As filed with the Securities and Exchange Commission on August 30, 2002
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INTERNET COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3645702
(State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization)
805 Third Avenue
New York, New York 10022
(212) 271-7640
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
G. MICHAEL CASSIDY
President and Chief Executive Officer
INTERNET COMMERCE CORPORATION
805 Third Avenue
New York, New York 10022
(212) 271-7640
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
PETER S. KOLEVZON, ESQ.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022-3903
(212) 715-9100
--------------------
Approximate date of commencement of proposed sale to the public: at such
time or times after the effective date of this Registration Statement as the
selling stockholders may determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed
Amount Proposed maximum
Title of each class to be maximum aggregate Amount of
of securities to be registered offering price offering price registration
registered (1) per share (2) (2) fee(2)
- --------------------------------------------------------------------------------
class A common
stock, par value
$.01 per share 498,715 $1.45 $723,136.75 $180.78
- --------------------------------------------------------------------------------
(1) Includes 298,715 shares of class A common stock that may be issued upon
exercise of warrants. Also includes an indeterminate number of shares of
class A common stock that may be issuable upon exercise of warrants
pursuant to the anti-dilution provisions of the warrants.
(2) The proposed maximum aggregate offering price was estimated solely to
calculate the registration fee under Rule 457(c) of the Securities Act of
1933 based upon the average of the highest and lowest prices per share of
the class A common stock on the Nasdaq National Market reported on
Thursday, August 29, 2002.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to section 8(a), may
determine.
PROSPECTUS
INTERNET COMMERCE CORPORATION
o This prospectus relates to the public offering from time to time by the
persons described on page 12 below of up to 498,715 shares of our class A
common stock.
o Our class A common stock is traded on the Nasdaq National Market under
the symbol ICCA. On August 29, 2002, the last sale price for the class
A common stock was $1.51.
o Any selling stockholder may sell the class A common stock on the Nasdaq
National Market or in privately negotiated transactions, whenever he
decides and at the price he sets. The price at which any of the shares of
class A common stock are sold and the commissions paid, if any, may vary
from transaction to transaction. We will not receive any proceeds from the
sale of these shares.
o This investment involves a high degree of risk. You should carefully
consider the risk factors beginning on page 4 of this prospectus before
you decide to invest.
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _______________, 2002
TABLE OF CONTENTS
Page
----
Prospectus Summary...........................................................3
Risk Factors.................................................................4
Risks Relating to ICC......................................................4
Risks Relating to the Internet and Online Commerce Aspects
of Our Business..........................................................7
Risks Relating to this Offering............................................8
Forward-Looking Statements...................................................9
Use Of Proceeds..............................................................9
Business....................................................................10
Selling Stockholders........................................................12
Plan Of Distribution........................................................13
Description Of Securities...................................................15
Legal Matters...............................................................18
Experts.....................................................................18
Where You Can Find More Information.........................................18
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before purchasing shares of our class A common stock. You should read
the entire prospectus carefully, including Risk Factors commencing on page 4,
before making an investment decision.
Internet Commerce Corporation
Internet Commerce Corporation, or ICC, a leader in the e-commerce
business-to-business communication services market, provides complete electronic
commerce, or EC, infrastructure solutions.
Our business operates in three segments. These three segments are:
o ICC.NET (formerly named CommerceSense(R)) - Our ICC.NET service, a global
Internet-based value added network, or VAN, uses the Internet and our
proprietary technology to deliver our customers' documents and data files
to members of their trading communities, many of which may have
incompatible systems, by translating the documents and data files into any
format required by the receiver. We believe that our ICC.NET service has
significant advantages over traditional VANs, and email-based and other
Internet-based systems, because our service has a lower cost, greater
transmission speed and more features.
o Professional Services - Our professional services segment facilitates the
development and operation of comprehensive business-to-business e-commerce
solutions.
o Service Bureau - Our service bureau manages and translates the data of
small and mid-sized companies that exchange electronic data interchange, or
EDI, data with large companies.
The mailing address of our principal executive offices is 805 Third
Avenue, New York, New York 10022, and our telephone number at that address is
(212) 271-7640.
The Offering
Class A common stock offered
by the selling stockholders......................................498,715 shares
Class A common stock to be
outstanding after the offering............................ 11,679,967 shares (1)
Nasdaq National Market symbol..............................................ICCA
- ---------------------------
(1) This information is based on the number of shares of class A common stock
(including restricted stock) outstanding on August 30, 2002. It includes
all of the shares of class A common stock being offered by this prospectus
by the selling stockholders. It excludes (a) 597,960 shares of class A
common stock issuable upon exercise of warrants, except for the warrants
held by the selling stockholders, (b) 447,628 shares of Class A common
stock issuable upon conversion of series C convertible redeemable preferred
stock, and (c) 4,557,408 shares of class A common stock issuable under
outstanding options, and 1,744,106 additional shares of class A common
stock reserved for issuance under our stock option plans, each as of August
30, 2002.
3
RISK FACTORS
You should carefully consider each of the following risk factors in
addition to the other information contained in this prospectus before purchasing
shares of our class A common stock. Investing in our class A common stock
involves a high degree of risk. Any of the following risks could materially and
adversely affect our business, operating results, financial condition and the
market price of our class A common stock and could result in the complete loss
of your investment.
Risks Relating to ICC
We have a limited operating history and there is insufficient historical
information to determine whether we will successfully implement any of our
business strategies. We were founded in November 1991 under the name Infosafe
Systems, Inc. and from 1991 to 1997 we conducted limited operations and
developed certain products that we were unable to exploit commercially and
consequently discontinued. In 1997, we shifted our business emphasis to focus
exclusively on the development and marketing of our ICC.NET service, formerly
known as our CommerceSense(R) service, and changed our name to Internet Commerce
Corporation in September 1998 to reflect this shift. As a result, we have only a
limited operating history and there is little historical information on which to
evaluate our business and prospects. We may not be successful in implementing
any of our business strategies.
We have never earned a profit and expect to incur losses in the future,
and cannot assure that we will be profitable in the future on an operating basis
or otherwise. We have incurred significant losses since we were founded in 1991.
We have never earned a profit in any fiscal quarter and, as of April 30, 2002,
we had an accumulated deficit of approximately $75.1 million.
Our revenue is primarily dependent on the number of customers who
subscribe to our ICC.NET VAN service and the volume of the data, documents or
other information they send or retrieve utilizing this service. The success of
our ICC.NET VAN service and our other services depends to a large extent on the
future of business-to-business electronic commerce using the Internet, which is
uncertain. In addition, we expect our expenses to increase in the areas of
information technology, sales and marketing. As a result, we expect to incur
additional losses in the future.
If our revenues decline or grow at a slower rate and we are unable to
adjust spending in a timely manner or if our expenses increase without
commensurate increases in revenues, our operating results will suffer and we may
not ever achieve profitability.
We currently depend primarily on our ICC.NET service. We are primarily
focusing on our ICC.NET service and as a result, our expected revenue growth for
the foreseeable future is almost entirely dependent on the success of this
service, including, but not limited to, the number of customers who subscribe to
the service and the volume (in kilocharacters) of the data, documents or other
information they send or retrieve utilizing our service, and revenue derived
from our professional services and service bureau segments. We will need to
generate significant additional revenue to achieve and maintain profitability.
If we do not increase our revenue significantly, we will continue to be
unprofitable.
We may not be able to compete effectively in the business-to-business
electronic commerce market, which could limit our market share and harm our
financial performance. Our principal competitors include: Peregrine Systems,
Inc., GE Global Exchange Services, International Business Machines Corporation
Global Services, Sterling Commerce, Inc., EasyLink Corp. and WorldCom, Inc. Each
of these competitors has an established VAN that has provided EDI for at least
several years and has long-established relationships with the users of EDI,
including many of our prospective customers.
4
Our market is characterized by rapidly-changing technology, customer
demands and intense competition. The Internet's recent growth and the intense
competition in our industry require us to continue to develop strategic business
and Internet solutions that enhance and improve the customer service features,
functions and responsiveness of our ICC.NET VAN and other proposed services and
that keep pace with continuing changes in information technology and customer
requirements. If we are not successful in developing and marketing enhancements
to our ICC.NET VAN service or other proposed services that respond to
technological change or customer demands, or we are otherwise not able to
compete effectively against our current and future competitors, we may lose
customers, may need to lower our prices, may experience reductions in gross
margins, increases in marketing costs or losses in market share, or we may
experience a combination of these problems, and, as a result, our business will
suffer.
Many of our current and potential competitors have significant existing
customer relationships and vastly larger financial, marketing, customer support,
technical and other resources than we do. As a result, they may be able to
respond more quickly to changing technology and changes in customer requirements
or be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
customers and employees, or be able to devote greater resources to the
development, promotion and sale of their services than we can. As a result, we
may not be successful in competing against competitors.
Furthermore, we rely on many of our competitors to interconnect at
reasonable cost with our service. In September 2001, one of our competitors
terminated an existing interconnect agreement. In April 2002 another one of our
competitors terminated our interconnect agreement. We have made alternative
arrangements to serve our customers that were affected by these terminations.
If we are successful in utilizing our ICC.NET platform to provide new
services, we may enter into different markets and may face the same or
additional competitors, most of which will have substantially greater financial
and other resources than we do.
If we are unable to obtain necessary future capital, our business will
suffer. As of July 31, 2002, we had unrestricted cash and marketable securities
in the amount of approximately $2.1 million. We may need to raise additional
funds if competitive pressures or technological changes are greater than
anticipated, if we are unable to increase revenue at anticipated rates, if our
expenses increase significantly or if our customers delay payment of our
receivables. We cannot assure you that any additional financing will be
available on reasonable terms or at all.
Raising additional funds in the future by issuing securities could
adversely affect our stockholders and negatively impact our operating results.
If we raise additional funds through the issuance of debt securities, the
holders of the debt securities will have a claim to our assets that will have
priority over any claim of our stockholders. The interest on these debt
securities would increase our costs and negatively impact our operating results.
If we raise additional funds through the issuance of class A common stock or
securities convertible into or exchangeable for class A common stock, the
percentage ownership of our then-existing stockholders will decrease and they
may experience additional dilution. In addition, any convertible or exchangeable
securities may have rights, preferences and privileges more favorable to the
holders than those of the class A common stock.
If we lose our net operating loss carryforward of approximately $76
million, our financial results will suffer. Section 382 of the Internal Revenue
Code contains rules designed to discourage persons from buying and selling the
net operating losses of companies. These rules generally operate by focusing on
ownership changes among stockholders owning directly or indirectly 5% or more of
the common stock of a company or any change in ownership arising from a new
issuance of stock by a company. In general, the rules limit the ability of a
company to utilize net operating losses after a change of ownership of more than
50% of its common stock over a three-year period. Purchases of our class A
common stock in amounts greater than specified levels could inadvertently create
a limitation on our ability to utilize our net operating losses for tax purposes
in the future. We are currently subject to a limitation on the utilization of
our net operating loss carryforward.
5
If we are unable to manage our growth, our financial results will suffer.
Our ability to implement our business plan successfully in a new and
rapidly-evolving market requires effective planning and growth management. If we
cannot manage our anticipated growth effectively, our business and financial
results will suffer. We expect that we will need to continue to manage and to
expand multiple relationships with customers, Internet service providers and
other third parties. We also expect that we will need to continue to improve our
financial systems, procedures and controls and will need to expand, train and
manage our workforce, particularly our information technology and sales and
marketing staffs.
We may face capacity constraints which impede our revenue growth and
business profitability. The satisfactory performance, reliability and
availability of our network infrastructure, customer support and document
delivery systems and our web site are critical to our reputation and our ability
to attract customers and maintain adequate customer service levels. Any
significant or prolonged capacity constraints could prevent customers from
sending or gaining access to their documents or other data or accessing our
customer support services for extended periods of time. This would decrease our
ability to acquire and retain customers and prevent us from achieving the
necessary growth in revenue to achieve profitability. If the amount of traffic
increases substantially and we experience capacity constraints, we will need to
expand further and upgrade our technology and network infrastructure. We may be
unable to predict the rate or timing of increases in the use of our services to
enable us to upgrade our operating systems in a timely manner.
If we do not keep pace with rapid technological changes, customer demands
and intense competition, we will not be successful. Our market is characterized
by rapidly changing technology, customer demands and intense competition. If we
cannot keep pace with these changes, our ICC.NET service could become
uncompetitive and our business will suffer. The Internet's recent growth and the
intense competition in our industry require us to continue to develop strategic
business and Internet solutions that enhance and improve the customer service
features, functions and responsiveness of our ICC.NET VAN and other proposed
services and that keep pace with continuing changes in information technology
and customer requirements. If we are not successful in developing and marketing
enhancements to our ICC.NET VAN service or other proposed services that respond
to technological change or customer demands, our business will suffer.
If we cannot successfully expand our business outside of the United
States, our revenues and operating results will be adversely affected. Our
current and future customers are conducting their businesses internationally. As
a result, an important component of our business strategy is to expand our
international marketing and sales efforts and if we do not successfully expand
our business in this way, we may lose current and future customers.
If we cannot hire and retain highly qualified employees, our business and
financial results will suffer. We are substantially dependent on the continued
services and performance of our executive officers and other key employees.
Competition for employees in our industry is intense. If we are unable to
attract, assimilate and retain highly qualified employees, our management may
not be able to effectively manage our business, exploit opportunities and
respond to competitive challenges and our business and financial results will
suffer. Many of our competitors may be able to offer more lucrative compensation
packages which include stock options and other stock-based compensation and
higher-profile employment opportunities than we can.
We depend on our intellectual property, which may be difficult and costly
to protect. If we fail to adequately protect our proprietary rights, competitors
could offer similar products relying on technologies we developed, potentially
harming our competitive position and decreasing our revenues. We attempt to
protect our intellectual property rights by limiting access to the distribution
of our software, documentation and other proprietary information and by relying
on a combination of patent, copyright, trademark and trade secret laws. In
addition, we enter into confidentiality agreements with our employees and
certain customers, vendors and strategic partners. In some circumstances,
however, we may, if required by a business relationship, provide our licensees
with access to our data model and other proprietary information underlying our
licensed applications.
6
Despite the precautions we take, it may be possible for unauthorized third
parties to copy aspects of our current or future products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of software
is difficult, and some foreign laws do not protect proprietary rights to the
same extent as United States laws. Litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets or to
determine the validity and scope of the proprietary rights of others, any of
which could be costly and adversely affect our revenues and operating results.
Intellectual property infringement claims against us could harm our
business. Our business activities and our ICC.NET service may infringe upon the
proprietary rights of others and other parties may assert infringement claims
against us. Any such claims and any resulting litigation could subject us to
significant liability for damages and could result in invalidation of our
proprietary rights. We could be required to enter into royalty and licensing
agreements, which may be costly or otherwise burdensome or which may not be
available on terms acceptable to us.
We may suffer systems failures and business interruptions which would harm
our business. Our success depends in part on the efficient and uninterrupted
operation of our service that is required to accommodate a high volume of
traffic. Almost all of our network operating systems are located at the
Securities Industry Automation Corporation, or SIAC. SIAC runs all computing
operations for the New York Stock Exchange and the American Stock Exchange. Our
systems are vulnerable to events such as damage from fire, power loss,
telecommunications failures, break-ins and earthquakes. This could lead to
interruptions or delays in our service, loss of data or the inability to accept,
transmit and confirm customer documents and data. Our business may suffer if our
service is interrupted. Although we have implemented network security measures,
our servers may be vulnerable to computer viruses, electronic break-ins,
attempts by third parties deliberately to exceed the capacity of our systems and
similar disruptions.
Risks Relating to the Internet and Online Commerce Aspects of Our Business
If Internet usage does not continue to grow or its infrastructure fails,
our business will suffer. If the Internet does not gain increased acceptance for
business-to-business electronic commerce, our business will not grow or become
profitable. We cannot be certain that the infrastructure or complementary
services necessary to maintain the Internet as a useful and easy means of
transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it and the
performance and reliability of the Internet may decline.
Privacy concerns may prevent customers from using our services. Concerns
about the security of online transactions and the privacy of users may inhibit
the growth of the Internet as a means of delivering business documents and data.
We may need to incur significant expenses and use significant resources to
protect against the threat of security breaches or to alleviate problems caused
by security breaches. We rely upon encryption and authentication technology to
provide secure transmission of confidential information. If our security
measures do not prevent security breaches, we could suffer operating losses,
damage to our reputation, litigation and possible liability. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments that render current encryption technology outdated may result in a
breach of our encryption and authentication technology and could enable an
outside party to steal proprietary information or interrupt our operations.
Failure of our third-party providers to provide adequate Internet and
telecommunications service could result in significant losses of revenue. Our
operations depend upon third parties for Internet access and telecommunications
service. Frequent or prolonged interruptions of these services could result in
significant losses of revenues. Each of them has experienced outages in the past
and could experience outages, delays and other difficulties due to system
failures unrelated to our on-line architecture. These types of occurrences could
also cause users to perceive our services as not functioning properly and
therefore cause them to use other methods to deliver and receive information. We
have limited control over these third parties and cannot assure you that we will
be able to maintain satisfactory relationships with any of them on acceptable
commercial terms or that the quality of services that they provide will remain
at the levels needed to enable us to conduct our business effectively.
7
Government regulation and legal uncertainties relating to the Internet
could harm our business. Changes in the regulatory environment in the United
States and other countries could decrease our revenues and increase our costs.
The Internet is largely unregulated and the laws governing the Internet remain
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy and taxation apply to the Internet. In addition,
because of increasing popularity and use of the Internet, any number of laws and
regulations may be adopted in the United States and other countries relating to
the Internet or other online services covering issues such as:
o user privacy;
o security;
o pricing and taxation;
o content; and
o distribution.
Costs of transmitting documents and data could increase, which would harm
our business and operating results. The cost of transmitting documents and data
over the Internet could increase. We may not be able to increase our prices to
cover these rising costs. Also, foreign and state laws and regulations relating
to the provision of services over the Internet are still developing. If
individual states or foreign countries impose taxes or laws that negatively
impact services provided over the Internet, our cost of providing our ICC.NET
and other services may increase.
Risks Relating to this Offering
Shares eligible for future sale by our existing stockholders may adversely
affect our stock price and may render it difficult to sell class A common stock.
The average weekly trading volume of our class A common stock on the Nasdaq
National Market was approximately 126,000 for the quarter ended July 31, 2002,
approximately 143,000 for the quarter ended April 30, 2002, approximately
220,000 for the quarter ended January 31, 2002 and approximately 120,000 for the
quarter ended October 31, 2001. From August 1, 2001 through July 31, 2002, the
average weekly trading volume of our class A common stock on the Nasdaq National
Market was approximately 328,000. Between October 1999 and August 2002, we have
registered on one or more registration statements, an aggregate of 10,768,165
shares of class A common stock, of which 4,430,000 shares remain unsold as of
August 30, 2002. The market price of our class A common stock could be
materially and adversely affected by sales of even a small percentage of these
shares or the perception that these sales could occur.
Our stock price may be extremely volatile and this volatility could affect
your ability to sell your shares of class A common stock at a favorable price.
Since August 1, 2000, the closing price of our class A common stock has
fluctuated from a low of $1.40 to a high of $18.00. The market price of our
class A common stock is likely to fluctuate substantially in the future. In the
event that the market price of our class A common stock should fall below $1.00
for thirty consecutive trading days, our class A common stock may be subject to
delisting from the Nasdaq National Market for failure to maintain one of the
continued listing standards. If our class A common stock is delisted from the
Nasdaq National Market in the future, we would be forced to list our class A
common stock on the Nasdaq SmallCap Market, OTC Bulletin Board, or some other
quotation medium, depending upon our ability to meet the specific listing
requirements of those quotation systems. If we are forced to list our class A
common stock on an alternative quotation system, an investor might find it more
difficult to buy and sell, or to obtain accurate price quotations for, shares of
our class A common stock. This lack of visibility and liquidity could further
decrease the price of our class A common stock. In addition, delisting from the
Nasdaq National Market might negatively impact our reputation and, as a
consequence, our business. In the past, companies that have experienced
volatility in the market price of their stock have been subject to securities
class action litigation. If we were subject to a securities class action
lawsuit, it could result in substantial costs and a significant diversion of
resources, including management time and attention.
The market for our class A common stock may be illiquid, which would
restrict your ability to sell your shares of class A common stock. Our class A
common stock is currently trading on the Nasdaq National Market. It is possible
that the trading market for the class A common stock in the future will be thin
and illiquid, which could result in increased volatility in the trading prices
for our class A common stock. The price at which our class A common stock will
trade in the future cannot be predicted and will be determined by the market.
The price may be influenced by many factors, including investors' perceptions of
our business, our financial condition, operating results and prospects, the use
of the Internet for business purposes and general economic and market
conditions.
8
Our board of directors can issue preferred stock with rights adverse to
the holders of class A common stock. Our board of directors is authorized,
without further stockholder approval, to determine the provisions of and to
issue up to 4,979,825 shares of preferred stock. Issuance of preferred shares
with rights to dividends and other distributions, voting rights or other rights
superior to the class A common stock could be adverse to the holders of class A
common stock.
We may have to spend significant resources indemnifying our officers and
directors or paying for damages caused by their conduct. The Delaware General
Corporation Law provides for broad indemnification by corporations of their
officers and directors and permits a corporation to exculpate its directors from
liability for their actions. Our bylaws and certificate of incorporation
implement this indemnification and exculpation to the fullest extent permitted
under this law as it currently exists or as it may be amended in the future.
Consequently, subject to this law and to some limited exceptions in our
certificate of incorporation, none of our directors will be liable to us or to
our stockholders for monetary damages resulting from conduct as a director.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference a number of
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Specifically, all statements other than statements of historical facts included
in this prospectus, or incorporated by reference in this prospectus, regarding
our financial position, business strategy and plans and objectives of management
for future operations are forward-looking statements. These forward-looking
statements are based on the beliefs of management, as well as assumptions made
by and information currently available to management. When used in this
prospectus, including the information incorporated by reference, the words
anticipate, believe, estimate, expect, may, will, continue, intend and plan and
words or phrases of similar import, as they relate to our financial position,
business strategy and plans, or objectives of management, are intended to
identify forward-looking statements. These cautionary statements reflect our
current view regarding future events and are subject to risks, uncertainties and
assumptions related to various factors which include but may not be limited to
those listed under the heading Risk Factors starting on page 4 and other
cautionary statements in this prospectus and in the information incorporated in
this prospectus by reference.
Although we believe that our expectations are reasonable, we cannot assure
you that our expectations will prove to be correct. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described in this prospectus as anticipated, believed,
estimated, expected, intended or planned. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.
USE OF PROCEEDS
The selling stockholders are selling all the shares of class A common
stock covered by this prospectus for their own account. We will not receive any
proceeds from the sale of shares of class A common stock by the selling
stockholders.
9
BUSINESS
Internet Commerce Corporation, or ICC
Business Description
Internet Commerce Corporation, a leader in the e-commerce
business-to-business communication services market, provides complete electronic
commerce infrastructure solutions.
Our business operates in three segments. These three segments are:
o ICC.NET (formerly named CommerceSense(R)) - Our ICC.NET service, the
Company's global Internet-based VAN, uses the Internet and our
proprietary technology to deliver our customers' documents and data
files to members of their trading communities, many of which may have
incompatible systems, by translating the documents and data files into
any format required by the receiver. We believe that our ICC.NET
service has significant advantages over traditional VANs, and
email-based and other Internet-based systems, because our service has
a lower cost, greater transmission speed and more features. ICC.NET
provides the following services:
o Traditional VAN services -- our ICC.NET service provides the full
suite of traditional VAN services, but uses the Internet to
provide cost savings and increased capabilities for our
customers;
o Electronic data interchange, or EDI, for web-based retailers --
our ICC.NET service provides an electronic document and data file
delivery link between web-based retailers and their vendors that
require that documents and data files be transmitted using EDI
format;
o EDI-to-fax service -- our ICC.NET service can translate
electronic documents into fax format and send the documents by
fax to our customers' trading partners that cannot receive
electronically transmitted documents; and
o Large-scale electronic document management and delivery -- our
ICC.NET service can transmit large-scale non-EDI electronic
documents and data files and provide real-time delivery,
archiving, security, authentication and audit services.
o Professional Services - Our professional services segment facilitates
the development and operation of comprehensive business-to-business
e-commerce solutions. We provide the following professional services:
o EC infrastructure solutions by providing mission critical
e-commerce consulting, software, outsourced services,
translation/mapping and technical resource management;
o On-site and off-site data mapping services to maximize
productivity and efficiency in managing inter-company and
intra-company data transaction requirements;
o Health Insurance Portability and Accountability Act, or HIPAA,
impact and data gap analysis for health care providers and
payers. We can design, build, test and rollout systems to ensure
compliance with Federally mandated standards for health care
data; and
10
o A series of product-independent EDI seminars for e-commerce
users. The seminars are hosted by leading universities and
training facilities in the United States. We also develop
in-house EDI training programs and offer public seminars for
understanding and implementing HIPAA regulations.
o Service Bureau - Our service bureau manages and translates the data of
small and mid-sized companies that exchange EDI data with large
companies and provides the following services:
o Receives electronic purchase orders from large retailers and
converts the purchase orders into hard copies or other
alternative formats and delivers those documents to their
suppliers that are our customers;
o Converts paper or other alternatively formatted invoices from our
customers into EDI format that is transmitted to their trading
partners;
o Provides Universal Product Code, or UPC, services for Advanced
Ship Notice, of ASN, Casing & Uniform Code Council, or UCC, 128
labels; and
o Maintains UPC catalogs allowing our customers to generate the UPC
numbers and tickets for the items in the UPC catalogs.
Business Strategy
We believe that our ICC.NET service provides a platform with many
applications that will allow our customers to fulfill a substantial portion of
their electronic document and data delivery requirements with significantly less
administrative effort and cost. We believe that ICC.NET will allow our customers
to send us the majority of their important documents and data files which we
will then be able to transmit to each of the intended recipients in any form
requested by the recipient. Our customers will thus be able to integrate a
substantial portion of their document and data file delivery methods into a
single, seamless process.
A large company that uses EDI to communicate with its vendors is referred
to as a hub; its trading partners, vendors or customers are referred to as
spokes. We intend to continue to market ICC.NET as a one-stop electronic
document and data delivery service to the 2,500 largest hub companies in the
United States. Due to the cost to the spoke companies of implementing EDI and
using VANs and other electronic document delivery methods, large hub companies
are currently connected electronically to only a small percentage of their
potential spoke companies.
We intend to continue to market ICC.NET to new customers with an
increasing focus on industries in which ICC.NET has enjoyed significant
penetration and revenues. Those industries include book retailing and
publishing, pharmaceutical manufacturing, footwear manufacturing, office
supplies and transportation logistics.
We believe that a significant number of these hub companies intend to
expand the use of electronic commerce to more of their spoke companies. Small
spoke companies using our ICC.NET service require only an Internet connection
and a web browser to receive and transmit documents electronically and, we
believe, will also be able to receive electronic documents using our ICC.NET fax
service. As a result, large hub companies may now be able to request or
encourage electronic commerce with their small spoke companies. In turn, many of
these spoke companies may become the hub companies for their suppliers, which
should further broaden the reach of our ICC.NET service.
Additionally, we will focus on marketing ICC.NET to other members of the
trading communities of our existing customers and we will pursue opportunities
to cross-sell our services to the customers of our several business segments.
Our current customers conduct their business internationally, and we are
servicing these customers and pursuing new international customers in Europe and
other places outside the United States.
11
We intend to encourage the use of our ICC.NET service through exceptional
customer service. We currently offer technical support to our customers
twenty-four hours a day, seven days a week. Due to the multiple redundancies of
all of our systems and the stability of the Securities Industry Automation
Corporation, or SIAC, which is the location of our data center, our ICC.NET
service has been fully operational more than 99% of the time. SIAC runs all
computing operations for the New York Stock Exchange and the American Stock
Exchange.
We expect to experience seasonality in our business that reflects the
seasonality of the businesses of our customers. We believe that period-to-period
comparisons of our operating results for any particular period will not
necessarily indicate our future performance.
SELLING STOCKHOLDERS
We commenced a warrant exchange offer on April 23, 2002. The offer was
made to investors who participated in our private placement on October 29, 2001
and to holders of warrants issued as fees in connection with this private
placement. The offer reduced the exercise price of the warrants issued in the
private placement to $2.50 per share of class A common stock for those investors
that agreed to exercise those warrants. In addition, for each share of class A
common stock purchased pursuant to the warrant exercise, a new warrant, or the
New Warrants, to purchase an equivalent number of shares of class A common stock
was issued. The New Warrants have an exercise price of $3.50 per share and are
exercisable for five-years. The New Warrants have the same redemption terms as
the warrants issued in the private placement. The warrant exchange offer was
originally set to expire on April 30, 2002, but was extended by our board of
directors until May 31, 2002. We received $658,768 in proceeds and issued a
total of 238,715 shares of class A common stock and warrants to purchase the
same number of shares of class A common stock as a result of the warrant
exchange offer. An additional 25,000 of the New Warrants were issued as
commissions to certain participants for their role as solicitation agent
conducted during the warrant exchange offer. The shares of class A common stock
issuable upon exercise of such New Warrants issued as commissions are not
registered in this registration statement.
On July 11, 2002, we entered into a Settlement Agreement with ING Merger,
LLC and ING Capital, LLC, pursuant to which we issued to ING Capital, 200,000
shares of our class A common stock and five-year warrants to purchase 60,000
shares of class A common stock. The warrants have an exercise price of $3.58 per
share and may be exercised on a cashless basis. We may, at our option, redeem
the warrants at a price of $.10 per warrant commencing in January 2003 if the
closing bid price of the class A common stock exceeds 200% of the exercise price
of the warrants for 30 consecutive trading days. These shares and warrants were
issued to ING Capital, a wholly-owned subsidiary of ING Merger, the successor in
interest to ING Barings, LLC, in settlement of $700,000 of fees we owed to ING
Barings for financial advice ING Barings provided to us in connection with our
acquisition of a privately owned professional services business in November
2000.
The table below sets forth information, as of August 30, 2002, regarding
the beneficial ownership of the shares of class A common stock by the selling
stockholders. As used herein, "selling stockholders" includes donees and
pledgees selling shares of class A common stock received from the persons or
entities listed below after the date of this prospectus. The information
regarding the selling stockholders' beneficial ownership after this offering
assumes that all the shares of class A common stock offered by this prospectus
are sold.
Number of Shares
Of Class A Number of Shares Class A Common Stock
Common Stock Of Class A Beneficially Owned
Beneficially Owned Common Stock After Offering (1)
Selling Stockholders Before Offering Offered Hereunder Number Percent
-------------------- ------------------ ----------------- -------- -----------
ING Capital, LLC 260,000 (2) 260,000 0 0 %
Blue Water Venture Fund II (3) 1,054,546 54,545 1,000,001 8.56 %
CCJ Trust 26,181 4,909 21,727 *
Chery Ulie 374,289 65,454 308,835 2.64 %
David Hubbard (4) 327,897 (5) 2,182 325,715 2.79 %
Gerhard Waldschutz 24,089 5,454 18,635 *
Harvey Blitz 45,750 6,000 39,750 *
12
Number of Shares
Of Class A Number of Shares Class A Common Stock
Common Stock Of Class A Beneficially Owned
Beneficially Owned Common Stock After Offering (1)
Selling Stockholders Before Offering Offered Hereunder Number Percent
-------------------- ------------------ ----------------- -------- -----------
Henry Steeneck 51,636 8,182 43,454 *
Herman Mueller 10,473 1,964 8,509 *
Katahdin LLC 22,500 22,500 0 0 %
Michael Solomon 49,089 5,454 43,635 *
Rhoderick Parker 26,181 4,909 21,272 *
Robert Rosen Trust 29,089 5,454 23,635 *
Robert W. Main 54,089 5,454 48,635 *
Samuel Staggers 29,089 5,454 23,635 *
Spencer I. Browne (6) 71,125 (7) 5,454 65,671 *
Stephen J. Posner 104,845 6,000 98,845 *
Steven Richman 173,072 10,800 162,272 1.39 %
TCMP3 Partners 21,728 16,364 5,364 *
Walter M. Psztur (8) 300,567 (9) 2,182 298,385 2.55 %
- --------------------
* Less than 1%.
(1) Assumes that all shares of class A common stock are sold pursuant to this
registration statement.
(2) Includes 60,000 shares of class A common stock issuable upon the exercise
of warrants.
(3) Mr. Cooke, a director of the Company, is a managing director of Blue
Water Capital II, L.L.C., the managing member of the Blue Water Venture
Fund II, L.L.C.
(4) Mr. Hubbard is the Company's Chief Technology Officer and Senior Vice
President of Engineering.
(5) Includes 233,929 shares of class A common stock issuable upon the exercise
of options that are fully exercisable within 60 days of August 30, 2002.
In addition, includes 110,000 shares of class A common stock issuable upon
the exercise of options, of which 1/3 are immediately exercisable, 1/3 are
exercisable when the Company's class A common stock closes at $10 and 1/3
are exercisable when the Company's net revenues in any one month equals or
exceeds $2 million.
(6) Mr. Browne is a director of the Company.
(7) Includes 3,703 shares of class A common stock granted as fees for serving
as a director of the Company.
(8) Mr. Psztur is the Company's Chief Financial Officer and Secretary.
(9) Includes 117,265 shares of class A common stock issuable upon the exercise
of options that are fully exercisable within 60 days of August 30, 2002.
In addition, includes 175,000 shares of class A common stock issuable upon
the exercise of options, of which 1/3 are immediately exercisable, 1/3 are
exercisable when the Company's class A common stock closes at $10 and 1/3
are exercisable when the Company's net revenues in any one month equals or
exceeds $2 million.
13
PLAN OF DISTRIBUTION
ICC is registering the shares of class A common stock on behalf of the
selling stockholders. We anticipate that the selling stockholders may sell all
or a portion of the shares of class A common stock offered by this prospectus
from time to time on the Nasdaq National Market, on other securities exchanges
or in private transactions, at fixed prices, at market prices prevailing at the
time of sale or at prices reasonably related to the market price, at negotiated
prices, or by a combination of these methods of sale through:
o ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o sales to one or more brokers or dealers as principal, and the resale by
those brokers or dealers for their account, including resales to other
brokers and dealers;
o block trades in which a broker or dealer will attempt to sell the shares
of class A common stock as agent but may position and resell a portion of
the block as principal to facilitate the transaction; or
o privately negotiated transactions with purchasers.
We are not aware as of the date of this prospectus of any agreements
between the selling stockholders and any broker-dealers regarding the sale of
the shares of class A common stock offered by this prospectus, although we have
made no inquiry in that regard. In connection with distributions of the shares
of class A common stock, the selling stockholders may enter into hedging
transactions with broker-dealers. In connection with these transactions:
o broker-dealers may engage in short sales of the shares of class A common
stock covered by this prospectus in the course of hedging the positions
they assume with selling stockholders;
o the selling stockholders may sell shares of class A common stock short and
deliver the shares of class A common stock offered by this prospectus to
close out their short positions;
o the selling stockholders may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the
shares of class A common stock offered by this prospectus, which the
broker-dealer may resell according to this prospectus; and
o the selling stockholders may pledge the shares of class A common stock
offered by this prospectus to a broker or dealer and upon a default, the
broker or dealer may effect sales of the pledged shares of class A common
stock according to this prospectus.
All costs, fees and expenses of registration incurred in connection with
the offering will be borne by us, except that ING Capital has agreed to
reimburse us for up to $15,000 of these expenses. All selling and other expenses
incurred by the selling stockholders will be borne by the selling stockholders.
We have agreed to indemnify or provide contributions to the selling stockholders
for certain liabilities, including liabilities arising under the Securities Act
of 1933, as amended, or the Securities Act.
The selling stockholders and any broker, dealer or other agent executing
sell orders on behalf of the selling stockholders may be considered to be
underwriters within the meaning of the Securities Act. If so, commissions
received by any of these brokers, dealers or agents and profit on any resale of
the shares of class A common stock may be considered to be underwriting
commissions under the Securities Act. These commissions received by a broker,
dealer or agent may be in excess of customary compensation.
The selling stockholders also may resell all or a portion of the shares of
class A common stock offered by this prospectus in reliance upon Rule 144 under
the Securities Act, provided that they meet the criteria and conform to the
requirements of that Rule.
We have notified the selling stockholders that they will be subject to
applicable provisions of the Securities Exchange Act of 1934 and its rules and
regulations, including, among others, Rule 102 under Regulation M. These
provisions may limit the timing of purchases and sales of any of the shares of
class A common stock by the selling stockholders. Rule 102 under Regulation M
provides, with some exceptions, that it is unlawful for the selling
14
stockholders or their affiliated purchasers to, directly or indirectly, bid for
or purchase, or attempt to induce any person to bid for or purchase, for an
account in which the selling stockholders or affiliated purchasers have a
beneficial interest, any securities that are the subject of the distribution
during the applicable restricted period under Regulation M. All of the above may
affect the marketability of the shares of class A common stock. To the extent
required by law, we may require the selling stockholders, and their brokers, if
applicable, to provide a letter that acknowledges compliance with Regulation M
under the Exchange Act before authorizing the transfer of the selling
stockholders' shares of class A common stock.
DESCRIPTION OF SECURITIES
The following summary description of the material terms of our capital
stock and warrants is not intended to be complete. The terms of our capital
stock are also governed by the provisions of our certificate of incorporation
and bylaws, which are included as exhibits to the registration statement, and
the Delaware General Corporation Law. You should read our certificate of
incorporation and bylaws very carefully. Some of the relevant provisions of our
certificate of incorporation and bylaws and the Delaware General Corporation Law
are discussed under the heading Delaware Law and Certificate of Incorporation
and Bylaw Provisions beginning on page 16 of this prospectus.
We have the authority to issue up to 40,000,000 shares of class A common
stock, 2,000,000 shares of class B common stock and 5,000,000 shares of
preferred stock.
Common Stock
Class A common stock
As of August 30, 2002, there were 11,679,967 shares of class A common
stock outstanding, held of record by approximately 179 stockholders. The class A
common stock is currently traded on the Nasdaq National Market under the symbol
ICCA.
Holders of class A common stock are entitled to one vote per share on all
matters to be voted on by our common stockholders. Subject to the preferences of
the preferred stock, the holders of class A common stock are entitled to a
proportional distribution of any dividends that may be declared by the board of
directors, provided that if any distributions are made to the holders of class A
common stock, identical per-share distributions must be made to the holders of
the class B common stock, even if the distributions are in class A common stock.
In the event of a liquidation, dissolution or winding up of ICC, the holders of
class A common stock are entitled to share equally with holders of the class B
common stock in all assets remaining after liabilities and amounts due to
holders of preferred stock have been paid in full or set aside. Class A common
stock has no preemptive, redemption or conversion rights. The rights of holders
of common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of series C preferred stock or any other series of
preferred stock that ICC may designate and issue in the future.
Preferred Stock
Our certificate of incorporation authorizes our board of directors,
without any approval of our stockholders, to issue up to 5,000,000 shares of
preferred stock from time to time and in one or more series and to fix the
number of shares of any series and the designation, conversion, dividend,
liquidation preference and other rights of the series. The board of directors
has designated 10,000 shares of preferred stock as series A preferred stock, 175
shares of preferred stock as series S preferred stock and 10,000 shares of
preferred stock as series C preferred stock. No shares of series A preferred
stock or series S proposed stock are outstanding and the Board of Directors does
not intend to authorize the issuance of any of these shares.
Future issuances of preferred stock may have the effect of delaying or
preventing a change in control of ICC. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the rights and powers,
including voting rights, of the holders of our common stock. In some
circumstances, the issuance of preferred stock could have the effect of
decreasing the market price of our common stock.
15
Series C preferred stock
As of August 30, 2002, ICC had 10,000 shares of series C preferred stock
outstanding, held by one stockholder.
Series C preferred stock is convertible, at the option of the holder, into
class A common stock. Each share of series C preferred stock is convertible into
a number of shares of class A common stock determined by dividing $1,000 by the
conversion price at the date of conversion. The conversion price for the series
C preferred stock is $22.34 per share, which is subject to adjustment in the
case of a reclassification, subdivision or combination of ICC's common stock and
upon a consolidation, merger or sale of substantially all of the assets of ICC.
Series C preferred stock is redeemable, in whole or in part, by ICC,
commencing on January 5, 2005. The redemption price for each share of series C
preferred stock is $1,000 plus unpaid dividends. Notice of redemption must be
given not less than fifteen days nor more than 45 days before the redemption
date.
Upon a liquidation, dissolution or winding up of ICC, the holders of
series C preferred stock are entitled to receive an amount equal to $1,000 per
share of series C preferred stock plus unpaid dividends before any distribution
is made to holders of common stock.
The holders of the outstanding shares of series C preferred stock are
entitled to a 4% annual dividend payable in cash or in shares of class A common
stock (valued at the then market price of the class A common stock), at the
option of ICC. These dividends are payable on each January 1 and commenced on
January 1, 2001. ICC elected to issue 111,142 shares of class A common stock in
payment of the dividend due on January 1, 2001 and 98,839 shares of class A
common stock in payment of the dividend due on January 1, 2002.
Each share of series C preferred stock is entitled to a number of votes
equal to the number of whole shares of common stock into which each share of
series C preferred is convertible as of the record date for the determination of
stockholders entitled to vote on any matter submitted to stockholders. As of the
date of this prospectus, each share of class C preferred stock is entitled to
approximately 44.76 votes.
Warrants
In April 1999, a consultant received 18,000 warrants for consulting
services performed for ICC. Each of these warrants entitles the holder upon
exercise to purchase one share of class A common stock for $9.94 and expires in
March 2004. As of August 30, 2002, all of these warrants were outstanding.
In connection with our strategic global alliance with Cable & Wireless, we
issued to Cable & Wireless 400,000 warrants to purchase shares of our class A
common stock. Each of these warrants entitles the holder upon exercise to
purchase one share of class A common stock for $22.21 and expires in January
2005. The number and exercise price of these warrants are subject to appropriate
adjustment in the event of any stock dividend, subdivision or combination of the
outstanding class A common stock. As of August 30, 2002, all of these warrants
were outstanding.
16
In connection with our acquisition of Research Triangle Commerce Inc. in
November 2000, warrants to purchase shares of RTCI common stock were exchanged
for warrants to purchase an aggregate of 45,760 shares of our class A common
stock at $5.77 per share. These warrants expire in January 2003. As of August
30, 2002, all of these warrants were outstanding.
On October 29, 2001, we sold in a private placement 1,159,716 shares of
class A common stock and warrants to purchase 347,915 additional shares of class
A common stock for gross proceeds of $3,189,219. The warrants expire in October
2006 and are exercisable at $3.58 per share. The warrants are redeemable at our
option for $.10 per warrant commencing in April 2003 if the closing bid price of
our class A common stock is at least 200% of the exercise price of the warrants
for 30 consecutive trading days. In connection with the private placement, we
incurred fees of $152,111, of which $35,000 was paid in cash and $117,511 was
paid by issuing warrants to purchase 50,000 shares of class A common stock.
These warrants have substantially the same terms as the warrants issued in the
October 2001 private placement.
We commenced a warrant exchange offer on April 23, 2002 that ended on May
31, 2002. The offer was extended to investors who participated in the private
placement on October 29, 2001 and to holders of warrants issued as fees in
connection with the private placement. The offer reduced the exercise price of
the warrants issued in the private placement to $2.50 per share for those
investors that agreed to exercise those warrants. In addition, for each share of
class A common stock purchased pursuant to the warrant exercise, a new five-year
warrant to purchase an equivalent number of shares of class A common stock was
issued. These warrants have an exercise price of $3.50 per share and otherwise
contain the same terms as the warrants issued in the private placement. We
received $658,768 in proceeds and issued a total of 263,715 shares of class A
common stock and warrants to purchase the same number of shares of class A
common stock.
One July 11, 2002, we entered into a Settlement Agreement with ING Merger,
LLC and ING Capital, LLC, a wholly-owned subsidiary of ING Merger, pursuant to
which, we issued to ING Capital warrants to purchase 60,000 shares of class A
common stock. See "Selling Stockholders" on page 12.
Delaware Law and Certificate of Incorporation and Bylaw Provisions
The following is a summary description of some material provisions of the
Delaware General Corporation Law and our certificate of incorporation and
bylaws. For further information you should refer to our certificate of
incorporation and bylaws.
We must comply with the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder for three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A business combination includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. An interested
stockholder is generally a person who, together with affiliates and associates,
owns, or within the past three years did own, 15% of the corporation's voting
stock.
There are provisions in our certificate of incorporation, our bylaws and
Delaware law that make it more difficult for a third party to obtain control of
ICC, even if doing so would be beneficial to our stockholders. This could
depress our stock price. However, these provisions enhance the likelihood of
continuity and stability in the composition of the policies formulated by our
board of directors. In addition, these provisions are intended to ensure that
the board of directors will have sufficient time to act in what it believes to
be in the best interests of ICC and its stockholders. These provisions also are
designed to reduce our vulnerability to an unsolicited takeover proposal that
does not contemplate the acquisition of all of our outstanding shares or an
unsolicited proposal for the restructuring or sale of all or part of ICC. The
provisions are also intended to discourage some tactics that may be used in
proxy fights.
Classified Board of Directors. Our board of directors is divided into
three classes of directors. The classes are as nearly equal in number as
possible and serve staggered three-year terms. One class of directors is elected
each year to serve a three-year term. The classified board provision will help
to assure the continuity and stability of the board of directors and our
business strategies and policies as determined by the board of directors. The
classified board provision could have the effect of discouraging a third party
from making a tender offer for our shares or attempting to obtain control of
ICC. In addition, the classified board provision could delay stockholders who do
not agree with the policies of the board of directors from replacing a majority
of the board of directors for two years.
17
Indemnification. We have included in our certificate of incorporation and
bylaws provisions to (1) eliminate the personal liability of our directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by the Delaware General Corporation Law, and (2) indemnify our
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, including circumstances in which indemnification is
discretionary.
We believe that these provisions are necessary to attract and retain
qualified persons as directors and officers.
Transfer Agent and Registrar
The transfer agent and registrar for our class A common stock is American
Stock Transfer and Trust Company.
LEGAL MATTERS
The legality of the shares of class A common stock being offered by this
prospectus has been passed upon by Kramer Levin Naftalis & Frankel LLP, New
York, New York.
EXPERTS
The consolidated financial statements and related financial statement
schedule for the years ended July 31, 2001 and 2000, incorporated in this
prospectus by reference from Internet Commerce Corporation's annual report on
form 10-K for the year ended July 31, 2001, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
Eisner, LLP (formerly Richard A. Eisner & Company LLP), our previous
independent auditors, have audited our financial statements and related
financial statement schedule for the year ended July 31, 1999, as stated in
their report included in our annual report on form 10-K for the year ended July
31, 2001, which is incorporated in this prospectus by reference. Our financial
statements for the year ended July 31, 1999 and related financial statement
schedule, are incorporated by reference in reliance on the report of Eisner, LLP
(formerly Richard A. Eisner & Company LLP), given on their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Government Filings. We file annual, quarterly and special reports, proxy
statements and other information with the SEC. Our SEC filings are available to
the public over the Internet at the SEC's web site at http://www.sec.gov. You
may also read and copy any document we file at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operation of the SEC's public reference room in Washington, D.C. by calling
the SEC at 1-800-SEC-0330.
We have filed with the SEC a registration statement on form S-3 to
register the shares of class A common stock to be offered. This prospectus is
part of that registration statement and, as permitted by the SEC's rules, does
not contain all the information included in the registration statement. For
further information about us and our class A common stock, you should refer to
that registration statement and to the exhibits and schedules filed as part of
that registration statement, as well as the documents we have incorporated by
reference which are discussed below. You can review and copy the registration
statement, its exhibits and schedules, as well as the documents we have
incorporated by reference, at the public reference facilities maintained by the
SEC as described above. The registration statement, including its exhibits and
schedules, are also available on the SEC's web site, given above.
o Stock Market. Shares of our class A common stock are traded on the Nasdaq
National Market.
o Information Incorporated by Reference. The SEC allows us to incorporate by
reference the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this
prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by
reference the documents listed below and any further filings made with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until
this offering has been completed:
o Our annual report on form 10-K for the year ended July 31, 2001;
o Our quarterly reports on form 10-Q for the quarters ended October 31,
2001, January 31, 2002 and April 30, 2002; and
o The description of our class A common stock contained in our Rule 424
prospectus filed with the SEC on July 18, 1995, including any
amendments or reports filed for the purpose of updating the
description. See also Description of Securities beginning on page 15
of this prospectus.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Internet Commerce Corporation
805 Third Avenue
New York, New York 10022
(212) 271-7640
Attn: Victor Bjorge
We are not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents. We have not authorized anyone to
provide you with, and you should not rely on, information other than that which
is in this prospectus, any prospectus supplement or which is incorporated in
this prospectus by reference.
19
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
the distribution of the securities covered by this Registration Statement. All
of the expenses will be borne by ICC except as otherwise indicated.
SEC Registration Fee (actual)................................. $ 180.78
Printing and engraving fees and expenses.......................$ 1,000
Legal fees and expenses........................................$ 15,000
Accounting fees and expenses...................................$ 5,000
Miscellaneous..................................................$ 1,000
----------
Total..........................................................$22,180.78
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, or
the DGCL, provides that a corporation may indemnify directors and officers as
well as other employees and individuals against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with
specified actions, suits, proceedings whether civil, criminal, administrative,
or investigative, other than action by or in the right of the corporation, known
as a derivative action, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses, including attorneys' fees, incurred in connection with the
defense or settlement of the action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
certificate of incorporation, bylaws, disinterested director vote, stockholder
vote, agreement or otherwise. Section 145 thus makes provision for
indemnification in terms sufficiently broad to cover officers and directors,
under certain circumstances, for liabilities arising under the Securities Act.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payment of unlawful dividends or unlawful
stock purchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
Article VII of our bylaws and Article Seventh of our Amended and Restated
Certificate of Incorporation, as further amended, both provide that we shall
indemnify, to the fullest extent permitted by Section 145 of the DGCL, each
person that Section 145 grants us power to indemnify. Article VIII of our bylaws
and Article Seventh of our Amended and Restated Certificate of Incorporation, as
further amended, both provide that no director shall be liable to us or any of
our stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director's duty of loyalty
to the corporation or its stockholders, (2) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the DGCL or (4) a transaction from which the
director derived an improper personal benefit, and that it is the intention of
the foregoing provisions to eliminate the liability of our directors to ICC and
our stockholders to the fullest extent permitted by Section 102(b)(7) of the
DGCL.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. If a claim for indemnification against such liabilities (other
than the payment by ICC of expenses incurred or paid by a director, officer or
controlling person of ICC in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection
II-1
with the securities being registered, we will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by ICC is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Item 16. Exhibits.
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated in this registration statement
by reference to a prior filing of ICC under the Securities Act or the Securities
Exchange Act of 1934, as amended, as indicated in parenthesis:
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Merger among ICC, ICC Acquisition Corporation,
Inc., a wholly-owned subsidiary of ICC, Research Triangle Commerce,
Inc., or RTCI, and the selling shareholders of RTCI (13)
2.2 Agreement and Plan of Merger among ICC, IDC, and the selling
shareholders of IDC (14)
3(i).1 Amended and Restated Certificate of Incorporation (1)
3(i).2 Certificate of Merger merging Infosafe Systems, Inc. and Internet
Commerce Corporation (1)
3(i).3 Certificate of Amendment to the Amended and Restated Articles of
Incorporation (2)
3(i).4 Certificate of Designations-- Series A Convertible Redeemable
Preferred Stock (1)
3(i).5 Certificate of Designations-- Series S Preferred Stock (1)
3(i).6 Certificate of Designations-- Series C Preferred Stock (9)
3(ii).1 Bylaws (18)
4.1 Specimen Certificate for Class A Common Stock (3)
4.2 Form of Class A Bridge Warrant issued in the 1998 bridge
financing (1)
4.3 Warrant Agreement dated January 12, 2000, by and among ICC and
Cable and Wireless USA, Inc. (9)
4.5 RTCI Employee Stock Option Plan (14)
4.6 Amendment to RTCI Employee Stock Option Plan (14)
4.7 Form of Three-Year Incentive Stock Option Agreement (14)
4.8 Form of Four-Year Incentive Stock Option Agreement (14)
4.9 Form of Non-Qualified Stock Option Agreement (14)
4.10 Form of Buy-Sell Agreement for Optionholders (14)
4.11 Research Triangle Commerce, Inc. Restricted Stock Plan (15)
4.12 Warrant Agreement between ICC and Ben Brooks (19)
4.13 Warrant Agreement between ICC and Marion Bass Securities
Corporation (19)
4.14 Warrant Agreement between ICC and Rene Matthews Usher (19)
4.15 Warrant Agreement between ICC and Mark Yount (19)
4.16 Warrant Agreement between ICC and Richard Blume dated April 1,
1999 (21)
4.17 Form of Class A Common Stock Warrant issued in October 2001
private placement (21)
II-2
4.18* Registration Rights Agreement dated July 11, 2002 by and among
ICC, ING Merger, LLC and ING Capital, LLC
4.19 * Warrant Agreement between ICC and ING Capital, LLC dated July 11,
2002
5.1 * Opinion of Kramer Levin Naftalis & Frankel LLP regarding legality
of the shares of class A common stock being registered pursuant to
this Registration Statement
10.1 1992 Stock Option Plan (3)
10.2 1994 Stock Option Plan (3)
10.3 Lease Agreement between 805 Third Ave. Co. as landlord and ICC as
tenant relating to the rental of ICC's current principal
executive office (6)
10.4 Lease Agreement, dated as of May 21, 1999, between JB Squared LLC
and ICC relating to the rental of approximately 4,000 square feet at
the Lakeview Executive Center, 45 Research Way, East Setauket, New
York, 11733 (7)
10.5 Employment Agreement for Anthony D'Angelo dated as of April 16,
2000 (20)
10.6 Employment Agreement for G. Michael Cassidy dated as of April 16,
2000 (17)
10.7 Employment Agreement for David Hubbard dated as of April 16, 2000
(17)
10.8 Employment Agreement for Walter M. Psztur dated as of April 16,
2000 (17)
10.9 Master Agreement between Cable & Wireless PLC and ICC executed on
November 24, 1999 (8)
10.10 Consulting Agreement, dated as of March 15, 2000, between Michele
Golden and ICC (10)
10.11 Amended and restated stock option plan (11)
10.12 First Amendment to Lease Agreement, dated as of January, 2000, by
and between JB Squared LLC and ICC relating to the rental of an
additional approximately 4,800 square feet at the Lakeview Executive
Center, 45 Research Way, East Setauket, New York, 11733 (17)
10.13 First Amendment of Lease Agreement between Madison Third Building
Companies LLC and ICC relating to the rental of additional office
space at 805 Third Avenue, New York, New York (17)
10.14 Lease Agreement, dated as of August 2, 2000, by and between IDC
Realty, LLC as landlord and ICC as tenant relating to the rental of
an approximately 8,000 square feet facility used by ICC's IDC
division (17)
10.15 Lease Agreement, dated as of November 1, 1999, by and between
Shannon Oaks Partnership as landlord and RTCI as tenant relating to
the rental of an approximately 8,000 square feet facility used by
ICC's professional services division (20)
10.16 Joint Services Agreement, between ICC and Hightech International
Services GmbH (a wholly-owned subsidiary of ThyssenKrupp Services
GmbH) executed on July 28, 2000 (20)
10.17 Letter agreement dated July 25, 2001 between ICC and Triaton GmbH
(f/k/a HighTech International Services, a wholly-owned subsidiary of
ThyssenKrupp Services GmbH) amending Joint Services Agreement (20)
10.19 Subscription Agreement dated as of October 29, 2001 by and
between ICC and Amaranth Trading LLC (20)
10.23 Form of Subscription Agreement dated as of October 29, 2001 by
and among ICC and the purchasers identified therein (20)
10.24 * Settlement Agreement dated July 11, 2002 by and among ICC, ING
Merger, LLC and ING Capital, LLC
10.25 * Agreement dated July 9, 2002 by and between Triaton GmbH, a company
of ThyssenKrupp Information Services GmbH organized under the laws
of Germany and ICC.
23(ii).1 Consent of Deloitte & Touche LLP (22)
23(ii).2 Consent of Eisner, LLP (formerly Richard A. Eisner & Company, LLP)
(22)
II-3
23(ii).4* Consent of Kramer Levin Naftalis & Frankel LLP (contained in Exhibit
5.1 hereto)
(b) Financial Statement Schedules:
Not Applicable.
* Filed herewith
(1) Incorporated by reference to the Company's Registration Statement on Form
S-3 (File no. 333-80043)
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended July 31, 1998
(3) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File no. 33-83940)
(4) Incorporated by reference to the Company's Report on Form 10-QSB dated
January 31, 1997
(5) Incorporated by reference to the Company's Report on Form 10-QSB dated
April 30, 1997
(6) Incorporated by reference to the Company's Report on Form 10-QSB dated
October 31, 1997
(7) Incorporated by reference to Amendment No. 3 to the Company's Registration
Statement on Form S-3 (File no. 333-80043)
(8) Incorporated by reference to the Company's Current Report on Form 8-K dated
December 1, 1999
(9) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-3 (File No. 333-93301)
(10) Incorporated by reference to the Company's Current Report on Form 8-K dated
March 28, 2000
(11) Incorporated by reference to the Company's Proxy Statement for the annual
meeting of stockholders for the year ended July 31, 1999
(12) Incorporated by reference to the Company's Current Report on Form 8-K dated
June 15, 2000
(13) Incorporated by reference to the Company's Current Report on Form 8-K dated
August 11, 2000
(14) Incorporated by reference to the Company's Registration Statement on Form
S-8 (File no. 333-49372)
(15) Incorporated by reference to the Company's Registration Statement on Form
S-8 (File no. 333-493640)
(16) Incorporated by reference to the Company's Current Report on Form 8-K dated
December 1, 1999
(17) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the year ended July 31, 2000
(18) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the SEC on July 1, 1999
(19) Incorporated by reference to the Company's Registration Statement on Form
S-3 (File No. 333-52450)
(20) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended July 31, 2001
(21) Incorporated by reference to the Company's Registration Statement on Form
S-3 (File no. 333-75760)
(22) To be filed as a pre-effective amendment
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
II-4
provided, however, that clauses (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in periodic reports filed by the registrant with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
8th day of August, 2002.
Internet Commerce Corporation
by: /s/ G. Michael Cassidy
-----------------------------
G. Michael Cassidy
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ G. Michael Cassidy President and Chief August 8, 2002
- ------------------- Executive Officer
G. Michael Cassidy (Principal Executive Officer),
Director
/s/ Walter M. Psztur Chief Financial Officer August 8, 2002
- ------------------- (Principal Financial
Walter M. Psztur and Accounting Officer)
/s/ Richard J. Berman Director August 8, 2002
- -------------------
Richard J. Berman
/s/ Peter J. Boni Director August 8, 2002
- -------------------
Peter J. Boni
/s/ Spencer I. Browne Director August 8, 2002
- -------------------
Spencer I. Browne
Director August __, 2002
- -------------------
Sarah Byrne-Quinn
/s/ Kim D. Cooke Director August 8, 2002
- -------------------
Kim D. Cooke
Director August __, 2002
- -------------------
Charles C. Johnston
Director August __, 2002
- -------------------
Arthur R. Medici
Kramer Levin Naftalis & Frankel LLP
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
FACSIMILE 47, Avenue Hoche
(212) 715-8000 75008 Paris
----- France
DIRECT NUMBER
(212) 715-9100
August 30, 2002
Internet Commerce Corporation
805 Third Avenue
New York, New York 10022
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Internet Commerce Corporation, a
Delaware corporation (the "Registrant"), in connection with the preparation and
filing of a Registration Statement on Form S-3 (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") with respect to
the registration under the Securities Act of 1933, as amended (the "Act"), of an
aggregate of 498,715 shares (the "Shares") of Class A Common Stock, par value
$.01 per share, of the Registrant, which includes shares issuable upon the
exercise of warrants.
In connection with the registration of the Shares, we have reviewed
copies of the Registration Statement, the Amended and Restated Certificate of
Incorporation of the Registrant, as amended, the By-laws of the Registrant, the
Settlement Agreement by and among the Registrant, ING Merger, LLC and ING
Capital, LLC dated July 11, 2002, the Class A Common Stock Warrant Agreement
dated July 11, 2002, resolutions of the Board of Directors of the Registrant and
such other documents and records as we have deemed necessary to enable us to
express an opinion on the matters covered hereby. In rendering this opinion, we
have (a) assumed (i) the genuineness of all signatures on all documents reviewed
by us, (ii) the authenticity of all documents submitted to us as originals and
(iii) the conformity to original documents of all documents submitted to us as
photostatic or conformed copies and the authenticity of the originals of such
copies; and (b) relied on (i) representations, statements and certificates of
public officials and others and (ii) as to matters of fact, statements,
representations and certificates of officers and representatives of the
Registrant.
Based upon the foregoing, we are of the opinion that the Shares
covered by the Registration Statement have been, or, in the case of Shares
issuable upon exercise of warrants, when issued in accordance with the terms of
such warrants, will be, validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. In giving the foregoing consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section 7
of the Act or the rules and regulations of the Commission thereunder.
We do not express any opinion with respect to any law other than the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America. Our opinion is rendered only with respect to the laws
which are currently in effect in such jurisdictions.
Very truly yours,
/s/ Kramer Levin Naftalis & Frankel LLP