CSP INC MA

APPROVAL OF AMENDMENT TO THE CHARTER TO EFFECT**

**AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES

General

We are asking stockholders to approve a proposed amendment to the Charter to effect an increase in the total number of shares of common stock of the Company from 9,753,900 shares to 20,000,000 (the “Authorized Shares Increase”), as further described below. The Board has unanimously approved and declared advisable the Authorized Shares Increase and recommends that the Company’s stockholders approve the Authorized Shares Increase. The text of the proposed charter amendment to implement the Authorized Shares Increase is attached hereto as Appendix A (the “Charter Amendment”).

If stockholders approve this proposal, then the Board will cause the Charter Amendment to be filed with the Massachusetts Secretary of State and the Authorized Shares Increase to be effected. However, if the Board were to subsequently determine that the Authorized Shares Increase was no longer in the best interests of the Company and its stockholders, the Board may determine in its discretion not to effect the Authorized Shares Increase and not to file the Charter Amendment. No further action on the part of stockholders will be required to either implement or abandon the Authorized Shares Increase.

The Charter currently authorizes the issuance of up to 9,753,500 shares of common stock, par value $0.01 per share (the “common stock”). All 9,753,500 authorized shares of common stock are currently issued and outstanding. Accordingly, we currently have no shares available for issuance, including to grant equity awards to incentivize and compensate our directors, employees and consultants, or if needed, to raise additional capital to fund business operations, or to make acquisitions. We are asking stockholders to approve an increase in the number of authorized shares of common stock to 20,000,000 shares.

On February 21, 2024, the Board approved and declared a two for one stock split to be effected in the form of a 100% stock dividend. The stock dividend was paid on March 20, 2024 to the shareholders of record as of the close of business on March 6, 2024. All of the remaining authorized and unissued shares of common stock were issued in the stock dividend.

As a result, as of the Record Date, we have no further authorized shares of common stock available for any future business purposes. In addition to the shares of common stock issued and outstanding on the Record Date, the Company has 102,904 shares available for grant under the Company’s 2015 Stock Incentive Plan (the “Plan”) and 262,658 shares available for grant under the Company’s 2014 Employee Stock Purchase Plan (“ESPP”). However, unless the Charter Amendment Proposal is approved, the Company will not be able make grants under the Plan or the ESPP as it does not currently have shares available for issuance.

The Company does not have any authorized preferred stock under its Charter.

Reasons for the Authorized Shares Increase

The Board believes that the Authorized Shares Increase is advisable and in the Company’s and its stockholders’ best interests, as it would provide the Company with flexibility to issue shares for general corporate purposes. By way of illustration, such purposes may include (a) making equity incentive awards to its employees from the Company’s stock-based plans, (b) utilizing shares for raising capital, or for structuring transactions with business partners, joint venture investors, or other entities, or (c) for other business purposes.

Principal Effects of the Authorized Shares Increase

The chart below illustrates the number of shares of common stock that will be available for issuance if the Authorized Shares Increase is approved and the Charter Amendment is effected.

The 10,246,100 additional shares of common stock authorized by the Charter Amendment, if approved, would have the same powers, preferences, and rights as the currently outstanding shares of common stock. Therefore, approval of the Charter Amendment and any subsequent issuance of additional shares of common stock would not affect a current stockholder’s rights as a stockholder, except for any dilutive effects incidental to increasing the number of our outstanding shares of common stock to earnings per share, book value per share, and the voting power of current holders of common stock. The Charter Amendment would not have any immediate dilutive effect on the proportionate voting power or other rights of existing stockholders unless additional shares are issued.

As is true for shares previous authorized but unissued, the future issuance of common stock authorized by the Charter Amendment may, among other things, decrease existing stockholders’ percentage equity ownership and, depending on the price at which they are issued, could be dilutive to the book value per share held by existing stockholders and have a negative effect on the market price of the common stock. Further, the additional shares of common stock authorized by the approval of this proposal could be issued by the Board without further vote of our stockholders except as may be required in particular cases by applicable law, regulatory agencies or the Nasdaq Global Market (“Nasdaq”) rules.

Certain Risks and Potential Disadvantages Associated with the Authorized Shares Increase

The Board does not intend to issue any shares of common stock except for purposes and on terms that the Board believes to be in the best interests of the Company and its stockholders. However, depending on the purpose and terms of issuance at the time, if we issue additional shares of common stock or other securities convertible into common stock in the future, it will dilute the voting rights of existing stockholders and could also dilute earnings per share and book value per share of existing stockholders. The proposed Authorized Shares Increase could also, under certain circumstances, make more difficult or discourage attempts to obtain control of the Company, thereby having an anti-takeover effect. While this is not the purpose or intent of the Board’s support of this proposal, we might be able to use the additional shares to oppose a hostile takeover attempt or delay or prevent changes in our control or our management. For example, we could issue additional shares without further stockholder approval so as to dilute the stock ownership or voting rights of persons seeking to obtain control without our agreement. Similarly, the issuance of additional shares to certain persons allied with our management could have the effect of making it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause such removal. The Authorized Shares Increase therefore may have the effect of discouraging unsolicited takeover attempts. Although the Authorized Shares Increase has been prompted by business and financial considerations and not by the threat of any known or threatened hostile takeover attempt, stockholders should be aware that the Authorized Shares Increase could facilitate future attempts by us to oppose changes in our control and perpetuate our management, including transactions in which the stockholders might otherwise receive a premium for their shares over then-current market prices. We cannot provide assurances that any such transactions will be consummated on favorable terms or at all, that they will enhance stockholder value, or that they will not adversely affect our business or the trading price of the common stock.

Interest of Certain Persons in Matters to be Acted Upon

Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this Proposal except to the extent of their ownership of shares of our common stock.

Reservation of Right to Delay the Filing of the Charter Amendment, or Abandon the Authorized Shares Increase

We reserve the right to delay the filing of the Charter Amendment or abandon the Authorized Shares Increase at any time, even if the Charter Amendment has been approved by stockholders at the Special Meeting. By voting in favor of the Charter Amendment, you are also expressly authorizing the Board to abandon the Authorized Shares Increase if the Board determines that such action is in the best interests of the Company and its stockholders.

No Appraisal Rights

Under Massachusetts Business Corporation Act, our Charter and our Bylaws, stockholders do not have a right to appraisal with respect to an amendment to our Charter to effect the Authorized Shares Increase.

Vote Required

Stockholders can vote** FOR, AGAINSTor ABSTAIN**on Proposal One.

The affirmative vote of the majority of all the shares of common stock entitled to vote as of the Record Date is required to approve Proposal One. Proxies solicited by the Board will be voted for approval of this Proposal 1, unless otherwise specified. If stockholder approval for this Proposal is not obtained, then the Authorized Shares Increase will not be effected.

Recommendation of the Board

The Board recommends a vote FOR Proposal One.

PROPOSAL TWO: