Exhibit 99.1
MCSi, INC.
0000 XXXXXXXXX XXXXXXX XXXXX
XXXXXX, XXXX 00000
September 11, 2001
Xx. Xxxxxxx X. Xxxxxxxx
Ms. Xxxxxx Xxxxxx
Xx. Xxxxxx Xxxxxxxxx
Xx. Xxxxxxx Xxxxxx
Zengine, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Gentlemen and Xx. Xxxxxx:
MCSi, Inc. ("MCSi") is proposing to purchase any and all outstanding
shares of common stock of Zengine, Inc. ("Zengine") not already owned by MCSi in
an exchange offer of 0.2946 shares of MCSi common stock, no par value per share
("MCSi Stock"), for each share of common stock, no par value per share, of
Zengine. The Board of Directors of MCSi believes that such a transaction makes
sense because the capital markets for e-commerce stocks have changed
dramatically since Zengine's initial public offering. This change, together with
the performance of the Zengine business and stock price over the past nine
months, has made the ownership of a public entity in the e-commerce business
less attractive. It is the belief of MCSi's management that the business of
Zengine could be integrated with the business of MCSi, which would reduce
redundant costs at Zengine and enhance the prospects for both companies. MCSi is
offering Zengine shareholders 0.2946 shares of MCSi for each share of Zengine.
We believe this represents an attractive valuation for Zengine shareholders,
both in absolute terms and in relation to some of Zengine's leading comparable
companies. At MCSi's most recent closing price of $12.73, the offered exchange
ratio represents a 20% premium to Zengine's 30 day average closing price of
$3.13, a 25% premium to the 45 day average of $3.00 and 26% premium to the 60
day average of $2.98. Furthermore, the implied price represents a 53.7% premium
to Zengine's closing price of $2.44 on July 19th, prior to the recent run-up in
Zengine's share price on extremely low volume.
In addition, we feel that the offer price represents an attractive
valuation relative to the current share prices of Zengine's leading comparable
companies such as Ariba, Broadvison, Art Technology and Blue Martini. These
companies are trading at between .5 and 1.2 times projected 2001 revenue. MCSi's
offer price for Zengine represents a
Zengine, Inc.
Board Members
September 11, 2001
Page 2
multiple of 2.4 times projected 2001 revenue, a premium of between 100% and 380%
to the comparable companies mentioned above.
If we hold at least 90 percent of the outstanding Zengine shares
following completion of our tender offer, we may effect a "short-form" merger of
Zengine with MCSi under Delaware law. If such a merger takes place promptly
after the offer, the consideration given to Zengine stockholders in the merger
would be the same as the consideration received by tendering stockholders in the
offer. Zengine stockholders would not be required to vote on such a transaction.
We are today requesting that you enter into an agreement and plan of
reorganization with respect to the offer and the proposed merger with MCSi. We
are not now requiring that Zengine pay any sort of break-up or similar fee in
the event that our offer is not consummated, including because of a higher offer
from another bidder. Our offer would not foreclose any other person from making
a higher offer for the shares that we do not already own.
We recognize that certain members of the board of directors of Zengine
are or have been affiliated with MCSi or its management. We request the
opportunity to discuss our offer with the independent directors of Zengine. We
currently expect to proceed with this offer if such directors, after
consultations with independent financial and legal advisors, concludes that the
offer is fair to Zengine stockholders. In addition, we could also determine to
proceed without negotiating an agreement with Zengine, or not to proceed with
the offer, if in our sole judgment changes in economic, business or market
conditions make the offer unadvisable. Please be aware, however, that time is of
the essence of this proposal. Accordingly, we must receive a response from the
independent directors of Zengine to this proposal on or before September 16,
2001. If not, the MCSi Board will meet to consider its alternatives.
Please call me at (000) 000-0000 at your earliest convenience to
discuss this matter. We look forward to hearing from you.
Sincerely,
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chairman, President and CEO
of MCSi, Inc.
