UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 28, 2005 (July 22, 2005)
Conversion Services International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-30420 20-1010495
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 Eagle Rock Avenue, East Hanover,
New Jersey 07936
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-9400
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Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation to the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into Material Definitive Agreement.
On July 22, 2005 ("Closing Date"), Conversion Services International, Inc., a
Delaware corporation (the "Company"), entered into (and simultaneously
consummated) an agreement and plan of merger (the "Agreement") with McKnight
Associates, Inc., a Texas corporation ("McKnight"), McKnight Associates, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company (the "Merger
Sub"), and William McKnight, an individual and formerly the sole stockholder of
McKnight. Pursuant to the Agreement, McKnight merged with and into Merger Sub
and the Company paid the following consideration: $672,000 in cash, the
commitment to pay an additional $250,000 in cash (the "Additional Payment"), the
issuance of 13,636,363 shares of the Company common stock, par value $0.001 per
share (the "Shares") valued on the Closing Date at $1,500,000, plus the
assumption of substantially all the liabilities of McKnight (the "Assumed
Liabilities").
Reference is made to the Agreement which is being filed as an Exhibit to this
Form 8-K. All statements made with respect to the transaction discussed in this
Item 1.01 are qualified by such reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
See Item 101 of this Current Report on Form 8-K, which Item is incorporated
herein by this reference for a description of the transaction. The following
describes certain of the material terms of the transaction. The description
below is not a complete description of the material terms of the transaction and
is qualified in its entirety by reference to the agreements entered into in
connection with the transaction which are included as exhibits to this Current
Report on Form 8-K:
Background
On the Closing Date, the Company completed the merger of McKnight with and into
Merger Sub. Pursuant to the Agreement, the merger was effected in exchange for
$672,000 in cash, the commitment to pay the Additional Payment in cash, the
issuance of the Shares (with an aggregate value of $1,500,000), plus the
assumption of the Assumed Liabilities. As a result of the merger, Merger Sub
will continue as the surviving corporation.
As of the Closing Date, William McKnight retained possession of the bank
accounts and accounts receivable of McKnight. The cash in any such accounts and
the value of any such receivables were treated under the Agreement as part of
the consideration paid in the transaction. However, if McKnight failed to
maintain, as of the Closing Date, working capital equal to $150,000, then the
value of the receivables to be retained by William McKnight will be reduced
proportionately to the amount by which McKnight's working capital was below
$150,000.
Additional Payment
Within sixty (60) days of the six (6) month anniversary of the Closing Date, the
Additional Payment must be paid by the Company to William McKnight. The
Company's obligation to make such payment is absolute and not predicated on any
condition, except that the Company will not have to make such payment if William
McKnight resigns as an employee of the Company prior to the six (6) month
anniversary of the Closing Date.
Registration of Stock and Lock Up Agreement
Pursuant to the terms of the Agreement, the Company is obligated to file a
registration statement registering the resale of the Shares. Following the
registration of the Shares, such Shares are to be governed by a lock-up
provision according to the following terms: one-third of the Shares are subject
to a three (3) year lock-up period after their registration; one-third of the
Shares are subject to a two (2) year lock-up period after their registration;
and one-third of the Shares are subject to a one (1) year lock-up period after
their registration.
Item 3.02. Unregistered Sales of Equity Securities.
See Item 2.01 of this Current Report on Form 8-K, which Item is incorporated
herein by this reference, for a more detailed description of the terms of the
transaction that includes the issuance of the Shares.
Item 7.01. Regulation FD Disclosure.
On July 25, 2005, the Company issued a press release announcing completion of
the transaction described in Item 2.01 above. The press release is attached
hereto as Exhibit 99. 1 and is incorporated herein by this reference. The press
release and the information in Item 7.01 of this Form 8-K shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor
shall they be deemed incorporated by reference in any filing under the
Securities Act, except as shall be expressly set forth by specific reference in
such filing.
Item 8.01. Other Events
Employment Agreement
On the Closing Date, William McKnight and the Company entered into an employment
agreement with an initial term of three (3) years at an annual base compensation
of $250,000. Pursuant to the employment agreement, William McKnight (i) will be
employed as Senior Vice President - Data Warehousing, (ii) will be eligible for
an annual bonus, if any, as may be determined by the Company, and (iii) may earn
an annual performance based bonus of up to $75,000 for each of the initial three
years of his employment.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
2 Agreement and Plan of Merger dated July 22, 2005 by and among
Conversion Services International Inc., a Delaware corporation,
McKnight Associates, Inc., a Delaware corporation, McKnight
Associates, Inc., a Texas corporation, and William McKnight.
3.1 Certificate of Merger of McKnight Associates, Inc. filed with the
Secretary of State of the State of Delaware on July 22, 2005.
3.2 Articles of Merger of McKnight Associates, Inc. filed with the
Secretary of State of the State of Texas on July 22, 2005.
10.1 Employment Agreement by and between William McKnight and Conversion
Services International Inc. dated July 22, 2005.
99.1 Press Release of Conversion Services International Inc., dated July
25, 2005.
This Current Report on Form 8-K may contain, among other things, certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, (i) statements
with respect to the Company's plans, objectives, expectations and intentions;
and (ii) other statements identified by words such as "may", "could", "would",
"should", "believes", "expects", "anticipates", "estimates", "intends", "plans"
or similar expressions. These statements are based upon the current beliefs and
expectations of the Company's management and are subject to significant risks
and uncertainties. Actual results may differ from those set forth in the
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that are subject to change based on various factors
(many of which are beyond the Company's control).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
July 28, 2005 CONVERSION SERVICES INTERNATIONAL, INC.
By: /s/ Scott Newman
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Name: Scott Newman
Title: President and Chief Executive
Officer