UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
September 27, 2004 (September 22, 2004)
Conversion Services International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-30420 20-1010495
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Eagle Rock Avenue
East Hanover, New Jersey 07936
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 560-9400
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Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation to the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On September 22, 2004, Conversion Services International, Inc. (the "COMPANY")
entered into a transaction pursuant to which the Company borrowed an aggregate
of $1,000,000 on a secured basis (the "LOAN") from three affiliates of Sands
Brothers Venture Capital ("SBVC"). Pursuant to three separate Senior
Subordinated Secured Convertible Promissory Notes which evidence the Loan
(collectively, the "NOTE"), the Loan accrues interest at a simple rate of 8% per
annum, has a one (1) year term and is secured by a lien on all of the assets of
the Company. The Loan and related obligations (including the security interest
in the Company's assets) are subordinated to the loans made to the Company in
August 2004 by Laurus Master Fund, Ltd.
Principal and accrued interest under the Loan are convertible into shares of
Company common stock (the "COMMON STOCK") at a price (the "CONVERSION/EXERCISE
PRICE") equal to either: (i) forty percent (40%) of the price per security of
the next public or private convertible debt or equity financing of the Company
which raises proceeds to the Company of $5,000,000 or more or (ii) following
September 7, 2005, $0.14 per share (subject, in each case, to certain customary
adjustments).
In connection with the Loan, SBVC was granted warrants (collectively, the
"WARRANT") to purchase an aggregate of 6 million shares of Common Stock at the
Conversion/Exercise Price (subject to certain customary adjustments). The shares
of Common Stock underlying the Note and the Warrant are subject to registration
rights consisting of one demand right and unlimited "piggyback" rights. Also,
the Warrant is redeemable by the Company if certain operational and stock price
milestones are met.
Additionally, and simultaneously with the entry into the Loan, the Company
executed a non-exclusive financial advisory agreement with Sands Brothers
International Limited ("SBIL"), a registered broker-dealer and an affiliate of
SBVC. Pursuant to such arrangement, the Company will pay SBIL at $6,000 per
month advisory fee in consideration of strategic financial advice.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Set forth below is a list of Exhibits included as part of this Current Report.
4.1 Common Stock Purchase Warrant of the Company, dated September 22, 2004,
in favor of Sands Brothers Venture Capital LLC.
4.2 Common Stock Purchase Warrant of the Company, dated September 22, 2004,
in favor of Sands Brothers Venture Capital III LLC.
4.3 Common Stock Purchase Warrant of the Company, dated September 22, 2004,
in favor of Sands Brothers Venture Capital IV LLC.
4.4 Registration Rights Agreement, dated September 22, 2004, between Sands
Brothers Venture Capital LLC, Sands Brothers Venture Capital III LLC,
Sands Brothers Venture Capital IV LLC and the Company.
10.1 Senior Subordinated Secured Convertible Promissory Note, dated
September 22, 2004, made by the Company in favor of Sands Brothers
Venture Capital LLC.
10.2 Senior Subordinated Secured Convertible Promissory Note, dated
September 22, 2004, made by the Company in favor of Sands Brothers
Venture Capital III LLC.
10.3 Senior Subordinated Secured Convertible Promissory Note, dated
September 22, 2004, made by the Company in favor of Sands Brothers
Venture Capital IV LLC.
10.4 Security Agreement, dated September 22, 2004, between Sands Brothers
Venture Capital LLC, Sands Brothers Venture Capital III LLC, Sands
Brothers Venture Capital IV LLC and the Company.
10.5 Subordination Agreement, dated September 22, 2004, between Sands
Brothers Venture Capital LLC, Sands Brothers Venture Capital III LLC,
Sands Brothers Venture Capital IV LLC, Laurus Master Fund, Ltd. and the
Company.
10.6 Advisory Agreement, dated September 22, 2004, between Sands Brothers
International Limited and the Company.
This Current Report on Form 8-K may contain, among other things, certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, statements with
respect to the Company's plans, objectives, expectations and intentions and
other statements identified by words such as "may", "could", "would", "should",
"believes", "expects", "anticipates", "estimates", "intends", "plans" or similar
expressions. These statements are based upon the current beliefs and
expectations of the Company's management and are subject to significant risks
and uncertainties. Actual results may differ from those set forth in the
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that are subject to change based on various factors
(many of which are beyond the Company's control).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
September 27, 2004 CONVERSION SERVCES INTERNATIONAL, INC.
By: /s/ Scott Newman
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Name: Scott Newman
Title: President and Chief Executive Officer