Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
INFORMATION
REQUIRED IN INFORMATION STATEMENT
SCHEDULE
14C INFORMATION
Information
Statement Pursuant to Section 14(c) of the Securities Exchange Act of
1934
Check
the
appropriate box:
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Preliminary
Information Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
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Definitive
Information Statement
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CONVERSION
SERVICES INTERNATIONAL, INC.
(Name
of
Registrant As Specified In Its Charter)
Payment
of Filing Fee (Check the Appropriate Box):
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Fee
computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
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(1)
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of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which the transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials
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o Check
box
if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and
identify the filing for which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
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previously paid:
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CONVERSION
SERVICES INTERNATIONAL, INC.
100
Eagle Rock Avenue
East
Hanover, New Jersey 07936
(973)
560-9400
NOTICE
OF ACTION TAKEN BY WRITTEN CONSENT
OF
OUR MAJORITY STOCKHOLDERS
To
the Common Stockholders of Conversion Services International,
Inc.:
We
are
circulating an Information Statement to inform our stockholders about
stockholder action which has been approved by written consent of stockholders
of
Conversion Services International, Inc. (the “Company” or “CSI”) who hold 53%
(in excess of a majority) of the voting power of our common stock, par value
$0.001 per share (the “Common Stock”). Such stockholder action has approved: (i)
a Certificate of Amendment to the Certificate of Incorporation of the Company
(the “Certificate of Amendment”) pursuant to which the authorized Common Stock
of the Company under the Certificate of Incorporation, as amended, will be
increased from 100,000,000 shares up to 200,000,000 shares of such Common
Stock
(the “Authorized Common Stock Increase”), to be effective as of the filing of
the Certificate of Amendment with the Delaware Secretary of State, attached
hereto as Appendix
A,
and
(ii) as required by the rules of the American Stock Exchange, the issuance
of a
$4,250,000 convertible note and corresponding warrant that, upon exercise
and
conversion thereof, would result in the issuance in an aggregate amount greater
than 20% of our outstanding shares of our Common Stock (the “Transaction”).
We
attach
an Information Statement describing the stockholder action by written consent
(approving the Authorized Common Stock Increase and the Transaction), which
stockholder action was taken pursuant to Section 228 of the Delaware
General Corporation Law (the “DGCL”), which permits any action that may be taken
at a meeting of the stockholders to be taken by written consent by the holders
of the number of shares of voting stock required to approve the action at a
meeting. No action is required by you. The Information Statement is being
furnished to all stockholders of the Company pursuant to Section 14(c) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules
thereunder solely for the purpose of informing stockholders of these corporate
actions before they take effect. Please read the accompanying Information
Statement carefully. In accordance with Rule 14c-2 under the Exchange Act,
the stockholder action approving the Authorized Common Stock Issuance and the
Transaction is expected to become effective twenty (20) calendar days
following the mailing of the Information Statement, or as soon thereafter as
is
reasonably practicable.
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE
REQUESTED NOT TO SEND US A PROXY.
| |
|
By Order of the Board of
Directors, |
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|
|
| April [__], 2007 |
|
Scott Newman |
| |
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President, Chief Executive Officer
and
Chairman |
TABLE
OF CONTENTS
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Page
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Introduction
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1
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Special
Note Regarding Forward-Looking Statements
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2
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Purpose
and Material Effects of the Stockholder Action
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3
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Authorized
Common Stock Increase
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3
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The
Transaction
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4
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Voting
Securities
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8
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Vote
Required
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8
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Security
Ownership of Certain Beneficial Owners and Management
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9
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Dissenter’s
Rights
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11
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Description
of Capital Stock
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11
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Mailing
Costs
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12
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2007
Annual Meeting
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12
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Stockholder
Communications With Directors
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12
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Where
You Can Find More Information
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12
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CONVERSION
SERVICES INTERNATIONAL, INC.
100
Eagle Rock Avenue
East
Hanover, New Jersey 07936
(973)
560-9400
INFORMATION
STATEMENT
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE
REQUESTED NOT TO SEND US A PROXY
INTRODUCTION
This
Information Statement is being furnished to the holders of record as of the
close of business on March 1, 2007 of shares of common stock, par value $0.001
per share (the “Common Stock”) of Conversion Services International, Inc., a
Delaware corporation (the “Company” or “CSI”) to notify such stockholders that
on March 26, 2007, the Company received written consents in lieu of a
meeting of stockholders from holders of more than a majority of the shares
of
Common Stock representing in excess of approximately 53% of the total votes
of
the Company (the “Majority Stockholders”), approving: (i) a Certificate of
Amendment to the Certificate of Incorporation of the Company (the “Certificate
of Amendment”) pursuant to which the authorized Common Stock of the Company
under the Certificate of Incorporation, as amended, will be increased from
100,000,000 shares up to 200,000,000 shares of such Common Stock (the
“Authorized Common Stock Increase”), to be effective as of the filing of the
Certificate of Amendment with the Delaware Secretary of State, attached hereto
as Appendix
A,
and
(ii) as required by the rules of the American Stock Exchange, the issuance
of a
$4,250,000 convertible note and corresponding warrant that upon exercise
and
conversion thereof would result in the issuance in an aggregate amount greater
than 20% of our outstanding shares of our Common Stock (the “Transaction”).
The
Board
of Directors has fixed the close of business on March 27, 2007 as the record
date for determining the stockholders entitled to notice of the foregoing,
and
has unanimously approved the Authorized Common Stock Increase and the
Transaction, as have the Majority Stockholders. Accordingly, your approval
is
not required and is not being sought. On the “record date”, 56,480,153 shares of
our Common Stock were issued and outstanding. The Common Stock constitutes
the
sole outstanding class of voting securities of CSI. Each share of Common
Stock
entitles the holder thereof to one vote on all matters submitted to
stockholders. Because stockholders collectively holding at least a majority
of
the voting rights of our outstanding Common Stock as of the record date have
voted in favor of each of the proposals or actions, no other stockholder
consents will be solicited in connection with this Information Statement.
Pursuant to Rule 14c-2 under the Securities and Exchange Act of 1934 (the
“Exchange Act”), each of the actions will not become effective until a date at
least 20 days after the date on which this Information Statement has been
mailed
to the stockholders. We anticipate that the actions contemplated herein will
be
effected in May 2007.
THIS
IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
AND
NO STOCKHOLDER MEETING WILL BE HELD TO
CONSIDER
ANY MATTER WHICH IS DESCRIBED HEREIN.
Please
read this Information Statement carefully. It describes the essential terms
of,
and contains certain information concerning, the Authorized Common Stock
Increase and the Transaction. Additional information about the Company is
contained in its periodic and current reports filed with the SEC. These reports,
their accompanying exhibits and other documents filed with the SEC may be
inspected without charge at the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material
may
also be obtained from the SEC at prescribed rates. The SEC also maintains a
web
site that contains reports, proxy and information statements and other
information regarding public companies that file reports with the SEC. Copies
of
these reports may be obtained from the SEC’s EDGAR archives at http://www.sec.gov.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information
included in this Information Statement may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the
“Securities Act”) and Section 21E of the Exchange Act. This information may
involve known and unknown risks, uncertainties and other factors which may
cause
the Company’s actual results, performance or achievements to be materially
different from future results, performance or achievements expressed or implied
by any forward-looking statements. Forward-looking statements, which involve
assumptions and describe the Company’s future plans, strategies and
expectations, are generally identifiable by use of the words “may,” “will,”
“should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project”
or the negative of these words or other variations on these words or comparable
terminology. These forward-looking statements are based on assumptions that
may
be incorrect, and there can be no assurance that these projections included
in
these forward-looking statements will come to pass. The Company’s actual results
could differ materially from those expressed or implied by the forward-looking
statements as a result of various factors. The Company undertakes no obligation
to update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.
[remainder
of page intentionally left blank]
PURPOSE
AND MATERIAL EFFECTS OF THE STOCKHOLDER ACTION
General
The
Information Statement is furnished only to inform the Company’s stockholders of
the actions described below before they take place. Your vote is not required
to
approve any of the actions as set forth herein. This Information Statement
does
not relate to an annual meeting or special meeting in lieu of an annual
meeting.
Pursuant
to the rules and regulations promulgated by the SEC under the Exchange Act,
including Rule 14c-2 promulgated thereunder, an information statement must
be
sent to the holders of voting stock who do not sign the written consent at
least
20 days prior to the effective date of any corporate action taken or authorized
pursuant to the consent of the Company’s stockholders. This Information
Statement was first mailed on or around April [__], 2007 to the Company’s
stockholders of record as of March 26, 2007 (the “Record Date”). The actions
described below will be effective no sooner than approximately [April __],
2007,
which is twenty days after the estimated date on which this Information
Statement will first be mailed to the Company’s stockholders.
This
Information Statement has been prepared by the Company’s management, and the
entire cost of furnishing this Information Statement will be borne by us. The
Company will request brokerage houses, nominees, custodians, fiduciaries and
other like parties to forward this Information Statement to the beneficial
owners of the Company’s voting securities held of record by them and the Company
will reimburse such persons for out-of-pocket expenses incurred in forwarding
such material.
Board
of Directors and Stockholders Approval
The
Company’s Board of Directors has unanimously approved the actions described
herein.
On
March
26, 2007, the Majority Stockholders, by written consent to action in lieu
of a
meeting pursuant to the DGCL, approved the Certificate of Amendment. No further
consents, votes or proxies are or were necessary to effect the approval of
the
Certificate of Amendment. As of the Record Date, the Company had 56,480,153
shares of Common Stock issued and outstanding. As of this same date,
stockholders representing 29,817,279 shares of Common Stock, or approximately
53% of the issued and outstanding shares of Common Stock, have approved the
actions described herein. No further vote of the stockholders is required
for
the Company to approve the actions. No payment was made to any person in
consideration of their executing the Written Consent. Stockholders who did
not
consent to the actions described herein are not entitled to dissenter’s rights
under Delaware law.
The
Board
of Directors and the Majority Stockholders have approved a Certificate of
Amendment to the Certificate of Incorporation of the Company pursuant to
which
the authorized Common Stock of the Company under the Certificate of
Incorporation, as amended, will be increased from 100,000,000 shares up to
200,000,000 shares of such Common Stock, to be effective as of the filing
of an
amendment to the Company’s Certificate of Incorporation with the Delaware
Secretary of State, attached hereto as Appendix
A.
The
Authorized Common Stock Increase would become effective on any date selected
by
the Board of Directors prior to the next annual meeting of
stockholders.
The
Board
of Directors and the Majority Stockholders believe that the increased authorized
number of shares of Common Stock contemplated by the Authorized Common Stock
Increase is desirable to make available shares of Common Stock to complete
the
Transaction (as described below), as well as for future issuance by allowing
the
Company greater flexibility with respect to general corporate purposes and
in
considering potential future actions involving the issuance of stock, including,
without limitation, raising capital, acquisitions of companies or assets,
for
strategic transactions, sales of stock or securities convertible into Common
Stock, stock dividends or splits, and potentially providing equity incentives
to
employees, officers and directors. The Board of Directors also believes that
an
increased authorized number of shares of Common Stock would be desirable
to make
additional unreserved shares of Common Stock available for issuance or
reservation without further stockholder authorization, except as may be required
by law or by the rules of AMEX. As described above, the AMEX Company Guide
requires stockholder approval as a prerequisite to approval of applications
to
list additional shares to be issued where the present or potential issuance
of
Common Stock (or securities convertible into Common Stock) could result in
an
increase in outstanding common shares of 20% or more.
Authorizing
the Company to issue more shares than currently authorized by the Certificate
of
Incorporation will not affect materially any substantive rights, powers or
privileges of the holders of shares of Common Stock. Holders of shares of
Common
Stock are entitled to one vote per share on all matters submitted to the
stockholders and do not have cumulative voting rights or pre-emptive rights
for
the purchase of additional shares of any class of capital stock. The additional
shares of Common Stock for which authorization is sought are identical to
the
shares of Common Stock now authorized. However, the issuance of additional
shares of Common Stock may, among other things, have a dilutive effect on
the
earnings per share and on equity and voting power of existing stockholders
and
adversely affect the market price for the Common Stock. Although the Board
of
Directors has no present intention of issuing any additional shares of Common
Stock or Preferred Stock (except with respect to the Transaction), the proposed
increase in the number of authorized shares of Common Stock could enable
the
Board of Directors to render more difficult or discourage an attempt by another
person or entity to obtain control of the Company. However, the Company does
not
view the Authorized Common Stock Increase as part of an “anti-takeover”
strategy. The Authorized Common Stock Increase is not being advanced as a
result
of any known effort by any party to accumulate shares of Common Stock or
to
obtain control of the Company.
If
the
proposals had not been adopted by the Majority Stockholders, it would have
been
necessary for this action to have been considered by the Company’s stockholders
at a special or annual stockholders’ meeting convened for the purpose of
approving the Authorized Common Stock Increase and the Transaction. The
elimination of the need for a meeting of the stockholders to approve the
Authorized Common Stock Increase and the Transaction is authorized by Section
228 of the DGCL, which provides that any action which may be taken at an
annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if the written consent shall be signed by
the
holders of outstanding shares of voting capital stock having not less than
the
minimum number of votes which would be necessary to authorize or take the
action
at a meeting at which all shares entitled to vote on a matter were present
and
voted. According to the DGCL, a majority of the outstanding shares of voting
capital stock entitled to vote on the matter is required in order to amend
the
Company’s Certificate of Incorporation. In order to eliminate the expense, delay
and management time involved in the holding of a special meeting, and in
order
to effectuate the Certificate of Amendment as early as possible in order
to
accomplish the Company’s objectives, the Board of Directors of the Company
resolved to seek the written consent of the Majority Stockholders of the
Company.
THE
TRANSACTION
The
Transaction was deemed by the Board of Directors and the Majority Stockholders
to be in the best interest of the Company’s stockholders, and the Authorized
Common Stock Increase was determined by the Board of Directors and the Majority
Stockholders based upon the number of shares which may be issued in Transaction.
The Board of Directors and the Majority Stockholders also considered several
other factors, including, without limitation, the working capital needs of
the
Company, the historical and projected performance of the Common Stock,
prevailing market conditions, general economic trends and the impact of the
Transaction and the Authorized Common Stock Increase on the Company and its
stockholders.
In
the
Transaction, Matthew Szulik, an “accredited” investor (within the meaning of
Regulation D promulgated under the Securities Act of 1933, as amended),
introduced to the Company by TAG Virgin Islands, Inc. (“TAG”), received a
promissory note convertible into 14,166,667 shares of Common Stock (the “Note”)
and a five-year warrant to purchase 14,166,667 shares of Common Stock at
an
exercise price of $0.33 (the “Warrant”) in exchange for $4,250,000 (the original
note was issued on March 1, 2007 for $4,000,000 and was subsequently amended
on
March 26, 2007 for $4,250,000). The Company is required to file a registration
statement with the SEC to register the shares of Common Stock underlying
the
Note and the Warrant.
TAG,
and
its predecessor Taurus Advisory Group, LLC, have introduced several investors
to
the Company since 2004 to help fund the Company’s operations, acquisitions and
investments. TAG is a registered investment advisor and advises a number
of the
Company’s stockholders in investment decisions, including decisions about
whether to invest in the Company’s stock. TAG has discretionary authority to
vote or dispose of the shares held in its client accounts and therefore may
be
deemed to be the beneficial owner of such shares. TAG expressly disclaims
such
beneficial ownership.
The
Note
has an interest rate of 10% per annum, has a maturity date of August 31,
2007,
and will automatically convert at an exercise price of $0.30 into 14,166,667
shares of Common Stock upon the effectiveness of this Information Statement
and
approval of an additional listing application with the American Stock Exchange.
The Note’s exercise price of $0.30 is adjustable if the Company (i) declares a
dividend on all its outstanding Common Stock in shares of its capital stock,
(ii) subdivides all its outstanding Common Stock, (iii) combines all its
outstanding Common Stock into a smaller number of shares, or (iv) issues
any
shares of its capital stock by reclassification of its Common Stock (including
any such reclassification in connection with a consolidation or merger
in which
the Company is the continuing corporation), then in each such case the
conversion price in effect immediately prior to such action shall be adjusted
so
that if the Note is thereafter converted, the holder may receive the number
and
kind of shares that it would have owned immediately following such action
if it
had converted the Note immediately prior to such action. Further, if the
Company
issues to all of its existing stockholders or otherwise grant rights, options
or
warrants entitling the holders thereof to subscribe for or purchase Common
Stock
(or securities convertible into or exchangeable for Common Stock) at a
price per
share (or having a conversion price per share) less than the then current
market
price per share on the record date for the determination of stockholders
entitled to receive such rights or granting date, as the case may be, then
in
each such case the conversion price of the Note in effect immediately prior
to
such action (the “Existing Conversion Price”) shall be adjusted by multiplying
the Existing Conversion Price in effect immediately prior to such record
or
granting date by a fraction, of which the numerator shall be the number
of
shares of Common Stock outstanding on such record or granting date plus
the
number of shares of Common Stock which the aggregate offering price of
the total
number of shares of Common Stock so to be offered (or the aggregate initial
conversion price of the convertible securities so to be offered) would
purchase
at such current market price and of which the denominator shall be the
number of
shares of Common Stock outstanding on such record or granting date plus
the
number of additional shares of Common Stock to be offered for subscription
or
purchase (or into which the convertible or exchangeable securities so to
be
offered are initially convertible or exchangeable). Finally, if the Company
distributes to all holders of its Common Stock evidences of its indebtedness
or
assets or rights or warrants to subscribe for or purchase Common Stock,
then in
each such case the conversion price of the Note shall be adjusted so that
the
same shall equal the price determined by multiplying the conversion price
in
effect immediately prior to the date of such distribution by a fraction
of which
the numerator shall be the current market price per share of the Common
Stock on
the record date mentioned below less the then fair market value (as determined
in good faith by the Board of Directors) of the portion of the assets or
evidences of indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock, and the denominator shall be the
current market price per share of the Common Stock.
Approximately
$3,700,000 of the money received has been used to retire certain debt owed
to
Laurus Master Fund, Ltd. (“Laurus”), and Sands Brothers Venture Capital LLC,
Sands Brothers Venture Capital III LLC and Sands Brothers Venture Capital
IV LLC
(collectively, the “Sands Funds”). Laurus is
an
investment firm with a strategy of making direct investments in small and
micro
cap companies, and has worked with the Company since August 2004 by providing
an
accounts receivable line of credit and acquisition funding.
Laurus
had provided a $3,101,084 over-advance on the accounts receivable line of
credit
in February 2006 (the “Laurus Over-advance”). This amount was due in 12 payments
of approximately $258,424 beginning February 1, 2007 (the Company made the
first
two payments in February 2007). With the funds from the Note, the Company
repaid
the Laurus Over-advance in full in the form of a cash payment of $2,601,084
and
the issuance of a warrant to purchase 1,785,714 shares of Common Stock at
an
exercise price of $0.01 (valued at $500,000).
In
addition, the Company issued to Laurus a secured non-convertible term note
in
February 2006, due in December 2007 and bearing interest at prime rate plus
1%.
Starting in March 2006, the Company paid Laurus approximately $45,000 per
month.
In March 2007, the Company satisfied in full the outstanding amount on the
secured non-convertible term note owed to Laurus with a cash payment of
approximately $409,722.
The
Sands
Funds provide corporate
financing needs for its clients with investment banking services, and has
worked
with the Company since September 2004. In
September 2004, the Company borrowed $1,000,000, due in one year and bearing
interest at 8% per annum, from the Sands Funds. In September 2005, the Company
executed an amended note with the Sands Funds for an aggregate principal
amount
of $1,080,000, due in January 2007 and bearing interest at 12% per annum.
Between January and March 2007, the Company executed several extension
agreements with the Sands
Funds to
repay
the amended subordinated secured convertible promissory notes, in which the
Company agreed to pay $1,050,000 cash and issue shares of Common Stock and
warrants to purchase Common Stock, on four separate payment dates of April
2,
2007, July 2, 2007, October 1, 2007 and December 31, 2007. With funds from
the Note, the Company paid the Sands
Funds $650,000
cash by March 2007. The remaining $400,000 cash will be paid in October and
December 2007. Further, the Sands Funds will receive approximately 880,000
shares of Common Stock (equaling approximately $250,000) and warrants to
purchase approximately 1,000,000 shares of Common Stock (both calculated
by
using an estimated stock price of $0.25) over the course of
2007.
The
Common Stock is listed on the American Stock Exchange (“AMEX”) and the Company
is subject to the rules and requirements set forth in the AMEX Company Guide.
Under Section 713(a) of the AMEX Company Guide, the Company was required to
obtain prior stockholder approval of the issuance of securities in any private
transaction involving (i) the issuance of shares of Common Stock (or
securities convertible into or exercisable for Common Stock) for less than
the
greater of book or market value of Common Stock which together with sales by
the
Company’s officers, directors or principal stockholders equals 20% or more of
the Common Stock outstanding before such issuance or (ii) the issuance of
shares of Common Stock (or securities convertible into or exercisable for Common
Stock) equal to 20% or more of our Common Stock outstanding before the issuance
for less than the greater of book or market value of the Common Stock. The
securities to be issued in the Transaction may be issued at a discount to the
market price of the Common Stock, if fully exercised and converted, such
securities would constitute more than 20% of the number of shares of the Common
Stock outstanding. The stockholder approval by written consent will become
effective on the twentieth (20th) day following the date on which this
Information Statement is first sent or given to all common stockholders, or
as
soon thereafter as is reasonably practicable.
Mr.
Szulik, the holder of the Note has acknowledged and agreed that the Common
Stock
into which the Note and Warrant may be converted will not be issued in an
amount
in excess of the number of shares that may be permitted under the AMEX rules
until the listing of the Common Stock underlying the Note and Warrant have
been
authorized by the AMEX.
Dilution
Issuance
of the Common Stock into which the Note and Warrant may be converted will
result
in dilution to existing stockholders, but will not otherwise materially affect
existing common stockholders’ rights as stockholders. Further issuance of
significant numbers of additional shares of Common Stock in the future (i)
will
dilute stockholders’ percentage ownership and (ii) if such shares are issued at
prices below what current stockholders’ paid for their shares, may dilute the
value of current stockholders’ shares. Additionally, the issuance of additional
shares of Common Stock may, among other things, have a dilutive effect on
earnings per share, and on stockholders' equity and voting rights. The issuance
of additional shares, or the perception that additional shares may be issued,
may also adversely affect the market price of the Common Stock. Holders of
Common Stock have no preemptive rights.
The
shares of authorized, but unissued Common Stock will be available from time
to
time for corporate purposes including raising additional capital, acquisitions
of companies or assets, for strategic transactions, and sales of Common Stock
or
securities convertible into Common Stock. The Company does not have any present
intention, plan, arrangement or agreement, written or oral, to issue shares
of
Common Stock for any purpose, except for the Transaction. Although the Company
does not have any present intention to issue shares of Common Stock, except
as
noted above, the Company may in the future raise funds through the issuance
of
Common Stock when conditions are favorable, even if the Company does not
have an
immediate need for additional capital at such time.
The
Company believes that the availability of the additional shares will provide
the
Company with the flexibility to meet business needs as they arise, to take
advantage of favorable opportunities and to respond to a changing corporate
environment. If the Company issues additional shares, the ownership interests
of
holders of the Company's Common Stock will be diluted.
The
following chart illustrates the impact of the Increase in Authorized on the
amount of Company Common Stock outstanding, reserved for issuance and available
for issuance:
|
Number
of shares of CSI Common Stock that are:
|
Current
|
After
Transaction is effected
|
| |
|
|
|
currently
outstanding
|
56,480,153
|
70,646,820
|
|
reserved
for issuance
|
30,928,435
|
45,095,102
|
|
available
for issuance
|
12,591,412
|
84,258,078
|
Upon
the
effectiveness of this Information Statement and the resulting conversion
of the
Note into 14,166,667 shares of Common Stock, Matthew Szulik will own
approximately 29.8% of the total outstanding shares of Common Stock. This
will make Mr. Szulik the largest individual holder of Common Stock of the
Company. In addition, if the Warrant is fully exercised (at a total
exercise price of $4,675,000, of which funds will be paid directly to the
Company), Mr. Szulik will own approximately 48.7% of the total outstanding
shares of Common Stock.
Shares
of
authorized and unissued Common Stock could be issued in one or more transactions
that could make more difficult, and therefore less likely, that any takeover
of
the Company could occur. Issuance of additional Common Stock could have a
deterrent effect on persons seeking to acquire control. The Board also could,
although it has no present intention of so doing, authorize the issuance
of
shares of Common Stock to a holder who might thereby obtain sufficient voting
power to assure that any proposal to effect certain business combinations
or
amendment to the Company's Certificate of Incorporation or Bylaws would not
receive the required stockholder approval. Accordingly, the power to issue
additional shares of Common Stock could enable the Board to make it more
difficult to replace incumbent directors and to accomplish business combinations
opposed by the incumbent Board.
Provisions
in our Certificate of Incorporation, our Bylaws and applicable provisions
of the
Delaware General Corporation Law may make it more difficult and expensive
for a
third party to acquire control of us even if a change of control would be
beneficial to the interests of our stockholders. Such provisions could
discourage potential takeover attempts and could adversely affect the market
price of our common stock. Specifically, the Company is authorized
to issue blank check preferred stock to thwart a takeover attempt and currently
neither our certificate
of incorporation nor our amended and restated bylaws allows
cumulative voting in the election of directors, which would otherwise allow
holders of less than a majority of stock to elect some
directors.
Interests
of Certain Persons in the Authorized Common Stock Increase and the
Transaction
No
director, executive officer, associate of any director or executive officer
or
any other person has any substantial interest, direct or indirect, by security
holdings or otherwise, in the proposals to effectuate the Authorized Common
Stock Increase and the Transaction and take all related actions which are not
shared by all other holders of the Common Stock. See “Security Ownership of
Certain Beneficial Owners and Management.”
VOTING
SECURITIES
Only
stockholders of record at the close of business on the Record Date will be
entitled to notice of the actions described in this Information Statement.
As of
the Record Date, there were 56,480,153 shares of Common Stock outstanding,
all
of which were fully paid, non-assessable and entitled to vote, and 39,000
shares
of preferred stock outstanding (19,000 shares of Series A Convertible Preferred
Stock and 20,000 shares of Series B Convertible Preferred Stock). Each share
of
Common Stock entitles its holder to one vote on each matter submitted to
the
stockholders.
VOTE
REQUIRED
We
are
required to obtain the affirmative vote of at least a majority of the issued
and
outstanding shares of Common Stock when obtaining stockholder approval by
written consent in lieu of a meeting, in order to effect the actions described
herein. That vote has already been obtained by written consent of the Majority
Stockholders with respect to each of such actions.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As
of the
date hereof, the Company’s authorized capitalization consisted of: (i) Twenty
Million (20,000,000) shares of preferred stock, par value $0.001 per share;
and
(ii) One Hundred Million (100,000,000) shares of Common Stock. If the Authorized
Common Stock Increase is implemented by the Board of Directors, the Company’s
authorized capitalization will include Two Hundred Million (200,000,000)
shares
of Common Stock.
The
following table sets forth, as of the Record Date, certain information regarding
the beneficial ownership of the Company’s Common Stock, the Company’s only class
of outstanding voting securities as of the Record Date by: (i) each person
who
is known by the Company to own beneficially more than 5% of the Company’s
outstanding Common Stock with the address of each such person, (ii) each of
the
Company’s present directors and officers, and (iii) all officers and directors
as a group:
|
Name
and Address of
Beneficial
Owner(1)(2)
|
Amount
of Common Stock
Beneficially
Owned
|
Percentage
of Outstanding
Common
Stock Beneficially Owned
|
|
Scott
Newman (3)
|
19,619,385
|
34.7%
|
|
Glenn
Peipert (4)
|
10,281,227
|
18.2%
|
|
William
Hendry (5)
|
30,000
|
*
|
|
William
McKnight (6)
|
829,091
|
1.5%
|
|
Bryan
Carey (7)
|
63,888
|
*
|
|
Lawrence
K. Reisman (8)
|
26,666
|
*
|
|
Frederick
Lester (9)
|
0
|
*
|
|
Thomas
Pear (10)
|
200
|
*
|
|
Robert
C. DeLeeuw (11)
|
6,558,334
|
11.4%
|
|
Matthew
Szulik (12)
|
18,770,935
|
27.5%
|
|
All
directors and officers as a group (8 persons)
|
30,850,457
|
54.4%
|
* Represents
less than 1% of the issued and outstanding Common Stock.
|
(1)
|
Each
stockholder, director and executive officer has sole voting power
and sole
dispositive power with respect to all shares beneficially owned by
him,
unless otherwise indicated.
|
|
(2)
|
All
addresses are c/o Conversion Services International, Inc., 100
Eagle Rock Avenue, East Hanover, New Jersey
07936.
|
|
(3)
|
Mr.
Newman is the Company’s President, Chief Executive Officer and Chairman of
the Board.
|
|
(4)
|
Mr.
Glenn Peipert is the Company’s Executive Vice President, Chief Operating
Officer and Director. Consists of an option to purchase 83,333 shares
of
Common Stock granted on November 16, 2005, and expiring on November
16,
2010, at an exercise price of $0.83 per share, and does not include
an
option to purchase 166,667 shares of Common Stock which vest as follows:
(i) 83,333 on November 16, 2007 and (ii) 83,334 on November 16, 2008.
|
|
(5)
|
Mr.
William Hendry is the Company’s Vice President, Chief Financial Officer
and Treasurer. Consists of an option to purchase 20,000 shares of
Common
Stock granted on May 28, 2004, and expiring on May 28, 2014, at an
exercise price of $3.00 per share, and does not include an option
to
purchase 10,000 shares of Common Stock, which shall vest on May 28,
2007.
Consists
of an option to purchase 10,000 shares of Common Stock granted on
November
16, 2005, and expiring on November 16, 2015, at an exercise price
of $0.83
per share, and does not include an option to purchase 20,000 shares
of
Common Stock which vest as follows: (i) 10,000 on May 16, 2007 and
(ii)
10,000 on May 16, 2008. Does not include an option to purchase 150,000
shares of Common Stock granted on October 10, 2006, and expiring
on
October 10, 2016, at an exercise price of $0.25, which vests as follows:
(i) 50,000 on October 10, 2007, (ii) 50,000 on October 10, 2008 and
(iii)
50,000 on October 10, 2009.
|
|
(6)
|
Mr.
McKnight is the Company’s Senior Vice President - Data
Warehousing.
|
|
(7)
|
Mr.
Carey is the Company’s Senior Vice President - Strategic Consulting.
Consists of an option to purchase 22,222 shares of Common Stock
granted on
May 28, 2004, and expiring on May 28, 2014, at an exercise price
of $3.00
per share, and does not include an option to purchase 11,111 shares
of
Common Stock, which shall vest on May 28, 2007.
Consists
of an option to purchase 41,666 shares of Common Stock granted
on November
16, 2005, and expiring on November 16, 2015, at an exercise price
of $0.83
per share, and does not include an option to purchase 83,334 shares
of
Common Stock which vest as follows: (i) 41,666 on May 16, 2007
and (ii)
41,668 on May 16, 2008. Does not include an option to purchase
150,000
shares of Common Stock granted on October 10, 2006, and expiring
on
October 10, 2016, at an exercise price of $0.25, which vests as
follows:
(i) 50,000 on October 10, 2007, (ii) 50,000 on October 10, 2008
and (iii)
50,000 on October 10, 2009.
|
|
(8)
|
Mr.
Reisman is a Director. Consists of an option to purchase 20,000
shares of
Common Stock granted on May 28, 2004, and expiring on May 28, 2014,
at an
exercise price of $3.00 per share, and does not include an option
to
purchase 10,000 shares of Common Stock, which shall vest on May
28,
2007.
Consists
of an option to purchase 6,666 shares of Common Stock granted on
November
16, 2005, and expiring on November 16, 2015, at an exercise price
of $0.83
per share, and does not include an option to purchase 13,334 shares
of
Common Stock which vest as follows: (i) 6,666 on November 16, 2007
and
(ii) 6,668 on November 16, 2008. Does not include an option to
purchase
25,000 shares of Common Stock granted on October 10, 2006, and
expiring on
October 10, 2016, at an exercise price of $0.25, which vests as
follows:
(i) 8,333 on October 10, 2007, (ii) 8,333 on October 10, 2008 and
(iii)
8,334 on October 10, 2009.
|
|
(9)
|
Mr.
Lester is a Director. Does not include an option to purchase 25,000
shares of Common Stock granted on October 10, 2006, and expiring
on
October 10, 2016, at an exercise price of $0.25, which vests as
follows:
(i) 8,333 on October 10, 2007, (ii) 8,333 on October 10, 2008 and
(iii)
8,334 on October 10, 2009.
|
|
(10)
|
Mr.
Pear is a Director. Does not include an option to purchase 25,000
shares
of Common Stock granted on October 10, 2006, and expiring on October
10,
2016, at an exercise price of $0.25, which vests as follows: (i)
8,333 on
October 10, 2007, (ii) 8,333 on October 10, 2008 and (iii) 8,334
on
October 10, 2009.
|
|
(11) |
Mr.
DeLeeuw was formerly the Company’s Senior Vice President and director.
Includes a fully vested option to purchase 250,000 shares of Common
Stock
granted on November 16, 2005 and expiring on November 16, 2015
at an
exercise price of $0.83 per share. Also includes a fully vested
option to
purchase 1,000,000 shares of Common Stock granted on January 9,
2006 and
expiring on January 9, 2016 at an exercise price of $0.46 per
share.
|
|
(12)
|
Includes
6,891,927 shares of Common Stock, 1,015,873 shares of Common Stock
underlying the June 2004 Unsecured Convertible Line of Credit Note,
3,050,000 shares of Common Stock underlying the Series A Convertible
Preferred Stock of the Company, 4,000,000 shares of Common Stock
underlying the Series B Convertible Preferred Stock of the Company,
and
warrants to purchase 3,813,135 shares of Common Stock of the
Company.
|
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY
CERTIFICATE(S) UNLESS REQUESTED TO DO SO.
If
and
when the Board of Directors decides to implement the Authorized Common Stock
Increase, the Company will amend Article Fourth Section A of the Company’s
Certificate of Incorporation, relating to the Company’s authorized capital, in
its entirety to state as follows:
FOURTH:
A.
AUTHORIZED
The
aggregate number of shares of all classes of capital stock with the Corporation
shall have authority to issue shall be two hundred twenty million (220,000,000)
shares, consisting of:
(1)
Twenty Million (20,000,000) shares of preferred stock, par value $0.001 per
share (“Preferred Stock”); and
(2)
two
hundred million (200,000,000) shares of common stock, par value $0.001 per
share
(“Common Stock”).
Under
the
DGCL, the Company’s stockholders are not entitled to dissenter’s rights with
respect to the Authorized Common Stock Increase or the Transaction, and the
Company will not independently provide stockholders with any such
right.
DESCRIPTION
OF CAPITAL STOCK
The
following description of the Company’s Common Stock and preferred stock is a
summary and is qualified in its entirety by the provisions of the Company’s
Certificate of Incorporation, as amended. The Company is currently authorized
to
issue up to 100,000,000 shares of Common Stock. As of the Record Date, there
were 56,480,153 shares of Common Stock issued and outstanding. The Company
is
authorized to issue up to 20,000,000 shares of preferred stock, par value
$0.001, of which 39,000 are outstanding (19,000 shares of Series A Convertible
Preferred Stock and 20,000 shares of Series B Convertible Preferred Stock).
If
the Authorized Common Stock Increase is implemented by the Board of Directors,
the Company’s authorized capitalization will include Two Hundred Million
(200,000,000) shares of Common Stock.
Common
Stock
The
holders of Common Stock are entitled to one vote for each share held of record
on all matters to be voted on by the stockholders. The holders of Common Stock
are entitled to receive dividends ratably, when, as and if declared by the
Board
of Directors, out of funds legally available. In the event of a liquidation,
dissolution or winding-up of the Company, the holders of Common Stock are
entitled to share equally and ratably in all assets remaining available for
distribution after payment of liabilities and after provision is made for each
class of stock, if any, having preference over the Common Stock. The holders
of
shares of Common Stock, as such, have no conversion, preemptive, or other
subscription rights and there are no redemption provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are validly issued,
fully-paid and nonassessable.
Preferred
Stock
The
shares of preferred stock may be issued in series, and shall have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issuance of such
stock adopted from time to time by the Company’s Board of Directors. The
Company’s Board of Directors is expressly vested with the authority to determine
and fix in the resolution or resolutions providing for the issuances of
preferred stock the voting powers, designations, preferences and rights, and
the
qualifications, limitations or restrictions thereof, of each such series to
the
full extent now or hereafter permitted by the laws of the State of
Delaware.
Transfer
Agent
Olde
Monmouth Stock Transfer Co., Inc., 200 Memorial Parkway, Atlantic Highlands,
New
Jersey 07716, is the transfer agent for the Company’s shares of Common
Stock.
MAILING
COSTS
The
Company is making the mailing and will bear the costs associated therewith.
There will be no solicitations made. The Company will reimburse banks, brokerage
firms, other custodians, nominees and fiduciaries for reasonable expenses
incurred in sending the Information Statement to beneficial owners of the
Company’s Common Stock.
2007
ANNUAL MEETING
The
Board
of Directors has not yet determined the date on which the next annual meeting
of
stockholders of the Company will be held. Any proposal by a stockholder intended
to be presented at the Company’s next annual meeting of stockholders must be
received at the offices of the Company a reasonable amount of time prior to
the
date on which the information or proxy statement for that meeting are mailed
to
stockholders in order to be included in the Company’s information or proxy
statement relating to that meeting.
STOCKHOLDER
COMMUNICATIONS WITH DIRECTORS
Stockholders
who wish to communicate with the Board of Directors or with a particular
director may send a letter to the Company at 100 Eagle Rock Avenue, East
Hanover, New Jersey 07936. Any such communication should clearly specify it
is
intended to be made to the entire Board of Directors or to one or more
particular director(s). Under this process, the recipient of the communication
will review such correspondence and will forward to the Board of Directors
a
summary of all such correspondence and copies of all correspondence that, in
the
opinion of the reviewer, deals with the functions of the Board of Directors,
or
that the reviewer otherwise determines requires their attention. Directors
may
at any time review a log of all correspondence received by the Company that
is
addressed to the members of the Board of Directors and request copies of such
correspondence. Concerns relating to accounting, internal controls or auditing
matters are immediately brought to the attention of the Board of
Directors.
WHERE
YOU CAN FIND MORE INFORMATION
The
Company is in compliance with the information and periodic reporting
requirements of the Exchange Act and, in accordance therewith, files periodic
reports, proxy and information statements and other information with the SEC.
Such periodic reports, proxy and information statements and other information
will be available for inspection and copying at the principal office of the
SEC
located at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all
or
any part thereof may be obtained at prescribed rates from the SEC’s Public
Reference Section at such addresses. Also, the SEC maintains a web site on
the
Internet at http://www.sec.gov
that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC, public reference
facilities and web site of the SEC referred to above.
We
will
provide without charge to each person to whom this Information Statement is
delivered, upon written or oral request of that person, a copy of all documents
incorporated by reference into the Information Statement, other than exhibits
to
those documents (unless such exhibits are specifically incorporated by reference
into such documents). Written requests for such documents should be directed
to
the Company at 100 Eagle Rock Avenue, East Hanover, New Jersey
07936.
APPENDIX
A
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
OF
CONVERSION
SERVICES INTERNATIONAL, INC.
Pursuant
to Delaware General Corporation Law Section 242, Conversion Services
International, Inc., a corporation organized and existing under the laws of
the
State of Delaware (the “Corporation”), does hereby certify:
That
the
board of directors, and stockholders of the Corporation holding a majority
in
interest of the outstanding shares of common stock of the Corporation, acting
by
written consent, approved the following amendments to the Corporation’s
Certificate of Incorporation:
Article
FOURTH Section A of the Corporation’s Certificate of Incorporation is hereby
amended in its entirety to read as follows:
FOURTH:
A.
AUTHORIZED
The
aggregate number of shares of all classes of capital stock with the Corporation
shall have authority to issue shall be two hundred twenty million (220,000,000)
shares, consisting of:
(1)
Twenty Million (20,000,000) shares of preferred stock, par value $0.001 per
share (“Preferred Stock”); and
(2)
two
hundred million (200,000,000) shares of common stock, par value $0.001 per
share
(“Common Stock”).
IN
WITNESS WHEREOF, the undersigned, being the President of the Corporation, has
duly executed this Certificate of Amendment as of the ____ day of _____
2007.
| |
|
|
|
| |
CONVERSION
SERVICES INTERNATIONAL, INC.
|
|
| |
|
|
|
| |
By:
|
/Scott
Newman/
|
|
| |
Scott
Newman |
|
| |
President,
Chief Executive Officer and Chairman |
|