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 [x]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
CommissionOnly (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INTERNATIONAL DISPENSING CORPORATION
--------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than 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)(1) 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 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:
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[ ] 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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<PAGE>
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue
Purchase, New York 10577
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 9, 1998
To the Stockholders:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of
International Dispensing Corporation, a Delaware corporation (the "Company"),
will be held at The Hidden Falls Clubhouse, Hidden Pond Road, Rye Brook, New
York 10573 on July 9, 1998 at 10:00 A.M., New York time, for the following
purposes:
(1) To amend the Certificate of Incorporation of the Company to provide
for a classified Board of Directors commencing with the 1998 Annual Meeting;
(2) To elect five directors to serve for the ensuing year or for the
remainder of their respective terms if Proposal 1 is adopted;
(3) To ratify and approve the Company's 1998 Stock Option Plan;
(4) To ratify and approve the Company's Director Option Plan; and
(5) To consider and transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on May 28, 1998
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and at any adjournments thereof.
A proxy statement and proxy are enclosed.
PLEASE READ THE ENCLOSED PROXY STATEMENT CAREFULLY.
Dated: June 2, 1998 By Order of the Board of Directors,
Jeffrey D. Lewenthal
Secretary
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YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN AND
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. THE BOARD OF DIRECTORS
URGES YOU TO DATE, SIGN AND RETURN AS SOON AS POSSIBLE THE ENCLOSED PROXY CARD
IN THE SELF-ADDRESSED ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
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<PAGE>
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue
Purchase, New York 10577
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 9, 1998
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of INTERNATIONAL DISPENSING CORPORATION, a Delaware
corporation (the "Company"), of proxies in the form enclosed for use at the
Annual Meeting of Stockholders of the Company (the "Meeting") to be held on July
9, 1998, and at any adjournments thereof, at the time and place set forth in the
accompanying Notice of Annual Meeting of Stockholders.
The Meeting is being held to consider and vote upon (i) the proposed
amendment to the Company's Certificate of Incorporation to provide for a
classified Board of Directors commencing with the 1998 Annual Meeting, (ii) the
election of five directors to serve for the ensuing year or for the remainder of
their respective terms if Proposal 1 is adopted, (iii) to ratify and approve the
Company's 1998 Stock Option Plan (the "1998 Plan") and (iv) to ratify and
approve the Company's Director Option Plan (the "Director Plan" and together
with the 1998 Plan, the "Plans").
Your proxy, if properly executed, will be voted as you direct and may
be revoked by you by written notice received by the Secretary of the Company at
any time before it is voted. Unless contrary instructions are indicated on the
proxy, it is expected that all shares of the Company's Common Stock, par value
$.001 per share (the "Common Stock") represented by valid proxies received
pursuant to this solicitation (and not revoked before they are voted) will be
voted FOR the amendment to the Company's Certificate of Incorporation to provide
for a classified Board of Directors, FOR the election of the five nominees for
director named herein, FOR ratification and approval of the 1998 Plan and FOR
ratification and approval of the Director Plan, and in the discretion of the
proxies named on the proxy card with respect to any other matters properly
brought before the Meeting and any adjournments thereof. This Proxy Statement
and the accompanying form of proxy are being mailed on or about June 2, 1998 to
all stockholders of record at the close of business on May 28, 1998.
The presence, in person or by proxy, of the holders of record of a
majority of the outstanding shares of Common Stock is necessary to constitute a
quorum at the Meeting.
This Proxy Statement should be read carefully.
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VOTING SECURITIES OF THE COMPANY
AND PRINCIPAL HOLDERS THEREOF
The Company's Common Stock is the only security of the Company entitled
to be voted at the Meeting. At the close of business on May 28, 1998, there were
9,566,668 shares of Common Stock entitled to be voted at the Meeting. Each
stockholder of record is entitled to one vote for each share held on all matters
to come before the Meeting. There are no cumulative voting rights. Only
stockholders of record at the close of business on May 28, 1998 are entitled to
notice of, and to vote at, the Meeting.
All proposals described in this Proxy Statement which are being
submitted to stockholders for a vote at the Meeting were duly adopted and
approved by the Board of Directors.
The holders of record of a majority of the outstanding shares of
Common Stock must be present in person or by proxy in order to establish a
quorum for conducting business at the Meeting. Under Delaware law, shares as to
which a stockholder abstains or withholds from voting and shares as to which a
broker indicates that it does not have discretionary authority to vote ("broker
non-votes") will be treated as present at the Meeting for the purposes of
determining a quorum. Proxies marked "Withhold Authority" with respect to the
election of one or more directors will not be counted in determining whether a
plurality of the shares of Common Stock voted at the Meeting in the election
have been voted in favor of the nominee for director. Proxies marked "Abstain"
with respect to other matters will have the effect of a vote against the matter
in question. Shares represented by broker non-votes will have the effect of a
vote against approval of the amendment to the Company's Certificate of
Incorporation and will not be counted in determining the number of shares
necessary for ratification of the Plans.
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Common Stock as of May 28, 1998, for (i)
each person or group that is known by the Company to be a beneficial owner of
more than 5% of the outstanding shares of Common Stock, (ii) the Chief Executive
Officer and each director or nominee for director of the Company, and (iii) all
directors and officers of the Company as a group. Except as otherwise indicated,
the Company believes that such beneficial owners, based on information furnished
by such owners, have sole investment and voting power with respect to such
shares, subject to community property laws, where applicable. No directors or
officers own any Class A Warrants (warrants to purchase one share of Common
Stock for $7.00 per share during the four year period which commenced on October
3, 1997) or the Units offered in connection with the Company's Initial Public
Offering consummated on October 23, 1996 (the "IPO") (consisting of two shares
of Common Stock and two Class A Warrants), nor, to the knowledge of the Company,
does any person hold more than 5% of any such Class A Warrant or IPO Unit.
Name and Address Percent of
Of Beneficial Owner(1) Number of Shares Class (2)(3)
---------------------- ---------------- ------------
Reseal International Corporation 2,225,000 23.3%
c/o The ReSeal Companies
599 Lexington Avenue, 23rd Floor
New York, New York 10022
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Jon Silverman 600,000 6.3%
c/o International Dispensing Corporation
2500 Westchester Avenue
Suite 304
Purchase, New York 10577
Gregory Abbott 1,000,927 10.5%
1200 Kessler Drive
Aspen, CO 81611
David Brenman 253,000(3) 2.6%
George Kriste 280,000 2.9%
Jay M. Rosen 0 *
Claude K. Lee 0 *
All directors and executive officers 2,133,927(3) 22.3%
as a group (5 persons)
- -----------------------------
* Less than 1%
(1) Address provided for beneficial owners of more than 5% of the Common
Stock.
(2) For purposes of computing the percentage of outstanding shares of
Common Stock held by each person or group of persons named above, any
security which such person or persons have or have the right to acquire
within 60 days is deemed to be outstanding but is not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person.
(3) Includes 200,000 shares of Common Stock owned of record by Venture
Financial Limited Partnership, a limited partnership. David Brenman is
the sole shareholder of Venture Financial, Inc., the General Partner of
such limited partnership.
ADDITION OF A NEW ARTICLE TENTH TO THE CERTIFICATE OF
INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
The Board of Directors adopted, declared the advisability of, and
proposes and recommends that the stockholders approve, a new Article Tenth to
the Company's Certificate of Incorporation to provide for a classified Board of
Directors commencing with the election of directors at this Annual Meeting. The
proposed amendment is attached hereto as Exhibit A and the following discussion
is qualified in its entirety by reference to such Exhibit.
The number of directors of the Company is currently fixed at five. The
effect of the new Article Tenth to the Certificate of Incorporation would be,
commencing with this 1998 Annual Meeting, to divide the directors into three
classes, consisting of one Class 1 director, two Class 2 directors and two Class
3 directors, with the term of office of the Class 1 director expiring at the
annual meeting of stockholders to be held in 1999, the term of office of the
Class 2 directors
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expiring at the annual meeting of stockholders to be held in 2000, and the term
of Class 3 directors expiring at the annual meeting of stockholders to be held
in 2001. Article Tenth would further provide that directors chosen to succeed
those whose terms expire in 1999, 2000 or 2001, shall be elected for a term of
three years. Under the proposed amendment, directors elected by the Board to
fill vacancies, other than by reason of an increase in the size of the Board of
Directors, will serve for the balance of such director's term. However, if the
Board fails to fill any such vacancy, it will be filled at the next annual
meeting of stockholders and the individual so elected shall serve for the
balance of such director's term. Under the proposed amendment, consistent with
the rule that the three classes of directors shall be as nearly equal in number
of directors as possible, the Board of Directors shall be required to allocate
any newly created directorship to Class 1 and then any additional newly created
directorship to the class whose term of office is due to expire at the earliest
date following such allocation.
The purpose of the amendment is to extend the time required to elect a
majority of directors and thus ensure continuity and stability in the management
of the Company. Classification of the Board will also better enable the Board of
Directors to protect the interests of the stockholders in the event that any
party should obtain, through a takeover bid or otherwise, a substantial amount
of Common Stock. The Company's Certificate of Incorporation does not contain any
provisions which may be viewed as having anti-takeover effect. Management has no
knowledge of any pending or threatened takeover bid, tender offer or similar
action, nor has the Company experienced, to date, difficulty in ensuring the
continuity and stability of its management. Conversely, if adopted, the proposed
amendment normally will extend from one to at least two years the time required
for stockholders to remove a majority of the Company's Board of the Directors
even when the only reason for such a change may be the performance of the
Company's directors and make more difficult a merger of the Company or the
assumption of control of the Company by a principal stockholder, thereby
adversely affecting stockholders who may desire to participate in a tender offer
or merger.
Under the General Corporation Law of the State of Delaware (the "GCL"),
amendments to the Certificate of Incorporation require the approval of the
holders of record of a majority of the outstanding stock entitled to vote
thereon and a majority of the outstanding stock of each class entitled to vote
thereon as a class. The GCL permits provisions in the Certificate of
Incorporation which require a greater vote than the vote otherwise required by
law for any corporate action. With respect to such supermajority provisions, the
GCL requires that any amendment or modification thereof, whether direct or
indirect, be approved by an equally large stockholder vote. The proposed
amendments to the Certificate of Incorporation provides that the concurrence of
the holders of at least 80% of the voting power of the Company entitled to vote
for the election of directors shall be necessary for their further amendment or
repeal of Article Tenth. The requirement of an increased stockholder vote is
designed to prevent a stockholder or stockholders with a majority, but less than
80% of the voting power of the Company, from avoiding the requirements of the
proposed amendments by simply amending such provision again.
Article II, Section 1 of the Company's current By-Laws is inconsistent
with the proposed amendment to the Company's Certificate of Incorporation to be
considered at the Meeting. The Board of Directors has approved an amendment to
such section of the By-Laws to make it consistent with the Certificate of
Incorporation, as amended. The amendment will take effect only if the amendment
to the Company's Certificate of Incorporation is approved by the stockholders.
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RECOMMENDATION AND REQUISITE VOTE
The affirmative vote of the holders of record of a majority of the
outstanding shares of Common Stock, with each share entitled to one vote, is
required for approval of the proposed amendment to the Certificate of
Incorporation. A vote for such proposal will constitute the specific approval of
the amendment outlined above and presented in Exhibit A.
The Board of Directors recommends a vote FOR the proposed amendment to
the Certificate of Incorporation.
ELECTION OF DIRECTORS
If the proposal to amend the Company's Certificate of Incorporation to
provide for a classified Board of Directors is approved, the five persons listed
below will be nominees for election for the terms of office indicated below, to
serve until their respective successors are duly elected and qualified. If the
proposal is not approved, all elected directors will serve until the next annual
meeting of stockholders or until their successors are duly elected and
qualified.
At a meeting held on April 2, 1998, the Board of Directors approved an
increase in the size of the Board of Directors from four to five. Three of the
nominees are currently directors of the Company. Directors shall be elected by
the affirmative vote of a plurality of the votes cast at the Meeting. If the
enclosed proxy is executed properly and returned, it is intended that the
persons named in the proxy will vote the shares represented FOR the election of
the directors nominated unless authority to do so is withheld. Management
believes that all nominees will be available and able to serve as directors. If,
for any reason, which management does not expect, any of these persons shall not
be available or able to serve, the proxies may exercise discretionary authority
to vote for and substitute such nominees as may be designated by the Board of
Directors.
NOMINEES
The following information is furnished as of May 28, 1998 with respect
to each nominee for director:
Year first
elected or
Current position and office with the appointed as a
Company and principal occupation during director of
Name and Age the past five years; other directorships the Company
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Class 1
Claude K. Lee Chairman of the Board of the Power Group, a -----
(65) privately held company he founded in 1968.
The Power Group is engaged in contract
packaging.
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Class 2(1)
George Kriste Director of the Company since 1995; Chairman 1995
(51) and Chief Executive Officer of New Century
Media, a radio station owner, since
January, 1992.
Jay M. Rosen Independent consultant since January, 1998; -----
(60) Vice President, General Counsel and Secretary
of Celcore, Inc., a privately held
company engaged in telecommunications
from January 1997 to December 1997; Vice
President and Associate General Counsel
of GTE Corporation for more than five
years prior thereto.
Class 3(2)
Jon D. Silverman Chairman, President, Chief Executive Officer 1996
(57) and a Director of the Company since
November 1996; principal of Tilis
Products, a privately owned specialized
international business consulting,
mergers and acquisitions firm in the
food, beverage and consumer products and
services industries, since 1982.
Gregory B. Abbott Director of the Company since 1995; 1995
(48) Private investor and writer for more than five
years.
- -----------------------------
(1) Term will expire at the year 2000 annual meeting of stockholders if the
proposal to amend the Company's Certificate of Incorporation to provide
for a classified Board is approved by stockholders.
(2) Term will expire at the year 2001 annual meeting of stockholders if the
proposal to amend the Company's Certificate of Incorporation to provide
for a classified Board is approved by stockholders.
The only other executive officer of the Company is Jeffrey D.
Lewenthal, age 54, who has served as the Executive Vice President of Business
Development and Chief Financial Officer of the Company since March 1997 and
Secretary and Treasurer of the Company since June 1997. From March 1996 until
joining the Company in March 1997, Mr. Lewenthal acted as Vice
President/Regional Director for Westar Linen Services, Inc., a company providing
linen services to the hospital industry. From 1995 to 1996, he acted as General
Manager, Western Region, for
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Brink's Incorporated, a company providing security services to financial
institutions. From 1993 to 1995, he acted as Region Chief Operating Officer for
Loomis Armored, Inc., a security service provider to financial and retail
customers. Prior to that, Mr. Lewenthal held various international senior
executive positions with PepsiCo and the Seven-Up division of Philip Morris.
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met three times during the fiscal year ended
December 31, 1997 ("Fiscal 1997"). All incumbent directors who were members of
the Board during Fiscal 1997 directors' meetings personally or by conference
telephone. The Company does not have any audit or nominating committee of the
Board of Directors or committee performing similar functions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Reporting persons
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, no persons failed to file, on a timely
basis, reports required by Section 16(a) of the Exchange Act for any
transactions occurring during Fiscal 1997.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the three fiscal years ended
December 31, 1997, information concerning the compensation paid or accrued to
the Chief Executive Officer of the Company. As of December 31, 1997, there were
no other persons serving as executive officers of the Company whose salary and
bonus for the Fiscal 1997 exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------------------- ------------------------------------------
Other Annual
Name and Compen- Restricted Securities All Other
Principal Fiscal sation Stock Underlying Compensa-
Position Year Salary($) Bonus($) ($)(1) Awards($) Options(#) tion($)
<S> <C> <C> <C> <C> <C> <C> <C>
Jon Silverman 1997 $187,500 _ _ _ _ $4000(2)
Chairman, CEO 1996 $144,000 _ _ _ _ _
and President 1995 $ 36,000 _ _ _ _ _
</TABLE>
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(1) The aggregate amount of perquisites and other personal benefits paid to
Mr. Silverman did not exceed the lesser of (i) 10% of such officer's
total annual salary and bonus for any given fiscal year and (ii)
$50,000. Thus, such amounts are not reflected in the table.
(2) Represents the premiums paid on a $1,000,000 term life insurance policy
as to which Mr. Silverman may designate the beneficiary.
EMPLOYMENT AND NON-COMPETE AGREEMENTS
The Company has entered into an employment agreement with Jon
Silverman, dated as of January 17, 1997, which expires on December 31, 1999.
Pursuant to such agreement, Mr. Silverman receives a base salary of $180,000. In
addition, if Mr. Silverman is insurable, the Company is obligated to pay the
premium on a $1,000,000 term life insurance policy, to which Mr. Silverman will
designate the beneficiary. Under the agreement, Mr. Silverman also is entitled
to customary benefits and perquisites.
Mr. Silverman's employment agreement may be terminated by the Company
sooner than December 31, 1999 in the case of his "disability" or "for cause" (as
such terms are defined in the agreement). If Mr. Silverman's employment is
terminated for any reason he shall receive his basic salary through the
effective date of termination. If his employment is terminated due to his
disability or without cause by the Company or if Mr. Silverman leaves the employ
of the Company for "good reason" (defined in the agreement to include, among
other things, a change in control of the Company or the removal of Mr. Silverman
from his position as the Chairman of the Board, President and Chief Executive
Officer), then Mr. Silverman shall also be entitled to receive in cash within 10
days after such termination an amount equal to the greater of (i) one year's
basic salary at the highest rate paid to him during the term of his employment
under the agreement or (ii) the basic salary that would have been paid to him
had the term of employment ended on December 31, 1999 calculated at the highest
rate paid to him during the term of his employment under the agreement.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company are reimbursed for reasonable
travel and lodging expenses incurred in attending meetings of the Board of
Directors and any committees on which they may serve. Directors do not presently
receive any fees for attendance of or participation in meetings of the Board of
Directors or its committees.
PROPOSALS TO APPROVE THE
1998 STOCK OPTION PLAN AND THE DIRECTOR OPTION PLAN
1998 STOCK OPTION PLAN
On April 2, 1998, the Board of Directors adopted, subject to
stockholder approval, the 1998 Stock Option Plan (the "1998 Plan"). The 1998
Plan is designed to provide long-term incentive benefits by the grant of stock
options to key employees and other persons (other than non-employee directors)
who perform services for or on behalf of the Company. An aggregate of 650,000
shares are reserved for issuance upon exercise of options which may be granted
under the 1998 Plan. Currently there are approximately four persons that are
eligible to receive options
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under the 1998 Plan, three of which are Company employees and one of which is a
Company consultant.
The 1998 Plan authorizes the issuance of incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and stock options that do not qualify under that Code
section ("NSOs").
The 1998 Plan shall be administered by the Board of Directors or by one
or more committees composed solely of two or more non-employee directors within
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Committee"). The Board of Directors or the Committee has
authority to administer and interpret the provisions of the 1998 Plan; to
determine when and to whom options will be granted; whether such options will be
ISOs or NSOs, and to prescribe the terms and conditions of the options
(including the number of shares of Common Stock subject to each option, the
exercise price of the option, the number of installments, if any, in which the
option may be exercised and the duration of the option), subject to the
provisions of the 1998 Plan.
Options granted under the 1998 Plan are not transferable other than by
will or the laws of descent and distribution. In the case of an ISO, the
exercise price of each option shall not be less than 100% of the fair market
value of the underlying Common Stock on the date the ISO is granted.
If the holder of an ISO ceases to be employed by the Company for any
reason other than such person's death or permanent disability, the ISO will
immediately become void upon such termination; provided, however, that the
option may be exercised within three months after the date the holder ceases to
be employed, but only to the extent the option was exercisable on the date of
such cessation of employment. Special provisions relating to the termination of
the option apply in the case of death or permanent disability of the holder of
an ISO. Termination of employment with the Company by the holder of an NSO
(including as a result of death or permanent disability) will have the effect
specified in the individual option agreement as determined by the Board of
Directors or the Committee.
The purchase price for options granted under the 1998 Plan must be paid
in full by any one or a combination of the following methods: (i) in cash or by
certified or cashier's check payable to the order of the Company, (ii) by
cancellation of indebtedness, (iii) through the delivery of other shares of
Common Stock having an aggregate fair market value equal to the total exercise
price of the option being exercised, (iv) with the approval of the Board of
Directors or the Committee, by a promissory note made by the optionee in favor
of the Company upon the terms and conditions to be determined by the Board of
Directors or the Committee and secured by the shares issuable upon exercise of
such option, (v) through any combination of the foregoing, or (vi) in such other
manner as the Board of Directors or the Committee may specify in order to
facilitate the exercise of options by the holders thereof.
The Board of Directors is authorized to suspend, terminate or amend the
1998 Plan at any time, provided that, without the consent of the optionee, no
amendment, suspension or termination shall be made that would impair any rights
or obligations of the optionee under any option theretofore granted under the
1998 Plan. If stockholder approval is required pursuant to Rule 16b-
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3 or any other rule or regulation under the Exchange Act, no amendment shall be
effective unless approved by the stockholders of the Company if such amendment
shall (i) increase the maximum number of shares which may be acquired pursuant
to options under the 1998 Plan, (ii) change the minimum exercise price of any
option which may be granted, (iii) increase the maximum term of any option which
may be granted or (iv) change the designation of persons eligible to receive
options under the 1998 Plan.
DIRECTOR PLAN
On April 2, 1998, the Board of Directors also adopted, subject to
stockholder approval, the Director Option Plan (the "Director Plan") pursuant to
which 250,000 shares of Common Stock are reserved for issuance upon the exercise
of stock options granted under the Director Plan to directors who are not
employees of the Company ("Non-Employee Directors"). The Director Plan was
proposed by the Board of Directors to attract and retain the best available
personnel for service as outside directors.
If approved by the stockholders, the Director Plan will be effective as
of April 2, 1998. The Director Plan is administered by a committee comprised of
the Chairman of the Board of Directors and/or by such other person or persons
designated by him (the "Director Plan Committee"). All options granted under the
Director Plan are NSOs and may only be granted to Non-Employee Directors.
The Director Plan provides for automatic and non-discretionary grants
of options ("Non-Discretionary Options") as well as discretionary grants of
additional options to Non-Employee Directors on such terms as shall be
determined by the Director Plan Committee, except that the duration of such
options shall not exceed 10 years from the date of grant. Under the Director
Plan, on April 2, 1998 each of Gregory Abbott and George Kriste were granted
options to purchase 40,000 shares of Common Stock.
The Director Plan provides that each Non-Employee Director, other than
the incumbent directors, shall be granted an option to purchase 5,000 shares of
Common Stock on the date such person first becomes a director. After the initial
grant of options to each Non-Employee Director, such person is automatically
granted an option to purchase an additional 5,000 shares of Common Stock on the
date of his reelection as a director if on such date he shall have served as a
director for at least six months.
The terms of each Non-Discretionary Option granted under the Director
Plan shall be 10 years. The exercise price of such Non-Discretionary Option
shall be 100% of the fair market value (as defined) of a share of Common Stock
on the date of grant. All Non-Discretionary Options granted under the Plan
become exercisable in three annual installments of one-third of the total number
of shares subject to the option commencing on the first anniversary of the date
of grant.
Options granted under the Director Plan are not transferable other than
by will or the laws of descent and distribution. In the event of the death of an
optionee, the optionee's estate or the person who acquired the right to exercise
the option by bequest or inheritance may exercise the option within 12 months
after the optionee's death, but only to the extent the optionee was entitled
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to exercise it on the date of his death. In the event an optionee ceases to be a
director as a result of total and permanent disability, the optionee may
exercise his option for a period of 12 months from the date of his termination
as a director, but only to the extent he was entitled to exercise the option as
of the date of termination. If an optionee ceases to be a director other than by
reason of his death or total and permanent disability, the optionee may exercise
his option for a period of three months after his termination, but only to the
extent he was entitled to exercise the option as of the date of termination.
The Board of Directors may at any time amend, alter, suspend or
discontinue the Director Plan, but without the consent of the optionee, no
amendment, alteration, suspension or discontinuation shall be made which would
impair the rights of an optionee under any grant theretofore made.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the 1998 Plan that qualify as ISOs under Section
422 of the Code will be treated as follows:
No tax consequences will result to the optionee or the Company from the
grant of an ISO to, or the exercise of an ISO by, the optionee. Instead, the
optionee will recognize gain or loss when he sells or disposes of the shares
transferred to him upon exercise of the option. For the purposes of determining
such gain or loss, the optionee's basis in such shares will be his option price.
If the date of sale or disposition of such shares is at least two years after
the date of the grant of the ISO and at least one year after the transfer of the
shares to him upon exercise of the option, the optionee will be entitled to
long-term capital gain treatment upon the sale or disposition.
The Company generally will not be allowed a deduction with respect to
an ISO. However, if an optionee fails to meet the foregoing holding period
requirements, any gain recognized by the optionee upon sale or disposition of
the shares transferred to him upon exercise of an ISO will be treated in the
year of such sale or disposition as ordinary income, rather than capital gain,
to the extent of the excess, if any, of the fair market value of the shares at
the time of exercise (or, if less, in certain cases the amount realized on such
sale or disposition) over their option price, and in that case the Company will
be allowed a corresponding deduction.
The amount, if any, by which the fair market value of the shares
transferred to the optionee upon the exercise of an ISO exceeds the option price
will constitute an "item of tax preference" subject in certain circumstances to
the "alternative minimum tax." Such item of tax preference will increase the
optionee's basis in his stock for purposes of the alternative minimum tax.
Options granted under the 1998 Plan and the Director Plan which are
NSOs will be treated as follows:
There are no federal income tax consequences to an optionee or to the
Company upon the grant of an NSO under either plan. Except as described below,
upon exercise of an NSO, the optionee will be treated as having received
ordinary income in an amount equal to the excess of the fair market value of the
Common Stock over the exercise price.
11
<PAGE>
The ordinary income recognized by an optionee with respect to the
exercise of an option is subject to both wage withholding and employment taxes.
The Company will generally be entitled to a deduction for federal income tax
purposes of an amount equal to the ordinary income taxable to the optionee upon
exercise, provided that applicable income tax withholding requirements are
satisfied.
An optionee's tax basis in the Common Stock received on exercise of
such option is equal to the amount of any cash paid on exercise plus the amount
of ordinary income recognized as a result of the receipt of such shares. The
holding period for such Common Stock generally begins on the date of exercise
or, in the case of an officer, director or beneficial owner of more than 10% of
any class of equity securities of the Company, on the earlier of (i) six months
after acquisition, or (ii) the earliest date on which such person may sell such
shares of Common Stock at a profit without being subject to suit under Section
16(b) of the Exchange Act (unless the optionee elects to be taxed as of the date
of exercise).
If an optionee exercises an option by delivering Common Stock held by
the optionee, the optionee will recognize ordinary income (and the Company will
be entitled to an equivalent tax deduction) to the extent that the value of
Common Stock received exceeds the exercise price under the option; however,
based upon rulings issued by the Internal Revenue Service, in general, no gain
or loss should be recognized upon the transfer of such previously acquired
Common Stock to the Company upon exercise of the option. Provided the optionee
receives a separate identifiable stock certificate therefor, the optionee's tax
basis in that number of shares of Common Stock received on such exercise which
is equal to the number of shares exchanged therefor will be equal to his tax
basis in the shares of Common Stock surrendered. Common Stock received by the
optionee in excess of the number of previously acquired shares of Common Stock
surrendered upon exercise of the option will have a tax basis equal to the
amount of ordinary income recognized in connection with such exercise. The
holding period for such additional shares will commence on the date ordinary
income is recognized.
On the disposition of Common Stock received upon exercise of an option,
the difference between the amount realized and the tax basis of the Common Stock
will be a long-term or short-term capital gain or loss, depending on whether the
optionee held the Common Stock for the requisite holding period.
New Plan Benefits
The following table sets forth the benefits or amounts that have been
received or allocated to each of the following under the 1998 Plan and the
Director Plan. Additional benefits or amounts that may be received by or
allocated to potential participants in the 1998 Plan and the Director Plan are
not determinable.
12
<PAGE>
Shares of
Name and Position Dollar Value Common Stock
- ----------------- ------------ ------------
Jon D. Silverman ............................... $115,500(1) 100,000
Chairman of the Board
and Chief Executive Officer
Executive Group ................................ $173,250(1) 150,000
Non-Executive Director Group ................... $92,400(1) 80,000
Non-Executive Officer
Employee Group ........................ $5,775(1) 5,000
Claude K. Lee, Nominee for
Election as a Director ................ (2) 5,000(3)
Jay M. Rosen, Nominee for
Election as a Director ................ (2) 5,000(3)
Michael Handler(4), Other Person
who is to Receive 5% of Options ....... $57,750(1) 50,000
RECOMMENDATION AND REQUISITE VOTE
The Board of Directors believes that the adoption of the proposed 1998
Plan and Director Plan will advance the interests of the Company by providing
equity incentive to motivate and retain its key employees and outside directors
and further aligning their interests with those of the Company's stockholders.
Accordingly, the Board of Directors recommends a vote FOR approval of the 1998
Plan and Director Plan. An affirmative vote of the holders of record of a
majority of the outstanding shares of Common Stock present, in person or by
proxy, and entitled to vote at the Meeting, is required to approve the adoption
of the 1998 Plan and Director Plan.
- -----------------
(1) Based on a comparison of the average bid and asked price of the Common
Stock as reported on the National Association of Securities Dealers OTC
Bulletin Board on May 20, 1998 ($2.75) and the exercise price for the
options granted to the person or group. All options were granted under
the 1998 Plan and Director Plan at an exercise price of $1.595 per
share.
(2) Not determinable.
(3) Contingent upon the Director Plan being approved and the nominees being
elected at the Meeting.
(4) President of Nologies, Inc., a consultant to the Company.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, Stratton Oakmont, Inc. ("Stratton Oakmont") acted as
the underwriter of the IPO pursuant to an underwriting agreement with the
Company (the "Underwriting Agreement"). On January 29, 1997, the United States
District Court Judge for the Southern District of New York, entered an order
which, inter alia, appointed Harvey R. Miller, Esq. (the "Trustee") to liquidate
the business of Stratton Oakmont pursuant to the Securities Investor Protection
Act of 1970 (the "Liquidation Proceeding"). As part of such Liquidation
Proceeding, the Trustee and the Company entered into a Sale and Assignment
Agreement dated as of November 19, 1997 (the "Sale and Assignment Agreement").
Pursuant to the Sale and Assignment Agreement the Trustee agreed to
sell to the Company or to no more than 10 qualified designees of the Company,
(a) on the closing date an aggregate number of shares of Common Stock of the
Company equal to or greater than 995,705 shares minus (1) 176,778 shares,
retained by another person pursuant to a certain settlement agreement with the
Trustee and (2) 200,000 shares and (b) all of the remaining shares of Common
Stock held by the Trustee on or prior to the first business day that is 180 days
after the closing date. The Trustee also agreed to assign to the Company on the
closing date all of Stratton Oakmont's right, title and interest in, to and
under the Underwriting Agreement, including, without limitation, (i) all of its
right, title and interest in, to and under its option to purchase up to an
aggregate of 83,333 IPO Units for a purchase price of $.001 per underlying IPO
Unit (the "Underwriter's Purchase Option"), (ii) its rights to enforce an
agreement by certain stockholders not to sell Common Stock for a period of two
years after the effective date of the registration statement relating to the IPO
(the "Effective Date"), and (iii) its rights to enforce the agreement by the
Company not to issue new stock (except in connection with dividends or similar
transactions) for a period of two years after the Effective Date. The
Underwriter's Purchase Option was exercisable for a term of twelve months after
the Effective Date. Pursuant to the Sale and Assignment Agreement, Mr. Jon
Silverman, the Chairman, President and Chief Executive Officer of the Company,
and Messrs. Gregory Abbott and George Kriste, each of whom is a director of the
Company, purchased from the Trustee for $0.60 per share, 100,000, 367,927, and
150,000 shares of Common Stock, respectively. Each of such persons has agreed
not to sell the shares he purchased for a period of two years.
STOCKHOLDER PROPOSALS
From time to time stockholders may present proposals to be included in
the proxy statement and form of proxy for consideration at the next Annual
Meeting of Stockholders. In order to be considered, such proposals must be
received at the Company's principal executive offices no later than February 2,
1999 and should be directed to the Secretary of the Company.
OTHER MATTERS
The Board of Directors does not know of any matters to be brought
before the Meeting. If any other matters not mentioned in this Proxy Statement
are properly brought before the Meeting or any adjournment thereof, the persons
named in the accompanying proxy intend to vote the shares represented by such
proxy in accordance with their best judgment on such matters.
14
<PAGE>
The Company has selected Arthur Andersen LLP to audit the Company's
financial statements for the year ending December 31, 1998. Arthur Andersen LLP
audited the Company's financial statements for Fiscal 1997.
A representative of Arthur Andersen LLP is expected to be present at
the Meeting and will have the opportunity to make any desired statement and
respond to appropriate questions.
Expenses incurred in connection with the solicitation of proxies will
be paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and regular employees of the Company may solicit
proxies personally or by telephone, for which they will receive no consideration
other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of Common Stock and will reimburse such person for their
expenses so incurred. Shareholder Communications Corporation has been retained
by the Company to assist in the solicitation of proxies, for a fee of $4,000,
plus out-of-pocket expenses, anticipated to be approximately $2,500 in the
aggregate.
THE COMPANY WILL PROVIDE TO ANY STOCKHOLDER OF RECORD AT THE CLOSE OF
BUSINESS ON MAY 28, 1998, WITHOUT CHARGE, UPON WRITTEN REQUEST TO ITS SECRETARY,
JEFFREY D. LEWENTHAL, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR
FISCAL 1997.
15
<PAGE>
EXHIBIT A
"TENTH A. Commencing with the Annual Meeting of Stockholders
held in July, 1998, the directors of the Corporation are classified
with respect to the time for which they shall severally hold office by
dividing them into three classes, each class to be as nearly equal in
number as possible, which classes shall be designated as Class 1, Class
2 and Class 3. Subject to the provisions hereof, the number of
directors in each class shall from time to time by designated by the
Board of Directors of the Corporation. The Class 1 directors shall be
elected initially for a term of one year; the Class 2 directors shall
be elected initially for a term of two years; and the Class 3 directors
shall be elected initially for a term of three years. At each annual
meeting, the successors to the class of directors whose terms shall
expire that year shall be elected to hold office for a term of three
years so that each term of office of one class of directors shall
expire in each year. Notwithstanding the rule that the three classes
shall be as nearly equal in number of directors as possible, in the
event of any change in the authorized number of directors, each
director then continuing to serve as such shall nevertheless continue
as a director of the class of which he is a member until the expiration
of his current term, or his prior death, resignation or removal. If any
newly created directorship may, consistent with the rule that the three
classes shall be as nearly equal in number of directors as possible, be
allocated to one or two or more classes, the Board shall allocate it to
that of the available classes whose term of office is due to expire at
the earliest date following such allocation.
B. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of
at least 80% of the voting power of all of the shares of the
Corporation entitled to vote for the election of directors shall be
required to amend or repeal, or to adopt any provisions inconsistent
with this Article TENTH."
16
<PAGE>
PROXY
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue, Suite 304
Purchase, New York 10577
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of International Dispensing Corporation (the
"Company") hereby constitutes and appoints Jon D. Silverman and Jeffrey D.
Lewenthal, and each of them the true and lawful attorneys, agents and proxies of
the undersigned, each with full power of substitution, to vote, at the meeting,
if only one shall be present and acting at the meeting, then that one, all of
the shares of common stock of the Company that the undersigned would be
entitled, if personally present, to vote at the annual meeting of stockholders
of the Company to be held on July 9, 1998 at 10:00 a.m., local time, at The
Hidden Falls Clubhouse, Hidden Pond Road, Rye Brook, New York 10573, or any
adjournments thereof.
This proxy is continued on the reserve side.
(over)
<PAGE>
Please date, sign and mail
your proxy card back as soon
as possible!
Annual Meeting of Stockholders
INTERNATIONAL DISPENSING CORPORATION
[X]Please mark your votes as in this example.
1. To amend the Certificate of For Against Abstain
Incorporation of the Company [ ] [ ] [ ]
to provide for a classified
Board of Directors commencing
with the 1998 Annual Meeting.
WITHHOLD Nominees: Class 1
AUTHORITY to serve until the 1999 Annual
FOR the to vote for Meeting of Stockholders
nominees the nominees Claude K. Lee
listed at listed at
right at right Class 2
2. Election of Directors [ ] [ ] to serve until the 2000 Annual
(Instruction: To wihhold Meeting of Stockholders (or
authority tovote for any 1999 Annual Meeting of
individual nominee, at Stockholders if Proposal 1 is
right.) not adopted)
George V. Kriste
Jay M. Rosen
Class 3
to serve until the 2001 Annual
Meeting of Stockholders (or
1999 Annual Meeting of
Stockholders if Proposal 1 is
not adopted)
Jon D. Silverman
Gregory B. Abbott
3. To ratify and approve the For Against Abstain
Company's 1998 Stock Option [ ] [ ] [ ]
Plan.
4. To ratify and approve the For Against Abstain
Company's Director Option [ ] [ ] [ ]
Plan.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting. This proxy, when properly executed,
will be voted in the manner directed herein by the undersigned stockholder.
If no direction is made, this proxy will be voted for Proposals 1, 3 and 4, FOR
the election of Claude K. Lee as the Class 1 Director, FOR the election of each
of George V. Kriste and Jay M. Rosen as the Class 2 Directors, and FOR the
election of Jon D. Silverman and Gregory B. Abbott as the Class 3 Directors.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign name by authorized person.
Signature(s) DATE:
- --------------------------------- -------------------
NOTE: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, adminstrator, trustee or
guardian, please give full title as such.
