Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as
[x] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
SALES ONLINE DIRECT, INC.
(Name of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth in the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] 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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SALES ONLINE DIRECT, Inc.
4 Brussels Street
Worcester, Massachusetts 01610
SOLICITATION OF CONSENTS
TO THE STOCKHOLDERS OF SALES ONLINE DIRECT, INC.:
The Board of Directors of Sales Online Direct, Inc. (the "Company")
requests your consent in writing, without a meeting, to an amendment to the
Company's Certificate of Incorporation, as amended, to increase the number of
authorized shares of common stock from 100,000,000 to 350,000,000 (the "Charter
Amendment").
The attached Consent Solicitation Statement describes the matter being
presented to the stockholders in this consent solicitation. Because this
solicitation of written consents is in lieu of a meeting of stockholders there
will be no meeting of stockholders held in connection with this consent
solicitation. The attached Consent Solicitation Statement is provided to you
pursuant to Rule 14a-3 under the Securities Exchange Act of 1934. We encourage
you to read the Consent Solicitation Statement thoroughly.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE CHARTER AMENDMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU CONSENT TO THE INCREASE IN THE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK.
Only holders of record of common stock of the Company as of the close of
business on November 6, 2001 (the "Record Date") are entitled to receive the
accompanying Consent Solicitation Statement and consent and to consent to the
Charter Amendment. Each stockholder is urged to sign, date and mail the
accompanying consent as promptly as possible in the enclosed self-addressed
stamped envelope.
BY ORDER OF THE BOARD OF DIRECTORS,
Gregory Rotman
President
November 19, 2001
Worcester, Massachusetts
YOUR CONSENT IS IMPORTANT TO US
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU OWN. TO ENSURE YOUR CONSENT BEING COUNTED, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED CONSENT AS PROMPTLY AS POSSIBLE AND MAIL IT
IN THE ENCLOSED ENVELOPE. ANY CONSENT GIVEN MAY BE REVOKED BY YOU IN WRITING AT
ANY TIME PRIOR TO THE RECEIPT BY THE COMPANY OF UNREVOKED CONSENTS FROM THE
HOLDERS OF A MAJORITY OF THE COMPANY'S COMMON STOCK. IF YOU HAVE ANY QUESTIONS
ABOUT THIS CONSENT SOLICITATION OR ABOUT PROVIDING YOUR CONSENT, PLEASE CONTACT
GREGORY ROTMAN, PRESIDENT, AT (508) 791-6710.
THIS CONSENT SOLICITATION STATEMENT IS BEING PROVIDED TO YOU BY THE
MANAGEMENT OF THE COMPANY
SALES ONLINE DIRECT, Inc.
4 Brussels Street
Worcester, Massachusetts 01610
CONSENT SOLICITATION STATEMENT
The Board of Directors of Sales Online Direct, Inc. (the "Company") hereby
requests consent from the holders of the Company's common stock. Please indicate
your consent by SIGNING, DATING and MAILING the enclosed consent ("Consent")
using the enclosed envelope.
This Consent Solicitation Statement and the accompanying form of Consent
are first being mailed on or about November 19, 2001 to holders of record of
common stock as of the close of business on November 6, 2001 (the "Record
Date").
Requests for information regarding this Consent Solicitation Statement may
be directed to the attention of Gregory Rotman, President, at (508) 791-6710 or
delivered in writing to the Company at its principal executive office located at
4 Brussels Street, Worcester, MA 01610.
The Board of Directors of the Company has proposed an amendment to Article
FOURTH of the Company's Certificate of Incorporation, as amended ("Certificate
of Incorporation"), to increase the authorized common stock of the Company from
100,000,000 to 350,000,000 shares (the "Charter Amendment"). See "Amendment to
Certificate of Incorporation to Increase Authorized Common Stock."
The Delaware General Corporation Law ("DGCL") requires that amendments to a
corporation's certificate of incorporation be approved by stockholders entitled
to vote thereon, as well as by the Board of Directors. Accordingly, the Company
is hereby soliciting consent from the holders of its common stock to the Charter
Amendment. The Charter Amendment requires the consent of persons holding not
less than a majority of the issued and outstanding common stock on the Record
Date.
SOLICITATION, VOTING AND REVOCABILITY OF CONSENTS
As of the Record Date, 75,074,117 shares of common stock were issued and
outstanding. Only holders of record of common stock as of the close of business
on the Record Date are entitled to consent to the Charter Amendment. Each share
of common stock is entitled to one vote. The shares of common stock for which
properly executed Consents in the accompanying form are received will, if no
contrary instruction is received, be deemed submitted FOR the Charter Amendment.
SECTION 228(c) OF THE DGCL REQUIRES THAT EACH CONSENT HAVE A DATED
SIGNATURE OF EACH STOCKHOLDER WHO SIGNS THE CONSENT. AN UNDATED CONSENT CANNOT
BE USED. In addition, under DGCL Section 228(c), none of the Consents will be
effective to approve the Charter Amendment unless Consents from holders of
record on the Record Date owning the minimum number of shares required to
approve such proposal have been received within the 60-day period following the
first dated Consent which is received with respect to such proposal (the
"Consent Solicitation Period"). The Consent provided may be executed by the
record holder or pursuant to authority given by the written proxy of any record
holder.
Any Consent given pursuant to this solicitation is considered revocable by
the person giving it at any time before it is used by the Company. If, prior to
the earlier of the date on which the Company has received Consents from persons
holding the minimum number of shares of common stock required to approve the
Charter Amendment or the end of the Consent Solicitation Period, the Company
receives a written notice of revocation of a Consent or receives a duly executed
Consent bearing a later date, any earlier dated consent will be revoked. If the
holders of a majority of the outstanding common stock as of the Record Date
approve the Charter Amendment, the Company intends to promptly amend the
Certificate of Incorporation in conformity thereto and file a certificate of
amendment ("Certificate of Amendment") with the Delaware Secretary of State. The
Company shall also promptly notify the stockholders who have not consented to
the action taken as required by Delaware law.
The Company will bear the cost of the solicitation of Consents by the Board
of Directors. The Company may use the services of its executive officers and
directors to solicit consents from stockholders in person and by mail, telephone
and facsimile. Arrangements may also be made with brokers, fiduciaries,
custodians and nominees to send Consents, Consent Solicitation Statements and
other material to the beneficial owners of the Company's common stock held of
record by such persons, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing.
AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE AUTHORIZED COMMON STOCK
The Company is currently authorized to issue 100,000,000 shares of Common
Stock, of which 75,074,117 shares are issued and outstanding as of the Record
Date. The Board of Directors believes that it is in the best interests of the
Company and its stockholders to increase the authorized Common Stock to
350,000,000 shares. This Charter Amendment has been unanimously approved by the
Board of Directors. Neither the par value of the Common Stock nor any rights
presently accruing to holders of Common Stock will be affected by this increase.
The Board of Directors reserves the right, notwithstanding stockholder approval
and without further action by the stockholders, not to proceed with the increase
of the authorized capital stock of the Company if, at any time prior to filing
the amendment with the Secretary of State of Delaware, the Board of Directors,
in its sole discretion, determines that the increase in the authorized capital
stock of the Company is no longer in the best interests of the Company and its
stockholders.
Vote Required; Manner of Approval; Appraisal Rights
Approval to increase the authorized capital stock under the DGCL requires
the affirmative vote of the holders of a majority of the outstanding shares of
voting stock of the Company. The Company has no class of voting stock
outstanding other than the Common Stock.
Section 228 of the DGCL provides generally that, unless the Company's
certificate of incorporation provides otherwise, stockholders may take action
without a meeting of stockholders and without prior notice if a consent or
consents, setting forth in writing the action so taken, is signed by the holders
of outstanding voting stock holding not less than the minimum number of votes
that would be necessary to approve such action at a meeting of stockholders.
Under the applicable provisions of the DGCL, this action is effective when
written consents from holders of record of a majority of the outstanding shares
of voting stock are signed and delivered to the Company. Withholding of consent,
abstentions, and broker non-votes all have the effect of a vote against the
Charter Amendment.
The Charter Amendment will become effective upon its filing with the
Secretary of State of Delaware. The form of Charter Amendment is attached as
Appendix A hereto and is incorporated by
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reference herein, which form is, however, subject to change as may be necessary
or required by the Delaware Secretary of State.
Under DGCL Section 262, stockholders are not entitled to appraisal rights,
whether or not stockholders consent to the Charter Amendment.
Reasons for Increase in Authorized Capital Stock
The Board of Directors considers the proposed increase to be in the best
interests of the Company and its stockholders. The proposed increase ensures
that a sufficient number of shares of common stock will be available for future
transactions, including acquisitions, stock splits, stock dividends, employee
benefit plans, stock bonus and award plans, satisfaction of debt, and other
general corporate purposes. As of the Record Date, the Company has 75,074,117
shares of common stock issued and outstanding, and approximately 20,000,000
shares reserved for issuance, for approximately 95,074,117 shares of common
stock either issued and outstanding or reserved for issuance. Therefore,
relatively few of the 100,000,000 shares of Common Stock are available for new
issuances.
The Company has three debt obligations in which the issuance or reservation
of additional shares of common stock will be necessary. On March 23, 2000, the
Company issued an 8% convertible note to Augustine Fund, L.P., in the principal
amount of $3,000,000 pursuant to a Securities Purchase Agreement. On November 7,
2001, the Company issued a second 8% convertible note to Augustine Fund, L.P.,
in the principal amount of $1,000,000 pursuant to a Loan Agreement. Also on
November 7, 2001, the Company issued a 6% convertible note in the principal
amount of $1,000,000 to Leslie Rotman, the sole stockholder of Rotman
Collectibles, Inc., pursuant to the merger of Rotman Collectibles into a Company
subsidiary. Rotman Collectibles is in the business of buying and selling movie
poster memorabilia.
The Augustine Fund notes are convertible into common stock at a conversion
price equal to 73% of the average of the closing bid price of the common stock
for five days immediately preceding the conversion date. The Rotman note is
convertible into common stock at a conversion price equal to 80% of the average
of the closing bid price of the common stock for five days immediately preceding
the conversion date. The number of shares received upon conversion may be
adjusted in the event of a stock split, stock dividend, reorganization, merger,
consolidation, or sale of the Company's assets and other similar transactions.
For each of the three notes, the Company has agreed to file with the
Securities and Exchange Commission a registration statement for the resale of
the shares issuable upon conversion of the convertible notes and the payment of
interest on the convertible notes. The Company has already registered 19,692,792
shares of common stock with respect to the first Augustine Fund note. An
additional registration statement with respect to the first Augustine Fund note,
and with respect to the other two notes, will be required. The Company's failure
to register the shares in the time specified in agreements with the respective
note holders would result in a further discount in the conversion price of the
common stock under the notes, to as low as 50% for the second Augustine Fund
note, and 70% for the Rotman note, each based on the average of the closing bid
price of the common stock for five days immediately preceding the conversion
date.
The convertible notes include a restriction that they are convertible by
any holder only to the extent that the number of shares issuable, together with
the number of shares of common stock owned by such holder, but not including
unconverted portions of the convertible note or unexercisable or warrants, would
not exceed 4.99% of the then outstanding shares of the Company's common stock as
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934. This 4.99% limit may not prevent
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any holder from converting all of the convertible note, because the holder can
convert the convertible note into 4.99% of the Company's outstanding common
stock, then to the extent it liquidates some or all of these shares, the holder
can convert additional amounts of the convertible note. As a result, the 4.99%
limit does not prevent a selling stockholder from selling more than 4.99% of the
Company's common stock, while never holding more than 4.99% at any one time.
The number of shares of common stock that may ultimately be issued upon
conversion of the three notes presently cannot be determined and could
fluctuate. The Company currently does not have enough shares authorized in its
Certificate of Incorporation to satisfy these contractual obligations.
In addition, based on the Company's current cash position, the Company will
likely need infusions of additional capital to fund anticipated marketing costs
and operating expenses in the next year, and the Company may seek additional
opportunities to purchase additional inventory with common stock. The Company
does not intend to issue its common stock except on terms that the Company deems
to be in the best interests of the Company and its stockholders.
Under the Company's Certificate of Incorporation, the Company's
stockholders do not have preemptive rights with respect to the common stock.
Thus, should the board of directors issue additional shares of common stock,
existing stockholders would not have any preferential rights to purchase shares.
Effect of Issuance of Additional Shares on Common Stock
If the Board of Directors elects to issue additional shares of common
stock, the issuance could have a dilutive effect on the earnings per share, book
value per share, voting power and shareholdings of current stockholders. The
number of shares of common stock issuable upon conversion of the convertible
notes could have the effect of reducing the Company's stock price, because the
conversion will be inversely proportional to the market price of the common
stock at the dates upon which the holder of the convertible note converts the
convertible note. In addition, to the extent that any holder of the convertible
notes converts and then sells common stock in accordance with the 4.99%
limitation, the common stock price may decrease due to the additional shares in
the market, possibly allowing the holder to convert the convertible note into
greater amounts of common stock, further depressing the stock price.
The additional shares issued upon conversion of the convertible notes would
also dilute the percentage interest of the Company's existing common
stockholders, and this dilution would increase as more shares of common stock
are issued due to the impact of the variable conversion price. Each additional
issuance of shares upon conversion would increase the supply of shares in the
market and, as a result, may cause the market price of the Company's common
stock to decline. The effect of this increased supply of common stock leading to
a lower market price may be magnified if there are sequential conversions of the
convertible notes into shares of common stock. A holder of a convertible note
could convert a portion of the convertible note and then sell the common stock
issued upon conversion, which could result in a drop in the Company's stock
price. If the stock price were to decrease, then a holder could convert the
convertible note at a lower conversion price, and be issued a greater number of
shares of common stock due to the lower conversion price. The increase in the
aggregate number of shares of common stock issued upon conversion of the
convertible note above what it would otherwise be could place significant
downward pressure on the Company's stock price. This downward pressure on the
Company's stock price might encourage market participants to sell the Company's
stock short, which would put further downward pressure on the Company's stock
price. In issuing the additional shares, however, the Company would avoid
repaying in cash the aggregate principal amount of $5,000,000 for the three
notes.
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Potential Anti-Takeover Effect
Although the Company's Board of Directors believes that the proposed change
to the present Certificate of Incorporation is beneficial to stockholders, the
provisions may have the effect of rendering the Company less attractive to
potential hostile acquirors. Therefore, the action may have the effect of
discouraging future takeover attempts from which stockholders may, or may not,
obtain a premium for their shares over current market prices. The provisions
could also render the removal of the incumbent Board of Directors more
difficult. The Board of Directors believes, however, that the potential benefits
outweigh these possible disadvantages.
INTEREST OF CERTAIN PERSONS IN OR IN
OPPOSITION TO MATTERS TO BE ACTED UPON MATTERS
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 proposed Charter Amendment which is
not shared by all other stockholders, except that, the holder of the Rotman note
is Leslie Rotman, who is the mother of Gregory Rotman, the Company's President
and CEO, and a director of the Company, and Richard Rotman, the Company's
Executive Vice President and CFO, and a director of the Company. The Company
believes that the merger transaction related to the issuance of the Rotman note
was on terms that were fair and reasonable to the Company and no less favorable
than could have been obtained by an unaffiliated party.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Company's management, the following table sets
forth the beneficial ownership of Common Stock as of the Record Date of each of
the Company's directors and executive officers, and all of the Company's
directors and executive officers as a group. The address of each person named
below is the address of the Company.
Name and Address of Number of Shares % of
Beneficial Owner Beneficially Owned Class
---------------- ------------------ -----
Gregory Rotman 8,309,005 11.06%
Richard Rotman 10,155,451 13.52%
John Martin 1,788,702(1) 2.38%
Andrew Pilaro 51,500 .06%
All directors and executive 20,304,658 27.04%
officers as a group
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(1) Includes 294,750 currently exercisable options to purchase shares of Common
Stock.
To the knowledge of the Company's management, as of the Record Date, there
are no persons and/or companies who or which beneficially own, directly or
indirectly, shares carrying more than 5% of the voting rights attached to all
outstanding shares of the Company, other than Gregory Rotman and Richard Rotman,
as set forth above, and the following persons:
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Name and Address of Number of Shares % of
Beneficial Owner Beneficially Owned Class
---------------- ------------------ -----
Marc Stengel 8,994,119(1) 11.98%
3743 Birch Lane
Owings Mills, MD 21117
Hannah Kramer 5,139,337 6.84%
673 Korisa Drive
Huntingdon Valley, PA 19006
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(1) Based solely upon the Form 4 filed with the Securities and Exchange
Commission on November 9, 2001.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
In order for a proposal by a stockholder of the Company to be included in
the Company's proxy statement for the 2002 annual meeting of stockholders, the
proposal must be received by the Company no later than January 23, 2002.
Stockholders who intend to present a proposal at the 2002 annual meeting of
stockholders, but who do not wish to have such proposal included in the
Company's Proxy Statement for such meeting, must provide notice of such proposal
to the Company's Secretary at the Company's executive offices not later than
April 8, 2002.
OTHER MATTERS
The Board of Directors knows of no other matters other than those described
in this Consent Solicitation Statement which must be approved or considered by
the holders of the Company's voting stock.
IF YOU HAVE ANY QUESTIONS REGARDING THIS CONSENT SOLICITATION STATEMENT
AND/OR THE CHARTER AMENDMENT, PLEASE CONTACT:
Sales Online Direct, Inc.
4 Brussels Street
Worcester, Massachusetts 01610
(508) 791-6710
BY ORDER OF THE BOARD OF DIRECTORS
Gregory Rotman
President
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APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SALES ONLINE DIRECT, INC.
Sales Online Direct, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by unanimous
written consent of its members pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware, filed with the minutes of the
Board of Directors, adopted a resolution proposing and declaring advisable
the following amendment to the Certificate of Incorporation of said
corporation.
RESOLVED, that the Certificate of Incorporation of Sales Online
Direct, Inc. be amended by changing the FOURTH Article thereof so
that, as amended, said Article shall be and read in its entirety as
follows:
"FOURTH: The amount of total authorized capital stock of the
corporation shall be divided into 350,000,000 shares of common stock
having a par value of $.001 each."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders holding a majority of the outstanding shares of stock entitled
to vote on the amendment have given written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation
Law of the State of Delaware and written notice of the adoption of the
amendment has been given as provided in Section 228 of the General
Corporation Law of the State of Delaware to every stockholder entitled to
such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of section 242 and Section 228 of the
General Corporation Law of the State of Delaware.
FOURTH: That this Certification of Amendment of the Certificate of
Incorporation shall be effective on the date of filing.
IN WITNESS WHEREOF, said Sales Online Direct, Inc., has caused this
Certificate to be executed, acknowledged and filed by its President this ____
day of ________, 200_.
SALES ONLINE DIRECT, INC.
By:
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Gregory Rotman, President
SALES ONLINE DIRECT, INC.
4 Brussels Street
Worcester, Massachusetts 01610
CONSENT
THIS CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRCTORS OF
SALES ONLINE DIRECT, INC.
The undersigned stockholder of Sales Online Direct, Inc. (the "Company") as of
November 6, 2001, hereby consents, pursuant to Section 228 of the Delaware
General Corporation Law, with respect to all shares of common stock, par value
$.001 per share, of the Company held by the undersigned, to the following action
without a meeting, without prior notice and without a vote.
Proposal (1): To approve an amendment to the Company's Certificate of
Incorporation, as amended, to increase the number of authorized shares of Common
Stock, $.001 par value, from 100,000,000 to 350,000,000 shares.
CONSENT _____ CONSENT WITHHELD _____ ABSTAIN _____
If no space is marked above with respect to the Charter Amendment, the
undersigned will be deemed to consent to such amendment.
PLEASE SIGN, DATE AND RETURN THIS CONSENT PROMPTLY, USING THE ENCLOSED
ENVELOPE. JOINT OWNERS SHOULD EACH SIGN PERSONALLY. IF SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE INCLUDE YOUR FULL TITLE.
CORPORATE PROXIES SHOULD BE SIGNED BY AN AUTHORIZED OFFICER.
Date: _______________________________, 2001
(Date is Mandatory for all Consents)
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(Printed Name of Stockholder)
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(Signature of Stockholder)
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(Signature of Stockholder, if held jointly)