SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14C OF THE
SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[x] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
INFOSAFE SYSTEMS, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14c-5(g) and 0-11.
1) Title of each class of securities to which transaction
applies: Class A Common and options to buy
2) Aggregate number of securities to which transaction
applies: 7,029,746
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): $0.1875
4) Proposed maximum aggregate value of transaction:
$815,833
5) Total fee paid: $163.17
[x] 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:
INFOSAFE SYSTEMS, INC.
805 THIRD AVENUE, 9TH FLOOR
NEW YORK, NEW YORK 10022
-------------------
INFORMATION STATEMENT
ACTION BY WRITTEN CONSENT OF MAJORITY SECURITYHOLDERS
-------------------
INTRODUCTION
This Information Statement is being furnished to the
stockholders of Infosafe Systems, Inc., a Delaware corporation
(the "Company"), pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
Regulation 14C promulgated thereunder ("Regulation 14C"), in
connection with certain actions (the "Consent Actions") to be
taken by the written consent of the holders of a majority of the
voting power of the Company's issued and outstanding equity
securities. The Consent Actions will become effective at 10:00
A.M., Eastern Daylight Savings Time, on September __, 1998, in
accordance with Regulation 14C, at the offices of the Company
located at 805 Third Avenue, 9th Floor New York, New York 10022.
This Information Statement is first being mailed to stockholders
of the Company on or about August __, 1998.
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
Only stockholders of record at the close of business on
August 21, 1998 (the "Record Date") are entitled to notice of the
Consent Actions. At the close of business on the Record Date,
the Company had issued and outstanding and voting as a class
4,720,419 shares of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), having one vote each, and
991,332 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock"), having six votes each. In
addition, although scheduled to be redeemed by the Company as of
March 31, 1999, all of the issued and outstanding shares of the
Company's Class E-1 Common Stock, par value $.01 per share, and
Class E-2 Common Stock, par value $.01 per share (together, the
"Class E Common Stock"), having one vote each, are entitled to vote
as a class with the Class A and Class B Common Stock through such date.
The Class A Common Stock, Class B Common Stock and Class E Common
Stock are sometimes referred to herein as the "Common Stock."
The approval of shares of Common Stock representing a
majority of the voting power of the Company is required to
approve the Consent Actions. No vote or further action of the
stockholders of the Company is required in order to approve,
adopt or implement the Consent Actions. No appraisal or other
similar rights are available to dissenters of the Consent Actions
and no approvals are required from any state or federal agencies.
The following stockholders (collectively, the "Consenting
Stockholders") own or control shares of Common Stock representing
more than a majority of the voting power of the Company and have
executed a written consent dated June 26, 1998 (the "Consent"),
adopting and approving the Consent Actions: Arthur R. Medici,
Alan N. Alpern, and that certain Voting Trust dated February 12,
1997 described below (the "Voting Trust"). Together the
Consenting Stockholders own or control 2,386,797 shares
(7,062,622 votes) out of the 8,480,248 shares (13,436,858 votes)
of Common Stock, representing 52.5% of the voting power of the
Company as of the Record Date. The actions to be
effectuated by the Consent will become effective (the "Consent
Effective Date") as of the twentieth (20th) day following the
date this Information Statement is first mailed to stockholders.
Under Section 228 of the Delaware General Corporate Law
("DGCL"), any action permitted to be taken at an annual or
special meeting of stockholders of a Delaware corporation may be
taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Pursuant to Section 228(d)
of the DGCL, prompt notice of any such action by written consent
must be given to those stockholders who have not consented in
writing, and this Information Statement constitutes such required
notice.
The Company will bear all of the costs of the preparation
and dissemination of this Information Statement and the
accompanying materials which are estimated to be approximately
$_________. No consideration has been or will be paid to any officer,
director, or employee of the Company in connection with the
preparation and dissemination of this Information Statement and
the accompanying materials or otherwise in connection with the
Consent Actions.
THE COMPANY
Background
The Company is a development stage company engaged in the
design, development and marketing of systems for securing,
controlling, metering and auditing electronic documents and
programs for use in corporate networks and open networks,
particularly the Internet. From November 18, 1991 (inception) to
April 30, 1998, the Company recognized revenues of
approximately $620,000, and had an accumulated deficit of
approximately $13 million. The Company has continued to
operate at a deficit since inception and expects to continue to
operate at a deficit until such time, if ever, as operations
generate sufficient revenues to cover costs.
In the third quarter ended April 30, 1998, the Company
announced that it had discontinued its operations and support for
its advanced imaging system products and its electronic vending
system for on-demand authorization to photocopy copyrighted
material, known as the CopyRight Metering System. This action
was taken due to the Company's inability to generate sufficient
revenue from these products or to achieve any significant market
penetration, its need to conserve cash resources, and it's
decision to accelerate the development and marketing of
Internet-based products and services for the electronic commerce
("EC") marketplace.
In April 1997, the Company formed and purchased a majority
interest in Internet Commerce Corporation ("ICC"), which develops
Internet-based products and EC services focusing on electronic
data interchange ("EDI") and the electronic transmission of
business documents. ICC is presently a 83.3%-owned subsidiary of
the Company. ICC believes that its services will provide a lower cost
alternative to Value Added Networks ("VANs"), which are based on
high-cost, high-maintenance private network infrastructures
maintained by many large companies. The Company is seeking to
position itself as an independent third party to authenticate,
certify, validate, authorize, and facilitate secure electronic
commerce transactions and the exchange of electronic information,
and to make such paperless commerce transactions affordable to
small and midsize companies and suppliers.
The Company believes that many corporations that have
invested in EDI using VANs are only connected to their largest
vendors, creating a "big player to big player" market. ICC will
initially target large corporations using VAN services who,
despite an investment in EDI, are not connected to many of their
vendors and must still process a large volume of paper
transactions manually. The Company believes that a Web-based
procurement system offers key advantages over VAN networks, such
as lower per-transaction costs, standard browser access and low
software start-up costs.
ICC has assembled a technical staff with significant
experience in EDI, real-time communications, database systems,
security technologies, and Internet/Intranet integration.
During its system development stage, ICC has sought input from
major corporations, many of which have expressed interest in this
type of service, and several of which provided beta test sites
for the ICC service. The Company initially funded ICC in an
amount of $500,000 of capital and also has provided continued
administrative and overhead support in excess of $2.5 million
since ICC's organization.
ICC launched CommerceSense(TM) for corporations and their
trading partners during the third quarter ended April 30, 1998.
The Company is seeking to raise additional financing for ICC to
accelerate the commercial introduction and marketing of its
Internet-based EDI/EC secure services. The Company's ability to
generate revenues and operate profitably and to continue as a going
concern, however, is dependent on its ability to market the
CommerceSense(TM) System developed by ICC and on the Company's
success in raising the necessary additional operating funds.
Description of Legal Proceedings
The Company commenced an arbitration against its former Vice
President and Director of Technology, Robert Nagel ("Nagel"), on
May 29, 1997 for fraud, breach of his employment contract, breach
of the duties of obedience and loyalty, unlawful diversion of
corporate assets and theft of corporate opportunities. Nagel
denied the claims and served a counterclaim alleging breach of
the employment agreement, discrimination on the basis of his
blindness, defamation, and violation of the Federal Wiretapping
Act and the Federal Eavesdropping Act. The damages sought by
Nagel against the Company is for approximately $1,000,000,
excluding interest, costs and attorney's fees. The Company
believes that it has a meritorious case against Nagel and strong
defenses to Nagel's counterclaims. Nonetheless, it is possible
that the arbitrators will find in favor of Nagel and against the
Company. To date, the Company and Nagel have participated in
eight (8) days of arbitration hearings. It is likely that the
decision of the arbitrators will be rendered during the fall of
1998. Other than foregoing matter, there are no pending or threatened
material legal proceedings to which the Company is a party.
The Reorganization Plan
The Consent was executed by the Consenting Stockholders in
order to implement and effect material elements of a plan of
reorganization for the Company (the "Reorganization Plan"),
adopted by the Board of Directors on the recommendation of
management. The Board of Directors acted in response to, among
other matters: (a) the Company's critical need for capital to
remain in operation, (b) de-listing notifications from The Nasdaq
Stock Market, Inc. with respect to the Class A Common Stock and
certain related warrants and units of the Company, and (c) the
proposed acceleration of the commercial introduction and
marketing of the CommerceSense(TM) System developed by ICC.
The following is an outline of the material elements of the
Reorganization Plan.
A. Private Placement of Bridge Financing.
The Company has commenced a private offering (the "Private
Offering") to accredited investors, including officers and
directors of the Company, of up to $2,000,000 in aggregate
principal amount of Bridge Units to raise the funds necessary to
continue in operation pending the completion of the remaining
elements of the Reorganization Plan. Each Bridge Unit consists
of an unsecured promissory note (the "Bridge Note") and warrants
to acquire shares of Class A Common Stock (the "Bridge
Warrants"). There is no minimum level of subscriptions or
purchases associated with the sale of the Bridge Units.
The Bridge Notes bear interest at a rate of 10% per annum
and are due and payable from the proceeds of the Warrant Exchange
Offer and Standby Offering (as defined herein) no later than the
one hundred eightieth (180th) day after the date of issuance of
each Bridge Note. The Bridge Notes are unsecured obligations of
the Company.
The Bridge Warrants entitle the holder to purchase 1.5
shares of Class A Common Stock for each $1.00 of principal amount
of Bridge Notes purchased at an exercise price of $0.50 per
share, at any time or from time to time during the period
beginning on the one hundred eightieth (180th) day after the date
of issuance of the Bridge Note Unit (the "Commencement Date"),
until the date which is thirty six (36) months thereafter (the
"Expiration Date"), provided, however, that, if more than one
year has elapsed since the issuance of the Bridge Warrants and
the bid price of the Class A Common Stock exceeds $1.50 per share
for ten (10) consecutive trading days thereafter, the Company may
accelerate the Expiration Date to a date not less than ten (10)
business days after the mailing of notice of such acceleration to
each registered holder of the Bridge Units (the "Acceleration
Notice").
As of the mailing of this Information Statement, the Company
had received and accepted subscription for the purchase of
$395,000 of Bridge Units from individual accredited investors.
B. The Consent
After consultation with its financial advisers and
management, the Board of Directors of the Company determined that
certain fundamental changes in the organization and capital
structure of the Company, as described below, must be promptly
effected in order to raise critical capital to continue its
operations and to position the Company for future growth and
development. In this regard, the Board decided to discontinue
the prior operations of the Company and to focus exclusively on
the development, introduction and marketing of ICC's Internet-
based EDI/EC products and services.
The Consent was executed by the Board of Directors of the
Company in their capacity as trustees of the Voting Trust,
by and among the Board on behalf of the Company and Arthur R. Medici,
the President and Chief Executive Officer of the Company and Alan N. Alpern,
the Chief Financial Officer of the Company, individually.
The Voting Trust is the record owner of 845,165 shares of
Class B Common Stock (5,070,990 votes), 590,816 shares of
Class E-1 Common Stock (590,816 votes) and 590,816 shares
of Class E-2 Common Stock (590,816 votes) (the foregoing
shares of Common Stock are referred to herein as the "Voting Trust Shares").
Accordingly, the Voting Trust controls 6,252,622 votes or 46.5%
of the total voting power of all outstanding classes of Common
Stock of the Company. Moreover, Messrs. Medici and Alpern own or
control an additional 810,000 votes or 6.0% of the total voting
power of the Common Stock (Mr. Medici has 690,000 votes on 70,000
shares of Class B Common Stock, 135,000 shares of Class E-1
Common Stock and 135,000 shares of Class E-2 Common Stock and Mr.
Alpern has 120,000 votes on 20,000 shares of Class B Common
Stock). The total combined voting power of the Voting Trust, Mr.
Medici and Mr. Alpern is 7,062,622 votes or 52.5% of the total
voting power of the Common Stock, which constitutes more than a
majority of the total combined voting power of all outstanding
classes of Common Stock of the Company.
Prior to the date of execution of the Consent, Mr. Michael
T. Brooks transferred 400,000 shares of Class B Common
Stock ("Brooks Shares") to the Voting Trust which he purchased
pursuant to a Stock Purchase Agreement dated June 19, 1998 at a
price of $0.28125 per share. Consideration for the purchase was
Mr. Brooks' negotiable promissory note (the "Brooks Note")
bearing interest at 10% payable on December 31, 1998. The
Company and Mr. Brooks entered into a Shareholder Agreement
dated as of June 19, 1998 (the "Shareholder Agreement"), that, inter
alia, grants the Company the right but not the obligation to
purchase the Brooks Shares at a price equal to 133% of the
original sales price ($0.375 per share) and required that Brooks
transfer the Brooks Shares to the Voting Trust.
The Consenting Stockholders also executed an addendum to the
Consent providing their authorization and approval for the
issuance and sale of shares of Class A Common Stock representing
potentially more than 19.9% of the voting power of the Company. Such
stockholder approval is required under the rules of The Nasdaq
Stock Market, Inc.
C. ICC Merger
The Board Of Directors approved the merger of ICC into the
Company pursuant to Section 251 of the DGCL, and the Consenting
Stockholders approved and adopted the Plan and Agreement of
Merger of Infosafe Systems, Inc. and Internet Commerce
Corporation (the "Merger Agreement") in the Consent. Pursuant to
the Plan and Agreement of Merger, the three holders of the 16.7%
of the shares of common stock of ICC not already owned by the
Company will receive, in exchange for each of such shares,
16.72474 shares of Class A Common Stock. The ICC Merger is
discussed more fully below. (See "The ICC Merger.")
D. Warrant Exchange Offer and Standby Public Offering
Upon completion of the Bridge Financing, the Company will
file a Registration Statement on Form S-4 (the "Registration
Statement") offering to exchange (the "Warrant Exchange Offer")
presently outstanding warrants to purchase Class A Common Stock
(the "Class A Warrants") and other warrants (the "Class B Warrants" and,
together with the Class A Warrants, the "Existing Warrants"),
issued in connection with the Company's initial public offering
and a subsequent round of financing, for the Company's newly
authorized Class C Warrants (the "Class C Warrants").
The Warrant Exchange Offer will only be available to the current
holders of Existing Warrants and will be open for a period not
to exceed thirty (30) days, unless extended by the Company.
In the Warrant Exchange Offer, the Company will offer to
exchange one Class C Warrant for each outstanding Class A Warrant
and two Class C Warrants for each outstanding Class B Warrant.
As a condition to the acceptance of the Exchange Offer, however,
each tendering holder of Existing Warrants must agree to
immediately exercise the Class C Warrants. The Class C Warrants
will be exercisable at a price equal to the fair market value of
the Class A Common Stock on the date of effectiveness of the
Warrant Exchange Offer. The Class A Warrants and Class B
Warrants are currently exercisable at $5.82 and $7.83,
respectively.
To the extent, however, that the holders of the Existing
Warrants do not elect to tender their Existing Warrants for
Class C Warrants, the Company intends to file a Post-Effective
Amendment to the Registration Statement to commence a public
offering for cash of the shares of Class A Common Stock
underlying the Class C Warrants that are not exchanged for
Existing Warrants (the "Standby Public Offering").
The rights of Existing Warrant holders that do not elect to
tender in the Warrant Exchange Offer will remain unaffected
and will continue to be exercisable at $5.82 per share for the
Class A Warrants and $7.83 per share for the Class B Warrants,
subject to adjustment as a result of the Reverse Split
(defined below) to $29.10 and $39.15 per share, respectively.
The Standby Public Offering will be conducted on a best
efforts basis by the officers and directors of the Company who
will not receive any additional remuneration in connection
therewith. A broker or dealer may be used in those jurisdictions
that so require and the Company will pay a commission for sales
placed by or confirmed through such broker or dealer. In
addition, there will not be any minimum individual or aggregate
subscription amount associated with the Standby Public Offering
and all proceeds of subscriptions accepted by the Company will be
immediately made available to Company. No escrow account will be
established for the deposit of the subscription proceeds.
E. Classified Board of Directors
As part of the Reorganization Plan, the Board of Directors
also determined to adopt a classified Board as an
anti-takeover measure to help protect the Company from a change
of control that may not optimize stockholder value. The purpose
and effect of the classified Board are discussed below. In
addition, the Board has determined to adopt and implement a
stockholders' rights plan in the near future to further insulate
the Company and its stockholders from a coercive take over.
Directors and Executive Officers
The directors and executive officers of the Company, along
with their respective ages and positions with the Company, are as
follows:
Name Age Position
- ---------------------- ---- ------------------------------
Arthur R. Medici 49 Chief Executive Officer,
President and Director
Alan N. Alpern 71 Chief Financial Officer
Robert S. Christie 44 Director
Charles C. Johnston 63 Director
Arthur R. Medici has been President, Chief Executive
Officer, and Director of the Company since November 1996. From
August 1994 to November 1996, Mr. Medici was President of the
North American division of Derwent Information, Ltd., a producer
of international patent abstracts and information formatted for
print, CD-ROM and digital online delivery. From November 1990 to
August 1994, Mr. Medici was Senior Vice President at Thomson &
Thomson. Both companies are subsidiaries of The Thomson
Corporation's Intellectual Property Resources Group.
Alan N. Alpern has been Chief Financial Officer of the
Company, which he co-founded, since January 1992 and was also
Chairman of the Board from January 1992 until April 1995. From
October 1995 until July 1997, he was a Director. From October
1996 until March 1998, he served as Chief Financial Officer of
American Pharmed Labs Inc., a pharmaceutical company. From June
1990 until October 1996, Mr. Alpern served as a director of Van
American, Inc., an insurance holding company in Lexington,
Kentucky. He also served as Chief Financial Officer of Van
American Company, Inc. from June 1990 until December 1993. From
May 1988 until June 1990, he was self-employed as an attorney and
business consultant.
Robert S. Christie has been a Director of the Company since
March 1997. Mr. Christie, an operations executive with extensive
experience in the international real-time information industry
and higher education markets, was named President and Chief
Executive Officer of International Thomson Publishing in February
1998. Previously he was President and Chief Executive Officer
of Thomson & Thomson Corporation, a trademark and copyright services
and information company. Prior to joining Thomson & Thomson,
he was President of the McGraw-Hill College Book
Company (1994-1996), and prior to that, Group Vice President
for Equity Information Services at Standard & Poor's Information
Company (1990-1994).
Charles C. Johnston has been a Director of the Company since
October 1996. Mr. Johnston is Chairman of ISI Systems ("ISI"), a
subsidiary of Teleglobe of Montreal. Previously he was founder,
Chief Executive Officer and President of ISI prior to its
purchase by Teleglobe in November 1989.
During Fiscal 1997, Thomas H. Lipscomb, Chairman of the
Board and former Chief Executive Officer, did not stand for
election as a Director and resigned as Chief Executive Officer
of the Company. Resignations were also submitted by former board
members William N. Walker, Frank Schwab, Jr. and Alan N. Alpern.
Other Significant Employees
The following persons, although not executive officers, make
significant business contributions to the Company:
David Hubbard Chief Technology Officer/Vice President of
Engineering -Infosafe/ICC
Michael Cassidy Executive Vice President -ICC
Michele Golden Executive Vice President -ICC
Walter M. Psztur Controller and Secretary
David Hubbard was named Chief Technology Officer and Vice
President of Engineering for Infosafe and ICC in April 1997. He
has over 15 years of large system design experience, having been
responsible as manager and individual contributor for the
research and development of corporate software and technology as
CTO for Track Data Corp., which provides real-time market data to
institutional and individual investors.
Michael Cassidy is a co-founder and Executive Vice President
of ICC. From 1995-1997, he was director of Business Development for
New Paradigm Software Corporation and provided management oversight
for its Electronic Data Interchange services. From 1992-1995, he was the
Chief Executive Officer of Greentree Software Inc., a Marlboro, MA
software developer. From 1990-1992, he was President of Rivergate
Systems, a networked imaging system provider.
Michele Golden is a co-founder and Executive Vice President
of ICC. From 1995-1997, she was president and founder of New Paradigm
Golden-link, an Electronic Data Interchange service provider.
She served as the U.S. liaison in the Prime Minister's Office of Israel
in 1994. From 1992-1994, she was vice president of Business Development
for CIS Corporation, an EDI service bureau. From 1985-1991, she was a
commercial real estate broker for Cushman & Wakefield.
Walter M. Psztur has more than 18 years experience in
business and finance. From 1993-September 1997 (when he joined
the Company as Controller and Secretary) he was the assistant
corporate controller for Standard Motor Products, a NYSE-listed
automotive replacement parts manufacturer and distributor. From
1992 to September 1993, he was the corporate accounting manager
at Breed Technologies, Inc., an automotive safety products
manufacturer.
Directors' Compensation
Directors of the Company do not receive any fixed
compensation for serving on the Board. Board members will be
reimbursed for all reasonable expenses incurred by them in
connection with serving as directors of the Company.
Each Director, other than the Chief Executive Officer, has
been granted a number of stock options as a director which vest
ratably over time and are exercisable at a price determined on
the date of grant.
Executive Compensation
The following table sets forth the compensation paid or
accrued by the Company for services rendered during the fiscal
years ended July 31, 1996, July 31, 1997 and July 31, 1998 to
Arthur R. Medici, the Company's Chief Executive Officer and
President, and the next four highest paid officers whose
compensation was more than $100,000 in the years indicated.
Summary Compensation Table
Long Term
Annual Compensation Compensation
----------------------------- --------------------
Name and Fiscal Years Other Annual
Principal Ended Compensation
Position July 31 Salary($) $ Options(#)
- ----------------- --------- ---------- ---------- ----------
Arthur R. Medici 1998 175,000
1997 102,000 -0- -0-
1996 n/a n/a n/a
Thomas H. Lipscomb 1998
1997 145,833 -0- -0-
1996 175,000 -0- -0-
Alan N. Alpern 1998 -0- 101,500
1997 -0- 125,000 -0-
1996 -0- 125,000 -0-
Option/SAR Grants
There were no in-the-money unexercised Options/SAR Grants at fiscal
year ended July 31, 1998.
Option Exercises
There were no Option/SAR Grants exercised during fiscal year ended
July 31, 1998.
Security Ownership of Principal
Holders, Directors and Executive Officers
The following table sets forth the number of shares of Common
Stock owned beneficially as of the Record Date by each principal
holder, director, each executive officer and all directors and
executive officers as a group. Other than as disclosed in the
following table and accompanying footnotes, the directors, the named
executive officers, and the directors and executive officers as a
group did not own any other equity securities of the Company. As of
the Record Date, the percentage of shares of any class of equity
securities of the Company beneficially owned by any director or any
named executive officer, or by all directors and all executive
officers as a group, did not exceed 1% of the class so owned. Unless
otherwise noted, each individual has sole voting and investment
power. Fractional shares are rounded to the nearest whole number.
<TABLE>
<CAPTION>
Class A Class B Class E
Common Stock(2) Common Stock Common Stock(3)
---------------- ---------------- ----------------
Name and Address Number Number Number % of Vote
of Beneficial Owner(1) of shares % of shares % of shares % of all classes
- ------------------------- --------- ---- --------- ---- --------- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Voting Trust(5) - - 845,165 1,181,632 46.5
Thomas H. Lipscomb (4)(5) - - 385,716 38.9 820,624 29.6 23.3
Arthur R. Medici (2) - - 70,000 7.1 270,000 9.8 5.1
Alan N. Alpern (2)(5) - - 20,000 2.0 210,340 7.6 2.5
Charles C. Johnston (2) 45,000 1.0 - - - - 0.3
Michael T. Brooks (5) 10,000 0.2 400,000 40.4 - - 17.9
All executive officers 45,900 1.0 90,000 9.1 480,340 17.4 7.9
and directors as a
group (3 persons)
____________________
</TABLE>
(1) Except as otherwise noted, each individual or entity
has sole voting and investment power over the securities
listed and the address of each beneficial owner is in care
of the Company at its principal office at 805 Third Avenue,
New York, New York 10022.
(2) The Executive officers and directors as a group hold a
total of 206,666 "out of the money" immediately
exercisable options to purchase Class A Common Stock at
option prices in excess of $3.50 per share. Mr. Medici
holds 116,666 options, Mr. Alpern holds 50,000 options,
Mr. Johnston holds 20,000 options and Mr. Christie holds
20,000 options.
(3) Includes shares of both Class E-1 Common Stock and Class E-2
Common Stock.
(4) Mr. Lipscomb has granted options to purchase 16,875
shares of Class A Common Stock issuable upon conversion of
the shares of Class B Common Stock beneficially owned by
him, including the right to receive 16,875 Class E
Shares, to two individuals and one entity (the "Lipscomb
Options").
(5) Substantially all of the Class B Common Stock and Class E-1
Common Stock and Class E-2 Common Stock beneficially owned
by Thomas H. Lipscomb, Alan N. Alpern, and Michael T.
Brooks constituting 23.3%, 2.5% and 17.9% of the vote of
all classes of common stock of the Company, respectively,
have been deposited in the Voting Trust or are subject to
an irrevocable proxy until February of 2000, except in the
case of Mr. Brook's shares which are subject to the
Company's option to purchase his Class B shares at any
time. Pursuant to the Voting Trust and irrevocable proxy,
the shares will be voted at the direction of a majority
of the Company's non-management directors and Mr. Medici,
subject to certain exceptions, including the dissolution
or liquidation of the Company, certain mergers and sale of
all or substantially all of the Company's assets. The
shares deposited in the voting trust or irrevocable proxy
will be released from the voting trust and irrevocable
proxy on the sale of the shares by the beneficiary
owner thereof.
THE CONSENT ACTIONS
By this Information Statement, the Company is providing
stockholders with the required notice of the following
corporate actions that were approved and adopted by the
Consenting Stockholders in the Consent:
(A) amendments (the "Certificate Amendments") to the
Certificate of Incorporation of the Company (the
"Certificate of Incorporation") that:
(1) effect a reverse stock split (1 new share for
every 5 old shares) of the Class A Common Stock, Class
B Common Stock, and Class E Common Stock;
(2) delete the references to 50,000 shares of 9%
Series A Cumulative Convertible Preferred Stock in the
Certificate of Incorporation for which authorization
has lapsed; and
(3) change the Company's name to "Internet
Commerce Corporation;"
(B) amendments (the "By-Laws Amendments") to the By-Laws of
the Company (the "By-Laws") that:
(1) effect the implementation of a classified
Board of Directors; and
(2) add language that specifies the duties and
responsibilities of certain officers of the Company;
(C) amendments to the Company's Amended and Restated Stock
Option Plan that, inter alia, increases the number of shares
authorized for awards and grants thereunder (the "Stock
Option Plan Approval"); and
(D) approve the merger of the Company's 83.3%-owned
subsidiary, Internet Commerce Corporation, with and into the
Company pursuant to Section 251 of the DGCL (the "Approval
of the ICC Merger").
The Certificate Amendments, the By-Laws Amendments, the Stock
Option Plan Approval and the Approval of the ICC Merger are
collectively referred to herein as the "Consent Actions".
CERTIFICATE AMENDMENTS
1. Reverse Stock Split
The Board has approved the Certificate Amendments to effect
a one-for-five reverse stock split (the "Reverse Split") of the
issued and outstanding shares of Common Stock (the "Existing
Common"), and the Consenting Stockholders have consented to
the Reverse Split and the Certificate Amendments, which are
expected to become effective as provided by Regulation 14C.
Pursuant to the Reverse Split, each share of Existing Common
issued and outstanding immediately prior to the Effective
Date will be reclassified as, and exchanged for, one-fifth
of one share of newly issued Class A Common Stock, par value
$.01 ("New Class A Common Stock"), Class B Common Stock, par
value $0.01 ("New Class B Common Stock"), Class E-1 Common
Stock, par value $0.01 ("New Class E-1 Common Stock") and
Class E-2 Common Stock, par value $0.01 ("New Class E-2
Common Stock"). The New Class A Common Stock, New Class B
Common Stock, New Class E-1 Common Stock and New Class E-2
Common Stock are collectively referred to herein as the "New
Common Stock."
The Reverse Split will not materially affect the
proportionate equity interest in the Company of any holder
of Existing Common or the relative rights, preferences,
privileges or priorities of any such stockholder. In
addition, the approximately 808,000 shares issuable upon
exercise of the Company's outstanding options under the
Company's 1994 Stock Option plan, and the
exercise prices per share, will be proportionately adjusted.
Neither the par value per share of the Common Stock nor the
authorized number of shares of Common Stock will not be
changed pursuant to the Certificate Amendments.
The Reverse Split was proposed by the Board in response to
notification by The Nasdaq Stock Market, Inc. ("Nasdaq") on
May 28, 1998, that the Class A Common Stock failed to
maintain a minimum bid price of $1.00. The Class A Common
Stock is subject to being de-listed from The Nasdaq SmallCap
Market (the "SmallCap Market") because the minimum closing
bid price of $1.00 had not been sustained for at least ten
consecutive trading days. On August 20, 1998, the closing
bid price of the Class A Common Stock was $.25 per share,
the Company's public float was approximately 4,720,419 shares
and the market value of such public float was approximately
$1,180,105 based upon such closing bid price. While the
Company currently does not meet the $1.00 minimum bid price
requirement of the SmallCap Market, the Reverse Split will
result in a proportional adjustment in the trading price
per share of the New Common Stock.
On July 8, 1998, the Company was also notified by Nasdaq
that it no longer meets the Nasdaq requirement that it
maintain: (i) net tangible assets of $2 million; (ii) a
market capitalization of $35 million; or (iii) net income of
$500,000 in two of the most recently completed fiscal year.
On July 10, 1998, the Company met with Nasdaq officials to
review the Company's plans for achieving compliance
through the implementation of the Reorganization Plan,
including the Bridge Financing, the Warrant Exchange Offer
and the Standby Public Offering, and submitted a formal
proposal on July 22, 1998 to Nasdaq for achieving compliance
(the "Listing Proposal").
The Listing Proposal indicates that the Company expects
that, with the proceeds of the Warrant Exchange Offer and
the Bridge Financing, it should meet the "net tangible
asset" requirement. There can be no assurance, however,
that either of these financing efforts will be successful.
In addition, on July 21, 1998, the Company was notified that
it no longer meets the Nasdaq requirement that it maintain a
minimum of two active market makers in the Company's Class A
and Class B Warrants (the "Existing Warrants"). The Company
informed the Nasdaq that, in its opinion, the public
announcement that the Company intended to engage in the
Warrant Exchange Offer had negatively affected the market
for the Existing Warrants and that once a Registration
Statement on Form S-4 is filed, it expected a resumption of
an active market. The Company believes that it satisfies
all other Nasdaq listing criteria.
The Board believes that maintaining a Nasdaq listing for the
Class A Common Stock is important to the Company and its stockholders
and that it is in the best interest of the Company and its stockholders
that the Reverse Split be effected in order to permit the
Company to do so. There can be no assurance, however, that
the Company will meet in the future all of the standards for
the SmallCap Market.
The effect of the Reverse Split will be to decrease the
number of issued and outstanding shares of Common Stock from
8,480,258 shares of Existing Common as of the date of this
Information Statement to approximately 1,696,052 shares of
New Common Stock as of the Effective Date. The relative effect of
the Reverse Split on each of the classes of Common Stock and
Existing Warrants is as follows:
Outstanding Shares
Authorized ----------------------------
Security Shares Before Split After Split
- ------------------ ------------ ------------ -----------
Class A Common 40,000,000 4,720,419 944,084
Class B Common 2,000,000 991,332 198,266
Class E-1 Common 2,000,000 1,384,253 276,851
Class E-2 Common 2,000,000 1,384,254 276,851
Preferred Stock 5,000,000 0 0
Series A Preferred 50,000 0 0
Number Outstanding/Exercise Price
------------------------------------------
Warrants/Options Before Split After Split
- ------------------ --------------- -------------------
Class A Warrants 4,714,772/$5.82 942,954/$29.10
Class B Warrants 3,782,604/$7.83 756,521/$39.15
Employee and
Director Options(1) 808,000/$1.87-7.50 1,526,400/$.06-37.50
_________________________
(1) Includes post-Reverse Split options issuable pursuant to the
ICC and the Company's combined stock option plans.
No assurance can be given, however, that the market price of
the New Common Stock will rise in proportion to the
reduction in the number of outstanding shares resulting from
the Reverse Split. The Company does not anticipate any change
in the Company's status as a reporting company for federal
securities law purposes as a result of the Reverse Split.
The New Common Stock issued pursuant to the Reverse Split
will be fully paid and non-assessable. All shares of New
Common Stock will have the same par value, voting rights and
other rights as shares of the Existing Common Stock have.
Stockholders of the Company do not have preemptive rights to
acquire additional shares of Common Stock which may be
issued.
Stock Certificates and Fractional Shares
The Reverse Split will occur on the Effective Date without
any further action on the part of stockholders of the
Company and without regard to the date or dates on which
certificates representing shares of Existing Common are
actually surrendered by each holder thereof for certificates
representing the number of shares of the New Common Stock which
each such stockholder is entitled to receive as a
consequence of the Reverse Split. After the Effective Date
of the Reverse Split, the certificates representing shares
of Existing Common will be deemed to represent one-fifth the
number of shares of New Common Stock. Certificates representing
shares of New Common Stock will be issued in due course as old
certificates are tendered for exchange or transfer to
American Stock Transfer & Trust Company, 6201 15th Avenue,
3rd Floor, Brooklyn, New York, NY 11219, Attention:
Reorganizations (the "Exchange Agent" or "Transfer Agent"),
telephone number: (212) 921-8247.
No fractional shares of New Common Stock will be issued and, in
lieu thereof, stockholders holding a number of shares of
Existing Common not evenly divisible by five, upon surrender
of their old certificates, will receive cash in lieu of
fractional shares of New Common Stock. Such cash payment will not
be made until a stockholder's certificates of Existing
Common are presented to the Exchange Agent. The price
payable by the Company for those shares of Existing Common
which are not divisible by five will be equal to the product
of (a) the number of such shares which cannot be exchanged
for a whole number of shares of New Common Stock and (b) the
average of the closing price of one share of Existing Common
as reported on the Nasdaq SmallCap Market for the 10
business days immediately preceding the Effective Date of
the Reverse Split for which transactions in the Existing
Common are reported.
Source of Funds; Number of Holders
The funds required to purchase the fractional shares are
available and will be paid from the current cash reserves of
the Company. The Company cannot predict with certainty the
number of fractional shares or the total amount that the
Company will be required to pay for fractional share
interests. It is not anticipated, however, that the funds
necessary to effect the cancellation of fractional shares
will be material.
As of the fiscal year ended July 31, 1998, there were
approximately 150 record holders of Class A Common
Stock, and approximately 20 record holders of Class B Common
Stock. The Company does not anticipate that, as a result of
the Reverse Split, the number of holders of record owners of
Existing Common or New Common Stock will change significantly.
Exchange of Stock Certificates
On or around the Effective Date, the Company will send to
each stockholder of record as of the Effective Date a
transmittal form (the "Transmittal Form") that each such
stockholder of record should use to transmit certificates
representing shares of Existing Common ("Old Certificates")
to the Exchange Agent for exchange or transfer. The
Transmittal Form contains instructions for the surrender of
Old Certificates to the Exchange Agent in exchange for
certificates representing the appropriate number of whole
shares in New Common Stock. No new certificates will be issued to
a stockholder until such stockholder has surrendered all Old
Certificates together with a properly completed and executed
Transmittal Form to the Exchange Agent.
Upon proper completion and execution of the Transmittal Form
and its return to the Exchange Agent together with all of a
stockholder's Old Certificates and/or an Affidavit of Loss
for any lost or destroyed certificates, as applicable, that
stockholder will receive a new certificate or certificates
representing the number of whole shares of New Common Stock into
which the shares of Common Stock represented by the Old
Certificates are being converted as a result of the Reverse
Split. Until surrendered to the Exchange Agent, Old
Certificates retained by stockholders will be deemed for all
purposes, including voting and payment of dividends, if any,
to represent the number of whole shares of New Common Stock to
which such stockholders are entitled as a result of the
Reverse Split. Stockholders should not send their Old
Certificates to the Exchange Agent until after the Effective
Date. Shares of Existing Common surrendered after the
Effective Date will be replaced by certificates representing
shares of New Common Stock as soon as practicable after such
surrender.
Certificates representing shares of Existing Common which
contain a restrictive legend will be exchanged for New
Common Stock with the same restrictive legend. As applicable, the
time period during which a stockholder has held the Existing
Common will be included in the time period during which such
stockholder actually holds the New Common Stock received in
exchange for such Existing Common for the purposes of
determining the term of the restrictive period applicable to
the New Common Stock.
Federal Income Tax Consequences
Except as described below with respect to cash received in
lieu of fractional share interests, the receipt of New
Common Stock in the Reverse Split should not result in any taxable
gain or loss to stockholders for federal income tax
purposes. The tax basis of New Common Stock received as a result
of the Reverse Split (when added to the basis for any
fractional share interests to which a stockholder is
entitled) will be equal, in the aggregate, to the basis of
the Existing Common exchanged for New Common Stock. The per share
tax basis of the New Common Stock is based on the tax basis of the
Existing Common for which the New Common Stock is exchanged. For
purposes of determining whether short-term or long-term
capital gains treatment will be applied to a stockholder's
disposition of New Common Stock subsequent to the Reverse Split, a
stockholder's holding period for the shares of Existing
Common will be included in the holding period for the New
Common Stock received as a result of the Reverse Split.
A stockholder who receives cash in lieu of fractional shares
of New Common Stock will be treated as first receiving such
fractional shares and then receiving cash as payment in
exchange for such fractional shares of New Common Stock and,
except for dealers, will recognize capital gain or loss in
an amount equal to the difference between the amount of cash
received and the adjusted basis of such fractional shares.
THE DISCUSSION SET FORTH ABOVE CONCERNING CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT IS INCLUDED
HEREIN FOR GENERAL INFORMATION ONLY. ALL STOCKHOLDERS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL,
STATE, LOCAL OR FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM
WHICH COULD RESULT FROM THE REVERSE SPLIT.
2. Series A Preferred Stock
The Certificate of Incorporation has also been amended by
the Consent to clarify the description of the authorized and
classified shares of Preferred Stock by deleting references
to the prior classification of 50,000 shares of that certain
9% Series A Cumulative Preferred Stock which are no longer
outstanding or authorized in accordance with the terms of
their classification in the Certificate of Incorporation.
No additional shares of Preferred Stock are being authorized
by the Consent. The Certificate of Incorporation retains
the authorization of 5,000,000 shares of Preferred Stock.
Under the Certificate of Incorporation, the Board of
Directors has the authority to issue up to 5,000,000 shares
of Preferred Stock in one or more series and to fix the
price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of
shares constituting a series or the designation of such
series, without any further action or approval of the
stockholders. The issuance of Preferred Stock, while
providing desired flexibility in connection with possible
acquisitions and other corporate purposes, could have the
effect of delaying, deferring or preventing a change in
control of the Company without further action or approval of
the stockholders and may adversely affect the market price
of, and the voting and other rights of, the holders of
Common Stock.
There are no shares of Preferred Stock currently
outstanding, and the Company has no present plans to issue
any shares of Preferred Stock. The Company anticipates, however,
that future financing may involve the issuance and sale of
Preferred Stock. The text of the amendments
relating to the Reverse Split and the revised Preferred
Stock section of Article FOURTH of the Certificate of
Incorporation adopted by the written consent of the
Consenting Stockholders can be found in the Form of
Certificate of Amendment to the Amended and Restated
Certificate of Amendment to the Company, which is annexed
hereto as Appendix A.
3. Name Change
The Board has approved the Amendment to the Certificate of
Incorporation changing the name of the Company to "Internet
Commerce Corporation." By written consent of the
Consenting Stockholders dated as of June 26, 1998, a
resolution approving the change in name was approved. The
text of the name change resolution can be found in the Form of
Certificate of Amendment of the Certificate of Incorporation
of the Company which is annexed hereto as Appendix A.
The Board proposed the change in the name of the Company to
reflect the change in focus of the Company's business away
from its discontinued products and services to an exclusive
pursuit of the commercial development and marketing of the
electronic commerce capabilities of the CommerceSense System
developed by ICC. The Board believes that the "Internet
Commerce Corporation" name is a positive asset which will be
helpful to the Company in the development of its business.
Effectiveness of the Certificate Amendments
The Company reserves the right, upon notice to stockholders,
to abandon or modify the proposed Certificate Amendments,
including the Reverse Split, at any time prior to the filing
of the Amendments pursuant to the provisions of the DGCL.
B. BY-LAW AMENDMENTS
1. Classified Board of Directors
The Board has approved the By-Law Amendments changing the
existing terms of the directors so that after
the next Annual Meeting of the Stockholders not all of the
directors will stand for election at any annual or special
meeting of the stockholders called for the purpose of
electing directors. Instead, only the members of the class
of directors whose designated term is expiring shall stand
for election at such meetings. By written consent of the
Consenting Stockholders dated as of June 26, 1998, a
resolution approving an amendment to the By-Laws striking
the existing provisions in Section 2 of ARTICLE III which
provides that each of the directors serve for period of [one
year or until the next annual meeting] and substituting
therefor provisions that classify the directors into three
(3) classes.
The directors in each such class shall serve, after the
initial classified terms, for a period of three (3) years.
To initiate the staggered terms of the three (3) classes of
directors, the first class (designated as Class I) shall
serve for an initial term of one year, the second class
(designated as Class II) shall serve for an initial term of
two (2) years and the third class (designated as Class III)
shall serve for an initial term of three (3) years. The
text of the By-Laws can be found in the Form of By-Law
Revisions which is annexed hereto as Appendix B.
Purpose and Effect of the Classified Board
The Board proposed the change to the terms of the directors
to provide the Company with a mechanism of achieving
continuity of the Board. Because only one of the three
classes of a classified Board will be elected annually, at
least two annual stockholders' meetings, instead of one,
will be required to effect a change in the control of the
Board through the normal election processes. The classified
board amendment would require a person seeking to acquire
control of the Company to wait up to two years to obtain
control of the Board even though that person has acquired
ownership of a majority or controlling minority interest in
the Company.
The classified board amendment would thus make it more
difficult and time-consuming for any individual or entity
who accumulates a substantial stock or voting position in
the Company to obtain control of the Board or to effect
change in the Company's day-to-day operations. It would
therefore reduce the vulnerability of the Company to
takeover proposals that are not in the best interests of the
Company or its stockholders. The amendment further provides
that any vacancies which occur during the year may be filled
by the board of directors to serve for the duration of the
remaining term and pursuant to Section 141(k)(1) of the DGCL,
any director or the entire board of directors may be removed
only with cause by a majority of the shares then entitled to vote.
2. Other By-Law Changes
The Board of Directors has amended the Company's By-Laws to
clarify the number, qualifications and term of office of the
officers of the Company, as well as the duties,
responsibilities and compensation of such officers. The
changes were made by the Board to more closely conform the
provisions relating to the Company's officers to those of
most Delaware corporations.
The changes outlined the duties and responsibilities of the
Company's chairman, chief executive and operating officers,
president, and secretaries and treasurers. The text of the
By-Law Amendments are included as Appendix B to this
Information Statement.
C. STOCK OPTION PLAN AMENDMENT APPROVAL
The Board has approved an increase in the number of shares
of Class A Common Stock that may be purchased with options
granted pursuant to the 1994 Stock Option Plan from
2,000,000 to 9,800,000 shares. By written consent of the
Consenting Stockholders dated as of June 26, 1998, a
resolution approving the amendment of the 1994 Stock Option
Plan to effect the increase was approved.
Purpose of the Increase in Authorized Shares
The Board proposed the change to increase the number of
shares available to underlying options granted under the
1994 Stock Option Plan because it has identified the
necessity for the Company to issue an amount of options to
its employees and directors which exceeds the number of
options currently available, and to accommodate the assumption of the
Stock Option Plan adopted by ICC. The Company's most important
asset is the strength of the employees that have developed
and will continue to develop the CommerceSense System. The
Board believes that it is essential that the Company be in
the position to issue a sufficient number of options to
attract and retain its employees. Upon consummation of the
Reverse Split, ICC Merger and Stock Option Plan Amendment,
the Company and ICC will have combined its respective stock
option plans. As a result, there will be 1,526,400 options
to purchase shares of Class A Common Stock.
Pursuant to the 1994 Stock Option Plan, as recently amended
by the Company's stockholders in 1997, (the "1994 Plan") the
Company may grant options to purchase an aggregate of
2,000,000 shares of Class A Common Stock. On effectiveness
of the resolution of the Consent, the number of shares authorized
under the 1994 Plan will be increased to 9,800,000.
The 1994 Plan provides for the grant to key employees
of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, and for
the grant of non-qualified stock options to eligible
executive officers, directors and key employees of the
Company. The 1994 Plan, which expires in 2004, is
administered by the Board of Directors or a committee
designated by the Board of Directors. The purposes of the
1994 Plan are to ensure the retention of existing executive
personnel, key employees and consultants of the Company, to
attract and retain new executive personnel, key employees
and consultants and to provide additional incentive by
permitting such individuals to participate in the ownership
of the Company, and the criteria to be utilized by the Board
of Directors or committee in granting options pursuant to
the 1994 Plan will be consistent with these purposes.
Options granted under the 1994 Plan may be exercisable for a
period of up to 10 years from the date of grant at an
exercise price which is not less than the fair market value
of the Class A Common Stock on the date of the grant, except
that the term of an incentive stock option granted under the
1994 Plan to a stockholder owning more than 10% of the
outstanding Class A Common Stock may not exceed five years
and its exercise price may not be less than 110% of the fair
market value of the Class A Common Stock on the date of the
grant. To the extent that the aggregate fair market value,
as of the date of grant, of the shares of which incentive
stock options become exercisable for the first time by an
optionee during the calendar year exceeds $100,000, the
portion of such option which is in excess of the $100,000
limitation will be treated as a non-qualified stock option.
Upon the exercise of an option, payment may be made by cash,
check or any other means that the Board or the committee
determines. No option may be granted under the 1994 Plan
after September 2004. The options are non-transferable
during the life of the option holder.
As of April 30, 1998, options to purchase 808,000 shares of Class A
Common Stock have been granted to various employees and directors.
These options are outstanding under the 1994 Plan and the
Company's 1992 Stock Option Plan and vest at varying times
from the date of grant. Options to purchase a total of 1,172,000
shares of Class A Common Stock remain available for grant
under the 1994 Plan.
D. THE ICC MERGER
The Board has approved the merger of ICC into the Company
pursuant to Section 251 of the DGCL. By written consent,
dated as of June 26, 1998, the Consenting Stockholders
approved and adopted the Plan and Agreement of Merger of
Infosafe Systems, Inc. and Internet Commerce Corporation
(the "Merger Agreement"). Pursuant to the Merger Agreement,
the three holders of the 16.7% shares of ICC not presently
owned by the Company will receive, in exchange for each of
their shares of ICC stock, 16.72474 shares of Class A Common
Stock.
In addition, the ICC Stock Option Plan (the "ICC Plan")
shall become a plan of the Company and the options granted
thereunder shall become options to purchase Class A Common
Stock at the same ratio. A total of 1,672,474 (334,495 post
Reverse Split) shares of Class A Common Stock will be issued
in exchange for ICC stock at the time the merger becomes is
effective. Assumption of the ICC Plan will result in an
aggregate of options outstanding, which will vest as
function of time only, for the purchase of Class A Common
Stock at a price of $.06 per share. In addition, the
Company will assume options exercisable by the founding
principals, based on future, substantial increasing market
prices for Common Stock, which will result in a maximum of
3,136,645 shares becoming purchasable at $.06 per share.
Purpose of the ICC Merger
The Board proposed the merger of ICC into the Company to
reflect the reality of the Company's business. All the
Company's other products and lines of business have been
terminated in order to focus all of the Company's resources
on the Internet related Electronic Commerce processing
business of ICC, which is known as the CommerceSense System.
The decision to proceed with the ICC Merger was made after
extended efforts to finance ICC independently, which were
unsuccessful because, among other things, potential
investors were concerned about the complex capital structure
of the Company impairing the entrepreneurial nature of the
CommerceSense System business opportunity. The ICC Merger
is in the view of the Board the most efficient means of
acquiring the 16.7% share of ICC not already owned by the
Company.
Appendix A
Form of Certificate of Amendment to the Amended and Restated Certificate
of Incorporation of Infosafe Systems, Inc.
Infosafe Systems, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of
the State of Delaware (the "DGCL"), does hereby certify as
follows:
1. The present name of the Corporation is Infosafe Systems,
Inc. and its original certificate of incorporation was filed
with the office of the Secretary of the State of Delaware on
November 18, 1991.
2. This Certificate of Amendment to the Amended and Restated
Certificate of Incorporation was duly adopted by the Board
of Directors of the Corporation (the "Board") and by 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 in accordance with
Sections 228, 242 and 245 of the DGCL.
3. This Certificate of Amendment to the Amended and Restated
Certificate of Incorporation amends the certificate of
incorporation of the Corporation, as heretofore amended (the
"Certificate of Incorporation").
4. Upon the filing (the "Effective Time") of this
Certificate of Incorporation pursuant to the DGCL, the
number of authorized shares of the Corporation's Class A
Common Stock shall be 40,000,000, Class B Common Stock
2,000,000, Class E-1 Common Stock 2,000,000, Class E-2
Common Stock 2,000,00, Preferred Stock 5,000,000, and Series
A Preferred 50,000 shares.
5. The text of the Certificate of Incorporation is hereby
amended by striking out Article First thereof and by
substituting in lieu of said Article as follows:
FIRST: The name of the corporation is
INTERNET COMMERCE CORPORATION, INC.
6. The text of the Certificate of Incorporation is hereby
amended by striking out Article Fourth, Sections I and III
in their entirety and replacing in lieu of said Sections of
Article Fourth as follows:
FOURTH:
I. Capitalization.
a. The aggregate number of shares which the Corporation shall
have authority to issue is Fifty One Million (51,000,000) shares,
consisting of (i) Forty Million (40,000,000) shares of Class A
Common Stock, $.01 par value per share; (ii) Two Million
(2,000,000) shares of Class B Common Stock, $.01 par value per
share; (iii) Two Million (2,000,000) shares of Class E-1 Common
Stock, $.01 par value per share; (iv) Two Million (2,000,000)
shares of Class E-2 Common Stock, $.01 par value per share; and
(v) Five Million (5,000,000) shares of preferred stock, $.01 par
value per share.
b. As of the Consent Effective Date ("Reverse Split Date"),
each five (5) shares of Class A Common Stock and Class B Common
Stock then issued and outstanding was, without any further action
on the part of the Corporation or any stockholder, automatically
changed and reclassified into one share of Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock and Class E-2 Common
Stock as the case may be, and from and after the Reverse Split
Date each certificate which theretofore represented any five (5)
shares of the then issued and outstanding Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock, or Class E-2 Common
Stock shall automatically be deemed to represent one share of
Class A Common Stock, Class B Common Stock, Class E-1 Common
Stock, or Class E-2 Common Stock as the case may be (the "Reverse
Stock Split").
c. No fractional shares of Common Stock shall be issued in
connection with the Reverse Stock Split and each holder of shares
shall be entitled to receive an amount equal to the fair value of
any fractional interests with respect to the shares of Common
Stock.
III. Preferred Stock. The Board of Directors of the
Corporation is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares
of Preferred Stock in series designated by the Board of
Directors pursuant to this Section III.
A. Series of Preferred Stock
1. Designation of Series of Preferred Stock. The Board of
Directors is hereby expressly authorized, by resolution or
resolutions thereof, to provide for, designate and issue, out of
the 5,000,000 authorized but undesignated and unissued shares of
Preferred Stock, one or more series of Preferred Stock, subject
to the terms and conditions set forth herein. Before any shares
of any such series are issued, the Board of Directors shall fix,
and hereby is expressly empowered to fix, by resolution or
resolutions, the following provisions of the shares of any such
series:
(a) the designation of such series, the number of shares to
constitute such series and the stated value thereof, if different
from the par value thereof;
(b) whether the shares of such series shall have voting rights
or powers, in addition to any voting rights required by law, and,
if so, the terms of such voting rights or powers, which may be
full or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates,
the conditions and dates upon which such dividends shall be
payable, and the preference or relation which such dividends
shall bear to the dividends payable on any shares of stock or any
other class or any other series of this class;
(d) whether the shares of such series shall be subject to
redemption by the Corporation and, if so, the times, prices and
other conditions of such redemption;
(e) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the
voluntary or involuntary liquidation, dissolution or winding up,
or upon any distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent
to and manner in which any such retirement or sinking fund shall
be applied to the purchase or redemption of the shares of such
series for retirement or other corporate purposes and the terms
and provisions relative to the operation thereof;
(g) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or any
other series of this class or any other securities and, if so,
the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any
other terms and condition or exchange;
(h) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment
of dividends or the making of other distributions on, and upon
the purchase, redemption or other acquisition by the Corporation
of, the Common Stock or shares of stock of any other class or any
other series of this class;
(i) the conditions or restrictions, if any, to be effective
while any shares of such series are outstanding upon the creation
of indebtedness of the Corporation upon the issue of any
additional stock, including additional shares of such series or
of any other series of this class or of any other class; and
(j) any other powers, designations, preferences and relative,
participating, optional or other special rights, and any
qualifications, limitations or restrictions thereof.
2. Additional Series of Preferred Stock The powers,
designations, preferences and relative, participating,
optional or other special rights of each series of
Preferred Stock, and the qualifications, limitations
or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
The Board of Directors is hereby expressly authorized from
time to time to increase (but not above the total number of
authorized shares of Preferred Stock) or decrease (but not
below the number of shares thereof then outstanding) the
number of shares of stock of any series of Preferred Stock
designated as any one or more series of Preferred Stock
pursuant to this Article.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Incorporation to be executed this 20th day of
August, 1998.
INTERNET COMMERCE CORPORATION, INC.
By: ____________________________
Arthur R. Medici
President and Chief Executive Officer
Appendix B
Selected By-Law Revisions
Article II
Board of Directors
***
Section 2. Number, Qualifications, Election and Term of
Office. The number of directors which shall constitute the
whole board shall be no less than three (3) and no greater
than seven (7) with such number to be determined by resolution
of the board of directors. The directors shall be elected
at the annual meeting of stockholders at which his class of
directors is slated to stand for reelection, except as
provided in this Section 2(c), and each director shall hold
office until the next such annual meeting of stockholders
and thereafter until his successor is duly elected and qualified,
unless a prior vacancy shall occur by his death, resignation
or removal from office. Directors need not be stockholders.
(b) The Board of Directors shall be divided into three
classes (denominated Class I, Class II and Class III), as
nearly equal in number as evenly as possible, with the term
of office of the Class I Directors to expire at the 2001
annual meeting of the stockholders, the term of office of
the Class II Directors to expire at the 1999 annual meeting
of stockholders, and the term of office of the Class III
Directors to expire at the 2000 annual meeting of
stockholders. At each subsequent annual meeting of stockholders,
successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term.
The Class I Director is Arthur R. Medici, Class II Director
is Charles C. Johnston, and Class III Director is Robert S.
Christie.
(c) Subject to the rights of the holders of any class of
Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized
number of directors or any vacancies on the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall
be filled by a majority vote of the stockholders or the
directors then in office. A director so chosen shall hold
office for the balance of the term then remaining. No
decrease in the number of directors constituting the Board
of Directors shall affect the tenure of office of any
director.
(d) Whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a
class, to elect one or more directors of the Corporation,
the Board of Directors shall consist of said directors so
elected in addition to the number of directors fixed as
provided above in this Article or in the Bylaws.
Notwithstanding the foregoing, and except as otherwise may
be required by law, whenever the holders of any one or more
series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the
Corporation, the terms of the director or directors elected
by such holders shall expire at the next succeeding annual
meeting of stockholders.
***
Section 12. Removal of Directors. Subject to the rights of
the holders of any class separately entitled to elect one or
more directors, any director, or the entire Board of
Directors, may be removed from office at any time, but only
for cause and then only by the affirmative vote of the
holders of at least a majority of the combined voting power
of all classes of shares of capital stock entitled to vote
in the election for directors voting together as a single
class.
Article IX
OFFICERS
***
Section 1. Number and Qualifications. The officers of
the Corporation shall include, President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer,
one or more Vice Presidents, a Secretary, and a Treasurer.
The Chairman of the Board of Directors shall be chosen by
the Board of Directors at its first meeting after the
annual meeting of the stockholders.
Section 2. Resignation. Any Officer of the Corporation may
resign at any time by giving written notice of his
resignation to the Board, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take
effect at the time specified
Section 3. Removal of Officers; Vacancies. The offices of
the corporation shall hold office until their successors are
elected and qualified. Any officer elected or appointed by
the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors.
Any vacancy occurring in any office of the corporation shall
be filled by the board of directors.
Section 4. Salaries. The salaries of all officers and
agents of the corporation shall be fixed by the board of
directors.
Section 5. The Chairman of the Board. The Chairman of the
Board of Directors, when present, shall preside at all
meeting of stockholders and Directors. He shall perform such
other duties as may be assigned to him from time to time by
the Board of Directors or the Executive Committee.
Section 6. The President. The President shall handle
general and active management of the business of the
Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The
President may execute bonds, mortgages and other
contracts requiring a seal under the seal of the
Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing
and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the
Corporation.
Section 7. The Chief Executive Officer. The Chief Executive
Officer shall be the chief executive officer of the
Corporation. He shall perform such other duties as may be
assigned to him from time to time by the Board of Directors
or the Executive Committee.
Section 8. The Chief Operating Officer. The Chief
Operating Officer shall be responsible to the Board of
Directors for the formulation and presentation to the Board
of the financial and business policies of the corporation
and programs for the implementation thereof by the
appropriate executives of the Corporation. He shall perform
such other duties as may be assigned to him from time to
time by the Board of Directors or the Executive Committee.
Section 9. The Chief Financial Officer. The Chief
Financial Officer shall handle the general and active
management of the financial affairs of the Corporation and
shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 10. The Secretary. The Secretary shall attend
all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings
of the Corporation and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall
be. He shall have the custody of the corporate seal of the
Corporation and he, shall have authority to affix the same to
any instrument requiring it and, when so affixed, it may be
attested by his signature. The Board of Directors may give
general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature.
