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   Gold/Mining/EnergyCSI Credit Systems CSU.VSE

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To: richieg who wrote (75)6/14/1999 11:08:00 AM
From: Stephen O
   of 90
Another takeover announced today for Kelsey's Intl at an 80% premium to the average trading price over the past 30 days. If that percentage was applied to the takeover price for CSI the price would be $1.80 to $1.90. That would be much more like it, a much fairer price.

Also Kelsey's is in the food business, not the fast growing business of electronic commerce, Credit/debit cards and customer loyalty programs.

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To: Ally who wrote (74)6/14/1999 5:10:00 PM
From: Stephen O
   of 90
CSI credits engineer for buyout situation - The Vancouver Sun

Alan Daniels Vancouver Sun

Glenn Baglo, Vancouver Sun / WINNING HAND: Mike Lukas flashes flush of loyalty cards.

Mike Lukas is a man with a $15-million brain.

That's the price Royal Bank of Canada has offered for Credit Systems International Inc., the Burnaby-based electronic marketing company Lukas, its software developer, co-founded 10 years ago.

The $1.30-a-share offer will be mailed to shareholders Tuesday. Last year, CSI shares traded at an average price of 96 cents on the Vancouver Stock Exchange.

CSI directors are recommending acceptance of Royal's offer, but dissident shareholders say they will hold out for a higher price.

John Pryde, investment advisor for Vancouver-based Canaccord Capital Corp., whose clients control 30 per cent of CSI shares, believes $2 a share is more realistic.

"This company has just started its rapid growth phase," Pryde said in an interview. "They are close to significant contracts for their software and it would be very valuable to the Royal Bank, because it can, with its marketing muscle, really put it to work.

"Mike Lukas is a genius. I have heard from other engineers he is one of the smartest on the west coast of Canada -- or the U.S. -- in his area."

Although he founded the company and has developed all its software to date, Lukas is not CSI's chief executive, nor does he wish to be, nor is he the company's largest shareholder.

He describes himself as a hands-on engineer, a man who takes ideas and builds things. Initially, he worked for two years, with no income, developing and manufacturing the company's first product, custom designed software for the parking-lot industry.

For years, when he was trying to expand CSI, he wasn't even among its highest paid employees.

"He's the technical brains; he's the guy who developed the technology and where it came from," said CSI president and CEO James Christensen, who was controller of Blackcomb Mountain until he joined CSI four years ago.

"There's a recurring joke around here: 'If Mike gets hit by a bus, it's over.'

"When it comes to the impact some of the rest of us have, it's an issue of vision: Where do we go with these brains?"

The Royal offer, which expires July 6, needs 75 per cent acceptance to succeed.

Pryde believes the bank could generate potential revenue of $40 million to $50 million a year in transaction fees from its 95,000 retail merchant customers in Canada and 200,000 in the U.S. once it controls CSI's ERNEX point-of-sale software, which Lukas designed.

Customers for ERNEX, which operates in restaurants and retail outlets throughout North America, include Original Levi's Stores, Nike and Superstar Group Ltd.

"They [Royal would pay for this [acquisition] in a very short time," Pryde said.

A point-of-sale terminal is the machine at the store checkout counter that swipes your credit or debit card. What ERNEX does, when used in tandem with a credit card, is promote loyalty for the retailer by offering instant rewards such as electronic coupons.

In addition to processing debit- and credit-card transactions, ERNEX also collects and "warehouses" transaction data about a store's customers, used for developing market strategy.

Analysts say effective loyalty programs result in incremental spending by customers, more dollars spent more frequently.

"What I like about this company is its entrepreneurial spirit," said Frank Moore, Royal's vice-president of merchant and point-of-sale services. "It's important the company remains intact. It's a good fit with their electronic loyalty marketing technology and our merchant payment business."

Lukas supports the takeover, noting CSI will continue to operate under current management as a wholly-owned subsidiary of Royal Bank.

He believes CSI shareholders should accept the offer.

"No one can say it is not a good return on investment, but it's not the home run, that people look for when they invest in a VSE company," he said.

"Is it worth giving up something we dreamed would be a $10 stock? It will be the shareholders' decision.

"In terms of the management decision to endorse the offer, we looked at it from the point of view that it gives an opportunity to do what we have been preaching for a couple of years: A chance to attack the market and grow more quickly."

Lukas said a small company is only as valuable as the people who work for it. "If there is interference, people will be disillusioned and start to walk away," he said. "If the people leave, the bank's investment is worthless.

"What the bank is buying is a concept. We have some technology and customers, but basically it's still very much a concept, but it's a concept that fits well with where it wants to go."

Lukas was one of the first graduates of SFU's engineering program in 1989, but he says what he came away with was worth more than a degree.

"You graduated from that program with the mind-set that you had to create an opportunity; you didn't just go and work for somebody else," he says.

What he created, initially with three SFU buddies who have left the company, was ENSC Ventures, now a wholly-owned subsidiary of CSI.

Last year, CSI lost $513,000 despite "historic high" revenues of $2.2 million. According to its annual report, the loss was "primarily due to research and development."

"I have been, all along, responsible for the technical side of the company," he said. "I have designed myself, or played a large role in designing, everything we have done.

"I have never been in this for the money. If that was the case, I would have got off long ago. People kept telling me I was stupid to stick with it so long."

"My father instilled in me this sense of responsibility that once you start something, you finish it, and do the best you can.

"Until I have been able to build something that's a success, I am not going to walk away."

Now that's loyalty.

Comments about this article? Send mail to Alan Daniels

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To: Stephen O who wrote (80)6/14/1999 8:44:00 PM
From: Ally
   of 90
CSI Management is keen to accept Royal Bank's offer simply because management's agenda is different from shareholders' agenda. Once the company is sold to Royal Bank, the shareholders have lost the complete stake in the company. Management, OTOH, have not lost total owership. Instead, management will have simply exchanged ownership for jobs with Royal Bank, plus conceivably, incentive options.

Therefore, let us not be fooled by supporting management on this deal. It is not to shareholders interest to give away the company at a meager price of $1.30. It is not to shareholders interest to create jobs for managment with Royal Bank. This deal should only go through for the right price... at least $2 per share, as estimated by the analyst.

So, hold on to your shares my fellow SI members. As described in the news article, Royal Bank is likely going to profit handsomely from this deal. So let us not sell out unless the price is right.

Say NO to the $1.30!

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To: Ally who wrote (81)6/14/1999 9:24:00 PM
From: richieg
   of 90
Hear! Hear ! Hold out at least until we have all the facts so we can make an educated decision.

I am STILL looking for a piece of software that integrates (easily or otherwise) into a retailer's web site that does what CSI's does... can't find any .. need help finding them, I guess.

If there isn't any other software like this then $1.30 per share isn't even the tip of the iceberg for it's real value both NOW and in the short term future.

And I still don't completely understand the secrecy regarding the above web integration.

We've only about 1/2 percent but holding.

cheers all !

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To: richieg who wrote (82)6/15/1999 9:45:00 PM
   of 90
I am with you guys. Hold out for a higher price. I would like to know what kind of deal management got.

Ed B.

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To: ED BAARTMAN who wrote (83)6/16/1999 10:57:00 AM
From: Stephen O
   of 90
Total volume yesterday 515,000 and a new high. Canaccord bought 361,000 shares. Is there another player coming in to this stock?

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To: Stephen O who wrote (84)6/16/1999 2:25:00 PM
From: richieg
   of 90
I've been monitoring this stock very closely and I would suggest that there are more than probably three parties buying. It will be interesting to see what the Royal does as I don't believe they are going to get control at $1.30 ... at least I hope not ...

Here's a place to start some interesting thought... There is approximately 1 large food store for every 10,000 population ... we have 30 million plus people in Canada ....all do FAR IN EXCESS of 100 transactions per day to regular customers ... There are 5 major banks (Royal - 1st and CIBC - 2nd)... most of these stores are open 7 days a week. Remember, this is only the large FOOD stores ! Not Sears, Canada Tire or the corner store etc. let's say they get 2 cents per transaction ( I have no idea of the real rates but understand it is as high as 5 cents)
At minimal amounts this suggests that a bank could easily generate 4.2 million per annum just from it's major food chain clients.
Work this out with whatever numbers you can find for various business ventures in Canada... Add in foreign business potential (???)...Let's not forget the internet (What potential we have here is still a mystery as we have no particulars)...

What we have gentlemen is a lot of funds generated by this small Vancouver venture when in the right hands... I think we may now envision management's stand. It's a nice dream to grow wildly with lots of backing and a huge ready made market on your plate.

How much are the shares worth ? A lot more than the current offering, it has been suggested ... I concur...

Depending on your school of thought the price may vary between one and five years gross return at a P/E of five to fifteen (or more if you live in Vegas)..When we have 14 mill fully diluted shares based on one years bank return when going full bore in a year or two or three we have again a value far in excess of the current offering.

I would be most interested in your interpretation of the value both to us and to a large financial institution like the Royal Bank.

I have held shares for about 2 years and am fully prepared to continue even if the wait is long.. someday we may even see a dividend !

I am surprised that a recommendation to sell can be made without FULL disclosure of all current and known future market potential, particularly when the internet market is so very explosive.

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To: richieg who wrote (85)6/17/1999 1:00:00 AM
   of 90
A very interesting post. Why don't you think the Royal Bank will get control at $1.30?

Ed B.

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To: ED BAARTMAN who wrote (86)6/17/1999 10:04:00 AM
From: keith schaefer
   of 90
Say goodbye to CSI, Canaccord accepts $1.30
Thursday, June 17, 1999

Canaccord makes surprise
endorsement of CSI deal

John Schreiner
Financial Post

VANCOUVER - In a surprising turn of events, Canaccord Capital
Corp. yesterday decided to endorse Royal Bank of Canada's
$1.30-a-share takeover offer for CSI Credit Systems International
Inc. of Burnaby, B.C.

"We think it's a fair offer, so we're going to recommend tendering to
the offer," Peter Brown, Canaccord chairman, said after getting a
report from a team of Canaccord analysts who visited CSI earlier
this week.

With Royal Bank seeking a minimum of 75% of the 14 million
shares in the offer mailed yesterday, Canaccord clients could
frustrate the takeover because they hold about a third of the shares.

John Pryde, a Canaccord broker whose clients account for most of
those shares, confirmed some of his clients are disappointed but
said he will recommend they take the bank's offer.

Christopher Harrop, chairman of Northern Securities Inc. in
Toronto, and Steve Ottridge, a Vancouver broker with Nesbitt
Burns Inc. -- each believed to represent clients holding close to one
million shares -- also said their clients are not happy with the offer.
"But I can't fight the Royal Bank and Peter Brown," Mr. Harrop

CSI is a small firm that has developed and is marketing leading edge
software for retailers using customer loyalty cards.

CSI's directors have endorsed the takeover and said in their circular
they will not solicit other takeover or merger proposals. They have
left the door open to unsolicited proposals but will have to pay the
Royal Bank a $400,000 fee if they back another bid. There are no
known other bidders.

The market clearly had expected a competing bid would emerge.
Since the offer for CSI was announced on June 4, the
Vancouver-listed shares have traded actively and often in large
blocks. On Tuesday, when 511,500 shares traded, several trades
were done at $1.31 and other blocks were offered briefly at $1.50.
Yesterday, 84,400 shares changed hands. They closed at $1.28, off

Formed in 1992, CSI appears poised to become profitable after
several years of losses because it has won software contracts with
such major retailers as Nike Canada Inc.

The directors' circular said CSI accepted Royal's offer, which is at a
modest premium to where the shares were trading, because of the
commercial risks faced by CSI "without a strategic partner, the
increase in the level of competition in the U.S. market and the need
for capital that would be required to achieve CSI's plans of
expansion into the United States."

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To: ED BAARTMAN who wrote (86)6/17/1999 2:32:00 PM
From: richieg
   of 90
Canaccord and a handful of others control (or their clients do) too many shares for the bank to grasp 75% of the total shares. Many of these people have said "no".

However, now with the turn of events at Canaccord I believe the(the Royal) will get control and so goes our thoughts on a real winner.

I am still curious regarding the internet possibilities but have this A.M. resigned myself to the facts of the existing offer and have sold.. taking the capital another venture ... check out DXT on VSE

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