On March 20, 2000, we entered into a three year Consulting Agreement with
Ross Mandell. a principal stockholder of our company. That agreement was
terminated in January 2002.
Chipcards Inc · SB-2/A · On 5/15/2
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On March 20, 2000, we entered into a three year Consulting Agreement with
Ross Mandell. a principal stockholder of our company. That agreement was
terminated in January 2002. See Nasdaq Listing Application and Approval. Mr.
Mandell provided consulting and advisory services in connection with general
management consulting and financial advisory consulting. His compensation
included 3,000,000 shares of our common stock and a cash fee of $3,000 per month
for a period of 15 months or until such time as we consummate a public offering
or have raised at least $4,000,000 in net proceeds from a private offering of
our common stock. At such time as we have raised at least $4,000,000 in net
proceeds from a private or public offering, the cash fee was to be increased to
$10,000 per month for a period of 24 months. Aggregate fees of $54,000 have been
paid to Mr. Mandell through December 31, 2001. Mr. Mandell sub-contracted a
portion of his consulting duties under this agreement to St. James Holdings LLC
in April 2000, and transferred 500,000 of his shares of common stock to St.
James Holdings LLC in payment for its services. The President and the Managing
Member of St. James Holdings, LLC is President and Chief Executive Officer of
The Thornwater Company, L.P., the co-underwriter for this offering. Mr. Mandell
was formerly registered as a broker with the underwriter. St. James Holdings LLC
secured services that were rendered in consideration for the services it
provided from an individual based in Germany who has extensive personal
experience in and knowledge of the smart card industry.
For over one year prior to the execution of the consulting agreement, Mr.
Mandell performed substantial services on behalf of the Company including
numerous trips for meetings with our executive officers concerning business
matters, trips to London and Paris, including attendance at a smart card show,
and review of our business and industry. During this period, Mr. Mandell met
with numerous customers and suppliers and rendered significant advice concerning
our business and prospects, including diversification by marketing smart cards
and seeking to do business in countries other than China. Mr. Mandell also was
instrumental in restructuring and strengthening the present management team and
devising sales strategy. After the execution of the consulting agreement,
Mr. Mandell has continued to provide services including introductions to
suppliers and analysis of potential acquisitions. We believe these services were
obtained on terms no less favorable than could otherwise have been obtained from
an unaffiliated third party.
Mr. Mandell is the President and Chief Executive Officer of Sky Capital
Ltd., a financial consulting and advisory company. He has been a stockbroker
since 1984. Mr. Mandell was employed by a number of stock brokerage firms since
that time, including E.F. Hutton and Oppenheimer & Co. In 1995, Mr. Mandell
founded (with two other individuals) Roan Capital Partners, L.P., a New
York-based broker-dealer and investment banking firm. Mr. Mandell sold his
interests in Roan Capital in April 1997, and joined The Thornwater Company,
L.P., another New York-based brokerage firm, where he served as Senior Vice
President. Mr. Mandell resigned from Thornwater in January 2001, and until
January 2002 served as a consultant to that firm. Mr. Mandell attained a
Bachelor of Arts degree from the University of Maryland in 1978.
In 1999, Mr. Mandell was named in an arbitration proceeding brought against
Roan Capital. The claimants in that arbitration sought damages of $700,000
against Mr. Mandell based on allegations that certain transactions that were
effected over a period of years in their securities brokerage accounts were
unauthorized and were unsuitable investments for them. The claimants also
asserted that Mr. Mandell was liable to them for an additional $350,000, which
they invested in a limited partnership that owned and controlled Roan Capital.
This arbitration was settled in November 1999. Pursuant to the written
settlement agreement, all claims against Mr. Mandell were dismissed with
prejudice, the claimants executed general releases in Mr. Mandell's favor, and
they covenanted not to sue him with respect to any matter. Mr. Mandell paid the
sum of $75,000 in consideration for that settlement.
Mr. Mandell was the subject of a New York Stock Exchange Hearing Panel
Decision dated January 17, 1995. The matters that were the subject of that
decision all occurred during the period beginning in 1986 and ending in 1990.
Pursuant to the decision, Mr. Mandell consented to findings that he effected
certain transactions without customer knowledge or authorization and accepted
orders for customers from a person other than the customer without written
authorization. He was censured and served a six week suspension in accordance
with the decision.
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