<PAGE> 1
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 a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule
14a-12
Towne Services, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(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 the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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Towne Services, Inc.
3950 Johns Creek Court, Suite 100
Suwanee, Georgia 30024
(678) 475-5200
November __, 2000
Dear Shareholder:
We cordially invite you to attend a special meeting to be held on
Wednesday, December 20, 2000 at 9:00 a.m. local time at the Hilton Garden Inn,
11695 Medlock Bridge Road, Duluth, Georgia 30097.
At the special meeting, you will be asked to consider and vote on the
adoption and approval of a proposal to amend our amended and restated articles
of incorporation. The amendment provides for a one-for-five reverse stock split
of the issued and outstanding shares of our common stock. The purpose of the
reverse stock split is to attempt to comply with the Nasdaq National Market's
$1.00 minimum bid price requirement for continued listing on the Nasdaq National
Market. Complete details of the business to be conducted at the special meeting
are provided in the attached Notice of Special Meeting of Shareholders and Proxy
Statement.
Our board of directors has determined that the proposal to be
considered at the special meeting is in the best interests of our shareholders.
For the reasons discussed in this proxy statement, our board of directors
recommends a vote "FOR" the proposal.
Please review the enclosed materials carefully. Whether or not you plan
to attend the meeting, please promptly return your proxy card in the enclosed
postage prepaid envelope. If you attend the meeting, you may vote in person if
you wish, even though you have previously returned your proxy.
Your vote is very important, and we appreciate your cooperation in
considering and acting on the matter presented. We look forward to seeing you at
the meeting.
Sincerely,
/s/ G. Lynn Boggs
-----------------------
G. Lynn Boggs
Chief Executive Officer
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TOWNE SERVICES, INC.
3950 Johns Creek Court, Suite 100
Suwanee, Georgia 30024
(678) 475-5200
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 20, 2000
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TO THE SHAREHOLDERS:
A special meeting of the shareholders of Towne Services, Inc. will be
held on Wednesday, December 20, 2000, at the Hilton Garden Inn, 11695 Medlock
Bridge Road, Duluth, Georgia 30097 at 9:00 a.m. local time, for the following
purposes:
1. to consider and vote on the adoption and approval of an amendment to
our amended and restated articles of incorporation, which provides for a
one-for-five reverse stock split of the issued and outstanding shares of our
common stock; and
2. to transact any other business properly coming before the special
meeting or any adjournment thereof.
We are not aware of any matters, other than those described above, that
are to come before the meeting. If any other matters arise, however, your signed
proxy card gives authority to G. Lynn Boggs and Henry M. Baroco to vote on those
matters at their discretion. If you decide to attend the special meeting, you
may revoke your proxy at any time before it is voted. Shareholders owning shares
of our common stock at the close of business on November 22, 2000 are entitled
to attend and vote at the special meeting.
By Order of the Board of Directors,
/s/ G. Lynn Boggs
-----------------------------------
G. Lynn Boggs
Chief Executive Officer
Suwanee, Georgia
November __, 2000
IT IS IMPORTANT THAT YOUR SHARES BE VOTED AT THE MEETING. PLEASE COMPLETE, SIGN,
DATE AND RETURN TO US THE ENCLOSED PROXY CARD.
<PAGE> 4
TOWNE SERVICES, INC.
3950 Johns Creek Court, Suite 100
Suwanee, Georgia 30024
(678) 475-5200
--------------------------------------------------------------------------------
PROXY STATEMENT
For the Special Meeting of Shareholders
to be held on December 20, 2000
--------------------------------------------------------------------------------
Our board of directors is soliciting your proxy for the special meeting
of shareholders to be held at 9:00 a.m. local time on Wednesday, December 20,
2000, at the Hilton Garden Inn, 11695 Medlock Bridge Road, Duluth, Georgia
30097. Voting materials, including this proxy statement and the proxy card, are
first being mailed to the shareholders on or about November ___, 2000.
Voting and Related Matters
Q: What am I voting on?
A: You are being asked to vote on the approval of an amendment to our
amended and restated articles of incorporation to effect a one-for-five reverse
stock split of our common stock and any other business properly coming before
the meeting. The amendment is further described below and the actual amendment
is contained in Appendix A.
Q: Who is entitled to Vote?
A: Shareholders as of the close of business on November 22, 2000, the
record date, are entitled to vote.
Q: How many shares can be voted?
A: As of the record date, approximately 27,435,919 shares of common stock
were issued, outstanding and entitled to vote at the special meeting. Each
shareholder of common stock is entitled to one vote for each share held.
Q: How do I vote?
A: Complete, sign and mail us your proxy card. If you return your signed
proxy card but do not indicate how you wish to vote, your shares will be voted
FOR the proposal. You may, of course, attend the meeting in person and vote.
Even if you plan to attend the meeting, we ask that you sign and return a proxy
card.
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Q: What if I change my mind after I return my proxy?
A: You may revoke your proxy and change your vote at any time before the
meeting. You may do this by signing and sending a written notice of revocation
or another proxy with a later date than the one you want to revoke, or by voting
in person at the meeting.
Q: Who will count the votes?
A: The chairman of the board of directors will select the inspectors of
the election for our special meeting. The inspectors will ascertain the number
of shares outstanding and the voting power of the shares, determine the shares
represented at the meeting, determine the validity of proxies and ballots, count
all votes and determine the results of the voting. The inspectors will deliver a
written report after the meeting.
Q: What constitutes a quorum?
A: There must be a quorum for the meeting to be held. A quorum is a
majority of the outstanding shares. To be counted towards the quorum,
shareholders may be present at the meeting or represented by proxy. If you
submit a properly executed proxy card, even if you abstain from voting, then you
will be considered part of the quorum. Broker non-votes, or proxies submitted by
brokers as holders of record on behalf of their customers that do not indicate
how to vote on the proposal, are also considered part of the quorum. However,
Broker non-votes and abstentions are not counted in the tally of votes FOR or
AGAINST the proposal and will have the same effect as votes against the
proposal. A WITHHELD vote is the same as an abstention.
Q: What happens if the special meeting is postponed or adjourned?
A: If the special meeting is postponed or adjourned for any reason,
including to permit the further solicitation of proxies, at any subsequent
reconvening of the meeting all proxies will be voted in the same manner as they
would have been voted at the original special meeting. However, as described
above, you may revoke your proxy and change your vote at any time before the
reconvened meeting.
Q: How many votes are required to approve the proposal?
A: The proposal to amend our amended and restated articles of
incorporation will be deemed approved by the shareholders if a majority of the
votes entitled to be cast on the amendment vote FOR the proposal.
Q: Who is paying for this proxy solicitation?
A: We are paying the cost of soliciting proxies. In addition to mailing
these materials, our officers, directors and employees will solicit proxies,
either personally or via telephone or facsimile. They will not be paid
specifically for this solicitation activity.
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We will also reimburse brokerage houses and other custodians, nominees and
fiduciaries who are record holders for their reasonable expenses in forwarding
these materials to the beneficial owners of those shares. Furthermore, we may
engage a firm to help solicit proxies in which event related fees will
approximate $7,500 (plus expenses). The extent to which we and our proxy
solicitation firm must solicit proxies depends entirely upon how soon proxy
cards are returned. Please send in your proxy cards immediately.
PROPOSAL
AMENDMENT TO OUR AMENDED AND RESTATED
ARTICLES OF INCORPORATION TO EFFECT A ONE-FOR-FIVE
REVERSE STOCK SPLIT OF OUR ISSUED
AND OUTSTANDING COMMON STOCK
Introduction
Our board of directors has approved the proposal to amend our amended
and restated articles of incorporation to effect a one-for-five reverse stock
split of our common stock. We are now submitting the proposal to you, the
shareholders, for approval. The proposed reverse stock split will take effect,
if at all, after it is approved by you and after we file Articles of Amendment
with the Secretary of State of the State of Georgia.
We expect that, if the proposal is approved by you, the Articles of
Amendment will be filed promptly. However, our board of directors may elect not
to file, or to delay the filing of, the Articles of Amendment if they determine
that filing the Articles of Amendment would not be in the best interest of our
shareholders. Factors leading to such a determination could include any possible
effect on our Nasdaq listing or future securities offerings.
Purpose of Reverse Split
Our common stock has been listed, and has traded, on the Nasdaq
National Market since July 30, 1998. For continued listing on the Nasdaq
National Market, it is necessary that, among other things, our shares of common
stock maintain a minimum bid price of at least $1.00 per share. Over the past
several months, the bid price of our shares of common stock has fallen below
$1.00 per share. On October 10, 2000, we received a letter from Nasdaq that our
minimum bid price was not in compliance with the minimum bid price requirement
for stock listed on Nasdaq. We were notified that if we do not comply with the
$1.00 per share requirement on or before January 8, 2001, our stock will be
delisted at the opening of business on January 9, 2001. We believe, but cannot
assure, that the proposed reverse stock split will enable the common stock to
trade above the minimum bid price established by the Nasdaq Continued Listing
Requirements. We will be in compliance with the Nasdaq Continued Listing
Requirements if our common stock trades at or above the minimum bid price of
$1.00 per share for at least ten consecutive trading days prior to January 8,
2001.
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If our stock is delisted from Nasdaq, trading of our stock, if any,
would have to be conducted in the non-Nasdaq over-the-counter market. In such an
event, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of our stock. In addition, if our
common stock were to become delisted from trading on Nasdaq and the trading
price were to remain below $5.00 per share, trading in our common stock may also
be subject to the requirements of certain rules promulgated under the Securities
Exchange Act of 1934, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a "penny stock"
(generally, any non-Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions). The additional burdens imposed
upon broker-dealers by these requirements could discourage broker-dealers from
facilitating trades in our common stock, which could severely limit the market
liquidity of the stock and the ability of investors to trade our common stock.
We believe that, if the reverse stock split is approved, there is a greater
likelihood that the minimum bid price of the common stock will be maintained at
a level over $1.00 per share.
Even though a reverse stock split, by itself, does not impact a
company's assets or prospects, because we cannot predict the market's reaction,
a reverse stock split could result in a decrease in our aggregate market
capitalization. The board of directors, however, believes that this risk is
offset by the prospect that the reverse stock split will improve the likelihood
that we will be able to maintain Nasdaq National Market listing and may, by
increasing the per share bid price, make an investment in the common stock more
attractive for certain investors. There can be no assurance, however, that
approval of the reverse stock split will succeed in raising the bid price of our
common stock above $1.00 per share, or that a bid price of $1.00, if achieved,
would be maintained, or that even if the Nasdaq's minimum bid price requirements
were satisfied, our common stock would not be delisted by the Nasdaq for other
reasons.
Our common stock is currently registered under Section 12(g) of the
Exchange Act, and as a result, we are subject to the periodic reporting and
other requirements of the Exchange Act. The reverse stock split will not affect
the registration of our common stock under the Exchange Act and we have no
present intention of terminating its registration under the Exchange Act in
order to become a "private" company.
The reverse stock split will not affect the number of authorized
shares. Accordingly, the reverse stock split will have the effect of creating
additional authorized and unreserved shares of our common stock. We have no
current plans to issue these shares; however, these shares may be used by us for
general corporate purposes.
The increase in the authorized but unissued shares of common stock also
may have the effect of discouraging an attempt by another person or entity,
through acquisition of a substantial number of shares of common stock, to
acquire control of us with a view to effecting a merger, sale of assets or
similar transaction, since the issuance of new shares could be used to dilute
the stock ownership of such person or entity. The authorized but unissued common
stock could be issued to a holder who would then have sufficient voting power to
assure that any business combination or any amendment to our
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amended and restated articles of incorporation would not receive the shareholder
vote required for approval. Our board of directors has no current plans to issue
any shares of common stock for any of these purposes and does not intend to
issue any stock except on terms or for reasons which they deem to be in our best
interests.
The reverse stock split may result in some shareholders owning
"odd-lots" of less than 100 shares of common stock. Brokerage commissions and
other transaction costs in odd-lots are generally somewhat higher than the costs
of transactions in "round-lots" of even multiples of 100 shares.
As a result of the reverse stock split, the approximately 27,435,919
shares of common stock outstanding on November 22, 2000 will become
approximately 5,487,184 shares of common stock, and any other shares issued
prior to the effectiveness of this proposal will be similarly adjusted. In
addition, if the proposed amendment becomes effective, each option and warrant
to purchase common stock and any other convertible security, outstanding on the
effective date will be adjusted so that the number of shares of common stock
issuable upon their exercise shall be divided by five (and corresponding
adjustments will be made to the number of shares vested under each outstanding
option) and the exercise price of each option and warrant shall be multiplied by
five.
For the above reasons, we believe that the reverse stock split is in
our best interests and in the best interests of our shareholders. There can be
no guarantee, however, that the market price of our common stock after the
reverse stock split will be equal to the market price before the reverse stock
split multiplied by the split number, or that the market price following the
reverse stock split will either exceed or remain in excess of the current market
price.
Exchange of Stock Certificates
If you approve the proposed reverse stock split, we will instruct our
transfer agent to begin implementing the exchange of certificates representing
outstanding common stock. As soon as practicable after the effectiveness of the
proposed amendment, holders of our common stock will be notified and requested
to surrender their certificates representing shares of common stock to the
transfer agent in exchange for certificates representing post-reverse split
common stock. Beginning on the date the proposed amendment becomes effective,
each certificate representing shares of our common stock will be deemed for all
corporate purposes to evidence ownership of as many shares of post-reverse split
common stock after applying the split factor and otherwise making adjustments
for fractional shares described below.
You will not be required to pay a transfer or other fee in connection
with the exchange of your certificates. You should not submit certificates until
requested to do so.
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Fractional Shares
No fractional shares of common stock will be issued as a result of the
reverse stock split. In lieu of receiving fractional shares, you will be
entitled to receive from us a cash payment in U.S. dollars equal to such
fraction multiplied by five times the average of the closing bid and asked price
per share of the common stock as quoted on Nasdaq for the five trading days
immediately preceding the date the amendment becomes effective.
Federal Income Tax Consequences of the Reverse Split
The following is a summary of the material federal income tax
consequences of the reverse stock split to you.
The reverse stock split will not be taxable to you, except for any cash
received in lieu of a fractional share of post-reverse split common stock.
Consequently, the holding period of shares of post-reverse split common stock
(including any fractional share interest) will include your holding period for
the shares of common stock exchanged, provided that the shares of common stock
are held as a capital asset at the effective time. In addition, your aggregate
basis of the shares of post-reverse split common stock (including any fractional
share interest) will be the same as your aggregate basis of the shares of common
stock exchanged.
Cash that you receive in lieu of a fractional share will be treated as
if the fractional share had been issued to you and then redeemed by us for the
cash. Accordingly, if you receive cash you will recognize taxable gain or loss
equal to any difference between the amount of cash received and your basis in
the fractional share. That basis will be an allocable portion of the aggregate
basis of the post-reverse split common stock described above.
YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES
OF THE REVERSE SPLIT IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, INCLUDING THE
APPLICATION OF ANY STATE, LOCAL OR FOREIGN TAX LAW.
No Dissenter's Rights
Under Georgia law, you are not entitled to dissenter's rights of
appraisal with respect to the reverse stock split since our common stock is
currently listed on a national exchange.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of November 22, 2000,
regarding beneficial ownership of our common stock by (1) each person who is
known to us to own beneficially more than five percent of our common stock; (2)
each director; (3) each currently employed executive officer; and (4) all of our
current directors and executive
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officers as a group. The information on beneficial ownership in the table is
based on information from the people listed below regarding their ownership of
common stock. Unless otherwise indicated, each person has sole voting power and
sole investment power with respect to the shares shown as beneficially owned by
them.
Ownership of Common Stock
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of Common
Beneficial Owner Beneficial Ownership Stock Outstanding
<S> <C> <C>
G. Lynn Boggs (1) 1,548,593 5.6
Henry M. Baroco (2) 2,011,133 7.3
Frank W. Brown (3) 333,635 1.2
John W. Collins (4) 525,693 1.9
Richardson M. Roberts (5) 70,570 *
Joe M. Rodgers (6) 274,718 1.0
John D. Schneider, Jr. (7) 67,500 *
J. Daniel Speight, Jr. (8) 289,770 1.1
Glenn W. Sturm (9) 357,974 1.3
J. Stephen Turner (10) 560,570 2.0
Randall S. Vosler (11) 130,000 *
Bahram Yusefzadeh (12) 115,570 *
Thomas A. Bryan (13) 1,363,168 5.0
SAFECO Corporation (14) 1,850,000 6.7
All directors and executive officers as a group 6,285,726 22.9
(15) (12 persons)
</TABLE>
* Less than one percent.
(1) Includes currently exercisable options to purchase 82,593 shares of
common stock. Mr. Boggs' business address is 3950 Johns Creek Court, Suite 100,
Suwanee, Georgia 30024.
(2) Includes currently exercisable options to purchase 1,455,923 shares of
common stock. Mr. Baroco's business address is 3950 Johns Creek Court, Suite
100, Suwanee, Georgia 30024.
(3) Includes (a) 150,000 shares of common stock held by Brown, Burke
Capital Partners, Inc., of which Mr. Brown is a principal, (b) 25,047 shares of
common stock held by Capital Appreciation Partners, L.P. of which Mr. Brown is
the managing member of the general partner, (c) 24,263 shares that Mr. Brown
owns jointly with his wife and (d) options to purchase 3,070 shares of common
stock. Mr. Brown disclaims beneficial ownership of the shares held by each of
Brown, Burke Capital Partners and Capital Appreciation Partners, L.P. except to
the extent of his pecuniary interest in the shares.
(4) Includes 50,000 shares of common stock held by The InterCept Group,
Inc., of which Mr. Collins is Chief Executive Officer, Chairman of the Board and
a significant shareholder, and currently exercisable options to purchase 143,993
shares of common
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stock held by Mr. Collins. Mr. Collins disclaims beneficial ownership of the
shares held by The InterCept Group, Inc.
(5) Includes currently exercisable options to purchase 30,570 shares of
common stock.
(6) Includes (a) currently exercisable options to purchase 53,070 shares of
common stock, (b) 200,000 shares of common stock held by Rodgers Capital Group,
L.P., of which Mr. Rodgers is a partner, and (c) warrants to purchase 21,648
shares of common stock. Mr. Rodgers disclaims beneficial ownership of the shares
held by Rodgers Capital Group except to the extent of his pecuniary interest in
the shares.
(7) Includes currently exercisable options to purchase 37,500 shares of
common stock.
(8) Includes 231,700 shares of common stock held by FLAG Financial
Corporation, of which Mr. Speight is Chief Executive Officer, President and a
director, and currently exercisable options to purchase 58,070 shares of common
stock. Mr. Speight disclaims beneficial ownership of the shares held by FLAG
Financial Corporation except to the extent of his pecuniary interest in the
shares.
(9) Includes currently exercisable options to purchase 3,070 shares of
common stock.
(10) Includes currently exercisable options to purchase 37,500 shares of
common stock.
(11) Includes currently exercisable options to purchase 130,000 shares of
common stock.
(12) Includes (a) 50,000 shares owned by the Yusefzadeh Family Limited
Partnership, of which Mr. Yusefzadeh is the general partner, (b) 38,400 shares
owned by Mr. Yusefzadeh's children, and (c) currently exercisable options to
purchase 13,070 shares of common stock. Mr. Yusefzadeh disclaims beneficial
ownership of the shares held his children and the Yusefzadeh Family Partnership,
except to the extent of his pecuniary interest in the shares.
(13) Includes 24,000 shares owned by Mr. Bryan's minor children and
currently exercisable options to purchase 133,168 shares of common stock. Mr.
Bryan is a co-founder of Towne Services and served as a director from 1995 to
1998. Mr. Bryan disclaims beneficial ownership of the shares held by his
children. Mr. Bryan's business address is 2410 Paces Ferry Road, 600 Paces
Summit, Atlanta, GA 30339.
(14) As reported by SAFECO Corporation in a Statement on Schedule 13G filed
with the SEC as of February 10, 2000 as supplemented in a Statement on Form 13F
with the SEC as of September 30, 2000. In its Statement on Schedule 13G, SAFECO
Corporation (a) reported that it is a parent holding company in accordance with
Rule 13d-1(b)(ii)(G) to a subsidiary, SAFECO Asset Management Company, which
serves as an investment advisor to several registered investment companies and
(b) disclaimed beneficial ownership of certain of the shares. SAFECO Asset
Management Company also filed a joint Statement on Schedule 13G with one of the
investment companies, SAFECO
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Common Stock Trust, to which it provides investment advisor services. The
aggregate holdings of all these entities are reflected in SAFECO Corporation's
filing. SAFECO Corporation's address is SAFECO Plaza, Seattle, WA 98185.
(15) Includes (a) 706,747 shares held by entities affiliated with our
executive officers and directors, (b) 38,400 shares held by family members of
our executive officers and directors, (c) 24,263 shares held jointly by our
directors and their spouses, (d) warrants to purchase 21,648 shares of common
stock, and (e) currently exercisable options to purchase 2,048,429 shares of
common stock. Our executive officers and directors disclaim beneficial ownership
as to an aggregate of 706,747 of these shares.
SUBMISSION OF SHAREHOLDER PROPOSALS
If you want us to consider including a proposal in our 2001 proxy
statement, you must deliver your proposal to our Secretary at our executive
offices located at 3950 Johns Creek Court, Suite 100, Suwanee, Georgia 30024, no
later than December 21, 2001.
OTHER MATTERS
As of the date of this proxy statement, we do not know of any other
matters that will be presented for action at the special meeting. If, however,
any other matters not currently known are properly brought before the special
meeting, the persons named on the proxy card will vote the proxy on those
matters in their discretion as determined by a majority of the board of
directors.
By Order of the Board of Directors,
/s/ G. Lynn Boggs
-----------------------------------
G. Lynn Boggs
Chief Executive Officer
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Appendix A
Amendment
to the
Amended and Restated Articles of Incorporation
of
TOWNE SERVICES, INC.
1. Article II of the Company's Amended and Restated Articles of
Incorporation shall be amended by the addition of the following provision:
Simultaneously with the effective date of this amendment (the
"Effective Date"), each five shares of the Company's Common Stock,
issued and outstanding immediately prior to the Effective Date (the
"Old Common Stock") shall, automatically and without any action on the
part of the holder thereof, be reclassified as and changed, pursuant to
a reverse stock split (the "Reverse Stock Split"), into one share of
the Company's outstanding Common Stock (the "New Common Stock"),
subject to the treatment of fractional share interests as described
below. Each holder of a certificate or certificates which immediately
prior to the Effective Date represented outstanding shares of Old
Common Stock (the "Old Certificates," whether one or more) shall be
entitled to receive upon surrender of such Old Certificates to the
Company's Transfer Agent for cancellation, a certificate or
certificates (the "New Certificates," whether one or more) representing
the number of whole shares of the New Common Stock into and for which
the shares of the Old Common Stock formerly represented by such Old
Certificates so surrendered, are reclassified under the terms hereof.
From and after the Effective Date, Old Certificates shall thereupon be
deemed for all corporate purposes to evidence ownership of New Common
Stock in the appropriately reduced whole number of shares. No
certificates or scrip representing fractional share interests in New
Common Stock will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a shareholder
of the Company. In lieu of any fraction of a share of New Common Stock
to which the holder would otherwise be entitled, the holder will
receive a cash payment in U.S. dollars equal to such fraction
multiplied by five times the average of the closing bid and asked price
per share of Common Stock as quoted on Nasdaq for the five trading days
immediately preceding the Effective Date. If more than one Old
Certificate shall be surrendered at one time for the account of the
same shareholder, the number of full shares of New Common Stock for
which New Certificates shall be issued shall be computed on the basis
of the aggregate number of shares represented by the Old Certificates
so surrendered. In the event that the Company's Transfer Agent
determines that a holder of Old Certificates has not surrendered all
his certificates for exchange, the Transfer Agent shall carry forward
any fractional share until
<PAGE> 14
all certificates of that holder have been presented for exchange such
that payment for fractional shares to any one person shall not exceed
the value of one share. If any New Certificate is to be issued in a
name other than that in which it was issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, and the stock transfer tax stamps to the Old Certificates so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent that such taxes are not payable.
From and after the Effective Date, the amount of capital shall be
represented by the shares of the New Common Stock into which and for
which the shares of the Old Common Stock are reclassified, until
thereafter reduced or increased in accordance with applicable law. All
references elsewhere in the Amended and Restated Articles of
Incorporation to the "Common Stock" shall, after the Effective Date,
refer to the "New Common Stock".
<PAGE> 15
REVOCABLE PROXY
FOR SPECIAL MEETING OF SHAREHOLDERS OF
TOWNE SERVICES, INC.
TO BE HELD ON DECEMBER 20, 2000
The undersigned hereby constitutes and appoints G. Lynn Boggs and
Henry M. Baroco and each or either of them as true and lawful agents and
proxies of the undersigned with full power of substitution in each, to
represent and vote, as indicated below, all of the shares of common stock of
Towne Services, Inc. ("Towne Services") that the undersigned would be entitled
to vote at the Special Meeting of Shareholders of Towne Services to be held on
Wednesday, December 20, 2000 at the Hilton Garden Inn, 11695 Medlock Bridge
Road, Duluth, Georgia 30097 at 9:00 a.m. local time, and at any adjournment
thereof, upon the matters described in the accompanying Notice of Special
Meeting of Shareholders and Proxy Statement for the Special Meeting of
Shareholders, receipt of which is acknowledged, and upon any other business
that may properly come before the meeting or any adjournment. Said proxies are
directed to vote on the matters described in the Notice of Special Meeting of
Shareholders and Proxy Statement for the Special Meeting of Shareholders as
follows, and otherwise in their discretion upon such other business as may
properly come before the meeting or any adjournment thereof.
The Board of Directors recommends a vote FOR the proposal. This proxy,
when properly executed, will be voted in the manner directed herein by the
undersigned shareholder. This proxy is revocable and will be voted as directed,
but if no instructions are specified, this proxy will be voted FOR the proposal
listed.
PROPOSAL
1. To adopt and approve an amendment to Towne Services' Amended
and Restated Articles of Incorporation to effect a
one-for-five reverse stock split of all of the issued and
outstanding shares of common stock of Towne Services.
FOR AGAINST ABSTAIN
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2. IN THEIR DISCRETION, G. Lynn Boggs and Henry M. Baroco may
act upon such other business as may properly come before the
meeting or any adjournment thereof.
If any other business is presented at the Special Meeting, including
whether or not to adjourn the meeting, this proxy will be voted by those named
in this proxy in their best judgment. At the present time, the board of
directors knows of no other business to be presented at the Special Meeting.
Please sign exactly as your name appears on your stock certificate.
When signing as attorney, executor, administrator, trustee or guardian, please
give your full title. If shares are held jointly, each holder may sign but only
one signature is required. If a corporation, please sign in full corporate name
by authorized officer. If a partnership, please sign in full partnership name
by authorized person.
Dated: ________________, 2000 ______________________________
SIGNATURE OF SHAREHOLDER
______________________________
SIGNATURE OF SHAREHOLDER
PLEASE COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
