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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Title
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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o
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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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(1) |
Amount
previously paid:
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(2) |
Form,
Schedule or Registration Statement No.:
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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 56%
(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
$4,000,000 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.
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By
Order of the Board of Directors,
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March
[__], 2007
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Scott
Newman
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President,
Chief Executive Officer and
Chairman
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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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Authorized
Common Stock Increase and the Transaction
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3
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Voting
Securities
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4
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Vote
Required
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5
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Security
Ownership of Certain Beneficial Owners and Management
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5
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Purpose
and Material Effects of the Stockholder Action
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7
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Dissenter’s
Rights
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8
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Description
of Capital Stock
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9
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Mailing
Costs
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9
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2007
Annual Meeting
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9
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Stockholder
Communications With Directors
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10
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Where
You Can Find More Information
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10
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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 February 27, 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 56% 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
$4,000,000 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 1, 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”, 53,480,153 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 April 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]
AUTHORIZED
COMMON STOCK INCREASE AND THE TRANSACTION
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 March [__], 2007 to the Company’s
stockholders of record as of March 1, 2007 (the “Record Date”). The actions
described below will be effective no sooner than approximately [March __],
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.
As
of the
Record Date, the Company had 53,480,153 shares of Common Stock issued and
outstanding. As of this same date, stockholders representing 29,817,279 shares
of Common Stock, or approximately 56% 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.
In
determining the Authorized Common Stock Increase, the Board of Directors and
the
Majority Stockholders contemplated the Transaction. In the Transaction,
investors received a promissory note convertible into 13,333,333 shares of
Common Stock and a warrant to purchase 13,333,333 shares of Common Stock at
an
exercise price of $0.33 in exchange for $4,000,000 (the “Note and Warrant”).
Approximately $3,700,000 of the money received has been or will be 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”). The Board of
Directors also considered several factors, including the historical and
projected performance of the Company’s Common Stock, prevailing market
conditions, general economic trends, the future needs of the Company, and the
impact of the Authorized Common Stock Increase on investor interest.
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.
The
noteholders have acknowledged and agreed that the Common Stock into which the
Notes and Warrants 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 Notes and Warrants have been
authorized by the AMEX.
Issuance
of the Common Stock into which the Notes and Warrants may be converted will
result in dilution to existing stockholders, but will not otherwise materially
affect existing common stockholders’ rights as stockholders.
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 53,480,153 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.
The
following table sets forth 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:
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Name
and Address of
Beneficial
Owner(1)(2)
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Amount
of Common
Stock
Beneficially Owned
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Percentage
of Outstanding Common
Stock
Beneficially Owned
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Scott
Newman(3)
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19,619,385
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36.7%
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Glenn
Peipert(4)
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10,281,227
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19.2%
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William
Hendry(5)
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30,000
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*
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William
McKnight(6)
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829,091
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1.6%
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Bryan
Carey (7)
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41,666
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*
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Lawrence
K. Reisman(8)
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26,666
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*
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Frederick
Lester(9)
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0
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*
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Thomas
Pear(10)
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200
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*
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Robert
C. DeLeeuw(11)
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6,558,334
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12.0%
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All
directors and officers as a group (8 persons)
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30,828,235
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57.5%
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--------------------------------------------
* Represents
less than 1% of the issued and outstanding Common Stock.
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(1)
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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.
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(2)
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All
addresses are c/o Conversion Services International, Inc., 100
Eagle Rock Avenue, East Hanover, New Jersey
07936.
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(3)
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Mr.
Newman is the Company’s President, Chief Executive Officer and Chairman of
the Board.
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(4)
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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.
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(5)
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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.
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(6)
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Mr.
McKnight is the Company’s Senior Vice President - Data
Warehousing.
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(7)
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Mr.
Carey is the Company’s Senior Vice President - Strategic Consulting.
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.
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(8)
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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.
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(9)
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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.
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(10)
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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.
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| (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.
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PURPOSE
AND MATERIAL EFFECTS OF THE STOCKHOLDER ACTION
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 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
may 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.
On
February 27, 2007, the Majority Stockholders, by written consent in lieu of
a meeting, approved the Certificate of Amendment. No further consents, votes
or
proxies are or were necessary to effect the approval of the Certificate of
Amendment.
The
large
majority of the cash raised from the Transaction was used to pay debt owed
to
Laurus and the Sands Funds. On February 1, 2006, the Company and its
subsidiaries entered into an Overadvance Side Letter (the “Letter”)
with
Laurus. Pursuant to the Letter, the Company was to pay Laurus approximately
$258,424 per month, starting February 1, 2007, until the aggregate principal
amount of $3,101,084 was paid in full (the Company had already made the first
two payments). As final payment to satisfy the Letter in full, the Company
paid
Laurus $2,084,237 and issued a warrant to purchase 1,785,714 shares of Common
Stock at an exercise price of $0.01. In addition, the Company satisfied the
outstanding amount on that certain Secured Non-Convertible Term Note, issued
to
Laurus on February 1, 2006, with a cash payment to Laurus of
$409,721.64.
On
September 22, 2005, the Company issued Amended and Restated Senior Subordinated
Convertible Promissory Notes issued to the Sands Funds (the “Sands
Notes”).
The
Company, and each of the Sands Funds, agreed that the Company will pay the
Sands
Funds $1,050,000 cash, as well as issue shares of Common Stock and warrants
to
purchase Common Stock, in four separate payments at the end of each quarter
of
2007, as final payment to satisfy the Sands Notes in full. As of the date
hereof, the Company made its first two cash payments of $500,000 (with
corresponding shares of Common Stock and warrants).
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 53,480,153 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).
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.
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CONVERSION
SERVICES INTERNATIONAL, INC.
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By:
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/Scott
Newman/
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Scott
Newman |
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President,
Chief Executive Officer and Chairman |
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