SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
INTERNET COMMERCE CORPORATION
(NAME OF ISSUER AND PERSON FILING STATEMENT)
CLASS A WARRANTS TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK
AND ONE CLASS B WARRANT
CLASS B WARRANTS TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK
(TITLE OF EACH CLASS OF SECURITIES)
Class A Common Stock - 460 59F 10 9
Class A Warrants - 460 59F 11 7
Class B Warrants - 460 59F 12 5
(CUSIP NUMBERS OF EACH CLASS OF SECURITIES)
RICHARD J. BERMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
805 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 271-7640
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE
PERSON FILING STATEMENT)
With Copy to:
PETER S. KOLEVZON, ESQ.
KRAMER LEVIN NAFTALIS & FRANKEL LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
JUNE 30, 1999
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
TRANSACTION VALUATION (1) AMOUNT OF FILING FEE (2)
------------------------- ------------------------
$2,253,292 $626.42
(1) Solely for the purpose of calculating the filing fee and based on 207,495
shares of Class A Common Stock (which is the maximum number of shares of Class A
Common Stock that may be issued) valued at the average of the high and low
prices on June 25, 1999 of $10.8595.
(2) Fee calculated in accordance with Rule 0-11(b)(2) and Rule 0-11(a)(4) under
the Securities Exchange Act of 1934, as amended.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: _____________ Filing Party: ________________
Form or Registration No.: ___________ Date Filed: __________________
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Statement relates is Internet
Commerce Corporation ("ICC"), a Delaware corporation. The principal executive
officers of the Company are located at 805 Third Avenue, New York, New York
10022.
(b) As of the date hereof, there were (i) 1,184,715 Class A Warrants
outstanding; each such Class A Warrant entitles the holder thereof to purchase
one share of ICC's Class A Common Stock, $.01 par value per share, and one Class
B Warrant upon payment of the exercise price in cash; and (ii) 950,490 Class B
Warrants outstanding; each such Class B Warrant entitles the holder thereof to
purchase one share of Class A Common Stock upon payment of the exercise price in
cash. The exercise prices of a Class A Warrant and a Class B Warrant on the date
hereof are $23.20 and $31.22, respectively, and such exercise prices are subject
to change pursuant to the anti-dilution provisions of such Warrants. Upon the
terms and subject to the conditions set forth in the Offering Circular, dated
June 30, 1999, as the same may be amended or supplemented from time to time, and
the related Letter of Transmittal, copies of which are filed herewith as
Exhibits (a)(1) and (a)(2), respectively, we are offering to exchange (the
"Exchange Offer") (i) one share of Class A Common Stock for eight (8) Class A
Warrants and (ii) one share of Class A Common Stock for sixteen (16) Class B
Warrants. The information under the captions "Summary" and "The Exchange
Offer--Terms of the Exchange Offer" in the Offering Circular is incorporated
herein by reference. To our knowledge, no officer, director or affiliate of ours
beneficially owns any of the Warrants.
(c) Our Class A Common Stock is listed on the Nasdaq SmallCap Market under the
symbol "ICCSA." The Warrants are currently traded in the over-the-counter market
on the "OTC Electronic Bulletin Board" under the symbols "ICCSW" for the Class A
Warrants and "ICCSZ" for the Class B Warrants. For further information, see
"Description of Securities" and "Price Range of Class A Common Stock and
Warrants" in the Offering Circular, which is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information under the captions "The Exchange Offer--Terms of the
Exchange Offer" in the Offering Circular is incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information under the captions "Summary--Background of the Exchange Offer,"
"--The Exchange Offer," and "--Purpose of the Exchange Offer" in the Offering
Circular is incorporated herein by reference. The Warrants are to be cancelled
upon consummation of the Exchange Offer.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
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(g) Not applicable.
(h) Not applicable.
(i) The Exchange Offer may result in the Warrants becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended.
(j) Not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Neither we nor, to our knowledge, any person referred to in Instruction C of
this Schedule or any associate or subsidiary of any such person, including any
executive officer or director of any such subsidiary, has effected any
transaction in the Warrants during the 40 business days prior to the date
hereof.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
None.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated to make
solicitations or recommendations in connection with the Exchange Offer. Morrow &
Co., Inc. has been retained as "information agent" to administer the Exchange
Offer and will be paid a negotiated fee of approximately $20,000 plus
disbursements for its services, regardless of how many Warrants are tendered for
exchange.
ITEM 7. FINANCIAL INFORMATION.
(a) We incorporate herein by reference the information in our Annual Report on
Form 10-KSB for the year ended July 31, 1998 and in our Quarterly Report on Form
10-QSB, for the quarter ended April 30, 1999, as amended by our Quarterly Report
on Form 10-QSB/A, and the information contained under the caption "Summary
Financial Information" in the Offering Circular is incorporated herein by
reference.
(b) The information contained under the caption "Summary Financial Information"
in the Offering Circular is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) The information contained under the captions "Summary--Background of the
Exchange Offer" in the Offering Circular is incorporated herein by reference.
(b) Upon exchange of the Warrants, we will issue the Class A Common Stock in
reliance on the exemption from the registration requirements of the Securities
Act of 1933, as amended, provided in Section 3(a)(9) thereof.
(c) Not applicable.
(d) Not applicable.
(e) The Offering Circular and the related Letter of Transmittal, which are
attached hereto as Exhibits (a)(1) and (a)(2), respectively, set forth
additional material information, and such material information is incorporated
herein by reference.
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<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1) Offering Circular, dated June 30, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Letter to Our Clients.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Bankers, Trust
Companies and other Nominees.
(a)(5) Form of Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(b) Not applicable.
(c) None.
(d) Opinion of Kramer Levin Naftalis & Frankel LLP.
(e) None.
(f) None.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Dated: June 30, 1999
INTERNET COMMERCE CORPORATION
By: /s/ Richard J. Berman
------------------------------------
Name: Richard J. Berman
Title: Chairman of the Board and Chief
Executive Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(a)(1) Offering Circular, dated June 30, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Letter to Our Clients.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Bankers, Trust
Companies and other Nominees.
(a)(5) Form of Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(b) Not applicable.
(c) None.
(d) Opinion of Kramer Levin Naftalis & Frankel LLP.
(e) None.
(f) None.
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Exhibit (a)(1)
[INTERNET COMMERCE CORPORATION LETTERHEAD]
June 30, 1999
Dear Warrantholder:
Internet Commerce Corporation is offering to exchange one share of
Class A Common Stock, $.01 par value per share, for each eight outstanding Class
A Warrants and one share of Class A Common Stock for each sixteen outstanding
Class B Warrants. The exchange offer is not conditioned upon the exchange of a
minimum number of warrants. The exchange offer will expire at 9:00 a.m. on July
30, 1999 unless extended.
The accompanying Offering Circular provides important information about
Internet Commerce Corporation and the detailed terms of the exchange offer.
Please read and consider the information contained in the Offering Circular
carefully. Any holder of warrants electing to tender his warrants pursuant to
the exchange offer must complete and sign the Letter of Transmittal, in
accordance with its instructions, and forward or hand deliver it, together with
the certificates representing the tendered warrants, to the exchange agent at
its address set forth on the back cover page of the Offering Circular. Any
beneficial owner of warrants whose securities are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee should not use
the Letter of Transmittal, but is instead urged to contact the registered
holder(s) of such securities promptly to instruct the registered holder(s)
whether to tender your securities.
Questions and requests for assistance or for additional copies of the
Offering Circular or Letter of Transmittal should be directed to the information
agent at its address and telephone number set forth on the back cover page of
the Offering Circular.
Again, we urge you to give your careful consideration to the offer
described in the accompanying Offering Circular.
Sincerely yours,
/s/ Richard J. Berman
-------------------------------------
Richard J. Berman
Chairman and Chief Executive Officer
<PAGE>
Offering Circular
INTERNET COMMERCE CORPORATION
Offer to Exchange
One Share of Class A Common Stock for
Eight (8) Outstanding Class A Warrants
and
One Share of Class A Common Stock for
Sixteen (16) Outstanding Class B Warrants
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME,
ON JULY 30, 1999, UNLESS THE OFFER IS EXTENDED.
Internet Commerce Corporation, a Delaware corporation, hereby offers,
upon the terms and conditions set forth in this Offering Circular, and in the
accompanying Letter of Transmittal, to exchange (i) one share of Class A Common
Stock, $.01 par value per share, for each eight (8) outstanding Class A Warrants
and (ii) one share of Class A Common Stock for each sixteen (16) outstanding
Class B Warrants. Each Class A Warrant entitles the holder thereof to purchase
one share of Class A Common Stock and one Class B Warrant upon payment of the
exercise price in cash. The exercise price of a Class A Warrant on the date of
this Offering Circular is $23.20 and is subject to change pursuant to the
anti-dilution provisions of the Class A Warrants. Each Class B Warrant entitles
the holder thereof to purchase one share of Class A Common Stock upon payment of
the exercise price in cash. The exercise price of a Class B Warrant on the date
of this Offering Circular is $31.22 and is subject to change pursuant to the
anti-dilution provisions of the Class B Warrants. See "Description of
Securities--Warrants."
This exchange offer is open to all holders of outstanding Warrants and
is not conditioned upon the exchange of a minimum number of Warrants. Our Class
A Common Stock is currently traded on the Nasdaq SmallCap Market under the
symbol "ICCSA." On June 29, 1999, the last reported sales price for the Class A
Common Stock was $12.00. Our Class A Warrants and Class B Warrants are currently
traded in the over-the-counter market on the "OTC Electronic Bulletin Board"
under the symbols "ICCSW" and "ICCSZ," respectively. On June 29, 1999, the last
reported sales prices for the Class A Warrants and the Class B Warrants were
$.63 and $.03, respectively. See "Price Range of Class A Common Stock and
Warrants." HOLDERS OF WARRANTS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE CLASS A COMMON STOCK, CLASS A WARRANTS AND CLASS B WARRANTS.
As of the date of this Offering Circular, there are 1,184,715 Class A
Warrants and 950,490 Class B Warrants outstanding. See "Description of
Securities-Warrants." The exchange offer is being made for all of the
outstanding Warrants. The Warrants were issued in our initial public offering in
1995 and in a private placement in our fiscal quarter ended April 30, 1997. No
fractional shares of Class A Common Stock will be issued in the exchange offer.
Rather, fractional shares of Class A Common Stock will be rounded up to the
nearest whole number of shares of Class A Common Stock.
Subject to applicable securities laws and the terms set forth in this
Offering Circular, we reserve the right to waive any and all conditions to the
exchange offer, to extend the exchange offer and otherwise to amend the exchange
offer, in any respect.
You are urged to read carefully "Risks Relating to The Exchange Offer"
on page 12 and "Other Risk Factors" commencing on page 27.
The exchange agent for the exchange offer is:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
The date of this Offering Circular is June 30, 1999
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
IMPORTANT
Any beneficial holder of Warrants desiring to tender all or any portion
of his or her Warrants should either (i) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in the
Letter of Transmittal and mail or deliver it, together with the certificates
representing tendered Warrants and any other required documents, to the exchange
agent or (ii) request his or her broker, dealer, commercial bank, trust company
or nominee to effect the transaction. Holders who wish to tender Warrants and
whose certificates representing such Warrants are not immediately available may
tender such Warrants by following the procedures for guaranteed delivery set
forth in "The Exchange Offer--Procedures for Tendering Warrants."
BENEFICIAL HOLDERS WHOSE WARRANTS ARE REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT
SUCH PERSON IF THEY DESIRE TO TENDER THEIR WARRANTS.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF US AS
TO WHETHER HOLDERS OF WARRANTS SHOULD TENDER THEIR WARRANTS PURSUANT TO THE
EXCHANGE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY US. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY
DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF ICC SINCE THE DATE HEREOF.
This Offering Circular does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities covered
by this Offering Circular, nor does it constitute an offer to sell or a
solicitation of an offer to buy any such securities by any person in any
jurisdiction in which such offer or solicitation would be unlawful.
We are making this exchange offer in reliance on the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), afforded by Section 3(a)(9) thereof. We therefore have made
no arrangements for and have no understanding with any broker, dealer, salesman
or other person for soliciting tenders of the Warrants. We have retained Morrow
& Co., Inc. as the information agent to help us administer the exchange offer
and to provide information to Warrant holders. We have agreed to pay the
information agent approximately $20,000 plus disbursements for these services,
regardless of how many Warrants are tendered. The information agent has not made
and will not make any recommendation to Warrant holders with respect to whether
they should tender their Warrants in the exchange offer. Officers, directors and
regular employees of ICC may solicit tenders of the Warrants but they will not
receive additional compensation therefor.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
o Government Filings. We file annual, quarterly and special reports,
proxy statements and other information with the SEC. Our SEC filings
are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the SEC's
public reference room in Washington, D.C. by calling the SEC at
1-800-SEC-0330.
o Stock Market. Shares of our Class A Common Stock are traded on The
Nasdaq SmallCap Market and our Class A Warrants and Class B Warrants
are traded in the over-the-counter market on the "OTC Electronic
Bulletin Board." Materials that are filed can be inspected at the
offices of the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
o Information Incorporated by Reference. The SEC allows us to
"incorporate by reference" the information we file with it, which means
that we can disclose important information to you by referring you to
those documents. The information incorporated by reference is an
important part of this Offering Circular, and information that we file
later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and
any further filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, until this offering has been completed:
o Our Annual Report on Form 10-KSB for the year ended July 31,
1998;
o Our Quarterly Reports on Form 10-QSB for the quarters ended
October 31, 1998, January 31, 1999 and April 30, 1999;
o Our Quarterly Reports on Form 10-QSB/A for the quarters ended
October 31, 1998, January 31, 1999 and April 30, 1999;
o Our Current Report on Form 8-K, filed with the SEC on April
20, 1999 and our amendment on Form 8K/A filed with the SEC on
April 28, 1999; and
o The description of our Class A Common Stock contained in our
Rule 424 Prospectus filed with the SEC on June 18, 1997,
including any amendments or reports filed for the purpose of
updating such description. See also "Description of
Securities" in this Offering Circular.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Internet Commerce Corporation
805 Third Avenue
New York, New York 10022
(212) 271-7640
Attn: Victor Bjorge
You should rely only on the information incorporated by reference or
provided in this Offering Circular or any supplement thereof. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this Offering Circular
or any supplement thereof is accurate as of any date other than the date on the
front of those documents.
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TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND MORE INFORMATION........................................3
SUMMARY....................................................................5
BUSINESS OF ICC...................................................5
BACKGROUND OF THE EXCHANGE OFFER..................................7
THE EXCHANGE OFFER................................................7
CAPITALIZATION.............................................................9
PRICE RANGE OF CLASS A COMMON STOCK AND WARRANTS..........................10
DIVIDEND POLICY...........................................................10
SUMMARY FINANCIAL INFORMATION.............................................11
RISKS RELATING TO THE EXCHANGE OFFER......................................12
THE EXCHANGE OFFER........................................................14
BUSINESS OF ICC...........................................................19
INDUSTRY.........................................................19
DESCRIPTION OF BUSINESS..........................................20
OTHER RISK FACTORS........................................................27
RISKS RELATING TO OUR COMPANY....................................27
RISKS RELATING TO THE INTERNET AND ONLINE COMMERCE ASPECTS
OF OUR BUSINESS..................................................31
RISKS RELATING TO OUR CLASS A COMMON STOCK.......................32
DESCRIPTION OF SECURITIES.................................................33
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.................................38
INTEREST IN WARRANTS......................................................39
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SUMMARY
This summary is provided solely for the convenience of the holders of
Warrants and is qualified in its entirety by reference to the full text and more
specific details contained in this Offering Circular and the related Letter of
Transmittal and any amendments hereto and thereto. As used herein, unless the
context otherwise requires, "we," "us," "our," "Company" or "ICC" refers to
Internet Commerce Corporation. References to our fiscal year shall refer to
ICC's fiscal year ended July 31, 1998.
BUSINESS OF ICC
We have developed, and own and operate, an Internet-based value-added
network ("VAN") with which we provide Electronic Data Interchange ("EDI")
services to large organizations and their trading partners under the trade name
CommerceSense. We have developed our CommerceSense service as an alternative to
the EDI services that are currently provided by traditional VANs that offer
their services primarily using dedicated telecommunications links. Our
CommerceSense service translates and transmits electronic documents, such as
purchase orders, requests for proposals and receipts, as well as images and
other data over the Internet through an "in" and "out" mailbox system. We began
the development of our CommerceSense service in 1997, introduced CommerceSense
for beta testing in November 1997 and launched the current version of
CommerceSense commercially in April 1999.
We believe that our CommerceSense service offers the following services
typically provided by traditional VANs:
o Document management, acknowledgment and tracking;
o Full archiving and reporting services;
o Third-party non-repudiation (we act as an independent
third party to verify document transmission, receipt
and content);
o Technical support; and
o Security and encryption as required by application.
In addition to providing many of the features of the services provided
by traditional VANs, we believe that CommerceSense offers advantages over the
services provided by traditional VANs, such as:
Lower Operating Costs. Our CommerceSense service uses the Internet to
offer customers services at significantly lower cost than traditional
VANs.
o CommerceSense does not require the customer to purchase
software or an EDI translator to access the network, thus
lowering the upfront costs required to subscribe to our
CommerceSense service compared to subscribing to a traditional
VAN service;
o Using the Internet rather than the traditional VAN
telecommunications infrastructure reduces the costs associated
with EDI transmissions and enables us to offer our
CommerceSense service at lower prices that are on average more
than 50% lower than those currently charged by traditional
VANs;
o CommerceSense does not require customers to make ongoing
software modifications or maintain a technical staff to manage
EDI transmissions; and
o The lower setup and operating costs allow a larger
percentage of an organization's smaller trading partners to
become EDI-enabled, thereby facilitating the exchange of
documents and other data and reducing costs for both the
organization and its trading partners.
Improved Quality of Service and Additional Features. Our CommerceSense
service uses the Internet to deliver a higher level of service and more
features than traditional VANs.
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o Documents are delivered significantly faster, depending
upon the speed of the customer's ISP connection;
o Customers may increase their overall productivity and more
effectively track, monitor and process business documents and
other data;
o Documents can be delivered either in real time or retrieved
when convenient for the customer, rather than in batches hours
after transmission. Real-time delivery improves the
reliability of our services by reducing the potential for
document corruption, bottlenecks and other problems associated
with batch delivery modes;
o Our CommerceSense service can handle transmissions of data
other than standard business documents, such as images,
engineering drawings, architectural blueprints, audio and
certain types of video; and
o A customer enjoys flexibility in creating different
document types and formats for various business applications.
For example, a customer can add its business logo to its
documents and can use its own format for each document type.
In addition, we believe our CommerceSense service offers advantages
over e-mail and other Internet-based electronic commerce systems, such as:
o Our CommerceSense service can handle a wide variety of
business documents and data, including purchase orders,
invoices, statements, inventory tracking and shipping
documents, images, engineering drawings, architectural
blueprints, audio and certain types of video; and
o We believe that CommerceSense is the only Internet-based
data transmission service that is approved to interconnect
with the six largest traditional VANs, which we believe
currently account for 90% of EDI revenue. Thus, we can handle
EDI traffic between our customers and any of their trading
partners that choose to continue to use a traditional VAN.
A large company that uses EDI to communicate with its vendors is
referred to as a "hub"; the vendors are referred to as "spokes". We intend to
continue to market our CommerceSense service to the 2,500 largest hub companies
in the United States. Due to the cost to the spoke companies of using VANs,
large hub companies using EDI are currently connected to only a small percentage
of their potential spoke companies. We believe that a significant number of
these hub companies intend to expand the use of electronic commerce to more of
their spoke companies. Since small spoke companies using our CommerceSense
service require only an Internet connection or a Web browser to receive and
transmit documents electronically, large hub companies may now be able to
request or encourage electronic commerce with their small hub companies. In
turn, many of these spoke companies may become the hub companies for their
suppliers, which should further broaden the reach of our CommerceSense service.
We believe that if we are able to sell our CommerceSense service to a
significant percentage of a hub company's spokes, we may be able to offer to
such a trading community ancillary messaging services in addition to
CommerceSense. It is our intention to attempt to develop and introduce a variety
of messaging products and services with a focus on the needs of large-scale
enterprises, particularly those enterprises that are in vertical markets in the
25 largest commercial industries. We believe that a large-scale CommerceSense
trading community within an individual vertical market could make available to
third parties desirable access to a group of buyers and sellers that share
applications and circumstances unique to their industry.
The address of our principal executive office is 805 Third Avenue, New
York, New York 10022. Our telephone number at that address is (212) 271-7640.
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BACKGROUND OF THE EXCHANGE OFFER
In January 1995 we completed our initial public offering of 310,000
units. Each unit consists of one share of Class A Common Stock, one Class A
Warrant and one Class B Warrant. In our fiscal quarter ended April 30, 1997 we
completed a private placement of 320,652 of the same units.
On April 30, 1999, there were 1,184,715 Class A Warrants, 950,490 Class
B Warrants and 1,383,437 shares of Class A Common Stock issued and outstanding.
If all outstanding Warrants were exercised for shares of Class A Common Stock,
the Class A Common Stock issued upon the exercise of the Warrants would
represent approximately 13% of the issued and outstanding Class A Common Stock
of ICC (excluding the effect of the exercise or conversion of ICC's other
outstanding options, warrants and Series A Preferred Stock). See
"Capitalization" and "Description of Securities" for more information about our
capital structure.
The exchange offer has two principal purposes. First, to offer Warrant
holders the ability to obtain some liquidity with respect to their investment in
ICC by obtaining publicly-traded Class A Common Stock (subject to certain
restrictions on resale as set forth under the caption "Risks Relating to the
Exchange Offer--Certain Federal Securities Law Considerations") that are listed
on the Nasdaq SmallCap Market in exchange for their Warrants; and second, to
benefit the holders of the Class A Common Stock by simplifying our capital
structure and increasing the number of shares of Class A Common Stock that are
publicly traded. This should increase the "public float" and the liquidity of
the Class A Common Stock in the market.
See "Risks Relating to the Exchange Offer" on page 12 and "Other Risk
Factors" commencing on page 27.
THE EXCHANGE OFFER
The Exchange Offer We are offering to exchange one
share of Class A Common Stock for
each eight (8) outstanding Class A
Warrants and one share of Class A
Common Stock for each sixteen (16)
outstanding Class B Warrants.
Expiration Date 9:00 a.m., New York City time, on
July 30, 1999, unless extended.
Withdrawal Rights Tenders of Warrants may be
withdrawn at any time prior to the
expiration of the exchange offer.
After the expiration, all tenders
are irrevocable.
Conditions to Exchange Offer Our obligation to consummate the
exchange offer is subject to several
conditions. See "The Exchange
Offer--Conditions to the Exchange
Offer."
How to Tender Warrants Warrant holders wishing to take part
in the exchange offer must complete
and sign the Letter of Transmittal,
in accordance with all applicable
instructions, and forward or hand
deliver the Letter of Transmittal to
the exchange agent at its address
set forth on the back cover page of
this Offering Circular. The Letter
of Transmittal must be accompanied
by any signature guarantees and any
other documents required by the
Letter of Transmittal, including
certificates representing the
tendered Warrants. Any beneficial
owner of Warrants whose securities
are registered in the name of a
broker, dealer, commercial bank,
trust company or other nominee is
urged to contact the registered
holder(s) of the Warrants promptly
to instruct the registered holder(s)
whether to tender your securities.
Beneficial
7
<PAGE>
holders whose certificates
representing their Warrants are not
immediately available or who cannot
deliver their certificates or any
other required documents to the
exchange agent before the expiration
of the exchange offer may tender
their Warrants pursuant to the
guaranteed delivery procedure set
forth herein. See "The Exchange
Offer--Procedures for Tendering
Warrants--Guaranteed Delivery
Procedures."
Delivery of Securities We will deliver the certificates for
the shares of Class A Common Stock
issuable upon conclusion of the
exchange offer as soon as
practicable after the expiration of
the exchange offer.
Certain Tax Consequences In general, Warrant holders will
recognize no gain or loss for
federal income tax purposes as a
result of the exchange of Warrants
for shares of Class A Common Stock
pursuant to the exchange offer. See
"Certain Federal Income Tax
Consequences."
Securities Outstanding As of April 30, 1999 there were
1,383,437 shares of Class A Common
Stock, 1,184,715 Class A Warrants
and 950,490 Class B Warrants
outstanding. Prior to this exchange
offer, there are 3,319,916 shares of
Class A Common Stock issuable upon
the exercise of the Warrants and an
additional 5,589,132 shares of Class
A Common Stock issuable upon the
exercise of other options and
warrants and the conversion of the
Series A Preferred Stock and the
Series S Preferred Stock. See
"Capitalization" and "Description of
Securities."
Market Prices The Class A Common Stock is
currently trading on the Nasdaq
SmallCap Market under the symbol
"ICCSA." The Class A Warrants and
Class B Warrants are currently
traded in the over-the-counter
market on the "OTC Electronic
Bulletin Board" under the symbols
"ICCSW" and "ICCSZ," respectively.
On June 29, 1999, the last reported
sale price for the Class A Common
Stock, Class A Warrants and Class B
Warrants were $12.00, $.63 and $.03,
respectively. See "Price Range of
Class A Common Stock and Warrants."
Exchange Agent American Stock Transfer and Trust
Company.
Information Agent Morrow & Co., Inc.
8
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of ICC at April 30,
1999, and as adjusted to reflect the exchange of 50%, 75% and 100% of the
Warrants for Class A Common Stock pursuant to the terms of the exchange offer,
without reduction for estimated fees and expenses relating to the exchange
offer, as if the transaction has occurred on such date.
<TABLE>
<CAPTION>
April 30, 1999
-----------------------------------------------
Actual As Adjusted(A)
------ --------------
Percent of Warrants Exchanged
-----------------------------
50% 75% 100%
----- ----- -----
<S> <C> <C> <C> <C>
Long-term liabilities $ 123,559 $ 123,559 $ 123,559 $ 123,559
---------- ---------- ---------- ----------
Redeemable common stock 5,729 5,729 5,729 5,729
----------- ----------- ----------- -----------
Stockholders' equity:
Preferred Stock:
Series A preferred stock - $.01 per value per share:
10,000 shares authorized, 9,595 issued and
outstanding, actual and adjusted 96 96 96 96
Series S preferred stock - $.01 par value per share: 175
shares authorized, 175 issued and outstanding, actual
and adjusted 2 2 2 2
Common stock:
Class A - $.01 par value per share; 40,000,000 shares
authorized, one vote per share; 1,383,437 shares issued
and outstanding, actual (B) 13,834 14,872 15,391 15,909
Class B - $.01 par value per share; 2,000,000 shares
authorized, six votes per share; 115,599 shares issued
and outstanding, as adjusted 1,156 1,156 1,156 1,156
Additional paid-in capital 27,336,848 27,335,810 27,335,291 27,334,773
Retained deficit (19,990,875) (19,990,875) (19,990,875) (19,990,875)
-------------- -------------- -------------- --------------
Total stockholders' equity $ 7,361,061 $ 7,361,061 $ 7,361,061 $ 7,361,061
============== ============== ============== ==============
Total capitalization $ 7,490,349 $ 7,490,349 $ 7,490,349 $ 7,490,349
============== ============== ============== ==============
</TABLE>
- ---------------
(A) Does not include: (i) 536,000 shares of Class A Common Stock issuable upon
exercise of warrants issued to consultants; (ii) 778,500 shares of Class A
Common Stock issuable upon exercise of warrants issued with bridge notes
in 1998; (iii) 59,850 shares of Class A Common Stock issuable upon
exercise of warrants issued to NASD registered broker-dealers who
participated in the private placement of the bridge notes; (iv) 173,250
shares of Class A Common Stock issuable upon exercise of warrants issued
to placement agents in the private placement of Series A Preferred Stock
in April 1999; (v) 2,064,334 shares of Class A Common Stock issuable upon
conversion of Series A Preferred Stock; (vi) 17,198 shares of Class A
Common Stock issuable upon conversion of Series S Preferred Stock; and
(vii) 1,960,000 Class A Common Stock issuable upon exercise of options
outstanding under the Company's 1994 Stock Option Plan. See "Description
of Securities."
(B) 1,487,185 shares issued and outstanding, as adjusted if 50% of the
Warrants are exchanged. 1,539,058 shares issued and outstanding, as
adjusted if 75% of the Warrants are exchanged. 1,590,932 shares issued and
outstanding, as adjusted if 100% of the Warrants are exchanged.
9
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK AND WARRANTS
Our Class A Common Stock is currently traded on the Nasdaq SmallCap
Market under the symbol "ICCSA." Our Class A Warrants and Class B Warrants were
traded on the Nasdaq SmallCap Market until February 23, 1999, when they were
delisted because there were too few market makers. Our Class A Warrants and
Class B Warrants are currently traded in the over-the-counter market on the "OTC
Electronic Bulletin Board" under the symbols "ICCSW" and ICCSZ," respectively.
The high and low bid quotations for the Class A Common Stock, Class A Warrants
and Class B Warrants for the quarterly periods set forth below, as reported on
the Nasdaq SmallCap Market or the "OTC Electronic Bulletin Board", as
applicable, were as follows:
<TABLE>
<CAPTION>
Class A Common Stock Class A Warrants Class B Warrants
Quarter Ended High Low High Low High Low
------------- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
March 31, 1997 $ 18.750 $10.625 $17.500 $3.750 $14.375 $1.875
June 30, 1997 20.000 8.125 13.750 5.000 12.500 4.375
September 30, 1997 10.000 3.750 8.750 0.625 5.469 0.625
December 31, 1997 10.625 4.688 5.156 0.938 3.750 0.625
March 31, 1998 8.438 4.063 2.500 0.938 2.344 0.391
June 30, 1998 1.875 0.625 1.250 0.156 1.250 0.156
September 30, 1998 1.563 0.625 0.078 0.078 0.313 0.078
December 31, 1998 7.875 1.500 n/a n/a n/a n/a
March 31, 1999 11.500 4.000 n/a n/a n/a n/a
June 30, 1999 (through June 29, 1999) 17.500 7.375 5.000 0.156 0.500 0.031
</TABLE>
On June 24, 1999, there were approximately 160 holders of record of the
Class A Common Stock, 89 holders of record of Class A Warrants and 83 holders of
record of Class B Warrants. At that date, we had 1,383,437 shares of Class A
Common Stock outstanding and 1,184,715 Class A Warrants and 950,490 Class B
Warrants outstanding.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our Class A Common
Stock. We currently intend to retain future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.
10
<PAGE>
SUMMARY FINANCIAL INFORMATION
ICC was formed in 1991. From 1991 through 1997 we conducted limited
operations and developed certain products that we were unable to exploit
commercially and subsequently discontinued. In 1998 we merged with our wholly
owned subsidiary and began to focus primarily on our CommerceSense service.
Since June 1998, we have raised approximately $9.6 million to fund the roll-out
of our CommerceSense service.
The summary consolidated financial information of ICC as of April 30,
1999 set forth below has been derived from the financial statements and notes
contained in ICC's Annual Report on Form 10-KSB for the year ended July 31, 1998
and ICC's Quarterly Report on Form 10-QSB, as amended, for the nine months ended
April 30, 1999. The summary consolidated information for the nine months ended
April 30, 1999 and for the period from November 18, 1991 (inception) to April
30, 1999 is subject to year-end adjustments and is not necessarily indicative of
results of operations to be expected for the fiscal year ending July 31, 1999.
The summary consolidated financial information that follows is qualified in its
entirety by reference to the more detailed information in these reports,
including the information appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations." These reports may be examined
and copies may be obtained from the offices of the SEC as described in "Where
You Can Find More Information."
Summary Consolidated Financial Information
(in thousands, except per-share data)
<TABLE>
<CAPTION>
Period from
November 18,
Year Ended Nine Months Ended 1991 (inception)
July 31, April 30, to April 30, 1999
---------------------------- --------------------------- ------------------
1997 1998 1998 1999
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenue $ 17 $ 19 $ 11 $ 46 $ 674
Operating expenses 3,175 3,072 2,041 3,806 18,486
Loss from operations 3,158 3,053 2,030 3,760 17,812
Interest and investment income 90 87 82 21 594
Interest expense 2 31 9 1,953 2,379
Net(loss) (3,068) (2,997) (1,957) (5,691) (19,991)
Basic and diluted loss per share $ (3.61) $ (2.79) $ (1.84) $ (4.01)
Shares used in computing basic 849,980 1,075,718 1,062,348 1,418,974
Balance Sheet Data:
Working capital (deficiency) $ 2,535 $ (914) $ (14) $ 5,858
Total assets 3,492 1,535 1,835 8,283
Long-term liabilities 0 197 219 124
Total stockholders' equity 2,960 132 1,079 7,361
Book value per share $ 2.43 $ .12 $ .89 $ (1.61)
</TABLE>
11
<PAGE>
RISKS RELATING TO THE EXCHANGE OFFER
Warrant holders who tender in the exchange offer may be economically
disadvantaged. Holders of Class A Warrants who tender their Warrants in the
exchange offer will realize greater value than holders of Class A Warrants who
do not tender their Warrants so long as the price of the Class A Common Stock is
less than $26.52 before the expiration of the Class A Warrants in February 2002.
On the other hand, if the price of the Class A Common Stock increases to $26.52
or more before the expiration of the Class A Warrants, holders of Class A
Warrants who do not tender their Warrants in the exchange offer will be able to
realize greater value than holders of Class A Warrants who do tender their
Warrants. This is because if the price of the Class A Common Stock is $26.52,
holders of eight Class A Warrants will have the right to purchase eight shares
of Class A Common Stock (having a total value of $212.16) for $185.60. This
would yield at least $26.56 of benefit, without giving any value to the eight
Class B Warrants the holder would also receive upon exercise of eight Class A
Warrants. A holder of eight Class A Warrants who tenders his Warrants in the
exchange offer will hold one share of Class A Common Stock having a value of
$26.52.
Holders of Class B Warrants who tender their Warrants in the exchange
offer will realize greater value than holders of Class B Warrants who do not
tender their Warrants so long as the price of the Class A Common Stock is less
than $33.31 before the expiration of the Class B Warrants in February 2002. On
the other hand, if the price of the Class A Common Stock increases to $33.31 or
more before the expiration of the Class B Warrants, holders of Class B Warrants
who do not tender their Warrants in the exchange offer will be able to realize
greater value than holders of Class B Warrants who do tender their Warrants.
This is because if the price of the Class A Common Stock is at least $33.31,
holders of sixteen Class B Warrants will have the right to purchase sixteen
shares of Class A Common Stock (having a total value of at least $532.96) for
$499.52. This would yield $33.44 of benefit. A holder of sixteen Class B
Warrants who tenders his Warrants in the exchange offer will hold one share of
Class A Common Stock having a value of $33.31.
On January 1, 2000, the exercise price and number of Class A Warrants
change to $18.08 and 1,519,683, respectively, and the exercise price and number
of Class B Warrants change to $24.34 and 1,219,236, respectively, if the
Company's shares of Series A Preferred Stock are not converted. See "Description
of Securities--Preferred Stock." Therefore, if holders hold their Warrants after
January 1, 2000 and the calculations in the prior two paragraphs are based on
the new exercise price and number of Warrants, then:
o holders of Class A Warrants who tender their Warrants in the
exchange offer will realize less value than holders of Class A
Warrants who do not tender their Warrants so long as the price
of the Class A Common Stock is more than $20.66 before the
expiration of the Class A Warrants in February 2002, and
o holders of Class B Warrants who tender their Warrants in the
exchange offer will realize less value than holders of Class B
Warrants who do not tender their Warrants so long as the price
of the Class A Common Stock is more than $25.96 before the
expiration of the Class B Warrants in February 2002.
The foregoing calculations assume that there are no other adjustments
to the exercise price and number of Warrants pursuant to the antidilution
provisions thereof. See "Description of Securities--Warrants."
The last reported sales price for the Class A Common Stock on June 29,
1999 was $12.00. There can be no assurance that the market price of the Class A
Common Stock will not increase to more than $26.51 or $33.30 per share. In the
future, the market price of the Class A Common Stock may fluctuate substantially
based upon general market and economic conditions, ICC's business and prospects
and other factors, including, for one example, the impact of the exchange offer.
See "Other Risk Factors--Risks Relating to Our Class A Common Stock --Our stock
price may be extremely volatile." It is not possible to predict the impact that
the exchange offer will have on the trading price of the Class A Common Stock.
There can be no assurance that the trading price will rise or fall or that any
trading price will be maintained for any period of time as a result of the
exchange offer.
Certain federal securities law considerations. In 1997, we issued
320,652 Class A Warrants and 320,652 Class B Warrants to holders in a private
placement transaction that was exempt from the registration requirements of the
Securities Act. As a result, these Warrants are "restricted securities" under
Rule 144 of the Securities Act and may only be resold under an effective
registration under the Securities Act or any exemption from registration. A
tender of these Warrants to ICC in the exchange offer would be an exempt
transaction.
12
<PAGE>
The exchange offer is being made by us in reliance on the exemption
from the registration requirements of the Securities Act afforded by Section
3(a)(9) thereof. Because the Warrants that were privately placed in 1997 have
not been registered under the Securities Act, the Class A Common Stock that will
be issued in exchange for these Warrants tendered in the exchange offer will be
"restricted securities." However, the holders of Class A Common Stock received
in the exchange offer should be able to "tack" the holding period of the
original Warrant to their Class A Common Stock for purposes of Rule 144. In
general, Rule 144 as currently in effect provides that any person who has
beneficially owned "restricted securities" for one year (including any
permissible tacking period) is entitled to sell "restricted securities" subject
to the volume and manner of sale limitations of Rule 144. If "restricted
securities" have been held for two years (including any permissible tacking
period), a holder who is not an affiliate of ICC and who has not been an
affiliate within the three months prior to the sale is entitled to sell
"restricted securities" without regard to the above limitations pursuant to Rule
144(k). Since the private placement of the Warrants was completed prior to May
1997, sales of Class A Common Stock received in the exchange offer may be made
in compliance with Rule 144 immediately.
The Warrants that we issued in our initial public offering were
registered under the Securities Act and are not subject to the limitations
described in the prior two paragraphs.
13
<PAGE>
THE EXCHANGE OFFER
Terms of the Exchange Offer
We hereby offer, upon the terms and subject to the conditions set forth
in this Offering Circular and in the accompanying Letter of Transmittal, to
exchange one share of Class A Common Stock for each eight (8) outstanding Class
A Warrants and one share of Class A Common Stock for each sixteen (16)
outstanding Class B Warrants. We intend to exchange and retire all of the
Warrants tendered to and accepted by us in the exchange offer.
Purpose of the Exchange Offer
The exchange offer has two principal purposes. First, to offer Warrant
holders the ability to obtain some liquidity with respect to their investment in
ICC by obtaining publicly-traded Class A Common Stock (subject to certain
restrictions on resale as set forth under the caption "Risks Relating to the
Exchange Offer--Certain Federal Securities Law Considerations") that are listed
on the Nasdaq SmallCap Market in exchange for their Warrants; and second, to
benefit the holders of the Class A Common Stock by simplifying our capital
structure and increasing the number of shares of Class A Common Stock that are
publicly traded. This should increase the "public float" and the liquidity of
the Class A Common Stock in the market.
Procedures for Tendering Warrants
The acceptance by a Warrant holder of the exchange offer pursuant to
one of the procedures set forth below will constitute an agreement between the
holder and ICC in accordance with the terms and subject to the conditions set
forth in this Offering Circular and in the Letter of Transmittal.
For a holder validly to tender Warrants pursuant to the exchange offer,
the holder must either (i) deliver the Warrants, together with a properly
completed and duly executed Letter of Transmittal or facsimile thereof and any
other documents required by the Letter of Transmittal, to the exchange agent at
the address set forth below under "--Exchange Agent" on or prior to the
Expiration Date, or (ii) comply with the guaranteed delivery procedures set
forth below.
Nominees or other record holders of Warrants that hold Warrants for
more than one beneficial owner are entitled to make multiple elections pursuant
to the Letter of Transmittal that reflect the election of each of the beneficial
owners for whom they are tendering Warrants. To make such multiple elections,
nominees or other record holders should properly complete the applicable table
in the Letter of Transmittal. NO LETTERS OF TRANSMITTAL AND NO WARRANTS SHOULD
BE SENT TO ICC.
All signatures on a Letter of Transmittal or a notice of withdrawal
must be guaranteed by an eligible institution unless the Warrants tendered are
tendered (i) by a record holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the relevant Letter
of Transmittal or (ii) for the account of an eligible institution. If Warrants
are registered in the name of a person other than the signer of a Letter of
Transmittal, then the Warrants must be endorsed by the record holder, or be
accompanied by a written instrument or instruments of transfer or exchange in
form satisfactory to us duly executed by the record holder, with the signature
guaranteed by an eligible institution. If signatures on a Letter of Transmittal
are required to be guaranteed, such guarantees must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
a correspondent in the United States, a credit union, a savings association or
otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act (each of which is an "eligible institution").
The method of delivery of Warrants and all other required documents to
the exchange agent is at the election and risk of the holder tendering Warrants,
but, if sent by mail, registered mail with return receipt requested, properly
insured, is recommended.
Unless the Warrants being tendered are deposited with the exchange
agent prior to the expiration of the exchange offer (accompanied by a properly
completed Letter of Transmittal and any other documents required
14
<PAGE>
by the Letter of Transmittal), or tendered pursuant to the guaranteed delivery
procedures set forth below, we may, at our option, reject such tender. Issuance
of Class A Common Stock in exchange for Warrants will be made only against
deposit of the tendered Warrants. If less than all the Warrants evidenced by a
submitted certificate are tendered, the tendering holder should fill in the
number of Warrants tendered in the appropriate box on the relevant Letter of
Transmittal with respect to the deposit being made, but only to the extent of
Warrants being tendered. The exchange agent will then return to the tendering
holder, as promptly as practicable following the expiration of the exchange
offer, the number of Warrants equal to the delivered Warrants not tendered. All
Warrants represented by any certificate deposited with the exchange agent will
be deemed to have been tendered unless otherwise indicated.
Holders who are not record holders of, and who seek to tender, Warrants
should (i) obtain a properly completed Letter of Transmittal from the record
holder with signatures guaranteed by an eligible institution, or (ii) obtain and
include with the relevant Letter of Transmittal Warrants, properly endorsed for
transfer by the registered holder or accompanied by a properly completed stock
power from the record holder, with signatures on the endorsement or power
guaranteed by an eligible institution or (iii) effect a record transfer of such
Warrants and comply with the requirements applicable to record holders for
tendering Warrants prior to the expiration of the exchange offer. Any Warrants
properly tendered prior to the expiration of the exchange offer accompanied by a
properly completed Letter of Transmittal will be transferred of record by the
transfer agent as of the expiration of the exchange offer at our discretion.
If a holder desires to tender Warrants pursuant to the exchange offer
but is unable to locate the Warrants to be tendered, the holder should write to
or telephone American Stock Transfer and Trust Company, 40 Wall Street (46th
Floor), New York, New York 10005 (800-937-5449 (from outside New York)) or
(212-936-5100 (from inside New York)), about procedures for obtaining
replacement certificates for Warrants or arranging for indemnification.
Each tendering holder must complete the Substitute Form W-9 provided in
the Letter of Transmittal and either (i) provide his or her correct taxpayer
identification number (social security number, for individuals) and certify that
the taxpayer identification number provided is correct (or that such holder is
awaiting a taxpayer identification number) and that (A) the holder has not been
notified by the Internal Revenue Service that he is subject to backup
withholding as a result of failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder that he is no longer
subject to backup withholding or (ii) provide an adequate basis for exemption
from backup withholding. Holders who do not satisfy these conditions may be
subject to a $50 (or greater) penalty imposed by the Internal Revenue Service
and may be subject to backup withholding at the rate of 31% with respect to
dividends paid on, and gross receipts from the sale of, shares of Class A Common
Stock received pursuant to the exchange offer. Exempt holders (including, among
others, corporations and certain foreign individuals) are not subject to these
requirements if they satisfactorily establish their status as such. Certain
foreign holders may be required to provide a Form W-8 or Form 1001 in order to
avoid or reduce withholding tax.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Warrants will be determined by us in our
sole discretion. Our determination will be final and binding. All tendering
holders, by execution of the Letter of Transmittal (or facsimile thereof), shall
waive any right to receive notice of the acceptance of the Warrants for
exchange. We reserve the absolute right to reject any and all Warrants not
properly tendered or any Warrants our acceptance of which would, in the opinion
of our counsel, be unlawful. We also reserve the right to waive any
irregularities or conditions of tender as to particular Warrants. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Warrants must be cured within such time as we shall determine. Neither we,
the exchange agent or the information agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Warrants, nor shall any of us incur any liability for failure to give
such notification. Tenders of Warrants will not be deemed to have been made
until such defects or irregularities have been cured to our satisfaction or
waived. Any Warrants received by the exchange agent that are not properly
tendered
15
<PAGE>
and as to which the defects or irregularities have not been cured or waived will
be returned by the exchange agent to the tendering Holders as soon as
practicable following the expiration of the exchange offer. The exchange agent
has no fiduciary duties to the Holders in the exchange offer and is acting
solely on the basis of our directions. Guaranteed Delivery Procedures
If a holder desires to tender Warrants and the holder's Warrants are
not immediately available or time will not permit the holder's Warrants or other
required documents to reach the exchange agent before the expiration of the
exchange offer, a tender may be effected if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration of the exchange offer, the exchange agent
receives from such eligible institution a properly completed Notice of
Guaranteed Delivery (by telegram, telex, facsimile transmission, mail or hand
delivery) substantially in the form provided by us which sets forth the name and
address of the holder and the number of Warrants tendered, states that the
tender is being made thereby and guarantees that within three Nasdaq Stock
Market trading days after the expiration of the exchange offer, the relevant
Letter of Transmittal (or facsimile thereof), together with the Warrants and any
other documents required by such Letter of Transmittal, will be deposited by the
eligible institution with the exchange agent; and
(c) all tendered Warrants, as well as all other documents required by
the relevant Letter of Transmittal, are received by the exchange agent within
three Nasdaq Stock Market trading days after the expiration of the exchange
offer.
Acceptance of Warrants and Payment
The acceptance for exchange and payment of Warrants validly tendered
and not withdrawn and delivery of the Class A Common Stock will be made as
promptly as practicable after the expiration of the exchange offer. We expressly
reserve the right to delay acceptance of any of the Warrants or terminate the
exchange offer and not accept for exchange any Warrants not already accepted if
any of the conditions set forth under "--Conditions of the Exchange Offer" shall
not have been satisfied or waived by us. We will be deemed to have accepted for
exchange validly tendered Warrants if, as and when we give oral or written
notice thereof to the exchange agent. Subject to the terms and conditions of the
exchange offer, delivery of shares of Class A Common Stock for Warrants accepted
pursuant to the exchange offer will be made by the exchange agent as soon as
practicable after the expiration of the exchange offer. The exchange agent will
act as agent for the tendering holders for the purposes of receiving Class A
Common Stock from us and transmitting the shares of Class A Common Stock to the
tendering holders. Tendered Warrants not accepted for exchange by us, if any,
will be returned without expense to the tendering holder as promptly as
practicable following the expiration of the exchange offer.
All tendering holders, by execution of the Letter of Transmittal (or
facsimile thereof), waive any right to receive notice of acceptance of their
Warrants for exchange.
Withdrawal Rights
Tenders of Warrants are irrevocable, except that tendered Warrants may
be withdrawn at any time prior to 9:00 a.m., New York City time, on the
expiration of the exchange offer. Holders who wish to exercise their right of
withdrawal must give notice of withdrawal in writing or by telegram, telex or
facsimile transmission. This notice must be timely received by the exchange
agent at 40 Wall Street (46th Floor), New York, New York 10005. Any such notice
of withdrawal must specify the name of the person who tendered Warrants to be
withdrawn and the number of Warrants to be withdrawn. If Warrants have been
delivered or otherwise identified to the exchange agent, the name of the
registered holder and the serial numbers of the particular Warrants to be
withdrawn must also be furnished to the exchange agent prior to the physical
release of the withdrawn Warrants. A notice of withdrawal must be signed by the
record holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to us that the person withdrawing the tender has succeeded
to the beneficial ownership of the Warrants.
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Any permitted withdrawals of tenders of Warrants may not be rescinded,
and any Warrants withdrawn will thereafter be deemed not validly tendered for
purposes of the exchange offer. Withdrawn Warrants may be re-tendered by
following one of the procedures described in this Offering Circular at any time
on or before the expiration of the exchange offer.
All questions as to validity, form and eligibility (including time of
receipt) of the notice of withdrawal will be determined by us in our sole
discretion. Our determination will be final and binding. Neither we, the
exchange agent or the information agent nor any other person will be under any
duty to give notification of defects or irregularities in any notice of
withdrawal, nor shall any of us incur any liability for failure to give any such
notification. Withdrawal of Warrants will not be deemed to have been made until
such defects or irregularities have been cured to our satisfaction.
Exchange Agent
American Stock Transfer and Trust Company will act as exchange agent
for the exchange offer. All correspondence in connection with the exchange offer
and the Letter of Transmittal should be addressed to the exchange agent as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail, Hand or Overnight Courier: Confirm by telephone:
40 Wall Street (800) 937-5449 (from outside New York)
46th Floor (718) 921-8200 (from inside New York)
New York, New York 10005
</TABLE>
Information Agent
Morrow & Co., Inc. will act as the information agent for the exchange
offer. The information agent will help us administer the exchange offer and will
answer questions and provide information to Warrant holders with respect to the
exchange offer. The information agent is not authorized, and will not make, any
recommendation to Warrant holders with respect to whether they should tender
their Warrants in the exchange offer. The information agent may be contacted as
follows:
By Mail, Hand or Overnight Courier: By Telephone:
445 Park Avenue (800) 566-9061
5th Floor
New York, New York 10022 Call Collect:
(212) 754-8000
Expiration Date; Extensions
The exchange offer will expire at 9:00 a.m., New York City time, on
July 30, 1999, unless extended. We reserve the right to extend the exchange
offer at our discretion, in which event the expiration of the exchange offer
shall mean the time and date on which the exchange offer as so extended shall
expire. We will notify the exchange agent of any extension prior to the
expiration of the exchange offer. This notice will specify the date and time to
which the exchange offer has been extended and may be given to the exchange
agent by facsimile or orally, if confirmed in writing prior to the opening of
the Nasdaq SmallCap Market on the next business day. During any extension, all
Warrants previously tendered and not properly withdrawn will remain subject to
the exchange offer, subject to the right of a tendering Warrant holder to
withdraw his Warrants in accordance with the procedures described above under
"Withdrawal Rights."
Any extension of the expiration of the exchange offer will be followed
as soon as practicable, but in no event later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled expiration of the
exchange offer, by public announcement, and any amendment of the exchange offer
will be followed as soon as practicable by public announcement. Without limiting
the manner by which we may choose to make such public announcement, we shall
not, unless otherwise required by law, have any obligation to publish, advertise
or otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
If we decide to waive, modify or amend a material provision of the
exchange offer, we may do so at any time, or from time to time, provided that we
give notice thereof in the manner specified above and extend the
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exchange offer to the extent required by the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). With respect to the percentage of the class of
securities being sought or a change in the consideration offered, Rule
13e-4(f)(1) under the Exchange Act generally requires that a tender offer remain
open for at least 10 business days from the date that notice of the change is
first published or sent or given to security holders. The minimum period during
which an offer must remain open following other material changes in the terms of
the offer or information concerning the offer will depend upon the facts and
circumstances, including the relative materiality of the change in the terms or
information. Any amendment to the exchange offer will apply to all Warrants,
regardless of when or in what order the Warrants are tendered. The term
"business day" means a day other than Saturday, Sunday or a federal holiday and
consists of the time period from 12:01 a.m. through 12:00 p.m., New York City
time.
Conditions of the Exchange Offer
Notwithstanding any other provision of the exchange offer, we may
cancel, modify or terminate the exchange offer and are not required to accept
for exercise any Warrants pursuant to the exchange offer if before the
expiration of the exchange offer:
(i) there shall be pending, instituted or threatened any legal action
or administrative proceeding before any court or government agency, by
any government agency or any other person prohibiting, restricting or
delaying the exchange offer;
(ii) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any governmental authority, which would
prohibit or materially restrict or delay consummation of the exchange
offer; or
(iii) there shall have occurred (and the adverse effect of such
occurrence will be continuing): (a) any general suspension of, or
limitation on prices for trading on, the Nasdaq Stock Market or in the
other over-the-counter markets; (b) a declaration of a banking
moratorium by United States or New York authorities; or (c) a
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States of
America which could reasonably be expected to affect materially and
adversely (or to delay materially) the consummation of the exchange
offer.
In the event that we terminate the exchange offer pursuant to any of
the conditions set forth above, the exchange agent will promptly return any
tendered Warrants to the holders thereof.
Mutilated, Lost, Stolen or Destroyed Certificates
Any tendering holder whose Warrants have been mutilated, lost, stolen
or destroyed should contact the exchange agent at its address set forth herein
for further instructions.
Expenses
We will not make any payments to any brokers, dealers or persons for
soliciting Warrant tenders in the exchange offer. We will, however, pay the
exchange agent reasonable and customary fees for its services and will reimburse
the exchange agent for its reasonable out-of-pocket expenses in connection
therewith and we have agreed to pay the information agent a fee of approximately
$20,000 plus disbursements for its services and to reimburse the information
agent for its reasonable out-of-pocket expenses. We will also reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Offering
Circular and related documents to the beneficial owners of Warrants and in
handling or forwarding tenders on behalf of their customers. We will also pay
all legal, accounting, printing, listing, filing and other similar fees and
expenses relating to the exchange offer.
Other Matters
The Offering Circular is being sent to persons who were holders of
record of the Warrants at the close of business on June 29, 1999.
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BUSINESS OF ICC
INDUSTRY
Electronic Commerce. Electronic commerce ("e-commerce") is business
conducted using the Internet. E-commerce includes purchase and sale
transactions, like the purchase of goods and services, both between businesses
(known as "business-to-business") and between businesses and consumers, as well
as services provided by VANs with respect to the exchange and processing of
business documents and data files. The flexibility and low cost of the Internet
is fostering rapid innovation and causing significant growth in the overall
market for e-commerce. Forrester Research estimates that business-to-business
e-commerce will grow from $109 billion in 1999 to $1.3 trillion in 2003, and
that the total market for business-to-business transactions will then be more
than ten times larger than the market for business-to-consumer transactions.
Electronic Data Interchange; Background. EDI is the electronic
transmission of business documents and data using a set of industry-specific
standards and is used to assist business-to-business e-commerce. Documents that
can be transmitted include purchase orders, invoices and receipts, but can also
include several other types of data such as blue prints and computed aided
design drawings. The development of EDI began in the 1960s, when several
industries became interconnected using dedicated telephone circuits and invented
their own data formats for transmitting business documents. In order to
facilitate the exchange of business documents between different industries, a
set of comprehensive standards was certified by the American National Standards
Institute in 1979. This standard, commonly referred to as "X12", has grown
rapidly in acceptance and became the primary U.S. standard for EDI in the early
1990's. Because of the implementation of uniform standards and the development
of personal computers with stand-alone telecommunications connectivity, EDI
usage has grown exponentially in the last ten years. There are currently an
estimated 260,000 EDI users in the United States generating annual EDI revenue
of approximately $7 billion. We estimate that these 260,000 EDI users conduct
business with as many as 6 million trading partners. We believe that total EDI
users and annual industry revenues have increased over the past five years at
compound annual growth rates of 30%, and are projected to grow at a rate of 30%
over the next five years.
Benefits of EDI. Organizations engaged in both traditional and
e-commerce have found EDI to be vital because it allows the organizations to
process data without human intervention and to reduce the lead time required to
replenish stocks. EDI also eliminates the possibility of data entry errors and
reduces the level of administrative support and the cost and burden of handling,
storing and retrieving documents associated with paper records. EDI also allows
for the rapid, accurate and secure exchange of business data and the reduction
of operating and inventory carrying costs. For these reasons, EDI users often
request or encourage their trading partners to use EDI as the principal means of
transferring business documents.
How EDI Works. In order to communicate electronically, each party must
reformat its internal data into a standardized form in a process known as data
translation. The sending party must translate its documents or data into the
standardized EDI format. The receiving party must then translate the incoming
documents or data back from the standardized EDI format into the internal format
utilized by the receiving party. The receiving party can then process the
documents or data in the same manner as documents or data the receiving party
originates within its own system. By employing a standardized format, two
parties can communicate with each other electronically, with each trading
partner continuing to use its own internal application systems.
Value-Added Networks; Background. Organizations using EDI have
traditionally relied on third-party VANs to establish and maintain connectivity
to their EDI trading partners and to provide a number of services that support
EDI activities. These services include the transmission and storage of
electronic data, the preparation, encryption and decryption of electronic
documents and the non-repudiation and verification of transmission, receipt and
content of data sent over the VAN. In addition, VANs connect many types of
computer hardware and communications devices, translate documents from
proprietary formats to the standardized EDI format and back and reduce the
possibility of one trading partner accessing the other's computer. Organizations
engaging in e-commerce use VANs to avoid the costs of installing and maintaining
different communication configurations for each trading partner. A VAN removes
the difficulties involved in conducting e-commerce with differing protocols,
time zones, hardware and software systems.
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Traditional VANs. Today, virtually all EDI is conducted on the networks
of traditional VANs, which use dedicated leased line telecommunication links and
the X12 protocol to transmit data between trading partners. We estimate that
there are approximately 32 traditional VANs in operation. We believe that the
six largest, Harbinger, GEIS, Advantis, Sterling Software, AT&T and MCI
Communications Corporation, account for more than 90% of total EDI revenue.
Using traditional VANs. The subscriber to a traditional VAN must
purchase an EDI translator product (which usually costs from $3,000 to $50,000)
and must also purchase proprietary EDI software to connect to the VAN (which
usually costs from $100 per month to $300 per month). Once connected, the user
pays usage charges based on the volume of data transmitted. Because VANs rely
primarily on costly dedicated leased line telecommunication links to transmit
business documents and other data, the prices they charge to users tend to be
substantially higher than Internet-based forms of data transmission. In addition
to these costs, EDI-enabled organizations must retain personnel specifically to
maintain their EDI systems, adding to the user's cost to use traditional VAN
services. In addition, traditional VANs utilize a batch system for the
transmission of EDI data, which entails collecting and storing documents for
later transmission as a batch. This leads to substantial delays, often several
hours, in delivering data to the recipient.
DESCRIPTION OF BUSINESS
The CommerceSense Solution. Our CommerceSense service incorporates
industry standard security and a patented branding process in the transmission
of electronic documents, images and other data over the Internet through an "in"
and "out" mailbox system. CommerceSense offers all the services of a traditional
VAN and is superior in the following ways:
Lower Operating Costs. Our CommerceSense service uses the Internet to
offer customers services at significantly lower cost than traditional
VANs.
o CommerceSense does not require the customer to purchase
software or an EDI translator to access the network. This
lowers the upfront costs required to subscribe to our
CommerceSense service compared to subscribing to a traditional
VAN service;
o Using the Internet rather than the traditional VAN
telecommunications infrastructure reduces the costs associated
with EDI transmissions and enables us to offer our
CommerceSense service at prices that are on average more than
50% lower than those currently charged by traditional VANs;
o CommerceSense does not require customers to make ongoing
software modifications or maintain a technical staff to manage
the transmission process, thereby further reducing customers'
ongoing operating costs; and
o The lower setup and operating costs allow a larger
percentage of an organization's smaller trading partners to
become EDI-enabled, thereby facilitating the exchange of
documents and other data and reducing costs for both the
organization and its trading partners.
Improved Quality of Service and Additional Features. Our CommerceSense
service uses the Internet to deliver a higher level of service and more
features than traditional VANs.
o Documents are delivered up to 100 times faster, depending
upon the speed of the customer's connection to its internet
service provider;
o Customers may increase their overall productivity and more
effectively track, monitor and process business documents and
other data;
o Documents can be delivered either in real time or
retrieved when convenient for the customer, rather than in
batches hours after transmission. Real-time delivery improves
the reliability of our services by reducing the potential for
document corruption, bottlenecks and other problems associated
with batch delivery modes;
o CommerceSense can handle transmissions of data other than
standard business documents, such as images, engineering
drawings, architectural blueprints, audio and certain types of
video; and
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o The customer enjoys flexibility in creating different
document types for various business applications. For example,
the customer can add its business logo to its documents and
can use its own format for each document type.
In addition, we believe our CommerceSense service provides the
advantages over e-mail and other Internet- based electronic commerce systems,
such as:
o Our CommerceSense service can handle a wide variety of
business documents and data, including purchase orders,
invoices, statements, inventory tracking and shipping
documents, images, engineering drawings, architectural
blueprints, audio and certain types of video; and
o We believe that CommerceSense is the only Internet-based
data transmission service that is a VAN. We are approved to
interconnect with the six largest traditional VANs, which we
believe currently account for 90% of EDI revenue. As a result,
we can handle EDI traffic between our customers and any of
their trading partners that choose to continue to use a
traditional VAN. Unlike other Internet services, customers can
use our service without requiring their trading partners to do
so. Although certain of the largest VANs have recently started
to offer Internet-based services, those services are primarily
on-ramps to the VAN that offers the service, which renders the
services subject to the disadvantages of a traditional VAN
described above. See "Competition."
Full Suite of Services. We provide the full range of VAN services to
our customers.
o Document management, acknowledgment and tracking;
o Archiving and reporting services;
o Third-party non-repudiation (we act as an independent
third party to verify document transmission, receipt
and content);
o Technical support; and
o Security and encryption as required by application.
We believe that the benefits of our CommerceSense service compared to
traditional VANs and e-mail and other Internet-based data transmission systems
provide us with a significant competitive advantage. We believe that these
benefits will appeal to the existing estimated universe of 260,000 EDI users in
the U.S., which generated aggregate EDI revenues of approximately $7 billion in
1998. In addition, we believe that the low-cost nature and significant business
advantages of our service accommodate trading partners of all sizes and will
make EDI accessible and appealing to the estimated 6 million potential EDI users
in the U.S. This will allow a larger percentage of an organization's trading
partners to become EDI-enabled, thereby facilitating the exchange of data and
reducing costs for both the organization and its trading partners. In standard
VAN terminology, purchasers of goods or services using a VAN are referred to as
"hubs" and their suppliers are referred to as "spokes". Spoke companies can
receive electronic purchase orders and other documents and data, either through
our secure Web site or directly over the Internet. We also create for spoke
companies that are not EDI-enabled customized templates for electronic documents
that can then be transmitted to the hub company. Spoke companies need only
Internet access or a Web browser to effect these transactions, at prices per
kilocharacter that are on average more than 50% lower than those currently
charged by traditional VANs.
Service Description. Each customer of CommerceSense has an inbox that
temporarily stores inbound transmissions upon arrival and an outbox which
archives copies of transmissions sent by the customer. CommerceSense receives a
transmission directly from a customer or through an interconnection with a VAN
and seals the transmission into a secure electronic envelope that can be opened
and viewed with a Web browser or directly from the Internet. Before arriving in
the inbox, the transmission is examined by the CommerceSense system to assure
that its format will be readable by the recipient. If not, our CommerceSense
service automatically performs the appropriate translation or format conversion
prior to depositing the transmissions in the recipient's inbox.
If the recipient desires real-time delivery of transmissions, an
automatic feature of CommerceSense, called the inbox supervisor, will
automatically forward each arriving transmission immediately to the recipient.
The
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transmission is therefore delivered to the recipient only moments after it is
sent. Alternately, the computer at each customer's physical site will
periodically call the CommerceSense system, usually on a schedule set by the
customer, and request transmission of the inbox contents. In either case, the
inbox supervisor forwards the inbox transmissions to the computer interface
service module, which transmits the transmissions to the customer's own computer
system.
Traditional VANs use a slower, older document delivery system. Rather
than immediately transmitting documents from the sender to the recipient or
allowing the recipient's computer to access the inbox at will, existing VANs
collect and store documents for later transmission as a batch at a rate much
slower than that provided by our CommerceSense service. This can result in
transmission times of up to several hours.
Each customer pays us a monthly fee for each mailbox maintained on the
system. There is a nominal setup charge, however the customer does not have to
purchase any software or hardware to access or operate our CommerceSense
service. Our technical staff works with the customer to set up each mailbox to
that customer's specifications. The customer also pays a monthly usage fee based
on the amount, in kilocharacters, of the data that is transmitted. Our charge
per kilocharacter is on average more than 50% lower than that currently charged
by traditional VANs. All upgrades to our service are provided free to our
customers through an automatic on-line update to the service. Additionally, we
provide technical support to our customers at no additional charge. Therefore,
our CommerceSense service provides a fully-integrated data interchange solution
at a much lower cost than is currently available.
We believe that traditional VANs cannot match our prices due to the
required initial setup costs and their ongoing infrastructure costs. Using a
traditional VAN service requires the user to incur an initial expense averaging
tens of thousands of dollars for hardware, software and training. In addition,
we believe that the VAN's ongoing costs of their dedicated leased line
telecommunications links and their large historical hardware investments
restrict the ability of the VANs to lower prices in response to the cost savings
made possible by the transmission of documents and data over the Internet. These
factors limit e-commerce participation through traditional VANs to those who can
afford it or to those whose largest trading partners request or encourage it.
Documents or other data sent via CommerceSense do not travel the same
route over the Internet as traditional e-mail or Web-based electronic
communications services. Our CommerceSense service uses FTP transmission to
ensure that the documents or other data travel directly from the sender to the
recipient rather than through several routing points. This provides for more
certain and secure delivery and greater ability to trace the documents or data
on the path from sender to recipient.
The system that provides the CommerceSense service is written entirely
in the Java programming language to capitalize on the most sophisticated
Internet technologies while allowing customers to view and download data into
any type of system. We believe that CommerceSense is year 2000 compliant.
Industry Standard Security. Our CommerceSense service enables customers
to select from a range of advanced security options. The system incorporates
industry standard encryption methods, including RSA(TM), a leader in data
security and encryption, and PGP(TM), as well as our patented branding
technology. See "Other Risk Factors--Risks Relating to the Internet and Online
Commerce Aspects of our Business--If Internet usage does not continue to grow or
its infrastructure fails, our business will suffer."
Universal Translation. CommerceSense supports all common EDI data
format standards, including X12 and EDIFACT, the equivalent of X12 used in
Europe, as well as any proprietary standard required by the customer. As a
result, our CommerceSense service works for customers with EDI translators or
provides a document translation service for a customer that is not EDI-enabled
to allow that customer to transmit its documents electronically to its trading
partners, whether the trading partners are EDI-enabled or not.
Secure Location at SIAC. Our data center is located in the same data
center that provides all the data-processing support for both the New York and
American Stock Exchanges. This facility is considered among the most secure
commercial data centers in the world and has not experienced a down moment since
its construction in 1990. The facility has round-the-clock armed guards, video
surveillance, massive on-site power generation capability, telecommunications
technical support and multiple privately-engineered fiber connections to the
Internet.
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Business Strategy. We intend to continue to market our CommerceSense
service to the top 2,500 large-scale EDI-using hub companies in the United
States. We believe that our target customers currently incur VAN charges in
excess of approximately $10,000 per month with an average price per
kilocharacter of approximately $0.25. We also believe that we can offer these
target customers a greater array of services using superior technologies at an
average price per kilocharacter that is more than 50% lower than their current
EDI bill. In addition, we believe that a significant number of these hub
companies would like to expand the use of electronic commerce to more of their
spoke companies. However, currently a significant investment in hardware and
software at each spoke company is required by traditional VANs to purchase or
lease the equipment and software necessary for the spoke company to link with
the hub company. In addition, the spoke company will be burdened with
significant costs to manage the complicated software and a smaller spoke company
may not have the financial or technical resources to create and transmit
documents or other data through such a link or may not conduct sufficient
business with the hub company to justify the investment.
Because of the cost to the spoke companies of using VANs, large hub
companies using EDI are currently connected to only a small percentage of their
spoke companies. Since small spoke companies using our CommerceSense service
require only an Internet connection or a Web browser to receive and transmit
documents electronically, large hub companies may now be able to request or
encourage electronic commerce with their small hub companies. In turn, many of
these spoke companies may become the hub companies for their suppliers, which
should further broaden and deepen the reach of our CommerceSense service.
The success of our strategy will depend on continued and expanded
acceptance of the Internet as an accepted vehicle for electronic commerce and
communication among businesses. See "Other Risk Factors--Risks Relating to the
Internet and Online Commerce Aspects of Our Business."
We may also acquire or invest in complementary businesses, products or
services or obtain the right to use complementary technologies through joint
ventures, strategic alliances or other business relationships. We also believe
that if we are able to sell our CommerceSense service to a significant
percentage of a hub company's spokes, we may be able to offer to such a trading
community ancillary messaging services in addition to CommerceSense. It is our
intention to attempt to develop and introduce a variety of messaging products
and services with a focus on the needs of large-scale enterprises, particularly
those enterprises that are in vertical markets in the 25 largest commercial
industries. We believe that a large-scale CommerceSense trading community within
an individual vertical market could make available to third parties desirable
access to a group of buyers and sellers that share applications and
circumstances unique to their industry.
However, we have currently neither identified any candidates for any
business relationships nor developed any additional services described in the
prior paragraph, and we may not be able to do so. Even if we develop these
services, we may not be able to market and sell them so as to generate profits.
See "Other Risk Factors--Risks Relating to Our Company--We may not be able to
successfully make acquisitions or investments in other companies."
Marketing and Sales. We intend to employ a variety of marketing
initiatives to enhance awareness of our product in the electronic commerce
community and to increase our sales domestically and internationally. We
anticipate it will be necessary to retain channel partners or independent
contractors to train customers in the use of CommerceSense to achieve our
business plan.
Direct Marketing through Sales Force. Direct sales to large corporate
users of existing VAN services have been very successful for ICC to date and
continue to form the core of our sales strategy. Our sales force currently
consists of nine people and is growing. Our sales force organization consists of
field sales representatives who provide direct assistance with sales calls at
customer sites and must meet target quotas. These representatives are supported
by technical personnel based in the field. All field sales personnel report to
the Vice President of Sales through one of two regional managers responsible for
the eastern and western parts of the United States. Hiring for our proposed
international sales organization is expected to commence in August 1999, with an
initial focus on Europe from a base in the London area.
Indirect Marketing through Hub Companies. We believe that smaller spoke
companies comprise a significant potential market that may be reached without
any direct marketing on our part, because the low cost of our CommerceSense
service will allow these smaller spoke companies to consider using the our
service if requested to do so by their hub companies.
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Seminars and Tradeshows. We plan to conduct seminar marketing,
consisting of a traveling "road show" providing targeted group demonstration and
selling activities to pre-qualified audiences invited to events in their own
localities by direct mail supported by telemarketing confirmation. We will
continue to attend tradeshows, including CeBIT, the major European tradeshow, in
2000 and 2001. We plan to staff national shows, currently planned for eight per
year, with sales, support and executive personnel from our headquarters.
Web-based and Print Advertising. We intend to use both Web-based and
traditional print advertising. We plan to roll out a redesigned Web site in
September 1999 embodying a variety of promotional features, including the
ability for a trading partner to subscribe to our CommerceSense service and
begin the installation process for its own account online, directly from our Web
site. We also intend to focus on print advertising in industry publications and
possibly in-flight magazines.
Strategic Relationships. We are currently establishing relationships
with general consulting firms in which the firms will recommend our products and
services as part of their project recommendations. In addition, we are currently
offering to create custom-designed interfaces to the purchasing software
packages, which commonly have an EDI component, of the twenty largest companies
that produce purchasing software. We believe that an interface with our
Internet-based electronic commerce system will appeal to the software companies'
desire to highlight the cutting-edge character of their software. The software
companies will not incur any costs by adding our interface, since we are
developing the interfaces to increase the number of users of our CommerceSense
service rather than to produce revenues by selling the interfaces.
International Marketing. The international sales organization is
initially planned to be based in data center facilities located in Southeastern
England, Frankfurt and Singapore and will develop a "country manager" structure
consisting of a mix of both U.S. national and locally-hired sales personnel
supporting direct sales to end users.
Technical Support. We provide technical support for new users of our
CommerceSense service by educating the users about the application and correctly
configuring the users' computer systems. We also provide ongoing assistance for
previously-installed users. Our domestic staff currently consists of five
individuals, which we intend to increase to eight to service our current backlog
of orders for installation commencing in July 1999. This group will then train
outsourcing firms to take over the installation of a majority of new users
commencing in the third calendar quarter in 1999. However, we intend to retain
roll-out staff sufficient to install key accounts and train the staffs of new
channel partners.
Customers. We currently provide our CommerceSense service to more than
100 customers, including the following:
o Three large web-based online shopping services;
o A large book retailer;
o Several large publishers;
o Three major office supply companies;
o A software manufacturer;
o A freight company;
o A large retail drug store chain; and
o Several automotive parts manufacturers.
We believe that no customer will account for a material portion of our revenues
by the end of 1999.
Competition. The electronic commerce and EDI network services and
computer software markets are highly competitive and fragmented and are
characterized by rapidly-evolving technology. We estimate that there are at
least 32 VANs. All of these competitors have substantially greater financial and
other resources than we
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do. Although we are unaware of any other company actually engaged in the
commercial implementation of an Internet electronic commerce service
substantially similar to our CommerceSense service, we anticipate that in the
future other companies will offer services which are functionally similar and
may compete directly with our CommerceSense service.
We further believe that it is possible to provide some of the benefits
of our CommerceSense service by other means and that competitors may provide
other solutions for the conduct of electronic commerce presently provided by
VANs. However, we believe that our CommerceSense service is of sufficiently high
quality and is priced to be very competitive with other electronic commerce
alternatives.
Traditional VANs. We estimate that six traditional VANs, Harbinger,
GEIS, Advantis, Sterling Software, AT&T and MCI Communications Corporation,
collectively control more than 90% of the market for VAN services. We have
interconnect agreements with each of these six largest VANs. Each of these VANs
offers or is attempting to develop Internet-based services. However, these
services are currently not priced to compete favorably with the existing VAN
service. VAN Internet offerings are currently primarily designed as on-ramps to
their networks rather than electronic commerce solutions independent of the
traditional VAN service.
Internet-Based Offerings. Netscape provides an integrated family of
Internet commerce applications for conducting business to business and business
to consumer electronic commerce on the Internet, called CommerceXpert. However,
these applications require the use of the Netscape Web browser, cannot connect
with VANs and, we believe, do not have the same reliability and number of
value-added components as our CommerceSense service.
There are currently a number of companies that offer electronic
commerce packages using the Internet as the delivery method. Each of these
companies requires users to buy expensive software. In addition, none of these
companies offers the option to interconnect with any of the current VANs or with
any other service. As a result, both the sender and the recipient in an
electronic commerce transaction must use the same system. Our CommerceSense
service allows users to interconnect with their trading partners that use VAN
services.
Numerous companies supply electronic commerce network services, and
several competitors target specific vertical markets such as the pharmaceutical,
agribusiness, retail and transportation industries. Competitors provide software
designed to facilitate electronic commerce and EDI communications. Existing VANs
provide network services and related software products and services. Other
competitors provide PC-based computer programs and network services which
facilitate electronic banking transactions. These competitors include banks and
other financial institutions that operate privately-owned computer networks that
link directly to their commercial customers.
We believe that existing competitors are likely to expand the range of
their electronic commerce services to include Internet access and that new
competitors are likely to offer services which utilize the Internet to provide
data transmission services. These new competitors may include telephone and
large media companies. A group of computer companies, including some of our
competitors, have formed CommerceNet. This is a consortium which has announced
an intention to explore the use of the Internet for commercial applications.
Additionally, several competitive network service providers allow their
subscribers access to the Internet and several major software and
telecommunications companies, including AT&T, MCI Communications Corporation,
Sprint and Microsoft, either currently provide or are expected to introduce
Internet access services. Similarly, the major on-line service companies, such
as America On-Line, Compuserve and Prodigy, also offer Internet services. All of
these companies may enhance their services in the future to include certain
aspects of electronic commerce.
We believe that the principal competitive factors affecting our market
are Internet expertise and talent, quality, price and speed of service delivery,
client references, quality of customer service and ease of use of Internet
document delivery sites. Although we believe that we compete adequately with
respect to these factors, we may not maintain our competitive position against
current and potential competitors. Many of our current and potential competitors
have significant existing customer relationships and much greater financial,
marketing, customer support, technical and other resources than we do. As a
result, they may be able to respond more quickly to changes in customer
requirements or be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to potential
customers and employees, or be able to devote greater resources to the
development, promotion and sale of their services than we can.
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See "Other Risk Factors--Risks Relating to Our Company--We may not be
able to compete effectively in the business-to-business electronic commerce
market."
Intellectual Property Rights. We rely on a combination of trade
secrets, confidentiality procedures, contractual provisions and patent and
trademark laws to protect our proprietary intellectual property rights. However,
we believe that given the rapid pace of innovation within the electronic
commerce industry, the technological and creative skills of our personnel are
more important in establishing and maintaining a leadership position in the
electronic commerce industry than the legal protection of our technology.
We currently have patent protection only for our branding technology.
By attaching a "brand" at the time the document is decrypted from a secure data
source, an "audit trail" of the decrypted information can be maintained so that
the user can track its document's path to the recipient. Our branding patent
covers:
o decrypting electronic items or products (i.e. documents or
software);
o attaching an identifying serial number; and
o logging the item number and serial number.
We believe that the protection of our rights in our CommerceSense
service depends primarily on our proprietary software and messaging techniques
which constitute "trade secrets." We have currently made no determination
whether we can patent these trade secrets.
We believe that our encryption methods provide state of the art
protection for all information transmitted through our CommerceSense service. We
plan to upgrade our encryption methods if new encryption technology becomes
available or if we become aware that it is possible to break our current
encryption methods.
We have entered into confidentiality and non-competition agreements
with all of our employees. In addition, we have adopted a policy that requires
all future employees to sign appropriate confidentiality agreements and, where
appropriate, non-competition agreements.
See "Other Risk Factors--Risks Relating to Our Company--We depend on
our intellectual property, which may be difficult and costly to protect."
Governmental Regulation. Our services are transmitted to our customers
through the Internet and over dedicated and public telephone lines.
Transmissions over telephone lines are governed by regulatory policies
establishing prices and other terms. Changes in the legislative and regulatory
environment relating to on-line services or EDI could adversely affect us. We
believe that we are currently in material compliance with all applicable
regulations.
Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet and on-line service providers in
a manner similar to long distance telephone carriers and to impose access fees
on these providers. This could increase the cost of transmitting documents and
data over the Internet. Furthermore, foreign laws and state tax laws and
regulations relating to the provision of products and services over the Internet
are still developing. If individual states impose taxes on services provided
over the Internet, our cost of providing our CommerceSense service may increase
and we may not be able to increase the price we charge for our CommerceSense
service to cover these costs. Any new domestic or foreign laws or regulations or
new interpretations of existing laws and regulations relating to the Internet
could have a material and adverse effect on our business, operating results or
financial condition.
See "Other Risk Factors--Risks Relating to the Internet and Online
Commerce Aspects of Our Business--Government regulation and legal uncertainties
relating to the Internet could harm our business."
Employees. On June 24, 1999, we had 40 full-time employees and two
consultants. No employees are parties to any collective bargaining agreement. We
believe our employee relations are generally good. Competition for qualified
personnel in the electronic commerce industry is intense, particularly for
software development and other technical staff as well as for marketing and
customer service personnel with the requisite technical knowledge. Our future
success will depend in part on our continued ability to attract, hire and retain
qualified personnel. See "Other Risk Factors--Risks Relating to Our Company--We
depend on our key personnel for our future success" and "--We need to hire and
retain qualified employees and may not be able to do so."
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Facilities. Our executive offices are located at 805 Third Avenue, New
York, New York 10022 under a lease that expires December 31, 2004. The lease
covers approximately 5,500 square feet, provides for annual rent of
approximately $200,000 and is subject to customary increases.
We leased a second facility during the second quarter of calendar 1999.
This facility, which is located in East Setauket, New York, contains
approximately 4,100 square feet and will initially accommodate 25 employees.
This lease is for 5 years at an annual rent of approximately $78,000 and is
subject to customary increases. We plan to locate our development and network
administration groups and our technical support call center at this facility.
Our data center is located at SIAC under an agreement that expires
December 2002. The agreement has an option to renew and to expand our usage of
the facility at the end of the current term. We plan to renew this agreement and
to exercise our option to expand.
These facilities should be adequate for our present and reasonably
foreseeable requirements.
OTHER RISK FACTORS
Prior to deciding whether to exchange the Warrants in the exchange
offer, Warrant holders should carefully consider all of the information
contained (or incorporated by reference) in this Offering Circular, especially
the risk factors described or referred to in "Risks Relating to the Exchange
Offer" and in the following paragraphs. Any of the following risks could
materially and adversely affect our business, operating results, financial
condition and the market price of our Class A Common Stock. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties that we do not currently recognize or that we currently
believe are immaterial may also adversely impact our business, operating
results, financial condition and the market price of our Class A Common Stock.
This Offering Circular contains a number of "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Specifically, all statements other
than statements of historical facts included in this Offering Circular regarding
our financial position, business strategy and plans and objectives of management
for future operations are forward-looking statements. These forward-looking
statements are based on the beliefs of management, as well as assumptions made
by and information currently available to management. When used in this Offering
Circular, the words "anticipate," "believe," "estimate," "expect," "may,"
"will," "continue" and "intend," and words or phrases of similar import, as they
relate to our financial position, business strategy and plans, or objectives of
management, are intended to identify forward-looking statements. These
"cautionary statements" reflect our current view with respect to future events
and are subject to risks, uncertainties and assumptions related to various
factors including, without limitation, those listed under the headings "Risks
Relating to the Exchange Offer," "Other Risk Factors" and other cautionary
statements in this Offering Circular.
Although we believe that our expectations are reasonable, we cannot
assure you that our expectations will prove to be correct. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described in this Offering Circular as anticipated,
believed, estimated, expected or intended. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.
RISKS RELATING TO OUR COMPANY
We have never earned a profit and expect to incur significant losses.
We have incurred significant losses since our company was founded in 1991. We
have never earned a profit in any fiscal quarter and, as of April 30, 1999, we
had an accumulated deficit of approximately $20.0 million. In their audit report
on our July 31, 1998 financial statements, Richard A. Eisner & Company, LLP
questioned our ability to continue as a going concern. However, this occurred
prior to the consummation of our April 1999 private placement of Series A
Preferred Stock in which we raised approximately $7 million of cash proceeds and
converted into equity approximately $2,595,000 million of debt. In addition, we
expect our cost of revenue and operating expenses to increase significantly,
especially in the areas of marketing, customer installation and customer
service. As a result, we expect to incur additional losses in the future.
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Our business is unproven, and we may not achieve profitability. The
profit potential of out business model is unproven. Our revenue for the
foreseeable future is almost entirely dependent on the number of customers who
subscribe to our CommerceSense service and the volume (in kilocharacters) of the
data, documents or other information they send or retrieve utilizing our
service. If we do not generate sufficient revenue to achieve and maintain
profitability, we will continue to be unprofitable. From 1991 to 1997 we
conducted limited operations and developed products that we were unable to
exploit commercially and consequently discontinued. In 1997, we focused
exclusively on the development and marketing of our CommerceSense service and
launched the current version of CommerceSense commercially in April 1999. The
success of CommerceSense depends to a large extent on the future
business-to-business electronic commerce using the Internet, which is uncertain.
We expect to base our expenditures on our plans and estimates of future
revenue. If we experience a shortfall in our estimated revenue, we may be unable
to adjust spending in a timely manner. As a result, we may not achieve
profitability.
We may be unable to manage our growth. Our ability to implement our
business plan successfully in a new and rapidly-evolving market requires
effective planning and growth management. If we cannot manage our anticipated
growth effectively, our business and financial results will suffer. We plan to
expand our existing operations substantially, particularly those relating to
sales and marketing, customer installation and technical support. We expect that
we will need to continue to manage and to expand multiple relationships with
customers, Internet service providers and other third parties. We also expect
that we will need to continue to improve our financial systems, procedures and
controls and will need to expand, train and manage our workforce, particularly
our information technology staff. As a result, our management and operating
systems may be strained by our growth and we may be unable to complete in a
timely manner necessary improvements to our operating systems, procedures and
controls to support our future operations.
We may face capacity constraints which impede our revenue growth and
business profitability. The satisfactory performance, reliability and
availability of our network infrastructure, customer support and document
delivery systems and our Web site are critical to our reputation and our ability
to attract customers and maintain adequate customer service levels. Any
significant or prolonged capacity constraints could prevent customers from
sending or gaining access to their documents or other data or accessing our
customer support services for extended periods of time. This would decrease our
ability to acquire and retain customers and prevent us from achieving the
necessary growth in revenue to achieve profitability. If the amount of traffic
increases substantially and we experience capacity constraints, we will need to
expand further and upgrade our technology and network infrastructure. We may be
unable to predict the rate or timing of increases in the use of our services to
enable us to upgrade our operating systems in a timely manner.
If we do not keep pace with rapid technological changes, customer
demands and intense competition we will not be successful. Our market is
characterized by rapidly changing technology, customer demands and intense
competition. If we cannot keep pace with these changes, our CommerceSense
service could become uncompetitive and our business will suffer. The Internet's
recent growth and the intense competition in our industry require us to continue
to develop strategic business and Internet solutions that enhance and improve
the customer service features, functions and responsiveness of our CommerceSense
service and that keep pace with continuing changes in information technology and
customer requirements. If we are not successful in developing and marketing
enhancements to our CommerceSense service or new services that respond to
technological change or customer demands, our business will suffer.
We may be unable to obtain necessary future capital. If we do not
become profitable, or if achieving profitability takes longer than we
anticipate, we will need to raise additional funds. If we are unable to obtain
necessary additional financing, we will be unable to expand more rapidly or
adapt to competitive pressures or technological changes and our business will
suffer. We cannot assure you that any additional financing will be available on
reasonable terms or at all. In addition, we may need to raise additional funds
sooner if we attempt to expand more rapidly or if competitive pressures or
technological changes are greater than anticipated.
If we raise additional funds through the issuance of debt securities,
the holders of the debt securities will have a claim to our assets that will be
prior to any claim of our stockholders. The interest on these debt securities
would increase our costs and negatively impact our operating results. If we
raise additional funds through
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the issuance of common stock or securities convertible into or exchangeable for
common stock, the percentage ownership of our then-existing stockholders will
decrease and they may experience additional dilution. In addition, any
convertible or exchangeable securities may have rights, preferences and
privileges more favorable to the holders than those of the common stock.
We may not be able to compete effectively in the business-to-business
electronic commerce market. The business-to-business electronic commerce
industry is evolving rapidly and is intensely competitive. If we are not able to
compete effectively against our current and future competitors, we may lose
customers, may need to lower our prices, may experience reductions in gross
margins, increases in marketing costs or losses in market share, or may
experience a combination of these problems and, as a result, our business will
suffer.
Many of our current and potential competitors have significant existing
customer relationships and vastly larger financial, marketing, customer support,
technical and other resources than we do. As a result, they may be able to
respond more quickly to changes in customer requirements or be able to undertake
more extensive marketing campaigns, adopt more aggressive pricing policies and
make more attractive offers to potential customers and employees, or be able to
devote greater resources to the development, promotion and sale of their
services than we can. As a result, we may not be successful in competing against
competitors.
Our principal competitors include: GE Information Services, Inc.,
Harbinger Corporation, AT&T Corp., MCI Communications Corporation, Sterling
Commerce, Inc. and Advantis, a joint-venture of International Business Machines
Corporation and Sears Roebuck & Co. Each of these competitors has an established
VAN that has provided EDI for at least several years and has long-established
relationships with the users of EDI, including many of our prospective
customers.
We currently depend on our CommerceSense service and may not be able to
expand into new business areas. We are currently focusing exclusively on our
CommerceSense service. As a result, our financial condition for the foreseeable
future will depend heavily on the success or failure of our CommerceSense
service. If our CommerceSense service is not successful, our revenue will not
increase sufficiently for us to become profitable. It is difficult to predict
demand and market acceptance for this service in the new and rapidly evolving
business-to-business electronic commerce market.
We intend to attempt to expand our operations by developing and
marketing new or complementary services or systems or by expanding the breadth
and depth of our offerings. We cannot assure you that we will be able to do so
effectively. Although we believe that we will be able to use our CommerceSense
service as a platform to provide these additional services or systems, we cannot
assure you that we will be able to do so effectively.
We may not be able to successfully make acquisitions or investments in
other companies. We may seek acquisitions of services, products or companies,
joint ventures or other arrangements which complement or expand our business.
However, we cannot assure you that we will be able to identify appropriate
acquisition candidates in the future. If an acquisition candidate is identified,
we cannot assure you that we will be able to successfully negotiate and finance
the acquisition. If we buy a company, we could have difficulty in assimilating
that company's personnel and operations. In addition, the key personnel of the
acquired company may decide not to work for us. If we make other types of
acquisitions, we could have difficulty assimilating the acquired services,
technologies or customers into our operations. These difficulties could disrupt
our ongoing business, distract our management and employees, increase our
expenses and adversely affect our results of operations. If we consummate one or
more significant acquisitions through the issuance of shares of common stock,
you could suffer significant dilution of your ownership interests in ICC.
Finally, expanding our business through acquisitions may expose us to new and
different competitors, which will likely have greater financial and other
resources than we do.
We depend on our key personnel for our future success. We are
substantially dependent on the continued services and performance of our
executive officers and other key employees. The loss of the services of any of
our executive officers or other key employees could impede the operation and
growth of our business and cause our revenues to decline. Although all of our
executive officers and certain key employees have entered into employment
agreements, none of these agreements prevents any of them from leaving us.
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We need to hire and retain qualified employees and may not be able to
do so. We believe we will need to expand significantly our information
technology, marketing and customer service staffs in the near future. Our
business and financial results depend in part on our ability to attract, retain
and motivate highly skilled employees. Competition for employees in our industry
is intense. If we are unable to retain our key employees or attract, assimilate
or retain other highly qualified employees, our management may not be able to
effectively manage our business, exploit opportunities and respond to
competitive challenges. Many of our competitors have significantly greater
financial and other resources than we do and may be able to offer more lucrative
compensation packages which include stock options and other stock-based
compensation and higher-profile employment opportunities than we can.
We need to hire and retain independent contractors and may not be able
to do so. We are substantially dependent on the services of independent
contractors to train customers in the use of CommerceSense. We have entered into
one such relationship and need to retain several other providers of such
services to achieve our business plan. If we fail to hire and retain qualified
independent contractors, then our business will be harmed.
We depend on our intellectual property, which may be difficult and
costly to protect. Other than our branding patent, our intellectual property
consists of proprietary or confidential information that is not currently
subject to patent, trademark or similar protection. Although we have applied for
trademark protection for the CommerceSense name, we may not be able to secure
significant protection for this trademark. If our competitors or others adopt
product or service names similar to CommerceSense, it may impede our ability to
build brand identity and customer loyalty.
The validity, enforceability and scope of protection of certain
proprietary rights in Internet-related businesses are uncertain and still
evolving. If unauthorized third parties try to copy our service or our business
model or use our confidential information to develop competing services, we may
lose customers and our business could suffer. We may not be able to effectively
police unauthorized use of our technology because policing is difficult and
expensive. In particular, the global nature of the Internet makes it difficult
to control the ultimate destination or security of software or other data
transmitted. The laws of other countries may not adequately protect our
intellectual property.
Our business activities and our CommerceSense service may infringe upon
the proprietary rights of others. In addition, other parties may assert
infringement claims against us. Any such claims and any resulting litigation
could subject us to significant liability for damages and could result in
invalidation of our proprietary rights. We could be required to enter into
costly and burdensome royalty and licensing agreements. These agreements may not
be available on terms acceptable to us, or may not be available at all. We may
also need to file lawsuits to defend the validity of our intellectual property
rights and trade secrets, or to determine the validity and scope of the
proprietary rights of others. Litigation is expensive and time-consuming and
could divert management's attention away from running our business.
Our operating results may fluctuate significantly due to seasonality.
We cannot assess fully the impact of seasonal factors on our business because of
the limited operating history of our CommerceSense service, together with our
expanded business strategy. However, we expect to experience seasonality in our
business that reflects the seasonality of the businesses of our customers. We
believe that period-to-period comparisons of our operating results may not be
meaningful and that our operating results for any particular period will not
necessarily be a good indicator of our future performance.
We may not be able to successfully expand our business outside of the
United States. Our current and future customers are conducting their businesses
internationally. To be a sole source supplier to these customers, we need to
provide our services internationally. As a result, an important component of our
business strategy is to expand our international marketing and sales efforts. We
have limited experience in expanding our business outside the United States and
if we do not successfully expand out business in this way, we may lose current
and future customers. This will adversely affect our revenues and operating
results.
We may suffer systems failures and business interruptions which would
harm our business. Our success depends in part on the efficient and
uninterrupted operation of our service that is required to accommodate a high
volume of traffic. Almost all of our network operating systems are located at a
single leased facility in New York, New York. Our systems are vulnerable to
damage from fire, power loss, telecommunications failures,
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break-ins, earthquakes and other events, this could lead to interruptions or
delays in our service, loss of data or the inability to accept, transmit and
confirm customer documents and data. Our business may suffer if our service is
interrupted. Although we have implemented network security measures, our servers
may be vulnerable to computer viruses, electronic break-ins, attempts by third
parties deliberately to exceed the capacity of our systems and similar
disruptions.
Several of our stockholders will exercise significant control. Several
of our stockholders currently, in the aggregate, beneficially own shares having
approximately 28.4% of the combined voting power of our voting securities. These
shares have been deposited into a voting trust and will be voted at the
direction of a majority of our non-management directors and Richard J. Berman,
our chairman and chief executive officer. See "Description of Securities".
The interests of these stockholders could conflict with your interests.
In addition, this concentration of ownership could delay or prevent another
person from acquiring control or causing a change in control of ICC, which may
affect your ability to resell your shares at a favorable price.
Year 2000 issues could affect the performance of our business. We may
have substantial exposure to the year 2000 problem, both with our own systems
and with systems we do not control. The year 2000 problem could harm our
business and financial results. Many currently installed computer systems and
software products have been coded to accept or recognize only two digit entries
to define the applicable year. These systems may erroneously recognize the year
2000 as the year 1900. Thus could result in major failures of malfunctions.
This risk is particularly significant for our business. We rely on
computer programs and systems in connection with our internal and external
communication networks and systems, including transmissions of information over
the Internet, order processing and fulfillment, accounting and financial
systems, customer access to our Web site and other business functions. Based on
our design process and assessment to date, we believe the current versions of
our service and our various systems are year 2000 compliant. However, we cannot
assure you that our programs designed to minimize the impact of the transition
to the year 2000 on the terminal operations software at our facilities and other
date sensitive equipment will be completely successful. In addition, the costs
of implementing these programs may exceed our current estimates. If these
programs are not successful or if their costs exceed our estimates, the date
change from 1999 to 2000 could harm our business. The full extent of any adverse
impact on our business is impossible to determine.
In addition, our customers may not become year 2000 compliant in a
timely fashion or at all. The failure of a customer to become year 2000
compliant will adversely affect the ability of that customer's trading partners
to receive or utilize the document or data we transmit. As a result, customers
that are not year 2000 compliant may cease using our CommerceSense service,
decreasing our revenues and harming our results of operations.
RISKS RELATING TO THE INTERNET AND ONLINE COMMERCE ASPECTS OF OUR BUSINESS
If Internet usage does not continue to grow or its infrastructure
fails, our business will suffer. If the Internet does not gain increased
acceptance for business-to-business electronic commerce, our business will not
grow or become profitable. We cannot be certain that the infrastructure or
complementary services necessary to maintain the Internet as a useful and easy
means of transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it and the
performance and reliability of the Internet may decline. The Internet could lose
its viability or its usage could decline due to many factors, including:
o cost and ease of Internet access;
o delays in the development of the Internet infrastructure;
o inconsistent service quality;
o the adoption of new standards or protocols for the Internet;
o changes or increases in governmental regulation;
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o the development and adoption of new technologies which do not
use the Internet; and
o intellectual property ownership.
Privacy concerns may prevent customers from using our services.
Concerns over the security of online transactions and the privacy of users may
inhibit the growth of the Internet as a means of delivering business documents
and data. We may need to incur significant expenses and use significant
resources to protect against the threat of security breaches or to alleviate
problems caused by such breaches. We rely upon encryption and authentication
technology to provide secure transmission of confidential information. If our
security measures do not prevent security breaches, we could suffer operating
losses, damage to our reputation, litigation and possible liability. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments may result in a compromise or breach of our encryption and
authentication technology and could enable an outside party to steal proprietary
information or interrupt our operations.
We depend on third-party providers of Internet and telecommunications
service. Our operations depend upon third parties for Internet access and
telecommunications. Frequent or prolonged interruptions of these services could
result in significant losses of revenues. These types of occurrences could also
cause users to perceive our products as not functioning properly and therefore
cause them to use other methods to deliver and receive information. We have
limited control over these third parties and cannot assure you that we will be
able to maintain satisfactory relationships with any of them on acceptable
commercial terms. Nor can we assure you that the quality of services that they
provide will remain at the levels needed to enable us to conduct our business
effectively. Each of them has experienced outages in the past, and could
experience outages, delays and other difficulties due to system failures
unrelated to our on-line architecture.
Government regulation and legal uncertainties relating to the Internet
could harm our business. Changes in the regulatory environment could decrease
our revenues and increase our costs. The Internet is largely unregulated and the
laws governing the Internet remain unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy and taxation apply
to the Internet. In addition, because of increasing popularity and use of the
Internet, any number of laws and regulations may be adopted with respect to the
Internet or other online services covering issues such as:
o user privacy;
o security;
o pricing;
o content;
o copyrights;
o distribution;
o taxation; and
o characteristics and quality of services.
Costs of transmitting documents and data could increase. The cost of
transmitting documents and data over the Internet could increase. We may not be
able to increase our prices to cover these rising costs. Several
telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet and on-line service providers in a manner
similar to long distance telephone carriers and to impose access fees on such
providers. Also, foreign laws and state tax laws and regulations relating to the
provision of services over the Internet are still developing. If individual
states impose taxes on services provided over the Internet, our cost of
providing our CommerceSense and other services may increase.
RISKS RELATING TO OUR CLASS A COMMON STOCK
Our stock price may be extremely volatile. The market price of our
common stock is likely to fluctuate substantially in the future. In the past,
companies that have experienced volatility in the market price of their stock
have been subject to securities class action litigation. If we were subject to a
securities class action lawsuit, it could result in substantial costs and a
significant diversion of resources, including management time and attention.
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The market for our common stock may be illiquid. Our common stock is
currently trading on the Nasdaq SmallCap Market. An active trading market may
not be sustained. If there is no active trading market for our common stock, you
may not be able to resell your shares at any price, if at all. It is possible
that the trading market for the common stock in the future will be "thin" and
"illiquid", which could result in increased volatility in the trading prices for
our common stock. The price at which the common stock will trade in the future
cannot be predicted and will be determined by the market. The price may be
influenced by investors' perceptions of us, the use of the Internet for business
purposes and general economic and market conditions.
Our common stock was delisted from the Nasdaq SmallCap Market on
February 22, 1999 because we did not satisfy the listing criteria. Since then we
have been relisted on the Nasdaq SmallCap Market. We believe that we are
significantly better positioned to maintain our listing on the Nasdaq SmallCap
Market as a result of the funds we raised in our private placement of Series A
Preferred Stock in April 1999.
Our board of directors can issue preferred stock with rights adverse to
the holders of common stock. Our board of directors is authorized, without
further stockholder approval, to determine the provisions of and to issue up to
4,989,825 shares of preferred stock. Issuance of preferred shares with rights to
dividends and other distributions, voting rights or other rights superior to the
common stock could be adverse to the holders of common stock.
Our certificate of incorporation and bylaws provide director and
officer indemnification and limit their liability. We may have to spend
significant resources indemnifying our officers and directors or paying for
damages caused by their conduct. The Delaware General Corporation Law provides
for broad indemnification by corporations of their officers and directors and
permits a corporation to exculpate its directors from liability for their
actions. Our bylaws and certificate of incorporation implement this
indemnification and exculpation to the fullest extent permitted under this law
as it currently exists or as it may be amended in the future. Consequently,
subject to this law and to certain limited exceptions in our certificate of
incorporation, none of our directors will be liable to us or to our stockholders
for monetary damages resulting from conduct as a director.
Our anti-takeover provisions and Delaware law may have adverse effects
on our stock price. There are provisions in our certificate of incorporation,
our bylaws and Delaware law that make it more difficult for a third party to
obtain control of ICC, even if doing so would be beneficial to our stockholders.
This could depress our stock price. These provisions include: (a) authority to
divide the Board of Directors into three classes so that only one-third of our
directors are elected each year and are elected for terms of three years; (b)
requiring a request by stockholders holding not less than 20% of our outstanding
stock to compel the Board of Directors to call a special meeting of the
stockholders, which request must state the object of the proposed meeting; (c)
requiring a stockholder to give advance notice to ICC of a proposal the
stockholder wishes to be acted on at any meeting of stockholders; and (d)
permitting the Board of Directors to amend or repeal our bylaws without
stockholder consent or vote.
DESCRIPTION OF SECURITIES
The following summary description of the material terms of our capital
stock and warrants. See "Delaware Law and Certificate of Incorporation and Bylaw
Provisions" in this Section for a discussion of several provisions of our
certificate of incorporation and bylaws and the Delaware General Corporation Law
that are important. For more information regarding our certificate of
incorporation and bylaws, see "Where You Can Find More Information."
We have the authority to issue up to 40,000,000 shares of Class A
Common Stock, 2,000,000 shares of Class B Common Stock, 2,000,000 shares of
Class E-1 Common Stock, 2,000,000 shares of Class E-2 Common Stock, and
5,000,000 shares of preferred stock, which includes 10,000 shares of Series A
Convertible Redeemable Preferred Stock ("Series A Preferred Stock") and 175
shares of Series S Preferred Stock ("Series S Preferred Stock"). Each class and
series of our capital stock has a par value of $.01 per share.
Common Stock
Class A Common Stock
As of April 30, 1999, there were 1,383,437 shares of Class A Common
Stock outstanding, held of record by approximately 160 stockholders. Class A
Common Stock is currently traded on the Nasdaq SmallCap Market under the symbol
"ICCSA".
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Holders of Class A Common Stock are entitled to one vote per share on
all matters to be voted on by our Class A Common stockholders. Subject to the
preferences of the preferred stock, the holders of Class A Common Stock are
entitled to a proportional distribution of any dividends that may be declared by
the board of directors. If any distributions are made to the holders of Class A
Common Stock, identical per-share distributions must be made to the holders of
the Class B Common Stock, even if the distributions are in Class A Common Stock.
Upon a liquidation, dissolution or winding up of ICC, the holders of Class A
Common Stock are entitled to share equally with holders of the Class B Common
Stock in all assets remaining after liabilities and amounts due to holders of
preferred stock have been paid in full or set aside. Class A Common Stock has no
preemptive, redemption or conversion rights. The rights of holders of Class A
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of Series A Preferred Stock, Series S Preferred Stock or any
other series of preferred stock that ICC may designate and issue in the future.
Class B Common Stock
As of April 30, 1999, there were 115,599 shares of Class B Common Stock
outstanding, held of record by 24 stockholders.
Class B Common Stock is convertible into Class A Common Stock on a
one-for-one basis both upon request of the holder of the Class B Common Stock or
automatically upon transfer of the Class B Common Stock to a stockholder that
does not hold any Class B Common Stock prior to the transfer. Class B Common
Stock is entitled to six votes per share rather than one vote per share. In all
other respects, each share of Class B Common Stock is identical to one share of
Class A Common Stock.
Class E-1 and E-2 Common Stock
As of April 30, 1999, there were 276,851 shares each of Class E-1
Common Stock and Class E-2 Common Stock outstanding. On May 28, 1999, we called
for redemption on June 11, 1999 all outstanding shares of Class E-1 and Class
E-2 Common Stock for a total redemption price of $276.85.
Preferred Stock
The certificate of incorporation authorizes the board of directors to
issue up to 5,000,000 shares of preferred stock from time to time and in one or
more series and to fix the number of shares of any series and the designation,
conversion, dividend and other rights of the series. The Board of Directors may
authorize the issuance of preferred stock without any approval of our
stockholders. The board of directors has designated 10,000 shares of preferred
stock as Series A Convertible Redeemable Preferred Stock and 175 shares of
preferred stock as Series S Preferred Stock.
Future issuances of preferred stock may have the effect of delaying or
preventing a change in control of ICC. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the rights and powers,
including voting rights, of the holders of our common stock. In some
circumstances, the issuance of preferred stock could have the effect of
decreasing the market price of our common stock.
Series A Preferred Stock
As of April 30, 1999, ICC had 9,595 shares of Series A Preferred Stock
outstanding, held by approximately 110 stockholders.
Series A Preferred Stock is convertible, at the option of the holder,
into Class A Common Stock. Each share of Series A Preferred Stock is convertible
into a number of shares of Class A Common Stock determined by the following
formula:
$1,000 divided by the average market price of the Class A Common Stock
for the ten trading days before the conversion date, up to a maximum of
333 shares and a minimum of 200 shares of Class A Common Stock, except
that until December 31, 1999 each of 8,505 shares of Series A Preferred
Stock is convertible into a maximum of 200 shares of Class A Common
Stock.
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As a result of this formula, if all of the Series A Preferred Stock were
converted before January 1, 2000, a maximum of 2,064,334 shares of Class A
Common Stock would be issued in this conversion. If all of the Series A
Preferred Stock were converted after December 31, 1999, a maximum of 3,198,334
shares of Class A Common Stock would be issued in this conversion. No fewer than
25 shares may be converted at one time unless the holder then holds fewer than
25 shares and converts all such shares at that time.
Series A Preferred Stock is redeemable, in whole or in part, by ICC,
commencing on the third anniversary of the date of issuance. The redemption
price for each share of Series A Preferred Stock is $1,000 plus unpaid
dividends. Notice of redemption must be given 30 days prior to the redemption
date.
Subject to the rights of stockholders holding any series of ICC
preferred stock that is senior to the Series A Preferred, upon a liquidation,
dissolution or winding up of ICC, the holders of Series A Preferred Stock are
entitled to receive an amount equal to $1,000 per share of Series A Preferred
Stock. If upon a liquidation, dissolution or winding up of ICC the assets
remaining after liabilities and amounts due to holders of senior preferred stock
have been paid in full or set aside are not sufficient to pay the amount due to
holders of Series A Preferred Stock and holders of other preferred stock ranking
on a parity with the Series A Preferred Stock, the holders of the Series A
Preferred Stock share ratably with the holders of the parity preferred stock in
the assets remaining.
The holders of the outstanding shares of Series A Preferred Stock are
entitled to a 4% annual dividend payable in cash or in shares of Class A Common
Stock, at the option of ICC, each July 1st commencing July 1, 1999.
Series A Preferred Stock has no voting rights except as expressly
required by law.
Series S Preferred Stock
As of April 30, 1999, ICC had 175 shares of Series S Preferred Stock
outstanding, held by one stockholder.
Commencing July 1, 1999, and on the first day of each calendar month
thereafter, twelve shares of Series S Preferred Stock shall be mandatorily
redeemed by ICC at a price of $1,000 per share. If ICC is unable to redeem the
twelve shares, the twelve shares will be automatically converted into Class A
Common Stock at a conversion rate per share of Series S Preferred Stock equal to
$1,000 divided by the average closing price of the Class A Common Stock for the
five trading days immediately prior to the conversion date.
Subject to the rights of stockholders holding any series of preferred
stock of ICC that is senior to the Series S Preferred Stock, upon a liquidation,
dissolution or winding up of ICC, the holders of Series S Preferred Stock are
entitled to receive an amount equal to $1,000 per share of Series S Preferred
Stock. If upon a liquidation, dissolution or winding up of ICC the assets
remaining after liabilities and amounts due to holders of senior preferred stock
have been paid in full or set aside are not sufficient to pay the amount due to
holders of Series A Preferred Stock and holders of other preferred stock ranking
on a parity with the Series S Preferred Stock, the holders of the Series S
Preferred Stock shall share ratably with the holders of the parity preferred
stock in the remaining assets.
Holders of the outstanding Series S Preferred Stock are not entitled to
receive any dividend payments and have no voting rights except as expressly
required by law.
Voting Trust. Thomas H. Lipscomb (former chairman of the board and president of
the Company), and Alan N. Alpern (former chief financial officer of the Company)
have deposited substantially all the shares of common stock beneficially owned
by them and other members of their families, which includes Class B Common
Stock, into a voting trust until February 18, 2000. As of May 1, 1998, 123,739
shares of Class B Common Stock were forfeited pursuant to an escrow agreement
dated as of September 11, 1992, as amended September 20, 1994, and such shares
were delivered by the escrow agent to the Company which holds the shares in
treasury. Accordingly, as of May 31, 1999, the shares in the voting trust
represent 28.4% of the total voting power of the Company. The shares of Common
Stock held in the voting trust will be voted at the direction of a majority of
the non-management directors of the Company and Richard J. Berman, the chief
executive officer of the Company, and Arthur R. Medici, former president and a
current director of the Company.
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<PAGE>
Warrants
As of April 30, 1999 there were 1,184,715 Class A Warrants outstanding.
Each Class A Warrant entitles the holder upon exercise to purchase one Class B
Warrant (described below) and one share of Class A Common Stock.
Each Class A Warrant is exercisable for $23.20 and expires in February 2002.
As of April 30, 1999 there were 950,490 Class B Warrants outstanding.
Each Class B Warrant entitles the holder upon exercise to purchase one share of
Class A Common Stock. Each Class B Warrant is exercisable for $31.22 and expires
in February 2002.
The Class A and Class B Warrants are traded in the over-the-counter
market on the "OTC Electronic Bulletin Board." The number of Class A and Class B
Warrants and the exercise prices thereof are subject to adjustment in the event
of any subdivision or combination of the outstanding Class A Common Stock, or
any stock dividend payable in shares of Class A Common Stock paid to holders of
Class A Common Stock. These warrants are also subject to adjustment upon any
sale of any shares of Class A Common Stock, or of any rights, warrants, options
or securities convertible into or exercisable for Class A Common Stock, for
consideration valued at less than the then market price (as defined the Class A
and Class B Warrants) of the Class A Common Stock. In the event that all the
Series A Preferred Stock remains outstanding on January 1, 2000, the number of
Class A Warrants and Class B Warrants outstanding as of May 31, 1999 would
increase to 1,519,683 and 2,738,906, respectively, and the exercise prices of
the Class A Warrants and Class B Warrants would decrease to $18.08 and $24.34,
respectively.
In connection with our initial public offering, unit purchase options
were issued to D.H. Blair and its designees to purchase 31,000 units for $33.75
per unit. Upon exercise of these options, the holders are entitled to receive
one share of Class A Common Stock, one Class A Warrant and one Class B Warrant.
In connection with our 1997 private placement, unit purchase options were issued
to D.H. Blair and its designees to purchase 112,229 of the same units for $15.75
per unit. The unit purchase options issued in connection with our 1997 private
placement are subject to an anti-dilution adjustment as a result of the private
placement of Series A Preferred Stock and this adjustment is substantial. The
unit purchase options issued in connection with our initial public offering
expire in January 2000. The unit purchase options issued in connection with our
1997 private placement expire in February 2002. The Company and D.H. Blair have
reached an agreement in principle for D.H. Blair to exchange all of these unit
purchase options for 105,000 shares of Class A Common Stock. The Company has
agreed to register under the Securities Act the resale of these shares of Class
A Common Stock by D.H. Blair and its designees.
Investors in our 1998 bridge financing purchased 10% notes with
warrants attached. For each $1 of notes, a purchaser was entitled to 0.3
warrants and we issued a total of 778,500 warrants in this transaction. Each of
these warrants entitles the holder upon exercise to purchase one share of Class
A Common Stock for $2.50. These warrants expire between December 2001 and July
2002.
Two placement agents provided services in connection with our 1998
bridge financing and are entitled to receive a total of 59,850 warrants for
these services. Each of these warrants entitles the holder upon exercise to
purchase one share of Class A Common Stock for $2.50. These warrants expire
between July 2001 and January 2002.
Several NASD registered broker/dealers provided services in connection
with our April 1999 private placement of Series A Preferred Stock and are
entitled to receive a total of 158,250 warrants for these services. Each of
these warrants entitles the holder upon exercise to purchase one share of Class
A Common Stock for $5.00 and expires in April 2002.
The warrants issued in our 1998 bridge financing to investors and
placement agents are redeemable by ICC for $2.50 per warrant within 10 days of
mailing an acceleration notice at any time from June 1999 to January 2001 if the
bid price of the Class A Common Stock exceeds $7.50 (subject to adjustment for
stock splits, dividends or combinations) for 10 consecutive trading days.
The number and exercise price of the warrants issued to financial
advisors in connection with our 1998 bridge financing and our April 1999 private
placement are subject to adjustment in the event of any stock dividend payable
in shares of Class A Common Stock paid to holders of Class A Common Stock or any
subdivision or combination of the outstanding Class A Common Stock.
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<PAGE>
Summerwind Restructuring, Inc. received 500,000 warrants as
consideration for various consulting services under a consulting agreement with
our predecessor, Infosafe Systems, Inc., dated as of June 12, 1998. Each of
these warrants entitles the holder upon exercise to purchase one share of Class
A Common Stock for $2.50 and expires in June 2003. The number and exercise price
of the warrants are subject to adjustment in the event of any sale or
distribution of debt or other securities of ICC or of cash, property or other
assets to holders of Class A Common Stock, any stock dividend payable in shares
of Class A Common Stock paid to holders of Class A Common Stock, any subdivision
or combination of the outstanding Class A Common Stock, or any sale of any
shares of Class A Common Stock, or of any rights, options, warrants, or
securities convertible into or exercisable for Class A Common Stock, for
consideration valued at less than the then exercise price of these warrants.
Delaware Law and Certificate of Incorporation and Bylaw Provisions
The following summary description of provisions of the Delaware General
Corporation Law and our certificate of incorporation and bylaws is not intended
to be complete. You should read our certificate of incorporation and bylaws very
carefully.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder for three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A business combination includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. An interested
stockholder is generally a person who, together with affiliates and associates,
owns, or within the past three years did own, 15% of the corporation's voting
stock.
The provisions of our certificate of incorporation and bylaws could
also have anti-takeover effects. These provisions enhance the likelihood of
continuity and stability in the composition of the policies formulated by the
board of directors. In addition, these provisions are intended to ensure that
the board of directors will have sufficient time to act in what it believes to
be in the best interests of ICC and its stockholders. These provisions also are
designed to reduce the vulnerability of ICC to an unsolicited proposal for a
takeover of ICC that does not contemplate the acquisition of all of its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of ICC. The provisions are also intended to discourage some tactics
that may be used in proxy fights. See "Other Risk Factors--Risks Relating to our
Class A Common Stock--Our anti-takeover provisions and Delaware law may have
adverse effects on our stock price."
Classified Board of Directors
We received stockholder authorization on June 26, 1998 to amend our
certificate of incorporation to provide for the board of directors to be divided
into three classes of directors, with each class as nearly equal in number as
possible, serving staggered three-year terms. We intend to elect directors for
each class at our next annual meeting of stockholders. After the next annual
meeting, approximately one-third of the board of directors will be elected each
year. The classified board provision will help to assure the continuity and
stability of the board of directors and the business strategies and policies of
ICC as determined by the board of directors. The classified board provision
could have the effect of discouraging a third party from making a tender offer
for our shares or attempting to obtain control of ICC. In addition, the
classified board provision could delay stockholders who do not agree with the
policies of the board of directors from replacing a majority of the board of
directors for two years.
Indemnification
We have included in our certificate of incorporation and bylaws
provisions to (1) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware General Corporation Law and (2) indemnify its directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law, including circumstances in which indemnification is discretionary. We
believe that these provisions are necessary to attract and retain qualified
persons as directors and officers.
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Transfer Agent and Registrar
The transfer agent and registrar for our Class A Common Stock is
American Stock Transfer and Trust Company.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion is a summary of certain United States
federal income tax aspects with respect to the exchange offer and is for general
information only and does not consider all aspects of United States federal
income tax that may be relevant to a holder of Warrants in light of his or her
personal circumstances. The discussion does not address the United States
federal income tax consequences to holders of Warrants who do not hold such
Warrants and the shares of Class A Common Stock to be issued pursuant to the
exchange offer as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"). This discussion also
does not address the United States federal income tax consequences to holders of
Warrants subject to special treatment under the federal income tax laws, such as
dealers in securities, tax-exempt entities, foreign holders, banks, thrifts,
insurance companies, regulated investment companies, investors in pass-through
entities and holders of Warrants that were acquired in connection with the
performance of services. In addition, the discussion is generally limited to the
United States federal income tax consequences to holders of Warrants tendering
such securities in the exchange offer.
The discussion does not describe any tax consequences arising out of
the tax laws of any state, local or foreign jurisdiction. This summary is based
upon the Code, existing and proposed regulations thereunder, and current
administrative rulings and court decisions. All of the foregoing are subject to
change, and any such change could affect the continuing validity of this
discussion. Subject to the limitations and qualifications referred to herein and
in its opinion letter, Kramer Levin Naftalis & Frankel LLP, counsel to ICC, has
rendered an opinion to ICC confirming the matters set forth in this section.
The following discussion is limited to the United States federal income
tax consequences relevant to a holder of Warrants that is (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized under
the laws of the United States or any political subdivision thereof or therein,
(iii) an estate, the income of which is subject to United States federal income
tax regardless of the source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over its administration and one
or more United States persons have the authority to control all substantial
decisions of the trust.
PERSONS TENDERING WARRANTS IN THE EXCHANGE OFFER SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX
LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO
THEIR PARTICULAR SITUATIONS.
Tax Consequence of Exchange for Warrants for Class A Common Stock
The exchange of Warrants for Class A Common Stock will not be a taxable
exchange to the Warrant holders. Each such holder's basis in the Class A Common
Stock received will equal the holder's basis in the Warrant exchanged and the
holder's holding period for the Class A Common Stock received will include the
holding period of the Warrant exchanged.
Consequences of Holding Class A Common Stock
Distributions made with respect to shares of Class A Common Stock
(including any taxable stock dividends) generally will be treated as ordinary
income to the extent of ICC's current and accumulated earnings and profits for
the taxable year of the distribution. Amounts distributed in excess of such
earnings and profits will be treated as a tax-free return of capital to the
extent of the holder's tax basis in its shares of Class A Common Stock, which
will reduce the holder's basis in such Class A Common Stock, with any amount
distributed in excess of such tax basis being treated as an amount received on a
sale or exchange of the stock. A dividends received deduction may be available
for certain corporate holders, subject to numerous conditions and exceptions.
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Generally, gain or loss will be recognized on a sale or other
disposition of Class A Common Stock to the extent of the difference between the
amount of cash (and the fair market value of other property) received in the
disposition and the holder's tax basis in its Class A Common Stock. Such gain or
loss will be capital gain or loss.
Backup Withholding
A holder of Class A Common Stock may be subject to backup withholding
at the rate of 31% with respect to dividends paid on the Class A Common Stock,
unless the holder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. Any amount paid as backup withholding will be
creditable against the holder's federal income tax liability.
Holders Who Do Not Participate in the Exchange Offer
Holders of Warrants who elect not to participate in the exchange offer
and who consequently do not exchange their Warrants for Class A Common Stock
should not recognize gain or loss as a consequence of the exchange offer.
THE FOREGOING IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX
ASPECTS OF THE EXCHANGE OFFER AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING
AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF WARRANTS.
HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE CONSEQUENCES TO
THEM OF THE EXCHANGE OFFER.
INTEREST IN WARRANTS
Based upon our records and upon information provided to us by our
directors, executive officers and affiliates, except as provided below, neither
ICC nor any of its subsidiaries or affiliates nor any of our directors or
executive officers, nor any associates of any of the foregoing, including the
directors or executive officers of our subsidiaries, has effected any
transactions in the Warrants during the forty business day period prior to the
date hereof. Any Warrants owned directly or indirectly by officers/directors at
the time of the exchange offer are eligible for exchange if properly tendered
pursuant to the exchange offer on the same basis as all other Warrants.
Dated: June 30, 1999
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<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and
duly executed, will be accepted. The Letter of Transmittal, Warrants and any
other required documents should be sent or delivered by each Warrant holder or
such holder's broker, dealer, commercial bank or trust company to the exchange
agent at its address set forth below:
The exchange agent for the exchange offer is:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By Registered or Certified Mail: By Hand: By Overnight Delivery:
American Stock Transfer and American Stock Transfer and American Stock Transfer and
Trust Company Trust Company Trust Company
40 Wall Street 40 Wall Street 40 Wall Street
46th Floor 46th Floor 46th Floor
New York, New York New York, New York New York, New York
10005 10005 10005
Confirm by Telephone: (800) 937-5449 (from outside New York)
(718) 921-8200 (from inside New York)
</TABLE>
Any questions or request for assistance or for additional copies of
this Offering Circular, the Letter of Transmittal, the Notice of Guaranteed
Delivery or any other materials relating to the exchange offer may be directed
to the exchange agent or the information agent specified below. Warrant holders
may also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the exchange offer.
The information agent for the exchange offer is:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
Toll Free (800) 566-9061
Call Collect (212) 754-8000
Banks and Brokerage Firms Please Call:
(800) 662-5200
<PAGE>
Exhibit (a)(2)
LETTER OF TRANSMITTAL
INTERNET COMMERCE CORPORATION
OFFER TO EXCHANGE
ONE SHARE OF CLASS A COMMON STOCK
FOR
EACH EIGHT (8) OUTSTANDING CLASS A WARRANTS
AND
ONE SHARE OF CLASS A COMMON STOCK
FOR
EACH SIXTEEN (16) OUTSTANDING CLASS B WARRANTS
PURSUANT TO THE OFFERING CIRCULAR DATED JUNE 30, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M. NEW YORK CITY TIME ON JULY
30, 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
<TABLE>
<CAPTION>
The Exchange Agent For The Exchange Offer Is:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
<S> <C> <C>
By Registered or Certified Mail: By Hand: By Overnight Delivery:
American Stock Transfer and American Stock Transfer and American Stock Transfer and
Trust Company Trust Company Trust Company
40 Wall Street 40 Wall Street 40 Wall Street
46th Floor 46th Floor 46th Floor
New York, New York 10005 New York, New York 10005 New York, New York 10005
Confirm by Telephone: (800) 937-5449 (from outside New York)
(718) 921-8200 (from inside New York)
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING WARRANT CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. YOU SHOULD READ THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF
TRANSMITTAL CAREFULLY BEFORE YOU COMPLETE THE LETTER OF TRANSMITTAL.
The undersigned acknowledges that he or she has received the Offering
Circular, dated June 30, 1999 (the "Offering Circular"), of Internet Commerce
Corporation, a Delaware company (the "Company"), and this Letter of Transmittal
and the instructions hereto (the "Letter of Transmittal"), which together
constitute the Company's offer (the "Exchange Offer") to exchange one share of
Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), for
each eight (8) outstanding Class A Warrants (the "Class A Warrants") and one
share of Class A Common Stock for each sixteen (16) outstanding Class B Warrants
(the "Class B Warrants," and together with the Class A Warrants, the"Warrants"),
upon the terms and subject to the conditions set forth in the Offering Circular.
The term "Expiration Date" shall mean 9:00 a.m., New York City time, on July 30,
1999, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the term shall mean the latest date and time to which the Exchange
Offer is extended by the Company. Capitalized terms used but not defined herein
have the meaning given to them in the Offering Circular.
This Letter of Transmittal is to be used if either (1) certificates
representing Warrants are to be physically delivered to the Exchange Agent
herewith by Holders (as defined below) or (2) tender of Warrants is to be made
according to the guaranteed delivery procedures set forth in the Offering
Circular under "The Exchange Offer--Guaranteed Delivery Procedures." Delivery of
this Letter of Transmittal and any other required documents must be made to the
Exchange Agent.
The term "Holder" as used herein means any person in whose name
Warrants are registered on the books of the Company or any other person who has
obtained a properly completed stock transfer power from the registered holder.
All Holders of Warrants who wish to tender their Warrants must, prior
to the Expiration Date: (1) complete, sign, and deliver this Letter of
Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to the
address set forth above; and (2) tender (and not withdraw) his or her Warrants
in accordance with the procedures for tendering described in the Instructions to
this
<PAGE>
Letter of Transmittal. Holders of Warrants whose warrant certificates are not
immediately available, or who are unable to deliver their warrant certificates
and all other documents required by this Letter of Transmittal to be delivered
to the Exchange Agent on or prior to the Expiration Date, must tender their
Warrants according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer--Guaranteed Delivery Procedures" in the Offering
Circular. See Instruction 2.
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of the Warrants validly tendered and not withdrawn and
the issuance of the Class A Common Stock will be made promptly following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Warrants when, as and if
the Company has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE OFFERING CIRCULAR
CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED IN THIS
LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR
FOR ADDITIONAL COPIES OF THE OFFERING CIRCULAR, THIS LETTER OF TRANSMITTAL AND
THE NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT.
SEE INSTRUCTION 12.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR
WARRANTS MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND COMPLY
WITH ALL OF ITS TERMS.
List below the Warrants to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Warrant Certificate Numbers and
number of Warrants should be listed on a separate signed schedule, attached
hereto.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DESCRIPTION OF CLASS A WARRANTS 1 2 3
- -----------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s): Certificate Number of Number of
(Please fill in, if blank) Number(s) Class A Class A
Warrants Warrants
Tendered*
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders who wish to tender all Warrants listed.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF CLASS B WARRANTS 1 2 3
- -----------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s): Certificate Number of Number of
(Please fill in, if blank) Number(s) Class B Class B
Warrants Warrants
Tendered*
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders who wish to tender all Warrants listed.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
SPECIAL REGISTRATION INSTRUCTIONS
SEE INSTRUCTIONS 4, 5 AND 6.
To be completed ONLY if certificates for Warrants in an amount not tendered, or
Class A Common Stock issued in exchange for Warrants accepted for exchange, are
to be issued in the name of someone other than the undersigned.
Issue certificate(s) to:
Name(s)_________________________________________________________
Address__________________________________________________________
(INCLUDE ZIP CODE)
___________________________________
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 5 AND 6.
To be completed ONLY if certificates for Warrants in an amount not tendered, or
Class A Common Stock issued in exchange for Warrants accepted for exchange, are
to be delivered to someone other than the undersigned.
Deliver certificate(s) to:
Name(s)________________________________________________________
Address________________________________________________________
(INCLUDE ZIP CODE)
_____________________________________
(TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S))
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATE(S) FOR WARRANTS AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED
DELIVERY PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY,
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
Holders whose Warrants are not immediately available or who cannot deliver their
Warrants and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date may tender their Warrants according to the
guaranteed delivery procedures set forth in the Offering Circular under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2.
[ ] CHECK HERE IF WARRANTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of tendering Holder(s)______________________________________
Date of Execution of Notice of Guaranteed Delivery__________________
Name of Institution which Guaranteed Delivery_______________________
Transaction Code Number_____________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE OFFERING CIRCULAR AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:______________________________________________________________
Address:___________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that (1)
it is acquiring the Class A Common Stock in the ordinary course of its business,
(2) it has no arrangements or understanding with any person, nor does it intend
to engage in, a distribution (as that term is interpreted by the Securities and
Exchange Commission (the "SEC")) of Class A Common Stock and (3) it is not an
affiliate (as that term is interpreted by the SEC) of the Company.
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Internet Commerce Corporation (the "Company") the number of
Warrants indicated above.
Subject to and effective upon the acceptance for exchange of the number of
Warrants tendered hereby in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Warrants tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent as
its agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Warrants with
full power of substitution (such power of attorney being deemed an irrevocable
power coupled with an interest), subject only to the right of withdrawal
described in the Offering Circular, to (1) deliver certificates for such
Warrants to the Company or transfer ownership of such Warrants together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company and (2) present such Warrants for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Warrants, all in accordance with the terms of the Exchange
Offer.
The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretative advice given by the staff of the SEC to third
parties in connection with transactions similar to the Exchange Offer, so that
the Class A Common Stock issued pursuant to the Exchange Offer in exchange for
the Warrants may be offered for resale, resold and otherwise transferred by
holders thereof (other than a broker-dealer who purchased such Warrants directly
from the Company for resale pursuant to Rule 144A, Regulation S or any other
available exemption under the Securities Act or a person that is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Class A Common Stock are acquired in the
ordinary course of such holders' business and such holders are not
participating, do not intend to participate and have no arrangement or
understanding with any person to participate, in the distribution of such Class
A Common Stock.
The undersigned agrees that acceptance of any tendered Warrants by the
Company and the issuance of Class A Common Stock in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Exchange Offer and that, upon the issuance of the Class A Common Stock, the
Company will have no further obligations or liabilities thereunder.
The undersigned represents and warrants that (1) the Class A Common Stock
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving Class A Common Stock (which shall be
the undersigned unless otherwise indicated in the box entitled "Special Delivery
Instructions" above) (the "Recipient"), (2) neither the undersigned nor the
Recipient (if different) is engaged in, intends to engage in or has any
arrangement or understanding with any person to participate in the distribution
(as that term is interpreted by the SEC) of such Class A Common Stock, and (3)
neither the undersigned nor the Recipient (if different) is an "affiliate" of
the Company as defined in Rule 405 under the Securities Act.
The undersigned understands and agrees that the Company reserves the right
not to accept tendered Warrants from any tendering holder if the Company
determines, in its sole and absolute discretion, that such acceptance could
result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Warrants
tendered hereby and to acquire Class A Common Stock issuable upon the exchange
of such tendered Warrants, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed to be necessary or desirable by the
Exchange Agent or the Company in order to complete the exchange, assignment and
transfer of tendered Warrants or transfer of ownership of such Warrants on the
account books maintained by or for the Company.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Warrants that
remain outstanding subsequent to the Expiration Date or, as set forth in the
Offering Circular under the caption "The Exchange Offer--Procedures for
Tendering Warrants," to terminate the Exchange Offer and, to the extent
permitted by applicable law, purchase Warrants in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
4
<PAGE>
The undersigned understands that the Company may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
validly tendered Warrants when, as and if the Company has given oral (which
shall be confirmed in writing) or written notice thereof to the Exchange Agent.
The undersigned understands that tenders of Warrants pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Warrants" in the Offering Circular and in the instructions hereto will
constitute a binding agreement between the undersigned, the Company and the
Exchange Agent in accordance with the terms and subject to the conditions of the
Exchange Offer.
If any tendered Warrants are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Warrants
will be returned, at the Company's cost and expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding on the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives Class
A Common Stock pursuant to the Exchange Offer hereby acknowledges and agrees
that upon the receipt of notice by the Company of the happening of any event
that makes any statement in the Offering Circular untrue in any material respect
or that requires the making of any changes in the Offering Circular in order to
make the statements therein not misleading (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
the Offering Circular until the Company has amended or supplemented the Offering
Circular to correct such misstatement or omission and has furnished copies of
the amended or supplemented Offering Circular to such broker-dealer.
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the Class A Common Stock issued in
exchange for the Warrants accepted for exchange and return any certificates for
Warrants not tendered or not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the Class A Common Stock issued in
exchange for the Warrants accepted for exchange and any certificates for
Warrants not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Registration Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Class A Common Stock issued in exchange for the Warrants
accepted for exchange in the name(s) of, and return any certificates for
Warrants not tendered or not exchanged to, the person(s) so indicated. The
undersigned understands that the Company has no obligations pursuant to the
"Special Registration Instructions" or "Special Delivery Instructions" to
transfer any Warrants from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the Warrants so tendered.
Holders who wish to tender the Warrants and (1) whose Warrants are not
immediately available or (2) who cannot deliver their Warrants, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Warrants according to the guaranteed
delivery procedures set forth in the Offering Circular under the caption "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal.
5
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT WARRANTS ARE BEING PHYSICALLY TENDERED
HEREBY AND WHETHER OR NOT TENDER IS TO BE MADE PURSUANT TO THE GUARANTEED
DELIVERY PROCEDURES
(PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN)
SEE INSTRUCTIONS 4 AND 6.
- ----------------------------------------------
- ----------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date: ___________________, 1999
Name(s)_______________________________________
- ----------------------------------------------
(PLEASE PRINT)
Capacity (full title)_________________________________
- ------------------------------------------------
Address__________________________________________
- ------------------------------------------------
- ------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number______________________
- -----------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
SEE INSTRUCTION 1.
- --------------------------------------------
(AUTHORIZED SIGNATURE)
Date:__________________, 1999
Name of Firm_________________________________
- ---------------------------------------------
- ---------------------------------------------
Capacity (full title)
Address______________________________________
- ---------------------------------------------
- ---------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number_______________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal
need not be guaranteed if (a) this Letter of Transmittal is signed by the
registered holder(s) of the Warrants tendered herewith and such holder(s) have
not completed the box set forth herein entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" or (b) such
Warrants are tendered for the account of a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States (each, an "Eligible Institution"). See Instruction 6. Otherwise,
all signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution. All signatures on
stock transfer powers and endorsements on certificates must also be guaranteed
by an Eligible Institution.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND WARRANTS. Certificates
for all physically delivered Warrants as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile hereof and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 9:00 a.m., New York
City time, on the Expiration Date. The method of delivery of the tendered
Warrants, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the Holder and the delivery will
be deemed made only when actually received by the Exchange Agent. If Warrants
are sent by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery. No Letter of Transmittal or Warrants should be sent to
the Company.
Holders who wish to tender their Warrants and (1) whose Warrants are
not immediately available, or (2) who cannot deliver their Warrants, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date must tender their Warrants according to the
guaranteed delivery procedures set forth in the Offering Circular. See "The
Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such procedure: (1)
such tender must be made by or through an Eligible Institution; (2) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, overnight courier, mail or hand delivery) setting
forth the name and address of the Holder of the Warrants, the certificate number
or numbers of such Warrants and the number of Warrants tendered, stating that
the tender is being made thereby and guaranteeing that, within three New York
Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal (or facsimile hereof) together with the certificate(s) representing
the Warrants and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (3) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Warrants in proper form for transfer, must be received
by the Exchange Agent within three New York Stock Exchange trading days after
the Expiration Date, all in the manner provided in the Offering Circular under
the caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder who
wishes to tender his or her Warrants pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery prior to 9:00 a.m., New York City time, on
the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Warrants according to
the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Warrants, and withdrawal of tendered Warrants
will be determined by the Company in its sole discretion, which determination
will be final and binding. All tendering holders, by execution of this Letter of
Transmittal (or facsimile thereof), shall waive any right to receive notice of
the acceptance of the Warrants for exchange. The Company reserves the absolute
right to reject any and all Warrants not properly tendered or any Warrants the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Warrants. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Warrants
must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Warrants,
nor shall any of them incur any liability for failure to give such notification.
Tenders of Warrants will
7
<PAGE>
not be deemed to have been made until such defects or irregularities have been
cured to the Company's satisfaction or waived. Any Warrants received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders pursuant to the Company's determination, unless
otherwise provided in this Letter of Transmittal as soon as practicable
following the Expiration Date. The Exchange Agent has no fiduciary duties to the
Holders with respect to the Exchange Offer and is acting solely on the basis of
directions of the Company.
3. INADEQUATE SPACE. If the space provided is inadequate, the
certificate numbers and/or the number of Warrants should be listed on a separate
signed schedule attached hereto.
4. TENDER BY HOLDER. Only a Holder of Warrants may tender such Warrants
in the Exchange Offer. Any beneficial owner of Warrants who is not the
registered Holder and who wishes to tender should arrange with such registered
holder to execute and deliver this Letter of Transmittal on such beneficial
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his or her Warrants, either make appropriate
arrangements to register ownership of the Warrants in such beneficial owner's
name or obtain a properly completed stock transfer power from the registered
holder or properly endorsed certificates representing such Warrants.
5. PARTIAL TENDERS; WITHDRAWALS. If less than the entire number of any
Warrants is tendered, the tendering Holder should fill in the number tendered in
the third column of the applicable box entitled "Description of Warrants" above.
The entire number of any Warrants delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated. If the entire number of all
Warrants is not tendered, then Warrants for the number of Warrants not tendered
and a certificate or certification representing Class A Common Stock issued in
exchange for any Warrants accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the "Special
Delivery Instructions" box above on this Letter of Transmittal, promptly after
the Warrants are accepted for exchange.
Except as otherwise provided herein, tenders of Warrants may be
withdrawn at any time prior to 9:00 a.m., New York City time, on the Expiration
Date. To withdraw a tender of Warrants in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 9:00 a.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (1) specify the name of
the person having deposited the Warrants to be withdrawn (the "Depositor"), (2)
identify the Warrants to be withdrawn, including the certificate number or
numbers and number of such Warrants, (3) be signed by the Depositor in the same
manner as the original signature on the Letter of Transmittal by which such
Warrants were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Registrar with
respect to the Warrants register the transfer of such Warrants into the name of
the person withdrawing the tender and (4) specify the name in which any such
Warrants are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Warrants so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no Class A
Common Stock will be issued with respect thereto unless the Warrants so
withdrawn are validly retendered. Any Warrants which have been tendered but
which are not accepted for exchange by the Company will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Warrants may be retendered by following one of the procedures
described in the Offering Circular under "The Exchange Offer--Procedures for
Tendering Warrants" at any time prior to the Expiration Date.
6. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK TRANSFER POWERS AND
ENDORSEMENTS. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered holder(s) of the Warrants tendered hereby, the signature must
correspond with the name(s) as written on the face of the Warrant without
alteration, enlargement or any change whatsoever.
8
<PAGE>
If any of the Warrants tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Warrants registered in different names are tendered, it
will be necessary to complete, sign and submit as many copies of this Letter of
Transmittal as there are different registrations of Warrants.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Warrants tendered and the certificate or
certificates for Class A Common Stock issued in exchange therefor is to be
issued (or any untendered number of Warrants to be reissued) to the registered
Holder, then such Holder need not and should not endorse any tendered Warrants,
nor provide a separate stock transfer power. In any other case, such Holder must
either properly endorse the Warrants tendered or transmit a properly completed
separate stock transfer power with this Letter of Transmittal with the
signatures on the endorsement or stock transfer power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Warrants listed, such
Warrants must be endorsed or accompanied by appropriate stock transfer powers in
each case signed as the name of the registered Holder or Holders appears on the
Warrants.
If this Letter of Transmittal (or facsimile hereof) or any Warrants or
stock transfer powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, or officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Warrants or signatures on stock transfer powers
required by this Instruction 6 must be guaranteed by an Eligible Institution.
7. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders
should indicate, in the applicable box or boxes, the name and address to which
Class A Common Stock or substitute Warrants for the number of Warrants not
tendered or not accepted for exchange are to be issued or sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or social
security number of the person named must also be indicated.
8. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under
the federal income tax laws, payments that may be made by the Company with
respect to Class A Common Stock issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should compete and sign the Substitute Form
W-9 included in this Letter of Transmittal and either (a) provide the correct
taxpayer identification number ("TIN") and certify, under penalties of perjury,
that the TIN provided is correct and that (1) the Holder has not been notified
by the Internal Revenue Service the ("IRS") that the Holder is subject to backup
withholding as a result of failure to report all interest or dividends or (2)
the IRS has notified the Holder that the Holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
Holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such Holder should write "Applied For" in the space
provided for the TIN in Part 1 of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part 1, the Company shall
retain 31% of payments made to the tendering Holder during the 60-day period
following the date of the Substitute Form W-9. If the Holder furnishes the
Exchange Agent or the Company with its TIN within 60 days after the date of the
Substitute Form W-9, the Company (or the Paying Agent) shall remit such amounts
retained during the 60-day period to the Holder and no further amounts shall be
retained or withheld from payments made to the Holder thereafter. If, however,
the Holder has not provided the Exchange Agent or the Company with its TIN
within such 60-day period, the Company (or the Paying Agent) shall remit such
previously retained amounts to the IRS as backup withholding. In general, if a
Holder is an individual, the TIN is the Social Security number of such
individual. If the Exchange Agent or the Company are not provided with the
correct TIN, the Holder may be subject to a $50 penalty imposed by the Internal
Revenue Service.
Certain Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such Holder must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's
9
<PAGE>
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Warrants are registered in more than one name), consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9. Failure to complete the Substitute Form W-9 will not, by itself, cause
Warrants to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Class A Common Stock. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Warrants pursuant to the Exchange Offer. If,
however, certificates representing Class A Common Stock or Warrants for the
number of Warrants not tendered or accepted for exchange are to be delivered to,
or are to be registered in the name of, any person other than the registered
Holder of the Warrants tendered hereby, or if tendered Warrants are registered
in the name of a person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Warrants pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered Holder or on any other
persons) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering Holder. See the Offering Circular under "The Exchange
Offer--Expenses."
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Warrants listed in this Letter of
Transmittal.
10. WAIVER OF CONDITIONS. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Exchange Offer
in the case of any Warrants tendered.
11. MUTILATED, LOST, STOLEN OR DESTROYED WARRANTS. Any tendering Holder
whose Warrants have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
12. REQUESTS FOR ASSISTANCE, COPIES. Requests for assistance and
requests for additional copies of the Offering Circular or this Letter of
Transmittal may be directed to the Exchange Agent or the Information Agent at
their respective addresses specified in the Offering Circular. Holders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE WARRANTS WARRANTS
SURRENDERED TENDERED ACCEPTED
- ----------------------- ---------------------- -----------------
- ----------------------- ---------------------- -----------------
Received__________ Accepted by__________ Checked by_________ Delivery
Prepared by__________ Checked by__________ Date__________
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Warrants are
accepted is required to provide such Holder's correct TIN on Substitute Form W-9
below or otherwise establish a basis for exemption from backup withholding. If
such Holder is an individual, the TIN is his social security number. If the
Exchange Agent is not provided with the correct TIN, a $50 penalty may be
imposed by the Internal Revenue Service, and payments with respect to Class A
Common Stock may be subject to backup withholding.
10
<PAGE>
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding requirements.
Exempt Holders should indicate their exempt status on Substitute Form W-9. A
foreign person may qualify as an exempt recipient by submitting to the Exchange
Agent a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, 31% of dividend payments with respect to
Class A Common Stock made will be withheld. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Class A
Common Stock, the Holder is required to provide either (a) the Holder's correct
TIN by completing the form below, certifying that the TIN provided on Substitute
Form W-9 is correct (or that such Holder is awaiting a TIN) and that (1) the
Holder has been notified by the Internal Revenue Service that the Holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified the Holder that the
Holder is no longer subject to backup withholding or (b) an adequate basis for
exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Warrants. If the Warrants are held in more than one name or are held not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (SEE INSTRUCTION 9)
PAYER'S NAME: AMERICAN STOCK TRANSFER AND TRUST COMPANY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1-PLEASE PROVIDE Social Security Number
YOUR TIN IN THE BOX AT ____________________________
Form W-9 RIGHT AND CERTIFY BY OR
SIGNING AND DATING
Department of the Treasury BELOW. Employer Identification Number
Internal Revenue Service ____________________________
(If awaiting TIN write "Applied For")
- ----------------------------------------------------------------------------------------------------------------------------------
Payer's Request for Taxpayer PART 2--For Payees exempt from backup withholding, see the enclosed Guidelines for
Identification Number (TIN) Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
instructed therein.
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number or a
Taxpayer Identification Number has not been issued to me and either (a) I have
mailed or delivered an application to receive a Taxpayer Identification Number
to the appropriate IRS or Social Security Administration office or (b) I intend
to mail or deliver an application in the near future. I understand that if I do
not provide a Taxpayer Identification Number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number; and
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, (b) I have not been notified by the IRS that I am subject
to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified
by the IRS that you are subject to backup withholding because of under-reporting interest
or dividends on your tax return. However, if after being notified by the IRS that you
were subject to backup withholding, you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed Guidelines.)
- -----------------------------------------------------------------------------------------------------------------------------------
NAME (please print):
ADDRESS (please print):
SIGNATURE: DATE: , 1999
===================================================================================================================================
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU IN RESPECT OF CLASS A
COMMON STOCK. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE>
Exhibit (a)(3)
INTERNET COMMERCE CORPORATION
Offer to Exchange
One Share of Class A Common Stock
for
Each Eight (8) Outstanding Class A Warrants
and
One Share of Class A Common Stock
for
Each Sixteen (16) Outstanding Class B Warrants
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M. NEW YORK
CITY TIME ON JULY 30, 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
June 30, 1999
To Our Clients:
Enclosed for your consideration is a Offering Circular dated June [30],
1999 (the "Offering Circular") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Exchange Offer") relating to an offer by Internet Commerce Corporation, a
Delaware corporation (the "Company"), to exchange one share of Class A Common
Stock, $.01 par value per share (the "Class A Common Stock") for each eight
(8) outstanding Class A Warrants (the "Class A Warrants") and one share of
Class A Common Stock for each sixteen (16) outstanding Class B Warrants (the
"Class B Warrants," and together with the Class A Warrants, the"Warrants"), upon
the terms and subject to the conditions set forth in the Offering Circular.
We are the holder of record of Warrants held by us for your account. A
tender for exchange of such Warrants can be made only by us as the holder of
record and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender for
exchange Warrants held by us for your account.
We request instructions as to whether you wish to have us tender for
exchange on your behalf any or all of such Warrants held by us for your account,
pursuant to the terms and subject to the conditions set forth in the Exchange
Offer.
Your attention is directed to the following:
1. The Exchange Offer will expire at 9:00 a.m. New York City
time on July 30, 1999, unless the Exchange Offer is extended. Your
instructions to us should be forwarded to us in ample time to permit us
to submit a tender on your behalf.
2. The Exchange Offer is made for all Warrants outstanding as of
the date of the Offering Circular.
3. The Exchange Offer is conditioned upon the satisfaction of
certain conditions set forth in the Offering Circular under the caption
"The Exchange Offer -- Conditions of the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum number of Warrants being
tendered for exchange.
4. Tendering Holders of Warrants will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 9
of the Letter of Transmittal, transfer taxes applicable to the exchange
of Warrants pursuant to the Exchange Offer.
5. In all cases, exchange of Warrants tendered and accepted for
exchange pursuant to the Exchange Offer will be made only after timely
receipt by American Stock Transfer and Trust Company (the "Exchange
Agent") of (i) certificates representing such Warrants pursuant to the
procedures set forth in the Offering Circular under the caption "The
Exchange Offer -- Procedures for Tendering Warrants," (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and (iii) any other
documents required by the Letter of Transmittal.
The Exchange Offer is being made solely by the Offering Circular and the
related Letter of Transmittal and is being made to all Holders of Warrants. The
Company is not aware of any state where the making of the Exchange Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Company becomes aware of any
<PAGE>
valid state statute prohibiting the making of the Exchange Offer or the
acceptance of Warrants tendered for exchange pursuant thereto, the Company will
make a good faith effort to comply with any such state statute or seek to have
such statute declared inapplicable to the Exchange Offer. If, after such good
faith effort, the Company cannot comply with such state statute the Exchange
Offer will not be made to, nor will tenders be accepted from or on behalf of,
the holders of Warrants in such state. In any jurisdiction where the securities,
blue sky or other laws require the Exchange Offer to be made by a licensed
broker or dealer, the Exchange Offer shall be deemed to be made on behalf of the
Company by one or more registered brokers or dealers that are licensed under the
laws of such jurisdiction.
If you wish to have us tender any or all of the Warrants held by us for
your account, please instruct us by completing, executing and returning to us
the instruction form contained in this letter. If you authorize a tender for
exchange of your Warrants, the entire aggregate amount of such Warrants will be
tendered for exchange unless otherwise specified in such instruction form. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf prior to the expiration of the Exchange Offer.
2
<PAGE>
Instructions with Respect to the
INTERNET COMMERCE CORPORATION
Offer to Exchange
One Share of Class A Common Stock
for
Each Eight (8) Outstanding Class A Warrants
and
One Share of Class A Common Stock
for
Each Sixteen (16) Outstanding Class B Warrants
The undersigned acknowledge(s) receipt of your letter enclosing the
Offering Circular dated June 30, 1999 (the "Offering Circular") and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Exchange Offer") pursuant to
an offer by Internet Commerce Corporation, a Delaware corporation (the
"Company"), to exchange one share of Class A Common Stock, $.01 par value per
share (the "Class A Common Stock"), for each eight (8) outstanding Class A
Warrants (the "Class A Warrants") and one share of Class A Common Stock for each
sixteen (16) outstanding Class B Warrants (the "Class B Warrants," and
together with the Class A Warrants, the"Warrants"), upon the terms and subject
to the conditions set forth in the Offering Circular.
This will instruct you to tender the number of Warrants indicated below
(or, if no number is indicated below, the entire number of Warrants) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Exchange Offer.
- --------------------------------------------------------------------------------
Aggregate Number of Class A Warrants to be Tendered:*
Aggregate Number of Class B Warrants to be Tendered:*___________________________
Dated:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s):
-------------------------------------------------------------------
Please print name(s):
-----------------------------------------------------------
Address:
------------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Tax Identification or Social Security Number:
-----------------------------------
- --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that the entire number of
Warrants held by us for your account are to be tendered for exchange.
4
<PAGE>
Exhibit (a)(4)
INTERNET COMMERCE CORPORATION
Offer to Exchange
One Share of Class A Common Stock
for
Each Eight (8) Outstanding Class A Warrants
and
One Share of Class A Common Stock
for
Each Sixteen (16) Outstanding Class B Warrants
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 9:00 A.M., NEW YORK CITY
TIME, ON JULY 30, 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
June 30, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Internet Commerce Corporation, a Delaware corporation ("Company"), is
offering to exchange one share of Class A Common Stock, $.01 par value per share
(the "Class A Common Stock"), for each eight (8) outstanding Class A Warrants
(the "Class A Warrants") and one share of Class A Common Stock for each sixteen
(16) outstanding Class B Warrants (the "Class B Warrants," and together with
the Class A Warrants, the"Warrants"), upon the terms and subject to the
conditions set forth in the Offering Circular, dated June 30, 1999 (the
"Offering Circular"), and in the accompanying Letter of Transmittal (the "Letter
of Transmittal," which together with the Offering Circular constitute the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings given to them in the Offering Circular.
THE EXCHANGE OFFER IS CONDITIONED UPON SATISFACTION OF CERTAIN
CONDITIONS SET FORTH IN THE OFFERING CIRCULAR UNDER THE CAPTION "THE EXCHANGE
OFFER -- CONDITIONS OF THE EXCHANGE OFFER." THE EXCHANGE OFFER IS NOT
CONDITIONED UPON ANY MINIMUM NUMBER OF WARRANTS BEING TENDERED FOR EXCHANGE.
Enclosed herewith for your information and forwarding to your clients
for whose accounts you hold Warrants registered in your name or in the name of
your nominee are copies of the following documents:
1. The Offering Circular dated June 30, 1999.
2. The blue Letter of Transmittal to tender Warrants for
exchange (for your use and for the information of your clients).
Facsimile copies of the Letter of Transmittal may be used to tender
Warrants for exchange.
3. The pink Notice of Guaranteed Delivery (to be used to
tender Warrants for exchange if certificates for Warrants are not
immediately available or if such certificates for Warrants and all
other required documents cannot be delivered to American Stock Transfer
and Trust Company (the "Exchange Agent") on or prior to the Expiration
Date.
4. A yellow printed form of letter which may be sent to your
clients for whose accounts you hold Warrants registered in your name or
in the name of your nominee, with space provided for obtaining such
clients' instructions with regard to the Exchange Offer.
5. Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
6. A return envelope addressed to the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME, ON JULY 30, 1999, UNLESS
EXTENDED.
In all cases, exchanges of Warrants accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (i) certificates representing such Warrants, (ii) the Letter
of Transmittal (or a manually signed facsimile thereof) properly completed and
duly executed with any required signature guarantees, and (iii) any other
documents required by the Letter of Transmittal.
<PAGE>
Holders of Warrants who wish to tender their Warrants and (i)
whose Warrants are not immediately available or (ii) who cannot deliver their
Warrants, the Letter of Transmittal or any other required documents to the
Exchange Agent prior to the Expiration Date may effect a tender by following the
guaranteed delivery procedure described in the Offering Circular under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures."
The Company will not pay any fees or commissions to any broker
or dealer or any other person for soliciting tenders of Warrants pursuant to the
Exchange Offer. The Company will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay or cause to be paid any
transfer taxes applicable to the exchange of Warrants pursuant to the Exchange
Offer, except as otherwise provided in Instruction 9 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Exchange Offer
should be addressed to the Exchange Agent, at its address and telephone numbers
set forth in the Letter of Transmittal. Additional copies of the enclosed
material may be obtained from the Exchange Agent.
Very truly yours,
INTERNET COMMERCE CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS THEREIN.
2
<PAGE>
Exhibit (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
CLASS A WARRANTS AND CLASS B WARRANTS
OF
INTERNET COMMERCE CORPORATION
As set forth in the Offering Circular dated June 30, 1999 (the
"Offering Circular") of Internet Commerce Corporation (the "Company") and in the
accompanying Letter of Transmittal (the "Letter of Transmittal"), this form or a
form substantially equivalent to this form must be used to accept the Exchange
Offer (as defined below) if the certificates for the outstanding Class A
Warrants and/or Class B Warrants (together, the "Warrants") of the Company and
all other documents required by the Letter of Transmittal cannot be delivered to
the Exchange Agent by the expiration of the Exchange Offer. Such form may be
delivered by hand or transmitted by facsimile transmission, telex or mail to the
Exchange Agent no later than the Expiration Date, and must include a signature
guarantee by an Eligible Institution as set forth below. Capitalized terms used
herein but not defined herein have the meanings ascribed thereto in the Offering
Circular.
<TABLE>
<CAPTION>
The Exchange Agent For The Exchange Offer Is:
AMERICAN STOCK TRANSFER AND TRUST COMPANY
<S> <C> <C> <C>
By Registered or Certified Mail: By Hand: By Overnight Delivery:
American Stock Transfer and American Stock Transfer and American Stock Transfer and
Trust Company Trust Company Trust Company
40 Wall Street 40 Wall Street 40 Wall Street
46th Floor 46th Floor 46th Floor
New York, New York 10005 New York, New York 10005 New York, New York 10005
Confirm by Telephone: (800) 937-5449 (from outside New York)
(718) 921-8200 (from inside New York)
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING WARRANT CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. YOU SHOULD READ THE INSTRUCTIONS ACCOMPANYING THE LETTER OF
TRANSMITTAL CAREFULLY BEFORE YOU COMPLETE THIS NOTICE OF GUARANTEED DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instruction thereto, such
signatures must appear in the applicable space provided on the Letter of
Transmittal for Guarantee of Signature(s).
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M.,
NEW YORK CITY TIME, ON JULY 30, 1999
UNLESS THE EXCHANGE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
<PAGE>
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Offering Circular and the
related Letter of Transmittal which describes the Company's offer (the "Exchange
Offer") to exchange one share of Class A Common Stock, $.01 par value per share
(the "Class A Common Stock"), for each eight (8) outstanding Class A Warrants
(the "Class A Warrants") and one share of Class A Common Stock for each sixteen
(16) outstanding Class B Warrants (the "Class B Warrants," and together with the
Class A Warrants, the"Warrants"), upon the terms and subject to the conditions
set forth in the Offering Circular. The undersigned hereby tenders to the
Company the aggregate number of Warrants set forth below on the terms and
conditions set forth in the Offering Circular and the related Letter of
Transmittal pursuant to the guaranteed delivery procedure set forth in the "The
Exchange Offer--Guaranteed Delivery Procedures" section in the Offering Circular
and the accompanying Letter of Transmittal.
The undersigned understands that no withdrawal of a tender of Warrants
may be made on or after the Expiration Date. The undersigned understands that
for a withdrawal of a tender of Warrants to be effective, a written notice of
withdrawal that complies with the requirements of the Exchange Offer must be
timely received by the Exchange Agent at one of its addresses specified on the
cover of this Notice of Guaranteed Delivery prior to the Expiration Date.
The undersigned understands that the exchange of Class A Common Stock
for Warrants pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of (1) such Warrants and (2) a Letter of
Transmittal (or facsimile thereof) with respect to such Warrants, properly
completed and duly executed, with any required signature guarantees, this Notice
of Guaranteed Delivery and any other documents required by the Letter of
Transmittal.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding on the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
2
<PAGE>
PLEASE COMPLETE
<TABLE>
<CAPTION>
<S> <C>
Number of Class A Warrants Name(s) of Registered Holder(s):_________________
Tendered for Exchange:___________________ _________________________________________________
Warrant Certificate No.(s)
(if available):___________________
Number of Class B Warrants Name(s) of Registered Holder(s):_________________
Tendered for Exchange:___________________ _________________________________________________
Warrant Certificate No.(s)
(if available):___________________
</TABLE>
PLEASE SIGN HERE
X_______________________________ ___________________________
X_______________________________ ___________________________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:_______________________________________________
This Notice of Guaranteed Delivery must be signed by the registered
Holder(s) of Warrants exactly as its (their) name(s) appear on certificates for
Warrants or by person(s) authorized to become registered Holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): __________________________________________________________________
__________________________________________________________________
Capacity: __________________________________________________________________
Address(es): __________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or a correspondent in the
United States, a credit union, a savings association or otherwise an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, hereby (1) represents that each holder of
Warrants on whose behalf this tender is being made "own(s)" the Warrants covered
hereby within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (2) represents that such tender of
Warrants complies with Rule 14e-4 of the Exchange Act and (3) guarantees that,
within three New York Stock Exchange trading days from the expiration date of
the Exchange Offer, a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), together with certificates representing the Warrants
covered hereby in proper form for transfer and all other required documents will
be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Warrants tendered hereby to the Exchange Agent within the time
period set forth above and the failure to do so could result in financial loss
to the undersigned.
______________________________________ ___________________________________
Name of Firm Authorized Signature
______________________________________ ___________________________________
Address Title
______________________________________ ___________________________________
Zip Code (Please Type or Print)
Area Code and Telephone No.___________ Dated:_____________________________
NOTE: DO NOT SEND CERTIFICATES FOR WARRANTS WITH THIS FORM. CERTIFICATES FOR
WARRANTS SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
Exhibit (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C>
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of -- number of --
- ---------------------------------------------------------------- -------------------------------------------------------------
1. An individual's account The individual 7. A vald trust, estate, The legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(4)
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the individuals(1)
3. Husband and wife (joint The actual owner of 8. Corporate account The corporation
account) the account or, if
joint funds, either
person(1)
9. Religious, charitable, The organization
or educational
organization account
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
10. Partnership account The partnership
5. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is 11. Association, club, or The organization
also trustee) other tax-exempt
organization
b. So-called trust account that The actual owner(1) 12. A broker or registered The broker or
is not a legal or valid trust nominee nominee
under State law
6. Sole proprietorship account The owner(3) 13. Account with the The public entity
Department of
Agriculture in
the name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ---------------------------------------------------------------- -------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
19
<PAGE>
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number, or Form
SS-4, Application for an Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number. United States resident aliens who cannot obtain a social security
number must apply for an ITIN (Individual Taxpayer Identification Number) on
Form W-7.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on payments of interest,
dividends and with respect to broker transactions include the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
o A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section
1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Payments made to a middleman known in the investment community as a
nominee as listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to a middleman known in the investment community as a
nominee as listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE
FORM.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
20
<PAGE>
Exhibit (d)
KRAMER LEVIN NAFTALIS & FRANKEL LLP
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100
ARTHUR H. AUFSES III MONICA C. LORD ARTHUR B. KRAMER
THOMAS D. BALLIETT RICHARD MARLIN MAURICE N. NESSEN
JAY G. BARIS THOMAS MOERS MAYER FOUNDING PARTNERS
PHILIP BENTLEY THOMAS E. MOLNER RETIRED
BARRY H. BERKE THOMAS H. MORELAND ------
SAUL E. BURIAN ELLEN R. NADLER PETER ABRUZZESE
NICHOLAS L. COCH GARY P. NAFTALIS MARTIN BALSAM
THOMAS E. CONSTANCE MICHAEL J. NASSAU JOSHUA M. BERMAN
JOHN E. DANIEL MICHAEL S. NELSON JULES BUCHWALD
MICHAEL J. DELL JAY A. NEVELOFF S. ELLIOTT COHAN
ABBE L. DIENSTAG MICHAEL S. OBERMAN RUDOLPH DE WINTER
KENNETH H. ECKSTEIN PETER J. O'ROURKE ARTHUR D. EMIL
CHARLOTTE M. FISCHMAN PAUL S. PEARLMAN MARIA T. JONES
DAVID S. FRANKEL SUSAN J. PENRY-WILLIAMS SHERWIN KAMIN
MARVIN E. FRANKEL BRUCE RABB ANDREW J. MALONEY
ALAN R. FRIEDMAN ALLAN E. REZNICK GEORGE M. MURPHY
CARL FRISCHLING DONALD L. RHOADS MAXWELL M. RABB
MARK J. HEADLEY SCOTT S. ROSENBLUM COUNSEL
ROBERT M. HELLER MICHELE D. ROSS ------
GEORGE P. HOARE HOWARD J. ROTHMAN M. FRANCES BUCHINSKY
GREGORY A. HOROWITZ MARK B. SEGALL JEFFREY W. DAVIS
PHILIP S. KAUFMAN JUDITH SINGER MARILYN FEUER
PETER S. KOLEVZON PETER G. SMITH RONALD S. GREENBERG
KENNETH P. KOPELMAN HOWARD A. SOBEL ROBERT T. SCHMIDT
MICHAEL PAUL KOROTKIN JEFFREY S. TRACHTMAN HELAYNE O. STOOPACK
SHARI K. KROUNER NEIL R. TUCKER SPECIAL COUNSEL
KEVIN B. LEBLANG JONATHAN M. WAGNER ------
DAVID P. LEVIN HAROLD P. WEINBERGER
EZRA G. LEVIN ALAN S. WILMIT
RANDY LIPSITZ E. LISK WYCKOFF, JR.
LARRY M. LOEB
FACSIMILE
(212) 715-8000
------
WRITER'S DIRECT NUMBER
(212) 715-9242
June 30, 1999
Internet Commerce Corporation
805 Third Avenue
New York, New York 10022
Ladies and Gentlemen:
We have acted as counsel to Internet Commerce Corporation, a
Delaware Corporation ("ICC"), in connection with the offer to exchange one share
of Class A Common Stock, $.01 par value per share, for each eight (8)
outstanding Class A Warrants and one share of Class A Common Stock, $.01 par
value per share, for each sixteen (16) outstanding Class B Warrants (the
"Exchange Offer").
For purposes of the opinion set forth below, we have reviewed and
relied upon the Issuer Tender Offer Statement on Schedule 13E-4 (the "Offering
Circular"), filed by ICC with the Securities and Exchange Commission, and such
other documents, records, and instruments as we have deemed necessary or
appropriate as a basis for our opinion. In rendering our opinion, we have
assumed that the Exchange Offer will be consummated as described in the Offering
Circular. Any inaccuracy in, or breach of, any of the aforementioned statements,
representations, or assumptions or any change after the date hereof in
applicable law could adversely affect our opinion. No ruling has been (or will
be) sought from the Internal Revenue Service by ICC as to the federal income tax
consequences of any aspect of the Exchange Offer. The opinion expressed herein
is not binding on the Internal Revenue Service or any court, and there can be no
assurance that the Internal Revenue Service or a court of competent jurisdiction
will not disagree with such opinion.
Based upon and subject to the foregoing as well as the
limitations set forth below, it is our opinion, under presently applicable
federal income tax law, that the
<PAGE>
statements contained in the section of the Offering Circular entitled "Certain
Federal Income Tax Considerations" are correct.
Our opinion with respect to the tax-free nature of the exchange
of Class A Common Stock for Warrants is based on our view that the exchange is
properly treated as a tax-free reorganization under section 368(a)(1)(E) of the
Internal Revenue Code of 1986, as amended (a "recapitalization"). Under recently
finalized Treasury Regulations, the receipt of stock in exchange for warrants in
a reorganization is generally tax-free. Although the regulations do not
specifically state that an exchange involving warrants is properly treated as a
recapitalization, and do not contain any examples of a recapitalization exchange
involving warrants similar to the exchange which is the subject of this opinion,
we believe that the examples in the regulations are merely illustrations of the
types of exchanges that may qualify as recapitalizations, and are not intended
to be exhaustive. There is no authority precluding such an exchange of stock for
warrants from being treated as a recapitalization. In addition, the Internal
Revenue Service and Treasury believe that warrants "generally represent a form
of investment in the capital structure of a corporation that justifies
nonrecognition treatment." Preamble to Proposed Amendments to the Income Tax
Regulations under sections 354, 355 and 356 of the Internal Revenue Code of
1986, 61 Fed. Reg. 67,612 (1996) (proposed Dec. 23, 1996). Therefore, in our
opinion, the receipt of Class A Common Stock in exchange for the Warrants is
properly treated as a recapitalization. See, R. David Wheat, Exchanges of
Warrants in Reorganizations, in TAX STRATEGIES FOR CORPORATE ACQUISITIONS,
DISPOSITIONS, SPIN-OFFS, JOINT VENTURES, FINANCINGS, REORGANIZATIONS &
RESTRUCTURINGS 1998, at 659 (PLI Tax Law and Estate Planning Course Handbook
Series No. 427, 1998); R. David Wheat, An Analysis of the New Regulations on
Exchanges of Warrants in Tax-Free Reorganizations, 25J. CORP. TAX'N 107 (1998).
Our opinion is based upon existing statutory, regulatory, and
administrative and judicial authority, any of which may be changed at any time
with retroactive effect to the detriment of ICC and its Warrant holders. We do
not undertake to advise you as to any changes after the date hereof in the
above-referenced authorities that may affect our opinion unless we are
specifically requested to do so. No opinion is expressed as to any matter not
specifically addressed above. Furthermore, no opinion is expressed as to any tax
consequences of the Exchange Offer under any foreign, state, or local tax law.
We hereby consent to the filing of this opinion as an exhibit to
the Offering Circular and to the use of our name in the Offering Circular. The
giving of this consent, however, does not constitute an admission that we are
"experts" within the meaning of Section 11 of the Securities Act of 1933, as
amended, or within the category of persons whose consent is required by Section
7 of said Act.
<PAGE>
This opinion has been delivered to you for the purpose of being
included as an exhibit to the Offering Circular and is intended solely for your
benefit.
Very truly yours,
KRAMER LEVIN NAFTALIS & FRANKEL LLP
