CONFORMED SUBMISSION TYPE: PRE 14C
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19980702
FILED AS OF DATE: 19980702
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: INFOSAFE SYSTEMS, INC.
CENTRAL INDEX KEY: 0000894738
STANDARD INDUSTRIAL CLASSIFICATION: 7374 - Data Processing Service
IRS NUMBER: 13-3645702
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0731
FILING VALUES:
FORM TYPE: PRE 14C
SEC ACT:
SEC FILE NUMBER: 000-24996
FILM NUMBER: 98501738
BUSINESS ADDRESS:
STREET 1: 805 THIRD AVENUE
CITY: NEW YORK
STATE: NY
ZIP: 10022
BUSINESS PHONE: 2128677200
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14C OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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
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INFOSAFE SYSTEMS, INC.
(Name of Registrant As Specified In Its Charter)
-----------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[x] 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
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2) Aggregate number of securities to which transaction
applies:
7,029,746
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3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
$.1875
------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$815,833
------------------------------------------------------
5) Total fee paid:
$163.17
------------------------------------------------------
[ ] 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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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1998
PRELIMINARY COPY -- SUBJECT TO CHANGE
INFOSAFE SYSTEMS, INC.
805 THIRD AVENUE, 9TH FLOOR
NEW YORK, NEW YORK 10022
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INFORMATION STATEMENT
FOR ACTION BY WRITTEN CONSENT OF MAJORITY STOCKHOLDERS
--------------------------------------------------------------
INTRODUCTION
This Information Statement is being furnished to the holders of
shares of Class A Common Stock, $.01 par value having one (1)
vote each (the "Class A Common Stock"); Class B Common Stock,
$.01 par value having six (6) vote each (the "Class B Common
Stock"); Class E-1 Common Stock, $.01 par value having one (1)
vote each (the "Class E-1 Common Stock") and Class E-2 Common
Stock, $.01 par value having one (1) vote each (the "Class E-2
Common Stock") (the Class A Common Stock, Class B Common Stock,
Class E-1 Common Stock and the Class E-2 Common Stock are
referred to herein together as the "Common Stock" and the shares
as "Shares"), of Infosafe Systems, Inc., a Delaware corporation
(the "Company"), 805 Third Avenue, New York, New York 10022, in
connection with the approval and adoption of: (a) amendments (the
"Certificate Amendments") to the Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation") that:(i)
effect a reverse split (1 new share for every 5 old shares) of
the Corporation's Class A Common Stock, Class B Common Stock,
Class E-1 Common Stock, and Class E-2 Common Stock,
(ii) delete the references to 50,000 shares of 9% Series A
Cumulative Convertible Preferred Stock for which authorization
has lapsed (iii) increase to the number of authorized shares of
Preferred Stock from 4,950,000 to 5,000,000 and (iv) change of
the Corporation's name to "Internet Commerce Corporation;" (b)
amendments (the "By-Laws Amendments") to the By-Laws of the
Corporation (the "By-Laws")that: (x) effect the implementation of
a "staggered" Board of Directors and (y) add language that
specifies the duties and responsibilities of certain officers
including Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, Chief Technology Officer and Chief Marketing
Officer; (c) the Corporation's Amended and Restated Stock Option
Plan that, inter alia, increases the number of shares authorized
thereunder and effects contains certain other provisions not
present in the Corporation's 1994 Stock Option Plan and (d) the
agreement of merger of ICC into the Corporation 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").
As of June 26, 1998, there were 8,480,248 shares of Common Stock
outstanding with a total combined voting power of 13,436,858 and
the Voting Trust dated February 12, 1997 (the "Voting Trust"),
Arthur R. Medici and Alan N. Alpern (collectively, the
"Consenting Shareholders"), owned shares of Common Stock with a
total combined voting power of 7,062,622 (representing
approximately 52.5% of the votes of the outstanding Shares).
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.
On June 26, 1998, the Consenting Shareholders executed and
delivered a written consent adopting the Consent Actions. By its
terms, the actions to be effectuated by such written 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. No vote or further
action of stockholders of the Corporation is required in order to
adopt the Consent Actions. This Information Statement is
intended to serve as notice to the Corporation's stockholders of
such action by written consent and of the adoption of the Consent
Actions. It is being mailed on or about July 13, 1998 to all
holders of record of Common Stock as of June 26, 1998.
WE ARE NOT ASKING YOU FOR A CONSENT OR PROXY AND YOU ARE
REQUESTED NOT TO SEND US A CONSENT OR PROXY.
A. CERTIFICATE AMENDMENTS
By written consent, dated as of June 26, 1998, and executed by
the Consenting Shareholders, the following resolutions of
stockholders of the Corporation were adopted:
RESOLVED, that the name of the Corporation shall be
changed to "Internet Commerce Corporation," and that
accordingly the Certificate of Incorporation of the
Corporation is hereby amended to effect such change by
striking out Article First thereof and by substituting
in lieu of said Article the following new Article:
"FIRST:
I. NAME
(A) The name of the Corporation is `Internet Commerce
Corporation.;'" and further, it is,
RESOLVED, that the number of outstanding shares of
Class A Common Stock and the Class B Common Stock be
reduced by means of a "Reverse Stock Split" (as defined
herein) and that the references to the 9% Series A
Cumulative Convertible Preferred Stock that are no
longer authorized in accordance with their terms be
deleted. In accordance with the foregoing, the
Certificate of Incorporation of the Corporation is
hereby amended by striking out Article Fourth thereof
in its entirety and by substituting in lieu of said
Article the following new Article:
"FOURTH:
II. CAPITAL STOCK; REVERSE STOCK SPLIT
(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 shares of Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock and
Class E-2 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
(1) 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. CLASS A COMMON STOCK, CLASS B COMMON STOCK, CLASS E-1 AND
CLASS E-2 COMMON STOCK.
(A) General. The designations, preferences,
limitations and relative rights of the Class A
Common Stock and the Class B Common Stock, the
Class E-1 Common Stock and the Class E-2 Common
Stock shall be in all respect identical, except as
stated in this Certificate of Incorporation or as
otherwise required by law.
(B) Voting Rights.
(1) At each meeting of stockholders of the
Corporation and upon each proposal presented
at such meeting, every holder of Class A
Common Stock, Class E-1 Common Stock and
Class E-2 Common Stock shall be entitled to
one vote in person or by proxy for each share
of Class A Common Stock, Class E-1 Common
Stock and Class E-2 Common Stock standing in
his or her name on the stock transfer records
of the Corporation and every holder of Class
B Common Stock shall be entitled to six votes
in person or by proxy for each shares of
Class B Common Stock standing in his or her
name on the stock transfer records of the
Corporation.
(2) Except as provided in this Paragraph (B) or
Paragraphs (G) and (H) of this Section II as
may be otherwise required by law, the holders
of Class A Common Stock, Class B Common Stock
and Class E-1 and E-2 Common Stock shall vote
together as a single class with respect to
all matters.
(3) Except as may be otherwise required by law or
stated in any Preferred Stock Designation (as
defined in Section III of this Article
Fourth), the holders of Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock
and Class E-2 Common Stock shall have the
exclusive right to vote for the election of
directors and for all other purposes, each
holder of the Class A Common Stock, Class B
Common Stock, Class E-1 Common Stock and
Class E-2 Common Stock being entitled to vote
as provided in this Paragraph (B) of this
Section II.
(C) Dividends and Distributions. Except as provided in
paragraph H, and subject to the rights of the
holders of Preferred Stock, and subject to any
other provisions of this Certificate of
Incorporation, as it may be amended from time to
time, holders of Class A Common Stock, Class B
Common Stock, Class E-1 Common Stock and Class E-2
Common Stock shall be entitled to receive such
dividends and other distributions in cash, in
property or in shares of the Corporation as may be
declared thereon by the Board of Directors from
time to time out of assets or funds of the
Corporation legally available therefor; provided,
however, that no cash, property or share dividend
or distribution may be declared or paid on the
outstanding shares of either the Class A Common
Stock, the Class B Common Stock, the Class E-1
Common Stock or the Class E-2 Common Stock, unless
an identical per share dividend or distribution is
simultaneously declared and paid on the
outstanding shares of the other such class of
stock; provided, further, however, that a dividend
of shares may be declared and paid in Class A
Common Stock to holders of Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock and
Class E-2 Common Stock if the number of shares
paid per share to holders of Class A Common Stock,
to holders of Class B Common Stock, to holders of
Class E-1 Common Stock and to holders of Class E-2
Common Stock shall be the same. If the
Corporation shall in any manner subdivide, combine
or reclassify the outstanding shares of Class A
Common Stock, Class B Common Stock, Class E-1
Common Stock or Class E-2 Common Stock, the
outstanding shares of the other such class shall
be subdivided, combined or reclassified
proportionally in the same manner and on the same
basis as the outstanding shares 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, have been subdivided, combined or
reclassified. A dividend in shares of Class A
Common Stock may be paid to the holders of shares
of any other class of the Corporation.
(D) Common Stock Subject to Priorities of Preferred
Stock. The Class A Common Stock, Class B Common
Stock, Class E-1 Common Stock and Class E-2 Common
Stock are subject to all the powers, rights,
privileges, preferences and priorities of the
Preferred Stock as may be stated in this
Certificate of Incorporation and in any Preferred
Stock Designation.
(E) Liquidation Rights. Upon liquidation, dissolution
or winding up of the Corporation, whether
voluntary or involuntary, and after the holders,
if any, of the Preferred Stock of each series
shall have been paid in full the amounts to which
they respectively shall be entitled, or a sum
sufficient for such payment in full shall have
been set aside, the remaining net assets of the
Corporation shall be distributed pro rata on a
share for share basis to the holders of the Class
A Common Stock, Class B Common Stock, Class E-1
Common Stock and Class E-2 Common Stock, to the
exclusion of the holders of the Preferred Stock.
(F) No Conversion of Class A Common Stock. The shares
of Class A Common Stock are not convertible into
or exchangeable for shares of Class B Common Stock
or any other shares or securities of the
Corporation.
(G) Conversion of Class B Common Stock.
(1) Optional Conversion. Each record holder of
Class B Common Stock is entitled, at any time
or from time to time, to convert any or all
of the shares of such holder's Class B Common
Stock into shares of Class A Common Stock at
the ratio of one share of Class A Common
Stock for each share of Class B Common Stock.
(2) Optional Conversion Procedures.
(a) Each conversion of shares pursuant to
Paragraph (G)(1) of this Section II
hereof shall be effected by the
surrender of the certificate or
certificates representing the shares to
be converted at the principal office of
the Corporation at any time during
normal business hours, together with a
written notice by the holder stating the
number of shares that such holder
desires to convert. Such conversion
shall be deemed to have been effected as
of the close of business on the date on
which such certificate or certificates
have been surrendered, and at such time,
the rights of any such holder with
respect to the converted shares of such
holder will cease and the person or
persons in whose name or names the
certificate or certificates for shares
are to be issued upon such conversion
will be deemed to have become the holder
or holders of record of such shares
represented thereby.
(b) Promptly after such surrender, the
Corporation will issue and deliver in
accordance with the surrendering
holder's instructions the certificate or
certificates for the Class A Common
Stock issuable upon such conversion and
a conversion and a certificate
representing any Class B Common Stock
which was represented by the certificate
or certificates delivered to the
Corporation in connection with such
conversion, but which was not converted.
(3) Automatic Conversion. Each share of Class B
Common Stock will convert automatically into
one share of Class A Common Stock upon the
sale or any other transfer thereof
(including, without limitation, conveyance
into a trust and transfer by the operation of
any will or the laws of descent and
distribution), except upon a sale or any
other transfer to a person who immediately
prior to such sale or transfer is a holder of
a share or shares of Class B Common Stock.
(4) Issuance Costs. The issuance of certificates
upon conversion of shares pursuant hereto
will be made without charge to the holder or
holders of such shares for any issuance tax
(except stock transfer tax) in respect
thereof or other costs incurred by the
Corporation in connection therewith.
(5) Reservation of Shares. Solely for the purpose
of issuance upon conversion of such shares as
herein provided, the Corporation shall at all
times reserve and keep available out of its
authorized but unissued shares of Class A
Common Stock such number of shares of Class A
Common Stock as are then issuable upon the
conversion of all outstanding shares of Class
B Common Stock.
(H) Class E Common Stock
(1) In General. The Class E-1 Common Stock and
Class E-2 Common Stock (collectively, "Class
E Common Stock") shall have all of the same
rights as the Class A Common Stock and Class
B Common Stock, except as specifically
provided herein. On liquidation of the
Corporation, each outstanding share of Class
E Common Stock shall have the same rights as
a share of Class A Common Stock. Whenever
any Class E Common Stock is outstanding, any
other corporate action, including but not
limited to any declaration of dividends
(whether in cash, property or securities),
distribution, repurchase, split or reverse
split, reorganization, recapitalization,
merger or consolidation, shall also affect
equally all shares of Class A Common Stock,
Class B Common Stock and Class E Common
Stock, except that any transaction that
results or would result in the holders of
Class E Common Stock holding cash, new
securities or other property (referred to
herein as the "Class E Distribution
Proceeds") shall be effected in such a
fashion that the cash, new securities or
other property issuable with respect to each
share of Class E Common Stock shall be held
in trust by the Corporation or by such other
person as it may appoint. Such trust shall
terminate at the Determination Date (as
defined below). During the period prior to
the Determination Date, the Class E Common
Stock itself (in addition to the Class E
Distribution Proceeds) shall remain subject
to the Escrow Conditions (as defined below),
so that the disposition of the Class E Common
Stock and corresponding Class E Distribution
Proceeds shall be subject to the same Escrow
Conditions. Any earnings of the cash, new
securities or other property held in such
trust shall be added to the corpus thereof,
all of which shall be distributed promptly
after the Determination Date, to the holders
of Class E Common Stock as of the
Determination Date, in proportion to their
holdings of Class E Common Stock, except that
if none of the Escrow Conditions (as defined
below) shall have been satisfied on or before
the Determination Date, then such corpus
shall revert to the Corporation.
(2) Determination Date. The Determination Date
shall be the earlier to occur of (i) the date
any of the Escrow Conditions are satisfied,
or (ii) March 31, 1999.
(3) E-1 Escrow Conditions.
The Escrow Conditions for the Class E-1
Common Stock shall be
(a) that the Corporation's "Income" (as
defined below) shall have equaled
or exceeded $4,400,000 (adjusted as
set forth below) for the fiscal
year ending July 31, 1996,
(b) that the Corporation's Income shall
have equaled or exceeded $6,600,000
(adjusted as set forth below) for
the fiscal year ending July 31, 1997,
(c) that the Corporation's Income shall
have equaled or exceeded $8,800,000
(adjusted as set forth below) for
the fiscal year ending July 31, 1998,
(d) that the "Market Price" (as defined
below) of the Class A Common Stock,
when averaged over any 30
consecutive trading days all of
which are less than 18 months after
the "Effective Date" (as defined
below), shall have equaled or
exceeded $12.50 per share, or
(e) that the Market Price of the Class A
Common Stock, when averaged over
any 30 consecutive trading days all
of which are more than 18 and less
than 36 months after the Effective
Date, shall have equaled or
exceeded $16.50 per share.
(4) E-2 Escrow Conditions.
The Escrow Conditions for the Class E-2
Common Stock shall be
(a) that the Corporation's Income shall
have equaled or exceeded $5,400,000
(adjusted as set forth below) for
the fiscal year ending July 31,
1996,
(b) that the Corporation's Income shall
have equaled or exceeded $8,100,000
(adjusted as set forth below) for
the fiscal year ending July 31,
1997,
(c) that the Corporation's Income shall
have equaled or exceeded
$10,800,000 (adjusted as set forth
below) for the fiscal year ending
July 31, 1998,
(d) that the Market Price of the Class A
Common Stock, when averaged over
any 30 consecutive trading days all
of which are less than 18 months
after the Effective Date shall have
equaled or exceeded $18.00 per
share, or
(e) that the Market Price of the Class A
Common Stock, when averaged over
any 30 consecutive days all of
which are more than 18 and less
than 36 months after the Effective
Date, shall have equaled or
exceeded $22.00 per share.
(5) Definitions.
(a) "Income" shall mean the Corporation's net
income before provision for income
taxes, but exclusive of any other
earnings that are classified as an
extraordinary item, and exclusive of any
charges to income that may result from
the release of any securities of the
Corporation from an escrow and the
conversion of the Class E Common Stock
into Class A Common Stock, as stated in
the Corporation's financial statements
for such fiscal year upon which
independent auditors have given a
report. For purposes of determining
whether the above criteria are met at
any Determination Date, the Income
amounts set forth above shall be
increased at any Determination Date by
multiplying such Income amounts by a
fraction, the numerator of which is the
average weighted number of shares of
Common Stock outstanding over the fiscal
year for which the Escrow Condition is
satisfied (including Class A and Class E
Common Stock, and treating as
outstanding common stock of any class
issuable upon conversion of securities
that are outstanding at the
Determination Date and which are
convertible into common stock without
the payment of additional consideration
("Conversion Shares")) and the
denominator of which is the sum of (i)
the number of shares of Common Stock
(Class A, Class E and Conversion Shares)
which are outstanding (or, with respect
to the Conversion Shares, treated as
outstanding as set forth above) at the
Effective Date, plus (ii) the number of
shares of Common Stock sold under the
"Registration Statement," as defined
below.
(b) The "Registration Statement" shall mean
that certain registration statement
filed by the Corporation under the
Securities Act of 1933, as amended,
which is the first registration
statement so filed by the Corporation
with the United States Securities and
Exchange Commission.
(c) The "Effective Date" shall mean the date
on which the Registration Statement
became effective within the meaning of
Section 8 of the Securities Act of 1933,
as amended.
(d) "Market price" shall mean, in order of
preferences, (i) the last reported sales
price on a consolidated transaction
reporting system, if the Class A Common
Stock is listed on a national securities
exchange or is listed on the Nasdaq
National Market, (ii) the high closing
bid price if such stock is otherwise
quoted on the Nasdaq Stock Market, or
(iii) otherwise, a bid price for such
stock determined by such means as the
Corporation's Board of Directors finds
to be reasonable.
(6) Conversion.
(a) If on the Determination Date, any of the
Escrow Conditions shall have been
satisfied, then each share of Class E
Common Stock shall be converted into one
share of Class A Common Stock, and if on
the Determination Date none of the
Escrow Conditions shall have been
satisfied, then the Class E Common Stock
remaining in escrow shall be redeemed by
the Corporation at a price per share of
$.0001 and canceled without further
obligation to the holder thereof. From
and after the Determination Date, the
rights of the holders of Class E Common
Stock shall be limited to the following:
(i) in the event that any of the Escrow
Conditions were satisfied at the
Determination Date, the right to receive
a certificate representing the number of
shares of Class A Common Stock into
which such Class E Common Stock was
converted, and otherwise to the rights
of a holder of such shares of Class A
Common Stock; or (ii) in the event that
none of the Escrow Conditions were
satisfied at the Determination Date, no
further right with respect to the Class
E Common Stock, which is thereby
canceled, or with respect to any other
property or securities previously issued
with respect thereto.
(b) Solely for the purpose of issuance upon
conversion of the Class E Common Stock
as herein provided, the Corporation
shall, at all times, reserve and keep
available out of its authorized but
unissued shares of Class A Common Stock
such number of shares of Class A Common
Stock as are then issuable upon the
conversion of all outstanding shares of
Class E Common Stock.
(7) No Transfer. No person holding shares of
Class E Common Stock of record may transfer
such shares, except by testamentary
disposition or by operation of law, and any
purported transfer other than as permitted by
the preceding clause shall be ineffective,
null and void.
(8) Registration. Shares of Class E Common Stock
shall be registered in the names of the
beneficial owners thereof and not in "street"
or "nominee" name. For this purpose, a
"beneficial owner" of any shares of Class E
Common Stock shall mean a person who, or any
entity which, possesses the power, either
singly or jointly, to direct the voting or
disposition of such shares. The Corporation
shall note on the certificates for shares of
Class E Common Stock the restrictions on
transfer and registration.
IV. PREFERRED STOCK
(A) General. 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:
1. 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;
2. 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;
3. 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;
(a) 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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;
(f) 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
(g) any other powers, designations,
preferences and relative, participating,
optional or other special rights, and
any qualifications, limitations or
restrictions thereof.
(B) Board Power to Modify Number of Shares 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 Paragraph (B); and, it is
further,
B. BY-LAWS AMENDMENTS
By written consent, dated as of June 26, 1998, and executed
by the Consenting Shareholders, the following resolution of stockholders
of the Corporation was adopted:
RESOLVED, that the terms of office of the Directors be
staggered so that no more than two (2) Directors shall
stand for election at any annual or special meeting of
the Shareholders called for the purpose of electing
directors, and that accordingly the By-Laws of the
Corporation shall be amended by striking out Section 2
of ARTICLE III in its entirety and by substituting in
lieu of said SECTION the following new Section:
"Section 2. Number, Qualifications, Election
and Term of Office. The number of directors of the
Corporation shall be five, which number may only be
increased or decreased, in the manner prescribed in the
Bylaws, by at least two-thirds of the directors then in
office, but shall never be less than the minimum number
permitted by the DGCL now or hereafter in force.
(b) 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.
(c) 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
paragraph (a) of this Article FIFTH 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.
(d) 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.
(e) The Board of Directors shall be divided into
three classes (denominated Class I, Class II and Class
III), as nearly equal in number as reasonably 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
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; and it is
further
RESOLVED, that the duties and responsibilities of the
officers of the Corporation be updated and revised to
reflect the new business plan for the Corporation
embodied in the "Infosafe Reorganization Plan" and that
accordingly the By-laws of the Corporation shall be
amended by striking out Article IX in its entirety and
by substituting in lieu of said Article IX the
following new Article;
"Article IX
OFFICERS
Section a) Number and Qualifications. The
officers of the Corporation shall include Chairman of
the Board, Vice Chairman of the Board, President, Chief
Executive Officer, Chief Operating Officer, Chief
Financial Officer, one or more Vice Presidents, a
Secretary, a Treasurer, and one or more Assistant
Secretaries and Assistant Treasurers. 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. The remaining officers of the
Corporation shall be chosen by the Executive Committee
from time to time and at its first meeting after the
annual meeting of the stockholders.
Section b) The offices of President,
Vice-President, Secretary and Treasurer need not be
members of the Board of Directors. Any two or more
offices may be held by the same person, except the
offices of President and Secretary. When all the
issued and outstanding stock of the Corporation is
owned by one person, such person may hold all or any
combination of offices.
Section c) The Executive Committee may appoint
such other officers and agents as it shall deem
necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties
as shall be determined from time to time by the
Executive Committee.
Section d) Compensation. The salaries of all
officers and agents of the Corporation shall be fixed
by the Board of Directors.
Section e) Term. The officers of the Corporation
shall hold office until their successors are chosen and
qualify. The Chairman of the Board of Directors may be
removed at any time by the affirmative vote of a
majority of the Board of Directors. Any officer
elected or appointed by the Executive Committee may be
removed at any time by the affirmative vote of a
majority of the Executive Committee. Any vacancy in
the office of Chairman of the Board of Directors shall
be filled by the Board of Directors. Any vacancy
occurring in any other office of the Corporation shall
be filled by the Executive Committee.
Section f) 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 g) The Chairman of the Executive
Committee. The Chairman of the Executive Committee,
when present, shall preside at all meetings 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 h) 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 i) The Chief Executive Officer 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 j) 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 k) The Chief Operating Officer 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 l) The Vice-Chairman of the Board of Directors. The
Vice-Chairman of the Board of Directors, in the absence of the
Chairman, shall preside at all meetings of stockholders and
Directors. He shall perform such other duties as are provided
herein and as may be assigned to him from time to time by the
Board of Directors or the Executive Committee.
Section m) 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.
Section n) 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 o) 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 p) The Chief Financial Officer 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 q) The Chief Marketing Officer. The Chief
Marketing Officer shall handle the general and active
management of the marketing, sales and strategic plans
of the Corporation, and shall perform such other duties
and have such other powers as the Board of Directors
may from time to time prescribe.
Section r) The Chief Technology Officer. The
Chief Technology Officer shall handle the general and
active management of the research, development and
engineering affairs of the Corporation, and shall
perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section s) The Vice-President. The
Vice-President or, if there shall be more than one, the
Vice-Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the
President and the Chief Operating Officer, perform the
duties and exercise the powers of the President and
shall perform such other duties and have such other
powers as the Board of Directors may from time to time
prescribe.
Section t) The Secretary and Assistant
Secretaries. 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, or an Assistant
Secretary, shall have authority to affix the same to
any instrument requiring it and, when so affixed, it
may be attested by his signature or by the signature of
such Assistant Secretary. 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.
Section u) The Assistant Secretary or, if there be
more than one, the Assistant Secretaries in the order
determined by the Board of Directors, shall, in the
absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and
shall perform such other duties and have such other
powers as the Board of Directors may from time to time
prescribe.
Section v) The Treasurer and Assistant Treasurer.
The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all
moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as
may be designated by the Board of Directors.
Section w) He shall disburse the funds of the
Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such
disbursements, and shall render to the President and
the Board of Directors at its regular meetings, or when
the Board of Directors so requires, an account of all
his transactions as Treasurer and of the financial
condition of the Corporation.
Section x) If required by the Board of Directors,
he shall give the Corporation a bond in such sum and
with such surety or sureties as shall be satisfactory
to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation,
retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging
to the Corporation.
Section y) The Assistant Treasurer, or, if there
shall be more than one, the Assistant Treasurers in the
order determined by the Board of Directors, shall, in
the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other
powers as the Board of Directors may from time to time
prescribe."
C. STOCK OPTION PLAN APPROVAL
By written consent, dated as of June 26, 1998, executed by
the Consenting Shareholders, the following resolution of
stockholders of the Corporation was adopted:
RESOLVED, that in accordance with the IRP and in the
best interests of the Corporation, the 1994 Stock
Option Plan shall be amended by increasing the number
of shares of Class A Common Stock that may be purchased
with options granted thereunder from 2,000,000 to
9,800,000, that accordingly the 1994 Stock Option
Plan is hereby amended by striking out Section 4
thereof in its entirety and by substituting in lieu
of said Section the following new Section:
"The stock subject to options granted under the Plan shall
be shares of authorized but unissued or reacquired
Common Stock. Subject to adjustment as provided in Section
15 below, the maximum number of shares of Common Stock of
the Company which may be issued and sold under the Plan
is 500,000 shares, If an option granted under the Plan
shall expire, terminate or is cancelled for any reason
without having been exercised in full, the unpurchased
shares subject to such option shall again be available for
subsequent option grants under the Plan;"
that plan as so amended shall be referred to as the "Amended and
Restated 1994 Stock Option Plan" and that it is hereby ratified
and approved.
D. ICC MERGER APPROVAL
By written consent, dated as of June 26, 1998, and executed by
the Consenting Shareholders, the following resolution of
stockholders of the Corporation was adopted:
RESOLVED, that the Agreement and Plan of Merger of the
Corporation and ICC, with the Corporation as the
survivor, set forth below is hereby approved:
"PLAN AND AGREEMENT
OF MERGER OF
INFOSAFE SYSTEMS, INC.
and
INTERNET COMMERCE CORPORATION
THIS AGREEMENT, dated as of June 19, 1998, by
and among Infosafe Systems, Inc., a Delaware corporation
("Infosafe" or the "Surviving Corporation") and Internet
Commerce Corporation, a Delaware corporation ("ICC"),
said two corporations being herein sometimes collectively
called the "Constituent Corporations".
W I T N E S S E T H:
WHEREAS, Infosafe is a corporation duly
organized and existing under the laws of the State of
Delaware, having been incorporated on November 18, 1991;
and
WHEREAS, ICC is a corporation duly organized
and existing under the laws of the State of Delaware,
having been incorporated on May 13, 1997; and
WHEREAS, Infosafe is the owner of 83.3% of
shares of common stock of ICC (the "ICC Common Stock")
with the remaining shares (the "Founders' ICC Shares") of
common stock of ICC being held by the founders of ICC,
Michele Golden, Michael Cassidy (the "ICC Founders")
and Michael Fromer; and
WHEREAS, the Founders and other persons (the
"ICC Option Holders") have options (the "ICC Options")
granted under the ICC Stock Option Plan (the "ICC Stock
Option Plan"), and the Constituent Corporations deem it
advisable that the ICC Stock Option Plan be continued and
maintained as a plan of Infosafe in accordance with the
same conversion ratio as the Founders' ICC Shares are
converted into Class A Common Stock (as defined herein)
in connection with terms of the merger herein stated;
and
WHEREAS, the Boards of Directors of the
Constituent Corporations deem it desirable, upon the
terms and subject to the conditions herein stated, that
ICC be merged with and into Infosafe and that Infosafe be
the surviving corporation.
NOW, THEREFORE, it is agreed as follows:
Section 9
Terms
9.1 On the effective time of the merger (as hereinafter
defined), ICC shall be merged with and into Infosafe, with
Infosafe as the surviving corporation.
9.2 Upon the effective time of the merger:
(a) The then outstanding Founders' ICC Shares shall, by
virtue of the merger and without any action on the part of the Founders,
be converted into an aggregate number of shares of Class A Common
Stock (the "Class A Common Stock"), par value $0.01 per share, of
the Surviving Corporation, at a ratio of 16.72474 shares of Class
A Common Stock for each of the Founders' ICC Shares.
(b) The then ICC Common Stock held by Infosafe shall be
canceled.
(c) The then outstanding ICC Options shall, by virtue of
the merger and without any action on the part of the ICC Option
Holders, be converted into an aggregate number of options to
purchase Class A Common Stock, at a ratio of 16.72474 options for
Class A Common Stock for each the ICC Options; and the ICC Stock
Option Plan shall become a plan of the Surviving Corporation,
which plan by virtue of the approval of the stockholders of
Infosafe of this Agreement is hereby ratified and approved.
9.3 Each of the ICC Founders' stock certificate or certificates
representing outstanding shares of ICC Common Stock or ICC Options
immediately prior to effective date of the merger, upon surrender of such
certificate or certificates to Infosafe after the effective date
of the merger, shall be entitled to receive a stock certificate
or certificates representing the number of shares of Class A
Common Stock into which such ICC Common stock was converted
pursuant to Section 1.2(a) above. Until so surrendered, each
such stock certificate shall, by virtue of the merger, be deemed
for all purposes to evidence ownership of the converted number of
shares of Class A Common Stock.
9.4 If any certificate representing Class A Common Stock is
to be issued in a name other than that in which the certificate
theretofore representing ICC Common Stock surrendered is
registered, it shall be a condition of such issuance that the
certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person
requesting such issuance shall either pay to Infosafe or its
transfer agents any transfer or other taxes required by reason of
the issuance of certificates representing Class A Common Stock in
a name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of
Infosafe or its transfer agents that such tax has been paid or is
not applicable.
Section 10
Effective Time
10.1 This Agreement shall be approved by the written
consent of no less than a majority of the votes of the
stockholders of Infosafe entitled to vote thereon and by
the unanimous written consent of the stockholders of ICC
entitled to vote thereon in accordance with the
applicable laws of the State of Delaware and Section
14(c) of the Securities Exchange Act of 1934, as amended
(the "34 Act"), and the rules promulgated thereunder.
Upon the effectiveness of the written consent of the
shareholders with a majority of the voting power of
Infosafe in accordance with Section 14(c) of the 34 Act
and the unanimous written consent of the stockholders of
ICC, so long as this agreement is not terminated as
contemplated by Section 5, a certificate merger, executed
in accordance with the law of the State of Delaware,
shall be filed with the Secretary of State of the State
of Delaware.
The merger shall become effective on the time
and date specified in the certificate of merger filed
with the Secretary of State of the State of Delaware,
herein sometimes referred to as the "effective time of
the merger."
Section 11
Covenants and Agreements
11.1 Infosafe covenants and agrees that it will present
this Agreement for adoption by written consent of no less
than a majority of the votes of the stockholders of
Infosafe entitled to vote thereon and that it will file a
Schedule 14C (the "Infosafe 14C") with the Securities and
Exchange Commission (the "SEC") which approves, inter
alia, this Agreement and certain amendments of the other
matters and such documents and information in connection
therewith as is required by law.
Section 12
Certificate of Incorporation and By-Laws Amendments
12.1 The Certificate of Incorporation and By-Laws of
Infosafe shall be amended immediately after the effective
time of the merger in accordance with the amendments
contained in and approved by the Written Consent of the
Holders of the Majority of the Voting Power of Infosafe for
which the Infosafe 14C was filed with the SEC and distributed
to the stockholders of Infosafe.
Section 13
Amendment
13.1 At any time prior to the filing of this Agreement
with the Secretary of State of the State of Delaware,
this Agreement may be amended by the Boards of Directors
of Infosafe and ICC to the extent permitted by Delaware
law notwithstanding favorable action on the merger by the
stockholders of either or both of the Constituent
Corporations.
Section 14
Miscellaneous
14.1 To the extent permitted by law, this Agreement may
be amended by an agreement in writing, before or after
the meeting of the effectiveness of the approval of the
stockholders of Infosafe, at any time prior to the
effective date of the merger, with respect to any of the
terms contained herein except the terms of the conversion
provided for in Section 1.2.
IN WITNESS WHEREOF, Infosafe, ICC and the ICC
Founders have each caused this Agreement to be executed,
by, in the case of Infosafe and ICC, its authorized
officer and its corporate seal affixed, all as of the
date first above written.
INFOSAFE SYSTEMS, INC.
By:_________________________________
INTERNET COMMERCE CORPORATION
By:_________________________________
E. REASONS FOR THE CONSENT AMENDMENTS
This consent was executed by the Consenting
Shareholders in order to implement and effect material
elements of a plan of reorganization (the "Infosafe
Reorganization Plan" or "IRP") for the Corporation adopted by
the Board of Directors on the recommendation of management.
The Board of Directors acted in response, without limitation,
to: (a) the Corporation's critical need for additional
capital to remain in operation which if not immediately
addressed could not have been assured beyond June 30, 1998,
(b) bring itself into compliance with the NASDAQ "minimum bid
price" requirement of $1.00 for maintaining its listing, (c)
implement its plans for the acceleration of the commercial
exploitation of the electronic commerce system (the
"CommerceSense(TM) System") developed by its majority owned
subsidiary, Internet Commerce Corporation (ICC) which the
Corporation has adopted as its sole focus (d) effect certain
corporate changes that are required from a business and/or
regulatory perspective.
The following is a brief summary and explanation
of the material elements of the Infosafe Reorganization Plan.
1. Private Placement of Bridge Financing. The
first element of the IRP to be implemented was the initiation of
a private placement by the Corporation of Bridge Note Units to
raise the funds necessary to continue in operation pending the
completion of the remaining elements of the IRP. Each Bridge
Note Unit includes a promissory note ("Bridge Note") of the
Corporation bearing interest at a rate of 10% per annum and that
is due and payable from the proceeds of the Warrant Exchange
Offer (as defined herein) no later than the one hundred eightieth
(180th) day after the date of issuance of each Bridge Note. In
connection with the issuance of the Bridge Notes and in
consideration of the payment of $0.01 per share underlying the
warrant, each obligee of a Bridge Note shall receive a warrant
(the "Class A Bridge Warrants") to purchase 1.5 shares of the
Corporation's Class A Common Stock (the "Common Stock") for each
$1.00 of principal of such Bridge Note at a price of $0.50 per
share, at any time or from time to time during the period from
the date the Corporation repays in full the Bridge Note (the
"Class A Commencement Date"), until the date which is thirty six
(36) months after such date (the "Class A Expiration Date").
Notwithstanding the foregoing sentence, provided that more than
one year has elapsed since the issuance of the Class A Bridge
Warrants, if the bid price of the Common Stock shall exceed $1.50
per share for ten (10) consecutive trading days, the Corporation
may accelerate the Class A Expiration Date to a date not less
than ten (10) business days after the mailing of the Acceleration
Notice (in the form annexed to the Class A Bridge Warrants) to
the Holder. In addition, in connection with issuance of the
Bridge Notes each obligee of a Bridge Note shall also receive a
warrant (the "Class B Bridge Warrants") to purchase a pro rata
amount (determined by relative principal of Bridge Notes held by
the obligees) of up to 6,000,000 shares of Common Stock at a
price per share equal to the actual exercise price of the
Corporation's previously issued Class A and Class B Warrants (the
"Existing Warrants") which are exercised pursuant to the
Corporation's contemplated registered warrant exchange offer to
all of the existing holders of Existing Warrants (the "Warrant
Exchange Offer"), at any time or from time to time during the
period from the later of the date the Corporation: (a) declares
the Warrant Exchange Offer closed in accordance with the terms
thereof or (b) the effective date of the Corporation's
registration statement that includes the shares underlying the
Class B Bridge Warrants (the "Class B Commencement Date"), until
the date which is thirty (30) days after such date (the "Class B
Expiration Date"). A maximum aggregate of up to 6,000,000 shares
of Common Stock (the "Variable Warrant Shares") may be purchased
by the Holders of Class B Bridge Warrants, provided however,
that, if the aggregate number of Variable Warrant Shares exceeds
the number of shares of Common Stock underlying any Existing
Warrants that remain outstanding after the Warrant Exchange Offer
is closed in accordance with its terms, the aggregate amount of
Variable Warrant Shares shall, upon receipt by the Holder of the
Warrant Share Reduction Notice (in the form annexed hereto),
which sets forth the amount of the Holder's allocable reduction
of Variable Warrant Shares (the "Reduction Amount"), the number
of Variable Warrant Shares set forth above shall be thereby
reduced by the Reduction Amount and only the remaining Variable
Warrant Shares (the "Fixed Warrant Shares") may be purchased by
the Holder upon exercise of the Class B Bridge Warrant.
Notwithstanding any provision herein to the contrary, the
Corporation shall have the right to cancel all of the Class B
Bridge Warrants if the Corporation so elects in its sole
discretion.
2. Majority Consent of the Shareholders. The
action taken by the written consent (the "Majority Consent") of
the Consenting Shareholders which is the basis of this information
statement is the second element of the IRP. The Majority Consent
was executed by the members of the Board of Directors of the
Corporation in the exercise their authority as trustees of a
voting trust (the "Voting Trust") dated as of February 12, 1997
by and among the members of the Board of Directors and certain
shareholders of the Corporation, Arthur R. Medici, the President
and Chief Executive Officer of the Corporation and Alan N.
Alpern, the Chief Financial Officer of the Corporation.
The Voting Trust owns 845,165 shares of Class B Common
Stock (6 votes per share), 590,816 shares of Class E-1 Common
Stock (one vote per share) and 590,816 shares of Class E-2 Common
Stock (one vote per share) (the foregoing shares are referred to
herein as the "Voting Trust Shares"). The Voting Trust controls
46.5% of the total voting power of all outstanding classes of
common stock of the Corporation. Mr. Medici and Mr. Alpern
possess a combined voting power of 6.0% (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 52.5% which constitutes more
than a majority of the total combined voting power of all
outstanding classes of stock of the Corporation.
Prior to the date of execution of the Majority
Consent, Michael T. Brooks ("Brooks") transferred 400,000 shares
of Class B Common Stock ("Brooks Shares") which he has 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 Corporation
and Brooks entered into a Shareholder Agreement (the "Shareholder
Agreement") dated as of June 19, 1998, that inter alia grants
the Corporation 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.
3. Merger of ICC into the Corporation. Another
element of the IRP is the merger (the "ICC Merger") of ICC into
the Corporation pursuant to Section 251 of the DGCL (the
"Merger"). The Plan and Agreement of Merger of the Company and
ICC is set forth above in D. ICC Merger Approval.
4. Warrant Exchange Offer: Another critical
element of the IRP is the Corporation's intention to prepare an
exchange offer prospectus (the "Prospectus") and other
appropriate notice filings under the Securities Act of 1933 and
the Securities and Exchange Act of 1934 to be filed with the
Securities and Exchange Commission (the "SEC") that will
thereafter be distributed to the holders of record of all
outstanding Class A Warrants and Class B Warrants of the
Corporation offering each holder the opportunity to reduce the
"purchase price" of the Class A Common Stock purchasable
thereunder to a price to be determined (the "Warrant Exchange
Offer"). The Warrant Exchange Offer will only be available to
the current holders who agree to exercise at the reduced purchase
price. In addition, in the case of the exercise of Class A
Warrants by the holders thereof will only receive a reduced
exercise price on the Class B Warrant issued thereunder if it is
also immediately exercised on the condition that any such warrant
must be immediately exercised. The holders of the Bridge Units,
pursuant to Class B Bridge Warrants, have the pro-rata right to
purchase an aggregate of up to 6,000,000 shares of Class A Common
Stock.
5. Anti-takeover Mechanism: The final key element
of the IRP, is the Board of Directors intention to adopt an anti-
takeover mechanism that will help protect the Corporation from a
change of control that does not optimize shareholder value. It
is presently contemplated that such anti-takeover mechanism may
utilize some or all of the 5,000,000 shares of Preferred Stock
authorized under the Corporation's Certificate of Incorporation.
F. RELATED AGREEMENTS WITH CONSENTING SHAREHOLDERS
See discussion under the heading E.2. Majority
Consent of the Shareholders, for information concerning the Voting
Trust and the Shareholder Agreement. The Voting Trust has the
power to vote 46.5% of the total voting power of the
Corporation's outstanding shares because Brooks upon purchase of
the Brooks Shares representing 2,400,000 votes agreed pursuant to
the Shareholder Agreement to deposit such shares into the Voting
Trust. The Shareholder Agreement grants the Corporation the right
to purchase the Brooks Shares at a price equal to $0.375 per
share (133% of initial purchase price of such shares).
G. SECURITY OWNERSHIP OF PRINCIPAL HOLDERS, DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of
Common Stock and the number of shares of Common Stock owned
beneficially as of June 19, 1998 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 equity securities of the Corporation. As of
June 19, 1998, the percentage of shares of any class of equity
securities of the Corporation 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 Common Stock(2) Common Stock(2)
-------------------- -------------------- --------------------
Name and Address Number Number Number % of Vote
of Beneficial Owner of Shares % of Shares % of Shares % of all Classes
_______________________ _____________ ____ _____________ ____ ____________ ____ ______________
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas H. Lipscomb (3)(4) - - 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)(4) - - 20,000 2.0 210,340 7.6 2.5
Charles C. Johnston (2) 45,000 1.0 - - - - 0.3
Michael T. Brooks (4) 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>
NOTES
(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 exerciseable 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) 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").
(4) 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.
