voted to recommend to the Company's stockholders
acceptance of the Offer. CSI Computer Specialists, Inc.'s Board of Directors
recommends that stockholders tender their Common Shares in the Offer.
CSI Computer Specialists, Inc. is a provider of 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.
ISI is a national provider of enterprise infrastructure management
services. ISI provides information technology outsourcing, enterprise systems
management and not-for-profit solutions to commercial and non-profit
organizations.
Footnote continued from previous page
Footnote continued on next page
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
EXHIBIT (a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer. - Social Security numbers have nine digits separated by two
hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits
separated by only one hyphen: i.e. 00-0000000. The table below will help
determine the number to give the payer.
- ------------------ -------------------- ---------------------------------
For this Type of Account: Give the For this Type of Account: Give the
SOCIAL EMPLOYER
SECURITY IDENTIFICATION
Number of - Number of -
- ------------------- --------------------------------- ---------------------
1. An individual's account. The individual 9.A valid trust, estate,
2.Two or more individuals The actual owner or pension trust The legal entity
(joint account) of the account or, (Do not furnish the
if combined funds, identifying number
any one of the of the personal
individuals(1) representative or
trustee unless the
legal entity itself
is not designated
in the account title.) (5)
3.Husband and wife (joint
The actual owner 10.Corporate account The corporation
account) of the account or, 11.Religious, charitable,
if joint funds, or educational
either person (1) organization account
4.Custodian account of a The minor (2) 12.Partnership account
minor (Uniform Gift to held in the name of the
Minors business The organization
Act)
5.Adult and minor (joint The adult or, if
the minor is the
only contributor, 13.Association, club, or
the minor (1) other tax-exempt
organization The organization
6.Account in the name of The ward, minor,
guardian or committee for a or incompetent 14.A broker or registeredThe broker
designated ward, minor, or or nominee
incompetent person 15.Account with the
7.a. The usual revocable Department of Agriculture The public entity
savings trust account in the name of a public
(grantor is also entity (such as a State or
trustee) grantor-trustee(1) local government, school nominee
district, or prison) that receives
agricultural program payments
b.So-called trust account The actual owner(1)
that is not a legal or The
valid trust under State Law
8.Sole proprietorship The owner (4)
account
- ------------------------- --------------------------------- ------------
(1) List first and circle the name of the person whose number your furnish. (2)
Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number. (4) Show the name of the owner. (5) List first
and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the
number will be considered to be that of the first name listed.
<PAGE>
Obtaining a Number
If you don't have a taxpayer identification number or the course of the payer's
trade or business and you don't know your number, obtain Form SS-5, you have not
provided your correct taxpayer Application for a Social Security Number Card, or
identification number to the payer. Form SS-4, Application for Employer
Identification o Payments of tax-exempt interest Number, at the local office of
the Social Security (including exempt-interest dividends under Administration or
the Internal Revenue Service (the section 852). "IRS") and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding
on ALL payments include the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under
section 501(a), or an individual retirement plan.
o The United States or any agency or
instrumentality thereof.
o A State, the District of Columbia, a
possession of the United States, or any
subdivision or instrumentality thereof.
o A foreign government, a political
subdivision of a foreign government, or any
agency or instrumentality thereof.
o An international organization or any agency,
or instru-mentality thereof.
o A registered dealer in securities or
commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under
section 584(a).
o An exempt charitable remainder trust, or a
nonexempt trust described in section 4947(a) (1).
o An entity registered at all times under the
Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not
generally subject to backup withholding include the
following:
o Payments to nonresident aliens subject to
withholding under section 1441.
o Payments to partnerships not engaged in a
trade or business in the U.S. and which have at
least one nonresident partner.
o Payments of patronage dividends where the
amount re-ceived is not paid in money.
o Payments made by certain foreign
organizations.
o Payments made to a nominee.
Payments of interest not generally subject to
backup with-holding include the following:
o Payments of interest on obligations issued
by individuals.
Note: You may be subject to backup withholding if this interest
is $600 or more and is paid in the course of the payers trade or
business and you have not provided your correct taxpayer
identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b) (5) to non-resident
aliens.
o Payments on tax-free covenant bonds under section 1451
o Payments made by certain foreign
organizations.
o Payments made to a nominee.
Exempt payees described above should file Form
W-9 to avoid possible erroneous backup
withholding. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS
ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends,
and pa-tronage dividends, that are not subject
to information report-ing are also not subject
to backup withholding. For details, see the
regulation under sections 6041, 6041A(a), 6045,
and 6050A.
Privacy Act Notice. - Section 6109 requires most
recipients of dividend, interest, or other
payments to give taxpayer identification numbers
to payers who must report the pay-ments to the
IRS. The IRS uses the numbers for
identifica-tion purposes. Payers must be given
the numbers whether or not recipients are
required to file tax returns. Payers must
generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee
who does not furnish a taxpayer identification
number to a payer. Certain penalties may also
apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer
Identification Number. - If you fail to furnish
your taxpayer identification number to a payer,
you are subject to a penalty of $50 for each
such failure unless your failure is due to a
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and
Interest Pay-ments. - If you fail to include any
portion of an includible payment for interest,
dividends, or patronage dividends in gross
income, such failure will be treated as being
due to a negligence and will be subject to a
penalty of 20% on any portion of an
under-payment attributable to that failure
unless there is clear and convincing evidence to
the contrary.
(3) Civil Penalty for False Information with Respect to
Withholding. - If you make a false statement with no reasonable
basis which result in no imposition of backup withholding, you
are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Falsify-ing
certifications or affirmations may subject you to criminal
penalties including fines and/or imprisonment. FOR ADDITIONAL
INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
Footnote continued from previous page
Footnote continued on next page
-9-
EXHIBIT (b)(1)
AMENDED AND RESTATED LOAN AND SECURITY Agreement
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT ("Agreement") is
made this 30th day of March, 2000, by and between INTERACTIVE SYSTEMS, INC., a
Maryland corporation and NATIONAL CONVERSION SYSTEMS, INC., a Virginia
corporation (collectively, the "Borrower") and SANDY SPRING NATIONAL BANK OF
MARYLAND, a national banking association (the "Bank").
RECITALS
WHEREAS, Bank has previously made a loan in the principal amount of TWO
MILLION AND NO/100 DOLLARS ($2,000,000.00), to Borrower, evidenced by a
Promissory Note (Secured Revolving Line of Credit) dated July 30, 1999, and
secured by that certain Loan and Security Agreement dated of even date therewith
by and between the Borrower and the Bank (herein the "Original Loan Documents"),
and
WHEREAS, Bank has agreed to make additional loans to Borrower to the
aggregate principal amount of FOUR MILLION SIX HUNDRED THOUSAND AND NO/100
DOLLARS ($4,600,000.00); AND
WHERAS, Bank is willing to make (and increase) such loans by amending
and restating the Original Loan Documents upon the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Borrower and Bank do hereby agree as follows:
1. CONSTRUCTION AND DEFINITION OF TERMS.
All terms used herein which are defined by the Maryland Uniform
Commercial Code shall have the same meanings assigned to them by the Maryland
Uniform Commercial Code unless and to the extent varied by this Agreement. All
accounting terms not specifically defined herein shall have the meanings
assigned to them as determined by generally accepted accounting principles. In
addition to the terms elsewhere in this Agreement, unless the context otherwise
requires, the following terms shall have the following meanings: 1.01 "Account
Debtor" shall mean the person or entity obligated upon a Receivable. 1.02
"Advance" shall mean each disbursement of Loan proceeds made by Bank. 1.03
"Banking Day" shall mean any day that banks in the state of Maryland are not
required or permitted to be closed. 1.04 "Borrowing Base" shall mean, as
determined by Bank from time to time, seventy five percent (75%) of the amount
of all billed Eligible Receivables aged less than ninety (90) days from invoice
date. 1.05 "Certified" shall mean that the information, statement, schedule,
report or other document required to be "certified" shall contain a presentation
of a duly authorized officer of Borrower that such information, statement,
schedule, report or other document is true and correct and complete. 1.06
"Closing" shall mean the date on which funds are first advanced to Borrower
hereunder. 1.07 "Collateral" shall mean all of Borrower's Receivables, Inventory
and Equipment, all property and funds of
<PAGE>
Borrower, both now owned and hereafter acquired, coming into Bank's possession,
all property and asserts of Borrower in or on which Bank has, or may in the
future acquire or be granted, a Lien, whether related or unrelated to this
Agreement and whether or not the obligation secured is of the same character or
class as Borrower's obligations hereunder, and all proceeds, cash and noncash,
including insurance proceeds, and products of all of the foregoing and all
books, records and data processing materials in any form (including tapes, disks
and the like) documenting, describing or in any way relating to any or all of
the foregoing, whether in the possession of Borrower or any other person, and
all of Debtor's franchise rights, licenses, permits, authorizations and general
intangibles, including, without limitation, patent rights, intellectual property
rights, contracts and other general intangibles as defined under the Uniform
Commercial Code in effect in the State of Maryland. 1.08 "Eligible Receivables"
shall mean, at any time, all of the Borrower's unbonded Receivables which
contain selling terms and conditions acceptable to Bank, except, that, the net
amount of any Eligible Receivables against which Borrower may borrow shall
exclude all returns, discounts, credits, and offsets of any nature and, unless
otherwise agreed to by Bank in writing, Eligible Receivables shall not include:
(a) Receivables with respect to which the Account Debtor is an officer, an
employee or agent of Borrower. (b) Receivables with respect to which the Account
Debtor is a subsidiary of, or affiliated with or related to Borrower or its
shareholders, officers, or directors. (c) Receivables with respect to which
goods are placed on consignment, guaranteed sale, or other terms by reason of
which the payment by the Account Debtor may be conditional. (d) Receivables with
respect to which Borrower is or may become liable to the Account Debtor for
goods sold or services rendered by the Account Debtor to Borrower. (e)
Receivables which are subject to dispute, counterclaim, or setoff. (f)
Receivables with respect to which the goods have not been shipped or delivered,
or the services have not been rendered, to the Account Debtor. (g) Receivables
with respect to which Bank, in its sole discretion, deems the creditworthiness
of financial condition of the Account Debtor to be unsatisfactory. (h)
Receivables of any Account Debtor who has filed or has had filed against it a
petition in bankruptcy or an application for relief under any provision of any
state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has
had appointed a trustee, custodian, or receiver for the assets of such Account
Debtor; or who has made an assignment for the benefit of creditors or has become
insolvent or fails generally to pay its debts (including its payrolls) as such
debts become due. (i) Receivables with respect to which the Account Debtor is
the United States government or any department or agency of the United States.
(j) Receivables which have not been paid in full within ninety (90) days from
the invoice date. The entire balance of the Receivables of any single Account
Debtor will be ineligible whenever the portion of such Receivables which have
not been paid
<PAGE>
within ninety (90) days from the invoice date is in excess of 50.00% of the
total amount outstanding on such Receivables. 1.09 "Equipment" shall mean all
right, title and interest of Borrower in and to equipment of every type and
description, now owned and hereafter acquired and wherever located, including,
without limitation, all machinery, vehicles, furniture, furnishings, tools,
fixtures, and property in, on or with which any of the foregoing may be stored
or maintained, materials and supplies, and any equipment described in any
supplement schedule hereafter delivered by or on behalf of Borrower to Bank,
together with all present and future parts, additions, accessories, attachments,
accessions, replacement parts and substitutions in any form whatsoever. 1.10
"Event of Default" shall mean any of the evens described in Section 8 hereof.
1.11 "Indebtedness" shall include all items which would properly be included in
the liability section of a balance sheet or in a footnote to a financial
statement, in accordance with generally accepted accounting principles,
including, without limitation, contingent liabilities. 1.12 "Inventory" shall
mean all right, title and interest of Borrower in and to inventory of every type
and description, now owned and hereafter acquired and wherever located,
including without limitation, raw materials, work in process, finished goods,
goods returned or repossessed or stopped in transit, goods used for
demonstration, promotion, marketing or similar purposes, property in or on which
any of the foregoing may be stored or maintained and all materials and supplies
usable or used or consumed in the course of Borrower's business, together with
all present and future substitutions, parts, additions, accessories,
attachments, accessions, replacement parts and additions thereto in any form
whatsoever. 1.13 "Lien" shall mean any statutory or common law consensual or
non-consensual mortgage, pledge, security interest, encumbrance, lien, right of
setoff, claim or charge of any kind, including, without limitation, any
conditional sole or other title retention transaction, any lease transaction in
the nature thereof and any secured transaction under the Uniform Commercial Code
of any jurisdiction. 1.14 "Loan", "Loans", "Line" or "Lines" shall mean
collectively (a) the term loan in the amount of Six Hundred Thousand and No/100
Dollars ($600,000.00), and (b) the receivable line of credit in an amount not to
exceed Four Million and No/100 Dollars ($4,000,000.00) (herein, sometimes, the
"Revolving Loan"), each to be established by Bank in favor of the Borrower
pursuant to the terms and conditions of this Agreement. 1.15 "Note" shall mean
collectively (a) the Promissory Note (Term) in the amount of Six Hundred
Thousand and No/100 Dollars ($600,000.00) (the "Equipment Term Note"), and (b)
the Amended and Restated Promissory Note (Secured Revolving Line of Credit) in
an amount not to exceed Four Million and No/100 Dollars ($4,000,000.00), (the
"Receivable Line Note"), each dated of even date herewith, each to be executed
and delivered by Borrower at or prior to Closing pursuant to 5.3(a) and (b)
hereof, and all renewals, replacements and extensions thereof. 1.16
"Obligations" shall include the full and punctual performance of all present and
future duties, covenants and responsibilities due to Bank by Borrower on account
of the Note, and the Other Agreements and otherwise, all present and future
obligations of Borrower to Bank for the payment of money under this Agreement,
the Note, and the Other Agreements, extending to
<PAGE>
all principal amounts, interest, late charges and all other charges and sums, as
well as all costs and expenses payable by Borrower on account of the Loans under
this Agreement, the Note, and the Other Agreements, and any and all other
present and future monetary liabilities of Borrower to Bank, whether direct or
indirect, contingent or non-contingent, matured or unmatured, accrued or not
accrued, related or unrelated to the Note, whether or not of the same character
or class as Borrower's Obligations on account of the Loans under this Agreement,
the Note, and the Other Agreements, including, without limitation, overdrafts in
any checking or other account of the Borrower at the Bank and claims against
Borrower acquired by assignment to Bank, whether or not security under any other
document, instrument or statutory or common law provision, as well as all
renewals, refinancings, consolidations, re-castings and extensions of any of the
foregoing. 1.17 "Other Agreements" shall mean any and all promissory notes,
security agreements, assignments, subordination agreements, pledge or
hypothecation agreements, mortgages, deeds of trust, leases, contracts,
guaranties, instruments and documents now and hereafter existing between Bank
and Borrower executed and/or delivered evidencing, guaranteeing, securing or in
any other manner relating to any of the Obligations. 1.18 "Permitted Liens"
shall mean (a) Liens of the Bank, (b) Liens for taxes and special assessments
not delinquent, and (c) Liens, if any, consented to by the Bank in writing. 1.19
"Person" shall include natural persons, corporations, associations,
partnerships, joint ventures, trusts, governments and agencies and departments
thereof, and every other entity of every kind. 1.20 "Receivables" shall mean all
of Borrower's present and future accounts, contract rights, notes, instruments,
documents, chattel paper, tax refunds, notes receivable, drafts, acceptances,
documents, claims, causes of action, all present and future rights of Borrower
to the payment of money due or to become due to Borrower for any reason
whatsoever, whether arising out of the sale, lease or other disposition of goods
or other property by Borrower or under any contract or agreement to render
services of any kind or otherwise, whether or not such right to payment has been
earned by performance, and howsoever such right to payment may be evidenced,
whether by open account, instrument, note draft, chattel paper or otherwise,
together with all other rights which Borrower may at any time have, by law or
agreement, against any account debtor, all rights which Borrower may at any time
have, by law or agreement, against any other obligor obligated to make such
payment, all goods returned, repossessed or stopped in transit the sale, lease
or other disposition of which contributed to the creation of any Receivable, and
all rights and liens which Borrower may at any time have, by law or agreement,
against any property of such account debtor or against any property of any such
other obligor, together with all ledger sheets, files, records, documents and
instruments (including, without limitation, computer programs, tapes and related
electronic data processing software), evidencing an interest in or relating to,
the foregoing. 1.21 "Subsidiary" shall include any corporation at least a
majority of the outstanding Voting Stock of which is owned, now or in the
future, by Borrower, or by one of the stockholders of the Borrower, or by
Borrower, and one or more of its Subsidiaries. 1.22 "Voting Stock" shall mean
the shares of any class of capital stock of a corporation having ordinary voting
power to elect the directors, officers or trustees thereof, including such
<PAGE>
shares that shall or might have voting power by reason of the occurrence of one
or more conditions or contingencies.
2. LOAN.
2.01 Loan Commitment. Subject to, and in accordance with the terms, conditions
and provisions of this Agreement, the Bank agrees to make the Loan to the
Borrower. The full principal amount of the Equipment Term Note shall be advanced
by Bank to Borrower at Closing and the principal amount of the Receivable Line
Note shall be advanced by Bank to Borrower on a revolving credit basis pursuant
to the terms hereof until the earlier to occur of (a) the respective maturity
dates of the notes evidencing the same, or (b) the date the Bank terminates the
Loan pursuant to the provisions of Section 9 hereof. 2.02 Manner of Borrowing
and Disbursement of Revolving Loan. Each Advance of account of the Revolving
Loan shall be made by the Bank to the Borrower no more than on the fifth (5th)
Banking Day on which Bank actually receives written notice, if requested by
Bank, from the Borrower setting forth the amount of such Advance, provided,
that, such written notice is actually received by Bank before 12:00 Noon Eastern
Time (Standard or Daylight as then applicable) on such Banking Day, or on such
later date set forth in Borrower's notice. Prior to making any Advances
hereunder, the Bank will require Borrower to submit to the Bank, for its
approval, a written statement of the purpose of such Advance, together with a
statement of contemplated source of repayment of the same. Notwithstanding any
other provision contained herein or in the Note, the Bank reserves the right to
deny funding for any such request in the exercise of its sole discretion. Each
Advance on account of the Revolving Loan shall be credited to a banking account
of the Borrower with the Bank or disbursed as otherwise instructed by Borrower
in its notice requesting such Advance. With respect to all matters and
transactions in connection therewith, the Borrower hereby irrevocably authorizes
the Bank to accept, rely upon, act upon and comply with any written
instructions, requests, confirmations, and orders from Borrower. The Borrower
acknowledges that the transmission between the Borrower and the Bank of any such
instructions, requests, confirmations, and orders from Borrower. The Borrower
acknowledges that the transmission between the Borrower and the Bank of any such
instructions, requests, confirmations, and orders involves the possibility of
errors, omissions, mistakes, and discrepancies and agree to adopt such internal
measures and operational procedures to protect its interests. By reason thereof,
the Borrower hereby assumes all risk of loss and responsibility for, and
releases and discharges the Bank from any and all responsibility or liability
for and agrees to indemnify, reimburse on demand, and hold the Bank harmless
from, any and all claims, actions, damages, losses, liability, and expenses by
reason of, arising out of or in any way connected with or related to (a) the
Bank's accepting, relying and acting upon, complying with, or observing any such
instructions, requests, confirmations, or orders, and (b) any such errors,
omissions, mistakes, and discrepancies; provided, that, the foregoing release
and indemnification shall not apply to matters attributable to Bank's gross
negligence or intentional willful misconduct. 2.03 The Account. The Bank shall
establish and maintain an account on the books of the Bank evidencing the
indebtedness of the Borrower to the Bank under the provisions of this Agreement
with respect to the Revolving Loan to which (a) the amount of each Revolving
Loan advance made by the Bank shall be debited by recording therein on the date
of each Advance a debt entry in the amount of the Advance, (b) each payment on
the Revolving Loan made by the Borrower shall be credited by recording therein
on the date received a credit entry in the amount of such payment, (c) all
interest on the Revolving Loan not paid as and when due and payable shall be
debited by
<PAGE>
recording therein on the date such interest becomes past due a
debit entry in the amount of such interest, (d) all Expense Payments
(hereinafter defined) not paid as and when due and payable shall be debited by
recording therein on the date such Expense payment becomes due a debit entry in
the amount of such Expense Payment, (e) all Liquidation costs (hereinafter
defined) shall be debited by recording therein on the date incurred the amount
of such Liquidation Costs, and (f) all other charges, interest, and expenses
chargeable by the Bank to the Borrower under this Agreement not paid as and when
due and payable shall be debited by recording therein on the date such charges,
interest, and expenses become past due a debit entry in the amount of such
charges, interest, and expenses. All credit entries to such account are
conditional and shall be readjusted as of the date made if final payment is not
received by the Bank in cash or solvent credits. The entries made by the Bank to
such account shall constitute prima facie evidence of the existence and amounts
of the Borrower's indebtedness to the Bank under the provisions of this
Agreement. 3. SECURITY. 3.01 Security Interest. As security for the payment and
performance of all of the Obligations and performance under the Other
Agreements, Borrower hereby irrevocably and unconditionally assigns, pledges and
grants to Bank a continuing security interest in the Collateral. Bank's
assignment, pledge and grant is coupled with an interest and shall continually
exist until all Obligations have been paid in full. If required by Bank at any
time, Borrower shall make notations, satisfactory to Bank, on its books and
records disclosing the existence of Bank's security interest in the Collateral.
Borrower agrees that, with respect to the Collateral, Bank shall have all the
rights and remedies of a secured party under the State of Maryland Uniform
Commercial Code, Bank shall have no liability or duty, either before or after
the occurrence of an Event of Default hereunder, on account of loss or damage
to, or to collect or enforce any of its rights against, the Collateral, or to
preserve any rights against account debtors or other parties with prior
interests in the Collateral. 3.02 Covenants and Representations Concerning
Collateral. With respect to all of the Collateral, Borrower covenants, warrants
and represents that: (a) No financing statement covering any of the Collateral
is on file in any public office or land or financing records except for
financing statements in favor of Bank and financing statements with respect to
any Permitted Liens. (b) Borrower is the legal and beneficial owner of all of
the Collateral, free and clear of all Liens, except for Permitted Liens. (c) The
security interest granted Bank hereunder shall constitute a first Lien upon the
Collateral, except for Permitted Liens, and Borrower will not, except in the
ordinary course of business, transfer, discount, sell or assign any interest in
the Collateral nor permit any other Lien to be created or remain thereon except
for Permitted Liens. (d) Borrower will maintain the Collateral in good order and
condition, ordinary wear and tear excepted, and will use, operate and maintain
the Collateral in compliance with all laws, regulations and ordinances and in
compliance with all applicable insurance requirements and regulations. Borrower
will pay promptly all taxes, judgments and charges of any kind levied or
assessed thereon, unless disputed in good faith and, if requested by the Bank,
bonded off to the Banks satisfaction.
<PAGE>
Borrower shall promptly notify Bank in writing of any such dispute, and any
pending or threatened litigation involving the Collateral. Borrower shall
promptly pay when due all transportation, storage, warehousing and other such
charges and fees affecting or arising out of or relating to the Collateral and
shall defend the Collateral, at Borrower's expense, against all claims and
demands of any persons claiming any interest in the Collateral adverse to
Borrower or Bank. (e) At all reasonable times Bank and its agents and designees
may enter Borrower's premises and inspect the Collateral and all books and
records of Borrower (in whatever form) relating to the Collateral or to the
finances and operations of Borrower's business. (f) Borrowers shall maintain
comprehensive casualty insurance on the Collateral, as may be reasonably
required by the Bank, against such risks, such amounts, with such loss
deductible amounts with such companies as may be required by or acceptable to
Bank, and each such policy shall contain a clause or endorsement, satisfactory
to Bank, naming Bank as loss payee and a clause or endorsement, satisfactory to
Bank, that such policy may not be cancelled or altered and Bank may not be
removed as loss payee without at least fifteen (15) days prior written notice to
Bank. Borrower hereby assigns to Bank any and all proceeds of such policies and
authorizes and empowers Bank to adjust or compromise any loss under such
policies and to collect and receive all such proceeds. Borrower hereby
authorizes and directs each insurance company to pay all such proceeds directly
and solely to Bank and not to Borrower and Bank jointly. Borrower authorizes and
empowers Bank to execute and endorse in Borrower's name all proofs of loss,
drafts, checks and any other documents necessary to accomplish such collection
and any persons making payments to Bank under the terms of this paragraph are
hereby relieved absolutely from any obligation or responsibility to see to the
application of any sums so paid. After deduction from any such proceeds of all
reasonable costs and expenses (including reasonable attorney's fees) incurred by
Bank in the collection and handling of such proceeds, the net proceeds may be
applied in whole or in part, at Bank's option, either toward replacing or
restoring the Collateral, or as a credit against such of the Obligations,
whether matured or unmatured, as Bank shall determine in Bank's sole discretion.
(g) All information, schedules, certificates, records and data furnished to the
Bank are true and correct in all material respects and complete insofar as
completeness may be necessary to give the Bank accurate knowledge of the subject
matter. (h) All books and records of Borrower pertaining to the Collateral are
located at 1777 N. Kent Street, Suite 1103, Arlington, Virginia 22209, and
Borrower will not change the location of such books and records without the
prior written consent of Bank. (i) Borrower shall do, make, execute and deliver
all such additional, and further acts, things, deeds, assurances, instruments
and documents as Bank may reasonably request to vest in and assure to Bank its
rights hereunder or in any of the Collateral, including, without limitation, the
execution and delivery of financing statements which Bank deems necessary or
appropriate to perfect or continue the security interest granted herein, and
Borrower agrees to pay all taxes, fees and costs (including attorney's fees)
paid or incurred by Bank in connection with the preparation and filing or
recordation thereof. 4.
<PAGE>
REPRESENTATIONS AND WARRANTIES.
To induce Bank to enter into this Agreement, Borrower represents and
warrants to Bank that as of the Closing: 4.01 Good Standing. Interactive
Systems, Inc., is duly organized and existing in good standing under the laws of
the state of Maryland, National Conversion Systems, Inc. is duly organized and
existing in good standing under the laws of the Commonwealth of Virginia, each
has the power to own its property and to carry on its business and is duly
qualified to do business and is in good standing in each jurisdiction in which
the transaction of its business makes such qualification necessary. 4.02
Authority. Borrower has full power and authority to enter into this Agreement,
to make the borrowing hereunder, to execute and deliver all documents and
instruments required hereunder and to incur and perform the Obligations provided
for herein and in the Note, all of which have been duly authorized by all
necessary and proper corporate and other action, and no consent or approval of
any person, including, without limitation, stockholders of Borrower and any
public authority or regulatory body, which has not been obtained, is required as
a condition to the validity or enforceability hereof or thereof. 4.03 Binding
Agreements. This Agreement has been duly and properly executed by Borrower,
constitutes the valid and legally binding obligation of Borrower and is fully
enforceable against Borrower in accordance with its terms. 4.04 No Conflicting
Agreements. The execution and performance by Borrower of this Agreement, the
borrowing hereunder, and Borrower's execution and delivery of and performance
under the Note will not (a) violate (i) any provision of law, any order, rule or
regulation of any court or other agency of government; (ii) any award of any
arbitrator, (iii) the charter or By-Laws of Borrower, or (iv) any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which
Borrower is a party or by which it or any of its property is bound, or (b) be in
conflict with, result in a breach of or constitute (with due notice and/or lapse
of time) a default under, any such award, indenture, contract, agreement,
mortgage, deed of trust or other instrument, or result in the creation or
imposition of any Lien upon any of the property or assets of Borrower. 4.05
Litigation. There are no undisclosed judgments, claims, actions, suits or
proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or its properties, at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, which may result in any material adverse
change in the business, operations, prospects, properties or assets or in the
condition, financial or otherwise, of Borrower, and Borrower is not, to its
knowledge, in default with respect to any judgment, order, writ, injunction,
decree, rule or regulation of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would have a material adverse effect on Borrower.
4.06 Financial Condition. The financial statements of Borrower heretofore
delivered to Bank are complete and correct, fairly present the financial
condition of Borrower and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. There are no
liabilities of Borrower, direct or indirect, fixed or contingent as of the date
of such statements which are not reflected therein. 4.07
<PAGE>
Taxes. Except as otherwise disclosed to the Bank, Borrower has
paid or caused to be paid all federal, state and local taxes to the extent that
such taxes have become due. Borrower has filed or caused to be file all federal,
state and local tax returns which are required to be filed by Borrower. 4.08
Titles to properties. Borrower has good and marketable title to all or (its
properties and assets (including the Collateral) and all of the properties and
assets of Borrower are free and clear of Liens, except to permitted Liens, and
has made no assignments thereof except to Bank. 4.09 Subsidiaries. Borrower has
no Subsidiaries other than Subsidiaries previously disclosed to the Bank. 4.10
Licenses and Permits. Borrower has duly obtained and now holds all licenses,
permits, certifications, approvals and the like required by federal, state and
local laws of the jurisdiction in which Borrower conducts its business and each
remains valid and in full force and effect and Borrower has paid all fees,
taxes, assessments and other charges necessary to maintain same. 4.11 Certain
Indebtedness. There is no Indebtedness of Borrower owing to any employee,
officer, stockholder or director of Borrower other than accrued salaries,
commissions and the like and any Indebtedness subordinated to the Obligations
pursuant hereto. 4.12 Broker's or Finder's Commissions. No broker's or finder's
fee or commission is or will be payable in connection with the issuance of the
Note or otherwise in connection with this Agreement or the transactions
contemplated hereby, and Borrower agrees to save harmless and indemnify Bank
from and against any claim, demand, action, suit, proceeding or liability for
any such fee or commission. 4.13 Outstanding Indebtedness. Borrower has no
outstanding Indebtedness except as permitted by Subsection 7.01 hereof and there
exists no default under the provisions of any instrument evidencing such
Indebtedness or of any agreement relating thereto. 4.14 No Adverse Change. There
has been no material adverse change in the business, properties or condition
(financial or otherwise) of the Borrower since the date of the latest financial
statements referred to in Section 6.01, below. 4.15 Use of Loan Proceeds. The
proceeds of the Loan shall be used solely for acquiring or carrying on a
business or commercial enterprise. 4.16 No Default. No Event of Default
(hereinafter defined), and no event which, with notice or passage of time or
both would constitute an Event of Default, has occurred hereunder. 5. CONDITIONS
OF LENDING.
Bank shall have no obligation to make any Advance of the proceeds
of the Loan unless each of the following conditions precedent
shall be satisfied as of the time of such Advance: 5.01
Representation and Warranties. Bank shall be
fully satisfied that all covenants, representations and warranties set forth in
this Agreement are true and correct on and as of such time with the same effect
as though such covenants, representation and warranties had been made on and as
of such time. 1.01
<PAGE>
-10-
5.02 Event of Default. No Event of Default or event which, with notice or
passage of time or both, would constitute an Event of Default shall have
occurred hereunder. 5.03 Documents. There shall have been delivered to Bank,
fully completed and duly executed (when applicable), the following documents,
the terms of which are hereby specifically incorporated herein by reference as
though fully set forth: (a) The Receivable Line Note. (b) The Equipment Term
Note. (c) The Financing Statements. (d) The Amended and restated Guaranty
Agreement. (e) The Subordination Agreement. (f) Certificate of Corporate
Resolutions of the Secretary of the Borrower. (g) Evidence fully satisfactory to
Bank and Bank's counsel that all loss payee clauses or endorsements in favor of
Bank required pursuant to the Other Agreements are in effect, together with
copies of all insurance policies and endorsements. 5.04 Borrowing Base
Certificate; Aged Receivable; Aged Payables. At Closing, at the time of every
subsequent advance hereunder, and if no advance is requested hereunder, then on
a monthly basis, if requested by Bank, Borrower shall submit to the Bank for its
approval, a completed "Borrowing Base Certificate" in the form attached to this
Loan Agreement. In addition, the Borrower shall furnish the Bank within fifteen
(15) days after the end of each calendar month, an aged analysis of all
outstanding Receivables, aged less than ninety (90) days from invoice date, and
all outstanding accounts payable, in form and substance satisfactory to the
Bank. Any provision contained herein or in the Note to the contrary
notwithstanding, the Bank will not permit advances under the Line to exceed
seventy-five percent (75%) of the amount of all billed Eligible Receivables aged
less than ninety (90) days from invoice date. 6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees with Bank that, until all of the
Obligations have been paid in full, Borrower and its Subsidiaries, if any, will:
6.01 Financial Reporting Requirements.
Furnish to Bank:
(a) As soon as available, but in
no event more than forty-five (45) days after the end of each monthly accounting
period of Borrower, (i) a statement of consolidating and consolidated income and
retained earnings and changes in consolidated financial position of Borrower for
such period and for the period from the beginning of the current year of
Borrower to the end of such period, and a consolidating and consolidated balance
sheet of Borrower and its Subsidiaries, if any, as at the end of such period,
setting forth in each case in comparative form figures for the corresponding
periods in the preceding fiscal year of Borrower, all in form and detail
satisfactory to Bank, which fairly represents the financial condition of the
Borrower, certified by the principal financial officer of Borrower and
accompanied by a certificate of that officer stating whether any event has
occurred which constitutes an Event of Default or which could constitute an
Event of Default (a)
<PAGE>
-20-
with the giving of notice and/or the lapse of time and, if so, stating the facts
with respect thereto, and (ii) an aged analysis of all outstanding Receivables,
in form and substance satisfactory to the Bank. (b) As soon as available and in
any event within ninety (90) days after the end of each fiscal year of Borrower,
a statement of consolidating and consolidated income and retained earnings and
changes in consolidated financial position of Borrower and its Subsidiaries, if
any, for such year, and a consolidating and consolidated balance sheet of
Borrower and its Subsidiaries, if any, as at the end of such year, setting forth
in each case in comparative form corresponding figures for the preceding fiscal
year of Borrower, all in form and detail satisfactory to Bank, audited by
independent certified public accountants satisfactory to Bank in accordance with
generally accepted accounting principles consistently applied, and accompanied
by a Certificate of the Chief Financial Officer of Borrower stating whether any
event has occurred which constitutes an Event of Default or which could
constitute an Event of Default with the giving of notice and/or the lapse of
time and, if so, stating the facts with respect thereto; and (c) Such other
information, tax returns, reports or statements concerning the operations,
business affairs and/or financial condition of Borrower and its Subsidiaries, if
any, as Bank may reasonably request from time to time. 6.02 Taxes. Pay and
discharge all taxes, assessments and governmental charges upon Borrower, its
income and properties prior to the date on which penalties are attached thereto.
6.03 Continuation of Business and Compliance with Laws. Continue its and its
Subsidiaries', if any, business operations as now being conducted and comply
with all applicable federal, state and local laws, rules, ordinances,
regulations and orders. 6.04 Litigation. Promptly notify Bank in writing of any
action, suit or proceeding at law or in equity by or before any court,
governmental agency or instrumentality which could result in any material change
in the business, operations, prospects, properties or assets or in the
condition, financial or otherwise, of Borrower and its Subsidiaries, if any.
6.05 Extraordinary Loss. Promptly notify Bank in writing of any event causing
extraordinary loss or depreciation of the value of any of Borrower's or its
Subsidiaries', if any, assets and the facts with respect thereto. 6.06 Books and
Records/Depository Accounts. Keep and maintain proper and current books and
records which fairly represents the financial condition of the Borrower and
permit access to Bank to, reproduction by Bank of and copying (all at the
Borrower's expense) by Bank from, such books and records during normal business
hours. Borrower will maintain its primary deposit relationship with Bank until
the obligations are repaid in full. 6.07 Maintenance of Properties. Maintain all
properties and improvements necessary to the conduct of Borrower's or its
Subsidiaries', if any, business in good working order and condition, ordinary
wear and tear excepted, and cause replacements and repairs to be made when
necessary for the proper conduct of its business. 6.08 Patents, Franchises, etc.
Maintain, preserve and protect all licenses, patents, franchises, trademarks and
<PAGE>
trade names of Borrower and its Subsidiaries, if any, or licenses by Borrower or
any Subsidiary, which are necessary to the conduct of the business of Borrower
or its Subsidiaries, if any, as now conducted, free of any conflict with the
rights of any other person. 6.09 Insurance. Maintain with insurers and in
amounts satisfactory to Bank such insurance against such risks and with such
loss deductible amounts as may be reasonably required by or reasonably
acceptable to Bank. 6.10 Evidence of Insurance. Deliver to Bank from time to
time as requested, and periodically if Bank shall so require, evidence
reasonably satisfactory to Bank that all insurance and endorsements required by
the Bank are in effect. 6.11 Financial Information. Deliver to Bank, promptly
upon request, and periodically if Bank shall so require, any reasonable
information, statements or reports concerning Borrower's and its Subsidiaries',
if any, business, financial affairs or any other matter or matters as may be
requested by Bank, including, without limitation, copies of federal and state
tax returns of Borrower and its Subsidiaries, if any. 6.12 Further Assurances.
The Borrower shall promptly, upon request, execute, acknowledge and deliver any
financing statement, endorsement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document as the
Bank may reasonably require in order to perfect, preserve, maintain, protect,
continue or extend the lien or security interest to the Bank under this
Agreement and its priority. The Borrower shall pay to the Bank on demand all
taxes, costs and expenses (including, but not limited to, reasonable attorney's
fees) incurred by the Bank in connection with the preparation, execution,
recording and filing of any such document or instrument mentioned aforesaid.
6.13 Borrowing Base Certificate. The Borrower shall submit completed Borrowing
Base Certificates to Bank each month (together with an aged analysis of all
outstanding Receivables and accounts payable) by the tenth (10th) day of each
calendar month. 6.14 Borrowing Base. In the event that the principal amount of
the Receivable Line Note ever exceeds the Borrowing Base, as determined by Bank,
Borrower will immediately curtail the principal amount of the Receivable Line
Note on Bank's demand so that it does not exceed the Borrowing Base. 6.15
Financial Covenants. (a) Borrower's cash flow shall be sufficient to service all
debt of the Borrower at the end of each of Borrower's fiscal quarters, as
properly reflected in the financial statements of Borrower for such fiscal
quarter approved by Bank, by a ratio of 1.20 to 1.00. (b) The ratio of
Borrower's current assets to current liabilities, each as determined by the
Bank, at the end of each of its fiscal quarters, as properly reflected in the
financial statements of Borrower for such fiscal quarters approved by Bank,
shall not be less than 1.10 to 1.00. (c) Borrower's debt-to-worth ratio at the
end of each of Borrower's fiscal quarters, as properly reflected in the
financial statements of Borrower for such fiscal quarter approved by Bank, shall
not be greater than 3.00 to 1.00. The ratio, as determined by the Bank, shall be
defined as total liabilities
<PAGE>
divided by shareholders equity (which may include subordinate Borrower debt
payable to the shareholders of the Borrower).
7. NEGATIVE COVENANTS.
Borrower covenants and agrees with Bank that, until all of the
Obligations have been paid in full, Borrower will not, directly or indirectly,
without Bank's prior written consent: 7.01 Indebtedness. Create, incur, assume
or permit to exist any Indebtedness except (a) Indebtedness to Bank, (b) current
trade Indebtedness, and trade Indebtedness incurred in the normal course of
business, (c) any Indebtedness specifically permitted hereunder, and (d)
Indebtedness which shall be approved in advance by Bank in writing, in Bank's
sole discretion, and if required by Bank, subordinated to all Obligations by a
written agreement satisfactory in form and substance to Bank and Bank's counsel.
7.02 Liens. Create, incur, assume or permit to exist, directly or indirectly,
any Lien upon any of Borrower's properties or assets, now owned or hereafter
acquired by Borrower, other than Permitted Liens. 7.03 Merger, Sale of Assets,
Etc. Enter into or be a party to any merger or consolidation; sell, assign,
transfer, convey or lease all or any part of its property or any interest
therein except in the ordinary course of Borrower's business as now being
conducted; purchase or otherwise acquire all or substantially all of the assets
of any other person, or any shares of stock of, or similar interest in, any
other person. 7.04 Guarantees. Guarantee or otherwise in any way become or be
responsible for Obligations or Indebtedness of any other person, whether by
agreement to purchase the Indebtedness of any other person, or by agreement for
the furnishing of funds to any other person for the purchase of goods, supplies
or services, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging Indebtedness of any other person, or
otherwise, except that Borrower may endorse negotiable instruments for
collection in the ordinary course of business. 7.05 Fiscal Year. Change
Borrower's fiscal year. 7.06 Loans. Make or permit to exist any loan to any
person. 7.07 Subsidiaries. Form or acquire any Subsidiaries, without the prior
written consent of the Bank. 7.08 Change of Name. Change the name of Borrower or
any Subsidiary of Borrower. 7.09 Change of Management. Change the person(s)
controlling the management and/or day to day activities of Borrower. 7.10 Trade
Names. Use any trade name other than Borrower's true corporate name nor permit
any Subsidiary of Borrower to use any trade name other than such Subsidiary's
true and corporate name. 7.11 Other Agreements. Borrower will not enter into any
agreement or undertaking containing any provision which would be violated or
breached by performance of its obligations hereunder.
<PAGE>
7.12 Borrowing Base. At no time shall the outstanding principal balance of the
Receivable Line Note exceed the Borrowing Base, as determined by Bank.
8. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default": (a) Any representation of warranty made herein
in any of the Other Agreements or in any statement, report, certificate,
opinion, financial statement or other document furnished or to be furnished in
connection with this Agreement or the Other Agreements shall be false or
misleading in any material respect. (b) Failure of Borrower to pay any of the
Obligations, including, without limitation, any sum due Bank under this
Agreement, or any of the Other Agreements, when and as the same shall become
due, whether at the due date thereof, by demand, by acceleration or otherwise.
(c) Default by Borrower with respect to any Indebtedness of Borrower to any
person or with respect to any Lien or document securing any Indebtedness of
Borrower. (d) Failure of Borrower or any other person to observe or perform any
warranty, covenant, condition or agreement to be observed or performed by
Borrower or such other person under this Agreement or any of the Other
Agreements. (e) If Borrower, any Subsidiary or any guarantor of any of the
Obligations shall (i) admit in writing its insolvency or its inability to pay
generally its debts as they mature, (ii) make a general assignment for the
benefit of creditors, (iii) commence a case under or otherwise seek to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law, statute or proceeding, or (iv) by any act
indicate its consent to, approval of or acquiescence in any such proceeding or
the appointment of any receiver of or trustee for Borrower, any Subsidiary or
any such guarantor or a substantial part of its property, or suffer any such
receivership, trusteeship or proceeding to continue undismissed for a period of
sixty (60) days. (f) If Borrower, any Subsidiary or any guarantor of any of the
Obligations becomes a debtor in any case under any chapter of the United States
Bankruptcy Code, and if the petition in Bankruptcy shall not be discharged or
dismissed within sixty (6) days after the date on which such petition was filed.
(g) Entry of any order, judgment or decree for the dissolution of Borrower, any
Subsidiary or any guarantor of any of the Obligations that is not a natural
person. (h) Entry of any judgment against Borrower, any Subsidiary or any
guarantor of any of the Obligations, which judgement shall not have been
discharged or execution thereof stayed within thirty (30) days after entry
thereof or discharged within the thirty (30) days after the expiration of any
such stay, if such judgment is not fully covered by applicable insurance (which
shall not include any bonding or other arrangement with which Borrower, a
Subsidiary or such guarantor may be liable for indemnification to any extent).
(i) If Borrower, any subsidiary or any guarantor of any of the Obligations shall
be enjoined or restrained in any manner from conducting its business in whole or
in part and Bank shall determine, in its reasonable discretion, that the same
<PAGE>
materially impairs any of the Collateral of the prospect for full and punctual
payment of all of the obligations. (j) If any assets of Borrower, any Subsidiary
or any guarantor of any of the Obligations shall be attached, levied upon,
seized or repossessed or come into the possession of a trustee, receiver or
other custodian which is not discharged within thirty (30) days. (k) If Bank
shall determine, in its reasonable discretion, that any material adverse change
has occurred in the value of the Collateral or in Borrower's financial
condition; or if Bank believes the prospect of payment of the Indebtedness is
impaired; or if Bank, in good faith, deems itself insecure. (l) If Borrower, any
Subsidiary or any guarantor of any of the Obligations shall be or become
insolvent or unable to pay its debts generally as they mature. (m) If there is a
change in ownership of thirty percent (30%) or more of the common stock of
Borrower. 9. RIGHTS AND REMEDIES. 9.01 Rights and Remedies of Bank. Upon the
occurrence of an Event of Default, Bank may, without notice or demand, exercise
in any jurisdiction in which enforcement hereof is sought, the following rights
and remedies, in addition to the rights and remedies of a secured party under
the Uniform Commercial Code and all other rights and remedies available to Bank
under applicable law, all such rights and remedies being cumulative and
enforceable alternatively, successfully, successively or concurrently: (a)
Declare the Note, all Interest accrued and unpaid thereon, and all other
Obligations to be immediately due and payable and the same shall thereupon
become immediately due and payable without presentment, demand or protest, all
of which are hereby expressly waived. (b) Institute any proceeding or
proceedings to enforce the Obligations and any Lien of Bank. (c) Take possession
of the Collateral, and for that purpose, so far as Borrower may give authority
therefor, enter upon the premises on which the Collateral or any part thereof
may be situated and remove the same therefrom without any liability for suit,
action or other proceeding by Borrower, BORROWER and its SUBSIDIARIES, if any,
HEREBY WAIVING ANY AND ALL RIGHTS TO PRIOR NOTICE AND TO JUDICIAL HEARING WITH
RESPECT TO REPOSSESSION OF COLLATERAL, and require Borrower, at Borrower's
expense, to assemble and deliver the Collateral to such place or places as Bank
may designate. (d) Operate, manage and control the Collateral, or permit the
Collateral or any portion thereof to remain idle, or store the same, and collect
all rents and revenues therefrom and sell otherwise dispose of any or all of the
Collateral (including, without limitation, toll, transfer or reassign any
license) upon such terms and under such conditions at Bank, in its reasonable
discretion, may determine, all without any notice or demand, and purchase or
acquire any of the Collateral at any such sales or other disposition, all to the
extent permitted by applicable law. (e) With respect to any instruments,
accounts, contract rights or other debts payable to Borrower or its
Subsidiaries, if any, securing the Obligations, notify any account debtors and
other obligors to make payments thereon
<PAGE>
directly to Bank, take control of the cash and non-cash proceeds thereof,
demand, collect, sue for and receive any money or property at any time due,
payable or receivable on account thereof, compromise and settle with any person
liable thereon, and extend the time of payment or otherwise change the terms
thereof, without incurring liability or responsibility to Borrower, any of its
Subsidiaries or any guarantor therefor. 9.02 Power of Attorney. Effective upon
the occurrence of an Event of Default, Borrower and its Subsidiaries, if any,
hereby designate and appoint Bank and its designees as attorney-in-fact of
Borrower and its Subsidiaries, if any, irrevocably and with power of
substitution, with authority to receive, open and dispose of all mail addressed
to Borrower, to notify the postal authorities to change the address for delivery
of mail addressed to Borrower and its Subsidiaries, if any, to such other
address as Bank designates; to endorse Borrower's and its Subsidiaries, if any,
name on any notes, acceptances, checks, drafts, money orders, instruments or
other evidences of payment or proceeds of the Collateral that may come into
Bank's possession; to sign Borrower's and its subsidiaries, if any, name on any
invoices, documents, drafts against and notices to account debtors or other
obligors of Borrower, assignments and requests for verification of accounts; to
execute any endorsements, assignments, or other instruments of conveyance or
transfer; to adjust and compromise any claims under insurance policies; to
execute releases; and to perform all other acts necessary and advisable; in
Bank's sole discretion, to carry out and enforce this Agreement and the other
Agreements. All acts of said attorney or designee are hereby rectified and
approved by Borrower and its Subsidiaries, if any, any said attorney or designee
shall not be liable for any acts of commission or omission nor for any error of
judgment or mistake of fact or law, except for gross negligence, willful
misconduct or bad faith. This Power of Attorney is coupled with an interest and
is irrevocable so long as any of the Obligations remain unpaid or unperformed or
there exists any commitment of Bank to Borrower which could give rise to any
Obligations. 9.03 Cumulative Nature of Remedies. Each right, power and remedy of
Bank shall be cumulative and concurrent, and recourse to one or more rights or
remedies shall not constitute a waiver of any other right, power or remedy. It
is mutually agreed that commercial reasonableness and good faith require Bank to
give Borrower no more than five (5) days prior written notice of the time and
place of any public disposition of the Collateral or of the time after which any
private disposition or any other intended disposition is to be made. 9.04
Liquidation Costs. The Borrower shall reimburse and pay to the Bank upon demand
all costs and expenses (the "Liquidation Costs"), including, without limitation,
attorneys fees and expenses, advanced, incurred by, or on behalf of the Bank in
collecting and enforcing the its rights and remedies hereunder. All Liquidation
Costs shall bear interest payable by the Borrower to the Bank upon demand from
the date advanced or incurred until paid in full at a per annum rate of interest
equal at all times to the then highest rate of interest charged on the principal
of the note, plus two percent (2%) per annum. 9.05 Expense Payments. If the
Borrower shall fail to make any payment or otherwise fail to perform, observe,
or comply with any of the conditions, covenants, terms, stipulations or
agreements contained herein, or in any of the documents evidencing the
obligations, the Bank without notice to or demand upon the Borrower and without
waiving or releasing any obligation or Event of Default may (but shall be under
no obligation to) at any time thereafter make such payment or
<PAGE>
perform such act for the account and at the expense of the Borrower, and may
enter upon any premises of the Borrower for that purpose and take all such
action thereon as the Bank may consider necessary or appropriate for such
purpose. All sums so paid or advanced by the Bank (the "Expense Payments"),
together with interest thereon from the date paid, advanced, or incurred until
repaid in full at a per annum rate of interest equal at all times to the then
highest rate of interest charged on the Note plus two percent (2%) per annum,
shall be paid by the Borrower to the Bank upon demand by the Bank. 10.
mISCELLANEOUS. 10.01 Performance for Borrower. Borrower agrees and hereby
authorizes that Bank may, in Bank's sole discretion, but Bank shall not be
obligated to, advance funds on behalf of Borrower without prior notice to
Borrower, in order to insure Borrower's compliance with any covenant, warranty,
representation or agreement of Borrower made in or pursuant to this Agreement or
any of the Other Agreements, to cover overdrafts in any checking or other
accounts of Borrower at Bank or to preserve or protect any right or interest of
Bank in the Collateral or under or pursuant to this Agreement or any of the
Other Agreements, including without limitation, the payment of any insurance
premises or taxes and the satisfaction or discharge of any judgment or any Lien
upon the Collateral or other property or assets of Borrower; provided, however,
that the making of any such advance by Bank shall not constitute a waiver by
Bank of any Event of Default with respect to which such advance is made nor
relieve Borrower of any such Event of Default. Borrower shall pay to Bank upon
demand all such advances made by Bank with interest thereon at the rate and
determined in the manner provide in the Note. All such advances shall be deemed
to be included in the Obligations and secured by the security interest granted
Bank hereunder. 10.02 Expenses. Whether or not any of the transactions
contemplated hereby shall be consummated, Borrower agrees to pay to Bank at
Closing or 30 days after the execution and delivery hereof, whichever is
earlier, all expenses of Bank (including the reasonable fees and reasonable
expenses of its counsel) in connection with the preparation of this Agreement
and all documents and instruments referred to herein and all expenses of Bank in
connection with the filing or recordation of all financing statements and
instruments as may be required by Bank at the time of, or subsequent to, the
execution of this Agreement, including, without limitation, all documentary
stamps, recordation of any document or instrument in connection herewith.
Borrower agrees to save harmless and indemnify Bank from and against any
liability resulting from the failure to pay any required documentary stamps,
recordation and transfer taxes, recording costs, or any other expenses incurred
by Bank in connection with this Agreement. This provisions of this Subsection
10.02 shall survive the execution and delivery of this Agreement and the payment
of all other Obligations. 10.03 Applications of Collateral. Except as may be
otherwise, specifically provided in Agreement, all Collateral and proceeds of
Collateral coming into Bank's possession may be applied by Bank to any of the
Obligations, whether matured or unmatured, as Bank shall determine in its sole
discretion. 10.04 Indemnification by Borrower. The Borrower hereby agrees to
indemnify and hold harmless the Bank from and against all liabilities, claims,
demands, and costs, including without limitation, reasonable attorney's fees,
arising out of or in connection with the Collateral, except arising from the
Banks gross negligence, willful misconduct or bad faith. 10.05
<PAGE>
Receipt Sufficient Discharge to Purchaser. Upon any sale or
other disposition of the Collateral or any part thereof, the receipt of the Bank
or any other person making the sale or disposition shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obligated to see to the application thereof. 10.06 Waivers by Borrower.
Borrower hereby waives, to the extent the same may be waived under applicable
law: (a) All claims, causes of action and rights of Borrower against Bank on
account of actions taken or not taken by Bank in the exercise of Bank's rights
or remedies hereunder or under the Other Agreements, except arising from the
Banks gross negligence, willful misconduct, bad faith, or in violation of any of
the provisions hereof, or in the Other Agreements. (b) All claims of Borrower
for failure of Bank to comply with any requirements of applicable law relating
to enforcement of Bank's rights or remedies hereunder or under the Other
Agreements; (c) All rights of redemption of Borrower with respect to the
Collateral; (d) In the event Bank seeks to repossess any or all of the
Collateral by judicial proceedings, any bond(s) or demand(s) for possession
which otherwise may be necessary or required; (e) Presentment, demand for
payment, protest and all exemptions; (f) Trial by jury in any action or
proceeding of any kind or nature in connection with any of Obligations, this
Agreement or any of the other Agreements; (g) Settlement, compromise or release
of the Obligations of any person primarily or secondarily liable upon any of the
Obligations; (h) Substitution, impairment, exchange or release of any collateral
security for any of the Obligations.
Borrower agrees that Bank may exercise any or all of its rights and/or
remedies hereunder and under the Other Agreements without resorting to and
without regard to any collateral security or sources of liability with respect
to any of the Obligations. 10.07 Waivers by Bank. Neither any failure nor any
delay on the part of Bank in exercising right, power or remedy hereunder or
under any of the Other Agreements shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other rights, power or remedy. 10.08 Bank's
Records. Every statement of account or reconciliation rendered by Bank to
Borrower with respect to any of the Obligations shall be presumed conclusively
to be correct and shall constitute an account stated between Bank and Borrower
unless, within 30 Banking Days after any such statement or reconciliation shall
have been mailed, postage prepaid, to Borrower, Bank shall receive written
notice of specific objection thereto. 10.09 Modifications. No modification or
waiver of any provisions of this Agreement, the Note or any of the Other
Agreements, and no consent to any departure by Borrower
<PAGE>
therefrom, shall in any event be effective unless the same shall be in writing,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice to or demand upon Borrower in any
case shall entitle Borrower to any other or further notice or demand in the
same, similar or other circumstances. 10.10 Bank's Setoff. Bank shall have the
right, in addition to all other rights and remedies available to it, to set off
against any or all of the Obligations and debt owing to Borrower by Bank,
including, without limitation, any funds in any checking or other account now or
hereafter maintained by Borrower at Bank. Borrower hereby confirms Bank's right
to banker's lien and setoff, and nothing in this Agreement or any of the Other
Agreements shall be deemed a waiver or prohibition of Bank's rights of banker's
lien or setoff. 10.11 Notices. Any notice or other communication in connection
with this Agreement, if by registered or certified mail, shall be deemed to have
been given when received by the party to whom directed, or, if by mail but not
registered or certified, when deposited in the mail, postage prepaid, provided
that any such notice or communication shall be addressed to a party hereto as
provided below (or at such other address as such party shall specify in writing
to the other parties hereto): (a) If to Borrower, at 1777 N. Kent Street, Suite
1103, Arlington, Virginia 22209. (b) If to Bank, at 17801 Georgia Avenue, Olney,
Maryland 20832. 10.12 Applicable Law. The performance and construction of this
Agreement, the Note and the Other Agreements shall be governed by the internal
laws of the State of Maryland. 10.13 Survival; Successors and Assigns. All
covenants, agreements, representations and warranties made herein and in the
Other Agreements shall survive Closing and the execution and delivery to Bank of
the Note, and shall continue in full force and effect until all of the
Obligations have been paid in full. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party. All covenants, agreements, representations and warranties
by or on behalf of Borrower which are contained in this Agreement and the Other
Agreements shall inure to the benefit of the successors and assigns of the Bank.
This Agreement may not be assigned by Borrower without the prior written consent
of Bank. 10.14 Use of Terms. The use of any gender or the neuter herein shall
also refer to the other gender or the neuter and the use of the plural shall
also refer to the singular, and vice versa. 10.15 Severability. If any term,
provision or condition, or any part thereof, of this Agreement or any of the
Other Agreements shall for any reason be bound or held invalid or unenforceable
by any court or governmental agency of competent jurisdiction, such invalidity
or unenforceability shall not affect the remainder of such term, provision or
condition nor any other term, provision or condition, and this Agreement, the
Note, and the Other Agreements shall survive and be construed as if such invalid
or unenforceable term, provision or condition had not been contained therein.
10.16 Merger and Integration. This Agreement and the attached Exhibits, if any,
contained the entire agreement of the parties hereto with respect to the matters
covered and the
<PAGE>
transactions contemplated hereby, and no other agreement, statement or promise
made by any party hereto, or by any employee, officer, agent or attorney of any
party hereto, which is not contained herein, shall be valid and binding. 10.17
Counterparts. This Agreement may be executed in any number of counterparts and
by different parties hereto on separate counterparts, each of which, when so
executed and delivered, shall be an original, but all such counterparts shall
together constitute the same instrument. 10.18 Headings. The headings and
subheadings contained in the titling of this Agreement are intended to be used
for convenience only and do not constitute part of this Agreement. 10.19 Consent
to Jurisdiction; Service of Process. The Borrower hereby agrees and consents
that any action or proceeding arising out of or brought to enforce the
provisions of this Agreement may be brought in any appropriate court in the
State of Maryland, or in any other court having jurisdiction over the subject
matter, all at the sole election of the Bank, and by the execution of this
Agreement the Borrower irrevocably consents to the jurisdiction of each such
court. The Borrower hereby irrevocably appoints Donald C. Weymer, President of
the Borrower, at its agent to accept service of process for it and on its behalf
in any section and to receive any notices required pursuant to or by the terms
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement, under seal as of the date first above written.
BORROWER:
INTERACTIVE SYSTEMS, INC., a Maryland corporation
By: /s/ Donald C. Weymer (SEAL)
Donald C. Weymer,
President
NATIONAL CONVERSION SYSTEMS, INC., a Virginia corporation
By: /s/ Donald C. Weymer (SEAL)
Donald C. Weymer,
President
BANK:
SANDY SPRING NATIONAL BANK OF MARYLAND
By: /s/ Pamela Roberts (SEAL)
Name: Pamela Roberts
Title: Vice President
<PAGE>
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<PAGE>
- 5 -
AMENDED AND RESTATED PROMISSORY NOTE
(SECURED REVOLVING LINE OF CREDIT)
FOR VALUE RECEIVED, the undersigned, INTERACTIVE SYSTEMS, INC., a
Maryland corporation and NATIONAL CONVERSION SYSTEMS, INC., a Virginia
corporation (collectively, the "Borrower"), promises to pay to the order of
SANDY SPRING NATIONAL BANK OF MARYLAND, a national banking association, with
offices at 17801 Georgia Avenue, Olney, Maryland 20832, its successors and
assigns, (the "Lender") at such offices or at such other place or places as the
Lender may from time to time designate in writing, the principal sum of FOUR
MILLION AND NO/100 DOLLARS ($4,000,000.00), together with interest at the rate
hereinafter provided until paid, said principal and interest being payable as
follows: (a) Interest shall accrue hereunder at the rate of One Percent (1%) per
annum above the Lenders "Prime Rate of Interest" (as such term is hereinafter
defined below), on so much of the principal as shall from time to time be
advanced and/or re-advanced and remain unpaid, and interest only shall be due
and payable monthly commencing on the first (1st) day of the first (1st)
calendar month following the date hereof and continuing on the same day of each
and every calendar month thereafter; and
(b) If not sooner paid, the entire balance of principal remaining unpaid, plus
interest accrued thereon at the aforesaid rate not previously paid, fees and
costs, if any, shall be due and payable in full on June 30, 2001.
For purposes of computing interest on the debt evidenced hereby,
interest shall be calculated on the basis of a three hundred sixty (360) day
calendar year. Payments made on account hereof shall be applied first to the
payment of late fees, then to the payment of accrued and unpaid interest, and
the remainder shall be credited to principal.
As used in this Note the expression "Prime Rate of Interest" shall be
defined as the rate of interest from time to time established and publicly or
privately announced by the Lender as its then applicable prime rate of interest
to be used as an index in determining actual interest rates to be charged to
certain borrowers of the Lender. The rate of interest hereunder shall be
adjusted as and when any change in the "Prime Rate of Interest" shall occur. The
Lender may establish and reestablish the "Prime Rate of Interest" from time to
time in its sole discretion, it being understood and agreed that (1) such rate
is intended merely as an index for setting interest rates of the Lender, and (2)
the particular borrower may be more than, equal to, or less than such index;
provided, however, that at no time shall the rate of interest applicable to this
Note exceed the highest rate permissible under applicable laws.
If default be made in the payment of any installment of principal or
interest due under this Note, and such default shall continue for a period of
ten (1) days after notice to the Borrower, the entire principal sum outstanding,
together with accrued interest thereon, fees and costs, if any, shall at once
become due and payable at the option of the Lender without further notice. If
default be made in the performance of any covenant of either (a) the Indemnity
Deed of Trust and Security Agreement made by Donald C. Weymer to secure the
Lender dated July 30, 1999, and recorded on September 21, 1999 among the Land
Records of Montgomery County, Maryland in Liber 17507, at folio
<PAGE>
276, or (b) the Amended and Restated Loan and Security Agreement given to secure
this Note, or in any of the documents listed in Section 5.03 thereof
(collectively, the "Security Documents") (the terms and provisions of which are
incorporated herein by this reference as if set forth in full), and if such
default shall continue for the duration of any applicable grace period therein
contained, the entire principal sum outstanding, together with accrued interest
thereon, shall at once become due and payable at the option of the Lender
without further notice. Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
Acceleration of maturity, once claimed by the Lender, may at its option be
rescinded by an instrument in writing to that effect; however, the tender and
acceptance of a partial payment or partial performance shall not, by itself,
affect or rescind such acceleration of maturity.
In the event any installment due under this Note is paid more than
fifteen (15) days after the date when the same is due, then the Lender shall be
entitled to collect a "late charge" in an amount equal to one-twentieth (1/20th)
of such installment.
In the event it shall become necessary to employ counsel to collect
this obligation or to protect the security hereof, the Borrower agrees to pay
reasonable attorney's fees, whether suit be brought or not, and all other costs
and expenses reasonably connected with collection, the protection of the
security, the defense of any counterclaim, the enforcement (including without
limitation, as a part of any proceeding brought under the Bankruptcy Reform Act
of 1978, as amended) of any remedies herein provided for, or provided for in the
Security Documents given to secure this Note.
The privilege is reserved to prepay the principal indebtedness
evidenced hereby, in whole or in part, at any time, without premium or penalty.
The Borrower and any endorsers, guarantors and sureties jointly and
severally waive presentment, protest and demand, notice of protest, notice of
dishonor, demand and dishonor, and any and all lack of diligence or delays in
the collection or enforcement hereof and expressly agree that this Note, or any
payment hereunder, may be extended from time to time without in any way
affecting the liability of the Borrower or any endorser, guarantor or surety
hereof. Borrower also waives any right to trial by jury fully with respect to
each instance and each issue as to which the right to a jury trial shall now or
hereafter exist hereunder.
The validity and construction of this Note and all matters pertaining
thereto are to be determined according to the laws of the State of Maryland.
In the event any provision of this Note (or any part of any provision)
is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Note; but this Note shall be as if such invalid, illegal or
unenforceable provision (or part thereof) had not been contained in this Note,
but only to the extent it is invalid, illegal or unenforceable.
All notices, demands, requests and other communications required
pursuant to the provisions of this Note or the Security Documents shall be in
writing and shall be deemed to have been properly given or served for all
purposes when presented personally or sent by United States Registered or
Certified Mail - Return Receipt Requested, postage prepaid, to the Borrower at:
1777 N. Kent Street, Suite 1103, Arlington, Virginia 22209; and to the Lender at
the address stated in the first paragraph of this Note. The Lender or Borrower
may designate a change of address by notice in writing to the other party.
Whenever in this Note the giving of notice by mail or otherwise is required, the
giving of such notice may be waived in writing by the person entitled to receive
such notice.
It is the intention of the Borrower and the Lender to conform strictly
to applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of
Maryland and the laws of the United States of America) then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this Note, it is agreed that the aggregate of
all consideration which constitutes interest under applicable law that is
contracted for, charged or received under this Note or under any of the other
aforesaid agreements or otherwise in connection with this Note shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited, first, on fees and costs, if any, due on this
Note and, secondly, on the principal balance due on this Note by the Lender (or,
if this Note shall have been paid in full, refunded to the Borrower).
As used in this Note, the singular shall include the plural and the
plural shall include the singular, where the context shall so require.
This Note shall be the joint and several obligation of each of the
makers hereof (if more than one) and shall apply to and bind them and each of
them and their respective heirs, successors, personal representatives and
assigns.
So long as the loan indebtedness evidenced by this Note remains unpaid,
the Borrower agrees to provide the Lender with such other information with
respect to the financial statements of the Borrower as the Lender may from time
to time require.
SHOULD ANY SUMS BECOME DUE AND PAYABLE HEREUNDER, AND SUCH SUM IS NOT
PAID WHEN AND AS DUE, TIME BEING OF THE ESSENCE, THE BORROWER AUTHORIZES ANY
ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES TO
CONFESS JUDGMENT ON BORROWER'S BEHALF OF THE FULL SUM DUE HEREON PLUS REASONABLE
ATTORNEYS' FEES, AND, UPON THE ENTRY OF JUDGMENT, BORROWER WAIVES THE BENEFIT OF
ANY AND EVERY STATUTE, ORDINACE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED
CONFERRING UPON BORROWER ANY RIGHT OR PRIVILEGE OR EXEMPTION, STAY OF EXECUTION
OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE
ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. BORROWER
CONSENTS TO VENUE IN ANY COUNTY IN THE STATE OF MARYLAND OR THE CITY OF
BALTIMORE WITH RESPECT TO THE INSTITUTION OF AN ACTION CONFESSING JUDGMENT
HEREON, REGARDLESS OF WHERE VENUE WOULD OTHERWISE BE PROPER. ANY JUDGMENT
ENTERED AGAINST BORROWER, WHETHER BY CONFESSION OR OTHERWISE, SHALL BEAR
INTEREST AT A RATE WHICH IS THE HIGHEST RATE OF INTEREST BEING PAID BY BORROWER
ON THE DATE OF JUDGMENT. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER
JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY
ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER MAY BE EXERCISED
ON ONE OR MORE OCCASIONS, FROM TIME TO TIME, IN THE SAME OR DIFFERENT
JURISDICTIONS AS OFTEN AS THE LENDER OR ITS ASSIGNS SHALL DEEM NECESSARY OR
ADVISABLE UNTIL ALL SUMS DUE HEREUNDER HAVE BEEN PAID IN FULL.
It is understood and agreed that in the event a default exists under
any other loan held by the Lender in which the Borrower or any guarantor
therefor is a borrower or a guarantor thereunder, then the Lender may, at its
option, declare the entire indebtedness evidenced hereby immediately due and
payable.
The Borrower hereby warrants and represents that the loan evidenced by
this Note and was made for acquiring or carrying on a business or commercial
enterprises.
Time is of the essence of all provisions of this Note.
It is contemplated that by reason of prepayments hereon there may be
times when no indebtedness is owing hereunder; but notwithstanding such
occurrences, this Note shall be in full force and effect as advances made
pursuant to and under the terms of this Note subsequent to each occurrence.
In the event that the unpaid principal amount hereof at any time, for
any reason, exceeds the maximum amount hereinabove specified, the Borrower
covenants and agrees to pay the excess principal amount forthwith upon demand;
such excess principal amount shall in all respects be deemed to be included
among the advances made pursuant to the other terms of this Note and shall bear
interest at the rate or rates hereinabove stated.
The proceeds of the loan evidenced hereby are to be advanced on a
revolving credit basis pursuant to the "Borrowing Base" provisions set forth in
the aforesaid Amended and Restated Loan and Security Agreement. Any amounts from
time to time paid on account of the principal indebtedness evidenced hereby may
be re-advanced to the Borrower pursuant to (and subject to the provisions and
limitations of) this Note and the aforesaid Amended and Restated Loan and
Security Agreement. The aggregate principal indebtedness evidenced hereby may
increase or decrease from time to time; provided, however, that the aggregate
principal indebtedness evidenced hereby at any one time shall not exceed the sum
of FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00).
This Note is a restatement and modification of a certain Promissory
Note (Secured Revolving Line of Credit), dated July 30, 1999, to the order of
Lender, evidencing a loan in the original principal amount of Two Million and
No/100 Dollars ($2,000,000.00) (the "Original Note"), secured by the Security
Documents. Nothing herein-contained shall be deemed a novation as to
indebtedness evidenced by the Original Note, as restated and modified.
<PAGE>
MADE this 30th day of March , 2000.
INTERACTIVE SYSTEMS, INC., a
Maryland corporation
By: /s/ Donald C. Weymer [Seal]
Donald C. Weymer,
President
NATIONAL CONVERSION SYSTEMS, INC.,
a Virginia corporation
By: /s/ Donald C. Weymer [Seal]
Donald C. Weymer,
President
Footnote continued from previous page
Footnote continued on next page
Pamela Roberts
April 24, 2000
Page 3
EXHIBIT (b) (2)
Interactive Systems, Inc.
1777 North Kent Street
Arlington, VA 22209
April 24, 2000
By Courier
Pamela Roberts
Sandy Spring National Bank
17801 Georgia Avenue
Olney, Maryland 20832
Re: Consent regarding various provisions of the Amended and Restated
Loan and Security Agreement between Interactive Systems, Inc. and
Sandy Spring National
Bank
Dear Ms. Roberts:
The purpose of this letter is to request your consent under certain
provisions of the Amended and Restated Loan Agreement entered into by
Interactive Systems, Inc. ("ISI") and Sandy Spring National Bank (the "Bank") on
March 30, 2000 (the "Agreement"), to a tender offer, which ISI will undertake in
order to acquire control of CSI Computer Specialists, Inc. ("CSI")
Plans of ISI:
ISI hereby advises the Bank that it anticipates commencing a tender
offer for all of the outstanding common stock of CSI not already owned by Mr.
Donald C. Weymer, ISI's founder, Chief Executive Officer, Director and 98%
shareholder, in April 2000 (the "Offer"). The Offer is intended to enable ISI to
acquire control of, and the entire equity interest in CSI. Upon completion of
the Offer, ISI intends to operate CSI as a majority-owned subsidiary of ISI.
If the CSI stockholders do not tender all of their common stock, ISI
intends to evaluate whether, under the circumstances at that time, it would be
in the best interest of ISI and CSI to acquire additional common stock by means
of a second tender offer, merger or other transaction.
ISI expects to use a portion of the funds from the revolving line of
credit under the Agreement to purchase the common stock.
Related Provisions in the Agreement:
1) Section 2.02. Manner of Borrowing and Disbursement of Revolving Loan.
Section 2.02 of the Agreement provides that, before each disbursement
under the line of credit, ISI is required to submit to the Bank for its
approval a written statement of the purpose of such disbursement,
together with a contemplated source of repayment of the disbursement.
Under Section 2.02 of the Agreement, ISI hereby requests up to
$1,100,000 for the purpose of purchasing the common stock of CSI
Computer Services, Inc. through the transaction described above. ISI
intends to repay the funds borrowed for the Offer from the collection
of receivables.
2) Section 7.03. Merger, Sale of Assets, Etc.
Section 7.03 of the Agreement provides that ISI must obtain the Bank's
written consent in order to enter into or be a party to a merger or
consolidation, or purchase or otherwise acquire any shares of stock of,
or similar interest in any other person.
Under Section 7.03 of the Agreement, ISI hereby requests the Bank's
consent regarding the transactions described above; specifically, the
purchase of common stock of CSI through the Offer and, if necessary, a
second tender offer, merger or other consolidation with CSI.
3) Section 7.07. Subsidiaries.
Section 7.07 of the Agreement provides that ISI may not form or acquire
any subsidiaries without the prior written consent of the Bank.
Under Section 7.07 of the Agreement, ISI hereby requests the Bank's
consent to acquire and operate CSI as a majority-owned subsidiary.
If you have any questions about this Consent Letter, please feel free
to call Robert V. Windley at (703) 247-1223, or our counsel, Jeffrey B. Grill at
(202) 663-9201. If you do not have any questions, please sign this letter below
evidencing your consent under the Agreement to the proposed actions listed
herein and return the original of this consent letter as soon as possible. The
enclosed copy is for your records.
Sincerely,
/s/ Donald C. Weymer
Donald C. Weymer
<PAGE>
THE BANK CONSENTS TO ALL OF THE ACTIONS PROPOSED IN THIS CONSENT LETTER FOR THE
PURPOSES OF THE LOAN AND SECURITY AGREEMENT:
SANDY SPRING NATIONAL BANK
By: /s/ Pamela Roberts
Pamela Roberts
Date: April 24, 2000
