SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
(Amendment No. 1)
CORNERSTONE INTERNET SOLUTIONS COMPANY
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(Name of Issuer)
CORNERSTONE INTERNET SOLUTIONS COMPANY
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(Name of Person(s) Filing Statement)
Class C Convertible Preferred Stock
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(Title of Class of Securities)
(CUSIP Number of Class of Securities)
Edward Schroeder
Cornerstone Internet Solutions Company
584 Broadway, Suite 509
New York, New York 10012
(212) 343-3920
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
Steven Wolosky, Esq.
Kenneth A. Schlesinger, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, NY 10022
(212) 753-7200
Facsimile: (212) 755-1467
October 28, 1998
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(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction Valuation1 Amount of Filing Fee
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$7,825,000 $1,565
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/ / 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: $1,565 Filing party: N/A
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Form or registration no.: Schedule 13E-4 Date filed: October 28, 1998
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(1) Estimated solely for purposes of calculating the fee in accordance with
Rule 0-11 under the Securities Exchange Act of 1934, as amended. Based
upon the book value of the Class C Convertible Preferred Stock $ 1,250,
multiplied by the number of shares of Class C Convertible Preferred
Stock (6,260) that the issuer, Cornerstone Internet Solutions Company
(the "Company"), is offering to acquire.
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This constitutes Amendment No. 1 ("Amendment No. 1") to the Schedule
13E-4 filed by the undersigned (the "Schedule 13E-4"). This Amendment No. 1
supplements the Schedule 13E-4 as specifically set forth. All capitalized terms
used herein which are not otherwise defined have the meaning ascribed to them in
the Schedule 13E-4.
This Amendment to Schedule 13E-4 is being filed to amend Item 1(b) and
Item 9 so that they read in their entirety as follows:
Item 1. Security and Issuer.
(b) The Company is offering to exchange one share of its newly-issued
Class D Convertible Preferred Stock ("Class D Preferred Stock"), for each share
of Class C Preferred Stock properly tendered and not validly withdrawn, upon the
terms and subject to the conditions set forth in the Offering Circular of the
Company (the "Offering Circular"), and the related Letter of Transmittal (the
"Exchange Offer"). Copies of the Offering Circular and the Letter of Transmittal
relating to the Exchange Offer are filed herewith as Exhibits (a)(1) and (a)(2),
respectively. The closing of the exchange offer is not contingent on any minimum
number of shares of Class C Preferred Stock being exchanged. The Company has
amended the conversion terms of the Class D Preferred Stock and has circulated a
Supplement to the Offering Circular to all holders of the Class C Preferred
Stock which describes the amended terms. There are currently 6,260 shares of
Class C Preferred Stock outstanding. Officers, directors and affiliates of the
Company that own shares of Class C Preferred Stock may participate in the
Exchange Offer on the same basis as all other holders of shares of Class C
Preferred Stock. Definitive information with respect to their participation in
the Exchange Offer will not be available to the Company until the consummation
thereof.
Item 9. Material to be Filed as Exhibits.
(a)(1) Offering Circular dated October 27, 1998.*
(2) Form of Letter of Transmittal.*
(3) Form of Press Release.*
(4) Form of letter to holders regarding the Class C Convertible
Preferred Stock from the President and Chief Executive Officer
of the Company.*
(5) 1998 Annual Report on Form 10-KSB.*
(6) Quarterly Report on Form 10-QSB for the quarter ended August 31,
1998.*
(7) Certificate of Designation for Class D Convertible Preferred
Stock, as amended.
(8) Supplement to Offering Circular.
(b)-(f) Not Applicable.
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* Previously filed.
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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.
CORNERSTONE INTERNET SOLUTIONS COMPANY
By: /s/ Edward Schroeder
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Name: Edward Schroeder
Title: President and Chief
Executive Officer
Dated: November 11, 1998
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CORNERSTONE INTERNET SOLUTIONS COMPANY
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND OTHER RIGHTS AND QUALIFICATIONS OF
Class D PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law
of the State of Delaware
CORNERSTONE INTERNET SOLUTIONS COMPANY, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, pursuant to authority conferred upon the Board of
Directors of the Corporation (the "Board") by the Certificate of Incorporation
of said Corporation, as amended, and pursuant to the provisions of Sections 151
of the Delaware General Corporation Law, said Board duly determined that 9,860
shares of Preferred Stock, $.01 par value per share, shall be designated "Class
D Preferred Stock," and to that end the Board adopted a resolution providing for
the designation, preferences and relative, participating, optional or other
rights, and the qualifications, limitations and restrictions, of the Class D
Preferred Stock, which resolution is as follows:
RESOLVED, that the Board, pursuant to the authority vested in
it by the provisions of the Certificate of Incorporation of the
Corporation, as amended, hereby creates a class of Preferred Stock of
the Corporation, par value $.01 per share, to be designated as "Class D
Preferred Stock" and to consist of an aggregate of 9,860 shares. The
Class D Preferred Stock shall have such designations, preferences and
relative, participating, optional or other rights, and the
qualifications, limitations and restrictions as follows:
1. Designations and Amount. 9,860 shares of the Preferred
Stock of the Corporation, par value $.01 per share, shall constitute a class of
Preferred Stock designated as "Class D Convertible Preferred Stock" (the "Class
D Preferred Stock").
2. Rank. The Class D Preferred Stock shall rank junior to the
class of Preferred Stock of the Corporation, par value $.01 per share,
designated as Class C Preferred Stock (the "Class C Preferred Stock") and shall
rank senior to all other classes and series of capital stock of the Corporation
now or hereafter authorized, issued or outstanding, including, without
limitation, the Common Stock, par value $.01 per share of the Corporation (the
"Common Stock"), and any other classes and series of capital stock
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of the Corporation now or hereafter authorized, issued or outstanding
(collectively, the "Junior Securities"). In addition, the Corporation will not
issue any class or series of any class or capital stock which ranks pari passu
with the Class D Preferred Stock with respect to rights on liquidation,
dissolution or winding up of the Corporation; however, the Corporation may issue
additional shares of the Class D Preferred Stock.
3. Dividends. The holders of the Class D Preferred Stock shall
not be entitled to receive any dividends, cash or otherwise, in connection with
such Class D Preferred Stock. No dividends shall be payable upon any Junior
Securities unless equivalent dividends, on an as-converted basis, are declared
and paid concurrently on the Class D Preferred Stock. No dividends shall be
payable on any other class of preferred stock during such time as the Class D
Preferred Stock remains outstanding.
4. Rights on Liquidation, Dissolution or Winding Up, Etc.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to the stockholders of the Corporation, whether from
capital, surplus or earnings, shall be distributed in the following order of
priority:
(i) The holders of the Class D Preferred Stock shall
be entitled to receive, prior and in preference to any
distribution to the holders of any Junior Securities an amount
equal to the product of the stated value of the Class D
Preferred Stock ($1,250 per share) (the "Stated Value")
multiplied by 1.1 for each share of Class D Preferred Stock
then outstanding, but in no event shall the holders of the
Class D Preferred Stock receive any such distribution prior
and in preference to the Class C Preferred Stock; and
(ii) If there is a distribution pursuant to Section
4(a)(i) hereof, the remaining assets of the Corporation
available for distribution, if any, to the stockholders of the
Corporation shall be distributed to the holders of any
Preferred Stock ranking junior to the Class D Preferred Stock
and thereafter pro rata to the holders of issued and
outstanding shares of Common Stock.
(b) If, at any time (the "Change of Control Date"), (i) all or
substantially all of the Corporation's assets are sold as an entirety to any
person or related group of persons other than an Affiliate or Affiliates (as
hereinafter defined) of the Corporation, or (ii) the Corporation is merged into
another corporation and the Corporation is not the surviving entity of such
merger, (collectively, the "Change of Control"), then the
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Corporation shall notify the holders of shares of the Class D Preferred Stock in
writing of such occurrence and shall make an offer to purchase (the "Change of
Control Offer") within the 30th day following the Change of Control Date (the
"Change of Control Payment Date") all shares of the Class D Preferred Stock then
outstanding at a purchase price per share equal to the product of the Stated
Value multiplied by 1.1 for each such share of the Class D Preferred Stock.
Notice of a Change of Control Offer shall be mailed by the
Corporation not less than 30 days nor more than 60 days before the Change of
Control Payment Date to the holders of shares of the Class D Preferred Stock at
their last registered addresses as they appear on the books of the Corporation
or its Transfer Agent. The Change of Control Offer shall remain open from the
time of mailing until the fifth business day preceding the Change of Control
Payment Date. The notice, which shall govern the terms of the Change of Control
Offer, shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4(b) and that all shares of the Class D Preferred
Stock will be accepted for purchase;
(2) the purchase price and the Change of Control Payment Date;
(3) that holders of shares of the Class D Preferred Stock
electing to have shares purchased pursuant to a Change of
Control Offer will be required to surrender certificates
representing their shares of the Class D Preferred Stock with
such documentation evidencing their election to have their
shares purchased as the Corporation shall reasonably request,
to the Corporation prior to the close of business on the
Change of Control Payment Date;
(4) that holders will be entitled to withdraw their election
if the Corporation receives, not later than the close of
business on the three Business Days preceding the Change of
Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder,
the number of shares of the Class D Preferred Stock the holder
delivered for purchase and a statement that such holder is
withdrawing his election to have such shares purchased;
(5) that holders whose shares are purchased only in part will
be issued certificates for shares representing the unpurchased
portion of the shares surrendered;
(6) the instructions that holders must follow in order to
tender their shares; and
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<PAGE>
(7) the circumstances and relevant facts regarding such Change
of Control.
On the Change of Control Payment Date, the Corporation shall
(i) accept for payment the shares tendered pursuant to the Change of Control
Offer and (ii) promptly mail to the holder of shares so accepted payment in an
amount equal to the purchase price.
For purposes of this Section 4(b), the term "Affiliate" shall
mean any person directly or indirectly controlling, controlled by or under
common control with the Corporation as of the Change of Control Payment Date.
For the purposes of this definition, the beneficial ownership of 10% or more of
the voting common equity of a person shall be deemed to be control.
5. Voting Rights. The holders of Class D Preferred Stock shall
be entitled to vote on all matters submitted to the holders of Common Stock of
the Corporation. Each share of Class D Preferred Stock shall have that number of
votes equal to the number of shares of Common Stock into which it is then
convertible as of the record date of the proposed stockholder action. The
holders of Class D Preferred Stock shall also vote as a separate class on all
matters which the General Corporation Law of the State of Delaware specifically
requires the holders of the Class D Preferred Stock to vote as a separate class.
6. Conversion of Class D Preferred Stock.
(a) The holders of Class D Preferred Stock shall have the
right commencing on the earlier of (i) June 30, 2000 or (ii) at any time after
the closing price of the Common Stock shall have been at least $1.50 per share
(subject to adjustment in the event of subdivision or combination of the shares
of Common Stock) on 15 trading days during any 20-trading day period to convert
each share of Class D Preferred Stock into such whole number of shares of Common
Stock as is equal to the aggregate Stated Value of the Class D Preferred Stock
divided by $1.00.
(b) Before any holder of Class D Preferred Stock shall be
entitled to convert the same into shares of Common Stock, such holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Class D Preferred Stock, and
shall give written notice to the Corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Class D Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as
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<PAGE>
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Class D
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.
(c) The Corporation shall not be required to issue fractions
of shares of Common Stock upon conversion of the Class D Preferred Stock. If any
fractions of a share would, but for this Section, be issuable upon any
conversion of Class D Preferred Stock, in lieu of such fractional share, the
Corporation shall pay to the holder, in cash, an amount equal to the same
fraction of the Closing Price per share of Common Stock.
(d) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of Common Stock sufficient
shares of Common Stock to permit the conversion of the then outstanding shares
of the Class D Preferred Stock pursuant to this Section 6. All shares of Common
Stock which may be issued upon conversion of shares of the Class D Preferred
Stock pursuant to this Section 6 shall be validly issued, fully paid and
nonassessable. In order that the Corporation may issue shares of Common Stock
upon conversion of shares of the Class D Preferred Stock, the Corporation will
endeavor to comply with all applicable Federal and State securities laws and
will endeavor to list such shares of Common Stock to be issued upon conversion
on each securities exchange on which the Common Stock is listed and endeavor to
maintain such listing for such period of time as either the Class D Preferred
Stock or Common Stock underlying such Class D Preferred Stock remains
outstanding.
(e) The Conversion Rate in effect at any time for conversion
of Class D Preferred Stock into Common Stock pursuant to Section 6(a) only shall
be subject to adjustment from time to time as follows:
(i) In the event that the Corporation shall (1) pay a dividend
in shares of Common Stock to holders of Common Stock, (2) make a
distribution in shares of Common Stock to holders of Common Stock, (3)
subdivide the outstanding shares of Common Stock into a greater number
of shares of Common Stock or (4) combine the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, the
Conversion Rate in effect pursuant to Section 6(a) only immediately
prior to such action shall be adjusted so that the holder of any shares
of the Class D Preferred Stock thereafter surrendered for conversion
pursuant to Section 6(a) only shall be entitled to receive only that
number of shares of Common Stock which he would have owned immediately
following such action had such shares of the Class D Preferred Stock
been converted
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<PAGE>
immediately prior thereto. Such adjustment shall be made whenever any
event listed above shall occur and shall become effective (A)
immediately after the record date in the case of a dividend or a
distribution and (B) immediately after the effective date in the case
of a subdivision or combination.
(ii) In case the Corporation shall distribute to all holders
of Common Stock shares of any class of capital stock other than Common
Stock, evidences of indebtedness or other assets (other than cash
dividends out of current or retained earnings), or shall distribute to
substantially all holders of Common Stock rights or warrants to
subscribe for securities, then in each such case the Conversion Rate
pursuant to Section 6(a) only shall be adjusted so that the same shall
equal the number determined by multiplying the number of shares of
Common Stock into which such share of the Class D Preferred Stock was
convertible immediately prior to the date of such distribution by a
fraction of which the numerator shall be the current market price
(determined as provided in Section 6(f)) of Common Stock on the record
date mentioned below, and of which the denominator shall be such
current market price of Common Stock, less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value) of the portion of the
assets so distributed or of such subscription rights or warrants
applicable to one share of Common Stock. Such adjustment shall become
effective immediately after the record date for the determination of
the holders of Common Stock entitled to receive such distribution.
(f) The closing price for each day shall be the last reported
sale price regular way or, in case no such reported sale takes place on such
date, the average of the daily reported closing bid and asked prices regular way
for ten consecutive trading days ending the last trading day before the day in
question, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, the closing sale price of the Common Stock,
or in case no reported sale takes place, the average of the daily closing bid
and asked prices for ten consecutive trading days ending the last trading day
before the day in question, on the Nasdaq SmallCap Market ("Nasdaq"), or if the
Common Stock is not quoted on Nasdaq, the OTC Electronic Bulletin Board or any
comparable system, the closing sale price or, in case no reported sale takes
place, the average of the daily closing bid and asked prices for ten consecutive
trading days ending the last trading day before the day in question, as
furnished by any two members of the National Association of Securities Dealers,
Inc. selected from time to time by the Corporation for that purpose. If the
Common Stock is not quoted on Nasdaq, the Bulletin Board or any comparable
system, the Board of Directors shall in good faith
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<PAGE>
determine the current market price on such basis as it considers appropriate.
(g) No adjustment in the Conversion Rate in Section 6(a) shall
be required until cumulative adjustments result in a concomitant change of 1% or
more of the Conversion Rate under Section 6(a) as in effect prior to the last
adjustment of the Conversion Rate under Section 6(a); provided, however, that
any adjustments which by reason of this Section 6(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 6 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be.
(h) In the event that, as a result of an adjustment made
pursuant to Section 6(e), the holder of any share of the Class D Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of capital stock of the Corporation other than shares of Common Stock,
thereafter the number of such other shares so receivable upon conversion of any
shares of the Class D Preferred Stock shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 6.
(i) The Corporation may make such changes in the Conversion
Rate under Section 6(a), in addition to those required by this Section 6, as it
considers to be advisable in order that any event treated for Federal income tax
purposes as a dividend of stock or stock rights shall not be taxable to the
recipients thereof.
(j) Whenever the Conversion Rate is adjusted pursuant to
Section 6(a), the Corporation shall promptly mail first class to all holders of
record of shares of the Class D Preferred Stock a notice of the adjustment and
shall cause to be prepared a certificate signed by a principal financial officer
of the Corporation setting forth the adjusted conversion rate and a brief
statement of the facts requiring such adjustment and the computation thereof.
Such certificate shall forthwith be filed with each transfer agent for the
shares of the Class D Preferred Stock.
(k) If any of the following shall occur: (i) any
reclassification or change of outstanding shares of Common Stock issuable upon
conversion of shares of the Class D Preferred Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or (ii) any consolidation or
merger to which the Corporation is a party other than a merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in name,
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<PAGE>
or par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding shares of
Common Stock, then in addition to all of the rights granted to the holders of
the Class D Preferred Stock as designated herein, the Corporation, or such
successor or purchasing corporation, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation, merger, sale or
conveyance, provide in its certificate of incorporation or other charter
document that each share of the Class D Preferred Stock shall have rights and
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. If, in the case of any such
reclassification, change, consolidation, merger, sale or conveyance, the stock
or other securities and property (including cash) receivable thereupon by a
holder of Common Stock includes shares of capital stock or other securities and
property of a corporation other than the successor purchasing corporation, as
the case may be, in such reclassification, change, consolidation, merger, sale
or conveyance, then the certificate of incorporation or other charter document
of such other corporation shall contain such additional provisions to protect
the interests of the holders of shares of the Class D Preferred Stock as the
Board shall reasonably consider necessary by reason of the foregoing. The
provision of this Section 6(k) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(l) In the event any shares of Class D Preferred Stock shall
be converted pursuant to Section 6 hereof, the shares so converted shall be
cancelled.
(m) The Corporation will not, by amendment of its Certificate
of Incorporation, as amended, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Section but will at all times
in good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of the Class D Preferred Stock
against impairment.
Such resolution was signed by the President and Secretary of
the Corporation.
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<PAGE>
IN WITNESS WHEREOF, we have executed this Certificate of
Designation this 6th day of October 1998.
CORNERSTONE INTERNET SOLUTIONS
COMPANY
By: /s/ Edward Schroeder
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Name: Edward Schroeder
Title: President and Chief
Executive Officer
By: /s/ Kenneth Gruber
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Name: Kenneth Gruber
Title: Chief Financial Officer
and Secretary
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THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR CLASS C
CONVERTIBLE PREFERRED STOCK OF CORNERSTONE INTERNET SOLUTIONS
COMPANY IS BEING AMENDED HEREBY. FOR A DESCRIPTION OF THE AMENDED
TERMS AND CONDITIONS, PLEASE REVIEW THE FOLLOWING SUPPLEMENT.
CORNERSTONE INTERNET SOLUTIONS COMPANY
The following supplements the Offering Circular (the "Offering
Circular") of Cornerstone Internet Solutions Company (the "Company") mailed to
holders of the Company's currently outstanding Class C Convertible Preferred
Stock, $.01 par value ("Class C Preferred Stock") whereby the Company has
offered to exchange, on a share for share basis, shares of its newly-issued
Class D Convertible Preferred Stock, par value $.01 per share (The "Class D
Preferred Stock") for shares of its currently outstanding Class C Preferred
Stock. The Closing of the Exchange Offer is not contingent on any minimum number
of shares of Class C Preferred Stock being exchanged. The Exchange Offer will
expire at 5:00 p.m., New York City time, on November 25, 1998 unless extended by
the Company. This Supplement should be read in conjunction with the Offering
Circular. Capitalized terms used herein and not otherwise defined shall have the
same meaning as ascribed to them in the Offering Circular.
Please be advised that the conversion terms of the Class D
Preferred Stock are being amended to read as follows:
Conversion. The holders of Class D Preferred Stock shall have the
right, at the holders option, at any time commencing after the earlier of (i)
June 30, 2000 or (ii) if the closing price of the Common Stock shall have been
at least $1.50 per share (subject to adjustment in the event of a subdivision or
combination of the shares of Common Stock) on 15 trading days during any
20-consecutive day period to convert each share of Class D Preferred Stock into
such whole number of shares of Common Stock equal to the aggregate stated value
of the Class D Preferred Stock to be converted divided by $1.00. subject to
adjustment.
As a result of the amendment, the reference to $3.00 per share as
it relates to the conversion of the Class D Preferred Stock should be $1.50 on
pages 1, 8, 9, 24 and 28 of the Offering Circular.
To the extent that you have not already delivered to the
Company's exchange agent a signed copy of the Letter of Transmittal and you wish
to participate in the Exchange Offer,
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the Letter of Transmittal should be sent to the Exchange Agent on or before
November 25, 1998.
If you have any questions or comments relating to the foregoing,
please contact Kenneth Gruber at the Company at (212) 343-3920.
Very truly yours,
CORNERSTONE INTERNET SOLUTIONS COMPANY
By: /s/ Edward Schroeder
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Edward Schroeder, Chief Executive
Officer and President
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