SCHEDULE 13D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Predictive Systems, Inc.
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(Name of Issuer)
Common Stock, par value $0.001 per share
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(Title of Class of Securities)
74036W102
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(CUSIP Number)
David M. Butze
President and Chief Executive Officer
International Network Services, Inc.
1600 Memorex Drive, Suite 200
Santa Clara, CA 95050
(408) 330-2700
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 8, 2003
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
1
SCHEDULE 13D
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
International Network Services, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
01-0739881
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
OO
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF None
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
11,539,191
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING None
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
None
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,539,191
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[_] N/A
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
29.5%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
________________________________________________________________________________
2
SCHEDULE 13D
Neither the filing of this Schedule 13D nor any of its contents shall be
construed as an admission by International Network Services, Inc. that it is the
beneficial owner of any of the common stock of Predictive Systems, Inc. referred
to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934,
as amended.
Item 1. Security and Issuer.
This Schedule 13D relates to shares of common stock, par value $0.001
("Common Stock") of Predictive Systems, Inc. a Delaware corporation ("Issuer" or
"Predictive"). Issuer's principal executive office is 19 West 44th St., New
York, NY 10036.
Item 2. Identity and Background.
(a) The name of the person filing this statement is International Network
Services Inc., a Delaware corporation ("INS").
(b) The address of INS's principal office and principal business is 1600
Memorex Drive, Suite 200, Santa Clara, CA 95050.
(c) INS provides network consulting services and business solutions to
help companies build, secure, and manage business-critical network
infrastructures.
(d) Neither INS nor, to INS's knowledge, any person named in Schedule A
hereto is required to disclose legal proceedings pursuant to Item 2(d).
(e) Neither INS nor, to INS's knowledge, any person named in Schedule A
hereto is required to disclose legal proceedings pursuant to Item 2(e).
(f) Each individual identified on Schedule A attached hereto is a citizen
of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
As an inducement for INS to enter into the Merger Agreement described in
Item 4 and in consideration thereof, the directors and executive officers of the
Issuer, and certain affiliates of the Issuer, entered into Voting Agreements
with INS (discussed in Item 4 below). INS did not pay additional consideration
to the directors, executive officers and affiliates of the Issuer in connection
with the execution and delivery of the Voting Agreements. In addition, the
directors, executive officers and certain affiliates of the Issuer granted INS
an irrevocable proxy with respect to the Issuer securities covered by the Voting
Agreements.
References to, and descriptions of, the Merger (discussed in Item 4 below),
the Merger Agreement and the Voting Agreements, as set forth herein, are
qualified in their entirety by reference to Exhibits 1 and 2, the copies of the
Merger Agreement and the substantial form of Voting Agreement, respectively,
which are incorporated herein by reference, to this Schedule 13D, and are
incorporated herein in their entirety where such references and descriptions
appear.
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SCHEDULE 13D
Item 4. Purpose of Transaction.
(a)-(b) Pursuant to the Voting Agreements, dated as of April 8, 2003 (the
"Voting Agreements"), among INS and certain stockholders of the Issuer listed on
Schedule B hereto (collectively, the "Stockholders"), INS may be deemed to be
the beneficial owner of 11,539,191 shares of Issuer common stock (collectively,
the "Subject Shares"). INS and the Stockholders entered into the Voting
Agreements to induce INS to enter into the Agreement and Plan of Merger, dated
as of April 8, 2003 (the "Merger Agreement"), among INS, Mid-West Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of INS
("Merger Sub"), and Issuer. Pursuant to the Merger Agreement, Merger Sub will
merge with and into the Issuer (the "Merger"), with the Issuer continuing as the
surviving corporation in the Merger as a wholly owned subsidiary of INS (the
"Surviving Corporation"). The shareholders of Predictive Systems are expected to
receive total cash consideration of approximately $19.2 million, subject to
certain conditions, including approval by the stockholders of the Issuer.
The Voting Agreements were entered into as a condition to the willingness
of INS to enter into the Merger Agreement and to increase the likelihood that
the approval of the Issuer's stockholders required in connection with the Merger
will be obtained. Pursuant to the terms of the Voting Agreements, any shares of
capital stock of the Issuer acquired by any Stockholder after the date of the
Voting Agreements and during the term of the Voting Agreements (including any
stock options, warrants or similar instruments) will be subject to the Voting
Agreements. Accordingly, any such acquisition of shares of capital stock of the
Issuer by any Stockholder may result in INS being deemed to acquire beneficial
ownership of additional securities of the Issuer.
Pursuant to the Voting Agreements, the Stockholders, with respect to the
Subject Shares (and any additional shares of capital stock or other securities
of the Issuer acquired by any Stockholder after the date of the Voting
Agreements and during the term of the Voting Agreements), have agreed, among
other things, (i) not to cause or permit any Transfer (as defined in Section
1(d) of the Voting Agreements) of any of the shares to be effected or make any
offer regarding the Transfer of any of the shares; (ii) not to deposit, or
permit the deposit of, any shares in a voting trust, grant any proxy in respect
of the shares, or enter into any voting agreement or similar arrangement,
commitment or understanding; (iii) to vote in favor of the approval of the
Merger and the adoption and approval of the Merger Agreement, and in favor of
each of the other actions contemplated by the Merger Agreement; (iv) to vote
against approval of any proposal made in opposition to, or in competition with,
consummation of the Merger and the transactions contemplated by the Merger
Agreement; (v) to vote against any other extraordinary corporate transaction
involving the Issuer or any of its subsidiaries (such as a merger,
reorganization, sale or transfer of a significant amount of assets or material
change in capitalization) or any other action that is intended to, or could
reasonably be expected to, impede, interfere with, delay, postpone, discourage
or adversely affect the Merger or any of the other transactions contemplated by
the Merger Agreement; (vi) to vote in favor of waiving any notice that may have
been or may be required relating to any extraordinary corporate transaction
involving the Issuer or any of its subsidiaries; and (vii) not to directly or
indirectly solicit, initiate, encourage or take an action intended to induce the
making, submission or announcement of any Acquisition Proposal (as defined in
Section 5.4(d) of the Merger Agreement) or engage or participate in any
discussions or negotiations with any person regarding, or furnish to any person
any information with respect to, or take any other action intended to facilitate
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Acquisition Proposal.
Further, as part of the Voting Agreements, each Stockholder has entered
into an Irrevocable Proxy thereby irrevocably appointing members of the Board of
Directors of INS, and each of them individually, as the sole and exclusive
attorneys and proxies of each Stockholder (the "Attorneys"), with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the Stockholder is entitled to do so) with
respect to all of the shares of capital stock of Issuer that now are or
hereafter may be beneficially owned by the Stockholder, and any and all other
shares or securities of Issuer issued or issuable in respect thereof on or after
the date of the Voting Agreement in accordance with the terms of the Irrevocable
Proxy, a copy of which is attached as Exhibit A to the Voting Agreement filed as
Exhibit 2 to this Schedule 13D. The names of each Stockholder and the number of
Subject Shares beneficially owned by each Stockholder, are set forth on Schedule
B hereto.
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SCHEDULE 13D
In exercising the right to vote the Subject Shares as the sole and
exclusive attorneys and proxies of the Stockholders, the Attorneys' rights are
limited to voting the Subject Shares, or granting a consent or similar approval
with respect to the Subject Shares, (i) in favor of the approval of the Merger
and the adoption and approval of the Merger Agreement, and in favor of each of
the other actions contemplated by the Merger Agreement; (ii) against approval of
any proposal made in opposition to, or in competition with, consummation of the
Merger and the transactions contemplated by the Merger Agreement; (iii) against
any extraordinary corporate transaction involving the Issuer or any of its
subsidiaries (such as a merger, reorganization, sale or transfer of a
significant amount of assets or material change in capitalization) or any other
action that is intended to, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the Merger or
any of the other transactions contemplated by the Merger Agreement; and (iv) in
favor of waiving any notice that may have been or may be required relating to
any extraordinary corporate transaction involving the Issuer or any of its
subsidiaries. The Stockholders may vote the Subject Shares on all other matters.
The Voting Agreements and Irrevocable Proxies expire upon the earlier of
(i) such date and time as the Merger Agreement shall have been validly
terminated pursuant to its terms, or (ii) such date and time as the Merger shall
become effective in accordance with the terms and conditions set forth in the
Merger Agreement.
(c) Not applicable.
(d) Upon consummation of the Merger, the directors of the Surviving
Corporation shall be the existing directors of Merger Sub as of immediately
prior to the consummation of the Merger, until their resignation or removal or
until their successors are duly elected and qualified. The existing director of
Merger Sub is David Butze. The officers of the Surviving Corporation shall be
the existing officers of Merger Sub as of immediately prior to the consummation
of the Merger. Each of the existing officer positions of Merger Sub are held by
David Butze.
(e) Other than as a result of the Merger described in this Item 4, not
applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Certificate of Incorporation of
the Issuer shall be amended and restated to be the same in substance as the
Certificate of Incorporation of Merger Sub, as in effect immediately prior to
the Merger, until thereafter amended. The name of the Surviving Corporation
shall be Predictive Systems, Inc. Upon consummation of the Merger, the By-laws
of Merger Sub, as in effect immediately prior to the Merger, shall be the
By-laws of the Surviving Corporation until thereafter changed or amended.
(h) - (i) Upon consummation of the Merger, the Issuer common stock will be
delisted from The Nasdaq Stock Market Inc. and will become eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act.
(j) Other than as described above, INS currently has no plan or proposals
that relate to, or may result in, any of the matters listed in Items 4(a) - (i)
of Schedule 13D (although INS reserves the right to develop such plans).
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SCHEDULE 13D
Item 5. Interest in Securities of the Issuer.
(a)-(b) As a result of the Voting Agreements, INS may be deemed to be the
beneficial owner of the Subject Shares. The Subject Shares (which include
1,123,156 shares of common stock subject to options that are exercisable within
60 days of April 8, 2003) constitute approximately 29.5% of the issued and
outstanding shares of Issuer common stock, based on the Issuer's representation
in the Merger Agreement that there were 37,983,438 shares of Issuer common stock
issued and outstanding at the close of business on April 9, 2003. INS may be
deemed to have the shared power to vote the Subject Shares with respect to those
matters described in Item 4 above. However, INS is not entitled to any rights as
a stockholder of Issuer as to the Subject Shares and expressly disclaims any
beneficial ownership of the shares covered by the Voting Agreements. INS does
not have the power to dispose of the Subject Shares.
(c) Neither INS nor, to the knowledge of INS, any person named in Schedule
A has effected any transaction in the Issuer common stock during the past 60
days.
(d) To the knowledge of INS, no other person has the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, such securities of Issuer.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Other than as described in Items 3, 4 and 5 and the agreements incorporated
herein by reference and set forth as exhibits hereto, to the knowledge of INS,
there are no other contracts, arrangements, understandings or relationships
(legal or otherwise) among the persons named in Item 2 and between such persons
and any person with respect to any securities of the Issuer, including but not
limited to transfer or voting of any of the securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be filed as Exhibits.
EXHIBIT NO. DESCRIPTION
----------- -----------
1. Agreement and Plan of Merger dated as of April 8,
2003, by and among International Network Services,
Inc., a Delaware corporation, Mid-West Acquisition
Corporation, a Delaware corporation and a wholly
owned subsidiary of International Network
Services, Inc., and Predictive Systems, Inc, a
Delaware corporation (incorporated by reference to
Annex A attached to the Schedule 14A filed by
Predictive Systems, Inc. on April 22, 2003).
2. Substantial Form of Voting Agreement and Irrevocable
Proxy dated as of April 8, 2003, which has been
entered into between International Network
Services, Inc., a Delaware corporation, and those
stockholders of Predictive Systems, Inc, a
Delaware corporation, listed on Schedule B hereto
(incorporated by reference to Annex E attached to
the Schedule 14A filed by Predictive Systems, Inc.
on April 22, 2003).
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SCHEDULE 13D
After reasonable 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.
Date: April 28, 2003 International Network Services, Inc.
By: /s/ David M. Butze
---------------------------------------
David M. Butze
President and Chief Executive Officer
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SCHEDULE 13D
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT NAME
----------- ------------
1. Agreement and Plan of Merger dated as of April 8,
2003, by and among International Network Services,
Inc., a Delaware corporation, Mid-West Acquisition
Corporation, a Delaware corporation and a wholly
owned subsidiary of International Network
Services, Inc., and Predictive Systems, Inc, a
Delaware corporation (incorporated by reference to
Annex A attached to the Schedule 14A filed by
Predictive Systems, Inc. on April 22, 2003).
2. Substantial Form of Voting Agreement and Irrevocable
Proxy dated as of April 8, 2003, which has been
entered into between International Network
Services, Inc., a Delaware corporation, and those
stockholders of Predictive Systems, Inc, a
Delaware corporation, listed on Schedule B hereto
(incorporated by reference to Annex E attached to
the Schedule 14A filed by Predictive Systems, Inc.
on April 22, 2003).
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF INTERNATIONAL NETWORK SERVICES, INC.
The following is the list of the directors and executive officers of INS.
Unless otherwise indicated, all directors and officers listed below are citizens
of the United States and employed by INS. The principal address of INS, and
unless otherwise indicated below, the current business address for each
individual listed below is 1600 Memorex Drive, Suite 200, Santa Clara, CA 95050.
Officers and Directors of International Network Services, Inc.
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Name and Business Address Present Principal Occupation
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David M. Butze Director of INS
President and Chief Executive Officer of INS
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Carl Berg (1) Director of INS
Partner, Berg & Berg Enterprises, Inc.
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John Montgonery Kersten Vice President of Business Development and Secretary of INS
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Julia K. Kellberg Vice President of Finance of INS
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Daniel J. Gallagher Vice President, General Counsel and Assistant Secretary of INS
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(1) Mr. Berg's business address at Berg & Berg Enterprises, Inc. is 10050
Bandley Drive, Cupertino, CA 95014
SCHEDULE B
VOTING AGREEMENTS AND IRREVOCABLE PROXIES
The following is the list of the holders of common stock of Predictive
Systems, Inc. who entered into Voting Agreements and Irrevocable Proxies with
INS on April 8, 2003.
Beneficial ownership is determined in accordance with SEC rules. In
computing the number of shares beneficially owned by a person, shares for which
the named person has sole or shared power over voting or investment decisions
have been included. The number of shares beneficially owned includes common
stock which the named person has the right to acquire, through conversion,
option or warrant exercise, or otherwise, within 60 days after April 9, 2003.
The number of shares beneficially owned also includes shares of restricted stock
held by the named person.
Name of Individual / Entity Signing Voting Agreement Shares Beneficially Owned
---------------------------------------------------- -------------------------
Andrew Zimmerman ................................. 541,571
Neeraj Sethi ..................................... 244,528
Shirley Howell ................................... 87,759
Gary N. Papilsky ................................. 74,912
Edward Schwartz .................................. 41,667
William W. Wyman ................................. 318,750
Peter L. Bloom ................................... 27,500
Eric Meyer ....................................... 2,236,737
Howard Morgan .................................... 15,000
Cisco Systems, Inc. .............................. 1,242,000
William W. Smith ................................. 21,250
Entities affiliated with General Atlantic Partners,
LLC ............................................ 6,687,517