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): September 22, 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 5. Other Events
Series B Preferred Stock
On September 22, 1999, the Registrant issued all 1,000 of its Series B
4% Preferred Stock (the "Series B Preferred Stock") to The Trinity Group, Inc.
The Series B Preferred Stock entitles the holder to receive, when and as
declared by the Board of Directors out of funds legally available therefor,
dividends at the rate of 4% per share to be paid annually on the first day of
July of each year. The holder of the Series B Preferred Stock has the right to
vote upon all matters upon which the holders of the Registrant's Common Stock
have the right to vote and, in addition, has the right to elect (i) three
directors if the number of directors is five or less, (ii) four directors if the
number of directors if six or seven, and (iii) a majority of the directors if
the number of directors is more than seven. The Series B Preferred Stock is not
convertible or redeemable by the Registrant. The holder of the Series B
Preferred Stock also has the right to receive $1.00 per share (plus all accrued
and unpaid dividends) in the event of any liquidation, dissolution or winding up
of the Registrant before any payment or distribution under such circumstances is
made on any series or class of capital stock ranking junior to the Series B
Preferred Stock and after all such payments or distributions have been made on
any series or class of capital stock ranking senior to the Series B Preferred
Stock as to payment or distribution.
Proposed Purchase of Series A 2% Voting Convertible Redeemable Preferred Stock
On October 22, 1999, the Registrant entered into a Term Sheet with
Joseph Randazza and Leslie Roth (the "Term Sheet") setting forth the principal
terms of certain proposed transactions between the Registrant, Authorized
Payments, Inc., a newly formed Delaware corporation which is a subsidiary of
Registrant ("API Delaware), and Messrs. Randazza and Roth.
In accordance with the terms of the Term Sheet, the Registrant agreed
to enter into a Stock Purchase Agreement with Messrs. Randazza and Roth (the
"Stock Purchase Agreement") pursuant to which such individuals will purchase
from the Registrant 16,152 shares of the Registrant's Series A 2% Voting
Convertible Redeemable Preferred Stock (the "Series A Preferred Stock") for a
purchase price to be subsequently agreed upon between the Registrant and such
individuals. The Series A Preferred Stock will be convertible into an aggregate
of 11,997,705 shares of the Registrant's Common Stock. The purchase price for
the Series A Preferred Stock will be based upon a valuation opinion of an
investment banker to be selected by such individuals, which opinion will be paid
for by the Registrant. The purchase price for the Series A Preferred Stock will
be comprised of a cash payment in an amount equal to the aggregate par value of
the Series A Preferred Stock and the delivery by such individuals of their
non-recourse, secured promissory notes (the "Notes") in a principal amount equal
to the difference between the total purchase price payable for such securities
and the aforementioned cash portion of the purchase price. The Notes will be
secured by a pledge of the shares of Series A Preferred Stock purchased by such
individuals and a pledge or assignment of Joseph Randazza's 50% interest in two
United States pending patent applications relating to a certain fingerprint
technology. The Notes will bear interest at the lowest rate provided under the
Internal Revenue Code for imputed interest and the principal and all interest
under the Notes will be due
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and payable on the fifth anniversary after the issuance of the Notes. The Notes
will also be mandatorily prepayable from such portion of the proceeds of any
sale of the shares of Common Stock underlying the Series A Preferred Stock as
shall equal the purchase price allocable to such shares and from all proceeds,
if any, received by Mr. Randazza from the sale, transfer, assignment, or other
disposition or exploitation of the aforementioned United States patent
applications (excepting any proceeds that may be received by Mr. Randazza from
the exploitation of such patent applications for purposes of "biometrics" as
defined in the Term Sheet).
The Registrant has agreed to grant Messrs. Randazza and Roth
"piggy-back" registration rights with respect to the shares of the Registrant's
Common Stock underlying the Series A Preferred Stock, as well as any other
registration rights that may be granted by the Registrant to Lewis S. Schiller
or any member of his family or to any officer, director, or principal
shareholder of the Registrant (and any other registration rights, if any, that
may be mutually agreed upon between such individuals and the Registrant). The
ability to convert the Series A Preferred Stock into shares of the Registrant's
Common Stock will be dependent upon a contemplated recapitalization of the
Registrant pursuant to which the Registrant intends to, among other things,
increase its authorized capital to allow for such conversion.
Proposed Purchase of Shares of Authorized Payments, Inc.
The Registrant also agreed that API Delaware will enter into a Stock
Purchase Agreement with Messrs. Randazza and Roth pursuant to which such
individuals will be entitled to purchase from API Delaware an aggregate of 70%
of the shares of Common Stock of API Delaware for a purchase price equal to the
aggregate par value of such shares, payable in cash on the date of closing under
such agreement. Messrs. Randazza and Roth have agreed to transfer to API
Delaware on the date of closing of any such transaction, any and all rights, if
any, to proposals, agreements and proprietary business ideas and information of
Authorized Payments, LLC., a limited liability company wholly owned by them
which was formed for the purpose of developing and marketing a payment and
transaction authorization and processing system principally for use in
E-commerce transactions by purchasers who effect such purchases with checking
account debits. The Registrant agreed that API Delaware will grant to any
investor that makes an investment of $350,000 or more in API Delaware, a right
to designate a member of API's Board of Directors. The Term Sheet contemplates
the payment by API Delaware to Messrs. Randazza and Roth of an annual management
fee of 20% of the net after-tax profits of API (the "Management Fee") for a
period of five years.
Proposed Loans to API
The Registrant has agreed to loan to API Delaware an amount equal to
20% of the proceeds of a contemplated private placement of its securities, with
a minimum loan of $350,000 (the "Loan"). The Loan will be due and payable in
five years, will be, to the extent of 20% of the outstanding principal amount of
the Loan (plus all then accrued interest) per year, mandatorily
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prepayable after the first year of operations of API Delaware from 25% of that
portion of API Delaware's cash flow from operations which exceeds API's
projected six month working capital requirements. The Loan will bear interest at
the lowest rate for imputed interest provided under the Internal Revenue Code
and will be secured by all of the assets of API Delaware. As consideration for
the Loan, API Delaware will issue and deliver to the Registrant a common stock
purchase warrant on terms to be mutually agreed upon. The Registrant will also
be entitled to receive additional common stock purchase warrants of API Delaware
on the same terms as the initial common stock purchase warrant to be received in
connection with the Loan in the event that the Registrant lends additional funds
to API Delaware. The number of shares of common stock of API Delaware owned by
the Registrant, inclusive of all shares reserved for issuance under any common
stock purchase warrants issued by API Delaware to the Registrant is not to
exceed, in the aggregate, 49.9% of the outstanding common stock of API Delaware.
Proposed Management Changes
The Term Sheet provides that on the closing date under the contemplated
Stock Purchase Agreement Joseph Randazza will become Senior Vice President and
Director of Sales and Marketing of the Registrant, as well as Chief Executive
Officer of Secured Portal Systems, Inc. ("SPS"), a subsidiary of the Registrant,
and Chief Executive Officer and President of API. In addition, the Term Sheet
also provides that on the closing date under the contemplated Stock Purchase
Agreement Leslie Roth will become the Senior Vice President of Technical
Services and Operations of the Registrant, as well as the Vice President of API.
Both of such individuals will serve as advisors to the Registrant's Board of
Directors until such time, if any, as the Registrant obtains officer and
director liability insurance, at which time the Registrant has agreed to cause
the election of Joseph Randazza to its Board of Directors.
It is contemplated that on the closing date of the Stock Purchase
Agreement the Board of Directors of API Delaware will consist of four members,
two of whom will be Messrs. Randazza and Roth and the remaining two of whom will
be Lewis Schiller and another designee of the Registrant. It is also
contemplated that API Delaware will issue to the Registrant a series of its
preferred stock pursuant to which the Registrant will have the right to elect a
majority of API Delaware's Board of Directors unless (a) the contemplated
employment agreements with Messrs. Randazza and Roth are terminated as a result
of a breach by the Registrant or its subsidiaries which are parties to such
agreements, (b) more than two payment or other material defaults by the
Registrant or those of its subsidiaries under such employment agreements occurs
in any year of the term of such agreements, or (c) the contemplated Loan to API
Delaware is not funded within 180 days after the execution of such agreements.
If any such circumstance shall occur, the Registrant will have the right to have
one of its designees serve on API's Board of Directors.
Proposed Employment Agreements
The Term Sheet contemplates the consummation of employment agreements
with Messrs. Randazza and Roth upon and subject to the consummation of the Stock
Purchase Agreement. It
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is contemplated under the Term Sheet that the Registrant, SPS and API Delaware
will enter into employment agreements with Joseph Randazza pursuant to which Mr.
Randazza will be employed as the Senior Vice President and Director of Sales and
Marketing of the Registrant, as well as the Chief Executive Officer of SPS and
the President and Chief Executive Officer of API Delaware. The term of each of
such agreements will be five years. Mr. Randazza will be entitled to an annual
base salary of $134,000 for his services as an officer of Registrant and an
annual draw against sales commissions in the amount of $66,000 in consideration
of his contemplated services as an officer of SPS. At such time as any loans
made by the Registrant to API Delaware have been repaid, the Term Sheet
contemplates that the Registrant and Mr. Randazza will negotiate and agree upon
an annual base salary in consideration of Mr. Randazza's contemplated services
as an officer of API Delaware. The contemplated employment agreements with Mr.
Randazza will also provide for annual cost of living increases in amounts to be
mutually agreed upon, annual bonus or incentive compensation in amounts and upon
terms to be mutually agreed upon, a 5% sales commission on Net Revenues (as such
term is defined in the Term Sheet) received by SPS from customers introduced to
SPS by Mr. Randazza or his designees, a sales override in an amount equal to 1/2
of l% of all such Net Revenues derived by SPS from customers which are not
introduced to it by Mr. Randazza or his designees, reimbursement of all ordinary
and necessary business expenses incurred by Mr. Randazza in connection with the
performance of his services as well as certain other specified fringe benefits.
If, at any time that the contemplated draw against sales commissions payable to
Mr. Randazza under the proposed employment agreement between him and SPS exceeds
sales commissions earned by Mr. Randazza by $99,000, no further draws will be
payable to Mr. Randazza until the amount of such draws, net of earned sales
commissions, are less than $66,000.
Although the Term Sheet is not binding upon the Registrant and the
other parties thereto, the Registrant agreed to commence payments on November
15, 1999 to Mr. Randazza of his annual base salary and draw against commissions
for services being rendered by him to the Registrant and SPS commencing for the
period beginning on October 15, 1999 and to continue to make such monthly
payments prior to the execution of definitive employment agreements with Mr.
Randazza, subject to cancellation by the Registrant upon thirty days' notice.
It is proposed that Mr. Randazza will devote only such of his time as
may be necessary to perform his services under such employment agreements until
such time as the total compensation received by him under such agreements equals
an annual rate of at least $350,000 (the "Annual Compensation Rate"), at which
time he will be required to devote his full time to the performance of his
services under such agreements. If, however, at any time after Mr. Randazza is
required to render full-time service to the Registrant and its subsidiaries
under such agreements, the aggregate compensation received by him thereunder
falls below such Annual Compensation Rate for a period of four consecutive
months, Mr. Randazza will not be required to render full-time services under
such agreements until such time as the total compensation thereafter reaches the
Annual Compensation Rate. Notwithstanding the foregoing, the Registrant has
agreed that Mr. Randazza will be permitted to engage in certain business
brokerage activities during the term of his employment agreements, provided that
he does not spend a material
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portion of his time doing so, that such activities do not interfere with his
services under such employment agreements, and that Mr. Randazza grants the
Registrant an opportunity to pursue any transactions in which he may be
rendering such brokerage services if the transaction involves a business which
is the same or similar to the Registrant's then or proposed business.
Finally, it is contemplated that any sales commissions payable to Mr.
Randazza based on Net Revenues derived from customers introduced by him to SPS
will be payable to him both during and after the term of such employment
agreement and that, so long as Mr. Randazza is the owner of 10% or more of the
outstanding common stock of API Delaware, API Delaware will not be permitted to
terminate his services as Chief Executive Officer or a director of API, other
than for cause as mutually agreed upon by API and Mr. Randazza.
It is also contemplated that the Registrant and API Delaware will enter
into separate employment agreements with Leslie Roth, pursuant to which Mr. Roth
will be employed as the Senior Vice President of Technical Services and
Operations of the Registrant and the Vice President of API Delaware. It is
contemplated that such agreements will have a term of five years, provide for
the payment of an annual salary of $37,500 for Mr. Roth's services as an officer
of the Registrant and an annual base salary of $75,000 for Mr. Roth's services
as an officer of API Delaware, subject to increase to an amount and based upon a
to be mutually agreed upon level of revenues and/or profits of API Delaware,
annual cost of living increases to be mutually agreed upon, annual bonus and
incentive compensation in amounts to be mutually agreed upon, and reimbursement
of all necessary business expenses incurred by Mr. Roth in connection with such
services.
Finally, it is contemplated that, so long as Mr. Roth is the owner of
5% or more of the outstanding common stock of API Delaware, API Delaware will
not be permitted to terminate his services as Vice President or a director of
API, other than for cause as mutually agreed upon by API and Mr. Roth.
It is proposed that Mr. Roth will devote only such of his time as may
be necessary to perform his services under such employment agreements until such
time as the total compensation received by him under such agreements equals an
annual rate of at least $200,000 (the "Roth Annual Compensation Rate"), at which
time he will be required to devote his full time to the performance of his
services under such agreements. If, however, at any time after Mr. Roth is
required to render full-time service to the Registrant and API Delaware under
such agreements, the aggregate compensation received by him thereunder falls
below the Roth Annual Compensation Rate for a period of four consecutive months,
Mr. Roth will not be required to render full-time services under such agreements
until such time as the total compensation thereafter reaches the Roth Annual
Compensation Rate.
It is contemplated that Mr. Roth will spend approximately 80% of his
time in performing his services to API Delaware and the remaining 20% thereof to
the performance of his services to the Registrant.
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The Registrant and Messrs. Randazza and Roth have agreed that in the
event that the agreements contemplated by the Term Sheet are not consummated,
the parties will share the aggregate legal fees and certain other specified
costs incurred in connection therewith.
The Term Sheet specifies a number of conditions to the closing of the
transactions contemplated thereby, including the approval of all definitive
agreements by the Board of Directors of the Registrant.
Amendment
In December 1999, the Registrant and Messrs. Randazza and Roth agreed
to modify the Term Sheet to provide that (i) the Loan will be a maximum of
$350,000 and will be based upon the net proceeds of the Registrant's
contemplated private placement, (ii) Mr. Roth will be engaged as the Senior Vice
President of Systems Development of the Registrant, (iii) of the $134,000 annual
salary of Mr. Randazza, $124,000 will be paid by SPS and $10,000 will be paid by
the Registrant, (iv) Mr. Randazza's total compensation payable by the
Registrant, API and SPS will not exceed $750,000 per annum, (v) of the $37,500
annual salary of Mr. Roth, $27,500 will be paid by API and the balance of
$10,000 will be paid by the Registrant, and (vi) Messrs. Randazza and Roth will
receive an aggregate of 10% of the outstanding capital stock of SPS on terms to
be mutually agreed upon.
Consulting Agreement
The Registrant entered into a Consulting Agreement on October 22, 1999,
as amended as of December 13, 1999 with First Argentum LLC pursuant to which
First Argentum agreed to provide certain business and financial consulting and
advisory services to the Registrant during a term expiring on November 1, 2000.
In consideration of the services to be rendered to the Registrant by First
Argentum, the Registrant issued to First Argentum 3,366 shares of its Series A
2% Voting Convertible Redeemable Preferred Stock, which shares are convertible
into an aggregate of 2,500,264 shares of the Registrant's Common Stock,
performance-based options to purchase shares of the Registrant's Common Stock
based upon the closing sale price of the Registrant's Common Stock as more
specifically described below, and such number of shares of the Common Stock of
SPS, as shall equal 5% of the total issued and outstanding shares of Common
Stock of SPS. First Argentum will be entitled to receive the aforementioned
performance-based stock options in the amounts and based upon the closing sale
prices of the Registrant's Common Stock as follows: (i) Options to purchase
250,000 shares if the closing sales price is $.50 or more; (ii) options to
purchase 250,000 shares if the closing sales price is $.65 or more; (iii)
options to purchase 250,000 shares if the closing sales price is $.80 or more;
and (iv) options to purchase 250,000 shares if the closing sales price is $.80
or more.
The closing sale price must be maintained for 20 consecutive trading
days before First Argentum is entitled to receive such options, except in the
case of the last 250,000 of such options, in which case the closing sale price
must be maintained for 180 or more consecutive
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trading days. Each of such options shall have a five year term. The Registrant
agreed, to the extent permitted by applicable law, to register 500,000 shares of
the Registrant's Common Stock issued to First Argentum upon conversion of the
3,366 shares of the Series A Preferred Stock promptly after and subject to the
Registrant's contemplated recapitalization pursuant to which, among other
things, the Registrant intends to increase its authorized capitalization so as
to enable the holders of the Series A Preferred Stock to convert such shares
into the Registrant's Common Stock. The Registrant also agreed to pay First
Argentum a finder's fee as specified in the Consulting Agreement with respect to
any transaction that the Registrant concludes with any third party introduced to
it by First Argentum.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1. Form of Certificate of Amendment of the Certificate of
Incorporation of the Registrant dated July 20, 1999 containing the Statement of
the Powers, Designations, Rights and Preferences of the Series B 4% Preferred
Stock, par value $.01 per share.
99.2. Term sheet dated October 22, 1999 between the
Registrant, Joseph Randazza, Leslie Roth and Lewis S. Schiller.
99.3. Consulting Agreement dated as of October 22, 1999
between the Registrant and First Argentum LLC.
99.4. Amendment No. 1 dated as of December 13, 1999 to the
Consulting Agreement between the Registrant and First Argentum LLC dated as of
October 22, 1999.
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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.
Date: January 3, 2000 By: /s/ Lewis S. Schiller
----------------------
Lewis S. Schiller
Chief Executive Officer
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Exhibit 99.1
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. (the
"Corporation"), 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 was filed on May 13, 1999.
4. Immediately following the filing of the Restated Certificate of
Incorporation on May 13, 1999, and on the same date, a Certificate of Amendment
of the Certificate of Incorporation was filed with the Department of State of
the State of New York.
5. The Restated Certificate of Incorporation of the Corporation is
hereby amended to (a) amend Paragraphs 1 and 4(b) of the Statement of the
Powers, Designations, Preferences, Privileges, Rights and Restrictions of the
Series A 2% Voting Convertible Redeemable Preferred Stock, and (b) add the
Statement of the Powers, Designations, Rights and Preferences of the Series B 4%
Voting Preferred Stock of the Corporation, as follows:
Paragraphs 1 and 4(b) of the Statement of the Powers, Designations,
Preferences, Privileges, Rights and Restrictions of the Series A 2% Voting
Convertible Redeemable Preferred Stock of the Corporation are hereby amended, in
their entirety, to read as follows:
"1. Designation and Number of Shares. The designation of this series of
One Hundred Fifty Thousand (150,000) 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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"4. (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 seven hundred forty-two and eight-tenths (742.8) shares
of Common Stock, subject to proper adjustment as provided in Paragraph 4(e) of
this Statement."
The Restated Certificate of Incorporation of the Corporation is hereby
amended to add the Statement of the Powers, Designations, Rights and Preferences
of the Series B 4% Voting Preferred Stock of the Corporation, as follows:
STATEMENT OF THE POWERS, DESIGNATIONS,
RIGHTS AND PREFERENCES OF THE SERIES B 4%
PREFERRED STOCK, PAR VALUE $.01 PER SHARE
1. Designation and Number of Shares. The designation of this series of
one thousand (1,000) shares of capital stock, par value $.01 per share, 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 B 4%
Preferred Stock," which is hereinafter referred to as the "Series B Preferred
Stock." In the event that the Corporation does not issue the maximum number of
shares of Series B Preferred Stock or in the event that the Corporation shall
acquire (whether by purchase, redemption or otherwise) and cancel any shares of
Series B Preferred Stock, the Corporation may, from time to time, by resolution
of the Board of Directors, reduce the number of shares of Series B 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
B Preferred Stock then issued or reserved for issuance. The number of shares by
which the Series B Preferred Stock is reduced shall have the status of
authorized but unissued shares of preferred stock, without designation as to
class or series until such stock is once more designated as part of a particular
class or series by the Board of Directors.
2. Dividend Rights.
2.1. Subject to the provisions of Paragraph 2.2 hereof, the
holders of the Series B Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors out of funds of the Corporation legally
available therefor or as otherwise provided in this Statement of Designation,
annual dividends at the rate of 4% per share of Series B Preferred Stock. Such
dividends shall be payable annually on the first day of July (the first day of
July of any particular year is referred to herein as a "Dividend Payment Date"),
to the holders of record of the Series B Preferred Stock on the preceding July
15. Each annual period ending on the date immediately prior to a Dividend
Payment Date is referred to herein as a "Dividend Period." Dividends on the
Series B Preferred Stock shall be cumulative and shall accrue on a day-to-day
basis, whether or not earned, from and after the day immediately succeeding the
date on which such shares are issued. Dividends on the Series B Preferred Stock
that are not declared and paid
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when due will compound annually on each Dividend Payment Date at the dividend
rate of 4% per annual period. Dividends payable for any partial Dividend Period
shall be computed on the basis of actual days elapsed over a 365-day year.
2.2. No dividends on the Series B Preferred Stock shall be
declared or set aside for payment and no other distribution shall be declared or
made upon or in connection with the Series B Preferred Stock and no Series B
Preferred Stock shall be redeemed, purchased or otherwise acquired for any
consideration by the Corporation or by any subsidiary thereof (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), nor shall any monies
be paid or made available for a sinking fund for the purchase or redemption
thereof unless, in each case (i) the dividends on all other classes of stock of
the Corporation for the Dividend Period during which the record date for such
other series or classes of stock of the Corporation for the Dividend Period
during which the record date for such other series or class of capital stock
occurs shall have been declared by the Board of Directors and aid or payment
shall have been provided for or (ii) the holders of a majority of the shares of
all other classes of stock of the Corporation then outstanding, with each class
voting as a class, shall consent thereto.
3. Voting Rights.
3.1. Except as otherwise required by law and the rights of any
holders of any class or series of capital stock hereafter created by the Board
of Directors pursuant to the Certificate of Incorporation of the Corporation,
the holders of shares of Series B Preferred Stock shall vote as a class upon all
matters upon which the holders of the Common Stock, $.01 par value, of the
Corporation (the "Common Stock") shall have the right to vote.
3.2. In addition to the voting rights set forth in Paragraph
3.1 of this Statement of Designation, the holders of the Series B Preferred
Stock shall have the right, voting as a single class, to elect (i) three
directors if the number of directors is five or fewer directors, (ii) four
directors if the number of directors is six or seven, and (iii) a majority of
the directors if the number of directors is more than seven. For purposes of
this Paragraph 3.2, the number of directors shall be the number of directors
which constitutes the entire Board determined in the manner provided for in the
By-Laws of the Corporation, regardless of whether the number of directors
actually serving is less than the number that constitutes the entire Board.
3.3. In the event that, pursuant to applicable law, the
holders of the Series B Preferred Stock are required to vote as a single class,
separate and apart from the Common Stock, each holder of Series B Preferred
Stock shall be entitled to one vote per share of Series B Preferred Stock on
such matters.
3.4. The Corporation is not restricted from creating other
classes or series of Preferred Stock which may be junior to, senior to or in
parity with, the Series B Preferred Stock as to dividends and/or upon the
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation without the consent of the holders of the Series B Preferred Stock.
3.5. The voting rights of the holders of the Series B
Preferred Stock may be exercised either by written consent or at a special
meeting of the holders of the shares of Series B Preferred Stock, called as
hereinafter provided, or at any annual meeting of stockholders held
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for the purpose of electing directors. At any time during which the holders of
the Series B Preferred Stock have voting rights with respect thereto, and if
such rights shall not already have been exercised by written consent, a proper
officer of the Corporation may call and, upon the written request, addressed to
the Secretary of the Corporation, of the record holders of shares representing
25% of the voting power of the shares then outstanding of the Series B Preferred
Stock, shall call a special meeting of the holders of the Series B Preferred
Stock. Such meeting shall be held at the earliest practicable date upon the
notice required for annual meeting of stockholders of the Corporation at the
place for holding annual meetings of stockholders of the Corporation or, if
none, at a place designated by the Board of Directors.
3.6. At any meeting held for the purpose of electing directors
at which the holders of the Series B Preferred Stock shall have the right to
elect directors as provided herein, the presence in person or by proxy of the
holders of shares representing more than 50% in voting power of the then
outstanding shares of Series B Preferred Stock having such right shall be
required and shall be sufficient to constitute a quorum for such class for the
election of directors by such class.
3.7. No consent of the holders of the Series B Preferred Stock
shall be required for the creation of any indebtedness of any kind of the
Corporation.
4. Conversion. The Series B Preferred Stock is not convertible into
Common Stock.
5. Redemption. The Series B Preferred Stock is not redeemable by the
Corporation.
6. Liquidation Rights.
6.1. In the event of the liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, holders of the Series B
Preferred Stock shall be entitled to receive One Dollar ($1.00) per share, plus
all accrued 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 the Series B 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 B Preferred
Stock as to such payment or distribution.
6.2. After payment of the preference set forth in Paragraph
6.1 of this Statement of Designation, the holders of the Series B Preferred
Stock shall have no further rights on liquidation, dissolution or winding up.
6.3. 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 6, except that the merger or consolidation of the Corporation into any
other corporation or the sale by the Corporation of all or substantially all of
its assets shall not be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Paragraph 6 if either (i) the
holders of all shares of Series B 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 B Preferred Stock held by
- 4 -
<PAGE>
them upon such effectiveness, one share of preferred stock of the resulting or
surviving corporation or purchaser or the parent of any such corporation, which
shares shall have, to the extent practicable, dividend and voting rights and
rights upon dissolution, liquidation or winding up reasonably equivalent to
those of such shares of Series B Preferred Stock, or (ii) the merger,
consolidation or sale or other transaction was approved by the holders of a
majority of the shares of Series B Preferred Stock then outstanding either at a
meeting of such stockholders or by a written consent in lieu of a meeting. Any
merger in which the Corporation shall be the surviving corporation shall not be
deemed a dissolution, liquidation or winding up of the Corporation for purposes
of this Paragraph 6.
6.4. In the event the assets of the Corporation available for
distribution to the holders of shares of Series B 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 6.1 of this Statement of Designation,
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 B Preferred Stock upon such dissolution, liquidation or winding
up unless proportionate distributive amounts shall be paid on account of the
shares of Series B 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.
7. Rank of Class or Series. For purposes of this Statement of
Designation, any stock of any class or series of the Corporation shall be deemed
to rank:
7.1. senior to shares of the Series B 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 B Preferred Stock;
7.2. junior to shares of the Series B Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be, if
such class shall be Common Stock or if the holders of shares of the Series B
Preferred 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 preference or priority to the holders of shares of such
class or classes.
8. No Preemptive Rights. No holder of the Series B 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.
9. Transfer Agent and Registrar. The Corporation may appoint a transfer
agent and registrar for the issuance, transfer and conversion of the Series B
Preferred Stock and for the
- 5 -
<PAGE>
payment of dividends to the holders of the Series B Preferred Stock (or may act
as its own transfer agent and registrar therefor).
IN WITNESS WHEREOF, the undersigned, being all of the directors of the
Corporation, have executed this Certificate for and on behalf of the Corporation
this 20th day of July 1999.
-----------------------------------
LEWIS S. SCHILLER,
Director
-----------------------------------
E. GERALD KAY,
Director
-----------------------------------
JOEL BROWN,
Director
- 6 -
<PAGE>
Exhibit 99.2
TERM SHEET
The following sets forth the principal terms of certain proposed
transactions between Fingermatrix, Inc. and its subsidiary, Authorized Payments,
Inc., a Delaware corporation, and Joseph Randazza and Leslie Roth (and their
respective successors and permitted assigns).
Purchase of Fingermatrix Shares
Seller: Fingermatrix, Inc., a New York corporation ("FINX"
- ------- or "Seller"), with offices at 249 N. Saw Mill
River Road, Elmsford, New York 10523.
Purchasers: Joseph Randazza ("Randazza") and Leslie Roth
- ----------- ("Roth" and, together with Randazza, the
"Purchasers").
Stock Purchase Agreement: Seller and Purchasers will enter
- ------------------------- into a Stock Purchase Agreement (the "Agreement"),
pursuant to which Purchasers will purchase from
Seller 16,152 shares of Seller's Series A 2%
Voting Convertible Redeemable Preferred Stock, par
value $.01 per share, which are convertible into
11,997,705 shares of Seller's Common Stock, par
value $.01 per share (the "FINX Shares") for a
purchase price to be agreed upon between Seller
and Purchasers based upon a valuation opinion (the
"Valuation Opinion") of an investment banker
selected by Purchasers (the "Purchase Price").
Seller will pay for the aforementioned Valuation
Opinion. The Purchase Price will consist of cash
in an amount equal to the aggregate par value
($161.52) of
- 1 -
<PAGE>
the FINX Shares (the "Cash Portion of the Purchase
Price") and promissory notes of Purchasers to
Seller in an aggregate principal amount equal to
the balance of the Purchase Price (the "Notes").
The shares of Seller's Common Stock underlying the
FINX Shares will, upon the issuance thereof to
Purchasers, be "restricted" securities as defined
under the Federal securities laws and will be
subject to the resale limitations of Rule 144
thereunder. The holders of all of such shares of
Common Stock will have customary "piggy-back"
registration rights and will be entitled to any
other registration rights granted to Lewis S.
Schiller and any member of his family or to any
officer, director or principal shareholder of
Seller (and any other registration rights, if any,
that may be mutually agreed upon).
Seller intends to file an Information Statement
with the Securities and Exchange Commission by
November 25, 1999 to effect a recapitalization of
Seller which will, among other things, permit the
conversion of the FINX Shares.
The Notes shall be non-recourse to the makers
thereof and shall be secured by (i) a pledge of
the FINX Shares and (ii) a pledge or assignment of
Randazza's 50% interest in two U.S. patent
applications relating to a particular fingerprint
technology (the "Randazza Patent Applications").
The Notes will bear interest at the lowest rate
provided for imputed interest under the Internal
Revenue Code and the principal and all interest
thereunder will be due and
- 2 -
<PAGE>
payable on the fifth anniversary after the
issuance thereof. The Notes will be mandatorily
prepayable from (i) such portion of the proceeds
of any sale of the shares of common stock
underlying the FINX Shares as shall equal the
purchase price allocable to such shares and (ii)
all proceeds received by Randazza from the sale,
transfer, assignment, or other disposition or
exploitation (collectively, the "Dispositions") of
the Randazza Patent Applications, except for any
and all proceeds received by Randazza from
Dispositions of the Randazza Patent Applications
for Biometrics and Purchaser's security interest
will not attach thereto. For purposes hereof,
"Biometrics" shall mean the science of
identification of individuals based upon unique
genetic or physical characteristics. Seller
acknowledges that the pledge or assignment of
Randazza's interest in the Randazza Patent
Applications is subject to certain existing
license agreements and Randazza disclaims any
representation as to the issuance of any patents
from the Randazza Patent Applications or the scope
thereof, if and when issued (one of such patent
applications is currently subject to certain
official action letters of the United States
Patent and Trademark Office).
Management: On the date of closing under the Agreement (the
- ----------- "Closing Date"):
(a) the Board of Directors of Seller shall consist
of Lewis S. Schiller, Gerald Kay and Joel Brown
(or another designee of Seller),
- 3 -
<PAGE>
(b) the initial Board of Directors of Authorized
Payments, Inc., a recently formed Delaware
corporation ("API"), shall consist of four members
(Lewis S. Schiller, Randazza, Roth and a designee
of Seller). Lewis S. Schiller will be Chairman of
the Board of API and Seller will have the right to
elect a majority of API's Board of Directors
pursuant to the API Preferred Stock, hereinafter
defined, subject to the provisions described in
the Section entitled "Purchase of Authorized
Payments, Inc. Shares - Preferred Stock." Seller
will, for so long as the Randazza and Roth
Employment Agreements remain in effect (unless
terminated for breach by Seller, SPS or API, as
applicable), nominate Randazza and Roth to serve
as members of API's Board of Directors.
(c) Randazza will be the Senior Vice-President and
Director of Sales and Marketing of Seller, Chief
Executive Officer of Secured Portal Systems, Inc.
("SPS"), a majority-owned subsidiary of Seller,
and President of API, and
(d) Roth will be the Senior Vice-President of
Technical Services and Operations of Seller and
the Vice-President of API.
Randazza and Roth will serve as advisors to
Seller's Board of Directors, without compensation,
until such time as Seller obtains officer and
director liability insurance, at which time Seller
will cause Randazza to be elected to its Board of
Directors. Promptly after Seller's receipt of the
proceeds of a contemplated private placement of
its securities, Seller will use its best
- 4 -
<PAGE>
efforts to obtain and maintain officer and
director liability insurance.
API Loans: Seller will, subject to and at such
- ---------- time as it receives the proceeds of a contemplated
private placement of its securities (or the
proceeds of any other financing), loan to API an
amount equal to 20% thereof, with a minimum of
$350,000 (the "Loan"). The Loan will be due and
payable five (5) years from the date thereof (the
"Maturity Date") and will be, to the extent of 20%
of the outstanding principal amount of the Loan
(plus all then accrued interest) per year,
mandatorily prepayable semi-annually after the
first year of operations of API from 25% of that
portion of API's cash flow from operations which
exceeds API's projected six month working capital
requirements. API's projected six month working
capital requirements will be determined by
calculating the average monthly operating expenses
of API for the six months preceding each
semi-annual mandatory prepayment date. All
mandatory prepayments will be applied first to
accrued interest on the Loan and then to the
outstanding principal balance thereof. The Loan
will bear interest at the lowest rate for imputed
interest provided for by the Internal Revenue Code
and will be secured by all of the assets of API.
All principal and interest payable under the Loan
will be payable on the Maturity Date (subject to
the aforementioned mandatory prepayment
provision).
- 5 -
<PAGE>
As consideration for the Loan, API will issue and
deliver to Seller on the date of the Loan a common
stock purchase warrant entitling Seller to
purchase such number of shares of API's capital
stock upon such terms, for such period of time and
at such exercise price as shall be mutually agreed
upon.
In the event that Seller's Board of Directors
approves any additional loans to API (the
"Additional Loans"), the term, interest rate and
payment terms will be the same as the Loan and
Seller will receive additional common stock
purchase warrants on the same basis as the
warrants Seller received in connection with the
Loan.
The number of shares of API's common stock
underlying all common stock purchase warrants
issued to Seller, and the number of shares of
API's common stock owned by Seller and Schiller
shall not exceed, in the aggregate, 49.9% of the
outstanding common stock of API.
Randazza Employment
Agreements: On the Closing Date, Seller and SPS will enter
- ----------- into separate employment agreements with Randazza
(the "Randazza Employment Agreements") providing
for Randazza's services as Senior Vice-President
and Director of Sales and Marketing of Seller,
Chief Executive Officer of SPS, and Chief
Executive Officer of API on the following
principal terms:
(i) A term of five (5) years, commencing on
October 15, 1999,
- 6 -
<PAGE>
(ii) an annual base salary of $134,000 for
Randazza's services as an officer of Seller (the
"Randazza Salary") and a draw (the "Randazza
Draw") against Sales Commissions (hereinafter
defined) of $66,000 per year for Randazza's
services as an officer of SPS and an annual base
salary to be mutually agreed upon for Randazza's
services as an officer of API, such salary to
commence only after all loans from Seller to API
have been repaid or at such time, if any, that
Seller no longer controls API,
(iii) annual cost of living increases, commencing
in the second year of the term of the employment
agreement between Seller and Randazza, in an
amount to be mutually agreed upon,
(iv) annual bonus or incentive compensation for
Randazza's services as an officer of Seller in an
amount to be mutually agreed upon between Seller
and Randazza,
(v) a sales commission in an amount equal to 5% of
all Net Revenues (hereinafter defined) received by
SPS during the term of the employment agreement
between SPS and Randazza from customers introduced
to SPS by Randazza or his designees (the "Sales
Commission"),
(vi) a sales override in an amount equal to 1/2 of
1% of all Net Revenues received by SPS during the
term of the employment agreement between SPS and
Randazza which are derived from customers which
are not introduced to SPS by Randazza or his
designees, and
- 7 -
<PAGE>
(vii) reimbursement of all ordinary and necessary
business expenses incurred by Randazza in
connection with the performance of his services
under the Randazza Employment Agreements (Randazza
will also receive a corporate credit card and
telephone credit card from Seller).
For purposes hereof, "Net Revenues" shall mean the
gross revenues received by SPS from the sale,
leasing and maintenance of all products sold by it
including, without limitation, the secured access
system distributed by SPS under its Exclusive
Distribution Agreement with GIL Security Systems,
Inc., less all applicable sales taxes, returns,
allowances and the cost of goods sold. If, at any
time that the aggregate draws received by Randazza
under his employment agreement with SPS exceed the
Sales Commission due to Randazza by $99,000 (the
"Net Draws"), no further draws will be paid to
Randazza until the Net Draws are less than
$66,000.
The Randazza Salary, the Randazza Draw and all
sales commissions, sales overrides and expense
reimbursements shall be paid to Randazza monthly,
in arrears, on the 15th day of each month during
the term of the Randazza Employment Agreements.
Any mutually agreed upon bonus payable to Randazza
by Seller will be paid to Randazza at such time as
shall be mutually agreed upon.
Randazza will devote such of his time as may be
necessary to perform his services under the
Randazza Employment Agreements until such time as
the total
- 8 -
<PAGE>
compensation received by him thereunder (whether
from base salary, bonuses, management fees, draws,
commissions, overrides (including, for these
purposes. accrued Sales Commissions and
overrides), or otherwise but excluding expense
reimbursements) equals an annual rate of $350,000
(the "Annual Compensation Rate"), at which time he
will devote his full time to the performance of
his services under such agreements. If, at any
time after Randazza is required to perform
full-time services under such Employment
Agreements, as aforesaid, such total compensation
falls below the Annual Compensation Rate for a
period of four consecutive months (unless such
total compensation received by Randazza at such
time during the contract year in which such event
occurs is not less than an amount to be mutually
agreed upon, Randazza will not be required to
render full-time services under such Agreements
until such time as such total compensation
thereafter reaches the Annual Compensation Rate.
Notwithstanding the foregoing, Randazza shall be
permitted to engage in business brokerage
activities during the term of the Randazza
Employment Agreements provided that he does not
spend a material portion of his time doing so,
such activities do not interfere with his services
under such Employment Agreements, and Randazza
grants Seller an opportunity to pursue any
transaction in which he contemplates acting as a
business broker prior to pursuing any such
transaction with any third party if such
transaction involves a business
- 9 -
<PAGE>
which is the same or similar to Seller's then
business or proposed business.
Randazza will receive the Sales Commission for as
long as SPS receives Net Revenues from the
customers introduced to SPS by Randazza or his
designees, both during and after the term of his
employment agreement with SPS.
The employment agreement between Randazza and API
will provide that, as long as Randazza is the
owner of 10% or more of the outstanding common
stock of API, Randazza cannot be terminated as the
Chief Executive Officer or director of API other
than for cause as such term shall be mutually
agreed upon in such employment agreement.
Commencement of Randazza
Compensation: Notwithstanding any provision of this Term Sheet
- ------------- to the contrary, in consideration of Randazza's
services to Seller and SPS, Seller will pay the
monthly installments of the Randazza Salary and
the Randazza Draw to Randazza, in arrears,
commencing on November 15, 1999 for the period
beginning on October 15, 1999, and will continue
to make such payments on the 15th day of each
month thereafter prior to the execution of the
Randazza Employment Agreements unless and until
Seller gives Randazza thirty (30) days notice of
its intention to discontinue making such payments
(in which case such payments will be made for all
periods prior to the expiration of such 30 day
period).
- 10 -
<PAGE>
Roth Employment Agreements: On the Closing Date, Seller and API will enter
- --------------------------- into separate employment agreements with Roth (the
"Roth Employment Agreements") providing for Roth's
services as Senior Vice-President of Technical
Services and Operations of Seller and
Vice-President of API on the following principal
terms:
(i) A term of five (5) years, commencing December
1, 1999 (Roth to have the right to terminate his
employment agreement with Seller in the event of
the discontinuance of the business activities of
API),
(ii) an annual base salary of $37,500 for Roth's
services as an officer of Seller and an annual
base salary of $75,000 for Roth's services as an
officer of API, subject to increase to an amount
and upon a level of revenues and/or profits of API
to be mutually agreed upon,
(iii) annual cost of living increases, commencing
in the second year of the term of the Roth
Employment Agreements, in an amount to be mutually
agreed upon,
(iv) annual bonus or incentive compensation for
Roth's services as an officer of Seller and API in
amounts to be mutually agreed upon between Seller,
API and Roth,
(v) reimbursement of all ordinary and necessary
business expenses incurred by Roth in connection
with the performance
- 11 -
<PAGE>
of his services under the Roth Employment
Agreements.
All base salary and expense reimbursements shall
be paid to Roth monthly, in arrears, on the 15th
day of each month during the term of the Roth
Employment Agreements.
The employment agreement between Roth and API will
provide that, as long as Roth is the owner of 5%
or more of the outstanding common stock of API,
Roth cannot be terminated as an officer or
director of API other than for cause as such term
shall be mutually agreed upon in such employment
agreement.
Roth will devote such of his time as may be
necessary to perform his services under the Roth
Employment Agreements until such time as the total
compensation received by him thereunder (whether
from base salary, bonuses, management fees, or
otherwise, but excluding expense reimbursements)
is increased to the rate of $200,000 per annum
(the "Roth Annual Compensation Rate"), at which
time he will devote his full time to the
performance of his services under the Roth
Employment Agreements. Roth will apportion
approximately 80% of his time to the performance
of his services to API and the remaining 20%
thereof to the performance of his services to
Seller. If, at any time after Roth is required to
perform full-time services under such Employment
Agreements, as aforesaid, such total compensation
falls below the Roth Annual Compensation Rate for
a period of four consecutive months (unless such
total compensation received
- 12 -
<PAGE>
by Roth at such time during the contract year in
which such event occurs is not less than an amount
to be mutually agreed upon), Roth will not be
required to render full-time services under such
Agreements until such time as such total
compensation thereafter reaches the Roth Annual
Compensation Rate.
The aforementioned employment agreements between
Seller, SPS, API and Messrs. Randazza and Roth, as
applicable, will contain restrictive covenants
precluding Randazza and Roth from rendering
services to competitors of Seller, SPS and API
during the term of such agreements and for a
period of two years after the expiration or
termination of such agreements (except for any
termination of such agreements as a result of a
breach thereof by Seller, SPS or API, as
applicable). Notwithstanding the foregoing,
Randazza shall be permitted to (i) license to
third parties rights to the Randazza Patent
Applications for purposes of exploiting
Biometrics, and (ii) develop new inventions and
products in areas of Biometrics and grant third
parties rights with respect thereto provided that
Randazza does not spend a material portion of his
time in connection with such activities and that
such activities do not interfere with the
performance of his services under the Randazza
Employment Agreements.
Upon the execution of the Randazza and Roth
Employment Agreements, Randazza will cause API to
assign to Seller certain existing key-man life
insurance policies which will thereafter be
maintained and paid for by Seller,
- 13 -
<PAGE>
provided that the annual premiums therefor do not
exceed $3,600. Of such insurance, $2,000,000
thereof will be for the benefit of Seller and the
remaining $2,000,000 thereof will be for the
benefit of Randazza or his designated beneficiary.
To the extent Roth is insurable, API will obtain
life insurance policies insuring Roth's life for
an aggregate of $2,000,000, $1,000,000 of which
will be for the benefit of Seller and the
remaining $1,000,000 thereof will be for the
benefit of Roth (provided that the annual premiums
therefor are acceptable to Seller).
Management Fee: API shall pay to Randazza and Roth an annual
- --------------- management fee in an aggregate amount equal to 20%
of the net after-tax profits of API (the
"Management Fee") during each year of the term of
the employment agreements between API and Randazza
and Roth (or, if such agreements are terminated
prior to the expiration of the term thereof as a
result of a breach by API, then for a period equal
to the remainder of the term of such Agreements).
Such annual net after-tax profits will be
determined by API's independent auditors in
accordance with generally accepted accounting
principles consistently applied throughout the
relevant periods. All such Management Fees shall
be payable quarterly within thirty (30) days after
the end of each calendar quarter during the term
of such Employment Agreements. The last annual
quarterly installment thereof shall be payable
within
- 14 -
<PAGE>
thirty (30) days after the completion of the
audited financial statements of API for the year
for which such Management Fee is payable. If, at
the end of each calendar year during the term of
such Employment Agreements, the Management Fee
requires adjustment as a result of any reduction
in the annual net after-tax profits for such year
below the cumulative net pre-tax profits for the
prior three quarters, such fee will be adjusted
between the parties for such period, such
adjustment to be made in and with respect to the
last annual installment of the Management Fee.
Notwithstanding the foregoing, all such Management
Fees will be deferred only if and for as long as
the Loan and/or any of the Additional Loans are in
default, provided that there is not then existing
a material uncured default by Seller or SPS, as
applicable, of the Randazza or Roth Employment
Agreements.
Purchase of Authorized Payments, Inc. Shares
Seller: Authorized Payments, Inc., a Delaware corporation.
- -------
Purchasers: Fingermatrix, Inc., a New York corporation
- ----------- ("FINX"), with offices at 249 N. Saw Mill River
Road, Elmsford, New York 10523, Lewis S. Schiller
("Schiller"), Joseph Randazza ("Randazza") and
Leslie Roth ("Roth").
Stock Purchase Agreement: Simultaneously with the execution of the
- ------------------------- Agreement, Seller and
- 15 -
<PAGE>
Purchasers will enter into a Subscription
Agreement (the "API Agreement") pursuant to which
Randazza and Roth will purchase from API 46-2/3%
and 23-1/3%, respectively, of the shares of common
stock of API and Seller and Schiller (and/or his
designees) will purchase from API 30% of the
shares of common stock of API (collectively, the
"API Shares"). The aggregate purchase price for
the API Shares shall be an amount equal to the
aggregate per share par value of the API Shares
which shall be paid in cash on the date of closing
under the API Agreement (the "Closing Date"), each
of such Purchasers to pay their proportionate
share of such purchase price based upon their
respective shareholdings in API.
On the Closing Date, any and all rights of
Authorized Payments, LLC will be assigned and
transferred to API.
The Agreement will provide for the consent of
Seller to certain actions of API to be mutually
agreed upon.
API will be authorized, but not obligated, to
provide any investor who or which makes an
investment in API of $350,000 or more, with the
right to designate a member of API's Board of
Directors.
Preferred Stock: Simultaneously with the execution of the
- ---------------- Agreement, API will issue to FINX a series of its
preferred stock (the "API Preferred Stock") which
will entitle the holder
- 16 -
<PAGE>
thereof to elect the majority of API's Board of
Directors for so long as there is no Default.
In the event that there is (a) a termination of
the Randazza or Roth Employment Agreements as a
result of Seller's or SPS's breach thereof, or (b)
more than two payment or other material defaults
by Seller or SPS, as applicable, in any year under
the Randazza or Roth Employment Agreements, or (c)
the Loan is not funded within 180 days after the
execution of the Agreement (each a "Default"),
Seller's right to elect a majority of the members
of API's Board of Directors pursuant to the API
Preferred Stock will terminate (and Seller will
only have the right to have one of its designees
serve as a director of API).
Legal Fees: In the event that the Agreement, the API Agreement
- ----------- and the Randazza and Roth Employment Agreements
are not executed and delivered by the parties
thereto, the aggregate amount of the cost of the
Valuation Opinion and all paid and accrued legal
fees and disbursements of Seller, Randazza and
Roth in connection with the transactions
contemplated hereby will be apportioned between
Seller, on the one hand and Randazza and Roth, on
the other hand, in equal amounts. Accordingly, in
such event, Seller will reimburse Randazza and
Roth for 50% of such legal fees incurred by them
and Randazza and Roth will reimburse Seller for
50% of the cost of the Valuation Opinion and
- 17 -
<PAGE>
50% of such legal fees incurred by Seller.
Conditions to Closing
of Agreements: 1. Completion of satisfactory due diligence by
- -------------- Fingermatrix, Inc. concerning the financial
condition, proposed business activities and
prospects of Authorized Payments, Inc. and all
material agreements and proposals to which
Authorized Payments, Inc. is or may become a
party.
2. The absence of any material pending or
threatened litigation against Fingermatrix, Inc.
or Authorized Payments, Inc., Joseph Randazza or
Leslie Roth and the absence of any liens or
encumbrances on the capital stock of Fingermatrix,
Inc. or Authorized Payments, Inc., as the case may
be.
3. The approval of the Agreements by the
respective Boards of Directors of Fingermatrix,
Inc. and Authorized Payments, Inc.
4. Execution of Employment Agreements between
Fingermatrix, Inc. and Messrs. Randazza and Roth
(as well as employment agreements between
Authorized Payments, Inc. and Secured Portal
Systems, Inc. and Messrs. Randazza and Roth).
Public Announcements: There shall be no press release or other public
- --------------------- announcement or disclosure of the transactions
contemplated by this Term Sheet without the prior
written consent
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<PAGE>
of the parties hereto, except to the extent
legally required of Fingermatrix, Inc. under
applicable law, or with respect to any press
release issued by Fingermatrix, Inc. announcing
the transactions which are the subject of this
Term Sheet and/or the proposed Agreements
(provided that Randazza and his counsel will be
provided with a copy of any proposed press release
relating to this Term Sheet prior to the issuance
thereof).
Fingermatrix, Inc. agrees that if it issues a
press release announcing the execution of this
Term Sheet, it will issue a subsequent press
release announcing any termination of the
negotiations of the transactions contemplated
hereby, if and when such termination occurs (and
will provide Randazza and his counsel with a copy
of any such proposed press release prior to the
issuance thereof).
Brokers: There are no brokers or finders in connection with
- -------- the proposed Agreements.
The foregoing sets forth the principal terms of certain proposed
transactions between Fingermatrix, Inc., Lewis S. Schiller and Authorized
Payments, Inc., Joseph Randazza and Leslie Roth with respect to the
aforementioned Agreements and is not binding upon any of the parties hereto,
except with respect to the Paragraph entitled "Public Announcements", the
Paragraph entitled "Commencement of Randazza Compensation" and the Paragraph
entitled "Legal Fees", each of which shall be binding upon the parties hereto.
Except with respect to the Paragraph entitled "Public Announcements", the
Paragraph entitled "Commencement of Randazza Compensation" and the Paragraph
entitled "Legal Fees" which shall be binding upon the parties hereto, the
foregoing does not constitute an agreement to agree and none of the parties
hereto shall have any rights or
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<PAGE>
obligations with respect to the transactions contemplated by this
Term Sheet unless and until definitive Agreements and related
documents are executed and delivered between Fingermatrix, Inc.,
Lewis S. Schiller and Authorized Payments, Inc., Joseph Randazza
and Leslie Roth.
Dated: October 22, 1999 FINGERMATRIX, INC.
By:____________________________________
Lewis S. Schiller, Chairman of the
Board and Chief Executive Officer
- ---------------------------------------
Joseph Randazza
- ---------------------------------------
Leslie Roth
- ---------------------------------------
Lewis S. Schiller
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<PAGE>
Exhibit 99.3
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made as of the 22nd day of
October, 1999 by and between FIRST ARGENTUM L.L.C., a New York limited liability
company with principal offices at 33 West Hawthorne Avenue, Valley Stream, New
York 11580 (hereinafter referred to as "Consultant") and FINGERMATRIX, INC., a
New York corporation with principal offices at 249 North Saw Mill River Road,
Elmsford, New York 10523 (hereinafter referred to as the "Company").
WHEREAS, Consultant has experience and expertise in all aspects of
investor relations for public companies, corporate structuring and valuation,
mergers, acquisitions and strategic alliances, and other matters relating to the
corporate affairs of public companies; and
WHEREAS, the Company is desirous of retaining Consultant to provide a
variety of financial and business consulting and advisory services to the
Company, and Consultant is willing to provide such services to the Company; and
WHEREAS, Consultant recognizes that presently, the Company is not
financially able to pay for Consultant's services in cash and Consultant has
agreed to accept certain equity securities of the Company in lieu of cash
compensation as consideration for the performance of its services under this
Agreement, all on and subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and terms
contained in this Agreement, and for good and valuable consideration, the
Company and Consultant agree as follows:
ARTICLE 1
ENGAGEMENT
1.1. The Company hereby engages and retains Consultant, upon the terms
and conditions set forth herein and during the Term (hereinafter defined)
hereof, to render certain business and financial consulting and advisory
services to the Company relating to a variety of financial and other business
matters, including structuring and modifying the Company's business and
operations, evaluating ways to increase shareholder value, including how to
position Company most effectively to conduct future private placements and/or
public offerings of its securities, and structuring and assisting with the
negotiation of acquisitions, mergers, sales, buy-outs and take-overs or
strategic alliances for the Company;
1.2. Consultant is hereby engaged and retained by the Company to
provide the following specific services to the Company:
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<PAGE>
1. Conduct an in-depth review and analysis of the Company's
business operations and financial condition and advise the Company regarding its
optimal financial structure;
2. Review the Company's Business Plans and Executive Summaries and
advise the Company relative to any proposed additions, deletions, modifications
and/or clarifications with respect thereto;
3. Review and make recommendations with respect to the Company's
capital structure and requirements and all budgets and projections relating to
the Company's current and future operations;
4. Assist the Company in identifying and obtaining senior,
mezzanine and equity and debt financing for its operations, including assistance
with negotiations of the structure and terms of all such transactions;
5. Assist the Company with the preparation of a profile of the
Company's operations and financial condition for publication in Standard & Poors
and other similar publications;
6. Review and make recommendations with respect to the Company's
strategic corporate planning and long-term investment policies;
7. Review and make recommendations with respect to press releases
and other promotional or public disclosures to financial news and other media,
customers, suppliers, vendors, broker-dealers, financial institutions and the
Company's shareholders;
8. Assist the Company with acquisitions of other entities,
including those operating businesses in the same industry as the Company and
conduct in-depth reviews and analysis of proposed targets' businesses and
financial condition and assist with the evaluation of financing alternatives and
transaction structures for all such acquisitions in an effort to maximize value
to the Company's shareholders;
9. Review and make recommendations with respect to the principal
terms and structure of all employment agreements between the Company and its
executive officers, including the terms of all management incentive and stock
option plans;
10. Assist the Company in selecting members of the Company's Board
of Directors and Advisory Board, if any;
- 2 -
<PAGE>
11. Review and assist the Company with the preparation of
documents required by the Company for private placements, public offerings,
acquisitions, reverse mergers, sales, buy outs, take-overs and strategic
alliances;
12. Upon request, attend meetings of executive management
committees and/or the Board of Directors of the Company; and
13. Liaison with corporate and securities counsel for all
corporate and securities matters affecting the Company.
1.3. Consultant hereby acknowledges and agrees that its engagement
hereunder is on a non-exclusive basis and, therefore, the Company will, during
the Term of this Agreement, be free to engage or retain any other firm or entity
to render the same or similar services to it. The Company hereby acknowledges
that Consultant's engagement hereunder does not prohibit Consultant from
rendering the kinds of services provided for hereunder to others.
1.4. The Company will provide Consultant with all financial and
business information and documentation concerning the Company which is
reasonably requested by Consultant hereunder to the extent such information and
documentation is available without the Company incurring any unreasonable effort
or expense. In addition, the Company will make its executive officers and
members of its Board of Directors available to Consultant, upon reasonable
advance notice and request of Consultant, for the purpose of providing
information to Consultant in connection with its contemplated services
hereunder.
1.5. Consultant will only be required to devote such of its time as it
may determine is necessary for the performance of its services hereunder.
Consultant will perform its services hereunder in the highest professional
manner and will provide such of its staff and personnel as it may deem necessary
for the performance of its services hereunder.
1.6. Consultant hereby acknowledges that all decisions relating to the
services and advice provided to the Company by Consultant hereunder will be made
exclusively by the Company, in its sole and absolute discretion, and Consultant
will have no right or authority to make any such decisions or to otherwise bind
the Company to any obligation or commitment without the written consent of the
Company.
1.7. Consultant will not, directly or indirectly, during the Term of
this Agreement, without the prior written consent of the Company, contact, meet
with, discuss or negotiate, or enter into any agreement with any third party
which the Company is doing business with, or considering doing business with,
including any prospective target company in connection with any proposed
acquisition, merger or strategic alliance or joint venture.
- 3 -
<PAGE>
ARTICLE 2
TERM
The term of this Agreement shall commence on the date hereof and expire
on November 1, 2000 (the "Term"). Notwithstanding the foregoing, the Company may
terminate this Agreement at any time upon thirty (30) days notice to Consultant.
Upon the expiration of the Term hereof, or upon the earlier termination of this
Agreement, the provisions of Section 5 hereof shall be applicable with respect
to any transaction covered thereby which is consummated by the Company within
one (1) year after any such termination or expiration.
ARTICLE 3
COMPENSATION
3.1. In consideration of Consultant's services under this Agreement,
the Company shall, within ten (10) business days after the date of this
Agreement, issue and deliver to Consultant:
(a) Three Thousand Three Hundred Sixty Six (3,366) shares of
its Series A 2% Voting Convertible Redeemable Preferred Stock, which shares are
convertible into an aggregate of Two Million Five Hundred Thousand Two Hundred
Sixty Four (2,500,264) shares of the Company's common stock (the "FINX Shares").
Notwithstanding any provision of this Agreement to the contrary, Consultant
acknowledges that, as of the date hereof, the Company does not have sufficient
shares of common stock authorized or reserved for issuance to allow for the
conversion of the FINX Shares. The Company has instructed its counsel to prepare
and file all required documents to effect a recapitalization of the Company
pursuant to which, among other things, the Company's authorized capital will be
increased to provide for a sufficient number of shares of common stock to
accommodate the full conversion of the FINX Shares (the "Recapitalization"). The
Company will use its best efforts to complete such recapitalization as soon as
practicable after the date hereof and will notify Consultant as soon as the same
has been completed.
(b) Such number of shares of common stock of Secured Portal
Systems, Inc. ("SPS"), a subsidiary of the Company, as shall equal 5% of the
total issued and outstanding shares of SPS (the "SPS Shares").
3.2. Promptly after and subject to the Recapitalization and the
conversion of the FINX Shares, and to the extent the Company is permitted by
applicable law to do so, the Company will prepare and file with the Securities
and Exchange Commission a registration statement on Form S-8 with respect to
500,000 of the shares of the Company's common stock issued to Consultant upon
conversion of the FINX Shares.
3.3. Consultant understands and acknowledges that neither the FINX
Shares nor the SPS Shares have been, nor will be, registered under the
Securities Act of 1933, as amended (the "Securities Act"), except to the extent
provided in Section 3.2 hereof, and are being issued and
- 4 -
<PAGE>
delivered hereunder pursuant to an exemption from the registration requirements
of Section 5 of the Securities Act inasmuch as the issuance of such shares
involves a transaction by an issuer not involving a public offering and that
reliance upon such exemption is predicated in part upon the following
representations and warranties of Consultant:
(a) Consultant is acquiring the FINX Shares and the SPS Shares
for investment purposes only, for its own account, and not for, with any view
to, or in connection with any distribution or public offering thereof within the
meaning of the Securities Act.
(b) Consultant understands that the FINX Shares and the SPS
Shares have not been registered under the Securities Act or any state securities
law by reason of their issuance in a transaction which is exempt from the
registration requirements of the Securities Act and such laws and such shares
must be held indefinitely unless they are subsequently registered under the
Securities Act and such laws or a subsequent disposition thereof is exempt from
registration under the applicable provisions of the Securities Act and such
laws.
(c) Consultant has sufficient knowledge and expertise in
business and financial matters so as to enable it to analyze and evaluate the
merits and risks of the investment contemplated hereby and is able to bear the
economic risk of such investment, including a complete loss of its investment in
the FINX Shares and the SPS Shares.
(d) Consultant acknowledges that it has made detailed inquiry
concerning the Company and its business and that the officers of the Company
have made available to Consultant any and all written information which it has
requested and have answered to Consultant's satisfaction all inquiries made by
Consultant.
(e) The transactions provided for in this Agreement with
respect to the FINX Shares and the SPS Shares are not part of any pre-existing
plan or arrangement for, and there is no agreement or other understanding with
respect to, the distribution by Consultant of any of the FINX Shares or the SPS
Shares.
(f) Consultant acknowledges that the certificates for the FINX
Shares and the SPS Shares will bear customary Securities Act legends.
- 5 -
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Consultant and the Company each hereby represent and warrant to the
other the following:
4.1. Each is a corporation or limited liability company, as applicable,
duly organized, validly existing, and in good standing under the laws of their
respective jurisdictions of formation and have all requisite power and authority
to own or lease their respective properties and carry on their respective
businesses as now conducted.
4.2. All action on the part of Consultant and the Company necessary for
the authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, has been properly taken
and obtained by each of them and this Agreement constitutes a valid and legally
binding obligation of Consultant and the Company, as the case may be,
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.
4.3. There is no action, suit, proceeding, or investigation pending or,
to the knowledge of the Company or Consultant, as applicable, threatened against
either of them which in any way relates to the validity of this Agreement or the
right of either of them to enter into or consummate this Agreement and the
transactions contemplated hereby.
4.4. Except as set forth in this Article 4 or as otherwise expressly
provided elsewhere in this Agreement, neither the Company nor Consultant has
made no representations or warranties to the other in connection with this
Agreement or the transactions contemplated by this Agreement.
ARTICLE 5
FINDERS FEES
5.1. In the event that, during the Term of this Agreement, Consultant
introduces the Company to a third party (an "Introduced Entity") which
consummates an acquisition, sale of all or substantially all of the capital
stock or assets of the Company, a reverse merger, joint venture or strategic
alliance for or with the Company (a "Transaction"), the Company will pay
Consultant a finder's fee calculated in accordance with the provisions of
Section 5.2 below (the "Finders Fee"). Any such Introduced Entity must be the
subject of a written notification from Consultant to the Company prior to the
introduction thereof (the Company having the right to reject any such
introduction and exclude same from this Agreement if the Company notifies
Consultant that it has previously been introduced to any such third party within
ten (10) days after receiving any such notice of introduction from Consultant).
The Company shall be under no obligation to consummate any Transaction, the
decision to do so being subject to the Company determining
- 6 -
<PAGE>
same in its sole and absolute discretion. Consultant will indemnify and hold the
Company harmless from any claim, cause of action, liability, cost or expense
incurred by the Company as a result of any third party asserting a claim against
the Company for a brokerage or finder's fee with respect to any such
Transaction.
5.2. The Company will pay Consultant the Finder's Fee when, as and if
the Company receives the proceeds from any such Transaction, in an amount
determined as follows:
Percentage Amount of Proceeds
- ---------- ------------------
5% Of the first $1,000,000 thereof
4% Of the second $1,000,000 thereof
3% Of the third $1,000,000 thereof
2% Of the fourth $1,000,000 thereof
1% Of all amounts in excess of the first $4,000,000 thereof
The Finder's Fee shall be paid in cash or kind based upon and in the same
proportion as the proceeds and other consideration received by the Company in
connection with any such Transaction.
ARTICLE 6
CONFIDENTIALITY
6.1. Consultant hereby agrees that all information or documentation
provided to it by the Company which is marked "confidential" by the Company and
which contains material non-published proprietary information of the Company
will not be utilized or disclosed by Consultant, directly or indirectly, during
or after the Term hereof, except in connection with the performance of
Consultant's services hereunder. Notwithstanding Consultant's aforementioned
covenant, Consultant shall be permitted to disclose such information in the
event that (i) such information is or becomes generally available to the public
other than as a result of an improper disclosure by Consultant; (ii) such
information is required to be disclosed in connection with any legal or
administrative action or proceeding (provided Consultant promptly notifies the
Company prior to any such disclosure); or (iii) such information was available
to Consultant prior to the Company providing Consultant with such information,
provided that such information was not obtained by Consultant from a source
known by it to be subject to any confidentiality agreement or covenant.
6.2. Upon the termination or expiration of this Agreement, Consultant
shall, upon the Company's request, return any and all Confidential Information
which is in Consultant's possession and/or under its control and shall not
retain any copies of any materials or documents containing Confidential
Information.
- 7 -
<PAGE>
ARTICLE 7
MISCELLANEOUS
7.1. This Agreement 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,
between the parties hereto with respect to the subject matter hereof and may not
be amended or modified except by an instrument in writing signed by the party to
be bound thereby.
7.2. All notices, consents, requests, demands and other communications
required or permitted to be given under this Agreement (collectively, the
"Notices") shall be in writing and delivered personally, 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
addresses as either of the parties hereto shall specify by notice given in
accordance with this provision):
(a) If to the Company:
Fingermatrix, Inc.
249 N. Saw Mill River Road
Elmsford, New York 10528
Attn: Lewis S. Schiller, President
and Chief Executive Officer
with copies to:
Jerold K. Levien, Esq.
Widowski Cassidy & Steinhart LLP
425 Madison Avenue, Suite 700
New York, NY 10017
(b) If to Consultant:
First Argentum L.L.C.
c/o Civilization Communications Inc.
33 West Hawthorne Avenue
Valley Stream, New York 11580
Attn: Henry Schwartz
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 only upon receipt.
7.3. Neither party hereto may assign this Agreement or its or their
respective rights, benefits or obligations hereunder without the written consent
of the other party hereto, except
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<PAGE>
that Consultant may assign its rights to the FINX Shares and the SPS Shares upon
notice to the Company, provided that any such assignment is in compliance with
all applicable Federal and state securities laws.
7.4. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
7.5. 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 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 or of any other provision, representation, warranty,
obligation or covenant of such other party, unless the instrument of waiver
expressly so provides.
7.6. 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.
7.7. It is expressly acknowledged by the parties hereto that the
Consultant will render services to the Company under this Agreement as an
independent contractor and nothing in this Agreement is intended, nor shall be
construed, to create an employer/employee, master/servant, principal/agent,
partnership or joint venture relationship between Consultant and the Company.
7.8. The parties hereto hereby agree that, at any time and from time
to time after the date hereof, upon the reasonable request of the other 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.
7.9. Each party hereto represents and warrants to the other that it
has been represented by counsel in connection with the negotiation, preparation,
and consummation of this Agreement. Each of the parties hereto shall bear all of
their 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, financial advisors and accountants.
7.10. This Agreement may be executed in one or more counterparts, each
of which, when executed and delivered, shall be deemed an original, but all of
which when taken together, shall constitute one and the same instrument.
- 9 -
<PAGE>
7.11. 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 HEREOF, the parties have executed this Agreement of the day
and year first above written.
WITNESS: FIRST ARGENTUM L.L.C.
______________________ By:________________________________
Henry Schwartz, Manager
- ---------------------- -----------------------------------
Print Name Martin Clare, Manager
WITNESS: FINGERMATRIX, INC.
_______________________ By:________________________________
Lewis S. Schiller
_______________________ President and Chief Executive Officer
Print Name
- 10 -
<PAGE>
Exhibit 99.4
Amendment No. 1 to Consulting Agreement
Reference is made to the Consulting Agreement dated as of October 22,
1999 (the "Agreement") between First Argentum LLC and Fingermatrix, Inc. All
capitalized terms which are used but not defined herein shall have the meanings
ascribed to them in the Agreement.
Article 3 of the Agreement is hereby amended to add thereto Section
3.1(c) which shall read as follows:
"3.1(c) Options to purchase such number of shares of the Company's
Common Stock set forth below subject to and upon the closing price of the
Company's Common Stock (whether on the NASDAQ Bulletin Board or other NASDAQ
market, or on any other stock exchange or publicly traded market), for twenty
(20) consecutive trading days being not less than the closing sale prices set
forth below. Any such options will have a term of five (5) years. The Company
will issue any such options to Consultant within seven (7) business days after
the date on which Consultant may become entitled to same in accordance with the
provisions hereof.
Closing Sale Price Number of Options
------------------ -----------------
$.50 250,000
$.65 250,000
$.80 250,000
$.80 250,000(*)
(*)Notwithstanding the foregoing, Consultant will be entitled to these options
only if such closing sale price is not less than $.80 per share for
one-hundred-eighty (180) or more consecutive trading days."
Except as provided above, none of the other terms or provisions of the
Agreement are being modified hereby and the Agreement shall remain in full force
and effect in accordance with its terms. To the extent there is any
inconsistency between the terms of the Agreement and the terms of this Amendment
No. 1, the terms of this Amendment No. 1 shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of December 13, 1999.
WITNESS: FIRST ARGENTUM LLC
________________________ By:_______________________________
- ------------------------ ----------------------------------
Print Name Print Name and Title
WITNESS: FINGERMATRIX, INC.
________________________ By:_______________________________
Lewis S. Schiller
________________________ Chairman of the Board
Print Name
- 1 -
