SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |x|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|x| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INTERNET COMMERCE CORPORATION
-----------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|x| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(c)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forward the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Internet Commerce Corporation
805 Third Avenue, 9th Floor
New York, New York 10022
(212) 271-7640
May 22, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
which will be held on June 19, 2000, at 9:00 a.m. at the New York Marriott East
Side, 525 Lexington Avenue, New York, New York 10017. We hope that you will be
able to attend the Annual Meeting in person, but to ensure that your vote is
counted, please mark, date, sign and return, at an early date, the enclosed
proxy in the prepaid envelope. If you have any questions or need assistance in
voting your shares, please call Larry Danziger at (212) 271-7645.
A copy of the Company's Annual Report to Stockholders for the year ended
July 31, 1999 is enclosed.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely yours,
/s/ Dr. Geoffrey S. Carroll
----------------------------
Dr. Geoffrey S. Carroll
President and
Chief Executive Officer
<PAGE>
INTERNET COMMERCE CORPORATION
Notice of Annual Meeting of Stockholders
to be held June 19, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of
Internet Commerce Corporation (the "Company") will be held at the New York
Marriott East Side, 525 Lexington Avenue, New York, New York 10017 on June 19,
2000, at 9:00 a.m., for the following purposes:
1. To elect two directors for a term expiring at the next annual
meeting of stockholders, to elect three directors for a term
expiring at the second annual meeting of stockholders following
this Annual Meeting, and to elect three directors for a term
expiring at the third annual meeting of stockholders following
this Annual Meeting.
2. To approve the Company's Amended and Restated Stock Option Plan.
3. To ratify the Company's selection of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending
July 31, 2000.
4. To transact such other business as may properly come before the
Annual Meeting and any postponement or adjournment of the Annual
Meeting.
The Board of Directors has fixed the close of business on May 12, 2000
as the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any postponement or adjournment thereof. A
complete list of stockholders entitled to vote will be available at the
Company's office, 805 Third Avenue, 9th Floor, New York, New York 10022, during
the ten days before the meeting.
May 22, 2000 By Order of the Board of Directors,
/s/ Dr. Geoffrey S. Carroll
-----------------------------
Dr. Geoffrey S. Carroll
President and
Chief Executive Officer
<PAGE>
Internet Commerce Corporation
805 Third Avenue, 9th Floor
New York, New York 10022
(212) 271-7640
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Internet Commerce Corporation, a Delaware corporation
("ICC" or the "Company"), of proxies in the accompanying form to be used at the
Annual Meeting of Stockholders to be held at the New York Marriott East Side,
525 Lexington Avenue, New York, New York 10017 on June 19, 2000 at 9:00 a.m. and
any postponement or adjournment thereof ("the Annual Meeting"). The shares
represented by the proxies received in response to this solicitation and not
revoked will be voted at the Annual Meeting. A proxy may be revoked at any time
before it is exercised by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date or by voting in person
at the Annual Meeting. As to matters coming before the Annual Meeting for which
a choice has been specified by a stockholder on the proxy, the shares will be
voted accordingly. If no choice is specified, the shares will be voted FOR each
proposal described and each director specified in this Proxy Statement.
Stockholders of record of the Company's Class A Common Stock (the "Class
A Common Stock"), the Class B Common Stock (the "Class B Common Stock") and the
Series C Convertible Redeemable Preferred Stock (the "Series C Preferred Stock")
at the close of business on May 12, 2000 (the "Record Date") are entitled to
notice of and to vote at the Annual Meeting. As of the close of business on the
Record Date, the Company had 6,189,791 shares of Class A Common Stock
outstanding and entitled to vote. Each holder of Class A Common Stock is
entitled to one vote for each share held as of the Record Date. As of the close
of business on the Record Date, the Company had 85,728 shares of Class B Common
Stock outstanding and entitled to vote. The Class B Common Stock is entitled to
vote together with the Class A Common Stock and the Series C Preferred Stock;
each share of the Class B Common Stock is entitled to six votes per share. As of
the close of business on the Record Date, the Company had 10,000 shares of
Series C Preferred Stock outstanding and entitled to vote. The Series C
Preferred Stock is entitled to vote together with the Class A Common Stock and
the Class B Common Stock; each share of the Series C Preferred Stock is entitled
to approximately 44.76 votes per share.
Approval of Proposals Two and Three and any other matter submitted to
stockholders for approval at this Annual Meeting will require the affirmative
vote of a majority of the aggregate voting power of the shares of outstanding
Class A Common Stock, Class B Common Stock and Series C Preferred Stock present
in person or represented by proxy at the Annual Meeting, voting together as a
single class. Directors are elected by a plurality vote of the aggregate voting
power of the shares of Class A Common Stock, Class B Common Stock and Series C
Preferred Stock
<PAGE>
present in person or represented by proxy, voting together as a single class.
For the election of directors, votes may be cast in favor of or withheld; votes
that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions with respect to any other matter are treated as shares
present or represented and entitled to vote on that matter and thus have the
same effect as negative votes.
Abstentions and broker non-votes are treated as shares that are present
for purposes of determining the presence or absence of a quorum. However, broker
non-votes will not be counted for the purposes of determining the number of
votes cast with respect to the particular proposal on which a broker has not
voted. Therefore, broker non-votes will not affect the determination as to
whether the requisite majority of votes cast has been obtained with respect to a
particular proposal.
The entire expense of printing, preparing, assembling and mailing proxy
materials and the cost of soliciting proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, solicitation may be made by
certain directors, officers and other employees of the Company by personal
interview, telephone, telegram or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company has retained D.F. King &
Co., Inc. to assist it in the solicitation of proxies for the Annual Meeting at
an estimated cost of $9,000.
The Company will reimburse brokerage firms and others for their
reasonable expenses in forwarding proxy materials to, and obtaining voting
instructions from, the beneficial owners of the Class A Common Stock.
This Proxy Statement and the accompanying form of proxy, together with a
copy of the Company's Annual Report to Stockholders for the year ended July 31,
1999, are being mailed to stockholders on or about May 22, 2000.
IMPORTANT
Please mark, date and sign the enclosed proxy and return it at your
earliest convenience in the enclosed postage-prepaid return envelope so that,
whether you intend to be present at the Annual Meeting or not, your shares of
Class A Common Stock, Class B Common Stock or Series C Preferred Stock can be
voted. This will not limit your right to attend or vote at the Annual Meeting.
-2-
<PAGE>
PROPOSAL ONE
ELECTION OF CLASS I, CLASS II AND CLASS III DIRECTORS
The Company has three classes of directors (each a "Class"), subject to
a maximum of ten directors. Each Class consists of a number of directors as
nearly as possible equal to the number of directors in the other classes. Two
Class I directors are to be elected at this Annual Meeting for a term expiring
at the next annual meeting of stockholders or until such directors' successors
shall have been duly elected and qualified. Three Class II Directors are to be
elected at this Annual Meeting for a term expiring at the second annual meeting
of stockholders following this Annual Meeting or until such directors'
successors shall have been duly elected and qualified. Three Class III Directors
are to be elected at this Annual Meeting for a term expiring at the third annual
meeting of stockholders following this Annual Meeting or until such directors'
successors shall have been duly elected and qualified. At each annual meeting of
stockholders after this Annual Meeting, the class of directors whose term
expires at such annual meeting will be elected for a three-year term.
Unless authority to vote for directors is withheld, the Company intends
that the shares represented by the enclosed proxy will be voted for the election
of each of the directors named below, all of whom are currently members of the
Board of Directors of the Company. In the event any such nominee becomes unable
or unwilling to accept nomination or election, the shares represented by the
enclosed proxy will be voted for the election of such persons as the Board of
Directors in its discretion may select. The Board of Directors has no reason to
believe that any of such nominees will be unable or unwilling to serve.
Set forth below is certain information regarding the Company's
directors, including information furnished by them as to their principal
occupations and business experience for the past five years, certain
directorships held by each, their respective ages as of May 22, 2000 and the
year in which each became a director of the Company. Each director has served
continuously with the Company since his or her first election as indicated
below.
DIRECTORS
Name Age Director Since
---- --- --------------
Class I
James A. Ortenzio 1,2 54 1999
Charles C. Johnston 1,2 65 1996
Class II
G. Michael Cassidy 47 1998
Michele Golden 40 1998
Arthur R. Medici 51 1996
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<PAGE>
Class III
Richard J. Berman 57 1998
Dr. Geoffrey S. Carroll 50 1999
Matthew D. Wolk 46 2000
1) Member of the Company's Audit Committee.
2) Member of the Company's Compensation Committee.
James A. Ortenzio has been chairman of JAO Holdings since 1982. JAO Holdings is
a private company with investments in the fashion, food and real estate
industries. Since 1996, he has also served as chairman of the Hudson River Park
Trust under Governor George Pataki. Mr. Ortenzio was appointed to the Board of
the Economic Development Corporation of the City of New York by Mayor Rudolph
Giuliani in 1994. Mr. Ortenzio has also served as Chairman of Transition for the
New York State Attorney General Dennis Vacco, Chairman of Economic Development
Transition for Governor George Pataki and is currently Senior Advisor to the
U.S. Department of Defense. He is also a member of the Board of Trustees of
Cornell University.
Charles C. Johnston is presently an active private investor. From 1990 to 1992,
Mr. Johnston was chairman of Teleglobe Inc., a computer services company. Since
January 1990, Mr. Johnston has been a member of the Board of Directors of
Teleglobe Inc. From 1969 to 1989, he was Chairman and Chief Executive Officer of
ICI Systems Inc., a computer services company.
G. Michael Cassidy has been the Executive Vice President - Sales for the Company
since July 1999 and is the developer of the business model of the Company and a
co-founder of Internet Commerce Corporation, a former subsidiary of the Company
which was incorporated in April 1997. In September 1998, Internet Commerce
Corporation was merged into Infosafe Systems, Inc. and Infosafe Systems, Inc.
changed its name to Internet Commerce Corporation. Mr. Cassidy is currently
responsible for ICC's marketing and sales strategies and industry positioning.
From August 1993 to October 1996, Mr. Cassidy was President and Chief Executive
Officer of Greentree Software, a software development company specializing in
supply chain management software solutions for Fortune 1000 companies. He began
his sales career at International Business Machines Corporation and later
managed strategic alliances for Coopers & Lybrand, certified public accountants.
Michele Golden is a co-founder of Internet Commerce Corporation, a former
subsidiary of the Company, and was an Executive Vice President of the Company
from May 1998 until March 2000. Ms. Golden has more than 10 years of senior
management experience in electronic commerce initiatives. Ms. Golden previously
was president and founder of New Paradigm Golden-link, an EDI service provider.
From 1992 to 1994 she was vice president of business development of CIS
Corporation, a computer software company.
Arthur R. Medici has been the Senior Vice President of Marketing of Cable &
Wireless USA, Inc., the United States subsidiary of a global telecommunications
company, since February 1999. He was president of ICC from November 1996 to
January 1999. From November 1996 to September 1998 he also served as the Chief
Executive Officer of ICC. From August 1994 to November 1996, Mr. Medici was
president of the North American division of Derwent
-4-
<PAGE>
Information, Ltd., a producer of international patent abstracts and information
formatted for print, CD-ROM and digital online delivery. From November 1990 to
August 1994, Mr. Medici was a senior vice president of Thomson & Thomson. Both
companies are subsidiaries of The Thomson Corporation's Intellectual Property
Resources Group.
Richard J. Berman joined ICC in September 1998 as chairman and chief executive
officer and served as the Company's Chief Executive Officer until June 1999. For
more than 15 years prior to September 1998, Mr. Berman, through American
Acquisition Company, acted as principal in venture capital and real estate, as
an advisor in mergers and acquisitions and as a source of funding for small
growth companies. He was also the chairman of Prestolite Battery Company, the
largest battery producer in Canada, which merged with Exide Corporation in 1993.
Dr. Geoffrey S. Carroll has been President and Chief Executive Officer of the
Company since June 1999. From January 1998 to October 1998, Dr. Carroll served
as President and Chief Executive Officer of LCC International, Inc., one of the
world's largest suppliers of integrated infrastructure resources to the wireless
telecommunications industry. From 1996 to 1997, Dr. Carroll served as Chief
Executive Officer of Origin B.V., the information technology services subsidiary
of Philips N.V., Europe's largest electronics manufacturer. Prior to 1996, Dr.
Carroll spent six years with Electronic Data Systems (EDS) in the capacities of
group executive for Europe, member of the EDS Europe board of directors and
president of Northern Europe. Dr. Carroll has spent his entire career in the
information technology field.
Matthew Wolk has been Vice President of Strategic Business Development - Global
Operations of Cable & Wireless PLC ("Cable & Wireless") since October 1999. From
August 1998 to March 1999, Mr. Wolk served as Vice President of Wireless Data
Products for Philips Consumer Communications LP ("PCC"), a division of Royal
Dutch Philips NV that manufactures and markets consumer communications products
sold worldwide. From September 1997 to March 1999, Mr. Wolk served as Vice
President of Global Strategic Business Development of PCC and from September
1996 to August 1997 he served as Vice President of Marketing - Americas of PCC.
Mr. Wolk was also a founder and President of 21st Century Marketing Corporation
("CMC"), which provides consulting services, from 1983 to 1996 and of National
Accounts Management Company ("NAMCO"), which is a national sales organization,
from 1983 to 1992. These companies assisted domestic and foreign brand-name
consumer manufacturing clients to enter the Americas markets and to expand
international business. Mr. Wolk has been a director of Telemac Corporation
since 1997.
Executive Officers
The executive officers of the Company, along with their respective ages
and positions with the Company, are as follows:
Name Age Position
Richard J. Berman 57 Chairman of the Board
Dr. Geoffrey S. Carroll 50 President and Chief Executive Officer
Richard Blume 52 Executive Vice President and Chief
Operating Officer
G. Michael Cassidy 47 Executive Vice President Sales
-5-
<PAGE>
David Hubbard 44 Chief Technology Officer
Walter M. Psztur 41 Chief Financial Officer, Secretary
Richard Blume has been Executive Vice President and Chief Operating Officer of
the Company since June 1999. Prior to joining ICC, Mr. Blume served as chief
operating officer - U.S. and president of the wireless division of Long Distance
International Inc., a facilities-based international telecommunications common
carrier. From 1994 to 1996, Mr. Blume was President of Digitable Communications
Inc., a satellite transponder, brokerage service and business development firm.
Mr. Blume was a founder and chief executive officer of Action Pay Per View, a
national pay per view movie network, and President of United Satellite
Communications, the first broadcast satellite company in the U.S.
David Hubbard has been the Chief Technology Officer of the Company since April
1997. He has more than 20 years of large systems design experience. Prior to
joining the Company, Mr. Hubbard was the Chief Technology Officer of Track Data
Corp., a real-time market data vendor. During his 14 years at Track Data, he
directed engineering for their real-time market ticker feeds and data analysis
systems, handling most of the world's stock, options and commodity exchanges, as
well as most major national and international news services.
Walter M. Psztur served as Corporate Controller of the Company from September
1997 until September 1998 when he was named Vice President of Finance and
Administration. Mr. Psztur was named ICC's Chief Financial Officer in July 1999.
From 1993 until September 1997, Mr. Psztur was the Assistant Corporate
Controller of Standard Motor Products, an automotive manufacturer and
distributor with annual revenues of approximately $700 million. His
responsibilities included corporate financial consolidation and reporting,
financial operations and financial systems, acquisition analysis and corporate
policies and procedures for accounting and financial controls.
Officers serve, at the discretion of the Board of Directors, until the
meeting of the Board of Directors next following each annual meeting of
stockholders, subject to their rights, if any, under contracts of employment.
Directors' Compensation
Directors of the Company do not receive any fixed compensation for
serving on the Board of Directors or any Committee of the Board. Board members
are reimbursed for all reasonable expenses incurred by them in connection with
serving as directors of the Company.
Board Committees
The audit committee held one meeting in fiscal year 1999. In fiscal year
ended July 31, 1999, the audit committee consisted of Mr. Johnston and Mr. Ruel.
Mr. Ruel resigned from the Board of Directors as of March 15, 2000 and was
replaced on the audit committee by Mr. Ortenzio. The audit committee acts as a
liaison between ICC and its independent auditors. The compensation committee was
formed in June 1999 and held no meetings in fiscal 1999. The compensation
committee initially consisted of Mr. Ortenzio and Mr. Ruel. Mr. Ruel resigned
from the Board of Directors as of March 15, 2000 and was replaced on the
compensation
-6-
<PAGE>
committee by Mr. Johnston. The compensation committee currently consists of Mr.
Johnston and Mr. Ortenzio. The compensation committee has the power and
authority to administer ICC's Amended and Restated Stock Option Plan (the
"Amended Plan") and review and approve the compensation of the executive
officers of the Company and such other employees of the Company as are assigned
thereto by the Board of Directors and to make recommendations to the Board of
Directors with respect to standards for setting compensation levels.
Meetings of the Board of Directors
The Board of Directors held seven meetings during the fiscal year ended
July 31, 1999. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors.
The Board of Directors unanimously recommends a vote FOR each of the
nominees for director listed above.
Directors are elected by a plurality vote of the aggregate voting power
of the outstanding shares of Class A Common Stock, Class B Common Stock and
Series C Preferred Stock, present in person or represented by proxy at the
Annual Meeting, voting together as a single class.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of Common Stock
owned beneficially as of April 30, 2000 by each director, each executive
officer, as well as all directors and executive officers as a group, and by each
person that beneficially owns more than 5% of the Company's outstanding Class A
Common Stock or Class B Common Stock. Other than as disclosed in the following
table and accompanying footnotes, the directors and the named executive
officers, and the directors and executive officers as a group, did not
beneficially own any other equity securities of the Company. Unless otherwise
noted, each individual has sole voting and investment power with respect to the
shares indicated as beneficially owned by such individual. Fractional shares are
rounded to the nearest whole number.
Class A Class B
Common Stock Common Stock
-----------------------------------------------
Number of Number of
Shares % Shares %
-----------------------------------------------
Directors, Executive Officers
and 5% Beneficial Owners (1):
Richard J. Berman (2) 413,827 6.7% __ *
Dr. Geoffrey S. Carroll (3) 450,000 7.3% __ *
G. Michael Cassidy (4) 366,791 5.9% __ *
Michele Golden (5) 675,552 10.9% __ *
Charles C. Johnston (6) 110,000 1.8% __ *
Arthur R. Medici (7) 250,000 4.0% __ *
James A. Ortenzio (8) 120,311 1.9% __ *
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<PAGE>
Matthew Wolk (9) 50,850 0.8% __ *
Richard Blume (10) 318,077 5.1% __ *
David Hubbard (11) 130,000 2.1% __ *
Walter M. Psztur (12) 90,000 1.5% __ *
Cable & Wireless PLC (13) 847,628 13.7% __ *
Thomas Lipscomb __ * 78,643 91.7%
All directors and executive
officers as a group
(11 persons) (14) 2,975,408 48.1% 0 *
- -----------------
* Less than 1%
(1) The amounts and percentages of Class A Common Stock in the table above
do not include shares of Class A Common Stock issuable upon the
conversion of the shares of Class B Common Stock listed in the table.
The conversion rate used to determine the number of shares of Class A
Common Stock issuable upon conversion of shares of Series A Preferred
Stock has been set at 200 shares of Class A Common Stock per share of
Series A Preferred Stock. The conversion rate used to determine the
number of shares of Class A Common Stock issuable upon conversion of
shares of Series C Preferred Stock has been set at 44.76 shares of Class
A Common Stock per share of Series C Preferred Stock.
(2) Includes 350,000 shares of Class A Common Stock issuable upon the
exercise of options.
(3) Consists of 450,000 shares of Class A Common Stock issuable upon the
exercise of options.
(4) Includes 251,021 shares of Class A Common Stock issuable upon the
exercise of options.
(5) Includes 209,117 shares of Class A Common Stock issuable upon the
exercise of options.
(6) Includes 50,000 shares of Class A Common Stock issuable upon the
exercise of options.
(7) Includes 174,404 shares of Class A Common Stock issuable upon the
exercise of options. Does not include 447,628 shares of Class A Common
Stock issuable upon the conversion of 10,000 shares of Series C
Preferred Stock owned by Cable & Wireless, of which Mr. Medici is an
officer, in which shares Mr. Medici disclaims any beneficial interest.
(8) Includes 30,000 shares of Class A Common Stock issuable upon the
exercise of warrants and 50,000 shares of Class A Common Stock issuable
upon the exercise of options.
(9) Includes 50,000 shares of Class A Common Stock issuable upon the
exercise of options. Does not include 447,628 shares of Class A Common
Stock issuable upon the conversion of 10,000 shares of Series C
Preferred Stock owned by Cable & Wireless, of which Mr. Wolk is an
officer, in which shares Mr. Wolk disclaims any beneficial interest.
-8-
<PAGE>
(10) Includes 18,000 shares of Class A Common Stock issuable upon the
exercise of warrants and 290,000 shares of Class A Common Stock issuable
upon the exercise of options.
(11) Consists of 130,000 shares of Class A Common Stock issuable upon the
exercise of options.
(12) Includes 63,000 shares of Class A Common Stock issuable upon the
exercise of options.
(13) Consists of 447,628 shares of Class A Common Stock issuable upon the
conversion of Series C Preferred Stock and 400,000 shares of Class A
Common Stock issuable upon the exercise of warrants.
(14) See notes (2), (3), (4), (5), (6), (7), (8), (9), (10), (11) and (12)
above.
Certain Relationships and Related Transactions
ICC has established a strategic global alliance with Cable & Wireless, a
global provider of Internet, data, voice and messaging services, to jointly
market and sell their respective product and service offerings in the
business-to-business e-commerce marketplace. Cable & Wireless will be entitled
to commissions for sales of ICC products and services based on quarterly target
levels to be agreed upon. These commissions will be payable in shares of Class A
Common Stock valued at the then fair market value of such shares.
As part of these arrangements, Cable & Wireless purchased for $10
million 10,000 shares of Series C Preferred Stock of ICC that is initially
convertible into shares of Class A Common Stock at $22.34 per share. Cable &
Wireless also received 400,000 warrants to purchase Class A Common Stock of ICC.
The warrants are exercisable until January 12, 2005 at $22.21 per share.
Mr. Medici is an executive officer of Cable & Wireless and Mr. Wolk has
been designated by Cable & Wireless as a nominee for election as a Class III
director at the Annual Meeting pursuant to an agreement with ICC that allows
Cable & Wireless to designate a person for election as a director of ICC. ICC
has agreed to allow Cable & Wireless to participate in any equity offering on
the same terms and conditions as other purchasers to maintain its percentage
interest of ICC.
Executive Compensation
The following table sets forth the compensation paid or accrued by ICC
for services rendered during the fiscal years ended July 31, 1997, July 31, 1998
and July 31, 1999 to our former chief executive officer, our current chief
executive officer and the four most highly compensated other executive officers
whose compensation in the year ended July 31, 1999 was more than $100,000.
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<PAGE>
Summary Compensation Table
Fiscal
Years Annual Compensation
Name and Principal Position Ended
July 31, Salary Bonus
Richard J. Berman(1)....... 1999 $103,848(2) $--
Chairman and former 1998 -- --
Chief Executive Officer 1997 -- --
Dr. Geoffrey S. Carroll.... 1999 16,667 --
President and Chief 1998 -- --
Executive Officer 1997 -- --
David Hubbard.............. 1999 140,000 --
Chief Technology Officer 1998 100,000 --
1997 40,833 --
G. Michael Cassidy......... 1999 106,250 --
Executive Vice President 1998 100,000 --
-- Sales 1997 29,167 --
Michele Golden............. 1999 105,000 --
Executive Vice President 1998 100,000 --
-- Business Development 1997 29,167 --
Walter M. Psztur........... 1999 105,000 10,000
Chief Financial Officer 1998 87,886 --
and Secretary 1997 -- --
- ----------------------
(1) Mr. Berman resigned as Chief Executive Officer upon Dr. Carroll's
appointment as President and Chief Executive Officer on June 30, 1999.
(2) Includes $67,500 paid in cash and 38,750 shares of Class A Common Stock,
valued at $36,348 as of September 15, 1998, which Mr. Berman received as
payment for his services performed pursuant to his employment agreement
during the period from September 15, 1998 through March 15, 1999.
Compensation Committee Interlocks and Insider Participation
None of the directors or executive officers of the Company had any
"interlock" relationship to report during the Company's fiscal year ended June
31, 1999.
Option/SAR Grants
The following table sets out the options that were granted during the
fiscal year ended July 31, 1999.
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<PAGE>
<TABLE>
<CAPTION>
Number of Percent of total
securities options/SAR's
underlying granted to
options/SAR's employees in Exercise or base
granted (#) fiscal year price ($ / Sh) Expiration date
----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Richard J. Berman 250,000 25.6% $2.50 January 31, 2006
Dr. Geoffrey S. Carroll 150,000 15.4% $40.00 - $80.00 June 29, 2009
David Hubbard 16,606 1.7% $2.50 January 31, 2006
Walter M. Psztur 63,652 6.5% $2.50 January 31, 2006
</TABLE>
During the 1999 fiscal year, additional options were granted under the
Amended Plan, subject to stockholder approval of the Amended Plan (see Proposal
Two in this Proxy Statement), as follows: options to purchase 100,000 shares of
Class A Common Stock were granted to Richard J. Berman, options to purchase
300,000 shares of Class A Common Stock were granted to Dr. Geoffrey S. Carroll
and options to purchase 200,000 share of Class A Common Stock were granted to
Richard Blume, an Executive Vice President and the Chief Operating Officer of
the Company. All of these options were exercisable for $12 per share and expire
on June 29, 2009. One-third of these options were exercisable immediately and
the balance became exercisable commencing on January 1, 2000. Mr. Blume was also
granted immediately exercisable options expiring on June 29, 2009 to purchase
(i) 30,000 shares of Class A Common Stock exercisable at $40.00 per share, (ii)
30,000 shares of Class A Common Stock exercisable at $60.00 per share and (iii)
30,000 shares of Class A Common Stock exercisable at $80.00 per share.
Option Exercises
There were no Options/SAR Grants exercised during the fiscal year ended
July 31, 1999.
Fiscal Year End Option Values
The following table sets forth the number of securities underlying
unexercised options and the value of unexercised in the money options at the end
of the fiscal year ended July 31, 1999 for our former chief executive officer,
our chief executive officer as of July 31, 1999 and the four most highly
compensated other executive officers whose compensation in the year ended July
31, 1999 was more than $100,000.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of
Unexercised Options at Fiscal Unexercised In the
Year End Money Options at
Fiscal Year End
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C>
Richard J. Berman(1) 283,334 / 66,666 $2,062,508 / 749,993
Dr. Geoffrey S. Carroll(2) 250,000 / 200,000 0 / 0
David Hubbard 127,334 / 2,667 1,685,993 / 29,993
G. Michael Cassidy 251,021 / 0 3,385,153 / 0
</TABLE>
-11-
<PAGE>
Michele Golden 376,397 / 0 5,075,879 / 0
Walter M. Psztur 100,000 / 0 1,188,370 / 0
- --------------
(1) Of these options, 100,000 were granted subject to approval by the
stockholders of the Amended Plan.
(2) Of these options, 300,000 were granted subject to approval by the
stockholders of the Amended Plan.
Employment Agreements
Richard J. Berman joined ICC as chairman and chief executive officer
under a two-year employment agreement beginning on September 15, 1998. Under the
employment agreement, Mr. Berman receives a base salary at an annual rate of
$180,000. However, due to ICC's working capital shortage, Mr. Berman agreed to
accept, and the Board of Directors unanimously authorized, payment of his salary
from September 15, 1998 through December 31, 1998 in shares of Class A Common
Stock valued at $2.00 per share and from January 1, 1999 through March 15, 1999
in shares of Class A Common Stock valued at $3.00 per share, both of which
values exceeded the fair market value of the Class A Common Stock of $1.10 at
the date the employment agreement was signed. As a result of these provisions,
Mr. Berman received a total of 38,750 shares of Class A Common Stock. In
addition, under the employment agreement Mr. Berman was granted a total of
250,000 options to purchase Class A Common Stock at $2.50 per share stock under
our employee stock option plan, one-third of which vested upon employment and
the balance vested in 20% increments when the Class A Common Stock attained or
exceeded each of following per-share bid prices for twenty consecutive trading
days: $7.50, $10.00, $12.50, $15.00 and $17.50.
Dr. Geoffrey S. Carroll joined ICC as President and Chief Executive
Officer on June 30, 1999 under a three year employment arrangement. Under the
employment arrangement, Dr. Carroll receives a base salary at an annual rate of
at least $350,000 per year. Dr. Carroll is also eligible to receive an annual
performance bonus. ICC has granted Dr. Carroll options to purchase Class A
Common Stock described under the caption "Option/SAR Grants".
Richard Blume joined ICC as Chief Operating Officer on June 30, 1999
under a three year employment agreement. Under the employment agreement, Mr.
Blume receives a base salary at an annual rate of $250,000 per year. Mr. Blume
is also eligible to receive an annual performance bonus. ICC has granted Mr.
Blume options to purchase Class A Common Stock described under the caption
"Option/SAR Grants".
We also entered into employment agreements with each of G. Michael
Cassidy, David Hubbard and Walter M. Psztur. The employment agreements with Mr.
Cassidy and Mr. Hubbard were each for a term of three years ended April 16,
2000. The employment agreement with Mr. Psztur is for a term of two years that
ends on July 31, 2000. Under the employment agreements for Mr. Cassidy and Mr.
Psztur, each received a base salary at the annual rate of $100,000 and, under
Mr. Hubbard's employment agreement, Mr. Hubbard received a base salary at the
annual rate of $140,000.
-12-
<PAGE>
Ms. Golden entered into a consulting agreement dated as of March 15,
2000 to provide consulting services to the Company for two years for a
consulting fee of $250,000 per year. The Company granted Ms. Golden options
expiring in March 2010 to purchase 100,000 shares of Class A Common Stock at
$84.625 per share.
BOARD REPORT TO STOCKHOLDERS ON COMPENSATION
The Company has compensated its executive officers in accordance with
the provisions of their employment agreements which were approved by the Board
of Directors prior to the execution and delivery of these agreements. No bonuses
were paid to any executive officers in fiscal year 1999 except that Mr. Psztur
was paid a bonus of $10,000. See the sections of this Proxy Statement entitled
"Employment Agreements", "Executive Compensation", "Option/SAR Grants" and
"Fiscal Year End Option Values" and Proposal II for more information.
Richard J. Berman
Dr. Geoffrey S. Carroll
G. Michael Cassidy
Michele Golden
Charles C. Johnston
Arthur R. Medici
James A. Ortenzio
Matthew Wolk
-13-
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the five-year cumulative
total stockholder return (change in stock price plus reinvested dividends) of
the Company's Common Stock with the CRSP Total Return Index for The Nasdaq
SmallCap Market (U.S. and Foreign) (the "Nasdaq Composite Index") and the
Internet Software & Services index by Media Financial Services, Inc. (the
"Internet Index"). The comparisons in the graph are required by the Securities
and Exchange Commission (the "Commission") and are not intended to forecast or
be indicative of possible future performance of the Company's Class A Common
Stock.
<TABLE>
<CAPTION>
July 31, July 31, July 31, July 31, July 31, July 31,
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Internet Commerce
Corporation........... $100.00 $140.91 $70.45 $38.07 $5.68 $50.00
Nasdaq Composite Index
$100.00 $132.58 $143.09 $211.04 $247.93 $394.38
Internet Index 1...... $100.00 $153.93 $171.45 $153.85 $278.42 $768.17
</TABLE>
Assumes a $100 investment on July 31, 1994 in each of the Company's
Class A Common Stock, the securities comprising the Nasdaq Composite Index, and
the securities comprising the Internet Index.
- -------------------------
1 A copy of the list of companies which comprise the Internet Index may be
obtained upon request by contacting Internet Commerce Corporation, 805 Third
Avenue, 9th Floor, New York, New York 10022.
-14-
<PAGE>
PROPOSAL TWO
APPROVAL OF THE AMENDED PLAN
The Board of Directors believes that the Company's existing Stock Option
Plan is inadequate to provide sufficient incentives for the successful
recruitment and retention of key personnel. The Board of Directors has adopted,
and is submitting to the stockholders for approval, the Amended Plan, which is
an amendment and restatement of the Infosafe Systems, Inc. 1994 Stock Option
Plan (the "1994 Plan"), was adopted by the Company June 30, 1999, the full text
of which Amended Plan is set forth in Exhibit A to this Proxy Statement.
Directors, officers and other employees of the Company, as well as consultants
to the Company, are eligible to participate under the Amended Plan. Stockholder
approval of Proposal Two is necessary, inter alia, to comply with the listing
maintenance standards of Nasdaq, to comply with the provisions of the
performance-based compensation exemption from the tax deduction limit imposed by
Section 162(m) of the Internal Revenue Code (the "Code") to the extent permitted
by such provisions.
The main features of the Amended Plan are outlined below, but the
outline is qualified by reference to the complete text of the Amended Plan.
General
The purpose of the Amended Plan is to secure for the Company and its
stockholders the benefits arising from capital stock ownership by employees,
officers and directors of, and consultants or advisers to, the Company and its
subsidiary corporations who are expected to contribute to the Company's future
growth and success. Except where the context otherwise requires, the term
"Company" shall include all present and future subsidiaries of the Company as
defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as
amended or replaced from time to time (the "Code").
The Amended Plan provides for the granting of stock options with respect
to up to an aggregate of 5,000,000 shares of Common Stock, subject to adjustment
in the event of certain capital changes as described below. Of this number,
1,960,000 shares were available under the 1994 Plan, and 3,040,000 shares were
added under the Amended Plan. During any calendar year, no participant in the
Amended Plan shall receive Options with respect to more than 300,000 shares of
Common Stock. Shares issued under the Amended Plan may be authorized but
unissued or reacquired Common Stock, at the discretion of the Committee. As of
May 16, 2000, the closing price of a share of Common Stock on The Nasdaq
SmallCap Market was $16.00.
Administration
The Amended Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board of Directors"),
which Committee may be the Board of Directors in the absence of another
appointment. If and to the extent the Board of Directors determines it is
appropriate for the compensation payable as a result of a grant of any Option to
qualify as "performance-based compensation" within the meaning of Section
-15-
<PAGE>
162(m)(4)(C) of the Code, such Option shall be authorized and granted by the
Committee (or a subcommittee thereof), which shall consist of two or more
individuals appointed by the Board of Directors, all of whom are "non-employee
directors" (as defined in Section 162(m) of the Code). If and to the extent it
is intended that any grant of an Option to a director or an officer who is a
Reporting Person (as the terms "director" and "officer" are defined for purposes
of Rule 16b-3) shall comply with Rule 16b-3, the decision to make the Option
grant, the timing of the Option grant, the exercise price of the Option, the
number of shares subject to the Option and the other terms of the Option shall
be determined either by (i) the Board of Directors, (ii) the Committee (or a
subcommittee thereof), which shall consist of two or more directors having full
authority to act in the matter, each of whom shall be a "non-employee director"
within the meaning of Rule 16b-3(b)(3). The Committee has full authority (i) to
administer the Amended Plan, including authority to interpret and construe any
provision of the Amended Plan and the terms of any Option issued under the
Amended Plan and to adopt such rules and regulations for administering the
Amended Plan as it may deem necessary or appropriate. Decisions of the Committee
shall be final and binding on all parties. The Committee's determinations under
the Amended Plan may, but need not, be uniform and may be made on a
participant-by-participant basis (whether or not two or more participants are
similarly situated).
Eligibility
Options may be granted to persons selected by the Committee in its
discretion who are, at the time of grant, employees, officers or directors of,
or consultants or advisers to, the Company. The granting of Options is
discretionary, and the Company cannot now determine the number or type of
Options that will be granted in the future to any particular person or group.
Awards
The Amended Plan provides for the grant of stock options not intended to
qualify as incentive stock options within the meaning of Section 422 of the Code
("NQOs") and stock options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code ("ISOs") (collectively,
"Options") in such amounts and subject to such terms and conditions, as the
Committee shall in its discretion determine. Each Option shall be evidenced by
an "Option Agreement" containing such terms as the Committee shall determine.
Non-Qualified Stock Options. The exercise price-per-share of each NQO
shall be determined by the Committee on the date of grant, but shall not be less
than that required by law. Each NQO first shall become exercisable on such date
or dates as the Committee shall determine and set forth in the Option Agreement.
Each NQO shall be exercisable in whole or in part for a term, not to exceed ten
years, established by the Committee on the date of grant. The Committee may
accelerate the date on which an Option may become exercisable or extend the
period during which the Option is exercisable. The exercise price shall be paid
in cash or a check to the order of the Company in an amount equal to the
exercise price of such Options, or by any other means which are permitted by the
Committee and which the Committee determines are consistent with the purpose of
the Amended Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3 and Regulation T promulgated by the
Federal Reserve Board).
-16-
<PAGE>
In the event of a participant's termination of employment for any reason
other than cause, disability (as each such term is defined in the Amended Plan)
or death, NQOs generally remain exercisable until the expiration of three months
after such termination (or, if earlier, the expiration of their term). In the
event of a participant's termination of employment by reason of disability, NQOs
shall remain exercisable until the expiration of one year after such termination
(or, if earlier, the expiration of their term). In the event of a participant's
death while employed or during a three month period following his or her
termination of employment, NQOs shall remain exercisable until the expiration of
one year after such death. In the event of a participant's termination of
employment for cause or a breach by the participant of an employment or
confidentiality or non-disclosure agreement, the Option shall expire immediately
upon such termination.
Incentive Stock Options. Generally, ISOs are options that may provide to
a participant certain federal income tax benefits that are not available with
NQOs, provided that a participant holds the shares acquired upon exercise of an
ISO for at least two years after the date the ISO is granted and at least one
year after the exercise date. The rules for ISOs under the Amended Plan are the
same as with respect to NQOs, except as follows:
1. The exercise price-per-share of each ISO granted under the
Amended Plan must not be less than the fair market value of a
share of Common Stock on the date on which such ISO is granted.
2. An ISO granted to any individual who owns stock possessing more
than ten percent of the total combined voting power of all
classes of stock of the Company is subject to the following
additional limitations: (i) the exercise price-per-share of the
ISO must be at least 110% of the fair market value of a share of
Common Stock at the time any such ISO is granted and (ii) the
ISO cannot be exercisable after the expiration of five years
from the grant date.
3. The aggregate fair market value of shares of Common Stock with
respect to which ISOs are exercisable for the first time by a
participant during any calendar year (determined on the grant
date) under the Amended Plan or any other plan of the Company or
its subsidiaries may not exceed $100,000.
4. In the event of a participant's termination of employment, ISOs
granted to the participant are exercisable to the same extent as
described above with respect to NQOs, with the following two
exceptions: (A) in no event shall an ISO be exercisable after
the expiration of the term set forth in the Option Agreement,
and (B) in the event of a termination of employment for any
reason other than cause, disability or death, an Option
Agreement may permit the exercise of an ISO more than three
months after the termination, in which case the Option shall be
treated as an NQO (rather than an ISO) to the extent it is
exercised more than three months after the termination of
employment.
Cancellation and New Grant of Options, Etc. At any time, with the
consent of the affected participant, the Committee may (i) cancel any or all of
the participant's outstanding Options and grant in substitution new Options
covering the same or different numbers of shares
-17-
<PAGE>
of Common Stock and having an exercise price-per-share which is lower or higher
than the exercise price-per-share of the cancelled Options or (ii) amend the
terms of any or all of the participant's outstanding Options to raise or lower
the Option exercise price-per-share of the Options.
Change of Control Events
In the event of any sale, merger, transfer or acquisition of the Company
in which the Company is not the surviving corporation or the sale of
substantially all of the assets of the Company, and provided that after the
Company has requested that the acquiring or succeeding corporation or an
affiliate of the acquiror substitute equivalent options and such acquiring or
succeeding corporation or its affiliate has refused or failed to assume all
Options outstanding under the Amended Plan or to issue substantially equivalent
options, then any or all outstanding Options under the Amended Plan shall
accelerate and become exercisable in full immediately prior to such event and
shall remain exercisable until the expiration of a period to be determined by
the Committee, which period shall not be less than fifteen days from the date of
the notice by the Committee to the holders of such Options, after which such
Options shall terminate. The Committee will notify holders of Options under the
Amended Plan of such accelerated exercisability. In addition, notwithstanding
the foregoing, in the event of a merger, transfer or acquisition of the Company
described in this paragraph, the Committee, in its sole discretion, may elect to
cancel, effective immediately prior to the occurrence of such event, each Option
outstanding immediately prior to such event (whether or not then exercisable),
and, in full consideration of such cancellation, pay to the participant to whom
such Option was granted, an amount in cash, for each share of Common Stock
subject to such Option equal to the excess of (x) the value, as determined by
the Committee in its absolute discretion, of the securities or other property or
assets (including cash) to be received by the holder of a share of Common Stock
as a result of such event over (y) the exercise price of such Option.
Substitute Options
The Company may grant Options in substitution for options held by
employees of another corporation who become employees of the Company or a
subsidiary of the Company, as a result of a merger or consolidation of the
employing corporation with the Company or a subsidiary of the Company, as a
result of the acquisition by the Company, or one of its subsidiaries, of
property or stock of the employing corporation. The Company may direct that
substitute Options be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
Transferability of Options
Options granted under the Amended Plan are exercisable during a
participant's lifetime only by the participant and are not transferable by the
participant, other than by will or the laws of descent and distribution.
Certain Corporate Changes
The Amended Plan provides for an adjustment in the number of shares of
Common Stock available to be issued under the Amended Plan, the maximum number
of shares with respect to
-18-
<PAGE>
which Options may be granted to a Participant in a year, and the number and
exercise price-per-share of shares of Common Stock subject to Options upon a
change in capitalization of the Company, a stock dividend or split, a merger or
combination of shares and certain other similar events.
Amendment and Termination
The Board of Directors may suspend, discontinue, revise or amend the
Amended Plan at any time and in any respect, subject to stockholder approval to
the extent necessary to comply with applicable law and any stock exchange
listing requirements. No amendment to the Amended Plan may reduce any Option
previously granted to a participant without the participant's prior written
consent Unless sooner terminated by the Board of Directors, the Amended Plan
shall terminate upon the earlier of (i) the close of business on June 29, 2009,
or (ii) the date on which all shares available for issuance under the Amended
Plan shall have been issued. If the date of termination is determined under (i)
above, then Options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the Option Agreements.
Summary of Federal Tax Consequences
The following is a description of the principal federal income tax
consequences of Options under the Amended Plan based on present federal tax
laws. Federal tax laws may change from time to time and any legislation that may
be enacted in the future by the United States Congress may significantly affect
the federal income tax consequences described below. No representation is or can
be made regarding whether any such legislation shall or may be enacted and/or
the impact of any such legislation. The description below does not purport to be
a complete description of the tax consequences associated with Options under the
Amended Plan applicable to any particular award recipient. Differences in each
individual's financial situation may cause federal, state and local tax
consequences of awards to vary.
Non-Qualified Stock Options. In general, a participant shall not be
deemed to receive any income at the time an NQO is granted, nor shall the
Company be entitled to a federal tax deduction at that time.
When a participant exercises an NQO, the participant shall recognize
ordinary compensation income equal to the excess of (a) the fair market value of
the Common Stock received as a result of the exercise of the option on the
exercise date over (b) the option exercise price, and the Company shall be
entitled to a tax deduction in that amount. The shares acquired by the
participant upon exercise of the NQO shall have a tax basis equal to the fair
market value of the shares on the exercise date. Upon any subsequent sale of the
Common Stock received on exercise of the NQO, the participant shall recognize a
capital gain (or loss) in an amount equal to the difference between the amount
realized on the sale and such tax basis. Any such gain (or loss) shall be
characterized as long-term capital gain (or loss) if the shares have been held
for more than one year; otherwise, the gain (or loss) shall be characterized as
a short-term capital gain (or loss). A participant's holding period for federal
income tax purposes for such shares shall commence on the date following the
date of exercise. Short-term capital gain is subject to tax at the same rate as
is ordinary income. Under current law, the rate at which net long-term
-19-
<PAGE>
capital gain is taxed varies depending on the participant's holding period and
the date the participant disposes of the shares. The Code currently provides
that, in general, the net long-term capital gain resulting from the sale of
shares held for more than 12 months is subject to tax at a maximum rate of 20%
(10% for individuals in the 15% tax bracket). The Code currently provides that
net long-term capital gain resulting from dispositions after December 31, 2000
of shares held for more than 5 years may be subject to a reduced rate.
If all or any part of the exercise price of an NQO is paid by the
participant with shares of Common Stock (including, based upon proposed
regulations under the Code, shares previously acquired upon exercise of an ISO),
no gain or loss shall be recognized by the participant on the shares surrendered
in payment. The number of shares received on such exercise of the NQO equal to
the number of shares surrendered shall have the same tax basis and holding
period, for purposes of determining whether subsequent dispositions result in
long-term or short-term capital gain or loss and the applicable tax rates, as
the basis and holding period of the shares surrendered. The balance of the
shares received on such exercise shall be treated for federal income tax
purposes as described in the preceding paragraphs as though issued upon the
exercise of the NQO for an exercise price equal to the consideration, if any,
paid by the participant in cash. The participant's compensation taxable as
ordinary income upon such exercise, and the Company's deduction, shall not be
affected by whether the exercise price is paid in cash or in shares of Common
Stock.
Incentive Stock Options. In general, a participant shall not be deemed
to receive any income at the time an ISO is granted or exercised if the
participant does not dispose of the shares acquired on exercise of the ISO
within two years after the grant of the ISO and one year after the exercise of
the ISO (discussed more fully in the next paragraph). In such a case, the gain
(if any) on a subsequent sale (the excess of the amount received over the
exercise price) or loss (if any) on a subsequent sale (the excess of the
exercise price over the amount received) shall be a long-term capital gain or
loss and shall be subject to tax based on the holding period of the shares, as
described in the discussion of NQOs above. However, for purposes of computing
the "alternative minimum tax" applicable to a participant, the participant shall
include in the participant's alternative minimum taxable income the amount the
participant would have included in income if the ISO were an NQO. Such amount
may be subject to an alternative minimum tax of 26% or 28%. Similarly, for
purposes of making alternative minimum tax calculations, the participant's basis
in the stock received on the exercise of an ISO shall be determined as if the
ISO were an NQO.
If a participant sells the shares acquired on exercise of an ISO within
two years after the date of grant of the ISO or within one year after the
exercise of the ISO, the disposition is a "disqualifying disposition," and the
participant shall recognize income in the year of the disqualifying disposition
equal to the excess of the amount received for the shares over the exercise
price. Of that income, the portion equal to the excess of the fair market value
of the shares at the time the ISO was exercised over the exercise price shall be
treated as compensation to the participant, taxable as ordinary income, and the
balance (if any) shall be long- or short- term capital gain depending on whether
the shares were sold more than one year after the ISO was exercised. The federal
tax rate applicable to any long-term capital gain depends upon the holding
period of the shares, as described above. If the participant sells the shares in
a disqualifying disposition at a price that is below the exercise price, the
loss shall be a short-term
-20-
<PAGE>
capital loss if the participant has held the shares for one year or less and
otherwise shall be a long-term capital loss.
If a participant uses shares acquired upon the exercise of an ISO to
exercise an ISO, and the sale of the shares so surrendered for cash on the date
of surrender would be a disqualifying disposition of such shares, the use of
such shares to exercise an ISO also would constitute a disqualifying
disposition. In such case, proposed regulations under the Code appear to provide
that the tax consequences described above with respect to disqualifying
dispositions would apply, except that no capital gain would be recognized with
respect to such disqualifying disposition. In addition, the basis of the
surrendered shares would be allocated to the shares acquired upon exercise of
the ISO, and the holding period of the shares so acquired would be determined,
in a manner prescribed in proposed regulations under the Code.
The Company is not entitled to a deduction as a result of the grant or
exercise of an ISO. If the participant has compensation taxable as ordinary
income as a result of a disqualifying disposition, the Company shall be entitled
to a deduction in an amount equal to the compensation income resulting from the
disqualifying disposition in the taxable year of the Company in which the
disqualifying disposition occurs.
Deduction Limit under Section 162(m) of the Code. In general, the
"Million-Dollar Limit" under Section 162(m) of the Code provides that, subject
to certain exceptions, remuneration in excess of $1 million that is paid to
certain "covered employees" of a publicly held corporation (generally, the
corporation's Chief Executive Officer and its four most highly compensated
employees other than the Chief Executive Officer) shall not be deductible by the
corporation. Grants of Options generally shall be eligible for an exception to
the Million-Dollar Limit applicable to certain qualified "performance-based
compensation." In addition, if and to the extent that the Committee determines
the Company's federal tax deduction in respect of an Option may be limited as a
result of Section 162(m) of the Code, the Committee may delay payments to a
participant with respect to the Option, and, in exchange, credit to an account
on the books and records of the Company a cash amount equal to the fair market
value of the shares of Common Stock subject to such Option (a "Book Account").
The amounts credited to such Book Account (which represents only an unfunded,
unsecured promise of the Company to pay such amounts to the participant) shall
be paid to the participant within thirty days after the date the Committee
determines that the Company's federal tax deduction will not be affected by such
payment. As a result, it would appear that the Company's deduction for such
amounts would be preserved.
Withholding of Taxes. Whenever a participant is required to recognize
compensation income taxable as ordinary income in connection with an Option, the
Company may be obligated to withhold amounts for the payment of federal, state
and local taxes. The Company may withhold (i) an amount in cash sufficient to
satisfy its withholding obligations (when the income is recognized through the
receipt of cash) or (ii) a number of shares, the fair market value of which is
sufficient to satisfy such withholding requirements. Additionally, when the
income is recognized through the receipt of stock, the Company may require that
the participant remit to the Company an amount in cash sufficient to satisfy the
Company's withholding obligations. At the election of the participant and
subject to the approval of the Committee, the participant may
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<PAGE>
satisfy any such withholding obligations by remitting to the Company shares of
Common Stock with a fair market value sufficient to satisfy the withholding
obligations.
Other Tax Matters. Tax consequences different from or in addition to
those described above may result in the event of an exercise of an option after
the termination of a participant's employment by reason of death. In addition,
various state laws may provide for tax consequences that vary significantly from
those described above.
New Plan Benefits
The Company has granted options to purchase shares of Class A Common
Stock (the "Initial Options") to certain individuals pursuant to the Amended
Plan. If the Amended Plan is approved by stockholders, the following table
indicates the amount of such Initial Options to be held by the executive
officers, directors, nominees and associates of such officers, directors and
nominees of the Company:
Number of Dollar
Name and Position Shares (1) Value (2)
- ----------------- ---------- ---------
Richard J. Berman.............................. 300,000 __
Chairman and former Chief
Executive Officer
Dr. Geoffrey S. Carroll........................ 500,000 __
President and Chief
Executive Officer
David Hubbard.................................. 100,000 __
Chief Technology Officer
G. Michael Cassidy............................. 150,000 __
Executive Vice President and
General Manager
Walter M. Psztur............................... 100,000 __
Chief Financial Officer and
Secretary
Richard Blume.................................. 290,000 __
Executive Vice President
and Chief Operating Officer
Michele Golden................................. 150,000 __
Director
Charles C. Johnston............................ 50,000 __
Director
Arthur R. Medici............................... 50,000 __
Director
James A. Ortenzio.............................. 50,000 __
Director
Matthew Wolk................................... 50,000 __
Director
Executive Group (3)............................ 1,440,000 __
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<PAGE>
Non-Executive Director Group (4)............... 350,000 __
Director Nominees.............................. 1,300,000 __
Associates of Directors, Executive Officers
and Nominees............................... __ __
Other 5% Recipients............................ __ __
Non-Executive Officer Employee Group........... 984,500 __
(1) Number of shares acquirable upon the exercise of each option grant.
(2) The dollar value of the awards is based on the difference between the
fair market value and the exercise price of the Class A Common Stock on
the date of grant. All of the Initial Options have exercise prices
either equal to or exceeding the fair market value (as defined in the
Amended Plan) of the Class A Common Stock on the date of grant.
(3) This group is comprised of the executive officers of the Company.
(4) Consists of directors of the Company who are not officers or employees
of the Company.
The Board of Directors unanimously recommends a vote FOR approval of the
Amended Plan.
Approval of Proposal Two requires the affirmative vote of a majority of
the aggregate voting power of the outstanding shares of Class A Common Stock,
Class B Common Stock and Series C Preferred Stock present in person or
represented by proxy at the Annual Meeting, voting together as a single class.
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PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has recommended to the Board of Directors, and the
Board of Directors has approved, the firm of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending July 31, 2000, subject
to ratification by the stockholders at the Annual Meeting.
The Company's financial statements have been audited by Richard A.
Eisner & Co. LLP ("Eisner & Company") since inception. Deloitte & Touche LLP was
hired by the Company on May 15, 2000. For more information, please see the
Company's Current Report on Form 8-K dated May 18, 2000.
Eisner & Company's report on ICC's financial statements for the last two
fiscal years did not contain an adverse opinion or disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit scope or
accounting principles. Further, there have been no disagreements with Eisner &
Company on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which disagreement, if not resolved
to the satisfaction of such auditors, would have caused such auditors to make
reference to the subject matter of the disagreement(s) in connection with their
reference report(s) thereon during ICC's two most recent fiscal years.
If the stockholders reject the appointment, the Board of Directors will
reconsider its selection. If the stockholders ratify the appointment, the Board
of Directors, in its sole discretion, may still direct the appointment of new
independent auditors at any time during the year if the Board of Directors
believes it would be in the best interests of ICC.
Representatives of Richard A. Eisner & Co. LLP are not expected to be
present at the Annual Meeting but will be available during the Annual Meeting to
respond to appropriate questions by telephone.
Representatives of Deloitte & Touche LLP are not expected to be present
at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR ratification of
the appointment of Deloitte & Touche LLP as the Company's Independent auditors
for the fiscal year ending July 31, 2000.
Approval of Proposal Three requires the affirmative vote of a majority
of the aggregate voting power of the outstanding shares of Class A Common Stock,
Class B Common Stock and Series C Preferred Stock present in person or
represented by proxy at the Annual Meeting, voting together as a single class.
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STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the annual meeting
of stockholders of the Company for the fiscal year ended July 31, 2000 must be
received by the Company at the offices of the Company, at 805 Third Avenue, 9th
Floor, New York, New York 10022 no later than January 22, 2001 in order to be
included in the proxy statement and form of proxy relating to such annual
meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file with the Commission initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Reporting persons are required by Commission
regulations to furnish the Company with copies of all forms they file pursuant
to Section 16(a).
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, the following current officers and directors
failed to file, on a timely basis, reports required by Section 16(a) of the
Exchange Act:
Mr. Berman did not timely file a Form 3 and, in connection with the
receipt of certain stock options, bridge warrants, shares of Series A Preferred
Stock and Class A Common Stock in 1998 and 1999, did not timely file three Forms
4. Mr. Blume, in connection with the receipt of certain shares of Series A
Preferred Stock and Class A Common Stock, did not timely file two Forms 4. Mr.
Cassidy did not timely file a Form 3 and, in connection with certain sales of
shares of Class A Common Stock, did not timely file a Form 4. Ms. Golden did not
timely file a Form 3 and, in connection with the grant of certain options and
the exercise of other options in 2000, did not timely file a Form 4. Mr. Hubbard
did not timely file a Form 3 and, in connection with the receipt of certain
stock options in 1998, did not timely file two Forms 4. Mr. Johnston did not
timely file a Form 3 and, in connection with the receipt of certain stock
options in 1998, did not timely file a Form 4. Mr. Medici did not timely file
eight Forms 4 in connection with various transactions in 1997, 1998, 1999 and
2000. Mr. Ortenzio did not timely file a Form 3 and, in connection with the
receipt of certain shares of Class A Common Stock in 1998 and 1999, did not
timely file two Forms 4. Mr. Psztur did not timely file a Form 3 and, in
connection with the receipt of certain stock options in 1997 and 1998, did not
timely file two Forms 4. The Company believes that as of the date of this Proxy
Statement that all of its current directors and executive officers are in
compliance with the Section 16(a) beneficial ownership reporting requirements.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in accordance with the judgment of the persons voting the proxies.
Whether you intend to be present at the Annual Meeting or not, we urge
you to return your signed proxy promptly.
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By order of the Board of Directors,
/s/ Dr. Geoffrey S. Carroll
------------------------------
Dr. Geoffrey S. Carroll
President and
Chief Executive Officer
Dated: May 22, 2000
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EXHIBIT A
INTERNET COMMERCE CORPORATION
STOCK OPTION PLAN
(Amended and restated as of June 30, 1999)
1. Purpose.
The purpose of this Internet Commerce Corporation Stock Option Plan (the
"Plan") is to secure for INTERNET COMMERCE CORPORATION (the "Company") and its
stockholders the benefits arising from capital stock ownership by employees,
officers and directors of, and consultants or advisers to, the Company and its
subsidiary corporations who are expected to contribute to the Company's future
growth and success. Except where the context otherwise requires, the term
"Company" shall include all present and future subsidiaries of the Company as
defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as
amended or replaced from time to time (the "Code"). Those provisions of the Plan
which make express reference to Section 422 of the Code shall apply only to
Incentive Stock Options (as that term is defined in the Plan) granted under the
Plan.
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan
("Options") shall be authorized by action of the board of Directors of the
Company (the "Board of Directors") (or a committee designated by the Board of
Directors of the Company) and may be either incentive stock options within the
meaning of Section 422 of the Code ("Incentive Stock Options") or non-qualified
options, which are not intended to meet the requirements of Section 422 of the
Code.
Options shall be evidenced by agreements in such form as the "Committee"
(as hereinafter defined) shall from time to time approve. All Options granted
under the Plan shall be clearly identified in the agreement evidencing such
Options as either Incentive Stock Options or as non-qualified options.
If and to the extent the Board of Directors determines it is appropriate
for the compensation payable as a result of a grant of any Option to qualify as
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code, such Option shall be authorized and granted by the compensation
committee or a similar committee of the Board of Directors (or a subcommittee
thereof), which shall consist of two or more individuals, each of whom is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations thereunder.
(b) Administration. The Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors. The delegation of powers to
the Committee shall be consistent with applicable laws or regulations
(including, without limitation, applicable state law, Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor
rule ("Rule 16b-3") and Section 162(m) of the Code). The Committee may, in its
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sole discretion, grant Options to purchase shares of the Company's Common Stock,
$.01 par value per share ("Common Stock") and issue shares upon exercise of such
Options as provided in the Plan. The Committee shall have full authority,
subject to the express provisions of the Plan, to administer the Plan, including
authority to interpret and construe any provision of the respective Option
agreements and the Plan, to prescribe, amend and rescind such rules and
regulations relating to the Plan as the Committee shall deem necessary or
appropriate, to determine the terms and provisions of the respective Option
agreements, which need not be identical, and make all other determinations,
which are, in the judgment of the Committee necessary or desirable for the
administration of the Plan. All decisions of the Committee with respect to the
Plan or any Option agreement shall be final and binding on all parties. The
Committee's determinations under the Plan may, but need not, be uniform and may
be made on a participant-by-participant basis (whether or not two or more
participants are similarly situated). The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any Option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency.
No member of the Committee shall be liable for any action,
omission, or determination relating to the Plan, and the Company shall indemnify
and hold harmless each member of the Committee and each other director or
employee of the Company to whom any duty or power relating to the administration
or interpretation of the Plan has been delegated against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Committee) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best interests of
the Company.
Subject to adjustment as provided in Section 15 below, the
aggregate number of shares of Common Stock that may be subject to Options
granted to any person in a calendar year shall not exceed 300,000 shares of
Common Stock.
3. Eligibility.
(a) General. Options may be granted to persons selected by the
Committee, in its discretion, who are, at the time of grant, employees, officers
or directors of, or consultants or advisers to, the Company, provided, that,
Incentive Stock Options may be granted only to individuals who are employees of
the Company (within the meaning of Section 3401(c) of the Code). A person who
has been granted an Option may, if he or she is otherwise eligible, be granted
additional Options if the Committee shall so determine, although no such person
shall have an entitlement to receive a grant of any additional Options.
(b) Grant of Options to Reporting Persons and Certain "Covered
Employees". If and to the extent it is intended that any grant of an Option to a
director or an officer who is a Reporting Person (as the terms "director" and
"officer" are defined for purposes of Rule
16b-3) shall comply with Rule 16b-3, the decision to make the Option grant, the
timing of the Option grant, the exercise price of the Option, the number of
shares subject to the Option and the
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other terms of the Option shall be determined either by (i) the Board of
Directors, (ii) a committee consisting of two or more directors having full
authority to act in the matter, each of whom shall be a "non-employee director"
within the meaning of Rule 16b-3(b)(3) or (iii) pursuant to provisions for
automatic grants set forth in Section 3(c) below. If and to the extent it is
intended that any Compensation payable as a result of any grant of an Option to
an individual who is or may become a "covered employee" within the meaning of
Section 162(m)(3) of the Code shall be considered qualified "performance-based
compensation" within the meaning of Section 162(m)(4)(C) of the Code and the
regulations thereunder, the decision to make the Option grant, the timing of the
Option grant, the exercise price of the Option, the number of shares subject to
the Option and the other terms of the Option shall be determined by a committee
consisting of two or more directors having full authority to act in the matter,
each of whom shall be an "outside director" within the meaning of Section
162(m)(4)(C) of the Code and the regulations thereunder.
4. Stock Subject to Plan.
The stock subject to Options granted under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock that
may be issued and sold under the Plan since its inception in 1994 is 5,000,000
shares. If an Option granted under the Plan shall expire, terminate or is
cancelled for any reason without having been exercised in full, the unpurchased
shares subject to such Option shall again be available for subsequent Option
grants under the Plan.
5. Forms of Option Agreements.
As a condition to the grant of an Option under the Plan, each recipient
of an Option shall execute an Option agreement in such form not inconsistent
with the Plan as may be approved by the Committee. Such Option agreements may
differ among recipients.
6. Purchase Price.
General. The purchase price-per-share of stock deliverable upon the
exercise of an Option shall be determined by the Committee at the time of grant
of such Option; provided, however, that in the case of an Incentive Stock Option
or any Option the compensation payable as a result of which is intended to
constitute qualified "performance-based compensation" under Section 162(m)(4)(C)
of the Code, the exercise price shall not be less than (i) 100% of the Fair
Market Value (as hereinafter defined) of such stock, at the time of grant of
such Option, or (ii) solely in the case of an Incentive Stock Option described
in Section 11(b), 110% of such Fair Market Value. "Fair Market Value" of a share
of Common Stock of the Company as of a specified date for the purposes of the
Plan shall mean the closing price of a share of the Common Stock on the
principal securities exchange on which such shares are traded on the date
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
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over-the-counter market on the day immediately preceding the date on which such
high bid and low asked prices were recorded. If the shares are not publicly
traded, Fair Market Value of a share of Common Stock (including, in the case of
any repurchase of shares, any distributions with respect thereto which would be
repurchased with the shares) shall be determined in good faith by the Committee.
In no case shall Fair Market Value be determined with regard to restrictions
other than restrictions which, by their terms, will never lapse.
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
Options, or by any other means which are permitted by the Committee in its sole
discretion and which the Committee determines are consistent with the purpose of
the Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3 and Regulation T promulgated by the
Federal Reserve Board).
7. Option Period.
Each Option shall be exercisable on such date or dates, during such
period and for such number of shares of Common Stock as shall be determined by
the Committee on the day on which such Option is granted and set forth in the
agreement evidencing such Option; provided, however, that no Option shall be
exercisable after the expiration of ten years from the date such Option was
granted; and, provided, further, however, that each Option shall be subject to
earlier termination, expiration or cancellation as provided in the Plan.
8. Exercise of Options.
Each Option granted under the Plan shall be exercisable either in full
or in part, subject to the provisions of the Option agreement evidencing such
Option and subject to the provisions of the Plan. Subject to the requirements in
the immediately preceding sentence, if an Option is not at the time of grant
immediately exercisable, the Committee may (i) in the agreement evidencing such
Option, provide for the acceleration of the exercise date or dates of the
subject Option upon the occurrence of specified events, and/or (ii) at any time
prior to the complete termination of an Option, accelerate the exercise date or
dates of such Option.
9. Nontransferability of Options.
No Option shall be assignable or otherwise transferable by the optionee
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder. An Option may be exercised during the lifetime of the optionee only
by the optionee. In the event an optionee dies during his employment by the
Company or any of its subsidiaries, or during the three-month period following
the date of termination of such employment, his Option shall thereafter be
exercisable, during the period specified in the Option agreement, by his
executors or administrators to the full extent to which such Option was
exercisable by the optionee at the time of his death during the periods set
forth in Section 10 or 11(d).
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10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, an optionee may exercise an
Option at any time within three (3) months following the termination of the
optionee's employment or other relationship with the Company or within one (1)
year if such termination was due to the death or "disability" of the optionee,
but, except in the case of the optionee's death, in no event later than the
expiration date of the Option. If the termination of the optionee's employment
is for cause or is otherwise attributable to a breach by the optionee of an
employment or confidentiality or non-disclosure agreement, the Option shall
expire immediately upon such termination. The Board of Directors shall have the
power to determine what constitutes a termination for cause or a breach of an
employment or confidentiality or non-disclosure agreement, whether an optionee
has been terminated for cause or has breached such an agreement, and the date
upon which such termination for cause or breach occurs. Any such determinations
shall be final and conclusive and binding upon the optionee. For purposes
hereof, the term "disability" shall mean, except in connection with an Incentive
Stock Option, any physical or mental condition that would qualify a Participant
for a disability benefit under the long-term disability plan maintained by the
Company or, if there is no such plan, a physical or mental condition that
prevents the Participant from performing the essential functions of the
Participant's position (with or without reasonable accommodation) for a period
of six consecutive months or, in connection with an Incentive Stock Option, a
disability described in Section 422(c)(6) of the Code. The existence of a
disability shall be determined by the Committee in its absolute discretion.
11. Incentive Stock Options.
Options that are intended to be Incentive Stock Options shall be subject
to the following additional terms and conditions.
(a) Express Designation. All Incentive Stock Options shall, at the
time of grant, be specifically designated as such in the Option agreement
evidencing such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted is, at the time of the grant of such Incentive Stock
Option, the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its "subsidiary
corporations" (within the meaning of Section 424 of the Code) (after taking into
account the attribution of stock ownership rules of Section 424(d) of the Code),
then the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) the purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the Fair Market Value
of one share of Common Stock at the time of grant; and
(ii) the Option exercise period shall not exceed five years after
the date of grant.
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(c) Dollar Limitation. For so long as the Code shall so provide,
Options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) that are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate Fair Market Value, as
of the respective date or dates of grant, of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the optionee
is, and has been continuously since the date of grant of his or her Option,
employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date of the optionee ceases to be an employee
of the Company (or within such lesser period as may be specified in the
applicable Option agreement), provided, that the agreement with respect to such
Option may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-qualified Option
under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to be such an
employee, the Incentive Stock Option may be exercised by the person to whom it
is transferred by will or the laws of descent and distribution within the period
of one year after the date of death (or within such lesser period as may be
specified in the applicable Option agreement); and
(iii) if the optionee's employment is terminated as a
result of the optionee's disability, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable Option agreement).
For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provision.
(a) Additional Option Provisions. The Committee (or the Board of
Directors) may, in its sole discretion, include additional provisions in Option
agreements covering Options including without limitation restrictions on
transfer, repurchase rights, rights of first refusal, commitments to pay cash
bonuses, to make, arrange for or guarantee loans or to transfer other property
to optionees upon exercise of Option, or such other provisions as shall be
determined by the Committee in its discretion; provided, that such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not, unless otherwise specifically
intended by the Committee, cause any Incentive Stock Option granted under the
Plan to fail to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code.
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(b) Acceleration, Extension, Etc. The Committee may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
Option or options may be exercised or (ii) extend the dates during which all or
any particular Option or Options may be exercised; provided, however, that not
such extension shall be permitted if it would cause the Plan to fail to comply
with Section 422.
13. General Restrictions.
(a) Investment Representations. The Company may require (i) any
person to whom an Option is granted as a condition of exercising such Option, to
give written assurances, in substance and form satisfactory to the Company to
the effect that such person is acquiring the Common Stock subject to the Option
for his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to make such other
representations or covenants, and (ii) that any certificates for shares or
Common Stock delivered in connection with the exercise of an Option bear such
legends in each case as the Company deems necessary or appropriate in order to
comply with federal and applicable state securities laws, to comply with
covenants or representations made by the Company in connection with any public
offering of its Common Stock or otherwise.
(b) Compliance With Securities Law. Each Option shall be subject to
the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject to such
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, or that the
disclosure of non-public information or the satisfaction of any other condition
is necessary as a condition of, or in connection with the issuance or purchase
of shares of Common Stock thereunder, such Option may not be exercised, in whole
or in part, unless such listing, registration, qualification, consent or
approval, or satisfaction of such condition shall have been effected or obtained
on conditions acceptable to the Board of Directors. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition. The Committee shall
inform an optionee in writing of any decision to defer or prohibit the exercise
of an Option. During the period that the effectiveness of the exercise of an
Option has been deferred or prohibited, the optionee may, by written notice,
withdraw the optionee's decision to exercise and obtain a refund of any amount
paid with respect thereto.
14. Rights as a Shareholder.
The holder of an Option shall have no rights as a shareholder with
respect to any shares covered by the Option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
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15. Adjustment Provisions for Recapitalizations, Reorganizations and Related
Transactions.
(a) Recapitalizations and Related Transactions. If, through or as a
result of any recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new of different shares or other non-cash assets are distributed with respect to
such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under the Plan and, to the extent permitted under
Section 162(m) of the Code and the regulations thereunder, the individual limit
on grants under Section 2, (y) the number and kind of shares or other securities
subject to any then outstanding Options, and (z) the price for each share
subject to any then outstanding Options, without changing the aggregate purchase
price as to which such Options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment would (i) cause the Plan to fail to comply with Section 422 of the
Code or (ii) be considered as the adoption of a new plan requiring stockholder
approval.
(b) Reorganization, Merger and Related Transactions. If the Company
shall be the surviving corporation in any reorganization, merger or
consolidation of the Company with one or more other corporations, any then
outstanding Option granted pursuant to the Plan shall pertain to and apply to
the securities or other property (including cash) to which a holder of the
number of shares of Common Stock subject to such Options would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the purchase price as to which
such Options may be exercised -shall be the same as the aggregate purchase price
as to which such Options may be exercised for the shares remaining subject to
the Options immediately prior to such reorganization, merger, or consolidation.
(c) Committee Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Committee, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account of
any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, Etc.
(a) General. In the event of any sale, merger, transfer or acquisition
of the Company of all or substantially all of the assets of the Company in which
the Company is not the surviving corporation, if the Company shall have
requested the acquiring or succeeding corporation (or an affiliate thereof) to
assume all outstanding Options or issue substitute or equivalent options, and
such acquiring or succeeding corporation shall have refused or failed to so
assume all Options outstanding under the Plan or to so issue substitute or
equivalent options, then any and all outstanding Options shall accelerate and
become exercisable in full immediately prior to such event. The Committee will
notify holders of Options that any such Options shall be fully exercisable for a
period of time determined by the Committee in its discretion; provided that such
period shall not be less than fifteen (15) days after the date of such notice.
The Options, to
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the extent not exercised, shall terminate upon expiration of the period of time
determined by the Committee. In addition, notwithstanding the foregoing, in the
event of a merger, transfer or acquisition of the Company described in this
Paragraph, the Committee may, in its sole discretion, elect to cancel, effective
immediately prior to the occurrence of such event, each Option outstanding
immediately prior to such event (whether or not then exercisable), and, in full
consideration of such cancellation, pay to the optionee to whom such Option was
granted, an amount in cash, for each share of Common Stock subject to such
Option equal to the excess of (x) the value, as determined by the Committee in
its absolute discretion, of the securities or other property or assets
(including cash) to be received by the holder of a share of Common Stock as a
result of such event over (y) the exercise price of such Option.
(b) Substitute Options. The Company may grant Options in substitution
for options held by employees of another corporation who become employees of the
Company, or a subsidiary of the Company, as a result of a merger or
consolidation of the employing corporation with the Company or a subsidiary of
the Company, as a result of the acquisition by the Company, or one of its
subsidiaries, of property or stock of the employing corporation. The Company may
direct that substitute Options be granted on such terms and conditions as the
Committee considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any Option agreement shall confer
upon any optionee any right with respect to the continuation of his or her
employment or other relationship with the Company or interfere in any way with
the right of the Company at any time to terminate such employment or to increase
or decrease the compensation of the optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an Option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may, at any time, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever; provided, however, that if
and to the extent required under Section 422 of the Code (if and to the extent
that the Board of Directors deems it appropriate to comply with Section 422) and
if and to the extent required to treat some or all of the Options as qualified
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code (if and to the extent that the Board of Directors deems it appropriate
to meet such requirements), no amendment shall be effective without the approval
of the stockholders of the Company, that (i) except as provided in Section 15
hereof, increases the number of shares of Company Stock with respect to which
Options may be issued (either to any individual in any year or in the
aggregate), (ii) modifies the class of individuals eligible to
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<PAGE>
participate in the Plan or (iii) materially increases the benefits accruing to
individuals pursuant to the Plan. Nothing herein shall restrict the Committee's
ability to exercise its discretionary authority hereunder, which discretion may
be exercised without amendment to the Plan.
(b) The modification or amendment of the Plan shall not, without the
consent of an optionee, reduce his or her rights under an Option previously
granted to him or her. The Committee may amend outstanding Option agreements in
a manner not inconsistent with the Plan; provided, however, no such amendment
shall, without the consent of the optionee, reduce the optionee's rights under
such agreement. Notwithstanding the foregoing, the Board of Directors shall have
the right to amend or modify the terms and provisions of the Plan and of any
outstanding Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such Options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code and to the extent
necessary to ensure that the amounts realized by any optionee who is a "covered
employee" within the meaning of Section 162(m) of the Code as a result of an
Option constitute qualified "performance-based compensation" within the meaning
of Section 162(m)(4)(C) of the Code.
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee, whether under the Plan or otherwise, any federal,
state or local taxes of any kind required by law to be withheld with respect to
any shares issued upon exercise of Options. Subject to the prior approval of the
Committee, which may be withheld by the Committee in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an Option or (ii) by delivering to the Company
shares of Common Stock already owned by the optionee. The shares so delivered or
withheld shall have a Fair Market Value equal to such withholding obligation as
of the date in the amount of tax to be withheld is to be determined. An optionee
who has made an election pursuant to this Section 20(a) may satisfy his or her
withholding obligation only with shares of Common Stock that are not subject to
any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(b) The acceptance of shares of Common Stock upon exercise of an
Incentive Stock Option shall constitute an agreement by the optionee (i) to
notify the Company if any and all of such shares are disposed of by the optionee
within two years from the date the Incentive Stock Option was granted or within
one year from the date the shares were issued to the optionee pursuant to the
exercise of the Incentive Stock Option, and (ii) if required by law, to remit to
the Company, at the time of and in the case of any such disposition, an amount
sufficient to satisfy the Company's federal, state and local withholding tax
obligations with respect to such disposition, whether or not, as to both (i) and
(ii), the optionee is in the employ of the Company at the time of such
disposition.
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<PAGE>
21. Cancellation and New Grant of Options, Etc.
The Committee shall have the authority to effect, at any time and from
time to time, with the consent of the affected optionees, (i) the cancellation
of any or all outstanding Options and the grant in substitution therefor of new
Options covering the same or different numbers of shares of Common Stock and
having an Option exercise price-per-share which may be lower or higher than the
exercise price-per-share of the cancelled Options or (ii) the amendment of the
terms of any and all outstanding Options to provide an Option exercise
price-per-share which is higher or lower than the then-current exercise
price-per-share of such outstanding Options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan, as originally adopted, became effective
August 30, 1994 and was approved by the Company's stockholders on September 21,
1994. The Plan, as amended and restated as of June 30, 1999, shall be effective
as of such date provided that the Plan is approved by the Company's
stockholders. If such stockholder approval is not obtained within twelve months
after the date of the Plan's amendment and restatement, any Options granted in
respect of shares in excess of the 1,960,000 shares available under the Plan
prior to the Plan's amendment and restatement immediately shall be cancelled and
shall be of no force or effect and, the Plan shall remain in effect as it
existed immediately prior to such amendment and restatement.
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate upon the earlier of (i) the close of business on June
29, 2009, or (ii) the date on which all shares available for issuance under the
Plan shall have been issued. If the date of termination is determined under (i)
above, then Options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
Options.
23. Provision for Foreign Participants.
The Committee may, without amending the Plan, modify Options granted to
individuals who are foreign nationals or employed outside the United States to
recognize differences in laws, rules, regulations or customs of such foreign
jurisdictions with respect to tax, securities, currency, employee benefit or
other matters.
24. Expenses and Receipts.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Option will be used for general
corporate purposes.
25. Limitations Imposed by Section 162(m) of the Code.
Notwithstanding any other provision hereunder, if and to the extent the
Committee determines the Company's federal tax deduction in respect of a
non-qualified Option may be limited as a result of Section 162(m) of the Code,
the Committee may delay the payment in respect of any such non-qualified Option
until a date that is within 30 days after the date that
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<PAGE>
compensation paid to the optionee no longer is subject to the deduction
limitation under Section 162(m) of the Code. In the event that an optionee
exercises a non-qualified Option at a time when the optionee is a "covered
employee" within the meaning of Section 162(m) of the Code, and the Committee
determines to delay the payment in respect of such non-qualified Option, the
Committee shall credit the Fair Market Value of the Common Stock that otherwise
would have been issued to the optionee upon exercise of the Option to an
unfunded account on the books and records of the Company. The optionee shall
have no rights in respect of such account other than as an unsecured general
creditor of the Company, and the amount credited thereto shall not be
transferable by the optionee other than by will or laws of descent and
distribution. The Committee may credit additional amounts to such account as it
may determine in its sole discretion. The amount credited to the account shall
be paid to the optionee if and to the extent (and within 30 days after) the
Committee determines that the Company's federal tax deduction with respect
thereto will not be limited by reason of Section 162(m) of the Code. Any account
created hereunder shall represent only an unfunded unsecured promise by the
Company to pay the amount credited thereto to the optionee in the future.
26. Governing Law.
The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
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<PAGE>
INTERNET COMMERCE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON JUNE 19, 2000.
The undersigned stockholder of Internet Commerce Corporation (the
"Company") acknowledges receipt of the Notice of Annual Meeting of Stockholders
and the Proxy Statement each dated May 22, 2000 and the undersigned revokes all
prior proxies and appoints Dr. Geoffrey S. Carroll and Walter M. Psztur as proxy
for the undersigned, each with full power of substitution, to vote all shares of
Class A Common Stock, Class B Common Stock and/or Series C Preferred Stock of
the Company which the undersigned is entitled to vote at the Company's Annual
Meeting of Stockholders to be held at the New York Marriott East Side, 525
Lexington Avenue, New York, New York 10017 at 9:00 a.m., local time, on June 19,
2000 and at any postponement or adjournment thereof, and the undersigned
authorizes and instructs such proxies or their substitutes to vote as follows:
1. ELECTION OF DIRECTORS: To elect the nominees listed below to the Board
of Directors for the terms set forth in Proposal One of the Proxy Statement:
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below) |_| listed below |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Class I Directors
JAMES A. ORTENZIO |_|
CHARLES C. JOHNSTON |_|
Class II Directors
G. MICHAEL CASSIDY |_|
MICHELE GOLDEN |_|
ARTHUR R. MEDICI |_|
Class III Directors
- -------------------
RICHARD J. BERMAN |_|
DR. GEOFFREY S. CARROLL |_|
MATTHEW WOLK |_|
2. APPROVAL OF THE AMENDED AND RESTATED STOCK OPTION PLAN: To approve the
Company's Amended and Restated Stock Option Plan:
FOR |_| AGAINST |_| ABSTAIN |_|
<PAGE>
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS: To ratify the
appointment of Deloitte & Touche LLP as the Company's independent auditors for
the fiscal year ending July 31, 2000:
FOR |_| AGAINST |_| ABSTAIN |_|
and in their discretion, upon any other matters that may properly come before
the meeting or any postponement or adjournment thereof.
(Continued and to be dated and signed on the other side.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IN THE ABSENCE OF DIRECTION, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL OF THE NOMINEES FOR DIRECTOR SET FORTH IN
THE PROXY STATEMENT, FOR APPROVAL OF THE AMENDED AND RESTATED STOCK OPTION PLAN
AND FOR RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS
AND, IN ACCORDANCE WITH THE JUDGMENT OF THE PROXIES, FOR OR AGAINST ANY OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY POSTPONEMENT OR
ADJOURNMENT THEREOF.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated: , 2000
----------------------------
------------------------------------------
(Signature of Stockholder)
------------------------------------------
(Signature of Stockholder)
Please sign exactly as your name(s)
appears on your stock certificate.
If signing as attorney, executor,
administrator, trustee or guardian,
please indicate the capacity in
which signing. When signing as joint
tenants, all parties to the joint
tenancy must sign. When the proxy is
given by a corporation, it should be
signed by an authorized officer.
