-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QjXioexlK+v/28rbtWehKPpTh8YUhD5jmGYHpon3t/AamqAiAZNxpvFKCJTNro6p WZhebEopWiuZkrN5nYCTBw== 0001144204-04-002068.txt : 20040225 0001144204-04-002068.hdr.sgml : 20040225 20040224182344 ACCESSION NUMBER: 0001144204-04-002068 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040223 ITEM INFORMATION: Other events FILED AS OF DATE: 20040225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOTAL IDENTITY CORP CENTRAL INDEX KEY: 0001016611 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 650309540 STATE OF INCORPORATION: FL FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30011 FILM NUMBER: 04625781 BUSINESS ADDRESS: STREET 1: 11924 FOREST HILL BLVD., STREET 2: SUITE 22-204 CITY: WELLINGTON STATE: FL ZIP: 33414 BUSINESS PHONE: (561) 202-8184 MAIL ADDRESS: STREET 1: 11924 FOREST HILL BLVD., STREET 2: SUITE 22-204 CITY: WELLINGTON STATE: FL ZIP: 33414 FORMER COMPANY: FORMER CONFORMED NAME: TMI HOLDINGS INC/FL DATE OF NAME CHANGE: 20011113 FORMER COMPANY: FORMER CONFORMED NAME: THRIFT MANAGEMENT INC DATE OF NAME CHANGE: 19960711 8-K 1 form8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K ---------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. February 23, 2004 0-30011 - -------------------------------------------------------------- ------------------------------------------------ Date of Report (Date of earliest event reported) Commission File Number TOTAL IDENTITY CORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 65-0309540 - -------------------------------------------------------------- ------------------------------------------------ (State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number) organization)
2340 Brighton-Henrietta Town Line Road Rochester, NY 14623 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (585) 427-9050 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 11924 Forest Hill Blvd., Suite 22-204 Wellington, Florida 33414 (561) 202-8184 - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 5. Other Events and Regulation FD Disclosure Total Identity Corp. Settles Dispute Over Acquisition On February 23, 2004, Total Identity Corp. f/k/a TMI Holdings, Inc. (the "Company"), Total Identity Systems Corp. ("TISC") and Robert David, the former principal of TISC ("David"), entered into a series of agreements that (a) amended the Stock Purchase Agreement dated October 13, 2003 by and among the Company, TISC and David, the Stock Purchase Agreement dated October 13, 2003 by and between the Company and David, and other related agreements (collectively, the "Original Purchase Agreements"), and (b) settled certain disputes that had arisen in connection with the Original Purchase Agreements, including an Arbitration initiated by the Company to resolve those disputes. Under the Original Purchase Agreements, the Company acquired (a) 60% of the capital stock of TISC, evidenced by newly issued shares, for $1,000,000, and (b) the remaining 40% of TISC's capital stock from David, for $800,000. In accordance with the amended agreements: o The purchase price for the capital stock purchased from TISC was reduced to $700,000, of which, $150,000 had previously been paid and $75,000 was credited to the Company as reimbursement for certain expenses incurred on behalf of TISC. The $475,000 balance of the purchase price balance is payable in five monthly installments of $95,000 each, commencing March 8, 2004. o The purchase price for the capital stock purchased from David was reduced to $500,000. The purchase price will be paid $400,000 in eight quarterly payments of $50,000 each, commencing in January 2005, and balance by the issuance of 200,000 shares of the Company's common stock. The Company's shares are restricted from transfer for one year and, under certain circumstances, David has the right to put 100,000 of the shares to the Company for $1.00 per share. o All of the shares purchased from TISC and David were pledged to secure payment of the purchase price and such shares are being held in escrow by counsel to David until the purchase price has been paid in full. o The Company's employment agreement with David was terminated and a consulting agreement was entered into with David for a period of 32 months, providing for a monthly consulting fee of $8,500. o The Company agreed to cause certain institutional indebtedness of TISC to be repaid prior to the end of David's consulting agreement, subject to acceleration in certain events. o The lease with an affiliate of David covering TISC's Rochester, New York facility will remain in place for a period of ten years, and the Company will have the right but not the obligation to purchase the property after five years at a price to be determined by three independent appraisers. The Arbitration commenced by the Company to resolve the differences that arose between the parties had previously been discontinued in order to pursue settlement discussions. Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits. (a) None. (b) None. (c) Exhibits. 10.1 Amendment No. 1 to Common Stock Purchase Agreement dated February 23, 2004, by and between Total Identity Corp., Total Identity Systems Corp. and Robert David. 10.2 Amendment No. 1 to Common Stock Purchase Agreement dated February 23, 2004, by and between Total Identity Corp. and Robert David. 10.3 Amended and Restated Promissory Note dated February 23, 2004. 10.4 Amended and Restated Pledge Agreement dated February 23, 2004. 10.5 Lease Amendment dated February 23, 2004. 10.6 Consulting Agreement dated February 23, 2004, by and between Total Identity Corp. and Robert David. 10.7 Amended and Restated Pledge Agreement dated February 23, 2004, by and between Total Identity Corp., Robert David and Shapiro, Rosenbaum, Liebschutz and Nelson, LLP. SIGNATURES 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. Dated: February 24, 2004 TOTAL IDENTITY CORP. By: /s/ Philip C. Mistretta ------------------------------------- Philip C. Mistretta President and Chief Executive Officer EX-10.1 3 ex10_1.txt Exhibit 10.1 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT ("Agreement") dated as of February 23, 2004, by and between TOTAL IDENTITY SYSTEMS CORP., a New York corporation (the "Company"), TOTAL IDENTITY CORP., a Florida corporation (the "Purchaser") and ROBERT DAVID, an individual resident of the State of New York ("David"). W I T N E S S E T H: WHEREAS, the parties are all of the parties to a Stock Purchase Agreement dated October 13, 2003 (the "Original Agreement"); and WHEREAS, a dispute has arisen between the parties to the Original Agreement as to alleged breaches, non-performance, interpretation and indemnification obligations thereunder (the "Disputed Items"); and WHEREAS, the parties desire to settle the Disputed Items and amend the Original Agreement upon the terms and conditions set forth herein NOW, THEREFORE, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 1.2 of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "Section 1.2 Purchase Price. The purchase price for the Common Shares shall be the sum of $700,000 (the "Purchase Price"), of which (a) $150,000 has been paid, the receipt of which is hereby acknowledged by the Company and David and (b) $75,000 of which shall be allocated as a credit to the Purchaser for its expenses in connection with a financing to benefit the Company. The $475,000 balance of the Purchase Price shall be paid in five equal monthly installments, each in the amount of $95,000, with the first installment being due and payable on March 8, 2004, and on or before the same day of each month thereafter until the $475,000 balance has been paid. The $475,000 balance of the Purchase Price shall be used by the Company to reduce trade payables and other indebtedness of the Company (other than indebtedness to the Purchaser), and, thereafter, for working capital. The parties agree that until such time as the Purchase Price has been paid in full, (y) for so long as either Dan Cass ("Cass") or Chuck Finzer ("Finzer") are employed by the Company, all expenditures by the Company shall require the dual signatures of Cass or Finzer, on the one hand, and the chief executive officer of Purchaser or his designee, on the other hand and (z) Purchaser shall provide David with documentary proof of the making of each installment payment required by this Section, which proof shall be deemed satisfied by providing a copy of the deposit slip or wire transfer to the Company's account." 2. The representations and warranties contained in Section 2.1 of the Original Agreement are hereby qualified, as of the date hereof, to the extent disclosed on the Schedule of Exceptions attached hereto as Schedule A and incorporated by reference herein ("Schedule of Exceptions"). 3. Section 2.1(g) of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "(g) Statement of Liabilities. The Statement of Liabilities attached to this Agreement as Schedule B reflects the categories of liabilities to which the Company was subject as of October 31, 2003. There are no categories of liabilities of the Company, absolute or contingent, incurred prior to October 13, 2003, except as set forth on the Statement of Liabilities. The Company and David represent and warrant to the Purchaser that there were no asserted or threatened customer warranty claims and/or product liability claims against the Company as of October 13, 2003." 4. Section 2.2(e) of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "(e) Information. The Purchaser acknowledges that it has been furnished with all materials relating to the business, finances and operations of the Company that have been requested and materials relating to the offer and sale of the Common Shares which have been requested by the Purchaser. Further, the Purchaser has, since October 13, 2003, the date of the Original Agreement, assumed responsibility for the day-to-day operations and finances of the Company. Therefore, Purchaser acknowledges that it has not relied upon any representations and warranties other than those contained in the Original Agreement, as amended by Amendment No. 1 to the Original Agreement. The Purchaser understands that its purchase of the Common Shares involves a high degree of risk. The Purchaser has obtained such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Common Shares." 5. Section 3.2(h) of the Original Agreement is hereby deleted in its entirety and, upon execution of this Agreement, David shall deliver to the Company a Bill of Sale conveying to the Company good and marketable title to the equipment described on the Schedule of Equipment attached hereto as Schedule C, free and clear of all liens, charges, encumbrances and security interests, subject however to the security interest of M&T Bank; and, as consideration for the delivery of such Bill of Sale, the Company hereby assumes the payment obligation to M&T Bank for such equipment to the extent of $178,000. 6. Section 6.1(a) of the Original Agreement is hereby deleted in its entirety and the following is inserted in its place and stead: "Section 6.1 Indemnification by the Company and David. The Company and David, jointly and severally, hereby indemnify and hold the Purchaser harmless from and against any and all damages, losses, liabilities, obligations, costs or expenses, including reasonable attorneys fees, incurred by the Purchaser and arising out of (a) the breach of any representation or warranty of the Company and/or David hereunder, after giving effect to the information disclosed on the Schedule of Exceptions, (b) the Company's failure to perform any covenant or obligation required to be performed by it hereunder, and/or (c) categories of liabilities or obligations of the Company not disclosed on the Statement of Liabilities." 2 7. Section 6.4 of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "Section 6.4 Limitations. The obligations of the parties to provide indemnification under this Agreement shall be subject to the following limitations: (a) No claim for indemnification shall be asserted by a party unless the amount of the claim for which indemnification is being sought exceeds $10,000; and (b) No claim for indemnification may be sought by a party after six months from the date hereof." 8. Section 7.1 of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "Section 7.1 Governing Law; Arbitration. This agreement shall be governed by and interpreted in accordance with the laws of the state of Florida without regard to the principles of conflict of laws. Each of the parties irrevocably and unconditionally agrees that any suit, action or legal proceeding arising out of or relating to this Agreement shall be settled by binding arbitration conducted in accordance with the Commercial Rules of Arbitration of the American Arbitration Association ("AAA"). The arbitration shall take place at such location as the AAA determines, and shall be heard by three arbitrators selected in accordance with AAA Rules of Commercial Arbitration. The Arbitrators shall render a reasoned award and such award shall be signed and dated. Any witness residing outside of the state in which the arbitration is heard may testify by affidavit, and such affidavit shall be admissible at any arbitration hearing. The decision of the arbitrators shall be final and binding upon the parties, and the arbitration award may be entered in any court of competent jurisdiction. Initially, each of the parties shall pay one-half of the fees of the AAA (other than filing fees), including without limitation hearing and arbitrators' fees, and the parties' obligation to pay such fees shall be enforceable in any court of competent jurisdiction. The parties to any arbitration hereunder agree to submit for determination by the arbitrators, the amount of fees and expenses, including reasonable attorney's fees, to be borne by each party." 9. Section 7.6 of the Original Agreement is hereby deleted in its entirety and the following is inserted in its place and stead: 3 "Section 7.6 Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing, must be delivered by courier, mail or hand delivery, and will be deemed to have been delivered upon receipt. The addresses for such communications shall be: If to the Purchaser: Total Identity Corp. 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 Telephone: (585) 427-9050 Attention: Philip Mistretta With a copy to: Schneider Weinberger LLP Suite 108 2499 Glades Road Boca Raton, Florida 33431 Telephone: (561) 362-9595 Attention: Steven I. Weinberger, Esq. If to the Company: Total Identity Systems Corp. 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 Telephone: (585) 427-9050 Attention: Philip Mistretta With a copy to: Trevett, Lenweaver & Salzer, P.C. 2 State Street, Suite 1000 Rochester, New York 14614 Telephone: (585) 454-2181 Attention: Kenneth Bersani, Esq. If to David: Robert David 3006 East Avenue Rochester, New York 14610 Telephone: (585) 383-0977 With a copy to: Shapiro, Rosenbaum, Liebschutz & Nelson, LLP 1100 Crossroads Building Two State Street Rochester, New York 14614 Telephone: (585) 232-2282 Attention: Warren B. Rosenbaum, Esq. 4 Each party shall provide three days prior written notice to the other party of any change in address, telephone number or facsimile number. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, or (B) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service or receipt from a nationally recognized overnight delivery service." 10. Contemporaneously herewith (a) the lease described in Section 3.1(e) of the Original Agreement is being modified by the parties thereto, (b) the Stock Purchase Agreement referred to in Sections 3.1(f) and 3.2(e) of the Original Agreement, and the promissory note and pledge agreement referred to therein and executed in connection therewith, are being modified by the parties thereto, (c) the employment agreement with David referred to in Sections 3.1(g) and 3.2(f) of the Original Agreement is being terminated and the parties thereto are entering into a consulting agreement (the "David Consulting Agreement;" and the agreements and transactions referred to in subsections (a) through (c) of this Section being collectively referred to as the "Other Agreements"), and (d) the parties hereto are entering into mutual releases, releasing each other from all claims and obligations, including the Disputed Items, except as otherwise provided in this Agreement and the Other Agreements. 11. Purchaser covenants and agrees that on or prior to the end of the term of the David Consulting Agreement, or the earlier termination date of the David Consulting Agreement if it is terminated by the Company without cause (as such term is defined in the David Consulting Agreement), Purchaser shall take such action as may be necessary, to pay, cause the payment of, replace, or otherwise with respect to the Company's indebtedness ("Institutional Indebtedness") to the US Small Business Administration ("SBA"), Mercantile Bank and M&T Bank ("Institutions"), such that (a) David and Irma David shall have no further personal liability for the Company's indebtedness to such institutions and (b) any collateral pledged by David and/or Irma David solely to secure the Institutional Indebtedness shall be released to David and/or Irma David, as the case may be. 12. In addition to Purchaser's obligation under Section 11, above, in the event that one or more of the Institutions declares the Company to be in default under Institutional Indebtedness due to (a) consummation of the transactions contemplated by the Original Agreement without the consent of an Institution or (b) due to any other default by the Company occurring subsequent to October 13, 2003, then in either such event, Purchaser shall take such action as may be necessary, to pay, cause the payment of, replace, or otherwise with respect to the Institutional Indebtedness such that (y) David shall have no further personal liability for the Company's indebtedness to such Institution(s) and (z) any collateral pledged by David and/or Irma David solely to secure such Institutional Indebtedness shall be released to David; provided, however, that the Purchaser's obligations under Section 12(b) shall not apply to the extent that an Institution alleges a default by the Company triggered by the acts or omissions of Robert David, Irma David, RJD Leasing Corp., 2340 Brighton-Henrietta Corp. and/or any of their respective affiliates (collectively, the "David Affiliates"). 5 13. Without intending to limit or qualify Purchaser's obligations in the immediately preceding Sections, Purchaser also covenants and agrees that, in its capacity as shareholder of the Company, it (a) will take such action as is reasonably necessary in order to perform its obligations under the preceding Section, including without limitation, voting its shares of the Company so as to do so, and (b) will not act in a manner that would prevent or impair the Company to perform its obligations to the Institutions. 14. David, on his behalf and on behalf of the David Affiliates, hereby covenants and agrees that he and they (a) will take such action as is reasonably necessary in order to cause each of them to perform their respective obligations to the Institutions, including without limitation, voting shares of any corporate David Affiliate to do so, and (b) will not act in a manner that could cause the Company to default under any Institutional Indebtedness or prevent the Company from performing any of its obligations to the Institutions; provided, however, that nothing herein contained shall require David or the David Affiliates to amend, waive, release, defer, subordinate or relinquish any rights set forth in the Original Agreement, as modified by the terms of this Agreement, the Other Agreements, and a certain Lease and Amended Lease for the business premises of the Company executed contemporaneously herewith, in order to comply with this Section 14. 15. Purchaser shall, to the extent required by the SBA, guarantee the Company's obligation to pay 10% of its "pre-tax profits" to the SBA. 16. Each of the parties hereby agrees that its covenants and agreements under this Agreement shall be within the scope of the indemnification provisions of Sections 6.1(a) and 6.2(b) of the Original Agreement, as the case may be. 17. It is understood and agreed that David is a party to this Agreement and the Original Agreement as well as an intended beneficiary thereof and has the power and standing to seek enforcement of this Agreement and of the Original Agreement as modified hereby. 18. Except as modified hereby, the Original Agreement shall remain in full force and effect. 6 IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed as of the date and year first above written. TOTAL IDENTITY CORP., a Florida corporation By: /s/ Philip C. Mistretta -------------------------------- Philip C. Mistretta, President TOTAL IDENTITY SYSTEMS CORP., a New York corporation By: /s/ Philip C. Mistretta -------------------------------- Philip C. Mistretta, Chairman and Chief Executive Officer /s/ Robert David ------------------------------------ Robert David 7 EX-10.2 4 ex10_2.txt Exhibit 10.2 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT ("Agreement") dated as of February 23, 2004, by and between TOTAL IDENTITY CORP., a Florida corporation (the "Buyer") and ROBERT DAVID, an individual resident of the State of New York (the "Seller"). W I T N E S S E T H: WHEREAS, the parties are all of the parties to a Stock Purchase Agreement dated October 13, 2003 (the "Original Agreement"); and WHEREAS, in connection with the Original Agreement, the parties thereto also entered into a pledge agreement (the "Pledge Agreement") and a promissory note (the "Promissory Note") of even date therewith; and WHEREAS, the Buyer, David and Total Identity Systems Corp., a New York corporation ("Total New York") are parties to a Stock Purchase Agreement dated October 13, 2003 (the "Corporate Stock Purchase Agreement"), as amended by Amendment No. 1 to the Corporate Stock Purchase Agreement of even date herewith, pursuant to which the Buyer acquired 60% of the issued and outstanding shares of Total New York (the Corporate Stock Purchase Agreement, as amended, being hereinafter referred to as the "Amended Corporate Stock Purchase Agreement"); and WHEREAS, a dispute has arisen between the parties to the Original Agreement as to alleged breaches, non-performance, interpretation and indemnification obligations thereunder (the "Disputed Items"); and WHEREAS, the parties desire to settle the Disputed Items and amend the Original Agreement upon the terms and conditions set forth herein NOW, THEREFORE, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Defined terms not otherwise defined herein shall have the respective meanings accorded to them in the Original Agreement. 2. Section 2 of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "2. Purchase Price. (a) Amount. The purchase price for the Shares (the "Purchase Price") shall be the sum of $500,000.00, payable upon execution of this Agreement, as follows: (i) $400,000 shall be paid by delivery to the Seller of the Buyer's amended and restated promissory note in the amount of $400,000.00, in the form attached hereto as Exhibit A (the " Restated Note"); and (ii) $100,000 shall be paid by the issuance and delivery to the Seller, upon execution of this Agreement, of a certificate evidencing 100,000 shares of the Buyer's common stock, registered in the name of the Seller (the "Purchase Price Shares"). (b) Provisions Relating to the Purchase Price. (i) The Restated Note shall amend and restate the Promissory Note delivered by the Buyer in connection with the Original Agreement. Simultaneous with the execution of this Agreement and delivery of the Restated Note, (A) the Seller shall deliver the original Promissory Note to the Buyer and (B) the Promissory Note shall cease to be of any further force or effect. (ii) Neither the Purchase Price Shares nor the Additional Shares (as hereinafter defined) have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and such securities may not be sold, assigned, transferred, pledged or otherwise disposed of ("Transfer") absent registration under the Securities Act or the availability of an applicable exemption therefrom. In the event that the Company files a registration statement under the Securities Act (other than on Form S-4, S-8 or successor forms) seeking to register shares of its common stock for its account or for the account of its shareholders, the Company agrees to register those Purchase Price Shares and Additional Shares that have not theretofore been disposed of by David so as to permit David to publicly resell such shares. (iii) Notwithstanding registration pursuant to the preceding subparagraph, the Seller agrees not to Transfer the Purchase Price Shares or the Additional Shares prior to the expiration of one year from the date hereof (the "Lock Up Period"). (iv) The certificates evidencing the Purchase Price Shares and the Additional Shares will contain the following or substantially similar legends: "The shares evidenced by this Certificate have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state ("Securities Laws"), and such shares may be not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of absent registration under applicable Securities Laws or an opinion of counsel reasonably satisfactory to the issuer that such registration is not required. 2 The shares evidenced by this Certificate are subject to the terms and conditions of an Amended and Restated Pledge Agreement dated February 23, 2004, and certain agreements executed in connection therewith (the "Agreements"). The disposition of these shares is subject to the terms and conditions of the Agreements, copies of which are on file at the offices of the issuer." (vi) In the event, upon expiration of the term of Consulting Agreement of even date herewith between the Buyer and the Seller, the closing bid price for the common stock of the Buyer is less than $1.00 per share, then the Buyer shall pay to the Seller for each of the Purchase Price Shares, an amount equal to the difference between $1.00 and the closing bid price per share on such date. However, in the event that, following expiration of the Lock Up Period but prior to expiration of the term of the Consulting Agreement, the Buyer's common stock trades at a bid price of $1.00 per share or higher for five consecutive trading days, then the Buyer's obligations under this subparagraph shall terminate and cease to be of further force or effect. (c) Additional Consideration. As additional consideration to the Seller for entering into this Agreement, upon execution of this Agreement, the Buyer shall issue and deliver to the Seller, a certificate evidencing an additional 100,000 shares of the Buyer's common stock, registered in the name of the Seller (the "Additional Shares"). (d) Representations and Warranties. (i) The Buyer represents and warrants to the Seller that the Purchase Price Shares and the Additional Shares (collectively, the "TIC Stock") have been duly authorized, and when issued and delivered, subject to execution and delivery of this Agreement, the TIC Stock will be validly issued, fully paid and non-assessable. (ii) The Seller represents and warrants to the Buyer that (A) he is acquiring the TIC Stock for his own account, for investment purposes and without a view towards distribution or resale except in accordance with applicable law, (B) he is an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, (C) he has had access to information concerning the Company, including filings made by the Company under the Securities Exchange Act of 1934, which are available at the web site of the United States Securities and Exchange Commission at www.sec.gov, (D) he has such experience in financial and business matters that he is able to evaluate the risks and merits of an investment in the Buyer, (E) he understands that the TIC Stock has not been registered under the Securities Act and that its Transfer is prohibited for a period of one year from the date hereof, and (F) he understands that the TIC Stock is a speculative investment and, except as otherwise provided in this Agreement, there is no assurance that the TIC Stock can be sold at a profit or at all." 3 3. Section 3 of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "3. Security. In order to secure payment of the Buyer's obligations under the Original Agreement, as amended hereby, the Amended Corporate Stock Purchase Agreement, the Restated Note, Buyer agrees that the Shares, as well as the shares of common stock of Total New York acquired by the Buyer pursuant to the Corporate Stock Purchase Agreement (the "Corporate Shares" and, together with the Shares, the "Pledged Shares") shall be pledged to the Buyer pursuant to the terms of an amended and restated pledge agreement in the form of Exhibit B hereto (the "Restated Pledge Agreement")." 4. The representations and warranties contained in Section 5 of the Original Agreement are hereby qualified to the extent disclosed on the Schedule of Exceptions attached hereto as Schedule A hereto ("Schedule of Exceptions"). 5. Section 5(f) of the Original Agreement is hereby modified by adding the following to the end thereof: "after giving effect to the information disclosed on the Schedule of Exceptions attached to the Amended Corporate Stock Purchase Agreement." 6. Section 10(d) of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "(d) Limitations. The obligations of the parties to provide indemnification under this Agreement shall be subject to the following limitations: (a) No claim for indemnification shall be asserted by a party unless the amount of the claim for which indemnification is being sought exceeds $10,000; and (b) No claim for indemnification may be sought by a party after six months from the date hereof." 7. Section 11(c) of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "(c) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing, must be delivered by courier, mail or hand delivery, and will be deemed to have been delivered upon receipt. The addresses for such communications shall be: If to the Seller: Robert David 3006 East Avenue Rochester, New York 14610 Telephone: (585) 383-0977 4 With a copy to: Shapiro, Rosenbaum, Liebschutz & Nelson, LLP 1100 Crossroads Building Two State Street Rochester, New York 14614 Telephone: (585) 232-2282 Attention: Warren B. Rosenbaum, Esq. If to the Buyer: Total Identity Corp. 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 Telephone: (585) 427-9050 Attention: Philip Mistretta With a copy to: Schneider Weinberger LLP 2499 Glades Road Suite 108 Boca Raton, Florida 33431 Att: Steven I. Weinberger, Esq. Telephone: (561) 362-9595 Each party shall provide three days prior written notice to the other party of any change in address, telephone number or facsimile number. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, or (ii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service or receipt from a nationally recognized overnight delivery service." 8. Section 11(e) of the Original Agreement is hereby deleted in its entirety and the following shall be inserted in its place and stead: "(e) Governing Law; Arbitration. This agreement shall be governed by and interpreted in accordance with the laws of the state of Florida without regard to the principles of conflict of laws. Each of the parties irrevocably and unconditionally agrees that any suit, action or legal proceeding arising out of or relating to this Agreement shall be settled by binding arbitration conducted in accordance with the Commercial Rules of Arbitration of the American Arbitration Association ("AAA"). The arbitration shall take place at such location as the AAA determines, and shall be heard by three arbitrators selected in accordance with AAA Rules of Commercial Arbitration. The Arbitrators shall render a reasoned award and such award shall be signed and dated. Any witness residing outside of the state in which the arbitration is heard may testify by affidavit, and such affidavit shall be admissible at any arbitration hearing. The decision of the arbitrators shall be final and binding upon the parties, and the arbitration award may be entered in any court of competent jurisdiction. Initially, each of the 5 parties shall pay one-half of the fees of the AAA (other than filing fees), including without limitation hearing and arbitrators' fees, and the parties' obligation to pay such fees shall be enforceable in any court of competent jurisdiction. The parties to any arbitration hereunder agree to submit for determination by the arbitrators, the amount of fees and expenses, including reasonable attorney's fees, to be borne by each party." 9. Contemporaneously herewith (a) the parties to the Corporate Stock Purchase Agreement are entering into the Amended Corporate Stock Purchase Agreement, (b) the parties to the Pledge Agreement are entering into the Restated Pledge Agreement referred to in Section 3 of this Agreement, (c) the Restated Promissory Note is being delivered by the Buyer in the place and stead of the Promissory Note (the agreements and transactions referred to in subsections (a) through (c) of this Section being collectively referred to as the "Other Agreements"), and (d) the parties hereto are entering into mutual general releases, releasing each other from all claims and obligations, including the Disputed Items, except as otherwise provided in this Agreement and the Other Agreements. The Original Agreement shall be construed so as to give effect to the Other Agreements. 10. Each of the parties hereby agrees that its covenants and agreements under this Agreement shall be within the scope of the indemnification provisions of Sections 10(a) and 10(b) of the Original Agreement, as the case may be. 11. Except as modified hereby, the Original Agreement shall remain in full force and effect. 6 IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed as of the date and year first above written. TOTAL IDENTITY CORP., a Florida corporation By: /s/ Philip C. Mistretta ---------------------------------- Philip C. Mistretta, President TOTAL IDENTITY SYSTEMS CORP., a New York corporation By: /s/ Philip C. Mistretta ---------------------------------- Philip C. Mistretta, Chairm and Chief Executive Officer /s/ Robert David -------------------------------------- Robert David 7 EX-10.3 5 ex10_3.txt Exhibit 10.3 AMENDED AND RESTATED PROMISSORY NOTE Principal Sum: $400,000 Date: February 23, 2004 FOR VALUE RECEIVED, TOTAL IDENTITY CORP., a Florida corporation (the "Maker") promises to pay to ROBERT DAVID (the "Holder"), at 3006 East Avenue, Rochester, New York 14610, or such address as the Holder may from time to time designate in writing to the Maker, the principal sum of $400,000.00, with interest on the unpaid balance at the rate of 8% per annum. This promissory note is issued in the place and stead of a certain promissory note dated October 13, 2003 in the principal amount of $800,000, issued in connection with a certain Stock Purchase Agreement dated October 13, 2003 by and between Maker and Holder (the "Stock Purchase Agreement"); and is the amended and restated promissory note referred to Amendment No. 1 to Stock Purchase Agreement dated February 20, 2004 made between the Maker and the Holder (the "Amended Stock Purchase Agreement"). This Note shall be subject to all of the terms and conditions of the Stock Purchase Agreement, as modified by the Amended Stock Purchase Agreement. This Note is also secured in accordance with the terms of an Amended and Restated Pledge Agreement of even date herewith by and between the Maker and the Holder. The principal amount of this Note shall be paid in eight equal quarterly installments, each in the amount of $50,000, with each installment to be accompanied by interest on the outstanding amount of the Note at the rate of 8% per annum. The initial installment shall be due and payable on January 1, 2005, and on the first day of each calendar quarter thereafter until the entire principal amount of this Note and accrued interest thereon has been paid in full. Prepayment in any amount is allowed at any time, and from time to time, without penalty. The following shall constitute "Events of Default" under this Note: 1. The Maker fails to make any payment required by this Note within 15 days of its due date. 2. The Maker becomes insolvent or unable to pay his debts as they mature or makes an assignment for the benefit of creditors, or any proceeding is instituted by or against the Maker alleging that the Maker is insolvent or unable to pay his debts as they mature, and any such proceeding, if involuntary, is not dismissed or stayed on appeal or otherwise within 30 days. 3. The entry of any judgment or the levy of any attachment against the Maker or any property of the Maker, which judgment or attachment is not paid or released within 30 days. 4. Any transfer by the Maker of any collateral securing this Note or the transfer by the Maker of all or substantially all of its assets except to a company wholly-owned by the Maker. 5. The transfer by any guarantor of all or substantially all of its assets. 6. The making of any assignment for the benefit of creditors by the Maker or any guarantor. 7. Any default on the part of Maker under the terms of a certain Stock Purchase Agreement dated as of October 13, 2003 by and between Total Identity Systems Corp., Maker and Holder, as amended by Amendment No. 1 to Stock Purchase Agreement of even date herewith. 7 8. Any default by Maker under the terms of the Stock Purchase Agreement between Maker and Holder dated October 13, 2003 as amended by the Amended Stock Purchase Agreement of even date herewith. 9. Any default on the part of Maker under the terms of the Amended and Restated Pledge Agreement between Maker and Holder of even date herewith. 10. Any default by Total Identity Systems Corp., a New York corporation ("TISC"), in its obligation to pay "rent," as provided in a certain Lease dated October 13, 2003, by and between TISC and 2340 Townline Road Corporation, as amended by Lease Amendment (the "Lease") of even date herewith; provided however, that no event of default under this subparagraph shall be deemed to have occurred until 10 days following TISC's receipt of written notice that it has failed to make two "rent" payments under the Lease, and TISC does not cure such failure within such 10 day period. 11. Any default by Shareholder in its obligation to pay consulting fees and/or health benefits to Secured Party, as provided in a certain Consulting Agreement between Shareholder and Secured Party of even date herewith; provided however, that no event of default under this subparagraph shall be deemed to have occurred until 10 days following TISC's receipt of written notice that it has failed to make two payments of consulting fees and/or health benefits to Secured Party under the Consulting Agreement, and TISC does not cure such failure within such 10 day period. Time is hereby declared to be of the essence, and upon the occurrence of an Event of Default, the entire unpaid principal amount of this Note together with accrued but unpaid interest thereon, shall at once become due and payable at the option of the Holder upon written notice to the Maker. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default. Except as provided in this Note, presentment, protest, notice, notice of dishonor, demand for payment, notice of protest and notice of non-payment are hereby waived. The Maker agrees to pay all of the Holder's expenses of collecting and enforcing this Note, and any guarantee or collateral securing this Note, including, without limitation, expenses and reasonable fees of legal counsel, court costs and the cost of appellate proceedings. The failure or delay by the Holder of this Note in exercising any of his rights hereunder in any instance shall not constitute a waiver thereof in that or any other instance. The Holder of this Note may not waive any of its rights, except in an instrument in writing signed by the Holder. This Note may not be amended except in a writing signed by the Maker and the Holder. TOTAL IDENTITY CORP., a Florida corporation By: /s/ Philip C. Mistretta ------------------------------- Philip C. Mistretta President GUARANTY FOR VALUE RECEIVED, Total Identity Systems Corp., a New York corporation, hereby unconditionally guarantees to Robert David, his successors and assigns, that all sums due under the foregoing Amended and Restated Promissory Note dated February 23, 2004, and interest shall be paid in full when due, following the expiration of all applicable grace periods, whether by acceleration or otherwise, in accordance with the terms of the same and the agreements given as security therefor. The undersigned as part of this guaranty does hereby further agree as follows: (1) The guarantor does hereby waive demand, protest, notice of non-payment and suit against the maker; (2) The guarantor shall not be released from this guaranty by the extension in time of payment granted to the maker or by the renewal, from time to time, of the said Amended and Restated Promissory Note irrespective of any change in the terms and interest rate charged thereon and the payee, his successors and assigns, shall have the full power and authority without notice to the undersigned to grant any such extensions, renewals, or modifications as it may deem proper in its sole judgment and discretion; (3) The holder of the Amended and Restated Promissory Note shall not be required to proceed first against the maker or against any collateral security held before resorting to the guarantor for payment; (4) The liability of the guarantor hereunder shall not in any way be affected, released or exonerated by the release or surrender of all or any part of the collateral security held for the payment of the obligations; (5) The liability of the guarantor hereunder shall not in any way be affected, released or exonerated by reason of any bankruptcy or insolvency proceedings by or with respect to Total Identity Corp. or any other guarantor; (6) Diligence on the part of any holder of the Amended and Restated Promissory Note in collecting the same and any defense arising out of lack of diligence in enforcing payment thereon is hereby waived by the guarantor; (7) This guaranty shall be enforceable by and against the respective administrators, executors, successors and assigns of the parties hereto; (8) This guaranty may not be changed orally, but only by an agreement in writing and signed by the party against whom enforcement of any such waiver, change, modification or discharge is sought to be charged; (9) In the event that this agreement is placed in the hands of an attorney for collection or enforcement, the guarantor shall be liable for all costs incurred, including reasonable attorney's fees. TOTAL IDENTITY SYSTEMS CORP., a New York corporation By: /s/ Philip C. Mistretta ---------------------------------------- Philip C. Mistretta Chairman and Chief Executive Officer EX-10.4 6 ex10_4.txt Exhibit 10.4 AMENDED AND RESTATED PLEDGE AGREEMENT THIS AGREEMENT is made this 23th day of February 2004 by and between TOTAL IDENTITY CORP., a Florida corporation ("Shareholder") and ROBERT DAVID ("Secured Party"). RECITALS A. Shareholder and Secured Party entered into a Pledge Agreement October 13, 2004 (the "Original Pledge Agreement") relating to the sale by Secured Party to Shareholder of shares of the common capital stock of Total Identity Systems Corp., a New York corporation ("Total New York") pursuant to a Stock Purchase Agreement dated of even date therewith (the "Stock Purchase Agreement"). B. Shareholder and Secured Party have amended the Stock Purchase Agreement in Amendment No. 1 to Stock Purchase Agreement of even date herewith ("Amendment No. 1"). C. As provided in Amendment No. 1, the promissory note issued by Shareholder in favor of Secured Party under the Stock Purchase Agreement has been amended and restated in an Amended and Restated Promissory Note of even date herewith (the "Restated Promissory Note"). D. On October 13, 2003, Shareholder acquired shares of the common capital stock of Total New York from Total New York pursuant to a Stock Purchase Agreement (the "Corporate Stock Purchase Agreement"). E. Shareholder, Total New York and Secured Party have amended the Corporate Stock Purchase Agreement in Amendment No. 1 to Stock Purchase Agreement of even date herewith ("Corporate Amendment No. 1"). F. Shareholder and Secured Party are entering into this Amended and Restated Pledge Agreement to amend and restate the Original Pledge Agreement to confirm to the understandings reached in Amendment No. 1 and Corporate Amendment No. 1. G. On October 13, 2003, an affiliate of Secured Party and Total New York entered into a Lease covering certain premises located at 2340 Townline Road, Rochester New York (the "Lease"), which Lease was amended by Lease Amendment of even date herewith (collectively, the "Amended Lease"). H. On October 13, 2003, Secured Party and Shareholder entered into an Employment Agreement (the "Employment Agreement"), and Secured Party and Shareholder have entered into a consulting agreement of even date herewith that, among other things, terminated the Employment Agreement (the "Consulting Agreement"). AGREEMENT NOW, THEREFORE, Shareholder and Secured Party agree as follows: Section 1. Termination of Original Pledge Agreement. The Original Pledge Agreement is hereby terminated and shall cease to be of any further or effect and simultaneously this Amended and Restated Pledge Agreement shall now govern the security interest being granted by Shareholder in favor of Secured Party under the Stock Purchase Agreement, as amended by Amendment No. 1 (collectively referred to as the "Amended Stock Purchase Agreement"). Section 2. Pledge and Grant of Security Interest. As absolute and unconditional security for the payment promptly when due by Shareholder of its obligations under the Restated Promissory Note, the Amended Stock Purchase Agreement, the Corporate Stock Purchase Agreement, as amended by Corporate Amendment No. 1 (collectively, the Amended Corporate Stock Purchase Agreement"), the Amended Lease and the Consulting Agreement, including, without limitation, payment of all principal, interest, costs of collection and attorneys' fees (collectively, the "Obligations"), Shareholder hereby pledges, assigns and transfers to Secured Party and grants to Secured Party a security interest in and to: (a) all the shares of the common capital stock of Total New York sold to Shareholder under the Amended Stock Purchase Agreement (the "Shares"); (b) all the shares of the common capital stock of Total New York sold to Shareholder under the Amended Corporate Stock Purchase Agreement (the "Corporate Shares" and, together with the Shares, the "Pledged Shares") and (ii) all share dividends, liquidating dividends, shares resulting from stock splits, reclassifications, warrants, options, non-cash distributions, rights to subscribe and other rights and distributions on or with respect to the Pledged Shares (other than dividends or other distributions paid in cash, if at the time of payment Shareholder is not in default with respect to any of its Obligations under the Restated Promissory Note) (collectively, the "Collateral"). Section 3. Mechanics of Pledge. All the Collateral shall be held in escrow by Shapiro, Rosenbaum, Liebschultz & Nelson, LLP, counsel to Secured Party (the "Escrow Agent"), pursuant to the terms of an escrow agreement of even date herewith (the "Escrow Agreement"), under which the Escrow Agent will hold the Collateral in escrow pending (a) a default under this Agreement, in which event the Collateral shall be delivered to Secured Party or (b) payment in full of the Obligations, in which event the Collateral shall be delivered to Shareholder, all as provided in the Escrow Agreement. In furtherance thereof, the Escrow Agent hereby acknowledges receipt of: (i) the stock certificates representing the Pledged Shares, and (ii) executed stock powers with respect to the Pledged Shares, endorsed in blank. Shareholder authorizes Secured Party to file in the appropriate UCC filing offices UCC-1 financing statements with respect to the security interest created under this Agreement, showing Shareholder as Debtor and Secured Party as secured party and executed by Shareholder. 2 Section 4. Covenants. (a) It is the intent of Shareholder and Secured Party that Secured Party shall retain a security interest in and to the Collateral and, for so long as the Obligations remain outstanding, in and to at least 51% of the issued and outstanding shares of common capital stock of Total New York. Accordingly, (i) prior to payment in full of the Obligations under the Amended Corporate Stock Purchase Agreement, Total New York shall not issue any additional shares of its capital stock without the prior written consent of Secured Party and Shareholder, and, thereafter (ii) in the event that Total New York issues additional shares of common capital stock, or securities having voting rights or securities convertible into common capital stock of Total New York, additional securities of Total New York shall be issued to the Shareholder and pledged hereunder to the extent necessary so that Secured Party retains a security interest in and to at least 51% of the issued and outstanding shares of voting capital stock of Total New York on a fully diluted basis. Any such additional shares shall be deemed "Collateral" within the meaning of this Agreement. (b) At such time, if any, as all or a portion of the Pledged Shares are delivered by the Escrow Agent to Secured Party under the Escrow Agreement, Shareholder shall deliver to Secured Party (or an agent designated by Secured Party), promptly upon request of Secured Party, such proxies and other documents as may be necessary to allow Secured Party to exercise the voting power with respect to any Pledged Shares or other capital shares owned by Shareholder included in the Collateral. In the absence of delivery of the Pledged Shares to Secured Party under the Escrow Agreement, Shareholder shall be entitled to exercise all voting rights attendant to the Pledged Shares. Section 5. Representations and Warranties of Shareholder. Shareholder hereby represents and warrants to Secured Party as follows: (a) Capacity. Shareholder has full legal right and capacity to execute, deliver and perform this Agreement, and this Agreement constitutes a valid and binding obligation of Shareholder, enforceable against Shareholder in accordance with its terms. (b) Ownership of Collateral. Shareholder is and will continue to be the lawful owner of the Pledged Shares, which is and shall at all times remain free and clear of all security interests, liens, encumbrances, claims and rights of others, except as otherwise permitted under this Agreement. (c) No Violation. The execution, delivery and performance by Shareholder of this Agreement does not violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with or without due notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or (except as contemplated hereby) result in the creation of any security interest, lien, or other encumbrance upon any of the properties or assets of Shareholder under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or loan agreement or other agreement, instrument or obligation to which Shareholder is a party, or by which Shareholder or any of its properties or assets may be bound or affected. 3 (d) Creation of Valid Security Interest. Upon the delivery to Secured Party of the certificate or certificates representing the Pledged Shares, accompanied by stock powers endorsed in blank, Secured Party shall have a valid first perfected security interest in the Pledged Shares, subject to the terms of this Agreement. Section 6. Events of Default. (a) The following shall constitute Events of Default under this Agreement: (i) Any default by Shareholder under the Amended Stock Purchase Agreement. (ii) Any default by Shareholder under the Amended Corporate Stock Purchase Agreement. (iii) Any default by Shareholder under the Restated Note. (iv) Any default by Total Identity Systems Corp., a New York corporation, in its obligation to pay "rent," as provided in a certain Lease dated October 13, 2003, by and between TISC and 2340 Townline Road Corporation, as amended by Lease Amendment of even date herewith. (v) Any default by Shareholder in its obligation to pay consulting fees and/or health benefits to Secured Party, as provided in a certain Consulting Agreement between Shareholder and Secured Party of even date herewith. Upon the occurrence of an Event of Default, following the expiration of all applicable grace periods, Secured Party shall notify the Escrow Agent of such occurrence, and the provisions of the Escrow Agreement shall govern disposition of the Collateral to Shareholder and/or Secured Party. In the event that all or a portion of the Collateral is delivered to Secured Party by the Escrow Agent, Secured Party shall thereupon be entitled to retain the Collateral or shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as in effect in the State of Florida and under any other applicable law, together with all rights and remedies provided in this Agreement with respect to all of the Collateral subject to this Agreement. Any notification required by law of intended disposition by Secured Party of any of the Collateral shall be deemed reasonably and properly given if given at least 10 days before such disposition and Secured Party agrees to provide such written notice of intended disposition to Shareholder. At any bona fide public sale, Secured Party shall be free to purchase all or any part of the Collateral. Out of the proceeds of any sale, Secured Party shall be entitled to retain an amount sufficient to satisfy Shareholder's Obligations to Secured Party, plus the amount of the expenses of the sale and related attorneys' fees incurred by Secured Party, and shall pay any balance of such proceeds to Shareholder. In any Notice of Default sent by the Secured Party to the Escrow Agent under the terms of the Escrow Agreement, said Notice shall specify whether the Secured Party intends to retain the Collateral or to sell the Collateral by bona fide public or private sale. In the event Secured Party elects to retain the Collateral as set forth in such Notice, as a condition to retaining the Collateral, Secured 4 Party shall pay or cause to be paid to Shareholder, within thirty (30) days following the date the Collateral is released from escrow by the Escrow Agent, all amounts theretofore paid by Shareholder to Total New York under the Amended Corporate Stock Purchase Agreement, and by Shareholder to Secured Party under the Restated Promissory Note, less the expenses incurred by Secured Party in recovering the Collateral and any related attorneys' fees incurred by Secured Party (the "Shareholder Repayment"). In the event that Shareholder Repayment is not received by Shareholder prior to the expiration of the said thirty (30) day period, then retention of the Collateral by Secured Party shall not be an available remedy to Secured Party, and Secured Party shall sell the Collateral at a bona fide public or private sale in accordance with this Agreement and the applicable provisions of Article 9 of the Uniform Commercial Code then in effect. (b) Without limitation on the rights provided to Secured Party hereinabove set forth, upon delivery of the Collateral to Secured Party by the Escrow Agent, Secured Party may take from time to time, all or any of the following actions (and Shareholder hereby appoints Secured Party and Secured Party's successors and assigns as such Shareholder's true and lawful attorney to take such actions, irrevocably and with full power of substitution, in the name of Shareholder or otherwise): (i) to collect by legal proceedings or otherwise, receive and receipt for all dividends, interest, principal payments and other sums now or hereafter payable upon or on account of the Collateral and to endorse any checks, other instruments or orders in connection therewith; (ii) to enter into any extension, reorganization, deposit, merger, or consolidation agreement, or any agreement in any way relating to or affecting the Collateral, and in connection therewith, to deposit or surrender control of such Collateral thereunder, accept other property in exchange for such Collateral and do and perform such acts and things as Secured Party may deem proper, and any money or property received in exchange for such Collateral shall be held by Secured Party pursuant to the provisions of this Agreement; (iii) to vote the Pledged Shares; (iv) make any compromise or settlement Secured Party deems desirable or proper with reference to the Collateral; (v) to cause all or any part of the Collateral to be transferred to Secured Party's name or to the name of a nominee designated by Secured Party; (vi) to date and otherwise complete to the extent Secured Party deems necessary the undated stock powers delivered upon the signing of this Agreement; and (vii) to file any claims or take any actions or institute any proceedings which Secured Party deems necessary or advisable in its sole and complete discretion and to compromise, litigate or settle the same. 5 (c) Shareholder acknowledges that compliance with the Federal securities laws, applicable blue sky or other state securities laws or similar laws analogous in purpose or effect may strictly limit the course of conduct of Secured Party if Secured Party attempts to dispose of all or any part of the Collateral and may also limit the extent to which or the manner in which any subsequent transferee of the Collateral may dispose of the same. Accordingly, SHAREHOLDER AGREES THAT IF ANY COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE SALE, SECURED PARTY MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER ASSURANCES, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO SECURED PARTY, RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED COMMERCIALLY REASONABLE. Without limiting the generality of the foregoing, the provisions of this paragraph would apply if, for example, Secured Party were to place all or any part of the Collateral for private placement by an investment banking firm, or if such investment banking firm purchased all or any part of the Collateral for its own account, or if Secured Party placed all or any part of the Collateral privately with a purchaser or purchasers. Section 7. Return of Collateral. At such time as the Obligations have been paid in full, Secured Party shall join with Shareholder in directing the Escrow Agent to return the Collateral then its possession to Shareholder. Section 8. Obligations Not Affected. (a) The obligations of Shareholder under this Agreement shall remain in full force and effect without regard to, and shall not be impaired or affected by: (i) any amendment, modification, addition, supplement, extension, increase or substitution to or for the Obligations, or any other instrument executed in connection with any of the Obligations, or any assignment or transfer thereof; (ii) any exercise, non-exercise or waiver by Secured Party of any right, remedy, power or privilege under or in respect of the Obligations, this Agreement or any instrument executed pursuant to it; (iii) any waiver, consent, extension, indulgence, delay, or other action or inaction in respect of, the Obligations, this Agreement or any instrument executed pursuant to such or any assignment or transfer thereof; (iv) the disposition, impairment, release, surrender, substitution, or modification of any other collateral securing the Obligations or any failure to perfect a security interest in any such collateral; (v) any release (including adjudication or discharge in bankruptcy) or settlement with any person primarily or secondarily liable for the Obligations (including, without limitation, any maker, indorser, guarantor or surety); 6 (vi) any delay, omission, waiver, or forbearance in exercising any right or power with respect to the Obligations or this Agreement; (vii) any defense arising from the enforceability or validity of the Obligations or this Agreement or any part thereof, or the genuineness, enforceability or validity of any agreement relating thereto; (viii) any other act or omission which might constitute a legal or equitable discharge of Shareholder; (ix) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation, or the like, of Shareholder or any other person, whether or not by notice or knowledge of any of the foregoing. (b) Shareholder hereby waives all defenses based on suretyship or impairment of collateral, presentment, protest, demand for payment, any right of set-off, notice of dishonor or default, notice of acceptance of this guaranty, notice of the incurring of any of the Obligations and notice of any other kind in connection with the Obligations or this Agreement. Section 9. Protection of Collateral. Secured Party may, upon ten days' prior written notice to Shareholder, perform, from time to time, at its option, any act which Shareholder has agreed under this Agreement to perform and which Shareholder has failed to perform which Secured Party deems necessary for the maintenance, preservation or protection of any of the Collateral or of Secured Party's security interest therein. Shareholder shall, upon demand, repay to Secured Party all moneys advanced by Secured Party in respect to its Collateral in connection with the foregoing, together with interest at a rate (or any maximum lesser rate permitted by applicable law) per annum equal to the interest rate on the Promissory Note. Section 10. Reasonable Care. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as Shareholder requests in writing with respect to its Collateral, but failure of Secured Party to comply with any such request shall not in itself be deemed a failure to exercise reasonable care, and no failure by Secured Party to do any act with respect to the preservation of any Collateral not so requested by Shareholder shall be deemed a failure to exercise reasonable care in the custody and preservation of such Collateral. Section 11. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing, must be delivered by courier, mail or hand delivery, and will be deemed to have been delivered upon receipt. The addresses for such communications shall be: To Shareholder at: Total Identity Corp. 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 Telephone: (585) 427-9050 7 With a copy to: Schneider Weinberger LLP Suite 108 2499 Glades Road Boca Raton, Florida 33431 Attention: Steven I. Weinberger, Esq. Telephone: (561) 362-9595 To Secured Party at: Robert David 3006 East Avenue Rochester, New York 14610 Telephone: (585) 383-0977 With a copy to: Shapiro, Rosenbaum, Liebschutz & Nelson, LLP 1100 Crossroads Building Two State Street Rochester, New York 14614 Attention: Warren B. Rosenbaum, Esq. Telephone (585) 232-2282 Each party shall provide three days prior written notice to the other party of any change in address, telephone number or facsimile number. Written confirmation of receipt (a) given by the recipient of such notice, consent, waiver or other communication, or (b) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service or receipt from a nationally recognized overnight delivery service. Section 12. Remedies Cumulative. No remedy herein conferred is intended to be exclusive of any other remedy, but every such remedy shall be cumulative and in addition to every other remedy conferred in this Agreement, or conferred on Secured Party by any other agreement, instrument or security, or now or hereafter existing at law or in equity or by statute. Section 13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, and, without limiting the foregoing, all rights and powers under this Agreement or with respect to Secured Party may be exercised by any successor or assign of Secured Party. Section 14. Governing Law; Arbitration. This agreement shall be governed by and interpreted in accordance with the laws of the state of Florida without regard to the principles of conflict of laws. Each of the parties irrevocably and unconditionally agrees that any suit, action or legal proceeding arising out of or relating to this Agreement shall be settled by binding arbitration conducted in accordance with the Commercial Rules of Arbitration of the American Arbitration Association ("AAA"). The arbitration shall take place at such location as the AAA determines, and shall be heard by three arbitrators selected in accordance with AAA Rules of Commercial Arbitration. The Arbitrators shall render a reasoned award and such award shall be signed and dated. Any witness residing outside of the state in which the arbitration is heard may testify by affidavit, and such affidavit shall be admissible at any arbitration hearing. The decision of the arbitrators shall be final and binding upon the parties, and the arbitration award may be entered in any court of competent jurisdiction. Initially, each of the parties shall pay one-half of the fees of the AAA (other than filing fees), including without limitation hearing and arbitrators' fees, and the parties' obligation to pay such fees shall be enforceable in any court of competent jurisdiction. The parties to any arbitration hereunder agree to submit for determination by the arbitrators, the amount of fees and expenses, including reasonable attorney's fees, to be borne by each party. 8 IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first above written. "Shareholder" TOTAL IDENTITY CORP., a Florida corporation By: /s/ Philip C. Mistretta ----------------------------------------- Philip C. Mistretta President "Secured Party" /s/ Robert David ----------------------------------------- Robert David 9 STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________ the _____________________ (_____) common shares of Total Identity Systems Corp., a New York corporation (the "Corporation"), standing in the name of the undersigned on the books of the corporation and represented by Certificate(s) Nos. _______ herewith, and does hereby irrevocably constitute and appoint ___________________ attorney to transfer the shares on the books of the corporation, with full power of substitution in the premises. ------------------------------------------ Dated: ____________________ Philip C. Mistretta, as President of Total Identity Systems Corp., a Florida corporation EX-10.5 7 ex10_5.txt Exhibit 10.5 LEASE AMENDMENT THIS LEASE AMENDMENT AGREEMENT ("Agreement") is made on the 23rd day of February, 2004, by and between 2340 TOWNLINE ROAD CORPORATION, a New York corporation with offices at 3006 East Avenue, Rochester, New York 14610 ("Lessor"), TOTAL IDENTITY SYSTEMS CORP., a New York corporation with offices at 2340 Brighton-Henrietta Town Line Road, Rochester, New York 14623 ("Lessee"), and TOTAL IDENTITY CORP., a Florida corporation with offices at 11924 Forest Hill Blvd., Suite 22-204, Wellington, FL 33414 ("Guarantor") Recitals This Agreement is made in reference to the following which Lessor, Lessee and Guarantor acknowledge are true and correct: a. Lessor and Lessee are parties to a Lease dated as of October , 2003 (the "Lease"). A copy of the Lease is annexed hereto as Exhibit "A." b. Pursuant to Lease, Lessee has leased from Lessor real property commonly known as 2340 Brighton-Henrietta Townline Road, Brighton, Monroe County, New York (the "Demised Premises"). c. The initial term of the Lease expires on October 31, 2013. d. Guarantor has guaranteed the payment and performance of the obligations of Lessee under the Lease. e. Lessor and Lessee wish to amend the Lease as hereinafter set forth. f. Guarantor is signing this Agreement to signify its consent to such Amendment and its agreement to continue to be bound to the terms of its guaranty of the Lease as amended hereby. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and other good and valuable consideration, and intending to be legally bound hereby, Lessor, Lessee and Guarantor hereby covenant and agree as follows: 1 1. Defined Terms. Unless otherwise expressly defined in this Agreement, all capitalized terms used in this Agreement shall have the meanings ascribed to such terms in the Lease. 2. Amendment to Section 1 of Lease. Section 1 of the Lease is hereby amended by providing that the term of the Lease shall terminate on October 31, 2013. The second paragraph of Section 1, which grants Lessee an option to renew for an additional term of five (5) years, is deleted. 3. Amendment to Sections 39 and 40 of Lease. Sections 39 and 40 of the Lease are hereby deleted in their entirety and are replaced by the following new Section 39: 39. Option to Purchase Provided that this Lease shall be in full force and effect and that Lessee shall not be in default hereunder beyond any applicable notice and grace periods, Lessee shall have the option to purchase the Demised Premises on the following terms and conditions: a. If this option is not duly and timely exercised as provided for herein, it shall cease, determine and expire and be of no further force or effect. b. This option shall be exercised exclusively by Lessee giving written notice thereof to Lessor, by certified mail, return receipt requested, between October 1, 2008 and October 31, 2013. A notice given prior to October 1, 2008 or after October 31, 2013, shall not be deemed to be a valid exercise of the option. 2 c. If the option is validly exercised, the purchase price for the Demised Premises shall be the fair market value of the Demised Premises as of the date on which the option is exercised. The fair market value shall be determined by three independent real estate appraisers, at least two of whom shall be members in good standing of the Appraisal Institute, to be engaged and paid for by Lessee. If the three appraisers are unable to agree as to the fair market value, the purchaser price shall be the average of the determinations of the three appraisers. d. The purchase price shall be paid in full at closing, in immediately available US funds. Payment of the purchase price is guaranteed by the Guarantor. e. Closing and transfer of title shall take place within fifteen (15) days of the determination of the purchaser price as set forth above. f. Upon the exercise of the option, Lessor agrees to furnish and deliver to Lessee's attorney, at least ten (10) days prior to closing, fully guaranteed tax, title and U.S. District Court Searches dated and redated subsequent hereto. Lessor will pay for continuation of said searches to and including the date of transfer of title. g. At closing, Lessor shall tender to Lessee a bargain and sale deed with lien covenant conveying a marketable title in fee simple to the Demised Premises free and clear of all liens and encumbrances, subject to the following: (i) Any state of facts an accurate survey and inspection of the premises would disclose. (ii) Rights of Lessee and any other parties in possession of the Demised Premises. (iii) Covenants, easements and restrictions of record. (iv) The reservations and right of reverter set forth in a deed to Lessor recorded in the Monroe County Clerk's Office in Liber 8996 of Deeds, page 532. h. Lessor will pay the transfer tax and for filing the TP-584 form. Lessee shall pay to record the deed, the filing fee for the equalization form, and for all other costs and expenses related to the transfer of title to Lessee. i. Subsequent to the date of the exercise of the option and until the closing and transfer of title to Lessee, Lessee shall continue to abide by all the terms of the Lease including, without limitation, the payment of Rent, Additional Rent and all other sums required to be paid hereunder. Rent shall be pro-rated to the date of transfer of title. 3 j. Should Lessee exercise this option and then fail to close, Lessee shall immediately vacate the Demised Premises, failing which Lessor may commence summary proceedings for eviction against Lessee. Lessee shall remain liable for Rent and other damages as provided for in this Lease and for Lessor's reasonable attorney's fees incurred in enforcing this section. Lessor may also pursue any other rights and remedies as Lessor may have against Lessee for failure to close. k. The exercise of this option by Lessee shall be deemed to be a waiver by Lessee of any objections based upon the condition of the Demised Premises. Lessee agrees to accept the Demised Premises in its then "AS IS" condition. 4. Superceding Effect; Other Terms the Same. The provisions of this Agreement shall supercede and prevail over any inconsistent provisions of the Lease. However, all terms and provisions of the Lease which are not inconsistent herewith, shall remain the same. 5. Guaranty. For the purpose of continuing its guaranty of the Lease as modified and amended herein, Guarantor has separately signed this Agreement where indicated below. 6. Further Modification or Amendment. The Lease, as modified by this Agreement, may not be further modified or amended except by a written agreement signed by both Lessor and Lessee. 7. Effective Date. This Agreement shall be effective when it is signed by Lessor, Lessee and Guarantor. 4 FOR PURPOSES OF BINDING THEMSELVES TO THE FORGING, Lessor, Lessee and Guarantor have signed this Agreement as of the date and year first set forth above. LESSOR: 2340 TOWNLINE ROAD CORPORATION By: /s/ Robert David ---------------------------------- name: Robert David title: President LESSEE: TOTAL IDENTITY SYSTEMS CORP. By: /s/ Philip C. Mistretta ---------------------------------- name: Philip C. Mistretta title: President GUARANTOR: TOTAL INDENTITY CORP. By: /s/ Philip C. Mistretta ---------------------------------- name: Philip C. Mistretta title: Chairman of the Board 5 EX-10.6 8 ex10_6.txt Exhibit 10.6 CONSULTING AGREEMENT THIS AGREEMENT (the "Agreement"), effective as February 23, 2004 (the "Effective Date"), is made by and between TOTAL IDENTITY CORP., a Florida corporation (the "Company") and ROBERT DAVID (the "Consultant"). RECITALS: This Agreement is made in respect to the following, which Company and Consultant acknowledge are true and correct: a. Company has acquired from Consultant, a controlling interest in Total Identity Systems Corp., a New York corporation ("TISC"). b. Consultant has substantial experience, knowledge and expertise in the operation of the business of TISC. c. Company deems Consultant's availability to provide advice and guidance to Company in connection with the business of TISC to be critical to the Company's success. d. Company desires to secure the availability of Consultant, and to engage Consultant to assist and consult with Company in the management of the business conducted by TISC, all on the terms and conditions herein set forth. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Engagement. Subject to Section 3 below, the Company hereby engages Consultant to render consulting services and advice to Company, and Consultant hereby accepts such engagement, upon the terms and conditions set forth herein. Consultant's engagement shall be for a term of thirty-two (32) months commencing on the Effective Date (the "Term"). Consultant shall perform such duties and responsibilities with respect to the management and operation of the business of TISC as may be reasonably requested of him by the Chief Executive Officer of the Company. In particular, Consultant shall assist in the transition to new management, in the maintenance and promotion of harmonious relations with the customers of the TISC, and in the location and solicitation of new customers. In rendering services hereunder, Consultant shall not be required to maintain a full time presence in Rochester, New York and shall not be required to devote his full time and attention to the business of the Company. However, Consultant shall generally be available to the Chief Executive Officer of the Company in person or by telephone or other communication device between 9:00 a.m. and 2:00 p.m. weekdays. 2. Compensation. During the Term, the Company shall pay Consultant the compensation and other amounts set forth below. 1 2.1. Consulting Fee. For the services rendered and to be rendered by Consultant hereunder, Company shall pay Consultant a consulting fee at the rate of $8,333.33 per month, for each month during the Term of this Agreement (the "Consulting Fee"). Said Consulting Fee shall be paid in installments not less frequently than monthly. Except as otherwise expressly permitted hereunder, all payments to Consultant shall be made without prior demand and without offset, defense or deduction of any kind. The Consulting Fee may be increased in the discretion of the Board of Directors of the Company. 2.2. Benefits. In addition to payment of the Consulting Fee, Company shall receive the following benefits to be paid for by the Company: (a) group health insurance under the existing Blue Cross-Blue Shield health insurance plan maintained by the Company, covering Consultant and his spouse, and under any health insurance plan subsequently adopted by the Company; and (b) reimbursement for reasonable and necessary out-of-pocket expenses incurred by Consultant in the performance of his duties hereunder (such expenses shall be reimbursed by the Company, from time to time, upon presentation of appropriate receipts therefore, provided such expenses are approved in advance in writing by the Chief Financial Officer or the Board of Directors). 3. Termination. 3.1. The Consultant's engagement and the Company's obligation to compensate Consultant pursuant to this Agreement shall be terminated upon the first to occur of the following events: (a) The death of Consultant. (b) The Complete Disability of Consultant. "Complete Disability" as used herein shall mean the inability of Consultant, due to illness, accident, or any other physical or mental incapacity, to perform the services contemplated by this Agreement for an aggregate of 90 days within any period of 12 consecutive months during the term hereof. (c) The discharge of Consultant by the Company for Cause. "Cause" as used herein shall mean: (i) Consultant's conviction of a crime involving illegal drug use or alcohol abuse by Consultant; (ii) improper or personal use of the Company's property assets; (iii) acts of fraud, dishonesty, malfeasance, criminal activity, wrongful conduct, breach of fiduciary duty by Consultant against the Company or its affiliates, or in connection with the performance of his duties hereunder; and/or (iv) Consultant's willful failure or refusal to comply with the provisions of this Agreement, or failure (including as a result of Consultant's illegal drug use or alcohol abuse that does not involve a criminal conviction) to perform Consultant's duties and obligations under this Agreement in any material respect following written notice of such failure or refusal and Consultant's failure to cure same within 30 days following Consultant's receipt of such notice. 2 4. Related Party Transactions. So long as Consultant is engaged by the Company, he shall not, without the prior written consent of the Company, cause or permit the Company, or any subsidiary to enter into or effect any agreement or transaction, or provide or receive any service, between the Company or any subsidiary on the one hand, and Consultant or a Related Party (defined below), on the other hand, except for the consultant relationship contemplated hereby. In any event, any such agreements, transactions or services shall be at prices and terms which are equal to the prices and terms available for similar agreements, transactions or services with unrelated third parties. As used herein, "Related Party" means (a) any person related by blood, adoption, or marriage to Consultant, (b) any director or officer of the Company or any of its subsidiaries, (c) any corporation or other entity in which Consultant has, directly or indirectly, at least 5% beneficial interest in the capital stock or other type of equity interest in such corporation or other entity, or (d) any partnership in which Consultant is a general partner or a limited partner having a 5% or more interest therein. 5. Treatment and Ownership of Confidential Information. 5.1 Confidentiality. The parties hereto acknowledge that Consultant shall or may be provided access to, make use of, acquire and/or add to Confidential Information (as that term is defined in Section 5.2 below). Consultant covenants and agrees that during the Term and at all times thereafter he shall not, except with the prior written consent of the Company, or except if he is acting during the Term solely for the benefit of the Company or any of the affiliates, at any time, directly or indirectly, disclose, divulge, report, transfer or use, for any purposes whatsoever, any such Confidential Information, including Confidential Information obtained, used, acquired or added by, or disclosed to, Consultant prior to the date of this Agreement. Consultant further acknowledges that the Confidential Information constitutes valuable, special and unique assets of the Company. 5.2 Confidential Information Defined. For purposes of this Agreement, the term "Confidential Information" shall mean all of the following materials and information which Consultant receives, conceives or develops or has received, conceived or developed, in whole or in part, in connection with Consultant's affiliation with the Company: (a) The contents of any manuals or other written materials of the Company or any of its affiliates; (b) The names of actual or prospective clients, customers, suppliers, or persons, firms, lenders, or persons, firms, corporations, or other entities with whom Consultant may have or has had contact on behalf of the Company or any of its affiliates or to whom any other Consultant of the Company or any of its affiliates has provided goods or services at any time; (c) The terms of agreements between the Company or any of its affiliates, and any third parties; (d) The contents of actual or prospective customer or client records, which customer and client lists and records shall not only mean one or more of the names and addresses of the customers of the Company or any of its affiliates, but shall also encompass any and all information whatsoever regarding them; 3 (e) Any data or database, or other information compiled by the Company or any of its affiliates, including, but without limitation, information concerning the Company or any of its affiliates, or any business in which the Company or any of its affiliates is engaged or contemplates becoming engaged, any company which the Company or any of its affiliates engages in business, any customer, prospective customer, or other person, firm or corporation to whom or which the Company or any of its affiliates has provided goods or services or to whom or which any Consultant of the Company or any of its affiliates has provided goods or services on behalf of the Company or any of its affiliates, or any compilation, analysis, evaluation or report concerning or deriving from any data or database, or any other information; (f) All policies, procedures, strategies and techniques regarding training, marketing and sales, either oral or written, and assorted lists containing information pertaining to lenders, customers and/or prospective customers; and (g) Any other information, data, training methods, formulae, technology, business methods, know-how, show-how, source code, subject code, copyright, trademarks, patents or knowledge of a confidential or proprietary nature observed, received, conceived or developed by Consultant in connection with Consultant's affiliation with the Company. 5.3 Exclusions. Excluded from the Confidential Information and therefore not subject to the provisions of this Agreement shall be any information which (a) is or becomes generally available to the public through no breach or fault of Consultant; provided that this exception shall apply only from and after the date the information became generally available to the public, and (b) Consultant can establish by Consultant's written records was in Consultant's possession at the time of disclosure and was not previously acquired directly or indirectly from the Company, provided that this exception shall apply only from and after the date that the information is disclosed to Consultant by a third party or was in Consultant's possession. Specific Confidential Information shall not be deemed to be within the foregoing exceptions merely because it is embraced by, or contained or referenced in, more general information in the public domain. Additionally, any combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are in the public domain. If Consultant intends to avail himself of any of the foregoing exceptions, Consultant shall notify the Company in writing of his intention to do so and the basis for claiming the exception. 5.4 Ownership. Consultant covenants and agrees that all right, title and interest in any Confidential Information shall be and shall remain the exclusive property of the Company and its affiliates, as the case may be. Consultant agrees to promptly disclose to the Company all Confidential Information hereafter developed in whole or in part by Consultant within the scope of this Agreement and to assign to the Company or any of the affiliates, as the Company determines in its sole discretion, any right, title or interest Consultant may have in such Confidential Information. 6. Inventions. 4 6.1 Consultant agrees to promptly inform and to disclose to the Company, in writing, all inventions, concepts, developments, procedures, ideas, innovations, systems, programs, techniques, processes, information, discoveries, improvements and modifications and related documentations, other works of authorship and the like (collectively the "Inventions"), which, during the course of Consultant's employment with the Company, Consultant has created, made, conceived, written either alone or with others, while in the Company's employ, or while performing services for the Company or its affiliates, whether or not during working hours, and at all times thereafter, whether or not such Inventions are patentable, subject to copyright protection or susceptible to any other form of protection which (a) related to the actual business or research of development of the Company or its affiliates; or (b) was suggested by or resulted from any task assigned or to be assigned to Consultant or performed by Consultant for or on behalf of the Company or any of its affiliates. In the case of any "other works of authorship", such assignment shall be limited to those works of authorship meeting both conditions (a) and (b) above. Consultant further acknowledges and agrees that all copyright and any other intellectual property right in Inventions and related documentation, and other works of authorship, created within the scope of Consultant's employment, are "works for hire" and are the property of the Company or its affiliates, as the case may be. 6.2 In connection with any of the Inventions assigned by Section 6.1, Consultant shall, on the Company's request, promptly execute a specific assignment of title to the Company or its designee, and do anything else reasonably necessary to enable the Company or such designee to secure a patent, copyright or other form of protection therefor in the United States and in other countries. 6.3 Consultant further acknowledges and agrees that the Company and its affiliates, licensees, successors or assigns (direct or indirect) are not required to designate Consultant as an author of any Invention which is subject to Section 6.1, when it is distributed, publicly or otherwise, or to secure my permission to change or otherwise alter its integrity. Consultant hereby waives and releases, to the extent permitted by law, all rights in and to such designation and any rights that Consultant may have concerning modifications of such Inventions. 6.4 Consultant understands that any rights, waivers, releases and assignments herein granted and made by Consultant are freely assignable by the Company and are for the benefit of the Company and its affiliates, licensees, successors and assigns. 6.5 Consultant affirms that Consultant has not disclosed and will not disclose to anyone outside of the Company and its affiliates, or has used, or will use, any Confidential Information or material received in confidence from third parties, such as customers, by the Company or any of its affiliates, other than as permitted by a written agreement between the Company and the third party. 6.6 Consultant irrevocably appoints any Company-selected designee to act as his agent and attorney-in-fact to perform all acts necessary to obtain patents and/or copyrights as required by this Agreement if Consultant (a) refuses to perform those acts or (b) is unavailable, within the meaning of the United States Patent and Copyright Laws. It is expressly intended by Consultant that the foregoing power of attorney is coupled with an interest. 5 6.7 Consultant shall keep complete, accurate and authentic information and records on all Inventions in the manner and form reasonably requested by the Company. Such information and records, and all copies thereof, shall be the property of the Company as to any Inventions within the meaning of this Agreement. In addition, Consultant agrees to promptly surrender all such original and copies of such information and records at the request of the Company. 7. Restrictive Covenants. 7.1 Acknowledgments. Consultant agrees and acknowledges that in order to protect the value of the Company and its business, it is necessary and appropriate that Consultant undertake not to utilize the special knowledge about the business of the Company that Consultant has acquired or may acquire and the relationships with the Company's customers, suppliers and Consultants to compete with the Company. Consultant further acknowledges that: (a) Consultant is one of a limited number of persons who will assist in developing the business of the Company; (b) Consultant will occupy a position of trust and confidence with the Company during the course of Consultant's engagement under this Agreement and Consultant has and will continue to become familiar with the proprietary and Confidential Information of the Company and its affiliates; (c) The agreements and covenants contained in this Section 7 are essential to protect the Company and the goodwill of its business and are an express condition precedent to the willingness of the Company to sign this Agreement; (d) The Company would be irreparably damaged if Consultant were to provide services to any person or entity in violation of the provisions of this Agreement; (e) The scope and duration of the provisions of this Section 7, and the provisions of Sections 5 and 6, are reasonably designed to protect a valuable interest of the Company and are not excessive in light of the circumstances; and (f) Consultant has a means to support Consultant and Consultant's dependents, if any, other than engaging in the activities prohibited by this Section 7. 7.2 Non-Compete. Consultant hereby agrees that during the term of Consultant's engagement by the Company and for the Post-Term Period (as hereinafter defined) identified below (the "Non-Compete Period"), except on behalf of the Company in accordance with this Agreement, Consultant shall not, directly or indirectly, as consultant, agent, employee, stockholder, director, partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as a consultant or advisor to, render services for (alone or in association with any person, firm, corporation or entity), or otherwise assist any person or entity that engages in or owns, invests in, operates, manages or controls any venture or enterprise that directly or indirectly engages or proposes to engage in the business now or hereafter conducted by the Company anywhere within the Rochester and Buffalo, New York Metropolitan areas (collectively the "Territory"); provided however, that nothing contained herein shall be construed to prevent the Consultant from (a) investing in stock or other securities of any public or 6 private enterprise provided that such investment does not require active participation by the Consultant and such enterprise does not engage in any activity competitive with the business now or hereafter conducted by the Company ("Permitted Investments"), or (b) attending to such charitable and/or civic activities as are deemed appropriate by Consultant; provided that such activities shall not detract from Consultant's duties and obligations under this Agreement. For purposes of this Section 7.2, the Post-Term Period shall be five years. 7.3 Non-Solicitation. Without limiting the generality of the provisions of Section 7.2 above, Consultant hereby agrees that for a period commencing on the date of this Agreement and ending upon expiration of the Non-Compete Period, except on behalf of the Company in accordance with this Agreement, Consultant will not, directly or indirectly, as Consultant, agent, consultant, principal or otherwise, (a) solicit any business from or in any way transact or seek to transact any business with or otherwise seek to influence or alter the relationship between the Company or any of its affiliates with any person or entity to whom the Company or any of its affiliates provided business-related services (i) at any time during the one year period preceding the Termination Date or (ii) if there has been no Termination Date, at any time during the Term hereof or (b) solicit for employment or other services or otherwise seek to influence or alter the relationship between the Company or any of its affiliates of any person who is or was an Consultant of the Company or any of its affiliates (x) at any time during the one (1) year period preceding the Termination Date or (xi) if there has been no Termination Date, at any time during the Term hereof. 7.4 Blue-Pencil. If any court of competent jurisdiction shall at any time deem the term of this Agreement or any particular Non-Compete Period too lengthy or the Territory too extensive, the other provisions of this Section 7 shall nevertheless stand, the Non-Compete Period shall be reduced to be the longest period permissible by law under the circumstances and the Territory shall be comprised of the largest territory permissible by law under the circumstances. The court in each case shall reduce the Non-Compete Period and/or Territory to one of permissible duration or size. 8. Remedies. Consultant acknowledges and agrees that the covenants set forth in Section 5, 6 and 7 of this Agreement are reasonable and necessary for the protection of the business interests of the Company and its affiliates, that irreparable injury will result to the Company if Consultant breaches any of the terms of Sections 5, 6 or 7, and that in the event of Consultant's actual or threatened breach of any provisions of Section 5, 6 or 7, the Company and its affiliates will have no adequate remedy at law. Consultant accordingly agrees that in the event of any actual or threatened breach by Consultant of any of the provisions of Section 5, 6 or 7, the Company and its affiliates shall be entitled to seek injunctive relief, specific performance and other equitable relief from any court of competent jurisdiction or in connection with an arbitration pursuant to Section 11.2, without bond and without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company and its affiliates from pursuing any other remedies available to them for such breach or threatened breach, including but not limited to the recovery of damages. 7 9. Representations and Warranties of Consultant. 9.1 Consultant represents and warrants to the Company that: (a) He is not and has not been subject to any litigation or any regulatory or administrative proceeding that could reasonably have an adverse impact on the ability of Consultant to render services under this Agreement; (b) He is free of known physical and mental disabilities that would, with or without reasonable accommodations create an undue hardship for the Company or any of its affiliates, impair his performance hereunder and he is fully empowered to enter and perform his obligations under this Agreement; (c) He is under no restrictive covenants to any person or entity that will be violated by his entering into and performing this Agreement; and (d) He is not the subject of any event described in Item 401(d)(1) through (4) of Regulation S-B [or Item 401(f) of Regulation S-K, if then applicable to the Company], promulgated by the Securities and Exchange Commission. 9.2 Consultant shall indemnify the Company on demand for and against any and all judgments, losses, claims, damages, expenses and costs (including without limitation all legal fees and costs, even if incident to appeals) incurred or suffered by the Company as a result of any breach by Consultant of any of these representations and warranties. 10. Successors. This Agreement is personal to Consultant and may not be assigned by Consultant. This Agreement is not assignable by the Company except in connection with the sale of all or substantially all of the Company's assets or stock or upon a merger or any similar transaction. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 11. Miscellaneous. 11.1 Modification and Waiver. Any term or condition of this Agreement may be waived at any time by the party hereto that is entitled to the benefit thereof; provided, however, that any such waiver shall be in writing and signed by the waiving party, and no such waiver of any breach or default hereunder is to be implied from the omission of the other party to take any action on account thereof. A waiver on one occasion shall not be deemed to be a waiver of the same or of any other breach on a future occasion. This Agreement may be modified or amended only by a writing signed by both parties hereto. 11.2 Governing Law; Arbitration. This agreement shall be governed by and interpreted in accordance with the laws of the state of Florida without regard to the principles of conflict of laws. Each of the parties irrevocably and unconditionally agrees that any suit, action or legal proceeding arising out of or relating to this Agreement shall be settled by binding arbitration conducted in accordance with the Commercial Rules of Arbitration of the American Arbitration Association ("AAA"). The arbitration shall take place at such location as the AAA determines, and shall be heard by three arbitrators selected in accordance with AAA Rules of Commercial Arbitration. The Arbitrators shall render a reasoned award and such award shall be signed and dated. Any witness 8 residing outside of the state in which the arbitration is heard may testify by affidavit, and such affidavit shall be admissible at any arbitration hearing. The decision of the arbitrators shall be final and binding upon the parties, and the arbitration award may be entered in any court of competent jurisdiction. Initially, each of the parties shall pay one-half of the fees of the AAA (other than filing fees), including without limitation hearing and arbitrators' fees, and the parties' obligation to pay such fees shall be enforceable in any court of competent jurisdiction. The parties to any arbitration hereunder agree to submit for determination by the arbitrators, the amount of fees and expenses, including reasonable attorney's fees, to be borne by each party. 11.3 Tax Withholding. The Company may withhold from any amounts payable under this Agreement such taxes as shall be required to be withheld pursuant to any applicable law or regulation. 11.4 Section Captions. Section and other captions contained in this Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. 11.5 Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement. 11.6 Integrated Agreement. This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and supersedes any other employment agreements executed before the date hereof. There are no agreements, understandings, restrictions, representations, or warranties among the parties other than those set forth herein or herein provided for. 11.7 Interpretation. No provision of this Agreement is to be interpreted for or against any party because that party or that party's legal representative drafted such provision. For purposes of this Agreement, "herein," "hereby," "hereunder," "herewith," "hereafter," and "hereinafter" refer to this Agreement in its entirety, and not to any particular section or subsection. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument. 11.8 Notices. All notices, requests, demands, or other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given upon receipt if delivered in person or by Federal Express (or similar overnight courier service) to the parties at the following addresses: If to Consultant: Robert David 3006 East Avenue Rochester, New York 14610 If to the Company: 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 9 Any party may change the address to which notices, requests, demands or other communications to such party shall be delivered or mailed by giving notice thereof to the other parties hereto in the manner provided herein. Any notice may be given on behalf of a party by its counsel. 11.9 No Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS AGREEMENT. 11.10 Effective Date/Superceding Effect. This Agreement is made concurrently with a certain Amendment No. 1 to Stock Purchase Agreement between Company and Consultant. Upon the Effective Date, this Agreement shall supercede an Employment Agreement between Company and Consultant made effective as of October 13, 2003, and neither the Company nor Consultant shall have any further rights or obligations under said Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. COMPANY: TOTAL IDENTITY CORP. By: /s/ Philip C. Mistretta -------------------------- Philip C. Mistretta Chairman of the Board CONSULTANT: /s/ Robert David ----------------------------- Robert David 10 EX-10.7 9 ex10_7.txt Exhibit 10.7 ESCROW AGREEMENT THIS AGREEMENT is made this 23rd day of February, 2004 by and between TOTAL IDENTITY CORP., a Florida corporation ("Shareholder"), ROBERT DAVID ("Secured Party"), and SHAPIRO, ROSENBAUM, LIEBSCHUTZ & NELSON, LLP (`Escrow Agent"). RECITALS This Agreement is made in reference to the following, which Shareholder and Secured party warrant and represent to Escrow Agent are true and correct: a. Concurrently herewith, Shareholder and Secured Party have entered into an Amended and Restated Pledge Agreement (the "Amended Pledge Agreement"), a copy of which is annexed hereto as Exhibit "A." b. Pursuant to Section 3 of the Amended Pledge Agreement, Shareholder is required to deliver to Escrow Agent the Pledged Shares as defined in the Amended Pledge Agreement, and executed stock powers (the "Stock Powers") with respect to such Pledged Shares. c. This Agreement is made pursuant to Section 3 of the Amended Pledge Agreement for the purpose of establishing the obligations and liabilities of the Escrow Agent with respect to the Pledged Shares. NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Secured Party, Shareholder and Escrow Agent hereby agree as follows: 1. Unless otherwise expressly defined in this Agreement, capitalized terms used in this Agreement shall have the meanings ascribed to such terms in the Amended Pledge Agreement. 2. Shareholder and Secured Party do hereby appoint Shapiro, Rosenbaum, Liebschutz & Nelson, LLP, as the Escrow Agent for the purposes set forth in Section 3 of the Amended Pledge Agreement. Shareholder and Secured Party may, by mutual written agreement, designate a different Escrow Agent. 3. Shareholder hereby warrants and represents that, it has heretofore delivered to Kenneth Bersani, Esq., the Pledged Shares and Stock Powers which it is so required to deliver under the terms of the Amended Pledge Agreement and has authorized Mr. Bersani to deliver same to Escrow Agent. 4. Escrow Agent signs this Agreement to signify its agreement and consent to serve as Escrow Agent and to acknowledge receipt of the Pledged Shares and the Stock Powers required to be delivered by Shareholder to Escrow Agent by under the terms of the Amended Pledge Agreement. 1 5. Subject to the further terms and conditions of this Agreement, Shareholder and Secured Party hereby authorize Escrow Agent to retain the Pledged Shares and the Stock Powers until such time as Shareholder shall have fully paid and performed the Obligations secured under the Amended Pledge Agreement. 6. a. Upon the occurrence of an Event of Default, as defined in Section 6 of the Amended Pledge Agreement, the Secured Party may send Escrow Agent written notice of the same. Said notice shall specify the nature of the Event of Default. If the nature of the Event of Default is limited to a default under sub-paragraphs (iv) and/or (v) of said Section 6, then the said Notice of Default shall further specify the aggregate unpaid balances of the Restated Promissory Note and the Purchase Price specified in Corporate Amendment No. 1 (as those respective terms are defined in the Amended Pledge Agreement), which aggregate unpaid balances shall be deemed the "numerator" of a fraction the denominator of which shall be $875,000 (such fraction hereinafter referred to as the "Default percentage"). The product of the Default Percentage multiplied by the total number of the Pledged Shares shall constitute the "Default Shares." b. If the Escrow Agent shall receive from the Secured Party a written notice of default in accordance with Section 6 (a), above, that an Event of Default has occurred, Escrow Agent shall forward a copy of such Notice to the Shareholder. Upon the expiration of ten (10) business days following the date of the Escrow Agents receipt of such Notice, Escrow Agent shall deliver the Pledged Shares and Stock Powers, or such portion thereof as shall represent the Default Shares in the event that the said notice specifies only those Events of Default set forth in sub-paragraphs (iv) and (v) of Section 6 of the Amended Pledge Agreement to the Secured Party. In the event that said Notice applies to the Default Shares only, then Escrow Agent be and hereby is authorized to deliver the Pledged Shares and/or the Stock Powers to Total New York's stock transfer agent with instructions that new share certificates of Total New York be promptly issued for the Pledged Shares, one certificate representing the total of the Default Shares and the other certificate representing the remaining balance of the Pledged Shares, in both cases registered in the name of the Shareholder. Shareholder does hereby constitute and appoint the Escrow Agent as its attorney-in-fact, with full power of substitution, to act on its behalf in providing such instructions to Total New York's stock transfer agent for the purposes of reissuing certificates for the Default Shares and the balance of the Pledged Shares. Upon delivery of the Pledged Shares or the Default Shares, as to case may be, and Stock Powers to Secured Party, Escrow Agent shall be full released and discharged from its obligations under this Agreement except to the extent that Escrow Agent continues to hld any portion of the Pledged Shares hereunder. Upon receipt of such reissued share certificates, Escrow Agent shall deliver the Default Shares and Stock Powers to Secured Party, and shall retain the balance of the Pledged Shares. However, if,prior to the expiration of said ten (10) business day period and delivery of the Pledged Shares or Default Shares and Stock Powers, as the case may be, Shareholder shall deliver to Escrow Agent written notice that Shareholder is contesting the occurrence of an Event of Default, and/or in the event that the said notice specifies only those Events of Defaults set forth in sub-paragraphs (iv) and (v) of Section 6 of the Amended Pledge Agreement, is contesting the Default Percentage, then the Escrow Agent shall withhold delivery of such Pledged Shares or Default Shares, as the case may be, and Stock Powers and may dispose of the same in accordance with the provisions of Section 7, below. 2 c. In the event that the Obligations are satisfied in full, Shareholder may send the Escrow Agent written notice thereof. If Escrow Agent shall receive a Notice from Shareholder that the Obligations which are secured by the Amended Pledge Agreement have been satisfied in full, Escrow Agent shall forward a copy of such Notice to the Secured Party. Upon expiration of ten (10) days business days following the Escrow Agents' receipt of such Notice, Escrow Agent shall deliver the Pledge Shares and the Stock Powers to the Shareholder, upon which the Escrow Agent shall be fully released and discharged from its obligations under this Agreement. However, if prior to the expiration of said ten (10) business day period and the delivery of the Pledged Shares to the Shareholder, Secured Party shall deliver to Escrow Agent written Notice that the Secured Party is contesting the claim that the Obligations have been satisfied in full, then the Escrow Agent shall withhold delivery of the Pledged Shares and Stock Powers and may dispose of the same in accordance with Section 7, below. d. For the purposes of the enforcement of the provisions of this Section 6 of this Escrow Agreement, the parties hereto and Total New York hereby designate Matthew Dwyer as the transfer agent for the Pledged Shares. Said Transfer Agent signs this Escrow Agreement for the limitd purposes of acknowledging receipt of a copy of the same and its agreement to comply with the provisions thereof by promptly reissuing the share certificates as required by paragraph (b) of Section 6 of this Agreement upon receipt of the Pledged Shares, Stock Powers and transfer instruction from the Escrow Agent. The parties hereto may mutually agree in a subsequent writing signed by each of them to designate and appoint a substitute Transfer Agent (a "Substitute Transfer Agent"), and upon receipt by the respective parties of a written instrument signed by Substitute Transfer Agent acknowledging receipt of a copy of this Escrow Agreement and undertaking to be bound by the terms hereof, the previous Transfer Agent shall be deemed released and discharged of any further duties under the terms of this Escrow Agreement. 7. In the event that the Escrow Agent is required to withhold delivery of the Pledged Shares and/or Default Shares and Stock Powers pursuant to Section 6, above, Escrow Agent may, at its option, either: (i) deliver the Pledge Shares and/or Default Shares and Stock Powers to the Clerk of the Supreme Court in Monroe County, New York, whereupon the Escrow Agent shall be released and discharged from all further liability and responsibility with respect to the Pledged Shares and/or Default Shares and Stock Powers and shall be fully discharged from all obligations under this Agreement, or (ii) the Escrow Agent may continue to withhold delivery of said Pledged Shares and/or Default Shares and Stock Powers until directed to do so by a final and non-appealable order of said Court, or by a written direction signed by Shareholder and Secured Party. 8. Escrow Agent's acceptance of its appointment as Escrow Agent is subject to the following additional terms and conditions each of which are acceptable to and agreed to by Shareholder and Secured Party: 3 a. Escrow Agent makes no representation or warranty as to the value, validity or enforceability of the Amended Pledge Agreement or as to the correctness of any statement contained therein or in Agreement. b. Escrow Agent may exercise its powers and perform its duties under this Agreement either directly or through its agents or attorneys. c. Escrow Agent shall be entitled to obtain from counsel selected by it with reasonable care, advice with respect to legal matters pertaining to this Agreement and the Amended Pledge Agreement and shall not be liable for any action taken, omitted to be taken or suffered in good faith in accordance with the advice of such counsel. d. Escrow Agent shall not be required to use its own funds in the performance of any of its duties or in the exercise of any of its rights or powers hereunder, and Escrow Agent shall not be obligated to take any action which, in its reasonable judgment, would involve any expense or liability unless Escrow Agent shall have been furnished security or indemnity in an amount and in form and substance satisfactory to it. e. Escrow Agent shall be entitled to rely on any notice, consent, certificate, affidavit, letter, telegram, telecopy, facsimile or teletype message, statement, order, instrument or other document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons. Escrow Agent shall deem and treat the Secured Party as the absolute owner of the Obligations secured by the Amended Pledge Agreement for all purposes hereof until such time as it receives actual notice of an assignment of such Secured Party's interest, together with the written agreement of the assignee in form and substance satisfactory to Escrow Agent that such assignee is bound by the Amended Pledge Agreement and this Agreement as the "Secured Party" thereunder. If Escrow Agent receives a notice or any such assignment by Secured Party, it shall forward a copy of the same to Shareholder. f. Neither Escrow Agent nor any of its partners, employees or agents shall be liable in any manner to any Secured Party for any action taken, omitted to be taken or suffered in good faith by it or them hereunder or in connection herewith, or be responsible for the consequences of any oversight or error of judgment, expressly including any liabilities arising out of the mere negligence of Escrow Agent or its partners, employees or agents, except for any liabilities due to the gross negligence or willful misconduct of Escrow Agent or such partner, employee or agent. g. Secured Party agrees to indemnify Escrow Agent from and against any and all liabilities, obligations, losses, damages, penalties, interests, actions, judgments and suits ("Escrow Agent Liabilities") of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Escrow Agent relating to, growing out of or resulting from of this Escrow Agreement, the Amended Pledge Agreement or relating to any action taken or omitted by such Escrow Agent under this Escrow 4 Agreement or the Amended Pledge Agreement, expressly including Escrow Agent Liabilities arising out of mere negligence of Escrow Agent, except to the extent that such Escrow Agent Liabilities result solely from Escrow Agent's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. The obligations of the Secured Party in this Section 8(g) shall survive the termination of this Escrow Agreement and the Amended Pledge Agreement and the discharge of any party's obligations under this Escrow Agreement, the Amended Pledge Agreement and the Obligations secured thereby. h. The Secured Party agrees to pay Escrow Agent a customary hourly rate for its services rendered hereunder as Escrow Agent. The Secured Party further agrees to reimburse Escrow Agent for any out-of-pocket costs or expenses incurred by Escrow Agent in connection with its duties under this Escrow Agreement (including, but not limited to, fees and disbursements of counsel and other professionals). The Secured Party shall pay the costs and fees of Escrow Agent within thirty days of the delivery to the Secured Party by Escrow Agent of a statement showing in reasonable detail the costs and fees incurred by Escrow Agent under this Escrow Agreement. 8. All notices required or permitted to be given pursuant to this Escrow Agreement shall be given by certified mail, return receipt requested, postage prepaid, addressed as follows: To Shareholder at: Total Identity Corp. 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 To Secured Party at: Robert David 3006 East Avenue Rochester, New York 14610 To Escrow Agent: Shapiro, Rosenbaum, Liebschutz & Nelson, LLP 1100 Crossroads Building Two State Street Rochester, New York 14614 Attn: Warren B. Rosenbaum, Esq. To Transfer Agent: Matthew Dwyer 2340 Brighton-Henrietta Town Line Road Rochester, New York 14623 5 All such notices, requests and other communications will be deemed given upon receipt. Any party from time to time may change its address for the purpose of notices to that party by giving notice specifying such change to the other parties hereto. 9. This Escrow Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Escrow Agreement to produce or account for more than one such counterpart. 10. Governing Law. This Pledge Agreement shall be governed by, and shall be construed and enforced in accordance with, the internal laws of the State of New York, without regard to conflicts of laws principles. 11. Severability. If any provision of any of the Pledge Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 12. No Interpretation Against Drafter. This Escrow Agreement has been entered into between persons sophisticated and knowledgeable in business matters. Accordingly, any rule of law or legal decision that would require interpretation of this Escrow Agreement against the party that has drafted it is not applicable and is irrevocably and unconditionally waived. The provisions of this Escrow Agreement shall be interpreted in a reasonable manner to effect the purposes of the parties and this Escrow Agreement. 13. Entirety. This Escrow Agreement represents the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, relating to the transactions contemplated herein and therein. 14. Survival. All representations and warranties of Secured Party and Shareholder hereunder shall survive the execution and delivery of this Pledge Agreement and the Secured Party Notes. 15. Consent and Waiver of Conflict of Interest. Shareholder acknowledges that Warren B. Rosenbaum, Esq., a partner in Escrow Agent, has acted as counsel for Secured Party in connection with the Amended Pledge Agreement, the Obligations secured thereby and related agreements. Shareholder and Secured Party hereby consent to such representation by Warren B. Rosenbaum and waive any conflict of interest which may arise by virtue of his law firm serving as Escrow Agent hereunder. Shareholder further consents and agrees that in the event of any dispute between Shareholder and Secured Party pertaining to this Agreement, the Amended Pledge Agreement, the Obligations secured thereby or any related agreements, upon deposit of the Pledged Shares and Stock Powers with the Clerk of the Supreme Court as provided for in Section 7, above, Warren B. Rosenbaum, Esq. and the firm of Shapiro, Rosenbaum, Liebschutz & Nelson, LLP, may represent and continue to represent Secured Party in connection with such dispute and in any litigation arising out such dispute. Shareholder hereby waives and relinquishes any claims of confidentiality or conflict of interest arising out of the service by Shapiro, Rosenbaum, Liebschutz & Nelson, LLP as Escrow Agent hereunder, and agrees that such service shall not be the basis of a motion to disqualify Shapiro, Rosenbaum, Liebschutz & Nelson, LLP from representing Secured Party in any litigation between Shareholder and Secured Party. 6 IN WITNESS WHEREOF, the Shareholder, Secured Party and Escrow Agent have signed this Agreement as of the date first above written. SHAREHOLDER: TOTAL IDENTITY CORP., a Florida corporation by: /s/ Philip C. Mistretta --------------------------------------- name: Philip C. Mistretta title: President SECURED PARTY: /s/ Robert David ------------------------------------------- Robert David ESCROW AGENT: SHAPIRO, ROSENBAUM, LIEBSCHUTZ & NELSON, LLP by: /s/ Warrren B. Rosenbaum ---------------------------------------- name: Warren B. Rosenbaum, Esq. title: Partner TRANSFER AGENT: by: /s/ Matthew Dwyer ---------------------------------------- name: Matthew Dwyer title: Transfer Agent 7 -----END PRIVACY-ENHANCED MESSAGE-----