SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 149c
of the Securities Exchange Act of 1934
Check appropriate box:
X Preliminary information statement Confidential, for use of the
Commission only (as permitted
by Rule 14c-5(d)(2)).
X Definitive information statement
Fingermatrix, Inc.
-------------------
(Name of Registrant as specified in Its Charter)
Payment of Filing Fee (check the appropriate box):
X No filing fee required (see (1) below)
Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Pursuant to Rule 0-11, with respect to a merger solely for the purpose of
changing domicile, no fee is required.
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction: $ __________
(5) Total fee paid: $__________
Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party: Registrant
(4) Date filed:
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FINGERMATRIX, INC.
249 N. Saw Mill River Road
Elmsford, NY 10523
INFORMATION STATEMENT
July 14, 2000
To the shareholders of Fingermatrix, Inc.
This Information Statement is being furnished to the shareholders of
Fingermatrix, Inc. (the "Company") in connection with the reincorporation of the
Company in Delaware through the merger of the Company with and into its
wholly-owned subsidiary, The Finx Group, Inc., a Delaware corporation ("The Finx
Group") (the "Merger"), which will be authorized by the written consent (the
"Written Consent") of the holders of a majority of the outstanding shares of
Common Stock, par value $.01 per share of the Company (the "Common Stock"), and
the outstanding shares of the Series A 2% Voting Convertible Preferred Stock,
par value $.01 per share of the Company (the "Series A Preferred Stock"), voting
together as one class of stock, and the outstanding shares of the Series B 4%
Preferred Stock, par value $.01 per share of the Company (the "Series B
Preferred Stock"), in accordance with the provisions of Section 903 of the New
York Business Corporation Law.
On June 23, 2000 the board of directors of the Company determined that
the reincorporation of the Company in Delaware was in the best interests of the
Company and approved the Agreement of Merger between the Company and The Finx
Group (the "Merger Agreement"). Pursuant to the Merger Agreement, at the
Effective Time (as defined in the Merger Agreement) of the Merger each ten (10)
shares of Common Stock of the Company, including shares of Common Stock to be
issued upon the conversion of the Series A Preferred Stock will be converted
into one (1) share of the Common Stock of The Finx Group. For the purpose of
determining the number of issued and outstanding shares of Common Stock at such
time, all of the issued and outstanding shares of the Series A Preferred Stock
will be deemed to have been converted into Common Stock. Therefore, upon the
Effective Time of the Merger, the Company will have fulfilled the conditions
subsequent set forth in Paragraph 5 of the Agreement and Plan of Reorganization
dated April 28, 1999 between the Company and The Trinity Group, Inc. (the
"Agreement and Plan of Reorganization") and the Debt Exchange Agreement dated
April 28, 1998 between the Company and certain former creditors of the Company
(the "Debt Exchange Agreement"). These conditions subsequent provide for the
automatic conversion of Series A Preferred Stock issued by the Company pursuant
such agreement in shares of Common Stock of the Company effective upon an
increase of the number of authorized shares of such
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Common Stock sufficient to permit such conversion. Such increase in the number
of shares of authorized Common Stock will be effected by the reincorporation of
the Company in Delaware as described herein. No act on the part of holders of
the Series A Preferred Stock who acquired such shares pursuant to the terms of
the Agreement and Plan of Reorganization or the Debt Exchange Agreement will be
required.
The approximate date on which this Information Statement is first being
sent or given to shareholders of the Company is July 14, 2000.
The Company will bear the costs of the preparation and mailing of this
Information Statement which are estimated at approximately $ 42,000.
WE ARE NOT ASKING YOU FOR A PROXY OR TO SIGN A WRITTEN CONSENT
AND YOU ARE REQUESTED NOT TO SEND US A PROXY OR CONSENT
VOTING
The board of directors fixed the close of business on June 30, 2000 as
the record date for purposes of the Written Consent to the matter specified
above, at which time 20,000,000 shares of Common Stock, 114,403 shares of Series
A Preferred Stock, convertible into 84,978,548 shares of Common Stock, and 1,000
shares of Series B Preferred Stock were issued and outstanding. Each share of
Common Stock is entitled to one vote on each matter submitted to the Company's
shareholders. Each share of Series A Preferred Stock votes with the Common Stock
and is entitled to one vote per share of Common Stock into which it is
convertible. The Series A Preferred Stock also votes separately as a class with
each share being entitled to one vote. Each of the shares of Series B Preferred
Stock is entitled to one vote, and votes separately as a class. The Trinity
Group, Inc. ("Trinity") and five other shareholders have advised the Company
that they intend to provide a Written Consent as to all of the shares of Common
Stock, Series A Preferred Stock and Series B Preferred Stock owned by them in
favor of the proposal to reincorporate the Company in Delaware. Because these
persons and entities own a sufficient number of shares to cause the adoption of
such proposal, no other shareholder consents will be solicited nor will
shareholder proxies be solicited and no shareholders meeting will be held in
connection with such matter.
Set forth below is a schedule of each class of voting securities of the
Company entitled to consent to the matter to be approved, the number of
outstanding shares of each such class and number of votes to which each class is
entitled.
Class of Security Number of Shares Number of Votes to which
----------------- ---------------- ------------------------
Outstanding Class is Entitled
----------- -----------------
Common Stock 20,000,000 104,978,548(1)
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Class of Security Number of Shares Number of Votes to which
----------------- ---------------- ------------------------
Outstanding Class is Entitled
----------- -----------------
Series A Preferred Stock 114,403(1) 84,978,548
Series B Preferred Stock 1,000 1,000
All Classes Voting Together 20,115,403 104,979,548
(1) Pursuant to the Amended and Restated Certificate of Incorporation
of the Company, the Series A Preferred Stock votes with the Common Stock as if
the Series A Preferred Stock and Common Stock were one class. The Series A
Preferred Stock casts such number of votes as it would if converted into Common
Stock. The conversion ratio is 742.8 shares of Common Stock for each share of
Series A Preferred Stock.
Set forth below is information as of May 31, 2000, based on information
provided to the Company by the individuals and entities named below, as to each
person or entity owning of record or known by the Company to own beneficially,
more than 5% of any class of the Company's voting securities.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of
-------------- Beneficial Owner Beneficial Ownership Class
---------------- (1), (2) -----
--------------------
<S> <C> <C> <C>
Common Stock The Trinity Group, Inc.(3) 52,089,100(4) 80.1%
21346 St. Andrews Blvd.
Series A Preferred Stock Suite 137 60,875 53.2%
Boca Raton, Florida 33433
Series B Preferred Stock 1,000 100%
Common Stock The Trinity Group-I, Inc. 52,256,800(5) 80.1%
21346 St. Andrews Blvd.
Series A Preferred Stock Suite 137 60,875(6) 53.2%
Boca Raton, Florida 33433
Series B Preferred Stock 1,000(7) 100%
Common Stock Grazyna B. Wnuk 12,084,754(8) 39.5%
21634 Club Villa Terrace
Series A Preferred Stock Boca Raton, FL 33433 14,048(9) 12.3%
Series B Preferred Stock -(10) -
Common Stock Carol Schiller 8,815,137(11) 31.9%
One Butler Road
Series A Preferred Stock Scarsdale, NY 10583 10,302 9%
Common Stock Lewis S. Schiller 52,256,800(12) 80.1%
21346 St. Andrews Blvd.,
Series A Preferred Stock Suite 137 60,875(13) 53.2%
Boca Raton, FL
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Title of Class Name and Address of Amount and Nature of Percent of
-------------- Beneficial Owner Beneficial Ownership Class
---------------- (1), (2) -----
--------------------
Series B Preferred Stock 1,000(14) 100%
Common Stock P.T. Dolak Permei 3,177,985(15) 14.7%
Surf Song Condos No. 68
205 P. Helix
Solana Beach, CA 92075
Series A Preferred Stock 2,259 2.0%
Common Stock Dr. Michael Kluzinsky 1,581,421(16) 7.3%
6014 U.S. Highway 19
New Port Richey, FL
34652
Series A Preferred Stock 2,129 1.9%
Common Stock Douglas Schiller 2,404,600(17) 10.9%
1202 Olympic Boulevard
Santa Monica, Ca 90404
Series A Preferred Stock 2,810 2.5%
Common Stock Linda Schiller 2,404,600(18) 10.9%
One Butler Road
Scarsdale, NY 10583
Series A Preferred Stock 2,810 2.5%
Common Stock Blake Schiller 2,404,600(19) 10.9%
One Butler Road
Scarsdale, NY 10583
Series A Preferred Stock 2,810 2.5%
Common Stock Gil Security Systems, Inc. 10,498,735(20) 34%
150-38 12th Avenue
Whitestone, NY 11357
Series A Preferred Stock 14,134 12.4%
</TABLE>
--------------
(1) The information set forth above as to the Common Stock assumes that
all of the 114,403 outstanding shares of Series A Preferred Stock are converted
into 84,978,548 shares of Common Stock.
(2) Unless otherwise indicated, to the Company's knowledge, all persons
and entities listed above have sole voting and investment power with respect to
their shares of Common Stock, except to the extent applicable law gives spouses
shared authority. Any shares of Common Stock that a person, entity or group has
the right to acquire within sixty (60) days after May 31, 2000 pursuant to the
exercise of outstanding warrants or options are deemed to be outstanding for the
purpose of computing the percentage ownership of such person, entity or group,
but are not deemed outstanding for the purpose of calculating the percentage
owned by any other person, entity or group.
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(3) Trinity is owned by The Trinity Group-I, Inc. ("Trinity-I"), a
corporation solely owned by Lewis S. Schiller, Chief Executive Officer and
Chairman of the Board of the Company. All of the outstanding shares of capital
stock of Trinity-I are pledged to Carol Schiller, the spouse of Lewis S.
Schiller.
(4) Reflects the conversion of 60,875 shares of Series A Preferred
Stock owned by Trinity into 45,217,950 shares of Common Stock.
(5) Trinity-I owns 167,700 shares of Common Stock. By virtue of its
ownership of all of the outstanding capital stock of Trinity, Trinity-I may be
deemed the beneficial owner of the shares of Common Stock owned by Trinity.
(6) Trinity owns 60,875 shares of the Series A Preferred Stock. By
virtue of its ownership of all of the outstanding capital stock of Trinity,
Trinity-I may be deemed the beneficial owner of the shares of Series A Preferred
Stock owned by Trinity.
(7) Trinity owns 1,000 shares of the Series B Preferred Stock. By
virtue of its ownership of all of the outstanding capital stock of Trinity,
Trinity-I may be deemed the beneficial owner of the shares of Series B Preferred
Stock owned by Trinity.
(8) Reflects the conversion of 14,048 shares of Series A Preferred
Stock owned by Grazyna B. Wnuk into 10,434,854 shares of Common Stock in
addition to the 1,649,900 shares of Common Stock Ms. Wnuk currently owns. Does
not include 52,195,100 shares of Common Stock owned by Trinity and Trinity-I, of
which Ms. Wnuk is an officer and director, as to which she disclaims beneficial
ownership.
(9) Includes Grazyna B. Wnuk's direct ownership of 14,048 shares of the
Series A Preferred Stock. Does not include 60,875 shares of the Series A
Preferred Stock owned by Trinity and Trinity- I, of which Ms. Wnuk is an officer
and director, as to which she disclaims beneficial ownership.
(10) Does not include 1,000 shares of the Series B Preferred Stock
owned by Trinity and Trinity-I, of which Ms. Wnuk is an officer and director, as
to which she disclaims beneficial ownership.
(11) Reflects the conversion of 10,302 shares of Series A Preferred
Stock owned by Carol Schiller into 7,652,326 shares of Common Stock.
(12) Mr. Lewis S. Schiller, by virtue of his ownership of all of the
outstanding shares of capital stock of Trinity-I, may be deemed the beneficial
owner of the shares of Common Stock and Series A Preferred Stock owned by
Trinity and Trinity-I.
(13) Mr. Lewis S. Schiller, by virtue of his ownership of all of the
outstanding shares of capital stock of Trinity-I, may be deemed the beneficial
owner of the shares of the Series A Preferred Stock owned by Trinity.
(14) Mr. Lewis S. Schiller, by virtue of his ownership of all of the
outstanding shares of capital stock of Trinity-I, may be deemed the beneficial
owner of the shares of the Series B Preferred Stock owned by Trinity.
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(15) Reflects the conversion of 2,259 shares of Series A Preferred
Stock owned by P.T. Dolak Permei into 1,677,985 shares of Common Stock.
(16) Reflects the conversion of 2,129 shares of Series A Preferred
Stock owned by Dr. Michael Kluzinski into 1,581,421 shares of Common Stock.
(17) Reflects the conversion of 2,810 shares of Series A Preferred
Stock owned by Douglas Schiller into 2,087,268 shares of Common Stock.
(18) Reflects the conversion of 2,810 shares of Series A Preferred
Stock owned by Linda Schiller into 2,087,268 shares of Common Stock.
(19) Reflects the conversion of 2,810 shares of Series A Preferred
Stock owned by Blake Schiller into 2,087,268 shares of Common Stock.
(20) Reflects the conversion of 14,134 shares of Series A Preferred
Stock owned by GIL Security Systems, Inc. into 10,498,735 shares of Common
Stock.
Set forth below is information as of May 31, 2000, based on information
provided to the Company by the individuals and entities named below, as to each
class of equity securities of the Company beneficially owned by all directors of
the Company, the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer who served
in such capacity as of December 31,1999, and the Company's directors and
officers as a group.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of
-------------- Beneficial Owner Beneficial Ownership Class
---------------- (1), (2) -----
--------------------
<S> <C> <C> <C>
Common Stock Grazyna B. Wnuk 12,084,754(3) 39.5%
21634 Club Villa Terrace
Series A Preferred Stock Boca Raton, FL 33433 14,048(4) 12.3%
Series B Preferred Stock -(5) -
Common Stock Lewis S. Schiller 52,256,800(6) 80.1%
21346 St. Andrews Blvd.,
Series A Preferred Stock Suite 137 60,875(7) 53.2%
Boca Raton, FL
Series B Preferred Stock 1,000(8) 100%
Common Stock Elliot J. Laitman 500,000(9) 2.5%
594 Church Avenue
Woodmere, NY 11598
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Common Stock E. Gerald Kay 1,000,000(10) 5%
225 Long Avenue
Hillside, NJ 07205
Common Stock All officers and directors 65,841,554 67.8%
as a group (4 persons)
Series A Preferred Stock 74,923 65.5%
Series B Preferred Stock 1,000 100%
</TABLE>
--------------
(1) The information set forth above assumes that all of the 114,403
outstanding shares of Series A Preferred Stock are converted into 84,978,548
shares of Common Stock.
(2) Unless otherwise indicated, to the Company's knowledge, all persons
and entities listed above have sole voting and investment power with respect to
their shares of Common Stock, except to the extent applicable law gives spouses
shared authority. Any shares of Common Stock that a person, entity or group has
the right to acquire within sixty (60) days after May 31, 2000 pursuant to the
exercise of outstanding warrants or options are deemed to be outstanding for the
purpose of computing the percentage ownership of such person, entity or group,
but are not deemed outstanding for the purpose of calculating the percentage
owned by any other person, entity or group.
(3) Reflects the conversion of 14,048 shares of Series A Preferred
Stock owned by Grazyna B. Wnuk into 10,434,854 shares of Common Stock. Does not
include 52,195,100 shares of Common Stock owned by Trinity and Trinity-I, of
which Ms. Wnuk is an officer and director, as to which she disclaims beneficial
ownership.
(4) Includes Grazyna B. Wnuk's direct ownership of 14,048 shares of the
Series A Preferred Stock in addition to the 1,649,900 shares of Common Stock Ms.
Wnuk currently owns. Does not include 60,875 shares of the Series A Preferred
Stock owned by Trinity and attributed to Trinity-I, of which Ms. Wnuk is an
officer and director, as to which she disclaims beneficial ownership.
(5) Does not include 1,000 shares of the Series B Preferred Stock owned
by Trinity and Trinity-I, of which Ms. Wnuk is an officer and director, as to
which she disclaims beneficial ownership.
(6) Mr. Lewis S. Schiller, by virtue of his ownership of all of the
outstanding shares of capital stock of Trinity-I, may be deemed the beneficial
owner of the shares of the Common Stock and Series A Preferred Stock owned by
Trinity.
(7) Mr. Lewis S. Schiller, by virtue of his ownership of all of the
outstanding shares of capital stock of Trinity-I, may be deemed the beneficial
owner of the shares of the Series A Preferred Stock owned by Trinity.
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(8) Mr. Lewis S. Schiller, by virtue of his ownership of all of the
outstanding shares of capital stock of Trinity-I, may be deemed the beneficial
owner of the shares of Series B Preferred Stock owned by Trinity.
(9) Reflects the exercise of an option to purchase up to 500,000 shares
of Common Stock granted to Elliot J. Laitman in 1999, which option is subject to
shareholder approval. In accordance with the terms of the Merger Agreement,
these options will be issued by The Finx Group pursuant to approval of the board
of directors.
(10) Reflects the exercise of an option to purchase up to 1,000,000
shares of Common Stock granted to E. Gerald Kay in 1999, which option is subject
to shareholder approval. In accordance with the terms of the Merger Agreement,
these options will be issued by The Finx Group pursuant to approval of the board
of directors.
APPROVAL OF REINCORPORATION INTO DELAWARE
The board of directors has approved the reincorporation of the Company
as a Delaware corporation through the merger by the Company into its
wholly-owned subsidiary, The Finx Group, a Delaware corporation.
The board of directors approved the reincorporation of the Company in
Delaware through a merger into The Finx Group, because, in its opinion, the best
interests of the Company will be served. The change of domicile will not involve
any change in the business, properties or management of the Company. The Merger
Agreement between the Company and The Finx Group is set forth in full as
Appendix A to this Information Statement. As a result of the Merger, without any
action on the part of any holder thereof, (a) each ten outstanding shares of
Common Stock of the Company will be exchanged for one share of the Common Stock,
par value $.01 per share of The Finx Group; (b) each outstanding share of the
Series A Preferred Stock will be deemed to have been converted into 74.28 shares
of the Common Stock, par value $.01 per share of The Finx Group; (c) each
outstanding share of Series B Preferred Stock will be exchanged for one share of
the Series A 4% Preferred Stock, par value $.01 per share, of The Finx Group
with the same rights, preferences and privileges as the Series B Preferred
Stock, and (d) each warrant or option to purchase ten shares of Common Stock
will be exchanged for a warrant or option to purchase one share of the Common
Stock, par value $.01 per share, of The Finx Group at an exercise price equal to
ten times the prior exercise price. There may be additional effects of the
Merger to those described in this Information Statement.
In 1999, the board of directors authorized the issuance of options to
purchase up to 15,885,000 shares of the Company's common stock to certain
individuals and entities. Each of the options is to have a term of seven years
and be exercisable at $ 0.30 per share. The issuance of such options has not yet
been approved by the shareholders of the Company. Pursuant to the terms of the
Merger Agreement, all of such options will be issued by The Finx Group pursuant
to approval of its board of directors.
The board of directors has unanimously approved the proposal to change
the Company's domicile to Delaware. The Merger Agreement provides, however, that
the proposed Merger may be abandoned at any time prior to becoming effective if
any circumstance should develop that, in the opinion of the board of directors
of the Company and The Finx Group, makes proceeding with the Merger inadvisable.
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Reasons For Change in State of Incorporation.
The Company was originally incorporated in New York because the laws of
that State were then deemed to be well adapted to the conduct of the Company's
business. Since the Company was discharged from bankruptcy pursuant to the
Bankruptcy Court's approval of the Company's Plan of Reorganization on March 31,
1996, the Company's operations and proposed operations have changed and are
expected to change both geographically and commercially. The corporate law of
Delaware affords a flexible and modern basis for corporate action including the
ability of the board of directors to grant options to its directors, officers
and employees. Because more than 50,000 corporations are incorporated in
Delaware, including a substantial number of the corporations whose securities
are publicly traded, a large body of case law has developed and been decided by
a judiciary of corporate specialists interpreting corporate law in Delaware.
Organization of The Finx Group
The Finx Group was organized by the Company in Delaware as a
wholly-owned subsidiary of the Company for the sole purpose of the Merger. Upon
the Merger becoming effective, the authorized capital stock of The Finx Group
will consist of 50,000,000 shares of common stock, par value $.01 per share,
1,000,000 shares of preferred stock, par value $.01 per share, of which 1000
shares have been designated as Series A 4% Preferred Stock.
The board of directors of The Finx Group, consisting of Lewis S.
Schiller, E. Gerald Kay and Grazyna B. Wnuk who are currently the directors of
the Company, will remain as directors of The Finx Group upon the Merger becoming
effective. No additional directors of The Finx Group have been designated at
this time nor have any arrangements been made with any person to serve as a
director of The Finx Group. The officers of the Company will be the officers of
The Finx Group upon the Merger becoming effective.
Material Federal Income Tax Consequences of the Merger
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Merger may not be the same for all of the
shareholders of the Company. Shareholders should consult their own tax advisors
to know their individual Federal, state, local and foreign tax consequences.
No gain or loss will be recognized to the Company or to The Finx Group
as a result of the Merger, and no gain or loss will be recognized under the
applicable sections of the United States Internal Revenue Code, as amended, to
the holders of the Common Stock of the Company as a result of the Merger.
Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares, however, there will be no cash payment
involved in this Merger.
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RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to Section 910 (a)(1)(A)(i) of the New York Business
Corporation Law, any shareholder of the Company who objects to the proposed
Merger of the Company into The Finx Group will not have any right to receive
from the Company the fair value of his, her or its shares.
COMPARISON OF DELAWARE AND NEW YORK LAW
Set forth below is a brief discussion of certain differences between
the New York Business Corporation Law ("NYBCL"), under which the Company is
incorporated, and the Delaware General Corporation Law (the "DGCL"), under which
The Finx Group is incorporated.
The statements set forth under this heading with respect to the NYBCL
and the DGCL and the respective certificates of incorporation of the Company and
The Finx Group are brief summaries thereof and do not purport to be complete.
The statements relating to the NYBCL and the DGCL are subject to the detailed
provisions of such statutes and the case law and other legal interpretations
relating to such statutes. The information relating to the respective
certificates of incorporation of the Company and The Finx Group is qualified by
such documents, copies of which are available from the Company.
Dividend Rights
Under the NYBCL, a corporation is prohibited from making a distribution
to shareholders if, after giving effect thereto: (i) such corporation would be
made insolvent, (ii) the declaration, payment or distribution would be contrary
to any restrictions contained in the corporation's certificate of incorporation,
(iii) such corporation's net assets remaining after such declaration, payment or
distribution is less than its stated capital. Under the DGCL, a corporation may
pay dividends out of surplus (defined as the excess, if any, of net assets over
capital), or, if no surplus exists, out of its net profits for the fiscal year
in which such dividends are declared and/or for its preceding fiscal year,
provided that dividends may not be paid out of net profits if the capital of
such corporation is less than the aggregate amount of capital represented by the
outstanding stock of all classes having a preference upon the distribution of
assets.
Holders of common stock of both the Company and The Finx Group are
entitled to receive such dividends as may be declared by the board of directors
from funds, legally available for such purpose after payment of any dividends
due with respect to any series of preferred stock.
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Voting Rights
Unless otherwise provided in the certificate of incorporation, the
NYBCL and the DGCL provide that every shareholder of record shall be entitled at
every meeting of shareholders to one vote for every share owned of record on the
record date for determining shareholders entitled to notice of and to vote at
meeting of shareholders. The certificates of incorporation of both the Company
and The Finx Group do not contain any provision which alters this right. The
certificates of incorporation of both the Company and The Finx Group give the
board of directors the power to create series of preferred stock and to provide
for voting rights for the holders of such series. Such rights may and, in the
case of the Series B Preferred Stock of the Company and the shares of Series A
Preferred Stock of The Finx Group which will be issued in exchange for such
shares, do include the right to more than one vote per share in connection with
the election of directors.
Directors
Under the NYBCL, the number of directors of a corporation may be (i)
fixed by the by-laws or (ii) by action of the shareholders or the board of
directors under the specific provisions of a by- laws adopted by the
shareholders. If the number is not fixed, there must be a minimum of three
directors. The minimum number of directors is one. Under the DGCL the number of
directors shall be fixed by, or in the manner provided in, the by-laws unless
the certificate of incorporation fixes the number of directors, in which event,
the number of directors can be changed only by an amendment to the certificate
of incorporation. The number of directors of both the Company and The Finx Group
are determined pursuant to the by-laws of such corporation. Directors of each of
the Company and The Finx Group are elected by a plurality of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote in the
election, subject to the voting preferences of the Series B Preferred Stock and
the Series A Preferred Stock of The Finx Group to be exchanged for it.
Ability to Grant Options to Employees, Directors and Officers
The NYBCL prohibits the issuance of options and rights to purchase
capital stock of a corporation to directors, officers or employees of the
corporation or any subsidiary or affiliate as an incentive to service or
continued service unless authorized at a meeting of shareholders by the vote of
the holders of a majority of all outstanding shares entitled to vote thereon or
authorized by and consistent with a plan adopted by such vote of shareholders.
Any such action which requires a meeting can be taken by written consent of the
holders of the requisite number of shares. The DGCL does not include any
requirement for obtaining shareholder approval for the issuance of such options
or rights.
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Fiduciary Duties of Directors
Under the NYBCL, directors owe a fiduciary duty to the corporation and
its shareholders and must perform their duties in good faith and with that
degree of care which an ordinarily prudent person in a like position would use
under similar circumstances. Directors must give reasonable attention to the
corporation's business. New York law presumes that, without evidence to the
contrary, in making a business decision, directors are acting in good faith and
exercising honest judgment. In taking action, directors may consider, among
other things, both the long-term and short-term interests of the corporation and
its shareholders. In addition, directors may consider the effects that the
corporation's actions may have in the short-term or in the long-term upon: (i)
the prospects for potential growth, development, productivity and profitability
of the corporation, (ii) the corporation's current employees, (iii) the
corporation's retired employees and other beneficiaries who are entitled to
receive retirement benefits, (iv) the corporation's customers and creditors, and
(v) the ability of the corporation to provide, as a going concern, goods,
services, employment opportunities and employment benefits to contribute to the
community in doing business. In performing his or her duties, a director shall
be entitled to rely upon information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared and/or
presented by: (i) officers of the corporation, (ii) legal counsel, public
accountants and other professionals, and (iii) a committee of the board of
directors of the corporation.
Under the DGCL, the business and affairs of a corporation are managed
by or under the direction of its board of directors. In exercising their powers,
directors are charged with an absolute fiduciary duty to protect the interests
of the corporation and to act in the best interests of its shareholders.
Delaware law in general presumes that, in making a business decision, directors
are disinterested and act on an informed basis, in good faith and in the honest
belief that the action taken was in the best interests of such corporation,
which presumption is known as the "business judgment rule." A party challenging
the propriety of a decision of the board of directors bears the burden of
rebutting the applicability of the presumption of the business judgment rule by
demonstrating that, in reaching their decision, the directors breached one or
more of their fiduciary duties -- good faith, loyalty and due care. If the
presumption is not rebutted, the business judgment rule attaches to protect the
directors and their decisions, and, generally, their business judgments will not
be judicially second guessed. Where, however, the presumption is rebutted, the
directors bear the burden of demonstrating the entire fairness of the relevant
transaction. Notwithstanding the foregoing, Delaware courts subject directors'
conduct to enhanced scrutiny in respect of defensive actions taken in response
to a threat to corporate control and approval of a transaction resulting in a
sale of such control.
Liability of Directors
Under the NYBCL, a corporation's certificate of incorporation may
eliminate or limit the personal liability of directors to the corporation or its
shareholders for damages in connection with any breach of duty in such capacity,
provided that no such provision may eliminate or limit: (i) the liability of any
director if a judgment or other final adjudication adverse to him or her
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establishes that his or her acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of any law or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled, (ii) liability which arises from injury suffered
by persons as a result of a declaration of a dividend or other distribution, a
purchase of the corporation's shares, a distribution of assets after
dissolution, the making of a loan, any of which is effected in violation of the
NYBCL or (iii) the liability of any director for any act or omission prior to
the adoption of a provision limiting or eliminating such director's liability.
The DGCL permits a corporation to include in its certificate of
incorporation a provision limiting or eliminating the liability of its directors
to such corporation or its shareholders for monetary damages arising from a
breach of fiduciary duty, except for: (i) a breach of the duty of loyalty to the
corporation; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) a declaration of a
dividend or the authorization of the repurchase or redemption of stock in
violation of the DGCL or (iv) any transaction from which the director derived an
improper personal benefit. The certificate of incorporation of The Finx Group
eliminates director liability to the maximum extent permitted by the DGCL, and
also contains broad indemnification provisions.
Call of Special Meetings
The NYBCL permits special meetings of the shareholders to be called by
the board of directors and such persons who may be authorized to do so by the
certificate of incorporation or the by-laws. At any such special meeting, only
such business may be transacted which is related to the purpose or purposes set
forth in the written notice provided to shareholders.
Under the DGCL, a special meeting of the shareholders may be called by
the board of directors or such other person as may be authorized by the
certificate of incorporation or by-laws.
Amendment to Charter Documents
Under the NYBCL, amendments or changes to the certificate of
incorporation may be authorized by vote of the board of directors, followed by
vote of the holders of a majority of all outstanding shares entitled to vote
thereon at a meeting of the shareholders. In addition, the holders of shares of
a class or series are entitled to vote and to vote as a class or series and the
amendment shall be authorized by vote of the holders of a majority of all
outstanding shares of the class or series when a proposed amendment would: (i)
exclude or limit such shareholders' right to vote on any matter, (ii) change
such shareholders' shares to reduce the par value, (iii) change such shares into
a different number of shares of the same class, or into the same or a different
number of shares of any one or more classes or any series thereof, (iv) fix,
change or abolish the designation of any authorized class, any of the relative
rights, preferences or limitations, including any provisions in respect of any
undeclared dividends, whether or not cumulative or accrued, or the redemption of
any shares, or any sinking fund for the redemption or purchase of any shares or
any preemptive rights to acquire shares or other securities (v) provide that
their shares may be converted into shares of any other class or into shares of
any other series of the same class, (vi) alter the terms or conditions upon
which their shares are convertible or change the shares issuable upon
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conversion of their shares, if such action would adversely affect such holders's
rights or (vii) subordinate their rights, by authorizing shares having
preferences which would be in any respect superior to their rights. For
amendments involving mergers, see "Approval of Merger and Asset Sales."
Under the DGCL, any provision of the certificate of incorporation of
The Finx Group may be amended by approval of the board of directors and the
affirmative vote of a majority of the voting power of the outstanding shares
entitled to vote thereon; provided, that any amendment which affects the rights
of the holders of any class or series of capital stock must be approved by the
holders of a majority of the shares of such class or series.
Approval of Merger and Asset Sales
Under the NYBCL, the board of directors, upon adopting a plan of merger
or consolidation, must submit such plan to a vote of shareholders. Notice of the
meeting to adopt the plan and an outline of the plan must be given to each
shareholder of record, as of the record date, whether or not such shareholder is
entitled to vote. The plan must be adopted at the meeting of shareholders by
vote of the holders of two-thirds of all outstanding shares entitled to vote
thereon. Notwithstanding any provision in the corporation's certificate of
incorporation, the holders of shares of a class or series of the corporation's
stock shall be entitled to vote and to vote as a class if the plan contains any
provision entitling the holders of such shares to vote and vote as a class
thereon. In such case, in addition to the authorization of the merger or
consolidation by vote of the holders of two-thirds of all outstanding shares,
the merger or consolidation shall be authorized by a vote of the holders of a
majority of all outstanding shares of each such class or series. Notwithstanding
shareholder authorization, the board of directors may abandon the plan of merger
or consolidation at any time prior to the filing of the certificate of merger or
consolidation with the New York Secretary of State, but only pursuant to a
provision for such abandonment contained in the plan.
No shareholder authorization from either the parent corporation or the
subsidiary corporation is required when a parent corporation merges any
subsidiary corporation into itself.
Under the NYBCL, a sale, lease, exchange or other disposition of all or
substantially all of the assets of the corporation, if not made in the usual or
regular course of business conducted by the corporation, shall be authorized
only by the following procedure: (i) the board of directors must authorize the
proposed sale, lease, exchange or other disposition and direct its submission to
a vote of shareholders, (ii) notice of meeting shall be given to each
shareholder of record, whether or not entitled to vote, and (iii) the
shareholders must approve such sale, lease, exchange or other disposition and
may fix, or may authorize the board to fix, any of the terms and conditions
thereof and the consideration to be received by the corporation therefor, by a
vote at a meeting of shareholders of the holders of two-thirds of all
outstanding shares entitled to vote thereon. Notwithstanding shareholder
approval, the board may abandon the proposed sale, lease, exchange or
other disposition without further action by the shareholders, subject to the
rights, if any, of third parties under any contract.
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Under the DGCL, unless required by a provision of the certificate of
incorporation, and the certificate of incorporation of The Finx Group contains
no such requirement, no vote of the shareholders of a constituent corporation
surviving a merger is necessary to authorize such merger if: (i) the agreement
of merger does not amend the certificate of incorporation of such constituent
corporation; (ii) each share of stock of such constituent corporation
outstanding prior to such merger is to be an identical outstanding or treasury
share of the surviving corporation after such merger; (iii) either no shares of
common stock of the surviving corporation and no shares, securities or
obligations convertible into such common stock are to be issued under such
agreement of merger, or the number of shares of common stock issued or so
issuable does not exceed 20% of the number thereof outstanding immediately prior
to such merger; and (iv) certain other conditions are satisfied. In addition,
the DGCL provides that a parent corporation that is the record holder of at
least 90% of the outstanding shares of each class of stock of a subsidiary may
merge such subsidiary into such parent corporation without the approval of such
subsidiary's shareholders or board of directors. Whenever the approval of the
shareholders of a corporation is required for an agreement of merger or
consolidation or for a sale, lease or exchange of all or substantially all of
its assets, such agreement, sale, lease or exchange must be approved by the
affirmative vote of the holders of a majority of outstanding shares of such
corporation entitled to vote thereon; provided that under the DGCL, where a
corporation's certificate of incorporation provides for more or less than one
vote per share on any matter, the required vote is a majority of the combined
voting power of the corporation's stock.
Rights of Appraisal
Procedure to Dissent. Under the NYBCL, a shareholder has a right to
dissent to any plan of merger or consolidation or any sale, lease, exchange or
other disposition of all or substantially all of the assets of the corporation,
provided that this right exists only when the shareholder was entitled to vote
on the proposed corporate action. In order to dissent, a shareholder must file
with the corporation, before the meeting of shareholders at which the action is
submitted to a vote, or at such meeting but before the vote, written objection
to the action. The objection shall include a notice of his, her or its election
to dissent, his, her or its name and residence address, the number and classes
of shares as to which he, she or it dissents and a demand for payment of the
fair value of his, her or its shares if the action is taken. Upon consummation
of the corporate action, the shareholder shall cease to have any of the rights
of a shareholder except the right to be paid the fair value of his, her or its
shares.
Right to Receive Fair Value of Shares. Shareholders who properly
dissent to any merger or consolidation under the NYBCL also have the right to
receive payment of the fair value of their shares, if such shareholders were
entitled to vote and did not assent to any plan of merger or consolidation to
which the corporation is a party, except where such shareholders are (i) holders
of shares of the parent corporation in a merger of a parent corporation and a
subsidiary corporation, (ii) holders of shares of the parent corporation in a
merger or consolidation of domestic and foreign corporations, or (iii) holders
of shares in a surviving corporation. Notwithstanding the foregoing,
shareholders of a surviving corporation do have the right to receive payment for
their shares if the merger or consolidation alters or abolishes any preferential
rights, redemption or sinking fund rights, preemptive rights or excludes or
limits the rights of such holders to vote on any matter.
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Furthermore, a shareholder has a right to receive payment of the fair
value of his, her or its shares in the case of any sale, lease, exchange or
other disposition of all or substantially all of the assets of a corporation
which requires shareholder approval, provided that shareholders do not have the
right to receive such payment in a transaction wholly for cash where the
shareholders' approval thereof is conditioned upon the dissolution of the
corporation and the distribution of substantially all of the corporation's net
assets to the shareholders is made in accordance with their respective interests
within one year after the date of such transaction.
The DGCL provides for appraisal rights on the part of the shareholders
of a corporation only in the case of certain mergers or consolidations and not
(unless the certificate of incorporation of a corporation so provides, which the
certificate of incorporation of The Finx Group does not) in the case of other
mergers, a sale or transfer of all or substantially all of such corporation's
assets or an amendment to such corporation's certificate of incorporation. In
addition, the DGCL denies appraisal rights to the shareholders of the surviving
corporation in a merger if such merger did not require for its approval the vote
of the shareholders of such surviving corporation.
Indemnification of Directors and Officers
The NYBCL provides in general that a corporation may indemnify any
director or officer made, or threatened to be made, a party to an action or
proceeding (a "Proceeding") (other than one by or in the right of the
corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys fees actually and necessarily incurred. In order to receive such
indemnification, the person must have acted in good faith, for a purpose which
he, she or it reasonably believed to be in, or in the case of service for any
other corporation or partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to the best interests of the corporation and in
addition, in criminal actions or proceedings such person had no reasonable cause
to believe that his, her or its conduct was unlawful. The NYBCL permits similar
indemnification in the case of actions by or in the right of the corporation,
provided that indemnification is not permitted in respect of (i) a threatened
action or a pending action which is settled or otherwise disposed of, or (ii)
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as such court
deems proper. In any case, the NYBCL provides that the indemnification permitted
under the NYBCL is not exclusive of any other rights to which a director or
officer seeking indemnification or advancement of expenses may be entitled. No
indemnification may be provided to a director or officer under the NYBCL if a
judgment or other final adjudication adverse to the director or officer
establishes that his, her or its acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action, or that he, she or it personally gained in fact a financial profit or
other advantage to which he, she or it was not legally entitled.
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The DGCL provides in general that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he, she or it is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him, her or it in connection
with such action, suit or proceeding if he, she or it acted in good faith and in
a manner he 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 his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of Nolo Contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he,
she or it 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
reasonable cause to believe that his, her or its conduct was unlawful.
In addition, the DGCL permits a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he, she or it is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he,
she or it acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which that court
shall deem proper.
Furthermore, under the DGCL, the determination of whether
indemnification is proper shall be made (1) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (3) by the shareholders of
the Corporation.
The DGCL provides that the expenses (including attorneys' fees)
incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he, she
or it is not entitled to be indemnified by the corporation. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
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The DGCL further provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the DGCL shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his,
her or its official capacity and as to action in another capacity while holding
such office.
The certificate of incorporation of The Finx Group contains broad
indemnification provisions.
Anti-Takeover Provisions
Section 912 of the NYBCL applies to a broad range of business
combinations between a New York corporation and an interested shareholder. The
NYBCL defines a "business combination" to include mergers, consolidations,
sales, leases, exchanges of shares, mortgages, pledges, securities
reclassifications and other transactions. An "interested shareholder" is defined
as any person who (i) is the beneficial owner, directly or indirectly, of 20%
percent or more of the outstanding voting stock of a corporation or (ii) is an
affiliate or an associate of such corporation and at any time within the
five-year period immediately prior to the date in question was a beneficial
owner, directly or indirectly, of 20% percent or more of the then outstanding
voting stock of such corporation. The NYBCL prohibits a corporation from
engaging in a business combination with an interested shareholder for a period
of five years following such interested shareholder's stock acquisition date
except under limited circumstances, including when (i) such business combination
or the purchase of stock made by such interested shareholder on such interested
shareholder's stock acquisition date is approved by the board of directors of
such corporation prior to such interested shareholder's stock acquisition date,
(ii) such business combination is approved by the affirmative vote of the
holders of a majority of the outstanding voting stock not beneficially owned by
such interested shareholder or any affiliate or associate of such interested
shareholder at a meeting called for such purpose no earlier than five years
after such interested shareholder's stock acquisition date.
Section 912 does not apply (i) to any business combination of a New
York corporation that does not have a class of voting stock registered with the
Securities and Exchange Commission pursuant to Section 12 of the Exchange Act
("Registered Voting Stock"), unless the certificate of incorporation provides
otherwise, or under certain circumstances, such as (ii) to any business
combination of a domestic corporation whose amended certificate of incorporation
provides that Section 912 applies, which did not have a class of registered
voting stock on the Effective Time of such amendment, and which is a business
combination with an interested shareholder (as defined therein) whose stock
acquisition date is prior to the Effective Time of such amendment, or (iii) to
any business combination of a domestic corporation the original certificate of
incorporation or amended by-laws of which contain a provision expressly electing
not to be governed by Section 912, or (iv) to any business combination of a
domestic corporation with an interested shareholder of such corporation who
became an interested shareholder inadvertently.
Section 203 of the DGCL applies to a broad range of business
combinations (as defined in the DGCL) between a Delaware corporation and an
interested shareholder (as defined). The DGCL definition of "business
combination" includes mergers, sales of assets, issuance of voting stock and
certain other transactions. An "interested shareholder" is defined as any person
who owns, directly or indirectly, 15% or more of the outstanding voting stock of
a corporation. The DGCL prohibits a corporation from engaging in a business
combination with an interested shareholder for a period of three years following
the date on which the shareholder became an interested shareholder, unless (i)
the board of directors approved the business combination before the shareholder
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became an interested shareholder, or the board of directors approved the
transaction that resulted in the shareholder becoming an interested shareholder,
(ii) upon consummation of the transaction which resulted in the shareholder
becoming an interested shareholder, such shareholder owned at least 85% of the
voting stock outstanding when the transaction began other than shares held by
directors who are also officers and by certain employee stock plans, or (iii)
the board of directors approved the business combination after the shareholder
became an interested shareholder and the business combination was approved at a
meeting by at least two-thirds of the outstanding voting stock not owned by such
shareholder.
Rights of Inspection
Under the NYBCL, every shareholder of record for at least six months
immediately preceding his demand, or any person holding at least five percent of
any class of outstanding shares, upon at least five days written demand, shall
have the right to examine in person or by agent or attorney, during normal
business hours, certain books and records, including the corporation's minutes
of the proceedings of its shareholders, a record of shareholders, balance sheets
and profit and loss statements. The shareholder must request the inspection for
a purpose which is in the interest of the corporation or related to his, her or
its status as a shareholder.
Under the DGCL any shareholder shall, upon written demand under oath
stating the purpose thereof, have the right during usual business hours to
inspect for any proper purpose the corporation's stock ledger, list of
shareholders and its other books and records and make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a shareholder.
Liquidation Rights
The holders of the Company's Common Stock of the Company and the common
stock of The Finx Group have substantially the same rights on liquidation,
dissolution or winding up.
THE MERGER
Terms of the Merger
Pursuant to the Merger Agreement, at the Effective Time of the Merger:
(a) Each ten issued and outstanding shares of Common Stock of the
Company, including shares of Common Stock issued upon the conversion of the
Series A Preferred Stock, will be converted into one share of the Common Stock
of The Finx Group.
(b) Each issued and outstanding share of Series B Preferred Stock will
converted into one share of the Series A Preferred Stock of The Finx Group.
(c) Each issued and outstanding option and warrant to purchase ten
shares of Common Stock of the Company shall become a right to purchase one share
of the Common Stock of The Finx Group.
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Exchange of Certificates and Elimination of Fractional Share Interests
Shareholders will be requested to exchange their certificates
representing shares of Common Stock, Series A Preferred Stock and Series B
Preferred Stock of the Company held prior to the Merger for new certificates
representing shares of common stock and Series A Preferred Stock of The Finx
Group. Shareholders will be furnished with the necessary materials and
instructions to effect such exchange promptly following the Effective Time.
Certificates representing shares of the Company's Common Stock, Series A
Preferred Stock and Series B Preferred Stock subsequently presented for transfer
will not be transferred on the books and records of the Company but will be
returned to the tendering person for exchange. Shareholders should not submit
any certificates until requested to do so. In the event any certificate
representing shares of the Company's securities is not presented for exchange
upon request by the Company, any dividends that may be declared or interest that
may become payable after the Effective Time with respect to such securities
represented by such certificate will be withheld by the Company until such
certificate has been properly presented for exchange, at which time all such
withheld dividends or interest which have not yet been paid to a public official
pursuant to relevant abandoned property laws will be paid to the holder thereof
or his designee, without interest.
No fractional shares of The Finx Group's Common or Series A Preferred
Stock will be issued to any shareholder. Accordingly, shareholders of record who
would otherwise be entitled to receive fractional shares of The Finx Group's
Common or Series A Preferred Stock, will, upon surrender of their certificates
entitling them to receive such stock, have the number of shares issuable to them
rounded up or down to the next closest full share.
As a result of the Merger, at the Effective Time, the shareholders of
the Company will have no rights as shareholders of the Company, except the right
to receive that number and class of securities of The Finx Group to which they
are entitled under the Merger Agreement.
The purpose of the Merger is to reincorporate the Company as a Delaware
corporation, with the current shareholders of the Company owning the same
interest therein as they would in the Company.
The board of directors of the Company, which is comprised of Lewis S.
Schiller, E. Gerald Kay and Grazyna B. Wnuk, who are also the directors of The
Finx Group, determined that the Merger is fair and in the best interest of the
shareholders.
Required Vote
The Merger requires the approval of the holders of two-thirds of all of
the outstanding shares of the Common and Series A Preferred Stock of the Company
voting together as one class of stock and a two-thirds of the outstanding shares
of the Series B Preferred Stock. Because Trinity and five other shareholders
have advised the Company that they intend to provide a Written Consent as to all
of the shares of Common Stock, Series A Preferred Stock and Series B Preferred
Stock owned by them in favor of the proposal to reincorporate the Company in
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Delaware and such voting power represents more than two-thirds of each class and
all classes of the Company's outstanding securities, the Merger will be approved
without the affirmative vote or consent of any other shareholder.
Effectiveness of the Merger
The Merger will become effective upon the filing of a Certificate of
Merger with the Department of State of the State of New York and the filing of a
Certificate of Merger with the Secretary of State of Delaware. It is expected
that the Merger will become effective July 18, 2000. Except for the approval by
the shareholders, no other approvals are required for the Merger to become
effective.
INCORPORATION BY REFERENCE
The Company hereby incorporates by reference in this Information
Statement, its Annual Report on Form 10-KSB for the year ended December 31, 1999
and its Form 10-QSB for the quarter ended March 31, 2000. The Form 10-KSB
includes, among other information, a description of the Company's business and
its audited financial statements for the years ended December 31, 1998 and 1999
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Form 10-QSB for the quarters ended March 31, 2000 and 1999,
includes unaudited financial statements of the Company for the quarter ended
March 31, 2000 and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Copies of the Company's Form 10-KSB for the year ended December 31,
1999 and Form 10-QSB for the quarter ended March 31, 2000, without Exhibits, may
be obtained without charge by writing to Lewis S. Schiller, Fingermatrix, Inc.,
249 North Saw Mill River Road, Elmsford, NY 10523. Exhibits will be furnished
upon request and upon payment of a handling charge of $.25 per page, which
represents the Company's reasonable cost of furnishing such Exhibits.
By Order of the board of directors
Lewis S. Schiller
Chairman of the Board
July 14, 2000
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Appendix A
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Plan of Merger") made as of the 26
day of June, 2000, by and between FINGERMATRIX, INC., a New York corporation
("Fingermatrix") and THE FINX GROUP, INC., a Delaware corporation ("The Finx
Group"), Fingermatrix and The Finx Group being sometimes collectively referred
to as the "Constituent Corporations." The Finx Group will be the surviving
corporation, sometimes hereinafter referred to as the "Surviving Corporation."
W I T N E S S E T H :
WHEREAS, Fingermatrix has authorized capital stock consisting of (a)
two hundred thousand (200,000) shares of Series A 2% Voting Convertible
Preferred Stock ("Series A Preferred"), par value $.01 per share, 114,403 shares
of which are issued or outstanding, (b) 1000 shares of Series B 4% Preferred
Stock, par value $.01 per share, 1,000 shares of which are issued or
outstanding, and (c) 20,000,000 shares of common stock, par value $.01 per share
("Fingermatrix Common Stock"), of which 20,000,000 shares are issued and
outstanding and none of which are held as treasury shares; and
WHEREAS, The Finx Group has authorized capital stock consisting of
fifty million (50,000,000) shares of common stock, par value $.01 per share
("The Finx Group Common Stock"), of which no shares are issued or outstanding
and one million (1,000,000) shares of preferred stock, par value $.01 per share,
of which one thousand (1,000) shares are issued and outstanding and are owned by
Fingermatrix; and
WHEREAS, all of the shares of The Finx Group Common Stock are owned by
Fingermatrix; and
WHEREAS, the board of directors of each of the Constituent Corporations
deems it advisable and to the advantage and welfare of its respective
Constituent Corporation and the shareholders thereof that Fingermatrix merge
with and into The Finx Group with The Finx Group to be the Surviving
Corporation, pursuant to the provisions of Section 901 of the Business
Corporation Law of the State of New York (the "NYBCL") and Section 252 of the
General Corporation Law of the State of Delaware (the "DGCL") ;
NOW, THEREFORE, subject to the approval of this Plan of Merger by the
shareholders of Fingermatrix and the board of directors of The Finx Group, the
Constituent Corporations hereby agree as follows:
1. The names of the Constituent Corporations are Fingermatrix, Inc.
and The Finx Group Inc.
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2. (a) Fingermatrix has authorized capital stock consisting of (i) two
hundred thousand (200,000) shares of Series A 2% Voting Convertible Preferred
Stock, par value $.01 per share, 14,403 shares of which are issued or
outstanding, (ii) 1000 shares of series B 4% Preferred Stock, par value $.01 per
share, 1,000 shares of which are issued or outstanding, and (iii) 20,000,000
shares of Fingermatrix Common Stock, of which 20,000,000 shares are issued and
outstanding and none of which are held as treasury shares;
(b) The Finx Group has authorized capital stock consisting of fifty
million (50,000,000) shares of The Finx Group Common Stock, of which no shares
are issued or outstanding and one million (1,000,000) shares of Preferred stock,
par value $.01 per share, of which one thousand (1,000) shares are issued and
outstanding and are owned by Fingermatrix.
3. At the Effective Time, as hereinafter defined, Fingermatrix will be
merged with and into The Finx Group (the "Merger") and the separate existence of
Fingermatrix, without further act or deed, will terminate.
4. This Plan of Merger constitutes a plan of merger pursuant to
Section 902 of the NYBCL and Section 252 of the DGCL, to be carried out in the
manner, on the terms and subject to the conditions herein set forth.
5. The Merger will become effective immediately upon filing of the
Certificate of Merger with the Department of State of the State of New York and
the Secretary of State of the State of Delaware following approval by the
shareholders of each of the Constituent Corporations of this Plan of Merger or a
plan of merger which sets forth the terms of the Merger as set forth in this
Plan of Merger and such other matters as may be provided by Sections 904, 906,
and 907 of the NYBCL and Section 252 of the DGCL. Such date and time is herein
referred to as the "Effective Time."
6. Fingermatrix agrees to vote its shares of The Finx Group Series A
Preferred Stock in favor of the Plan of Merger.
7. At the Effective Time of the Meger, the shares of the Series A
Preferred of the The Finx Group owned by Fingermatirx will be canceled and such
shares will be returned to the status of authorized but unissued shares.
8. At and after the Effective Time, the Surviving Corporation will
succeed to and possess, without further act or deed, all of the estate, rights,
privileges, powers and franchises, both public and private, and all of the
property, real, personal and mixed, tangible and intangible, of the Constituent
Corporations; all debts due either of the Constituent Corporations will be
vested in the Surviving Corporation; all claims, demands, property, rights,
privileges, powers and franchises and every other interest of either of the
Constituent Corporations will be the property of the surviving Corporation; the
title to any real property of either of the Constituent Corporations will not
revert or be in any way
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impaired by reason of the Merger, but will be vested in the surviving
Corporation; all rights of creditors and all liens upon any property of either
of the Constituent Corporations will be preserved unimpaired, limited in lien to
the property affected by such lien at the Effective Time; and all debts,
liabilities and duties of the Constituent Corporations will thenceforth attach
to the Surviving Corporation and may be enforced against it to the same extent
as if such debts, liabilities and duties had been incurred or contracted by the
Surviving Corporation.
9. At the Effective Time:
(a) Each ten outstanding share of Fingermatrix Common Stock, shall,
by operation of law and without further action on the part of the former
holders, automatically be converted into and become the right to receive one
share of The Finx Group's fully paid and non-assessable shares of Common Stock.
Fractional shares issuable upon such conversion will be rounded to the next
nearest whole number of shares, and no fractional shares will be issued nor any
payment be made in respect thereof.
(b) Each outstanding share of the Series A 2% Voting Convertible
Preferred Stock of Fingermatrix shall, by operation of law and without further
action on the part of the former holders, automatically be converted into 742.8
shares of Fingermatrix Common Stock and, by operation of law and without further
action on the part of the former holders of such Common Stock, every ten shares
of such Common Stock shall be exchanged for one share of The Finx Group's fully
paid and non- assessable shares of Common Stock.
(c) Each outstanding share of the Series B 4% Preferred Stock of
Fingermatrix, shall, by operation of law and without further action on the part
of the former holders, automatically be converted into and become the right to
receive one share of The Finx Group's fully paid and non-assessable shares of
Series A 4% Preferred Stock of The Finx Group.
(d) Each option to purchase ten shares of Fingermatrix Common Stock
shall be converted into an option to purchase one share of The Finx Group.
(e) Each warrant to purchase ten shares of Fingermatrix Common Stock
shall be converted into a warrant to purchase one share of The Finx Group.
10. The certificate of incorporation of The Finx Group as existing at
the Effective Time shall not be modified or amended by the Merger.
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11. The By-Laws of Fingermatrix, as existing at the Effective Time,
will continue in force as the By-Laws of the Surviving Corporation until
altered, amended or repealed as provided therein or as provided by law.
12. The directors and officers of The Finx Group immediately prior to
the Merger will be the directors and officers of the Surviving Corporation, to
hold office until their respective successors have been elected and shall
qualify, or as otherwise provided in the By-Laws of the Surviving Corporation.
13. This Plan of Merger may be terminated and the Merger abandoned for
any reason whatsoever, by mutual consent of the boards of directors of the
Constituent Corporations, at any time prior to the Effective Time,
notwithstanding the adoption and approval of this Plan of Merger by the
shareholders of the Constituent Corporations.
14. This Plan of Merger may be amended at any time prior to the
Effective Time by the mutual consent of the boards of directors of the
Constituent Corporations; provided, however, that no such amendment shall
adversely affect the rights of the shareholders of Fingermatrix or The Finx
Group subsequent to the adoption and approval of this Plan of Merger by the
shareholders of Fingermatrix or The Finx Group, as the case may be.
IN WITNESS WHEREOF, the foregoing Plan of Merger which was duly adopted
by the board of directors of each of the Constituent Corporations, has been
executed by the Chairman of the Board and Secretary or Assistant Secretary of
the Constituent Corporations on and as of the date first set forth above.
WITNESS: FINGERMATRIX, INC.
_________________________ By:________________________________
Lewis S. Schiller, Chairman of the
Board and Chief Executive Officer
-------------------------
Print Name
WITNESS: The Finx Group, Inc.
_________________________ By:________________________________
Lewis S. Schiller, Chairman of the
Board and Chief Executive Officer
-------------------------
Print Name
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