SECURITIES AND EXCHANGE COMMISSION
Washington, DC
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 1999
Fingermatrix, Inc.
(Exact name of Registrant as Specified in its Charter)
New York 0-9940 13-2854686
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
249 North Saw Mill River Road, Elmsford, New York 10523
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (914) 592-5930
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Item 1. Changes in Control of Registrant.
Exchange of Shares
On April 28, 1999, in a share exchange with The Trinity Group, Inc.
("Trinity"), a privately held Delaware corporation, the Registrant acquired all
of the issued and outstanding shares, common and preferred, of SES Acquisition
Corp. in exchange for 85% of the equity and voting power of the Registrant
consisting of 10,571,607 shares of Common Stock and 93,654 shares of Series A 2%
Voting Convertible Redeemable Preferred Stock (the "Series A Preferred Stock")
of the Registrant. Pursuant to the terms of the Agreement and Plan of
Reorganization, the current shareholders of the Registrant will retain 10% of
the ownership of the Registrant consisting of 9,428,393 shares of the Common
Stock of the Registrant and certain creditors of the Registrant will receive
6,346 shares of the Series A Preferred Stock in exchange for their debt of
$648,365.70, in the aggregate. Such shares, on conversion, will equal 5% of the
equity and voting power of the Registrant.
The Registrant has not conducted any business operations since October
15, 1977, other than to search for investment capital, a source of debt
financing, an entity to purchase the Registrant or a merger or joint venture
partner. Such efforts were unsuccessful.
The Agreement and Plan of Reorganization requires that SES Acquisition
Corp. and its subsidiaries have a minimum combined net worth of not less than
$1,500,000. The Agreement and Plan of Reorganization also requires that, as soon
as practicable, the Registrant call and hold a Special Meeting of Stockholders
to vote upon increasing the authorized capital of the Registrant so as to permit
the conversion of all of the Series A Preferred Stock into Common Stock and,
upon the completion of such conversion, effecting a reverse split of the
outstanding shares of the Common Stock so that there will remain 5,000,000
shares of Common Stock outstanding and no outstanding shares of the Series A
Preferred Stock. Trinity owns a sufficient number of shares of the Registrant to
cause the adoption of these proposals whether or not any other shareholder
votes. The Registrant does not intend to solicit proxies for such meeting.
SES Acquisition Corp. is the sole stockholder of Sequential Electronic
Systems, Inc. which designs and manufactures electro-optical products and
S-Tech, Inc. which designs and manufactures specialized vending machines and a
variety of avionic equipment. It also owns a 50.1% interest in FMX, Inc. which
developing electronic fingerprint identification technology.
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Change of Directors and Officers
Effective upon the closing of the share exchange the current directors
of the Registrant resigned and Messrs. Lewis S. Schiller, E. Gerald Kay and Joel
Brown were appointed to the Board of Directors of the Registrant. At such time
the officers of the Registrant also resigned and the Board of Directors
appointed Lewis S. Schiller as Chairman of the Board and Chief Executive Officer
and Chief Financial Officer, Fred Zivitofsky as President and Grace Wnuk as Vice
President and Secretary.
Mr. Lewis S. Schiller was appointed as Chairman of the Board, Chief
Executive Officer and Director of the Registrant on April 28, 1999. He also
serves as Chairman of the Board, Chief Executive Officer and as a director of
Trinity, SES and SES's subsidiaries. For more than five years prior to his
resignation on April 2, 1998, Mr. Schiller was the Chairman of the Board, Chief
Executive Officer and a director of Consolidated Technology Group Ltd. ("COTG"),
a public company, and as, Chairman of the Board, Chief Executive Officer and a
director of COTG's public and privately-held subsidiaries.
Mr. Fred Zivitofsky was appointed President of the Registrant on
April28, 1999. From 1993 until August 1997 Mr. Zivitofsky served as Senior Vice
President and Chief Operating Officer of S-Tech, Inc., a wholly owned subsidiary
of SES Acquisition Corp. From August 1997 to date he has served as President of
S-Tech.
Ms. Grazyna B. Wnuk was appointed Vice President and Secretary of the
Registrant. For more than five years prior to her resignations on April 2, 1998,
Ms. Wnuk serve as Secretary of COTG and all of its public and privately-held
subsidiaries.
Mr. E. Gerald Kay was appointed as a director of the Registrant on
April 28, 1999. For more than five years prior to his resignation on April 2,
1998, he served as a director of COTG and its public and certain of its
privately-held subsidiaries. Mr. Kay has also served as Chairman of the Board
and Chief Executive Officer of Chem International, Inc., a pharmaceutical
manufacturer, Manhattan Drug Co., Inc., a wholesaler of pharmaceutical products,
The Vitamin Factory, Inc., a chain of retail vitamin stores, and Connaught
Press, Inc., a publisher, for more than the past five years. From 1988 to 1990,
he was also President and a Director of The Rexall Group, Inc., a distributor of
Rexall brand products.
Mr. Joel Brown was appointed as a director of the Registrant on April
28, 1999. For more than five years prior to such date, Mr. Brown has been a
private investor.
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Item 5. Other Events
The Registrant is not up to date in filing its periodic reports with
the U.S. Securities and Exchange Commission. The last such periodic report filed
was the Registrant's report on Form 8-K dated September 3, 1997 announcing a
temporary shutdown of operations. Previously, the Registrant had filed its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
The Registrant intends to file or requalify for filing on the EDGAR
System.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Form of Agreement and Plan of Reorganization dated April
28, 1999 between the Registrant and The Trinity Group, Inc.
99.2 Form of Debt Exchange Agreement dated April 28, 1999
among the Registrant and those parties whose names appear on Exhibit "A" to the
Agreement.
99.3 Form of Certificate of Amendment of the Certificate of
Incorporation of the Registrant dated April 28, 1999 containing the Statement of
the Powers, Designations, Preferences, Privileges, Rights and Restrictions of
the Registrant's Series A 2% Voting Convertible Redeemable Preferred Stock.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINGERMATRIX, INC.
By: /S/ Lewis S. Schiller
Date: May 13, 1999 ---------------------
------------- Lewis S. Schiller
Chief Executive Officer
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Exhibit 99.1
AGREEMENT AND PLAN OF REORGANIZATION
between
FINGERMATRIX, INC.
and
THE TRINITY GROUP, INC.
AGREEMENT AND PLAN OF REORGANIZATION dated this ___day of April, 1999
between FINGERMATRIX, INC., a New York corporation formerly located at 145
Palisade Street, Dobbs Ferry, New York 10522 ("Fingermatrix" or the "Company")
and THE TRINITY GROUP, INC., a Delaware corporation having an office at 21346
St. Andrews Boulevard, Suite 137, Boca Raton, FL 33433 ("Trinity").
W I T N E S S E T H
WHEREAS, the Company desires to acquire from Trinity and Trinity
desires to exchange with the Company all of the issued and outstanding shares of
the capital stock SES ACQUISITION CORP., a Delaware corporation ("SESA") in
exchange for 85% of the equity and voting power of the Company, all upon the
terms and conditions hereinafter set forth and for the purposes of carrying out
a share exchange pursuant to Section 913 of the New York BCL and a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986; and
WHEREAS, in order to carry out the foregoing objectives, the parties
hereto desire to enter into and adopt this Agreement and Plan of Reorganization;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. For the purposes of this Agreement, the following terms
shall have the meanings ascribed to them below:
(a) "Closing" shall mean the consummation of the transaction to occur
on the Closing Date (as hereinafter defined) pursuant to this Agreement.
(b) "Closing Date" shall mean April 15, 1999 or such later date upon
which the parties hereto may agree.
(c) "Common Stock" shall mean shares of the common stock, $.01 par
value, of the Company.
(d) "Creditors" shall mean the persons defined as Creditors in the Debt
Exchange Agreement (as hereinafter defined).
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(e) "Debt Exchange Agreement" shall mean that certain agreement dated
as of January 1, 1999, by and between the Company and the persons whose names
appear on Exhibit A to such agreement.
(f) "Intellectual Property" shall mean the rights and property referred
to in Paragraph 2(a)(vi) of this Agreement.
(g) Noteholders" shall mean the persons defined as Noteholders in the
Debt Exchange Agreement.
(h) "Notes" shall mean the four promissory notes of Fingermatrix
referred to and defined as the Notes in the Debt Exchange Agreement
(i) "Notices" shall mean all notices, consents, requests, demands and
other communications required or permitted under this Agreement.
(j) "Series A Preferred Stock" shall mean Series A 2% Voting
Convertible Preferred Stock of the Company.
2. Warranties and Representations.
(a) The Company hereby warrants and represents as follows:
(i) The Company is and on the Closing Date will be a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York.
(ii) The Company has not conducted any business operations,
other than a search for investment capital, a source of debt financing, an
entity to buy the Company or its business, a merger or joint venture partner
since October 15, 1997.
(iii) The Company's authorized capital stock consists of
20,000,000 shares of Common Stock, $.01 par value per share, and 1,000,000
shares of Preferred Stock, $.01 par value per share of which 9,428,393 shares of
the Common Stock and no shares of the Preferred Stock are issued and outstanding
on the date hereof and 1,186,500 shares of the Common Stock are reserved for
issuance upon the exercise of outstanding options and warrants.
(iv) The Company has and prior to the Closing Date will have
no affiliates or subsidiaries. The Company does not own or control and on the
Closing Date will not own or control any of the capital stock of any
corporation.
(v) (A) The books of account of the Company fairly and
correctly reflect the Company's income, expenses, assets and liabilities in
accordance with generally accepted accounting principles consistently applied;
(B) the financial statements of the Company as at and for the years ended
September 30, 1996, 1995 and 1994, prepared and certified by Farber, Blicht
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& Eyerman, LLP, including the related notes, fairly present the financial
position of the Company as of said dates and the results of its operations for
such years; (C) the unaudited financial statements of the Company as at and for
the nine-month period ended June 30, 1997, including the related notes, if any,
fairly present the financial position of the Company as of said date and the
results of its operations for said period; and (D) to the best of the Company's
knowledge and belief, said financial statements show all material liabilities
and commitments of the Company, direct or contingent, as of said dates and, to
the best of the Company's knowledge and belief, the Company has no material
liabilities or commitments, direct or contingent, that are not reflected in said
financial statements except such current liabilities as have been incurred since
the dates thereof in the ordinary course of business and unpaid New York State
Liability in the aggregate amount of $4,500.
(vi) As of the Closing date, any and all intellectual property
of the Company including, but not limited to, copyrights, trademarks, trade
names and registrations therefor, licenses, inventions, letters patent,
applications for letters patent and patent license rights, in any form or
medium, in the possession of a director of the Company, has been physically
returned to the Company.
(vii) The Company has not filed any federal tax returns for
fiscal years subsequent to 1996.
(viii) The consummation of the transactions contemplated by
this Agreement will not result in the breach of any term or provision of the
Certificate of Incorporation or Bylaws of the Company or result in the breach of
any term or provision of, or constitute a default or result in the acceleration
of any obligation under, any loan agreement, indenture, financing agreement or
any other agreement or instrument of any kind to which the Company is a party.
(ix) When approved, executed and delivered by the Board of
Directors of the Company, this Agreement will have been duly and validly
authorized, executed and delivered and all requisite corporate action will have
been taken so that this Agreement will be valid and binding upon and enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
affecting generally the enforcement of creditors' rights and by general
principles of equity.
(b) Trinity hereby warrants and represents as follows:
(i) Trinity is and on the Closing Date will be a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and entitled to own its properties and to conduct its business
in the places where such properties are now owned and such business is now
conducted.
(ii) The execution, delivery and performance of this Agreement
by Trinity has been duly and validly authorized and all requisite corporation
action and upon execution and delivery it will be valid and binding upon Trinity
in accordance with its terms, except as the
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same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting generally the enforcement of creditors' rights and by
general principles of equity.
(iii) It is the record and beneficial owner, free and clear of
all liens and encumbrances, of all of the issued and outstanding shares of the
capital stock of SESA.
(iv) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of the
Certificate of Incorporation or Bylaws of Trinity or result in the breach of any
term or provision of, or constitute a default or result in the acceleration of
any obligation under, any agreement or other instrument to which SESA is a
party.
(vii) SESA is and on the Closing Date will be a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and entitled to own its properties and to conduct its business
in the places where such properties are now owned and such business is now
conducted.
(viii) The execution, delivery and performance of this
Agreement by SESA has been duly and validly authorized and all requisite
corporation action and upon execution and delivery it will be valid and binding
upon SESA in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
generally the enforcement of creditors' rights and by general principles of
equity.
(ix) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of the
Certificate of Incorporation or By-laws of SESA or result in the breach of any
term or provision of, or constitute a default or result in the acceleration of
any obligation under, any agreement or other instrument to which SESA is a
party.
(x) The unaudited combined financial statements of Sequential
Electronic Systems, Inc., a Delaware corporation ("SES") and FMX Inc., a
Delaware corporation ("FMX") and unaudited financial statement of S-Tech, Inc.,
a Delaware corporation ("S-Tech") as at and for the year ended December 31,
1998, true, correct and complete copies of which have been delivered to
Fingermatrix, fairly present, in all material respects, the financial position
of SES, FMX and S-Tech as of said dates and the results of their operations for
such years. The unaudited Balance Sheet as at December 31, 1998 constituting a
part of such financial statements shows that SES, FMX, Inc., and S-Tech, Inc.
have a combined net worth in excess of $1,500,000. Copies of such financial
statements are annexed hereto Exhibit A and incorporated herein by this
reference.
(xi) On the Closing Date, SESA will be the owner, free and
clear of all liens and encumbrances (except the lien created by that certain
Pledge Agreement dated as of January 1, 1998, among Lewis S. Schiller, SES and
Carol Schiller, of 50.1% of the issued and outstanding shares of FMX. and 100%
of the issued and outstanding shares of SES and S-Tech.
Inc. and SES.
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(c) Notwithstanding any investigation conducted before or after the
Closing, and notwithstanding any actual or implied knowledge or notice of any
facts or circumstances which any party may have as a result of such
investigation or otherwise, the parties shall be entitled to rely upon the
warranties and representations set forth herein, and the obligations of the
parties with respect thereto shall survive the closing and continue in full
force and effect until the third anniversary of the Closing Date, at which time
all warranties and representations set forth in this Agreement and all liability
of the parties with respect thereto shall terminate.
3. The Closing.
(a) On the Closing Date, the Company will:
(i) Cause to be filed with the Secretary of State of New York
the Certificate of Amendment to the Restated Certificate of Incorporation of the
Company, in the form annexed hereto as Exhibit 1 and incorporated herein by this
reference.
(ii) Certify that it has in its possession all of the
Intellectual Property of the Company in whatever form or medium and with all
manuals, instructions and the like, and all sales and marketing information,
contracts and agreements which was, prior to the Closing Date, in the possession
of any of the Company's Directors;
(iii) Deliver to Trinity a mutual termination without cost to
Trinity of the Employment Agreement between the Company and Thomas T. Harding;
(iv) Deliver to Trinity a mutual termination without cost to
Trinity of the Consulting Agreement between the Company and Newell & Storr &
Co., Inc.
(v) Deliver to Trinity fully executed Debt Exchange Agreements
between the Company and all of the Creditors and Noteholders;
(vi) Issue and deliver to the Creditors and Noteholders
certificates for an aggregate of 6,346 shares of the Series A Preferred Stock,
as provided for in the Debt Exchange Agreement;
(vii) Issue and deliver to Trinity a certificate for 93,654 shares
of the Series A Preferred Stock ;
(viii) Issue and deliver to Trinity certificates registered in
the name of The Trinity Group, Inc. for 10,571,607 shares of the Common Stock;
and
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(ix) reserve 271,650 shares of the Common Stock for issuance
upon the exercise of outstanding warrants and options of the Company; and
(b) On the Closing Date the directors of the Company will submit
seriatim resignations and elect or appoint three nominees of Trinity to fill the
vacancies created by such resignations. Such nominees, when duly elected or
appointed, will take over the management of the Company.
(c) On the Closing Date, Trinity will convey or cause to be conveyed to
the Company all of the issued and outstanding shares of each class of the
capital stock of SESA.
4. Conditions Precedent. All of the representations and warranties of the
parties hereto shall be true as of the Closing Date.
5. Conditions Subsequent:
(a) As soon as practicable following the Closing hereunder, the newly
formed board of directors of the Company will undertake to call and hold a
special meeting of the Fingermatrix shareholders for the purpose of obtaining
shareholder approval to increase the authorized capital of the Company so as to
permit the conversion of the Series A Stock and, upon completion of such
conversion, to reverse split the Common Stock so that there will remain
5,000,000 shares of Common Stock, $.01 par value, issued and outstanding. In
connection with such meeting, the Company will cause to be prepared and
circulated among the security holders of the Company an Information Statement
(the "Information Statement") with respect to the Company which shall be
prepared, filed and distributed in accordance with the provisions of Section
14(c) of the Securities Exchange Act of 1934, as amended, and Rule 14C
promulgated thereunder. The documented cost of the preparation of such
Information Statement, including legal and accounting fees, printing costs and
distribution costs, will be borne by Trinity.
(b) Upon the authorization and filing of the documentation necessary to
increase the authorized capital of the Company as aforesaid, and without further
act or deed, the shares of the Series A Preferred Stock held by the Creditors,
Noteholders and Trinity will be converted into 74,283,930 shares of the Common
Stock of which the Creditors and Noteholder will be entitled to 4,714,197
shares, pursuant to the terms of the Certificate of Designation, Rights and
Preferences of the Series A Preferred Stock and the Debt Exchange Agreement and
Trinity will be entitled to 69,569,733 shares;
(c) Upon the authorization by the Fingermatrix shareholders, as
provided in Paragraph 5(a) above, and without further act or deed, the issued
and outstanding shares of the Common Stock of the Company will be reverse split
on a 18.85679 shares for 1 share basis so that there will be 5,000,000 shares of
the Common Stock issued and outstanding;
6. Covenants of SESA.
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(a) Within ten (10) days of becoming a holder of ten percent (10%) or
more of the Common Stock of Fingermatrix, Trinity will file with the SEC a Form
3 reflecting its acquisition of shares of the Common Stock hereunder.
(b) On the Closing Date, the Company will file a Form 8-K with the SEC,
reporting the transactions that took place at the Closing.
7. Miscellaneous.
(a) This Agreement, including the Disclosure Schedule Exhibits hereto
and documents to be delivered at Closing, constitute the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, representations, warranties, statements,
promises, arrangements and understandings, whether oral or written, express or
implied, among the parties hereto with respect to the subject matter hereof and
may not be changed or modified except by an instrument in writing signed by the
party or parties to be bound thereby. This Agreement has been subject to the
mutual consultation, negotiation and agreement of the parties hereto and shall
not be construed for or against any party hereto on the basis of such party
having drafted this Agreement.
(b) All Notices shall be in writing and delivered personally or by a
nationally recognized overnight courier service, receipt acknowledged, or mailed
by registered or certified mail, postage prepaid, return receipt requested,
addressed to the parties hereto as follows (or to such other address as any of
the parties hereto shall specify by Notice given in accordance with this
provision):
(i) If to Fingermatrix, to:
Fingermatrix, Inc.
c/o Gordon Molesworth
1091 W. Calle Excelso
Green Valley, AZ 85614
(ii) If to Trinity, to:
The Trinity Group, Inc.
21346 St. Andrews Boulevard
Suite 137
Boca Raton, FL 33433
with a copy to:
Jerold K. Levien, Esq.
30 Jean Drive
Englewood Cliffs, NJ 07632.
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All such Notices shall be deemed given when personally delivered as aforesaid,
or, if mailed as aforesaid, on the third business day after the mailing thereof
or on the day actually received, if earlier, except for a notice of a change of
address which shall be effective and deemed to have been given only upon
receipt.
(c) No party hereto may assign this Agreement or its or their
respective rights, benefits or obligations hereunder without the written consent
of the other parties hereto.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors, heirs, personal representatives,
administrators, executors and permitted assigns. Nothing contained in this
Agreement is intended to confer upon any person or entity, other than the
parties hereto, or their respective successors, heirs, personal representatives,
administrators, executors or permitted assigns, any rights, benefits,
obligations, remedies or liabilities under or by reason of this Agreement.
(e) No waiver of any provision of this Agreement or of any breach
thereof shall be effective unless in writing and signed by the party to be bound
thereby. The waiver by any party hereto of a breach of any provision of this
Agreement, or of any representation, warranty, obligation or covenant in this
Agreement by any other party hereto, shall not be construed as a waiver of any
subsequent breach of the same or of any other provision, representation,
warranty, obligation or covenant of such other party, unless the instrument of
waiver expressly so provides.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, with respect to contracts made and to be
fully performed therein, without regard to the conflicts of laws principles
thereof. The parties hereto hereby agree that any suit or proceeding arising
under or as a result of this Agreement or the consummation of the transactions
contemplated hereby, shall be brought solely in a federal or state court located
in the City, County, and State of New York. By their execution hereof, the
parties hereto consent and irrevocably submit to the in personam jurisdiction of
the federal and state courts located in the City, County and State of New York
and agree that any process in any suit or proceeding commenced in such courts
under this Agreement may be served upon them personally or by certified or
registered mail, return receipt requested, or by a nationally recognized
overnight courier service, with the same force and effect as if personally
served upon them in such County and State. The parties hereto each waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense of lack of in personam jurisdiction with respect
thereto.
(g) The parties hereto hereby agree that, at any time and from time to
time after the date hereof and through and after the date of execution hereof,
upon the reasonable request of any party hereto, they shall do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such further acts, deeds, assignments, transfers, conveyances, and
assurances as may be reasonably required to more effectively consummate this
Agreement and the transactions contemplated thereby or to confirm or otherwise
effectuate the provisions of this Agreement.
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(h) Each party hereto represents and warrants to the other that it has
been represented by independent counsel of its own choosing in connection with
the negotiation, preparation, and consummation of this Agreement. In the event
of any action or proceeding instituted by any party hereto to enforce the
provisions of this Agreement, the party prevailing therein shall be entitled to
reimbursement by the other party of the reasonable legal costs and expenses
incurred by the prevailing party in connection therewith.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which when taken together, shall
constitute one and the same instrument.
(j) The Paragraph headings used in this Agreement have been used for
convenience of reference only and are not to be considered in construing or
interpreting this Agreement.
(k) If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of this Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the undersigned have signed this Agreement this ___
day of April, 1999.
ATTEST: FINGERMATRIX, INC.
By:___________________
Gordon R. Molesworth, Thomas T. Harding,
Secretary President
ATTEST: THE TRINITY GROUP, INC.
By:___________________
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Exhibit 99.2
DEBT EXCHANGE AGREEMENT
AGREEMENT made this ___ day of April, 1999 by and between
those parties whose names appear on Exhibit A annexed hereto and incorporated
herein by this reference (each a "Creditor" and, collectively, the "Creditors")
and FINGERMATRIX, INC., a New York corporation ("Fingermatrix").
W I T N E S S E T H :
WHEREAS, the Creditors are unsecured creditors of
Fingermatrix; and
WHEREAS, the aggregate amount owed by Fingermatrix to the
Creditors is $654,796.95,inclusive of interest through December 31,1998 (the
"Debt"), each Creditor holding the amount of debt set forth next to his or its
name on Exhibit A hereto; and
WHEREAS, Fingermatrix does not have the resources to continue
in business and attempts by the Board of Directors of Fingermatrix, over an
extended period of time, to either refinance or sell Fingermatrix have not been
successful except with respect to the transactions described herein; and
WHEREAS, simultaneously herewith, Fingermatrix and THE TRINITY
GROUP, INC. ("Trinity") will enter into an Agreement and Plan of Reorganization
(the "Agreement") pursuant to which Fingermatrix will exchange shares of its
voting securities with Trinity for all of the issued and outstanding shares of
the capital stock of SES ACQUISITION CORP. ("SESA") in a share exchange pursuant
to Section 913 of the New York BCL and, at the time of such exchange, SESA will
own certain companies, as specified in the Agreement, having a net worth in
excess of $1,500,000; and
WHEREAS, all the foregoing is contingent upon the Creditors
converting the Debt into such number of shares of the Series A 2% Voting
Convertible Preferred Stock , .01 par value, of Fingermatrix (the "Series A
Preferred Stock") as will equal, when fully converted and on a fully diluted
basis, 5% of the authorized shares of all classes of Fingermatrix; and
WHEREAS, each Creditor deems it to be in his or its best
interest to convert his or its debt into shares of the Series A Preferred Stock,
as hereinafter provided and subject to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned do hereby agree as follows:
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1. Definitions. "Notes" shall mean the four promissory notes of
Fingermatrix listed below, together with all interest accrued thereon and
unpaid, as well as any and all penalties due, if any, as of December 31, 1998:
(a) Note dated May 31, 1997 in the original principal amount of
$100,000, held by PT Dolak Permei;
(b) Note dated June 30, 1997 in the original principal amount of
$100,000, held by PT Dolak Permei;
(c) Note dated September 30, 1998 in the original principal amount of
$200,000, held by Dr. M. Kluzinski; and
(d) Note dated January 1, 1998 in the original principal amount of
$25,000, held by Gordon Molesworth.
2. Exchange of Indebtedness.
2.1 Each Creditor that holds a Note hereby terminates any and all
right, title and interest it has or may have had in and to such Note, all
interest accrued thereon and all penalties due with respect to such Note, if
any, and does hereby return, assign and deliver such Note to Fingermatrix for
cancellation.
2.2 Each Creditor that has performed professional or other services for
Fingermatrix for which such Creditor has not been paid in full does hereby
relinquish any and all rights it has or may have had to payment therefor.
2.3 In consideration of the return of the Notes, the release of bills
for professional services rendered and the Release set forth in Paragraph 3
hereof, Fingermatrix does hereby issue and deliver to the Creditors, in the
respective amounts set forth next to their names on Exhibit A hereto, an
aggregate of 6,346 shares of the Series A Preferred Stock, subject to adjustment
upon the happening of certain events as provided for in the Certificate of
Amendment to the Restated Certificate of Incorporation of Fingermatrix, into 5%
of the issued and outstanding Common Stock, $.01 par value, of Fingermatrix, on
a fully diluted basis.
3. Releases.
3.1 In consideration of the issuance and delivery to the Creditors of
the Series A Preferred Stock as provided in subparagraph 2.3 hereof, each
Creditor, for himself or itself and on behalf of any entity owned or controlled,
directly or indirectly, by such Creditor (hereinafter referred to as the
"Releasor"), hereby unconditionally and irrevocably releases and discharges
Fingermatrix, and its parents and subsidiaries, and any entity owned, controlled
by or under common control with Fingermatrix, and their respective shareholders,
officers, directors,
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principals, employees, agents and attorneys (hereinafter collectively referred
to as the "Releasees"), from any and all actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, obligations, contracts, controversies, agreements, promises,
variances, trespasses, damages, liabilities, judgments, executions, claims and
demands whatsoever, in law, admiralty or equity (whether known or unknown and
whether liquidated or unliquidated), whether asserted individually,
derivatively, or in any other capacity, which the Releasor or his or its heirs,
executors, administrators, personal representatives, successors and assigns and
any entity owned, controlled by, or under common control with the Releasor and
the shareholders, officers, directors, partners (general and limited),
principals, employees, agents, parents, subsidiaries, and affiliates thereof
ever had, now have or hereafter can, shall or may have against any of the
Releasees for, by reason of, in any way based upon, arising out of, related to,
or connected with, directly or indirectly, any matter, cause, thing,
transaction, act or omission whatsoever from the beginning of the world to the
date hereof, except for any representations, warranties, covenants or
obligations of Fingermatrix under this Agreement.
4. Representations and Warranties of the Creditors. In order to induce
Fingermatrix to enter into this Agreement and consummate the transactions
provided for herein, each Creditor represents and warrants to Fingermatrix as
follows:
4.1 He or it has all requisite power and authority necessary for, and
has taken all action with respect to, the authorization, execution, delivery and
performance of this agreement and the consummation of the transactions
contemplated hereby and this agreement, when executed and delivered by him or
it, will constitute his or its valid and legally binding obligation enforceable
in accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
4.2 He or it is not in violation or default of any judgment, order,
writ, decree, note, instrument, or other agreement to which he or it is a party
or by which he or it is bound, the violation or default of which would
materially adversely affect this agreement or the transactions contemplated by
this agreement.
4.3 The amount of debt set forth next to his or its name on Exhibit A
hereto constitutes the total amount , inclusive of interest, principal,
penalties, premiums and all other charges, owed to him or it by Fingermatrix and
that upon payment or satisfaction of such amount he or it will have no claim,
cause of action, debt or account against Fingermatrix.
5. Representations and Warranties of Fingermatrix. In order to induce the
Creditors to enter into this agreement and consummate the transactions provided
for herein, Fingermatrix represents and warrants to the Creditors that
Fingermatrix has all requisite power and authority necessary for, and has taken
all action with respect to, the authorization, execution, delivery and
performance of this agreement and the consummation of the transactions
contemplated hereby
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and this agreement, when executed and delivered by Fingermatrix, will constitute
a valid and legally binding obligation of Fingermatrix, enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other laws affecting generally the
enforcement of creditors' rights and by general principles of equity.
6. Miscellaneous.
6.1 All notices, consents, requests, demands and other communications
required or permitted to be given under this agreement (the "Notices"), shall be
in writing and delivered personally or by nationally recognized overnight
courier, receipt acknowledged, or mailed by registered or certified mail,
postage prepaid, return receipt requested, addressed to the parties hereto as
follows (or to such other address as either of the parties hereto shall specify
by notice given in accordance with this provision):
(i) If to the Creditors:
To each Creditor as his or its address
appears on Exhibit A hereto;
(ii) If to Fingermatrix, to:
Fingermatrix, Inc.
c/o Gordon Molesworth
1091 W. Calle Excelso
Green Valley, AZ 85614
with a copy to:
Fred Sonnenfeld, Esq.
Sonnenfeld & Richman
360 Lexington Avenue
New York, NY10017
(iii) If to Trinity, to:
The Trinity Group, Inc.
21346 St. Andrews Boulevard
Suite 137
Boca Raton, FL 33433
with a copy to:
Jerold K. Levien, Esq.
30 Jean Drive
Englewood Cliffs, NJ 07632
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<PAGE>
All such Notices shall be deemed given when personally delivered as aforesaid,
or, if mailed as aforesaid, on the third business day after the mailing thereof
or on the day actually received, if earlier, except for notice of a change of
address which shall be effective and deemed to have been given only upon
receipt.
6.2 No party hereto may assign this agreement or his or its rights
benefits or obligations hereunder without the written consent of all of the
non-assigning parties hereto.
6.3 This agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors, heirs, personal representatives,
administrators, executors and permitted assigns. Nothing contained in this
agreement is intended to confer upon any person or entity, other than the
parties hereto, or their respective successors, heirs, personal representatives,
administrators, executors or permitted assigns, any rights, benefits,
obligations, remedies or liabilities under or by reason of this agreement.
6.4 No waiver of any provision of this agreement or of any breach
thereof shall be effective unless in writing and signed by this party to be
bound thereby. The waiver by either party hereto of a breach of any provision of
this agreement, or of any representation, warranty, obligation or covenant in
this agreement by the other party hereto, shall not be construed as a waiver of
any subsequent breach of the same or of any other provision, representation,
warranty, obligation or covenant of such other party, unless the instrument of
waiver expressly so provides.
6.5 This agreement shall be governed by and construed in accordance
with the laws of the State of New York, with respect to contracts made and to be
fully performed therein, without regard to the conflicts of laws principles
thereof. The parties hereto hereby agree that any suit or proceeding arising
under or as a result of this agreement or the consummation of the transactions
contemplated hereby, shall be brought solely in a federal or state court located
in the City, County and State of New York. By their execution hereof, the
parties hereto consent and irrevocably submit to the in personam jurisdiction of
the federal and state courts located in the City, County and State of New York
and agree that any process in any suit or proceeding commenced in any of such
courts under this agreement my be served upon them personally or by certified or
registered mail, return receipt requested, or by a nationally recognized
overnight courier service, with the same force and effect as if personally
served upon them in such County and State. The parties hereto each waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense of lack of in personam jurisdiction with respect
hereto.
6.6 The parties hereto hereby agree that, at any time and from time to
time after the date hereof, upon the reasonable request of either party hereto,
they shall do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such further acts, deeds, assignments, transfers,
conveyances, assurances and other documents as may reasonably be required to
more effectively consummate this agreement and the transactions contemplated
thereby or to confirm or otherwise effectuate the provisions of this agreement.
6.7 This agreement may be executed in one or more counterparts, each of
which shall be deemed as an original, but all of which when taken together,
shall constitute one and the same
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<PAGE>
instrument. Notwithstanding the preceding sentence, the agreement will not
become effective until it is signed by all of the Creditors.
6.8 The Section headings used in this agreement have been used for
convenience of reference only and are not to be considered in construing or
interpreting this agreement.
6.9 Each party hereto represents and warrants to the other that he or
it has been represented by independent counsel of his or its own choosing in
connection with the negotiation, preparation, and consummation of this
agreement. Except as expressly provided in this agreement, each of the parties
hereto shall bear all of his or its respective costs and expenses incurred in
connection with the negotiation, preparation, execution, consummation,
performance and/or enforcement of this agreement, including, without limitation,
the fees and disbursements of their respective counsel.
6.10 If one or more provisions of this agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this agreement and the balance of this agreement shall remain in full force and
effect.
6.11 This agreement, including Exhibit A hereto, constitutes the sole
and entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, representations, warranties,
statements, promises, arrangements and understandings, whether oral or written,
express or implied, among the parties hereto with respect to the subject matter
hereof and may not be changed or modified except by an instrument in writing
signed by the party or parties to be bound thereby. This agreement has been
subjected to the mutual consultation, negotiation and agreement of the parties
hereto and shall not be construed for or against either party hereto on the
basis of such party having drafted this agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals this___ day of April, 1999.
ATTEST: FINGERMATRIX, INC.
_____________________ By:__________________
Gordon R. Molesworth, Thomas T. Harding,
Secretary President
ATTEST: MOLESWORTH & ASSOCIATES
_____________________ By:_______________________
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ATTEST: SONNENFELD & RICHMAN
_____________________ By:___________________________
ATTEST: T. HARDING & ASSOCIATES
_____________________ By:___________________________
ATTEST: KILGANNON & STEIDL
_____________________ By:___________________________
ATTEST: NEWELL-STORR & CO., INC.
_____________________ By:___________________________
WITNESS:
_____________________ ___________________________
PT Dolak Permei
WITNESS:
_____________________ ___________________________
M. Kluzinski, M.D.
WITNESS:
_____________________ ___________________________
Gordon Molesworth
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<PAGE>
Exhibit 99.3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
FINGERMATRIX, INC.
Pursuant to Section 805 of the New York Business Corporation Law
THE UNDERSIGNED, being all of the directors of FINGERMATRIX, INC., do
hereby certify as follows:
1. The name of the Corporation is Fingermatrix, Inc.
2. The Certificate of Incorporation of the Corporation was filed with
the Department of State of the State of New York on May 12, 1976.
3. On March 31, 1995 the Corporation's Plan of Reorganization under
Chapter 11 of the United States Bankruptcy Code was confirmed by order of the
United States Bankruptcy Court for the Southern District of New York (Case No.
93 B 21794). Pursuant thereto a Restated Certificate of Incorporation of the
Corporation was to be filed by the Trustee in Bankruptcy. Said Restated
Certificate of Incorporation was not filed. Said Restated Certificate of
Incorporation is being filed on the date of and immediately preceding the filing
of this Certificate of Amendment of the Certificate of Incorporation of the
Corporation.
4. The Restated Certificate of Incorporation of the Corporation is
hereby amended to add the Certificate of the Powers, Designations, Preferences
and Rights of the Series A 2% Voting Convertible Preferred Stock of the Company,
as follows:
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES,
PRIVILEGES, RIGHTS AND RESTRICTIONS OF THE SERIES A 2% VOTING
CONVERTIBLE REDEEMABLE PREFERRED STOCK.
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series A 2% Voting
Convertible Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of
One Hundred Thousand (100,000) shares of preferred stock, par value $.01 per
share ("Preferred Stock"), created by the Board of Directors of the Corporation
pursuant to the authority granted to it by the Certificate of Incorporation of
the Corporation is "Series A 2% Voting Convertible Redeemable Preferred Stock"
(the "Series A Preferred Stock.") In the event that the Corporation does not
issue the maximum number of shares of Series A Preferred Stock the Corporation
may, from time to time, by resolution of the Board of Directors, reduce the
number of shares of Series A Preferred Stock authorized, provided that no such
reduction shall reduce the number of authorized shares to a number which is less
than the number of shares of Series A Preferred Stock then issued or reserved
for issuance. The number of shares by which the Series A Preferred Stock is
reduced shall have the status of authorized but unissued shares of Preferred
Stock, without designation as to series until such stock is once more designated
as part of a particular series by the Corporation's Board of Directors.
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<PAGE>
2. Dividend Rights.
(a) Holders of shares of Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds of this Corporation legally available therefor, cash dividends at an
annual rate of Thirteen Cents ($.13) per share, subject to the provisions of
Paragraphs 2(c) and (d) of this Statement. Dividends shall be payable in
quarterly installments. Such installments shall be paid on the dividend payment
dates, as hereinafter defined. Dividend payment dates shall be January 1, April
1, July 1 and October 1 of each year, with the first dividend payment date being
April 1, 1999. Dividends shall be payable on the dividend payment dates to
holders of Series A Preferred Stock of record on the 15th day of the preceding
December, March, June and September, respectively. Each quarterly period ending
on a dividend payment date is referred to as a "dividend period." Dividends on
the Series A Preferred Stock shall be fully cumulative and accrue, which respect
to each share of Series A Preferred Stock, from the date such share of Series A
Preferred Stock is originally issued.
(b) The amount of any dividends "accrued" on any share of
Series A Preferred Stock at any dividend payment date shall be deemed to be the
amount of any unpaid dividends accumulated thereon to and including such
dividend payment date, whether or not earned or declared, and the amount of
dividends accrued on any share of Series A Preferred Stock at any date other
than a dividend payment date shall be calculated as the amount of any unpaid
dividends accumulated thereon to and including the last preceding dividend
payment date, whether or not earned or declared, plus an amount calculated on
the basis of the annual dividend rate of Thirteen Cents ($.13) per share for the
period after such last preceding dividend payment date to and including the date
as of which the calculation is made.
(c) Except as provided in this Statement, no dividends shall
be declared or paid or set aside for payment on any class or series of capital
stock ranking on a parity with or junior to the Series A Preferred Stock as to
dividends for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
payment thereof is set aside for such payment on the Series A Preferred for all
dividends periods terminating on or prior to the dividend payment date of such
dividends on any such series or class. When dividends are not paid in full upon
the shares of Series A Preferred Stock and any other series of Preferred Stock
of the Corporation ("Preferred Stock") ranking on a parity as to dividends with
the Series A Preferred Stock, all dividends declared upon shares of Series A
Preferred Stock and such other series of Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on the Series A
Preferred Stock shall in all cases bear to each other the same ratio that the
accrued dividends per share on the shares of Series A Preferred Stock and such
other series of Preferred Stock bear to each other. Holders of shares of Series
A Preferred Stock shall not be entitled to dividends thereon, whether payable in
cash, property or stock, in excess of the full cumulative dividends thereon, as
provided in this Statement. No dividend on Series A Preferred Stock shall be
declared or paid or set apart for payment with respect to any dividend payment
date unless full dividends, including accumulated dividends, if any, on any
series or class of capital stock ranking, as to dividends, prior to Series A
Preferred Stock which are to have been paid on or
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<PAGE>
prior to such dividend payment date have been or contemporaneously are declared
and paid or declared and a sum sufficient for payment thereof has been set aside
for all dividend periods for such series or class terminating on or prior to
such dividend payment date.
(d) As long as any shares of Series A Preferred Stock are
outstanding, no dividends (other than a dividend in any series or class of
capital stock ranking junior to Series A Preferred Stock as to both dividends
and payments in the event of voluntary or involuntary dissolution, liquidation
or winding up), shall be declared or paid or set aside for payment and no other
distribution shall be declared or made upon any such junior series or class of
capital stock, and no such junior series or class of capital stock or any series
of Preferred Stock on a parity with Series A Preferred Stock as to both
dividends and payments in the event of voluntary and involuntary dissolution,
liquidation or winding up shall be redeemed, purchased or otherwise acquired for
any consideration by the Corporation or by any subsidiary (which shall mean any
corporation or entity, the majority of voting power to elect directors of which
is held directly or indirectly by the Corporation ), except by conversion into
or exchange for any such junior series or class of capital stock; unless, in
each case, the full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been paid in full for all past dividend periods or
unless the holders of a majority of the Series A Preferred Stock then
outstanding shall consent thereto.
3. Voting Rights.
(a) Except as otherwise required by law, and subject to the
earlier redemption of the Series A Preferred Stock, the holders of shares of
Series A Preferred Stock shall vote together with the Common Stock, as if the
Common Stock and the Series A Preferred Stock were a single class; provided
that, in all matters, the holders of the Series A Preferred Stock shall have the
right to cast such number of votes per share of Series A Preferred Stock as are
equal to the number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock based on the conversion rate per share of Common Stock
on the record date for determining holders entitled to vote, but without regard
to whether the shares of Series A Preferred Stock are then convertible into
Common Stock.
(b) In the event that, pursuant to applicable law, the holders
of the Series A Preferred Stock are required to vote as a single class separate
and apart from the Common Stock, each holder of Series A Preferred Stock shall
be entitled to one vote per share of Series A Preferred Stock.
4. Conversion into Common Stock.
(a) (i) All of the issued and outstanding shares of the Series
A Preferred Stock will be converted automatically, without any required act or
deed on the part of the holders thereof, in accordance with the provisions of
that certain Agreement and Plan of Reorganization by and among the Corporation,
SES Acquisition Corp. and The Trinity Group, Inc. dated as of January 1, 1999.
In the event of such conversion, the provisions of Paragraph 4(a)(iii) and
4(c)through (k), inclusive, shall apply.
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<PAGE>
(ii) In the event the Series A Preferred Stock is not
converted pursuant to Paragraph 4(a)(i) hereof, on the first anniversary of the
Closing Date of that certain Debt Exchange Agreement dated as of January 1, 1999
among the Corporation and certain Creditors (as defined therein), then, as of
such date, each holder of the Series A Preferred Stock will have the right to
convert any or all of its shares of Series A Preferred Stock into shares of the
Common Stock, $.01 par value, of the Corporation (the "Common Stock"), at the
conversion rate (as hereinafter defined) (the "Conversion Rate") or, as to any
shares of the Series A Preferred Stock called for redemption prior to the first
anniversary of such Closing Date, at any time prior to the time and date of such
redemption (unless the Corporation defaults in the payment of the Redemption
Price, in which case such right shall not terminate at such time and date), to
convert such shares into fully paid and non-assessable shares of Common Stock at
the Common Stock Conversion Rate as of the Date of conversion.
(iii) No fractional shares of Series A Preferred Stock
may be converted. If the number of shares of Series A Preferred Stock which may
be converted pursuant to this Paragraph 4 includes a fractional share of Series
A Preferred Stock, the number of shares of Series A Preferred Stock that may be
converted shall be rounded up so that the amount of shares of Series A Preferred
Stock subject to conversion is a whole number. If the shares of Series A
Preferred Stock are held by more than one holder, the number of shares of Series
A Preferred Stock which may be converted by each such holder shall be such
holder's pro rata share of the then outstanding Series A Preferred Stock or such
other percentage as may be jointly determined by all such shareholders. In
determining the number of shares of Series A Preferred stock which may be
converted by a holder of Series A Preferred Stock pursuant to Paragraph
4(a)(ii), if any fractional share of Series A Preferred Stock which is held by
such holder is more than one-half share, such fractional share of Series A
Preferred Stock shall be rounded up to a full share of Series A Preferred Stock
and shall confer upon the holder thereof the right to immediately convert such
share and if any fractional share of Series A Preferred Stock is less than or
equal to one-half share of Series A Preferred Stock, such fractional share shall
be rounded down to zero shares and shall confer no immediate conversion
privilege on the holder with respect to such fractional share.
(b) The Conversion Rate shall mean the number of shares of
Common Stock issuable upon conversion of one (1) share of Series A Preferred
Stock. The Conversion Rate shall be one (1) share of Common Stock, subject to
proper adjustment as provided in Paragraph 4(e) of this Statement.
(c) Conversion of the Series A Preferred Stock shall be
effected by surrender of the certificate representing the shares of Series A
Preferred Stock being converted to the transfer agent for the Series A Preferred
Stock, or, if none shall have been appointed, to the Corporation, together with
the form of notice of election to convert as may be provided from time to time
by the Corporation.
(d) Shares of Series A Preferred Stock shall be deemed to have
been converted immediately prior to the close of business on the day of the
surrender for conversion of the certificate therefor, together with the form of
notice of election provided by the Corporation duly signed by the holder
thereof, and the person or persons entitled to receive shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares
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<PAGE>
of Common Stock as of such time. As promptly as practicable on or after the
conversion date, the Corporation or its transfer agent shall issue and shall
deliver a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion, together with a cash payment in lieu of any
fraction of any share, as hereinafter provided, to the person or persons
entitled to receive the same.
(e) The Conversion Rate shall be subject to adjustment as
follows:
(i) In case the Corporation shall, after the date on
which this Amendment of the Restated Certificate of Incorporation of the
Corporation is filed (the "Filing Date"), (A) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (B)
subdivide, split or reclassify its outstanding Common Stock into a greater
number of shares, (C) effect a reverse split or otherwise combine or reclassify
its outstanding Common Stock into a smaller number of shares, or (D) issue any
shares by reclassification of its shares of Common Stock, the Conversion Rate in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of the shares of Series A Preferred
Stock converted after such date shall be entitled to receive the aggregate
number and kind of shares which, if such shares had been converted immediately
prior to such time, it would have owned upon such conversion and been entitled
to receive upon such dividend. subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed in this
Paragraph 4(e)(i) shall occur.
(ii) No increase or decrease in the Conversion Rate
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%); provided, however, that any adjustments which by
reason of this Paragraph 4(e)(ii) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Paragraph 4(e) shall be made to the nearest one-hundredth (1/100) of
a share.
(iii) The Corporation may retain a firm of independent
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Paragraph 4(e), and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(iv) In the event that at any time, as a result of an
adjustment made pursuant to this paragraph 4(e), the holder of shares of Series
A Preferred Stock thereafter shall become entitled to receive any shares of the
Corporation, other than Common Stock, thereafter the number of such other shares
so receivable upon conversion of shares of Series A Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in this Paragraph 4.
(v) In addition to the adjustments provided for in
this Paragraph 4(e), the Corporation may modify the Conversion Rate in a manner
which will increase the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock if the Corporation believes that such
adjustment is necessary or desirable in order to avoid adverse Federal income
tax consequences to the holders of the Common Stock.
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<PAGE>
(f) Whenever the Conversion Rate shall be adjusted as required
by the provisions of Paragraph 4(e) of this Statement, the Corporation shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Conversion Rate, setting forth in reasonable
detail the facts requiring such adjustment. Each such officers certificate shall
be made available at all reasonable times for inspection by any holder of shares
of Series A Preferred Stock, and the Corporation shall. forthwith after each
such adjustment, mail a copy of such certificate by first class mail to the
holders of Series A Preferred Stock at such holders' addresses set forth in the
Corporations books and records.
(g) In case:
(i) the Corporation shall pay any dividend or make any
distribution upon Common Stock (other than a regular cash dividend payable out
of retained earnings or cash); or
(ii) the Corporation shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights; or
(iii) any reclassification of the capital stock of
the Corporation consolidation or merger of the Corporation with or into another
corporation, sale, lease or transfer of all or substantially all of the property
and assets of the Corporation to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Corporation shall be
effected; then in any such case, the Corporation shall cause to be mailed by
fast class mail to the record holders of Series A Preferred Stock at least ten
(10) days prior to the date specified in (A) or (B) below, as the case may be, a
notice containing a brief description of the proposed action and stating the
date on which (A) a record is to be taken for the purpose of such dividend,
distribution or rights, or (B) such reclassification, consolidation, merger,
conveyance, lease. dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up and the provisions of Paragraph 4(h)
below shall be applicable.
(h) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the Corporation, or in
case of any consolidation or merger of the Corporation into another corporation
(other than a merger with a subsidiary in which merger the Corporation is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock or
the class issuable upon conversion of Series A Preferred Stock) or in case of
any sale, lease or conveyance to another corporation of the property of the
Corporation as an entirety, the Corporation shall, as a condition precedent to
such transaction, cause effective provisions to be made so that the holder of
the Series A Preferred Stock shall have the right thereafter by converting the
Series A Preferred Stock, to receive the land and amount of shares of stock and
other securities and property receivable upon
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<PAGE>
such reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been received upon conversion of the Series A Preferred Stock
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Statement. The foregoing provisions of this Paragraph 4(h) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(i) No fractional shares or script representing fractional
shares shall be issued upon the conversion of shares of Series A Preferred
Stock. If, upon conversion of any share of Series A Preferred Stock as an
entirety, the holder would, except for the provisions of this Paragraph 4(i) be
entitled to receive a fractional share of Common Stock, then an amount equal to
such fractional share multiplied by the fair market value per share of the
Common Stock on the last business day prior to the date of conversion shall be
distributed to the holder. The fair market value per share shall mean the
closing price (or average of the closing high bid and low asked prices if there
is no sale on such date) on the Nasdaq Stock Market or the New York or American
Stock Exchange, if the Common Stock is admitted to trading or listed on such
market or stock exchange, or if not so listed or admitted to trading, the
average of the reported highest bid and lowest asked prices as reported by
Nasdaq or the National Quotation Bureau. Inc. or similar reporting service
selected by the Board of Directors, or if no such prices are available, the
current market value shall be determined in good faith by the Board of
Directors.
(j) The Corporation shall at all times reserve and keep
available, free from preemptive right out of its authorized but unissued Common
Stock the full number of shares of Common Stock then issuable upon the
conversion of all shares of Series A Preferred Stock then outstanding.
(k) The Common Stock issuable upon conversion of the Series A
Preferred Stock shall, when so issued, be duly and validly authorized and
issued, fully paid and non-assessable.
5. Liquidation Rights
(a) (i) In the event of the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, holders of the
Series A Preferred Stock shall be entitled to receive One Dollar ($1.00) per
share, plus declared and unpaid dividends before any payment or distribution
upon dissolution, liquidation or winding up shall be made on any series or class
of capital stock ranking junior to Series A Preferred Stock as to such payment
or distribution, and after all such payments or distributions have been made on
any series or class of capital stock ranking senior to the Series A Preferred
Stock as to such payment or distribution.
(ii) After payment of the preference set forth in Paragraph
6(a)(i) of this Statement of Designation the holders of the Series A Preferred
Stock shall have no further rights on liquidation, dissolution or winding up.
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(b) The sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of the property and assets of the Corporation shall be deemed a voluntary
dissolution, liquidation or winding up of the Corporation for purposes of this
Paragraph 5. The merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any other corporation into
or with the Corporation, shall not be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, for the purposes of this Paragraph 6;
provided, however, that the merger or consolidation of the Corporation into
another corporation shall be deemed to be a voluntary dissolution, liquidation
or winding up of the Corporation for the purposes of this Paragraph 5, unless
either (i) the holders of all shares of Series A Preferred Stock outstanding
upon the effectiveness of such merger or consolidation shall have the right,
upon such effectiveness, to receive for each share of Series A Preferred Stock
held by them upon such effectiveness, one share of preferred stock of the
resulting or surviving corporation, which share shall have, to the extent
practicable, dividend and voting rights and rights upon dissolution, liquidation
or winding up reasonably equivalent to those of such share of Series A Preferred
Stock, and shall have the right to convert such share of preferred stock into
the number of shares of stock or other securities or property receivable upon
such merger or consolidation, as the case may be, by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock was
convertible immediately prior to such merger or consolidation, subject to
adjustment as provided in Paragraph 4 of this Statement, (ii) each holder of the
shares of Series A Preferred Stock shall be entitled to receive upon the
effectiveness of such merger or consolidation in exchange for such holders
shares of Series A Preferred Stock the number of shares of stock or other
securities or property receivable upon such merger or consolidation, as the case
may be, as such holder would have received had it converted its Series A
Preferred stock into Common Stock immediately prior to such merger or
consolidation, or (iii) the merger or consolidation was approved by the holders
of a minority of the shares of Series A Preferred Stock then outstanding either
at a meeting of such stockholders or by a written consent in lieu of a meeting.
The provisions of this Paragraph 5(b) shall not be construed to limit the
obligations of the Corporation pursuant to Paragraph 4(h) of this statement of
Designation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of Series A Preferred Stock upon
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Paragraph 5(a)(i) of this Statement, no such
distribution shall be made on account of any shares of any other class or series
of capital stock of the Corporation ranking on a parity with the shares of
Series A Preferred Stock upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
Series A Preferred Stock, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Series A Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders all amounts to which such holders are entitled
pursuant to Paragraph 5(a)(i) of this Statement before any payment shall be
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made to the holders of any class of capital stock of the Corporation ranking
junior upon liquidation to the Series A Preferred Stock.
6. Rank of Series. For purposes of this Statement, any stock of
any series or class of the Corporation shall be deemed to rank:
(a) prior to the shares of Series A Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be, if
the holders of such class or classes shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or priority to the
holders of shares of Series A Preferred Stock;
(b) on a parity with shares of Series A Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fired provisions, if any, be different
from those of Series A Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series A Preferred Stock; and
(c) junior to shares of Series A Preferred Stock as to dividends
or upon liquidation, dissolution or winding up, as the case may be, if such
class shall be Series B Preferred Stock or Common Stock or if the holders of
shares of Series A Preferred Stock shall be entitled to receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of such class or classes.
7. No Preemptive Rights. No holder of shares of the Series A
Preferred Stock shall, as such holder, be entitled as of right to purchase or
subscribe for any shares of stock of the Corporation of any class or any series
now or hereafter authorized or any securities convertible into or exchangeable
for any shares, or any warrants, options, rights or other instruments evidencing
rights to subscribe for or purchase any such shares, whether such shares,
securities, warrants, options, rights or other instruments be unissued or issued
and thereafter acquired by the Corporation.
8. Transfer Agent and Registrar. The Corporation may appoint a
transfer agent and registrar for the issuance, transfer and conversion of the
Series A Preferred Stock and for the payment of dividends to the holders of the
Series A Preferred Stock.
9. Creation of Other Preferred Stock. The Corporation is not
restricted from creating other series of Preferred Stock which may be senior or
junior to or on a parity with the Series A Preferred Stock as to dividends
and/or on the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation without the consent of the holders of the Series A Preferred
Stock.
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IN WITNESS WHEREAS, the undersigned, being all of the directors of the
Corporation, have executed this Certificate for and on behalf of the Corporation
this ___ day of _______1999.
___________________________________
GORDON R. MOLESWORTH,
Director
___________________________________
FRED SONNENFELD,
Director
___________________________________
THOMAS T. HARDING,
Director
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