U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF
SMALL BUSINESS ISSUER
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
EVEREST SECURITY SYSTEMS CORPORATION
(Formerly Everest Funding Corporation, formerly
Burningham Enterprises, Inc.)
- -------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
NEVADA 58-2201633
(State of Incorporation) (I.R.S. Employer
Identification Number)
- --------------------------------------------------------------------------------
823 NW 57TH STREET
FORT LAUDERDALE, FLORIDA 33309
(Address of Principal Executive Offices)
TELEPHONE: (305) 772-0330
Securities to be Registered Under Section 12(b) of the Act:
NONE
Securities to be Registered Under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001
(Title of Class)
This is one of 124 pages.
Exhibit Index on Page 21.
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EVEREST SECURITY SYSTEMS CORPORATION
FORM 10SB
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page No.
<S> <C>
Item 1. Description of Business................................................. 3
Item 2. Management's Discussion and Analysis or Plan of Operations.............. 7
Item 3. Description of Property.................................................11
Item 4. Security Ownership of Certain Beneficial Owners and Management..... 11
Item 5. Directors, Executive Officers, Promoters and Control Persons............12
Item 6. Executive Compensation..................................................14
Item 7. Certain Relationships and Related Transactions..........................16
Item 8. Legal Proceedings.......................................................16
PART II
Item 9. Market for Common Equity and Related Stockholder Matters.............. 17
Item 10. Recent Sales of Unregistered Securities.................................18
Item 11. Description of Securities...............................................18
Item 12. Indemnification of Directors and Officers...............................19
Item 13. Financial Statements....................................................19
Item 14. Changes in and Disagreements with Accountants...........................19
PART III
Item 15. Financial Statements and Exhibits.......................................19
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
BUSINESS DEVELOPMENT
Everest Security Systems Corporation ("Company") was incorporated under
the laws of the State of Nevada on October 30, 1986 as Burningham Enterprises,
Inc. ("Burningham"). The Company's executive offices are located at 823 NW 57th
Street, Fort Lauderdale, Florida 33309 and its telephone number is (305)
772-0330. The Company initiated a public offering on a form S-18 Registration
Statement which was declared effective on March 1987 when it completed its
initial "blank check/blind pool" public offering raising one hundred thousand
dollars ($100,000).
Burningham had no operations and did not acquire any business from
October 1986 until February 1988. On February 25, 1988 Burningham changed its
name to Everest Funding Corporation ("Everest"). In February 1988, Burningham
completed a reverse merger with Everest Mortgage Corporation whereby Everest
Mortgage Corporation ("EMC") became a wholly owned subsidiary of Burningham. EMC
was in the mortgage origination business. In late 1993 EMC ceased operations.
Subsequently EMC was dissolved on July 5, 1995.
Everest was inactive until June 1995 when it changed control. Pursuant
to this change in control new directors were elected to the Board and in July
1995, the Board and a majority of shareholders approved a one for twenty reverse
split. The reverse split became effective on July 24, 1995. On November 27,
1995, Everest changed its name to Everest Security Systems Corporation. The
Company is a home alarm service and installation company.
On October 9, 1995, the Company entered into a Purchase Agreement with
Specialty Device Installers, Inc. ("SDI"). Under the terms of the Purchase
Agreement the Company was to purchase all of the shares of SDI in exchange for
100,000 shares of common stock of the Company. The Purchase Agreement also
called for the Company to enter into an employment contract with Frank Bauer
whereby the Company would pay a salary to him in the amount of fifty-two
thousand dollars ($52,000) per annum plus bonuses based on the performance of
SDI. The bonus structure is yet to be determined by the Board of Directors. In
November 1995, Frank Bauer was elected to the Board of Directors of the Company.
SDI was incorporated under the laws of the State of Florida on August
1991. SDI is a provider of quality installation and systems service to
developers, builders, and operating companies in the cable television and
burglar alarm industry. SDI also offers management programs which allow
developer/builder participation in ongoing security and cable programs, offering
custom tailored programs to fit any development from zero to 100% ownership.
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On January 15, 1996, the Company formed Federal Alarm Systems, Inc.
("FASI"), a wholly owned subsidiary organized under the laws of the State of
Florida. FASI was formed to monitor burglar alarm contracts installed by SDI as
well as to monitor and service purchased burglar alarm contracts.
THE COMPANY'S SERVICES
The Company through its wholly owned subsidiary SDI, is a provider of
quality installation and maintenance contracts to developers, builders, and
operating companies in the cable television and burglar alarm industry.
The Company anticipates that its fastest growth sector will be in the
purchasing and servicing of existing security monitoring contracts. This
expectation is based on the fact that the monitoring of electronic security
services has high fixed costs but has comparatively low marginal costs
associated with servicing additional customers. The Company, through its wholly
owned subsidiary FASI, will buy the contracts from small and mid-size alarm and
installation companies at the present discounted value.
BUSINESS STRATEGY
Because of the vast number of small and mid-sized undercapitalized
companies in the alarm services industry, it is the prime time for the purchase
and consolidation of these entities into the Company. FASI has developed a
disciplined acquisition program which management believes will enable the
Company to optimize monthly recurring revenue potential, derive high incremental
margins by reducing its operating and overhead costs, as well as maintain high
subscriber satisfaction and low attrition rates. The program essentially
consists of the following stages:
1. Identification and negotiation: FASI's in-house acquisition team identifies
target companies and/or blocks of contracts through trade shows, alarm
organization membership lists, and industry contacts. FASI typically pays 20 to
27 times monthly recurring revenues. Monthly recurring revenues are the
valuation approach most commonly used in the security industry. The variance in
valuation depends on size, quality and geographic density of the customer list,
and the proximity to FASI's existing operations. Once FASI acquires a company,
management believes that it will be able to immediately eliminate duplicative
overhead and monitoring costs. FASI is, in effect, paying less than four times
pro forma operating cash flow while realizing incremental gross margins of more
than 50% on acquired monitoring revenues. To guard against future subscriber
cancellations, FASI negotiates purchase holdbacks, usually around 15% of the
acquisition price, or requires sellers to guarantee and service the account for
12 to 18 months.
2. Due Diligence: FASI's management then conducts in depth reviews of
potential acquisitions, including selective field equipment inspections,
individual review of substantially all of the subscriber contracts, and an
analysis of the rights and obligations under such contracts.
4
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FASI's management is able to estimate, fairly accurately, future maintenance and
monitoring expenses associated with the acquisition. FASI's management does this
by checking the service history of selected accounts and inspecting signal
activity at the acquired company's monitoring station, noting incidences of
false alarms.
3. Integration: FASI aims to integrate acquisitions quickly and minimize
subscriber attrition. First the acquired company sends a letter to its
subscribers explaining the sale and transition. This letter is followed by one
or more other letters that include FASI's service brochures and window decals.
Within a month of acquisition, each new customer is contacted by FASI's customer
service group which answers any questions and concerns the customer may have.
The customer is then visited by a FASI employee who installs a new FASI yard
sign on the customer's premises. Approximately six months later, subscribers
receive a follow-up telephone call.
SDI also developed an installation program. It has gained access to a
continuous stream of installation contracts by aligning itself with major real
estate developers such as the Malco Development Group ("Malco"). Malco's
president is also the president of the Company. SDI does contract work for other
monitoring companies who contract out their installation work, as well.
MARKETING
A large portion of the Company's marketing activities have been through
referrals and a limited amount of advertising. The Company recognizes the need
for a full blown marketing and sales strategy to maximize its market penetration
as well as to maintain customer service. The Company's approach will be to
continue to rely on customer referrals but its main focus will be on the
implementation of an independent dealer network and a direct sales force aided
by telemarketing.
COMPETITION
The alarm service industry is very competitive and extremely fragmented.
Although new competitors are continually entering the field, the major
competition in the alarm services market comes from large companies such as ADT
Security Systems, The Alert Center, Inc., Brink's Home Security, Honeywell,
Inc., Protection One, Rollins Protective Services, Inc., and Westinghouse
Security Systems. These companies charge competitive prices and provide quality
service. The national competitors have superior financial, marketing, and other
resources. Another source of competition, although to a much smaller degree, are
systems directly connected to police and fire departments and alternative
methods of protection, such as locks, gates, and manned guarding.
The average monthly monitoring contract is approximately $25 per month
nationwide.
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Installation fees range between $400 per installation to free installation,
depending on the geographical location and the degree of competition in the
region.
Generally, the large companies utilize both their own installers and
sub-contractors to install their systems. However, they usually maintain their
own monitoring and service contracts. The following chart illustrates the
revenue and size of the largest home security companies. The information is
derived from Home Security magazine, August 1995.
<TABLE>
<CAPTION>
Company 1994 Revenue ($ All Accounts 1994 Home Employees
- ------- --------------- ------------ --------- ---------
million) Installations
-------- -------------
<S> <C>
ADT Security $725 850,000 170,000 8,600
Alert Centre $57 152,000 3,400 670
Brink's Home $110 340,000 75,000 1,400
Honeywell $233 190,000 N/A 2,000
National $213 275,000 3,700 2,050
Guardian
Protection One $34 133,000 1,800 531
Rollins $66 121,000 11,000 671
Protective
Wells Fargo $219 124,000 12,000 2,440
Alarm
Westinghouse $115 215,000 60,000 1,800
Security
- ------------------- ------------------- ------------------- ------------------- -------------------
</TABLE>
The Company's subsidiaries do not rely on any of the customers of the
large companies, as the thrust of its business will be to purchase alarm
monitoring contracts from individual home owners. Major suppliers of alarm
products (over 10%) to SDI are: A-1 Alarm Supply in Hollywood, Florida, ADI Ltd.
in Clearwater, Florida, and King Alarm Distribution, Inc. in Deerfield Beach,
Florida. Alarm and fire product distributors are readily available throughout
the United States. Therefore, other sources are available to the Company.
However, it would take time to establish credit terms if the need arose. The
Company does not have long term contracts with its suppliers but feels it has a
good working relationship with them and receives volume discounts on certain
products.
GOVERNMENT REGULATIONS
6
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SDI and FASI are operating in the home security industry. The Company is
therefore, subject to federal, state, county and municipal laws, regulations and
licensing requirements. The Company is currently under the regulation of the
Florida State Government. SDI has an unlimited electrical contractor license as
required by the State of Florida. It also has all municipal and city licenses
required to work in Dade, Broward, and Palm Beach Counties. The Company believes
that it holds the necessary licenses and is in substantial compliance with all
licensing and regulatory requirements in each jurisdiction in which it operates
to date.
The Company relies on the use of telephone lines and radio frequencies
to transmit signals and relay alarm calls. The cost and type of equipment that
may be employed for telephone lines is regulated by the federal and state
governments. The use and operation of radio frequencies is regulated by the
Federal Communications Commission and the state public utilities commissions.
EMPLOYEES
There are a total of thirty-six (36) employees in the Company. All
employees are full time except one. All new employees are subject to an in-depth
interview process initiated by the department head. All employees are covered by
worker's compensation and basic health insurance is provided. The employee
breakdown is as follows:
<TABLE>
<S> <C>
Everest Security Systems 2 Administration Lester Colodny, President
Specialty Device Installers 5 Administration
2 Supervisory
21 Installers/Technicians
Federal Alarm Services 5 Administration
1 Salesperson
</TABLE>
Any increase in the number of employees will be determined by an
increase in the level of business. The Company does not expect any significant
changes in the number of employees, at this time. Management believes that
relations with its employees are satisfactory.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion considers the operation of the Company for the
fiscal period ending December 31, 1995 (audited) on a pro forma basis with
comparison figures for the fiscal period ending December 31, 1994 (unaudited).
SDI was not acquired until October 1995. The following discussion should be read
in conjunction with the audited financial statements for the fiscal year ending
December 31, 1995. These are included as Financial Statements in Item 15 of this
Form 10-SB.
7
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PLAN OF OPERATION
The Company provides security alarm installation, security maintenance
contracts, and security monitoring contracts to developers, builders, and
operating companies in the burglar alarm industry. The Company's future focus
will be to offer new services to its existing customer base as well as to
acquire other security companies or security monitoring contracts in the
Southeast, Southwest, and Pacific Northwest. These are regions that are
experiencing a significant influx in population. The Company anticipates that
the population growth will spur the demand for security services.
The Company expects its fastest growth sector to be in the purchasing
and servicing of security monitoring contracts through its wholly owned
subsidiary FASI. The Company must raise significant capital before it can
purchase contracts. To date the Company has raised approximately one million
dollars ($1,000,000) through an offering pursuant to Rule 504 of Regulation D,
promulgated under the Securities Act of 1933, as amended. Approximately 60% of
the funding will be used to purchase monitoring contracts. To reach its goal of
acquiring fivethousand (5,000) contracts, the Company would be required to raise
three million dollars ($3,000,000). Raising less capital would require the
Company to reduce its goals proportionately.
At present, the Company has no commitments to raise future capital and
cannot guarantee the ability to do so. If the Company cannot raise the
additional capital, it will have to use the cash flow from its operations to
purchase contracts. The Company is cash flow positive and believes that during
the next twelve months it will be able to continue its operations and expand its
monitoring business, albeit, at a far slower rate than would be projected if it
was able to raise the additional capital.
RESEARCH OF INDUSTRY TRENDS
The United States security alarm service industry, according to
independent research done by Security Sales, a publication servicing the alarm
industry, is an $11.7 billion market growing at a pace of 8 - 10% per year. The
same research shows that the security industry is fragmented, there are
currently more than ten thousand (10,000) companies engaged in alarm services.
It is the opinion of the Company's management that many of the security
installation companies that now exist are undercapitalized and are therefore
unable to install systems and maintain home security contracts. By acquiring
these contracts the Company believes it will be able to bring about the benefit
of economies of scale due to its potentially greater access to capital,
management, and monitoring stations.
The residential segment is particularly attractive to the Company
because only about 10% of United States' households in major metropolitan areas
presently have alarm systems. Security Sales is forecasting a 10 - 15% per year
growth rate in the demand for residential household installations of security
systems.
Independent research projects a nationwide market for home security to
be approximately
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eighteen billion eight hundred million dollars ($18,800,000,000) by the end of
the year 2000. Conservative estimates by management suggest FASI's market share,
with our intensified and accelerated marketing plan, product and service
development, and customer service would be about .1%, generating eighteen
million dollars ($18,000,000) by the end of the year 2000. These projections are
based on the ability of the Company to raise the required capital to achieve
such ends. Presently, the Company does not have the commitments to raise the
needed capital.
SALES
The Company has been in the organization and start-up phase. The Company
does have sales in the installation business. Sales for 1995 were one million
two hundred twenty thousand two hundred forty eight dollars ($1,220,248)
compared to the same period for 1994 when sales were one million one hundred
twenty seven thousand six hundred eighty four dollars ($1,127,684). This
represents an 8% increase over the 1994 period. Subsequent to the year end, the
Company is actively acquiring monitoring contracts. It currently has over seven
hundred twentyfive (725) contracts at an average monthly revenue of twenty-six
dollars ($26) per contract.
Revenues throughout the discussed period reflect installation revenue
only. The main thrust of the Company will be in monitoring contracts from which
the Company has generated little revenue to date.
The cost of sales for the Company is higher than the cost of sales for
the larger companies in the industry. The Company believes that as the Company
grows and economies of scale take effect, cost of sales will come in line with
industry averages. The cost of sales for the fiscal period ending December 31,
1995 were nine hundred thirty one thousand three hundred eight dollars
($931,308) compared to seven hundred seventy six thousand two hundred thirty
dollars ($776,230) for the fiscal period ending December 31, 1994. This was an
increase of 20% over the previous period.
Operating expenses, as a percentage of total sales, are high for the
period as a result of the corporate structure. With the restructuring into the
public company expenditures will be more in line with industry averages.
Operating expenses for the fiscal period ending December 31, 1995 were three
hundred sixty eight thousand one hundred twenty one dollars ($368,121) compared
to the same fiscal period for 1994 of three hundred sixty seven thousand nine
hundred thirty five dollars ($367,935). This was a increase of .05% for the 1995
period over the 1994 period.
OUTLOOK
SDI and FASI have several strategies for growth. First the companies
will be industry consolidators. FASI's initial projected plan is to purchase
five thousand (5,000) contracts. This will give the Company a good presence in
the market place with revenues in the one million
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eight hundred thousand dollars ($1,800,000) per year range in contract
monitoring and approximately one million five hundred thousand dollars
($1,500,000) in installation business. The Company approximates that it will
take three million dollars ($3,000,000) to purchase five thousand (5,000)
contracts. To date, the Company does not have the necessary financing to
purchase five thousand (5,000) contracts. Nor does the Company currently have
any commitments for the funding that is required to achieve its goals.
The Company projects that through FASI, its wholly owned subsidiary, it
will continue to acquire contracts, doubling the number of purchased contracts
each year until it has fourty thousand (40,000) contracts under management. To
achieve such significant growth the Company must raise additional capital. At
present, the Company does not have any commitments for such additional capital
and cannot guarantee its ability to raise the additional capital in the future.
If the Company is able to raise the necessary capital and reach its goal of
obtaining forty thousand contracts under management, then Company's future
growth through acquisitions at a rate of approximately 20% per annum is
anticipated. If the Company realizes its goals, the forty eight thousand
(48,000) contracts under management by the year 2000 should reflect
approximately eighteen million dollars ($18,000,000) in recurring revenue.
Installation revenue by SDI will also grow. Management expects that SDI's sales
will increase from one million two hundred thousand dollars ($1,200,000) to
three million dollars ($3,000,000) by the year 2000. Intense competition from
companies much larger than the Company could negatively effect the above
projections by driving the recurring revenue below twenty five dollars ($25) per
month.
Second, it is anticipated that FASI and SDI will generate subscribers
through internally produced growth. The Company will use an independent dealer
network, direct sales force aided by telemarketing and customer referrals. The
Company expects that by selling additional services, monthly recurring revenues
per subscriber will increase by about 5% per year to approximately thirty two
dollars ($32) per month. The additional services the Company plans to provide
include, two way voice, pager service, and cellular phone backup. These
projections will be negatively impacted if competitive pricing reduces the
Companies ability to charge higher monthly rates.
Third, FASI may experience margin expansion derived from incremental
margins of more than 50% on acquired monitoring revenue. Profit margins will
increase because of the benefits of economies of scale. Margin expansion will be
further enhanced by the operating leverage SDI and FASI will attain by adding
new subscribers to its central monitoring station and field service operations.
The incremental margins from economies of scale will not be met if the Company
does not meet its projections or raise the necessary capital to fund its
acquisition strategy.
ELEMENTS OF INCOME OR LOSS FROM OUTSIDE SOURCES
There have been no significant elements of income or loss from sources
outside the Company.
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SEASONAL ASPECTS
The Company's business is not materially effected by seasonal changes.
OBJECTIVES
The Company's objective is to move into a prominent market position.
This expansion will be accomplished by either a large secondary public offering
or a major profitable acquisition. To further this goal the Company will pursue
the development of a comprehensive plan to intensify and accelerate its
marketing and sales activities, product development, services expansion,
distribution and customer service. To date, no commitment for future funding has
been secured, nor is there any guarantee that the Company will be able to meet
its upcoming financial needs.
ITEM 3. DESCRIPTION OF PROPERTY
The Company leases a three thousnad four hundred (3,400) square foot
office/warehouse facility at 823 NW 57th Street, Fort Lauderdale, Florida 33309.
The telephone number is (305) 772-0330. It is a one year lease which expires on
May 30, 1996. The rent is one thousand five hundred twenty two dollars ($1,522)
per month.
OWNERSHIP OF REAL ESTATE
The Company does not own any real estate at this time.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1996, information with
respect to any person known by the Company to own beneficially more than five
percent (5%) of the Company's Common Stock, the shares of the Common Stock
beneficially owned by each officer and director of the Company, and the total of
the Company's Common Stock beneficially owned by the Company's officers and
directors as a group.
<TABLE>
<CAPTION>
Stockholder Shares Beneficially Owned *(1) Percent of Class *(1)
<S> <C>
Lester Colodny 0 0%
2500 N. Military Trail
Suite 175
Boca Raton, Florida 33431
Frank Bauer 210,000 *(2) 5.1%
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4090 122 Drive North
Royal Palm Beach, Florida
Robert W. Knight *(3) 66,250 3.1%
34A-2755 Lougheed Hwy.
Suite 522
Port Coquitlam, B.C.
V3B 5Y9 Canada
Steven A. Sanders 66,250 3.1%
50 Broad Street
Suite 437
New York, New York 10004
Karl Gelbard 10,000 .46%
4001 South Ocean Drive
Hollywood, Florida 33019
International Treasury 1,075,000 50%
& Investments Ltd.
Hirzel House, Smith Street
St. Peter, Guernsy
All Directors and Officers 824,402 38.3%
as a Group (5 persons)
- ----------------------
</TABLE>
*(1) Calculation based on 2,151,902 shares outstanding (including shares that
have been paid for in full, but not issued) as of March 31, 1996.
Information derived from the transfer agent, security holders, and/or
company records.
*(2) This figure includes options to purchase 100,000 shares.
*(3) Represents shares owned by a private corporation controlled by Robert
Knight.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND OFFICERS
The directors and officers of the Company are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Name Age Position
<S> <C>
Lester Colodny 58 Chief Executive Officer/President
Chairman of the Board
Frank Bauer 51 Chief Operating Officer, Director
Robert W. Knight 39 Secretary/Treasurer, Director
Steven A. Sanders 50 Director
Karl Gelbard 72 Director
</TABLE>
LESTER COLODNY
Lester Colodny was elected to the Board of Directors and appointed
President, C.E.O. of the Company in November 1995. Mr. Colodny also holds the
position of Chairman of the Board and C.E.O. of Malco Development Group. Malco
Development Group is currently involved in both single and multi developments in
Florida, Georgia, and Colorado. The initial stages of these developments
encompass over two thousand five hundred (2,500) homes and apartments.
Mr. Colodny is a graduate of the University of Miami with a B.S. degree
in Architectural and Structural Engineering. Mr. Colodny also holds a degree in
Architecture and Civil Engineering from the Georgia Institute of Technology. Mr.
Colodny has over 30 years of international experience in real estate
development, construction, and property management. Since the late 1980's Mr.
Colodny's company has invested heavily in the United States, purchasing many
properties and initiating a string building program. Included in the building
program were both commercial and residential projects, of which in excess of one
hundred thousand (100,000) units have been completed along with a number of
office and commercial structures.
FRANK BAUER
Mr. Bauer was named President and Director of SDI as well as a Director
of Everest Security Systems in November 1995. From January 1993 to November
1995, Mr. Bauer served as Vice President and Secretary of SDI. From 1988 to
December 1992 Mr. Bauer served as President and Director of SDI. He also served
as Vice President and Director of Corrections Services, Inc. during the same
time period.
STEVEN A. SANDERS
Mr. Sanders has been a Director of the Company since June 1995. Mr.
Sanders has been a Director of OP-TECH Environmental Services, Inc. since
October 31, 1991. OP-TECH Environmental Services, Inc. is a reporting company
under Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act").
Mr. Sanders has been a Director of Juno Acquisition,
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Inc. since June 1994. Juno Acquisition, Inc. completed a "blank check" public
offering in 1995 raising fifty thousand dollars ($50,000). From June 1, 1988
until October 1, 1992, Mr. Sanders was Of Counsel to the law firm of Jacobs
Persinger & Parker. For more than five years prior thereto, he was a senior
partner of Sanders & Sierchio, a law firm. Since October 1, 1992, Mr. Sanders
has been President of the Law Office of Steven A. Sanders, P.C.
ROBERT W. KNIGHT
Mr. Knight has been Secretary/Treasurer, and a Director of the Company
since June 1995. He was President of the Company from June 1995 until October
1995. He is currently President and Director of J.A. Industries, Inc. and he has
been since July 1992. J.A. Industries, Inc. is a reporting company under
Section 12(g) of the Exchange Act. From 1991 to July 1992, he was an
independent financial consultant. Mr. Knight has ten years of experience in the
public company and corporate finance arenas.
KARL GELBARD
Mr. Gelbard has been a director of the Company since September 6, 1995.
Mr. Gelbard is also a director of J.A. Industries, Inc. J.A. Industries, Inc.
is a reporting company under Section 12(g) of the Exchange Act. Mr. Gelbard has
been retired since 1988. In January of 1978 he was appointed Regional Director
of the Asian/Pacific Region and manager of the Hong Kong office of Merrill
Lynch.
ITEM 6. EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid
by the Company or any of its subsidiaries, as well as certain other compensation
paid or accrued, during the fiscal years indicated, to the Chief Executive
Officer for such period in all capacities in which he served. No other Executive
received total annual salary and bonus in excess of one hundred thousand dollars
($100,000).
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Name and Year Salary Bonus Other (Awards) (Awards) (Payouts) All Other
Principal Annual restricted Options/ LTIP Compens
Position Compen- stock SARs ation
sation award
<S> <C>
Lester 1995 $0 $0 $0 $0 0 $0 0
Colodny
President/ 1994 N/A
CEO
1993 N/A
Frank 1995 $52,000 $0 $0 $0 100,000 $0 0
Bauer
COO 1994 N/A
1993 N/A
Robert 1995 $12,000 $0 $0 $13,600 0 $0 0
Knight
V.P. 1994 N/A
Admin
1993 N/A
- ----------- ---------- ---------- ----------- ---------- ----------- ---------- ---------- -----------
</TABLE>
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The following table sets forth information with respect to the Chief
Executive Officer concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Name Number of Percent of Total Exercise or Base Expiration Date
- ---- --------- ---------------- ---------------- ---------------
Securities Options/SARs Price
---------- ------------ -----
Underlying Granted to ($/share)
---------- ---------- ---------
Options/SARs Employees in
------------ ------------
Granted Fiscal Year
------- -----------
<S> <C>
Frank Bauer 100,000 $2.00/share December 31,
2000
G.M. Capital 74,720 $2.00/share December 31,
Partners, Ltd. 2000
- ------------------- ------------------- ------------------- ------------------- -------------------
</TABLE>
The following table sets forth information with respect to the Chief
Executive Officer concerning the exercise of options during the last fiscal year
and unexercised options and SARs held as of the end of the fiscal year:
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
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<PAGE>
<TABLE>
<CAPTION>
Name Shares Acquired Value Realized Number of Value of
on Exercise (#) ($) Securities Unexercised in-
Underlying the-money
Unexercised Options/SARs at
Options/SARs at Fiscal Year-End
Fiscal Year-End ($)
(#) Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <C>
Frank Bauer 0 0 100,000 0
G.M. Capital 0 0 74,720 0
Partners, Ltd.
- ------------------- ------------------- ------------------- ------------------- -------------------
</TABLE>
The following table sets forth information with respect to the Chief
Executive Officer concerning the grants of options and Stock Appreciation Rights
("SAR") during the past fiscal year:
Estimated Future Payout Under Non-Stock Price Based Plans
<TABLE>
<CAPTION>
Name Number of Performance or Threshold Target Maximum
- ---- --------- ----------- -- --------- ------ -------
Shares, Units or Other Period ($ or #) ($ or #) ($ or #)
---------------- ------------ -------- -------- --------
Other Rights (#) Until
----- ---------- -----
Maturation Or
-------------
Payout
------
<S> <C>
Robert W. 0 0 N/A N/A N/A
Knight
- ---------------- ---------------- ---------------- --------------- --------------- ----------------
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions or proposed transactions to which the
Company was to be a party in which any of the Directors, officers, security
holders, or their immediate family members had or is to have a direct or
indirect interest.
ITEM 8. LEGAL PROCEEDINGS
There are no material pending legal proceedings as defined in Item 103
of Regulation S-B.
16
<PAGE>
PART II
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK
The Company's Common Stock is quoted on the NASDAQ OTC Bulletin Board
under the symbol EVST.
To the best of the Company's knowledge there are presently six (6)
market-makers. A public trading market having the characteristics of depth,
liquidity and orderliness, depends on the existence of market-makers as well as
the presence of willing buyers and sellers. There can be no guarantee that these
market-makers will continue to make a market. If the market-makers discontinue
making a market for the Company there will be virtually no liquidity.
The following chart sets forth the range of high and low bid prices for
the Company's Common Stock based on closing transactions during each specified
period as reported by the National Quotation Bureau, Incorporated. The prices
reflect inter-dealer prices without retail mark-up, mark-down, quotation, or
commission. The figures do not necessarily represent actual transactions.
1994 High Low
---- ---- ---
First Quarter N/A N/A
Second Quarter N/A N/A
Third Quarter N/A N/A
Fourth Quarter $.01 $.01
1995
First Quarter $.011 $.01
Second Quarter $.06 $.05
Third Quarter $2 9/16* $1/2*
Fourth Quarter $3 $2
1996
First Quarter $3 9/16 $3
* Following a 1-for-20 reverse split of the Company's Common Stock,
effective July 24, 1995.
There are approximately one hundred (100) shareholders in the Company as
of March 31, 1996.
The Company is authorized to issue one hundred million (100,000) shares
of Common
17
<PAGE>
Stock at $0.001 par value per share, of which two million one hundred fifty one
thousand nine hundred two (2,151,902) shares were issued and outstanding as of
March 31, 1996.
DIVIDENDS
The Company has not declared any cash dividends since its inception, and
does not anticipate paying such dividends in the foreseeable future. The Company
plans on retaining any future earnings for use in the Company's business. The
payment of any future dividends rests within the discretion of its Board of
Directors in light of the conditions then existing, including the Company's
earnings, capital requirements, and financial condition, as well as other
relevant factors.
TRANSFER AGENT
The transfer agent for the Common Stock of the Company is Interwest
Transfer Company, 1981 E. Murray Holladay Road, Suite 100, Salt Lake City, Utah
84117.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On June 22, 1995 the Company issued twenty million (20,000,000) shares
for one hundred thousand dollars ($100,000). The issuance was exempt from
registration in accordance with Rule 144 of the Securities Act of 1933.
On July 5, 1995 the Company issued 3,975,000 shares to three individuals
for par value. Two of the individuals were officers and directors of the
Company. The issuance was exempt from registration in accordance with Rule 701
of the Securities Act of 1933.
In October 1995 the Company issued 500,000 shares at $2.00 per share.
The issuance was exempt from registration pursuant to Rule 504 of Regulation D
promulgated under the Securities Act of 1933.
In November 1995 the Company issued one hundred thousand (100,000)
shares to Frank Bauer in accordance with the terms of the purchase agreement of
SDI. The issuance was exempt from registration under Rule 144 of the Securities
Act of 1933.
ITEM 11. DESCRIPTION OF SECURITIES
COMMON STOCK
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefor, when and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution, or winding up of the affairs of the
18
<PAGE>
Company; (iii) do not have preemptive, subscription, or conversion rights, or
redemption or sinking fund provisions applicable thereto; and (iv) are entitled
to one non-cumulative vote per share, either in person or by proxy, on all
matters on which stockholders may vote at all meetings of stockholders.
The holders of Common Stock of the Company do not have cumulative voting
rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors, can elect all of the directors of
the Company if they so chose. If such action was to occur, the holders of the
remaining shares would not be able to elect any of the Company's directors.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the General Corporation Law of the State of Nevada
contains provisions entitling directors and officers of the Company to
indemnification from judgements, fines, amounts paid in settlement, and
reasonable expenses, including attorney's fees, as the result of an action or
proceeding in which they may be involved by reason of being or having been a
director or officer of the Company, provided such officers or directors acted in
good faith.
ITEM 13. FINANCIAL STATEMENTS
For information regarding this item, reference is made to the "Index of
Exhibits and Financial Statements."
ITEM 14. CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
For information regarding this item reference is made to the "Index of
Exhibits and Financial Statements."
19
<PAGE>
INDEX
The following documents are filed as part of this Registration
Statement:
(A) Financial Statements
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NO.
<S> <C>
Certified Public Accountant Audit Report
for Everest Security Systems Corp. 24
Balance Sheet of the Company at December 31, 1995 25
Statement of Operations for Year Ended December 31, 1995 27
Statement of Operations Stockholders Equity for Year Ended
December 31, 1995 28
Statement of Cash Flows 29
Notes to Consolidated Financial Statements 31
Certified Public Accountant Audit Report for SDI 41
Statement of Operations for SDI for the Period
September 30, 1995 and Year Ended December 31, 1994 42
Statement of Retained Earnings of SDI for the Period
September 30, 1995 and Year Ended December 31, 1994 43
Statements of Cash Flows for the Period
September 30, 1995 and Year Ended December 31, 1995 44
Notes to Financial Statements 46
Everest Security Systems Corp. and SDI Unaudited
Proforma Condensed Consolidated Financial Statements 50
21
</TABLE>
<PAGE>
EVEREST SECURITY SYSTEMS
CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
For The Year Ended
December 31, 1995
<PAGE>
[SEMPLE & COOPER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Everest Security Systems Corporation and Subsidiary
We have audited the accompanying consolidated balance sheet of Everest Security
Systems Corporation and Subsidiary as of December 31, 1995, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Everest Security
Systems Corporation and Subsidiary as of December 31, 1995, and the results of
their operations, changes in stockholders' equity, and their cash flows for the
year then ended, in conformity with generally accepted accounting principles.
/s/ SEMPLE & COOPER, P.L.C.
Certified Public Accountants
Phoenix, Arizona
February 23, 1996
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1995
ASSETS
Current Assets:
Cash and cash equivalents (Note 1) $ 8,114
Accounts receivable - trade, net of allowance for
doubtful accounts (Notes 1, 6 and 8) 151,425
Available for sale securities (Notes 1, 3 and 5) 65,600
Prepaid expenses 7,033
Inventory (Notes 1 and 6) 50,742
--------
Total Current Assets 282,914
--------
Property and Equipment, net (Notes 1, 4, 6 and 7) 15,076
--------
Other Assets:
Loan receivable - related entity (Note 5) 20,500
Deferred contract costs, net (Note 1) 47,043
Refundable deposits 2,410
Goodwill, net (Notes 1 and 2) 211,124
--------
281,077
--------
Total Assets $579,067
========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-2-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET (Continued)
December 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable
- current (Note 6) $ 61,666
- related parties (Note 5) 33,387
Obligation under capital lease - current portion
(Notes 1 and 7) 1,978
Accounts payable 99,362
Accrued liabilities 36,111
Accrued interest payable (Note 5) 7,311
-----------
Total Current Liabilities 239,815
-----------
Long-Term Liabilities:
Obligation under capital lease - long-term portion
(Notes 1 and 7) 7,410
-----------
Commitments and Contingencies (Notes 5 and 8) --
Stockholders' Equity: (Notes 9 and 10)
Common stock 2,030
Additional paid-in capital 1,976,130
Accumulated deficit (1,053,577)
-----------
924,583
Stock subscriptions receivable (570,000)
Cumulative translation adjustment (Note 1) 11,861
Treasury stock (202)
Unrealized loss on available for sale
securities (Notes 1 and 3) (34,400)
-----------
Total Stockholders' Equity 331,842
-----------
Total Liabilities and Stockholders' Equity $ 579,067
===========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-3-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For The Year Ended December 31, 1995
Revenues $ 273,028
Cost of Revenues 265,365
---------
Gross Profit 7,663
General and Administrative Expenses 211,163
---------
Loss from Operations (203,500)
---------
Interest Expense 1,994
---------
Net Loss $(205,494)
=========
Net Loss per Share (Note 1) $ (.21)
=========
Weighted Average Shares Outstanding 981,529
=========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-4-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Year Ended December 31, 1995
<TABLE>
<CAPTION>
Additional Stock Cumulative
Common Stock Paid-in Accumulated Subscriptions Translation Treasury
Shares Amount Capital Deficit Receivable Adjustment Stock
<S> <C>
Balance, beginning
of year 326,152 $ 326 $ 847,959 $ (848,083) $ -- $ -- $ (202)
Issued for available
for sale securities 1,000,000 1,000 99,000 -- -- -- --
Issued for consulting
services 218,750 219 59,656 -- -- -- --
Issued for shares of
Specialty Device
Installers, Inc. 100,000 100 199,900 -- -- -- --
Issued for cash 100,000 100 199,900 -- -- -- --
Issued and unpaid 285,000 285 569,715 -- (570,000) -- --
Aggregate adjustment
from foreign
currency translation -- -- -- -- -- 11,861 --
Net unrealized losses
on available for
sale securities -- -- -- -- -- -- --
Net loss -- -- -- (205,494) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, end of year 2,029,902 $ 2,030 $ 1,976,130 $(1,053,577) $ (570,000) $ 11,861 $ (202)
=========== =========== =========== =========== =========== =========== ===========
<CAPTION>
Unrealized
Loss on
Available Total
for Sale Stockholders'
Securities Equity
<S> <C>
Balance, beginning
of year $ -- $ --
Issued for available
for sale securities -- 100,000
Issued for consulting
services -- 59,875
Issued for shares of
Specialty Device
Installers, Inc. -- 200,000
Issued for cash -- 200,000
Issued and unpaid -- --
Aggregate adjustment
from foreign
currency translation -- 11,861
Net unrealized losses
on available for
sale securities (34,400) (34,400)
Net loss -- (205,494)
--------- ---------
Balance, end of year $ (34,400) $ 331,842
========= =========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-5-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1995
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Cash received from customers $ 246,278
Cash paid to suppliers and employees (360,459)
Interest paid (1,994)
---------
Net cash used by operating activities (116,175)
---------
Cash flows from investing activities:
Loan receivable - related entity (20,500)
Purchase of property and equipment (1,268)
Purchase of monitoring contracts (46,498)
---------
Net cash used by investing activities (68,266)
---------
Cash flows from financing activities:
Proceeds from notes payable 46,029
Repayment of notes payable (41,340)
Proceeds from notes payable - related parties 78,159
Repayment of notes payable - related parties (106,018)
Repayment of obligation under capital lease (173)
Proceeds from sale of common stock 200,000
---------
Net cash provided by financing activities 176,657
---------
Effect of exchange rate changes 11,861
---------
Net increase in cash and cash equivalents 4,077
Cash and cash equivalents at beginning of year 4,037
---------
Cash and cash equivalents at end of year $ 8,114
=========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-6-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1995
Reconciliation of Net Loss to Net Cash Used
by Operating Activities:
Net loss $(205,494)
---------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 13,581
Issuance of stock for services 59,875
Changes in Assets and Liabilities:
Accounts receivable - trade (26,749)
Prepaid expenses (2,210)
Inventory (577)
Refundable deposits 211
Accounts payable 55,498
Accrued liabilities (10,310)
---------
89,319
---------
Net cash used by operating activities $(116,175)
=========
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
-7-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Nature of Corporation:
Everest Security Systems Corporation is a Corporation organized under
the laws of the State of Nevada. The Company was organized in 1986 as
Burningham Enterprises, Inc. In February, 1988, the Company changed its
name to Everest Funding Corporation and acquired Everest Mortgage
Corporation, Inc. The acquisition was accounted for under the purchase
method of accounting as a reverse acquisition, whereby Everest Mortgage
Corporation, Inc. was deemed to have acquired Everest Funding
Corporation.
During 1992, Everest Mortgage Corporation, Inc. ceased operations.
Everest Funding Corporation was inactive until April, 1995, when the
Company was reinstated in the State of Nevada. On September 30, 1995,
the Company acquired all of the issued and outstanding stock of
Specialty Device Installers, Inc. (Note 2). In October, 1995, the
Company conducted a private offering of their common stock. In October,
1995, the Company's Board of Directors resolved to change the name of
the Corporation to Everest Security Systems Corporation.
The principal purpose of the Corporation is to act as the holding
company of Specialty Device Installers, Inc., a Florida Corporation,
which is primarily engaged in the sale, installation and monitoring of
security device systems to private and commercial customers in southern
Florida.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, Specialty Device
Installers, Inc. (SDI, Inc.) from the date of its acquisition, October
1, 1995. Intercompany transactions and balances have been eliminated in
consolidation.
Revenue Recognition:
Revenue from installation services and product sales is recognized when
the services are rendered or product installations made. Revenues from
contract monitoring services, which are normally pre-billed, are
deferred and taken into income on a prorata basis as earned.
-8-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies: (Continued)
Cash and Cash Equivalents:
Cash and cash equivalents include all highly liquid investments
purchased with an initial maturity of three (3) months or less.
Available for Sale Securities:
Available for sale securities are equity securities that the Company
purchased and held for the purpose of selling over an undetermined
period, and are reported at fair value, with unrealized gains and losses
reported as a separate component of stockholders' equity.
Accounts Receivable - Trade:
Accounts receivable - trade primarily represent amounts billed but
uncollected on completed installations and monitoring contracts. The
receivables are principally unsecured.
The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance is provided for based upon a review
of the individual accounts outstanding and the prior history of
uncollectible accounts receivable. At December 31, 1995, an allowance
has been provided for potentially uncollectible accounts receivable in
the amount of $10,000.
Inventory:
Inventory quantities and valuations are determined on an annual basis by
a physical count and pricing of same. Inventory is stated at the lower
of cost, first-in, first-out method, or market.
Property and Equipment:
Property and equipment are recorded at cost. Depreciation is provided
for on the straight-line method over the estimated useful lives of the
assets. The average lives range from five (5) to seven (7) years.
Maintenance and repairs that neither materially add to the value of the
property nor appreciably prolong its life are charged to expense as
incurred. Betterments or renewals are capitalized when incurred.
Depreciation expense was $628 for the year ended December 31, 1995.
The Company is the lessee of office equipment under a capital lease
agreement expiring November, 1999. The asset is being depreciated over
its estimated productive life. Amortization of the equipment is included
in depreciation expense, as noted above.
-9-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies: (Continued)
Goodwill:
Goodwill represents the excess of the cost of acquiring Specialty Device
Installers, Inc. over the fair value of their net assets at the date of
acquisition, and is being amortized on the straight-line method over
five (5) years. Amortization expense charged to operations for the
period from the date of acquisition, September 30, 1995 through December
31, 1995 was $11,110. The carrying value of goodwill will be
periodically reviewed by the Company and impairments, if any, will be
recognized when expected future operating cash flows derived from
goodwill are less than their carrying value.
Deferred Contract Costs:
Deferred contract costs represent the cost of purchasing long-term
monitoring contracts and are being amortized on the straight-line method
over the life of the contracts. Amortization expense charged to
operations for the period from the date of acquisition, September 30,
1995 through December 31, 1995 was $1,843.
Translation of Foreign Currencies:
Account balances and transactions denominated in foreign currencies and
the accounts of the Corporation's foreign operations have been
translated into United States funds, as follows:
Assets and liabilities at the rates of exchange
prevailing at the balance sheet date;
Revenue and expenses at average exchange rates for the
period in which the transaction occurred;
Exchange gains and losses arising from foreign currency
transactions are included in the determination of net earnings
for the period;
Exchange gains and losses arising from the translation of the
Corporation's foreign operations are deferred and included as a
separate component of stockholders' equity.
Income Taxes:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax basis, and the utilization of the net operating loss carryforward.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
-10-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies: (Continued)
Loss Per Share:
The loss per share amount is based on the weighted average number of
shares outstanding of 991,607 at December 31, 1995. A fully diluted loss
per share amount is not presented for 1995 as it is anti-dilutive.
2. Business Combinations:
On October 1, 1995, the Company purchased all of the outstanding shares
of Specialty Device Installers, Inc. for common share consideration. The
acquisition was accounted for by the purchase method. The results of
operations are included in the accounts from the effective date of the
acquisition. Details of the purchase are as follows:
Fair market value of assets acquired:
Working capital $ 86,104
Fixed assets 4,875
Other assets 5,009
Debt (118,222)
Goodwill 222,234
----------
Consideration given $ 200,000
==========
Common shares issued 200,000
==========
3. Investments:
Available for Sale Securities:
As of December 31, 1995, the Company had securities classified as
available for sale as follows:
Aggregate Unrealized
Fair Value Cost Holding Loss
Equity Securities:
J.A. Industries,
Inc., 100,000
shares $ 65,600 $ 100,000 $ 34,400
========== ========== ==========
Stockholders' equity for the year ended December 31, 1995 includes an
unrecognized holding loss on available for sale securities of $34,400.
Realized gains and losses are determined on the specific identification
basis. During the year ended December 31, 1995, there were no sales
proceeds or gross realized gains on securities classified as available
for sale.
-11-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Investments: (Continued)
Available for Sale Securities: (Continued)
Subsequent to the date of these financial statements, J.A. Industries,
Inc.'s common stock was trading at approximately $.42 per share. The
investment in J.A. Industries, Inc.'s common stock is recorded at the
fair market value of the stock at December 31, 1995.
4. Property and Equipment:
As of December 31, 1995, property and equipment consist of the
following:
Furniture $ 3,000
Equipment 14,244
----------
17,244
Less: accumulated
depreciation (2,168)
----------
$ 15,076
==========
5. Related Party Transactions:
Loan Receivable - Related Entity:
As of December 31, 1995, the loan receivable from a related entity
consists of a loan receivable from J.A. Industries, Inc., in the amount
of $20,500, due on demand with no stated interest.
Notes Payable - Related Parties:
As of December 31, 1995, notes payable - related parties consist of the
following:
Note payable to J.A. Industries, Inc., due
on demand with no stated interest. $ 15,000
Note payable to Knight Financial, due on
demand with no stated interest. 5,000
Note payable to an individual, due on
demand with no stated interest. 13,387
----------
$ 33,387
==========
-12-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Related Party Transactions: (Continued)
Notes Payable - Related Parties:
The Company has accrued interest payable of $7,311 at December 31, 1995
related to the above note payable to an individual. The interest was
accrued through the date of acquisition, September 30, 1995, at which
time further interest accrual was suspended.
Other Transactions:
The Company has a management agreement with Knight Financial Limited, a
company owned by an officer and stockholder of the Company. The
agreement is effective through May 30, 1996, and provides for
compensation of $24,000 per year plus stock options for 100,000 shares
under an Incentive Stock Option Plan, exercisable at a price of $2 per
share. None of the options have been exercised to date. Included in
accounts payable as of December 31, 1995, is $1,474 of compensation
accrued under the above agreement.
The Company has an employment agreement with the president of the
Company's wholly-owned subsidiary. The agreement was effective through
December 31, 1995, and has been extended for one (1) additional year.
The agreement is for a base salary of $52,000 plus a ten percent (10%)
incentive based on the year end adjusted net profits of the subsidiary.
The net profits of the Company will be adjusted to exclude any incentive
salary paid pursuant to this agreement, any contributions to the pension
or profit sharing plans, any extraordinary gains or losses (including
but not limited to gains or losses on disposition of assets) and any
provisions or refunds for state or federal income taxes.
The Company is holding 100,000 common shares of J.A. Industries, Inc. as
available for sale securities. An officer and stockholder of the Company
is also an officer and stockholder of J.A. Industries, Inc.
6. Notes Payable:
As of December 31, 1995, notes payable consist of the following:
$50,000 revolving line of credit with Barnett Bank,
interest at prime plus 4%, due on demand; collateralized
by substantially all of the Company's assets. $ 47,139
10% note payable to High Tech, monthly
installments of $879, including principal and
interest, due May, 1995; unsecured. 9,204
-13-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Notes Payable: (Continued)
Loan payable to J.A. (Canada), Inc., non-interest
bearing, due on demand; unsecured. J.A. (Canada), Inc.
is a former subsidiary of J.A. Industries, Inc., a
related entity. 5,323
----------
$ 61,666
==========
7. Obligation Under Capital Lease:
The Company is the lessee of office equipment with a cost of $9,561
under a capital lease agreement which expires in November, 1999. At
December 31, 1995, future minimum lease payments due under the capital
lease agreement are as follows:
Year Ended
December 31, Amount
1996 $ 3,063
1997 3,063
1998 3,063
1999 2,807
----------
Total minimum lease payments 11,996
Less: amount representing interest (2,608)
----------
Present value of net minimum lease
payments 9,388
Less: current maturities of capital
lease obligations (1,978)
----------
Non-current maturities of capital
lease obligations $ 7,410
==========
The interest rate under the capital lease agreement is based on the
lessor's implicit rate of return at the inception of the lease.
-14-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Commitments and Contingencies:
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk principally consist of accounts
receivable. The Company's accounts receivable primarily result from its
electronic security installation and monitoring, and reflects a customer
base throughout south Florida. The Company's contracts receivable
consist primarily of three (3) to five (5) year monitoring contracts in
south Florida. The contracts are non-cancellable and secured by the
monitoring equipment. Credit limits, ongoing credit evaluation and
account monitoring procedures are utilized to minimize the risk of loss.
Operating Lease:
The Company is currently leasing office space in Fort Lauderdale,
Florida under a non-cancellable operating lease agreement which expires
May 30, 1996. Payments are approximately $1,600 per month.
9. Stockholders' Equity:
Reverse Stock Split:
On July 24, 1995, the Company declared a 1 for 20 reverse split of the
Company's common stock. The reverse stock split did not affect the par
value of the common stock. The accompanying financial statements give
retroactive effect to the stock split.
Common Stock:
The Company has authorized the issuance of 100,000,000 shares of the
Company's common stock with a par value of $.001 each. At December 31,
1995, there were 2,029,902 shares issued and 2,019,824 shares
outstanding.
Treasury Stock:
Treasury stock is shown at cost, and as of December 31, 1995, consists
of 10,078 shares.
10. Stock Option Plan:
The Company has issued stock options to various key employees and an
outside consulting firm. As of December 31, 1995, the Company has
granted options to purchase 174,720 shares of common stock at $2.00 per
share. On September 30, 2000, 100,000 of the options expire. On December
31, 2000, the remaining 74,720 options expire. In addition, 100,000
options have been granted to an officer, exercisable through May, 2000
at $2 per share. As of December 31, 1995, none of these options have
been exercised.
-15-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Stock Option Plan: (Continued)
In October, 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock Based Compensation", effective
for years beginning in 1996. As of December 31, 1995, the Company has
not yet adopted this standard.
11. Deferred Income Taxes:
The timing differences that give rise to the deferred tax asset at
December 31, 1995, are presented below:
Net operating loss carryforward $ 48,500
Unrecognized holding loss on
available for sale securities 8,600
Allowance for doubtful accounts 2,500
----------
59,600
Less: valuation allowance (59,600)
----------
Net deferred tax asset $ -
==========
At December 31, 1995, the Company has a net operating loss carryforward
for federal purposes of approximately $194,000, which expires in 2010.
12. Monitoring Contracts:
The Company has contracts to perform monitoring services on various
security alarm installations. As of December 31, 1995, the minimum
annual payments receivable under non-cancellable monitoring contracts,
are as follows:
Year Ended
December 31, Amount
1996 $ 37,856
1997 33,807
1998 32,246
1999 28,794
2000 22,881
----------
$ 155,584
==========
-16-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Statement of Cash Flows:
Non-Cash Investing and Financing Activities:
During the year ended December 31, 1995, the Company recognized
investing and financing activities that affected assets, liabilities and
equity, but did not result in cash receipts or payments. These non-cash
activities consist of the following:
The Company issued 100,000 shares of common stock to
acquire all of the outstanding common stock of Specialty
Device Installers, Inc. The stock was valued at $2 per
share.
The Company issued 1,000,000 shares of common stock to
acquire 100,000 shares of J.A. Industries, Inc. from an
investment company. The investment was valued at
$100,000.
The Company issued 218,750 shares of common stock for
consulting services valued at $58,875.
The Company issued 285,000 shares of common stock for
notes receivable in the amount of $570,000. As of
December 31, 1995, the Company had not been paid for
the common stock subscribed.
The Company financed the purchase of office equipment
in the amount of $9,651 under a capital lease agreement.
14. Major Customers:
For the year ended December 31, 1995, two (2) customers make up
approximately 38% and 25% of the Company's sales, respectively.
-17-
<PAGE>
[SEMPLE & COOPER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Specialty Device Installers, Inc.
We have audited the accompanying statements of operations, retained earnings
(deficit), and cash flows for the year ended December 31, 1994 of Specialty
Device Installers, Inc. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Specialty
Device Installers, Inc. for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
/s/ SEMPLE & COOPER, P.L.C.
Certified Public Accountants
Phoenix, Arizona
February 23, 1996
-18-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
STATEMENTS OF OPERATIONS
For The Nine Month Period Ended September 30, 1995 (Unaudited)
and For The Year Ended December 31, 1994
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1995 1994
<S> <C>
Sales $ 947,254 $1,127,684
Cost of Sales 665,943 776,230
---------- ----------
Gross Profit 281,311 351,454
General and Administrative Expenses 340,715 367,935
---------- ----------
Loss from Operations (59,404) (16,481)
---------- ----------
Other Income (Expenses):
Interest income - 7
Interest expense (7,030) (6,737)
Loss on trading securities (2,494) (736)
Gain on trading securities - 4,911
Loss on sale of assets (9,115) -
---------- ----------
(18,639) (2,555)
---------- ----------
Net Loss $ (78,043) $ (19,036)
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
-19-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
STATEMENTS OF RETAINED EARNINGS (DEFICIT)
For The Nine Month Period Ended September 30, 1995 (Unaudited)
and For The Year Ended December 31, 1994
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1995 1994
<S> <C>
Retained earnings, beginning
of period $ 51,852 $ 75,424
Distribution to stockholders (13,620) (4,536)
Net loss (78,043) (19,036)
---------- ----------
Retained earnings (deficit),
end of period $ (39,811) $ 51,852
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
-20-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
STATEMENTS OF CASH FLOWS
For The Nine Month Period Ended September 30, 1995 (Unaudited)
and For The Year Ended December 31, 1994
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1995 1994
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Cash flows from operating activities:
Cash received from customers $ 959,296 $1,071,132
Cash paid to suppliers and employees (985,376) (1,130,740)
Interest paid (4,185) (2,272)
Interest received - 7
---------- ----------
Net cash used by operating
activities (30,265) (61,873)
---------- ----------
Cash flows from investing activities:
Sale of property and equipment 3,000 -
Purchase of property and equipment (2,037) (4,952)
Purchase of trading securities - (8,813)
Sale of trading securities - 9,906
Purchase of monitoring contracts (2,388) -
---------- ----------
Net cash used by investing
activities (1,425) (3,859)
---------- ----------
Cash flows from financing activities:
Proceeds from debt 41,653 30,000
Repayment of debt (13,662) (9,198)
Proceeds from note from stockholder 9,222 43,965
Repayment of note from stockholder - (4,396)
Distribution to stockholder (2,535) (4,536)
---------- ----------
Net cash provided by financing
activities 34,678 55,835
---------- ----------
Net increase (decrease) in cash and cash
equivalents 2,988 (9,897)
Cash and cash equivalents at beginning
of period 1,049 10,946
---------- ----------
Cash and cash equivalents at end
of period $ 4,037 $ 1,049
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
-21-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
STATEMENTS OF CASH FLOWS (Continued)
For The Nine Month Period Ended September 30, 1995 (Unaudited)
and For The Year Ended December 31, 1994
<TABLE>
<CAPTION>
(UNAUDITED)
September 30, December 31,
1995 1994
<S> <C>
Reconciliation of Net Loss to Net Cash
Used by Operating Activities:
Net Loss $ (78,043) $ (19,036)
---------- ----------
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 1,292 3,306
Loss on sale of property and
equipment 9,115 -
Loss on trading securities 2,494 736
Gain on trading securities - (4,911)
Changes in Assets and Liabilities:
Accounts receivable 12,042 (56,552)
Inventory (7,610) (7,802)
Prepaid expenses 498 (1,026)
Refundable deposits - (960)
Accounts payable 7,420 31,189
Accrued liabilities 19,682 (11,282)
Interest payable to stockholder 2,845 4,465
---------- ----------
47,778 (42,837)
---------- ----------
Net cash used by operating activities $ (30,265) $ (61,873)
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
-22-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Nature of Corporation:
Specialty Device Installers, Inc. (SDI, Inc.), is a Florida
corporation, incorporated on August 20, 1991. SDI, Inc.'s primary
business is the sale, installation and monitoring of security device
systems to private and commercial customers in southern Florida.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Unaudited Financial Statements:
The unaudited financial statements include all adjustments (consisting
of normal recurring accruals) which the Company considers necessary for
a fair presentation of the results of operations for the interim
period. Operating results for the nine month period ended September 30,
1995 are not necessarily indicative of the results that may be expected
for the entire fiscal year ended December 31, 1995.
Revenue Recognition:
Revenue from services and product sales is recognized in the
consolidated statements of income as services are rendered or product
installations made. Service revenues, which consist of subscriber
billings for services not yet rendered, are deferred and taken into
income as earned. Revenue from the installation of electronic security
systems is recognized when installations are completed.
Cash and Cash Equivalents:
Cash and cash equivalents include all highly liquid investments
purchased with an initial maturity of three (3) months or less.
Trading Securities:
Trading securities are equity securities that the Company purchased
with the intent of selling short-term and are stated at fair value.
-23-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies:
Accounts Receivable:
Accounts receivable primarily represent amounts billed but uncollected
on completed installations, as well as charges for contract monitoring
services. The receivables are principally unsecured.
The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance is provided for based upon a review
of the individual accounts outstanding and the prior history of
uncollectible accounts receivable. At September 30, 1995, an allowance
has been provided for potentially uncollectible accounts receivable in
the amount of $10,000 (unaudited).
Inventory:
Inventory quantities and valuations are determined on an annual basis by
a physical count and pricing of same. Inventory is stated at the lower
of cost, first-in, first-out method, or market.
Property and Equipment:
Property and equipment are recorded at cost. Depreciation is provided
for on the straight-line method over the estimated useful lives of the
assets. The average lives range from five (5) to seven (7) years.
Maintenance and repairs that neither materially add to the value of the
property nor appreciably prolong its life are charged to expense as
incurred. Betterments or renewals are capitalized when incurred.
Depreciation expense was $1,292 and $3,306 for the nine month period
ended September 30, 1995 (unaudited) and the year ended December 31,
1994, respectively.
Income Taxes:
For federal tax reporting purposes, the Company was operating as a
Subchapter S Corporation through September 30, 1995. As such, all
taxable income and available tax credits were passed from the corporate
entity to the individual stockholder. It was the responsibility of the
individual stockholder to report the taxable income or loss and tax
credits, and to pay any resulting income taxes. On a proforma basis,
there would be no tax expense or benefit due to the net operating losses
incurred.
2. Business Combinations:
On October 1, 1995, the stockholder of the Company entered into a Stock
Purchase Agreement under which he agreed to sell one hundred percent
(100%) of the outstanding stock of the Company to Everest Security
Systems Corporation for 100,000 shares of common stock of Everest
Security Systems Corporation.
-24-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Related Party Transactions:
Note Payable to Stockholder:
As of September 30, 1995 (unaudited), note payable to stockholder
consists of the following:
Note payable to an individual, due on demand
with a stated interest rate of 8%. $ 66,568
Less: current portion (66,568)
----------
$ -
==========
The Company has accrued interest payable of $7,311 at December 31, 1995
related to the above note payable. Interest expense on this note payable
was $2,846 and $4,580 for the nine month period ended September 30, 1995
(unaudited), and for the year ended December 31, 1994, respectively.
4. Contingencies:
Major Customers:
For the nine month period ended September 30, 1995 (unaudited), two (2)
customers make up approximately 38% and 25% of the Company's sales.
For the year ended December 31, 1994, three (3) customers made up
approximately 48%, 13% and 10% of the Company's sales.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk principally consist of accounts
receivable. The Company's accounts receivable primarily result from its
electronic security installation and monitoring, and reflects a customer
base throughout south Florida. The Company's contracts receivable
consist primarily of three to five year monitoring contracts in south
Florida. The contracts are non-cancellable and secured by the monitoring
equipment. Credit limits, ongoing credit evaluation and account
monitoring procedures are utilized to minimize the risk of loss.
5. Stockholders' Equity:
Common Stock:
The Company has authorized the issuance of 1,000 shares of the Company's
common stock with a par value of $1.00 each. At September 30, 1995
(unaudited), there were 200 shares issued and outstanding.
-25-
<PAGE>
SPECIALTY DEVICE INSTALLERS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Statement of Cash Flows:
Non-Cash Investing and Financing Activities:
During the nine month period ended September 30, 1995 (unaudited), the
Company recognized investing and financing activities that affected
assets, liabilities and equity, but did not result in cash receipts or
payments. These non-cash activities consist of the following:
The Company distributed property to the stockholder with
a value of $11,085.
The Company's insurance carrier paid off an outstanding
note payable in the amount of $7,981, as part of a
settlement on a vehicle destroyed in an accident.
-26-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited proforma condensed consolidated financial statements
give effect to the acquisition by Everest Security Systems Corporation of
Specialty Device Installers, Inc. pursuant to the Stock Purchase Agreement
between the parties, and are based on the estimates and assumptions set forth
herein and in the notes to such statements. This proforma information has been
prepared utilizing the historical financial statements and notes thereto, which
are incorporated by reference herein. The proforma financial data does not
purport to be indicative of the results which actually would have been obtained
had the purchase been effected on the dates indicated or of the results which
may be obtained in the future.
The proforma financial information is based on the purchase method of accounting
for the acquisition of Specialty Device Installers, Inc. The proforma entries
are described in the accompanying footnotes to the unaudited proforma condensed
consolidated financial statements. The proforma unaudited condensed consolidated
statements of operations assume the acquisition took place on the first day of
the period presented.
ACQUISITION
On October 1, 1995, Everest Security Systems Corporation purchased all of the
outstanding shares of Specialty Device Installers, Inc. for common share
consideration. The acquisition was accounted for by the purchase method. In the
agreement, 100,000 shares of common stock of Everest Security Systems
Corporation valued at $200,000, was issued for all of the outstanding stock of
SDI, Inc.
-27-
<PAGE>
EVEREST SECURITY SYSTEMS CORPORATION AND SUBSIDIARY
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For The Year Ended December 31, 1994
UNAUDITED PROFORMA CONSOLIDATED FINANCIAL STATEMENTS:
The following represents unaudited proforma consolidated statements of
operations for the year ended December 31, 1994, assuming the following
transaction was consummated as of January 1, 1994:
- Acquisition of Specialty Device Installers, Inc.
for 100,000 shares of common stock
In addition, the proforma consolidated net income per share gives retroactive
effect to the same events which were given retroactive effect in the
accompanying consolidated financial statements.
<TABLE>
<CAPTION>
Everest
Security
Systems Specialty
Corporation Device Proforma
and Installers, Proforma Consolidated
Subsidiary Inc. Adjustment Amounts
<S> <C>
Revenue $ - $1,127,684 $ - $1,127,684
Cost of Revenue - 776,230 - 776,230
---------- ---------- ----------
Gross Profit - 351,454 - 351,454
General and
Administrative - 367,935 44,447(1) 412,382
---------- ---------- ----------
Loss from
Operations - (16,481) - (60,928)
Other Income
(Expense) - (2,555) - (2,555)
---------- ---------- ----------
Net Loss $ - $ (19,036) - $ (63,483)
========== ========== ==========
Net Loss per
Share N/A $ (.15)
========== ==========
Weighted Average
Number of Shares
Outstanding 316,074 416,074
========== ==========
</TABLE>
(1) To amortize goodwill recorded in connection with the purchase of
Specialty Device Installers, Inc. on a straight-line basis over five
(5) years.
-28-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 2, 1996 EVEREST SECURITY SYSTEMS CORPORATION
By: /s/ LESTER COLODNY
Lester Colodny, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ LESTER COLODNY Dated May 2, 1996
Lester Colodny, President,
Chief Executive Officer and
Chairman of the Board
/s/ FRANK BAUER
Frank Bauer, Chief Operating Officer Dated May 2, 1996
/s/ ROBERT W. KNIGHT
Robert W. Knight, Secretary/ Dated May 1, 1996
Treasurer and Director
/s/ STEVEN A. SANDERS Dated May 5, 1996
Steven A. Sanders, Director
and Director
/s/ KARL GELBARD
Karl Gelbard, Director Dated May 2, 1996
<PAGE>
(B) Exhibits
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- --------- ----------- -----
<S> <C>
3 (i) Articles of Incorporation dated October 30, 1986 52
3 (i)(a) Amendment to the Articles of Incorporation 61
3 (i)(b) Amendment to the Articles of Incorporation 65
3 (ii) Bylaws 67
4 Specimen Stock Certificate 79
10 (a) Management Agreement between Everest Funding Corporation
and Knight Financial Limited 81
10 (b) Share Purchase Agreement dated October 9, 1995 between Security
Device Installers Inc. and Everest Security Systems Corporation 86
10 (b)(1) Amendment to October 9, 1995 Share Purchase Agreement 102
10 (c) Executive Employment Agreement between Everest Funding
Corporation and Frank Bauer 104
10 (d) Consulting Agreement between G.M. Capital Partners, Ltd. and
Everest Funding Corporation 109
10 (e) Everest Security Systems Corp. Employee Stock Option
Agreement with G.M. Capital Partners, Ltd. 117
10 (f) Everest Security Systems Corp. Employee Stock Option
Agreement with Frank Bauer 118
21 Specialty Device Installers, Inc. and Federal Alarm Systems, Inc.,
companies duly incorporated under the laws of the State of Florida,
are wholly owned subsidiaries of the Registrant.
28 Everest Security Systems Corp. Incentive Stock Option Plan 119
</TABLE>
22
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
OF
BURNINGHAM ENTERPRISES, INC.
* * * * *
FIRST. The name of the corporation is
BURNINGHAM ENTERPRISES, INC.
SECOND. Its principal office in the State of Nevada is located at
One East First Street, Reno, Washoe County, Nevada 89501. The name and address
of its resident agent is The Corporation Trust Company of Nevada, One East
First Street, Reno, Nevada 89501.
To hold, purchase and convey real and personal estate and in mortgage or
lease any such real and personal estate with its franchises and to take the same
by device or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage, or otherwise dispose of
52
<PAGE>
letters patent of the United States or any foreign country, patent rights,
licenses and privileges, inventions, improvements and processes, copyrights,
trade-marks and trade names, relating to or useful in connection with any
business of this corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge
or otherwise dispose of the shares of the capital stock of or any bonds,
securities or evidences of the indebtedness created by any other corporation
or corporations of this state, or any other state or government, and, while
owner of such stock, bonds, securities or evidences of indebtedness, to
exercise all the rights, powers and privileges of ownership, including the
right to vote, if any.
To borrow money and contract debts when necessary for the transaction
of its business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures, and other obligations
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by mortgage,
pledge or otherwise, or unsecured, for money borrowed, or in payment for
property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its
53
<PAGE>
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or funds; provided it shall not use its funds or property for
the purchase of its own shares of capital stock when such use would cause
any impairment of its capital; and provided further, that shares of its own
capital stock belonging to it shall not be voted upon, directly or indirectly,
nor counted as outstanding, for the purpose of computing any stockholders'
quorum or vote.
To conduct business, have one or more offices, and hold, purchase, mortgage
and convey real and personal property in this state, and in any of the several
states, territories, possessions and dependencies of the United States, the
District of Columbia, and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of
the objects hereinbefore enumerated or necessary or incidental to the protection
and benefit of the corporation, and, in general, to carry on any lawful business
necessary or incidental to the attainment of the objects of the corporation,
whether or not such business is similar in nature to the objects hereinbefore
set forth.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference to,
or inference from, the terms of any other clause in these articles of
54
<PAGE>
incorporation, but the objects and purposes specified in each of the foregoing
clauses of this article shall be regarded as independent objects and purposes.
FOURTH. The amount of the total authorized capital stock of the
corporation is One Hundred Thousand Dollars ($100,000) consisting of One Hundred
Million (100,000,000) shares of stock of the par value of One Hundredth of a
Cent Dollars ($.001) each.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the by-laws of this
corporation, provided that the number of directors shall not be reduced to less
than three (3), except that in cases where all the shares of the corporation
are owned beneficially and of record by either one or two stockholders, the
number of directors may be less than three (3) but not less than the number
of stockholders.
The names and post-office addresses of the first board of directors, which
shall be three in number, are as
55
<PAGE>
follows:
NAME POST-OFFICE ADDRESS
Brent Jay Burningham 1164 W. 500 N.
Salt Lake City, UT 84116
Gary Van Vranken 641 N. 200 W.
Salt Lake City. UT 84103
Bret Van Leevwen 560 W. Fine Drive
Salt Lake City, UT 64115
SIXTH. The capital stock, after the amount of the subscription price, or
par value, has been paid in shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH. The name and post-office address of each of the incorporators
signing the articles of incorporation are as follows:
NAME POST-OFFICE ADDRESS
Keyoumars Saeed 1700 Broadway, Ste. 1211
Denver, CO 80290
Carol M. Carpenter 1700 Broadway, Ste. 1211
Denver, CO 80290
Corinne M. Lude 1700 Broadway, Ste. 1211
Denver, CO 80290
EIGHTH. The corporation is to have perpetual existence.
NINTH. In furtherance, and not in limitation of the powers conferred by
statue, the board of directors is
56
<PAGE>
expressly authorized:
Subject to the by-laws, if any, adopted by the stockholders, to make,
alter or amend the by-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and liens
upon the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one
(1) or more committees, each committee to consist of one (1) or more of the
directors of the corporation, which, to the extent provided in the resolution
or in the by-laws of the corporation, shall have and may exercise the powers
of the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the by-laws of the corporation or as may be
determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders' meeting called for that purpose, or when authorized by
the written consent of the holders of at least a majority of the voting stock
issued and outstanding, the board of
57
<PAGE>
directors shall have power and authority at any meeting to sell, lease or
exchange all of the property and assets of the corporation, including its
good will and its corporate franchisees, upon such terms and conditions as its
board of directors deem expedient and for the best interests of the
corporation.
TENTH. Meetings of stockholders may be held outside the State of Nevada,
if the by-laws so provide. The books of the corporation may be kept (subject
to any provision contained in the statutes) outside the State of Nevada at
such place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.
ELEVENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the articles of incorporation, in the manner
now or hereafter prescribed by statute, or by the articles of incorporation,
and all rights conferred upon stockholders herein are granted subject to
this reservation.
TWELFTH. No shareholder shall be entitled as a partner of right to
subscribe for or receive additional shares of any class of stock of the
corporation, whether now or hereafter authorized, or any bonds, debentures or
other
58
<PAGE>
securities convertible into stock, but such additional shares of stock or
other securities convertible into stock may be issued or disposed of by the
board of directors to such persons and on such persons and on such terms as
in its discretion it shall deem advisable.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation
Law of the State of Nevada, do make and file these articles of incorporation,
hereby declaring and certifying that the facts herein stated are true, and
accordingly have hereunto set our hands this 29th day of October, 1986.
/s/ Keyoumars Saeed
Keyoumars Saeed
/s/ Carol M. Carpenter
Carol M. Carpenter
/s/ Corinne M. Lude
Corinne M. Lude
59
<PAGE>
STATE OF Colorado
COUNTY OF Denver
On this 29th day of October, 1986, before me, a Notary Public, personally
appeared Keyoumars Saeed, Carol M. Carpenter and Corinne M. Lude, who
severally acknowledged that they executed the above instrument.
/s/ Virgenia M. Omstead
Notary Public
Virgenia M. Omstead
My commission expires 6/30/89
60
EXHIBIT 3(i)(a)
CERTIFICATE OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
BURNINGHAM ENTERPRISES, INC.
Pursuant to the provisions of Article 78.340 of the Nevada Revised
Statutes, the undersigned Corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
FIRST: The name of the Corporation is BURNINGHAM ENTERPRISES, INC.
SECOND: That at a meeting of the Board of Directors of Burningham
Enterprises, Inc., resolutions were adopted setting forth a proposed
amendment to the Articles of Incorporation of the Company declaring said
Amendment advisable and calling a meeting of the stockholders of the Company
for consideration thereof.
THIRD: The following Amendment to the Articles of Incorporation of
Burningham Enterprises, Inc. was duly adopted by the shareholders of the
corporation at a meeting held February 23, 1988, in the manner prescribed by
the laws of the State of Nevada, to-wit:
ARTICLE I - NAME
The name of this corporation is EVEREST FUNDING CORPORATION
FOURTH: The number of shares of the corporation outstanding at the time
of the adoption of such amendments was 6,010,000 and the number entitled to
vote thereon was 6,010,000.
FIFTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows, to-wit:
CLASS NUMBER OF SHARES
Common 6,010,000
SIXTH: The number of shares voted for such amendments was 5,420,000 with
none opposing and none abstaining.
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<PAGE>
SEVENTH: These amendments do not provide for any exchange,
reclassification or cancellation of issued shares.
EIGHTH: These amendments do not effect a change in the stated capital
of the corporation as set forth above.
IN WITNESS WHEREOF, the undersigned President and Secretary having been
thereunto duly authorized have executed the foregoing Articles of Amendment
for the corporation this 23rd day of February, 1988.
BURNINGHAM ENTERPRISES, INC.
By /s/ Brent Burningham
President
Attest:
/s/ J. Todd Martin
Secretary
State of Utah )
) ss.
County of Salt Lake )
On the 23rd day of February, 1988, personally appeared before me Brent
Burningham, who acknowledged to me that (s)he is the President of Burningham
Enterprises, Inc. who signed the foregoing instrument and that (s)he has
read the foregoing instrument and knows the content thereof.
SUBSCRIBED AND SWORN TO before me this 23rd day of February, 1988.
/s/ Scott H. Smith
Notary Public
Residing at:
Salt Lake City, Utah
My Commission Expires:
2-17-1992
62
<PAGE>
State of Utah )
) ss.
County of Salt Lake )
On the 23rd day of February, 1988, personally appeared before me J. Todd
Martin, who acknowledged to me that (s)he is the Secretary of Burningham
Enterprises, Inc. who signed the foregoing instrument and that (s)he has
read the foregoing instrument and knows the content thereof.
SUBSCRIBED AND SWORN TO before me this 23rd day of February, 1988.
/s/ Scott H. Smith
Notary Public
Residing at:
Salt Lake City, Utah
My Commission Expires:
2-17-1992
63
<PAGE>
[letterhead of Smith & Headman appears here]
Via Telecopier
Followed by Federal Express
February 25, 1988
Nevada Secretary of State
Corporations Division
Capitol Complex
Carson City, NV 89710
Attn: Bev
Re: Burningham Enterprises, Inc.
Dear Bev:
Pursuant to our telephone conference today, please be advised that you
are hereby authorized to change the corporate name of Burningham Enterprises,
Inc. to Everest Funding Corporation. We understand that the name previously
chosen is not available.
If you have any questions regarding this matter, please don't hesitate
to call me. Thank you for your help in this matter.
Very truly yours,
/s/Scott H. Smith
Scott H. Smith
cc: Harry Winderman
64
Exhibit 3(i)(b)
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE
STATE OF NEVADA
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
NOV 27 1995
7659-86
Everest Funding Corporation
Name of Corporation
We the undersigned Robert Knight President and
Steven A. Sanders Secretary of
Everest Funding Corporation Corporation
cc hereby certify
That the Board of Directors of said corporation at a meeting duly convened,
held Oct. 19, 1995 adopted a resolution to amend the original Articles of
Incorporation.
RESOLVED, that the name of the corporation be changed
to Everest Security Systems Corporation
The number of shares outstanding and entitled to vote at an amendment of the
Articles of Incorporation is 1,524,902 that the said change(s) and amendment
have been consented to and approved by a majority of stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
(Signature of President appears here)
-------------------------------------
President IDH 2138965
(Signature of Steven A. Sander appears here)
--------------------------------------------
Secretary
ACKNOWLEDGMENT:
BC
On Oct 24 '95 personally appeared before me, a Notary Public, the above
individuals, acknowledged he executed the above instrument on behalf of
said Corporation.
(Signature of Pankaj Shah appears here)
---------------------------------------
Pankaj Shah
NOTARY PUBLIC
211-3030 Lincoln Ave.
Coquitlam, B.C. V3B 8B4
Tel: 941-7434
65
<PAGE>
MINUTES OF SPECIAL MEETING OF THE STOCKHOLDERS
OF
Everest Funding Corporation
A Nevada Corporation
DATE OF MEETING October 19, 1995
PLACE OF MEETING Port Coquitlam, B.C.
TIME OF MEETING 11:00 a.m.
The Special Stockholders Meeting was called to order by the Corporate President.
The Corporate Secretary kept the record of the meeting. A roll of the
Stockholders was taken, a quorum being present, the meeting proceeded.
The Stockholders agreed to change the name of
Everest Funding Corporation
The new name for the corporation will
be EVEREST SECURITY SYSTEMS CORPORATION
No further business coming before the meeting, upon motion duly mace, seconded
and carried, the meeting was adjourned.
Dated as of the 19th day of October 1995.
(Signature of Steven A. Sanders appears here)
--------------------------------------------
Secretary
66
Exhibit 3(ii)
BY-LAWS
OF
Everest Funding Corporation
ARTICLE I - OFFICES
The principal office of the corporation in the State of Nevada shall be
located in the City of Las Vegas County of Clark. The corporation may have such
other offices, either within or without the State of incorporation as the board
of directors may designate or as the business of the corporation may from time
to time require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on the 15th day of
April in each year, beginning with the year 1996 at the hour 2 o'clock P.M.,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders
of not less than fifty per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate
By-Laws 1
67
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any place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than two days nor more than thirty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officer or persons calling
the meeting, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the stockholder at his address as it appears
on the stock transfer books of the corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, ten days. If the stock transfer
books shall be closed for the purpose of determining stockholders entitled to
notice of or to vote at a meeting of stockholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing
the stock transfer books, the directors may fix in advance a date as the record
date for any such determination of stockholders, such date in any case to be
not more than thirty days and, in case of a meeting of stockholders, not less
than ten days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders
By-Laws 2
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<PAGE>
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least five days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
five days prior to such meeting, shall be kept on file at the principal office
of the corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The original stock
transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
7. QUORUM.
At any meeting of stockholders fifty-one percent of the outstanding shares
of the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by
By-Laws 3
69
<PAGE>
proxy, for each share of stock entitled to vote held by such stockholders. Upon
the demand of any stockholder, the vote for directors and upon any question
before the meeting shall be by ballot. All elections for directors shall be
decided by plurality vote; all other questions shall be decided by majority
vote except as otherwise provided by the Certificate of Incorporation or the
laws of this State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
By-Laws 4
70
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be five. Each director
shall hold office until the next annual meeting of stockholders and until his
successor shall have been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual
meeting of stockholders. The directors may provide, by resolution, the time
and place for the holding of additional regular meetings without other notice
than such resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least two days previously
thereto by written notice delivered personally, or by telegram or mailed to
each director at his business address. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so addressed, with
postage thereon prepaid. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph company.
The attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
By-Laws 5
71
<PAGE>
6. QUORUM.
At any meeting of the directors two directors shall constitute a quorum
for the transaction of business, but if less than said number is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the
removal of directors without cause may be filled by a vote of a majority of
the directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled
by vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified
in the notice, the resignation shall take effect upon receipt thereof by the
board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
11. COMPENSATION.
No compensation shall be paid to the directors, as such, for their
services, but by resolution of the board a fixed sum and expenses for actual
attendance at each regular or special meeting of the board may be authorized.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
By-Laws 6
72
<PAGE>
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the secretary of
the corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an executive
committee and other committees, each consisting of three or more directors. Each
such committee shall serve at the pleasure of the board.
By-Laws 7
73
<PAGE>
ARTICLE IV - OFFICERS
1. NUMBERS.
The officers of the corporation shall be a president, a vice-president,
a secretary and a treasurer, each of whom shall be elected by the directors.
Such other officers and assistant officers as may be deemed necessary may be
elected or appointed by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall
By-Laws 8
74
<PAGE>
perform all duties incident to the office of president and such other duties as
may be prescribed by the directors from time to time.
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, the vice-president shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-president shall perform such other
duties as from time to time may be assigned to him by the President or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these by-laws
or as required, be custodian of the corporate records and of the real of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform
all duties incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or
sureties as the directors shall determine. He shall have charge and custody
of and be responsible for all funds and securities of the corporation; receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
By-Laws 9
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<PAGE>
ARTICLE V - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be general or
confined to specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by
a resolution of the directors. Such authority may be general or confined to
specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall
be signed by such officer or officers, agent or agents of the corporation and
in such manner as shall from time to time be determined by resolution of
the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such
form as shall be determined by the directors. Such certificates shall be
signed by the president and by the secretary or by such other officers
authorized by law and by the directors. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
stockholders, the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the
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<PAGE>
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the
corporation as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, and cancel the old certificate; every such transfer shall
be entered on the transfer book of the corporation which shall be kept at
its principal office.
(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof, and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share
on the part of any other person whether or not it shall have express or
other notice thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the 1 day of
January in each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state
of incorporation, year of incorporation and the words, "Corporate Seal".
By-Laws 11
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ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions
of these by-laws or under the provisions of the articles of incorporation,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the stockholders representing a majority of all the
shares issued and outstanding, at any annual stockholders' meeting or at any
special stockholders' meeting when the proposed amendment has been set out
in the notice of such meeting.
By-Laws 12
78
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP NO. 299815 10 0
Everest Security
Systems Corporation
AUTHORIZED SHARES: 100,000,000
PAR VALUE $.001
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
EVEREST SECURITY SYSTEMS CORPORATION
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by
the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Steven A. Sanders /s/ (signature of President)
SECRETARY PRESIDENT
(Seal appears here with the following text: Everest Security Systems
Corporation/Nevada/Corporate Seal)
INTERWEST TRANSFER CO. INC. P.O. BOX 17136/SALT LAKE CITY, UTAH 84117
COUNTERSIGNED & REGISTERED
COUNTERSIGNED Transfer Agent Authorized Signature
79
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving bank),
or a trust company. The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM-as tenants in common UNIF GIFT MIN ACT-......Custodian......
TEN ENT-as tenants by the entireties (Cust) (Minor)
JT TEN-as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..........................
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
SPECIMEN
80
EXHIBIT 10(a)
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made and effective this June 1, 1995,
by and between Everest Funding Corporation, a Nevada Corporation ("Company") and
Knight Financial Limited/Robert Knight ("Executive").
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment.
Company hereby agrees to initially employ Executive as its President and
Chief Executive Officer and Executive hereby accepts such employment in
accordance with the terms of this Agreement and the terms of employment
applicable to regular employees of Company. In the event of any conflict or
ambiguity between the terms of this Agreement and terms of employment applicable
to regular employees, the terms of this Agreement shall control. Election or
appointment of Executive to another office or position, regardless of whether
such office or position is inferior to Executive's initial office or position,
shall not be a breach of this Agreement.
2. Duties of Executive.
The duties of Executive shall include the performance of all of the duties
typical of the office held by Executive as described in the bylaws of the
Company and such other duties and projects as may be assigned by a superior
officer of the Company, if any, or the board of directors of the Company.
Executive shall devote his entire productive time, ability and attention to the
business of the Company and shall perform all duties in a professional, ethical
and businesslike manner. Executive will not, during the term of this Agreement,
directly or indirectly engage in any other business, either as an employee,
employer, consultant, principal, officer, director, advisor, or in any other
capacity, either with or without compensation, without the prior written consent
of Company.
3. Compensation.
Executive will be paid compensation during this Agreement as follows:
A. A base salary of $36,000 USD per year, payable in instalments according to
the Company's regular payroll schedule. The base salary shall be adjusted at
the end of each year of employment at the discretion of the board of directors.
B. The Company will grant Executive stock options in the amount of 100,000
shares of the common stock of the Company. Such stock options shall have a
five year term and shall be issued pursuant to a qualified Incentive Stock
Option Plan under Section 422 of the Internal Revenue Code of 1986 as amended
through August 15, 1993. Provisions of such plan shall be attached to and become
part of this Agreement.
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Such Stock Option Plan and agreement covering the options subject of this
section of this Agreement shall include the right of Executive to exercise, on
the date of the option or any date thereafter prior to the option termination
date, all of the shares exercisable under the terms of such option. Further,
the Company agrees that Executive may finance the acquisition of option shares
through the issuance of a note to the Company. Such note shall have a term of
at least five (5) years, with interest only payments required until the
principal amount of such note is paid, with interest at the applicable mid-term
Federal rate determined under Section 127(d) of the Internal Revenue Code at the
time of interest payment. Collateral for such note and the only recourse for
such note shall be the shares being financed. The Company agrees to release to
Executive shares collateralizing the loan provided the principal amount of the
loan is reduced by payment to the Company of an amount equal to the number of
shares released times the strike price of the option. In the event the total
value of the shares serving as collateral exceeds the principal amount of the
note at any time during the term of the note, the number of shares serving as
collateral shall be reduced so that the value of the remaining shares equals the
value of the principal balance of subject note providing that the released
shares are under the joint control of the Company and Executive. Upon the sale
of any such shares the proceeds will be divided so that the first payment will
be applied to reduce the principal amount of the note by the value of the option
price times the number of shares sold and secondly any remaining funds to be
paid to Executive. In the event Executive exercises such option with a note as
described herein, Executive may, at his sole discretion, satisfy payment for any
interest or principal amount due to the Company, by his cancellation of
any amounts owed him by the Company. Such amounts may include due but unpaid
remuneration, expenses, or any other amount that may be due but unpaid to
Executive on the date payment of such interest and/or principal is due. Common
shares issued under the Incentive Stock Option Plan attached hereto shall have
no restriction on resale other than those imposed by the Securities Acts of the
SEC and the Arizona Blue Sky laws. Further, such shares issued pursuant to
this plan shall contain a provision authorizing and requiring the Company to
register, at its expense, such shares in order that these shares may be traded
on any exchanges which currently, or thereafter, permit the stock of the Company
to be traded, within three months following receipt of such stock or as a
"piggyback" registration to any registration of securities undertaken by the
Company for its common stock, whichever occurs earliest.
In the event of termination under the terms of Agreement, shares exercisable at
the date of termination shall be exercisable by Executive for a period of ninety
days (90 days) after the date of termination.
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4. Benefits.
A. Holidays. Executive will be entitled to at least three (3) weeks paid
holidays each calendar year. Company will notify Executive on or about the
beginning of each calendar year with respect to the holiday schedule for the
coming year. Personal holidays, if any, will be scheduled in advance
subject to requirements of Company. Such holidays must be taken during the
calendar year and cannot be carried forward into the next year. Executive is not
entitled to any personal holidays during the first six months of employment.
B. Sick Leave. Executive shall be entitled to sick leave and emergency
leave according to the regular policies and procedures of Company. Additional
sick leave or emergency leave over and above paid leave provided by the Company,
if any, shall be unpaid and shall be granted at the discretion of the board of
directors.
C. Expense Reimbursement. Executive shall be entitled to reimbursement
for all reasonable expenses, including travel and entertainment, incurred by
Executive in the performance of Executive's duties. Executive will maintain
records and written receipts as required by the Company policy and reasonably
requested by the board of directors to substantiate such expenses.
5. Term and Termination
A. The Initial Term of this Agreement shall commence on June 1, 1995 and it
shall continue in effect for a period of One (1) year. Thereafter, the
Agreement shall be renewed upon the mutual agreement of Executive and
Company. This Agreement and Executive's employment may be terminated at
Company's discretion during the Initial Term, provided that Company shall pay to
Executive an amount equal to payment at Executive's base salary rate for the
remaining period of Initial Term.
B. This Agreement may be terminated by Executive at Executive's discretion by
providing at least thirty (30) days prior written notice to Company. In the
event of termination by Executive pursuant to this subsection, Company may
immediately relieve Executive of all duties and immediately terminate this
Agreement, provided that Company shall pay Executive at the then applicable base
salary rate to the termination date included in Executive's original termination
notice.
C. In the event that Executive is in breach of any material obligation owed
Company in this Agreement, habitually neglects the duties to be performed under
this Agreement, engages in any conduct which is dishonest, damages the
reputation or standing of the Company, or is convicted of any criminal act or
engages in any act of moral turpitude, then Company may terminate this Agreement
upon five (5) days notice to Executive. In event of termination of the
agreement pursuant to this subsection, Executive shall be paid only at the then
applicable base salary rate up to and including the date of termination.
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D. In the event Company is acquired, or is the non-surviving party in a merger,
or sells all or substantially all of its assets, this Agreement shall not be
terminated and Company agrees to use its best efforts to ensure that the
transferee or surviving company is bound by the provisions of this Agreement.
6. Notices.
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
by certified mail, postage prepaid, or recognized overnight delivery services;
If to Company:
Everest Funding Corporation
50 Broad Street
Suite 437
New York, NY 10004
If to Executive:
Robert Knight
4025 Sunset Boulevard
North Vancouver, British Columbia
V7R 3Y6
7. Final Agreement.
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
8. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws of
the state of Arizona.
9. Headings.
Headings used in this Agreement are provided for convenience only and shall not
be used to construe meaning or intent.
10. No Assignment.
Neither this Agreement nor any or interest in this Agreement may be assigned by
Executive without the prior express written approval of
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Company, which may be withheld by Company at Company's absolute discretion.
11. Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Everest Funding Corporation
By: /s/ Robert Knight
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Robert Knight, Chairman of the Board
/s/ Robert Knight
------------------------------------
Robert Knight
AGREEMENT
THIS AGREEMENT dated October 9, 1995 and made
BETWEEN: EVEREST FUNDING CORPORATION a Nevada Corporation, having its principal
office at 50 Broad Street, Suite 437, New York, New York.
(hereinafter called "Everest")
OF THE FIRST PART
AND: SPECIALTY DEVICE INSTALLERS, INC. a Florida Corporation having its
principal office at 823 W. 57th Street, Fort Lauderdale, Florida.
(hereinafter called the "Company")
OF THE SECOND PART
AND: FRANK R. BAUER AND MARJORIE J. BAUER, having an address at 4090
122 Drive North, Royal Palm Beach, Florida.
(hereinafter called the "Seller")
OF THE THIRD PART
WHEREAS: The Seller owns a total of 200 Common Shares without par value, of the
Company, said shares being 100% of the issued and outstanding common stock of
the Company; and
WHEREAS: The Seller desires to sell and Everest desires to purchase 100% of
such Seller's shares under the terms and conditions set forth in this Agreement:
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. Purchase and Sale. The Seller hereby agrees to sell, transfer, assign and
convey to Everest and Everest hereby agrees to purchase and acquire from the
Seller all of the Seller's shares, said shares constituting 100% of all of the
Company's issued and outstanding common stock, (the "Company Shares"). The
transaction contemplated herein is hereinafter referred to as the
"Reorganization" and the consummation of the Reorganization is hereinafter
referred to as the "Closing".
2. Purchase Price. The aggregate purchase price to be paid by Everest for the
Company Shares shall be one hundred thousand
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(100,000) shares of Everest, $.001 par value, voting common stock (the "Everest
Shares"). The Everest Shares will be issued to the individual Seller in
accordance with Schedule "A" attached hereto and made a part hereof.
3. Warranties and Representations of Company and Seller. In order to induce
Everest to enter into this Agreement and to complete the Reorganization, the
Company and the Seller, jointly and severally, unconditionally warrant,
represent and guarantee that:
a. Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Florida and has full power and authority to carry on its
business as now conducted and to own and operate its assets, properties
and business. Attached hereto as Schedule "B" are true and correct
copies of the Company's Certificate of Incorporation, amendments thereto
and all current by-laws of the Company.
b. Capitalization. The Company's entire authorized equity capital consists
of 1,000 common shares par value $1.00 of which 200 Common Shares par
value $1.00 are outstanding as of the date hereof and will be
outstanding as of the Closing. There are no other voting or equity
securities authorized or issued, nor any authorized or issued securities
convertible into voting stock, and no outstanding subscriptions,
warrants, calls, options, rights, commitments or agreements by which the
Company or the Seller are bound, calling for the issuance of any
additional shares of common stock or any other voting or equity
security. The Company's Shares being transferred to Everest constitute
100% of the equity capital of the Company, which includes, inter alia,
100% of the Company's voting power, right to receive dividends, when, as
and if declared and paid, and the right to receive the proceeds of
liquidation attributable to common stock, if any.
c. Ownership of Company Shares. The Seller is the sole and absolute owners
of the Company Shares, free and clear of all liens, encumbrances, and
restrictions whatsoever. By the sale of the Company Shares to Everest
pursuant to this Agreement, Everest will thereby acquire good, absolute
marketable title thereto and be the owner of 100% of the capital stock
of the Company, free and clear of all liens, encumbrances and
restrictions of any nature whatsoever.
d. Financial Statements. There have been attached to this Agreement as
Schedule "C" the following financial statements (the "Company Financial
Statements") of the Company which are hereby incorporated as an integral
part of this Agreement:
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i) Balance sheets, as of December 31, 1994, as compiled without
audit;
ii) Income statements for the twelve (12) month period ended December
31, 1994, unaudited
All of said Company Financial Statements are true and correct and were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved. Except for changes in the
ordinary course of business, there have been no material changes since the
latest date thereof.
e. Significant Agreements. The Company is not and will not at Closing be
bound by any of the following, unless specifically listed in Schedule
"D" hereto:
i) employment, advisory or consulting contract,
ii) plan providing for employee benefits of any nature;
iii) lease with respect to any property or equipment;
iv) contract or commitment for any future expenditure in
excess of $25,000;
v) contract or commitment pursuant to which it has assumed,
guaranteed, endorsed, or otherwise become liable for any
obligation of any other person, firm or organization;
vi) contract, agreement, understanding, commitment or arrangement,
other than in the normal course of business, not fully disclosed
or set forth in this Agreement;
vii) agreement with any person relating to the dividend, purchase or
sale of securities, that has not been settled by the delivery or
payment of securities when due, and which remains unsettled upon
the date of this Agreement.
f. Taxes. The Company has filed all federal, provincial and local income or
other tax returns and reports that it is required to file with all
governmental agencies, wherever situate, and has paid all taxes as shown
on such returns. All such returns are true and complete.
g. Absence of Undisclosed Liabilities. At the date of the Company Financial
Statements described in Paragraph 3 (d) of this Agreement, the Company
had no liabilities including liabilities from litigation (instituted or
threatened) of
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any nature, fixed or contingent, that are not fully included in the
figures shown herein or disclosed and quantified on the attached
Schedule "C" or "D". Between the date of the Company Balance Sheet and
the date of this Agreement, no liabilities, debts or obligations of any
kind, other than minor liabilities in the ordinary course of business,
have been incurred by the Company, nor will any liabilities other than
minor liabilities in the ordinary course of business be incurred by the
Company between the date of this Agreement and Closing.
h. Pending Actions. There are no legal actions, lawsuits, proceedings or
investigations, either administrative or judicial, pending or
threatened, against or affecting the Company, or against the Seller and
arising out of their operation of the Company, except as set forth on
Schedule "E" attached hereto.
i. Governmental Regulation. The Company holds the licenses and
registrations set forth in Schedule "F" hereto from the State set forth
therein. All of such licenses and registrations are in full force and
effect, and there are no proceedings, hearings or other actions pending
that may affect the validity or continuation of any of them. Nor
approval of any other trade or professional association or agency of
government other than as set forth on Schedule "F" is required for any
of the transactions affected by this Agreement, and the completion of
the Reorganization will not, in and of themselves, affect or jeopardize
the validity or continuation of any of them.
j. Ownership of Assets. Except as disclosed in the Company Financial
Statements attached hereto as Schedule "C", the Company has good,
marketable title, without any liens or encumbrances of any nature
whatever, to all of the following if any: its assets, properties and
rights of every type and description, including without limitation, all
cash on hand and in banks, certificates of deposit, stocks, bonds, and
other securities, good will, customer lists, its corporate name and all
variants thereof, trademarks and trade names, copyrights and interests
thereunder, licenses and registrations, pending licenses and permits and
applications therefor, inventions, processes, know-how, trade secrets,
real estate and interests therein and improvements thereon, machinery,
equipment, vehicles, notes and accounts receivable, fixtures, rights
under agreements, and leases, franchises, all rights and claims under
insurance policies and other contracts of whatever nature, rights in
funds, rights of every kind and nature owned or held by the Company as
of this date, and will continue to hold such title on and after the
completion of the Reorganization; nor, except in the ordinary course of
business, has the Company disposed of
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any such asset since the date of the Company Financial Statements
described in Paragraph 3 (d) of this Agreement.
k. Notes and Accounts Receivable. All notes, accounts and loans receivable
set forth in the balance sheet described in Paragraph 3 (d) of this
Agreement, and any presently existing, are bona fide and not in default.
l. No Interest in Suppliers. Customers, Landlords or Competitors. Neither
the Seller nor any member of their families have any interest of any
nature whatever in any supplier, customer, landlord or competitor of the
Company, except as set forth on Schedule "D" hereto.
m. No Debt Owed by Company to Seller. Except as disclosed and identified as
a related party transaction in the Company Financial Statements attached
hereto as Schedule "C" or shown on Schedule "C", the Company does not
owe any money, securities, or property to either the Seller or any
member of their families or to any company controlled by such person,
directly or indirectly.
n. Corporate Records. All of the Company's books and records, including,
without limitation, its books of account, corporate records, minute
book, stock certificate books and other records of the Company are up to
date, complete and reflect accurately and fairly the conduct of its
business in all respects since its date of incorporation.
o. No Misleading Statements or Omissions. Neither this Agreement nor any
financial statement, exhibit, schedule or document attached hereto or
presented to Everest in connection herewith contains any materially
misleading statement, or omits any fact or statement necessary to make
the other statements or facts therein set forth not materially
misleading.
p. Validity of this Agreement. All corporate and other proceedings required
to be taken by the Seller and by the Company in order to enter into and
to carry out this Agreement have been or will be duly and properly
taken. This Agreement has been duly executed by the Seller and the
Company, and constitutes the valid and binding obligation of each of
them. The execution and delivery of this Agreement and the carrying out
of its purposes will not result in the breach of any of the terms of
conditions of, or constitute a default under or violate, the Company's
Certificate of Incorporation or bylaws, or any agreement, lease,
mortgage, bond, indenture, license or other document, or undertaking,
oral or written, to which the Company or the Seller are a party or are
bound or may be affected, nor will such execution, delivery and carrying
out violate any order,
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writ, injunction, decree, law, rule or regulation of any court,
regulatory agency or other governmental body; and the business now
conducted by the Company can continue to be so conducted after
completion of the Reorganization, with the Company as a wholly-owned
subsidiary of Everest.
q. Enforceability of this Agreement. When duly executed and delivered, this
Agreement and the Exhibits hereto which are incorporated herein and made
a part hereof are legal, valid and enforceable by Everest according to
their terms, and that at the time of such execution and delivery,
Everest will have acquired good marketable title in and to the Company
Shares sold to Everest.
4. Warranties and Representations of Everest. In order to induce the Seller and
the Company to enter into this Agreement and complete the Reorganization,
Everest unconditionally warrants, represents and guarantees that:
a. Organization and Standing. Everest is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada, is qualified to do business as a foreign corporation in every
other state in which it operates to the extent required by the laws of
such states, and has full power and authority to carry on its business
as now conducted and to own and operate its assets, properties and
business.
b. Capitalization. Everest's entire authorized equity capital consists of
100,000,000 shares of voting common stock, $.001 par value as of the
date of this Agreement approximately 1,524,902 shares of voting common
stock of Everest will be issued and outstanding. The relative rights and
preferences of Everest's equity securities are set forth on the
Certificate of Incorporation, as amended, and Everest's by-laws,
attached as Schedule "G" hereto. There are no other voting or equity
securities convertible into voting stock and no outstanding
subscriptions, warrants, calls, options, rights, commitments or
agreements by which Everest is bound, calling for the issuance of any
additional shares of common stock or any other voting or equity security
except as set forth in Schedule "H". The by-laws of Everest provide that
a simple majority of the shares voting at a stockholder's meeting at
which a quorum is present may elect all of the directors of Everest.
Cumulative voting is not provided for by the by-laws or Certificate of
Incorporation of Everest.
c. Ownership of Shares. By Everest's issuance of Everest Shares to the
Seller pursuant to this Agreement, the Seller will thereby acquire good,
absolute marketable title thereto, free and clear of all liens,
encumbrances and restrictions of any nature whatsoever, except by reason
of
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the fact that such Everest Shares will not have been registered under
the 33 Act.
d. Financial Statements. There have been attached to this Agreement as
Schedule "I" Everest's unaudited financial statements for the 6 months
ending June 30, 1995 and the fiscal year ending December 31, 1994 (the
"Everest Financial Statement"), which is hereby incorporated as an
integral part of this Agreement. Said Everest Financial Statement is
true and correct, and was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved. Except for changes in the ordinary course of business,
there have been no material changes since the latest date thereof.
e. Significant Agreements. Except as set forth in Schedule "J", Everest is
not and will not at Closing be bound by any of the following:
i) employment, advisory or consulting contract;
ii) plan providing for employee benefits of any nature;
iii) lease with respect to any property or equipment;
iv) contract or commitment pursuant to which it has assumed,
guaranteed, endorsed, or otherwise become liable for any
obligation of any other person, firm or organization;
v) contract, agreement, understanding, commitment or arrangement,
other than in the normal course of business, not fully disclosed
or set forth in this Agreement;
vi) agreement with any person relating to the dividend, purchase or
sale of securities, that has not been settled by the delivery or
payment of securities when due, and which remains unsettled upon
the date of this Agreement.
f. Taxes. Everest has filed all federal, state and local income or other
tax returns and reports that it is required to file with all
governmental agencies, wherever situate, and has paid all taxes as shown
on such returns. All of such returns are true and complete.
g. Absence of Undisclosed Liabilities. At and as of the Closing Date,
Everest will have no liabilities of any kind or nature, fixed or
contingent, which are not described in the Everest Financial Statement.
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h. Pending Actions. Except as set forth in Schedule "K" there
are no legal actions, lawsuits, proceedings or
investigations, either administrative or judicial, pending
or threatened, against or affecting Everest, or against any
of Everest's officers or directors and arising out of their
operation of Everest. Everest is not in violation of any
law, ordinance or regulation of any kind whatever, including
but not limited to, the 33 Act, the 34 Act, the Rules and
Regulations of the SEC, or the Securities Laws and
Regulations of any state. Everest is not an investment
company as defined in the Securities laws. Everest has
filed all reports required to be filed under the 33 Act and
the 34 Act.
i. Ownership of Assets. Except as set forth in Schedule "L"
Everest has good, marketable title, without any liens or
encumbrances of any nature whatever, to all of the following
if any: its assets, properties and rights of every type and
description, including without limitation, all cash on hand
and in banks, certificates of deposit, stocks, bonds, and
other securities, good will, customer lists, its corporate
name and all variants thereof, trademarks and trade names,
copyrights and interests thereunder, licenses and
registrations, pending licenses and permits and applications
therefor, inventions, processes, know-how, trade secrets,
real estate and interests therein and improvements thereon,
machinery, equipment, vehicles, notes and accounts
receivable, fixtures, rights under agreements, and leases,
franchises, all rights and claims under insurance policies
and other contracts of whatever nature, rights in funds,
rights of every kind and nature owned or held by Everest as
of this date, and will continue to hold such title on and
after the completion of the Reorganization; nor, except in
the ordinary course of business, has Everest disposed of any
such asset since the date of the Everest Financial
Statements described in Paragraph 4 (d) of this Agreement.
j. Notes and Accounts Receivable. All notes, accounts and
loans receivable, if any, set forth in the balance sheet
described in Paragraph 4 (d) of this Agreement, and any
presently existing, are bona fide and not in default, and
will be collected by Everest in full promptly when due.
k. No Interest in Suppliers. Customers, Landlords or
Competitors. No officer, director or principal shareholder
of Everest nor any member of their families has any interest
of any nature whatever in any supplier, customer, landlord
or competitor of Everest.
l. No Debt Owed by Everest to Certain Persons. Except as set
forth in Schedules "I" and "M", Everest does not owe any
money, securities, or property to any of its officers,
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directors or principal shareholders of any member of their families or
to any company controlled by such person, directly or indirectly.
m. Corporate Records. All of Everest's books and records,
including, without limitation, its books of account,
corporate records, minute book, stock certificate books and
other records of the Company are up to date, complete and
reflect accurately and fairly the conduct of its business in
all respects since its date of incorporation.
n. No Misleading Statements or Omissions. Neither this
Agreement nor any financial statement, exhibit, schedule or
document attached hereto or presented to the Company in
connection herewith contains any materially misleading
statement, or omits any fact or statement necessary to make
the other statements or facts therein set forth not
materially misleading.
o. Validity of this Agreement. All corporate and other
proceedings required to be taken by Everest in order to
enter into and to carry out this Agreement have been duly
and properly taken. This Agreement has been duly executed by
Everest, and constitutes the valid and binding obligation of
Everest. The execution and delivery of this Agreement and
the carrying out of its purposes will not result in the
breach of any of the terms of conditions of, or constitute a
default under or violate, Everest's Certificate of
Incorporation or by-laws, or any agreement, lease, mortgage,
bond, indenture, license or other document, or undertaking,
oral or written, to which Everest is a party or are bound or
may be affected, nor will such execution, delivery and
carrying out violate any order, writ, injunction, decree,
law, rule or regulation of any court, regulatory agency or
other governmental body.
p. Enforceability of this Agreement. When duly executed and
delivered, this Agreement and the Exhibits hereto which
are incorporated herein and made a part hereof are legal,
valid and enforceable by the Company and the Seller
according to their terms, and that at the time of such
execution and delivery, the Seller will have acquired good
marketable title in and to the Everest Shares acquired
pursuant thereto.
5. Term. All representations, warranties, covenants and
agreements made herein and in the Exhibits attached hereto shall
survive the execution and delivery of this Agreement and payment
pursuant thereto.
6. The Everest Shares. All of the Everest Shares shall be
fully paid and non-assessable shares of Everest common stock,
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with full voting rights, dividend rights, and the right to
receive the proceeds of liquidation, if any. The Seller further
represent that the Everest Shares are being acquired by them for
investment and not with a view to or for resale in connection
with any distribution of stock within the meaning of the 33 Act.
By such representation, the Seller mean that they are acquiring
the Everest Shares for their own account for investment and that
no one else has any beneficial ownership in such shares nor are
such shares subject to any pledge or lien. Further, the Seller
understand that the Everest Shares will not be registered under
the 33 Act by reason of a specific exemption provided within.
Because the Everest Shares are unregistered under the Act, they
must be held indefinitely unless subsequently registered under
the 33 Act or an exemption from such registration is available.
The Seller further understand that in the event that there is a
continued market for the Everest common stock, any routine sales
of the Everest Shares made in reliance upon Rule 144 can be made
only in limited amounts in accordance with the terms and
conditions of that rule, and in the event that rule is not
applicable or is unavailable for any reason, registration under
the Act or compliance with exemption will be required. The Seller
understand that Everest is under no obligation to register under
the 33 Act the common stock that they are acquiring, nor to
effect compliance with any exemption from registration.
The Seller agree that each certificate representing any or all
of the Everest Shares shall bear on its face a legend in
substantially the following form:
These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold
or transferred in the absence of an effective
Registration Statement under that Act without an
opinion of counsel satisfactory to the Company that
such Registration is not required.
The Seller further consent that Everest will place a stop order
on the certificates evidencing the Everest Shares, restricting
the transfer of the Everest Shares, except in compliance with the
terms of this Agreement and the 33 Act. Everest shall provide
Seller an opinion of counsel reviewing the effects of the
restrictions referenced in this Agreement regarding the
Securities and Exchange Regulations on Everest's Stock sold to
Seller.
7. Non-Competition and Secrecy. Because Frank Bauer has had
access to information pertaining to the business of the Company
which may be secret and confidential, including the names,
addresses and other data pertaining to customers and employees,
and formulas, the Seller agrees that, effective upon the
Closing, for a period of two (2) years from the date of this
Agreement, he will not, in or with respect to any geographical
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area where the Company does business, directly or indirectly, be
financially interested in, or represent or render any advice or
services to, any other business which is competitive with that of
the Company, nor remove from the Company's premises either
originals or copies in any form of the names, addresses or
telephone numbers of any customers or employees of the Company or
any other confidential or proprietary information; provided,
however, that the foregoing restriction shall not preclude the
Seller from the ownership of less than two (2%) percent of the
voting securities of any company whose securities are traded on a
national securities exchange or in the over the counter market,
even if its business competes with that of the Company. Further, the
Seller agrees that, in the event he shall violate any of the
restrictions of this Section, Everest will be without adequate
remedy at law and will therefore be entitled to enforce such
restrictions by temporary or permanent injunctive or mandatory
relief obtained in action or proceeding instituted in any court
of competent jurisdiction without the necessity of proving damage
without prejudice to any other remedies it may have at law or in
equity.
8. Conditions Precedent to Closing. The obligations of the
Company and Seller under this Agreement and plan shall be and are
subject to fulfilment, prior to or at the Closing, of each of the
following conditions:
a) that Everest and its management representations and
warranties contained herein shall be true and correct
at the time of Closing as if such representations and
warranties were made at such time, and Everest shall
deliver a certificate to such effect at Closing;
b) that Everest and its management shall have performed or
complied with all agreements, terms and conditions
required by this Agreement to be performed or complied
with by them prior to or at the time of the Closing;
c) that the Company and Everest shall have entered into
employment agreements with Frank Bauer whereby Mr.
Bauer will be paid an annual salary of $52,000 plus
bonus to be determined at a later date.
d) that Everest shall have offered to the key executives,
officers and employees of Company the opportunity to
participate in the Everest employee share purchase plan
and that Everest shall have offered stock options to
key executives of the Company on terms equal to those
currently offered to other executives of Everest, all
to the satisfaction of the Seller within one hundred
eighty (180) days from the signing of this Agreement.
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e) that the Company and the Seller shall have completed
its due diligence investigations with respect to the
assets and undertakings of Everest, to its
satisfaction, within thirty (30) days from the signing
of this Agreement; and
f) Everest shall have provided Seller an opinion of
counsel reviewing the effects of the restrictions
reference in this Agreement regarding the United States
Securities and Exchange Regulations of Everest's stock
sold to Seller, satisfactory to the Seller.
9. Conditions Precedent to Closing of the Purchaser. The
obligations of Everest under this Agreement and plan shall be and
are subject to fulfilment prior to or at the Closing, of each of
the following conditions:
a) that the Company's and Seller's representations and
warranties contained herein shall be true and correct
at the time of closing date as if such representations
and warranties were made at such time, and Company and
Seller shall deliver a certificate to such effect at
the Closing;
b) that the Company and Seller shall have performed or
complied with all agreements, terms and conditions
required by this Agreement to performed or complied
with by then prior to or at the time of Closing.
10. Covenants of the Parties Prior to Closing. Upon the
satisfaction of the conditions precedent contained in paragraph 8
and 9 hereof, the parties shall do the following:
a) Each party will have full and free access to the books
and records, material contracts books and constating
documents of the other during the course of this
transaction and thereafter. If this transaction fails
to close, each party shall return all books and copies
and not disclose the content to any third parties;
b) Before Closing, the Company will provide Everest with
an accurate list of its inventory, accounts receivable,
office equipment and other equipment;
c) The parties shall operate their respective business in
the normal course, and shall not make any extraordinary
expenditure without the consent of the other party; and
11. Covenants of the Parties on Closing. On Closing, which will
occur 30 days after signing this Agreement, the parties agree to
do the following:
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a) At the Closing, the Company will elect Mr. Frank Bauer
to the Board of Directors;
b) Everest will have completed its Rule 504 offering
document raising gross proceeds of $1,000,000 USD of
which $70,000 will be used to retire shareholder's and
officer's loans to Seller and $40,000 to satisfy a
promissory note to Corrections Services, Inc. (attached
as Schedule "O")
c) At or within thirty (30) days after the closing, or so
soon thereafter as the Company can, the Company will
provide financial statements that satisfy all
requirements for acquired companies under Form 8-K
under the Securities Exchange Act of 1934, as amended
(the "34 Act") and Regulation S-X; and at the Closing
the Company will provide a letter from the independent
auditor of the effect that such financial statements
can be prepared and delivered within thirty (30) days
after Closing, or as soon thereafter as the Company
can;
12. Termination. This Agreement may be terminated at any time
before Closing by:
a. The mutual agreement of the parties.
b. Any party if:
i) any provision of this Agreement applicable to the
other party shall be materially untrue or fail to
be accomplished;
ii) any legal proceeding shall have been instituted
or shall be imminently threatening to delay,
restrain or prevent the consummation of this
Agreement.
For the purposes of this paragraph 12, the term "Party" shall mean
Everest on one hand and the Company and Seller collectively on the other
hand. Upon termination of this Agreement and plan before the Closing for
any reason, in accordance with the terms and conditions set forth in this
paragraph, each said party shall bear all costs and expenses as each
party has incurred. In the event of breach of this Agreement, the
prevailing party shall be awarded reasonable attorneys' fees.
13. Indemnification Against Brokerage. The Seller and the Company
on one hand and Everest on the other hand warrant and represent to each
other that no broker or finder has acted in connection with this
Agreement, other than in Schedule "P", and that they indemnify and
hold the other harmless from any claim or demand for commission or other
compensation by any broker, finder or similar agent claiming to have
been employed by any party.
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14. Schedules. All Schedules attached hereto are incorporated
herein by this reference as if they were set forth in their
entirety.
15. Miscellaneous Provisions. Time is of the essence in the
performance of this Agreement. This Agreement is the entire
agreement between the parties in respect of the subject matter
hereof, and there are no other agreements, written or oral, nor
may this Agreement be modified except in writing and executed by
all of the parties hereto. The failure to insist upon strict
compliance with any of the terms, covenants or conditions of this
Agreement shall not be deemed a waiver or relinquishment of such
right or power at any other time or times. This Agreement shall
be binding upon the parties, their successors, personal
representatives and heirs.
16. Closing. The Closing of the Reorganization shall take place
at 11:00 a.m. on the 30th day after the fulfilment or waiver of
all of the conditions contained in Agreement at the offices of
Everest Funding Corporation, 50 Broad Street, Suite 437, New York,
NY or such other date and place as the parties hereto shall agree
upon. At the Closing, all of the documents and items referred to
herein shall be exchanged.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Florida, except as to
corporate or securities matters required by law to be governed in
accordance with Nevada law.
18. Counterparts. This Agreement may be executed in any number
of counterparts, all of such counterparts shall be deemed to
constitute one and the same instrument, and each of the executed
counterparts shall be deemed an original hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands
and seals as of the date and year first above written.
EVEREST FUNDING CORPORATION, )
by its duly authorized signatories ) c/s
)
/s/ Robert W. Knight )
SPECIALTY DEVICE INSTALLERS, INC. )
by its duly authorized signatories )
)
/s/ Marjorie Bauer ) c/s
)
/s/ Frank Bauer )
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<PAGE>
FRANK BAUER, authorized signature
/s/ Frank Bauer
MARJORIE BAUER, authorized signature
/s/ Marjorie Bauer
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<PAGE>
LIST OF SCHEDULES
A. Issuance of shares of Everest to Shareholders of SDI
B. Constating Documents of SDI
C. Financial Statements of SDI
D. Material Contracts of SDI
E. Litigation of SDI
F. Licences and Registrations of SDI
G. Constating documents of Everest
H. Options for the Purchase of Shares of Everest
I. Financial Statements of Everest
J. Material Contracts of Everest
K. Litigation of Everest
L. Encumbrances to Assets of Everest
M. Non-Arm's Length Liabilities of Everest
O. Promissory Note to Correction Services, Inc.
P. Finder's Fee
Exhibit 10(b)(1)
AMENDMENT
THIS Amendment dated November 8, 1995 and made
BETWEEN: EVEREST FUNDING CORPORATION a Nevada Corporation, having
its principal office at 50 Broad Street, Suite 437,
New York, New York.
(hereinafter called "Everest")
OF THE FIRST PART
AND: SPECIALTY DEVICE INSTALLERS, INC. a Florida Corporation
having its principal office at 823 W. 57th Street, Fort
Lauderdale, Florida.
(hereinafter called the "Company")
OF THE SECOND PART
AND: FRANK R. BAUER AND MARJORIE J. BAUER, having an address
at 4090 122 Drive North, Royal Palm Beach, Florida.
(hereinafter called the "Seller")
OF THE THIRD PART
WHEREAS: The Seller, Company and Everest (collectively the "Parties") entered
into a purchase agreement dated October 9, 1995 attached hereto as Schedule "A"
(the "Agreement"); and
WHEREAS: the Parties hereby agree to amend the Agreement (the "Amended
Agreement") as set forth below.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. The Parties agree to waive the condition of Paragraph 11.(b) of the
Agreement concerning the completion of the Rule 504 Offering being done by
Everest as a condition of closing. Everest will provide the payment of
$70,000 to Seller and the payment of $40,000 to Correction Services.
2. Paragraph 16. shall be amended to read as follows: The closing of the
reorganization shall take place at 11:00 A.M. on the thirtieth day after the
fulfillment or waiver of all conditions contained in the Agreement at the
offices of Everest Funding Corporation, 50 Broad Street, Suite 437, New York,
New York or other such place as the parties may agree and which date shall be no
later than November 17, 1995 unless such date is extended in writing by the
Parties hereto. At the closing, all of the documents and items referred to
herein shall be exchanged.
<PAGE>
3. This Amended Agreement shall be governed by and construed in accordance with
the laws of Florida.
4. This Amended Agreement may be executed in any number of counterparts, all of
such counterparts shall be deemed to constitute one and the same instrument, and
each of the executed counterparts shall be deemed an original hereof.
IN WITNESS WHEREOF, the Parties hereto have set their hands and seals as of
the date and year first above written:
EVEREST FUNDING CORPORATION, )
by its duly authorized signatories) c/s
illegible signature )
SPECIALTY DEVICE INSTALLERS, INC. )
by its duly authorized signatories) c/s
illegible signature )
illegible signature )
FRANK BAUER, authorized signature
/s/ FRANK BAUER
MARJORIE BAUER, authorized signature
/s/ MARJORIE J. BAUER
EXHIBIT 10(c)
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made and effective this
1st day of October, 1995, by and between Everest Funding Corporation ("Company")
and Frank Bauer ("Executive").
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment.
Company hereby agrees to initially employ Executive as its President of
the Company's wholly owned subsidiary, Specialty Device Installers, Inc.
("SDI") and Executive hereby accepts such employment in accordance with the
terms of this Agreement and the terms of employment applicable to regular
employees of Company. In the event of any conflict or ambiguity between the
terms of this Agreement and terms of employment applicable to regular employees,
the terms of this Agreement shall control.
2. Duties of Executive.
The duties of Executive shall include the performance of all of the duties
typical of the office held by Executive as described in the bylaws of SDI and
such other duties and projects as may be assigned by a superior officer of SDI,
if any, or the board of directors of the Company. Executive shall devote his
entire productive time, ability and attention to the business of SDI and shall
perform all duties in a professional, ethical and businesslike manner.
Executive will not, during the term of this Agreement, directly or indirectly
engage in any other business, either as an employee, employer, consultant,
principal, officer, director, advisor, or in any other capacity, either with or
without compensation, without the prior written consent of the Company.
3. Compensation.
Executive will be paid compensation during this Agreement as follows:
A. A base salary of fifty-two thousand ($52,000) per year, payable in
installments according to SDI's regular payroll schedule. The base salary shall
be adjusted at the end of each year of employment at the discretion of the board
of directors and said salary shall not be reduced below the initial base salary.
B. An incentive salary equal to 10% of the adjusted net profits (hereinafter
defined) of SDI beginning with SDI's year end December 31, 1995 and each fiscal
year thereafter during the term of this Agreement. "Adjusted net profit" shall
be the net profit of SDI before federal and state income taxes, determined in
accordance with generally accepted accounting practices by SDI's independent
accounting firm and adjusted to exclude: i) any incentive salary
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<PAGE>
payments paid pursuant to this Agreement; (ii) any contributions to pension
and/or profit sharing plans; (iii) any extraordinary gains or losses
(including, but not limited to, gains or losses on disposition of assets);
(iv) any refund or deficiency of federal and state income taxes paid in a prior
year; and (v) any provision for federal or state income taxes made in prior
years which is subsequently determined to be unnecessary. The determination of
the adjusted net profits made by the independent accounting firm employed by SDI
shall be final and binding upon Executive and SDI. The incentive salary payment
shall be made within thirty (30) days after SDI's independent accounting firm
has concluded its audit. If the final audit is not prepared within ninety (90)
days after the end of the fiscal year, then SDI shall make a preliminary
payment equal to fifty percent (50%) of the amount due based upon the adjusted
net profits preliminarily determined by the independent accounting firm,
subject to payment of the balance, if any, promptly following completion of the
audit by the SDI's independent accounting firm.
4. Benefits.
A. Vacation. Following the first six months of employment, Executive shall
be entitled to fourteen (14) paid vacation days each year.
B. Sick Leave. Executive shall be entitled to sick leave and emergency leave
according to the regular policies and procedures of SDI. Additional sick leave
or emergency leave over and above paid leave provided by SDI, if any, shall be
unpaid and shall be granted at the discretion of the board of directors.
C. Pension and Profit Sharing Plans. Executive shall be entitled to
participate in any pension or profit sharing plan or other type of plan adopted
by SDI for the benefit of its officers and/or regular employees.
D. Expense Reimbursement. Executive shall be entitled to
reimbursement for all reasonable expenses, including travel and entertainment,
incurred by Executive in the performance of Executive's duties. Executive
will maintain records and written receipts as required by SDI policy and
reasonably requested by the board of directors to substantiate such expenses.
5. Term and Termination.
A. The Initial Term of this Agreement shall commence on October 1, 1995 and it
shall continue in effect for a period of Five (5) years. Thereafter, the
Agreement shall be renewed upon the mutual agreement of Executive and Company.
This Agreement and Executive's employment may be terminated at Company's
discretion during the Initial Term, provided that Company or SDI shall pay to
Executive an amount equal to payment at Executive's base salary rate for the
remaining period of Initial Term.
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<PAGE>
B. In the event that Executive is in breach of any material obligation owed
SDI or Company in this Agreement, habitually neglects the duties to be
performed under this Agreement, engages in any conduct which is dishonest,
damages the reputation or standing of the Company or SDI, or is convicted of any
criminal act or engages in any act of moral turpitude, then Company may
terminate this Agreement upon five (5) days notice to Executive. In event of
termination of the agreement pursuant to this subsection, Executive shall
be paid only at the then applicable base salary rate up to and including the
date of termination. Executive shall not be paid any incentive salary payments
or other compensation, prorated or otherwise.
C. In the event Company or SDI is acquired, or is the non-surviving party in
a merger, or sells all or substantially all of its assets, this Agreement shall
not be terminated and Company guarantees that the transferee or surviving
company is bound by the provisions of this Agreement.
D. In the event Executive terminates this agreement or is subject to
termination under paragraph B. above, and because executive has had access to
information pertaining to the business of the Company which may be secret
and confidential, including the names, addresses and other data pertaining
to customers and employees, and formulas, the Executive agrees that, effective
upon the date of this Agreement, and for a period of two (2) years from the
date of termination from this Agreement, he will not, in or with respect to any
geographical area where the Company does business, directly or indirectly, be
financially interested in, or represent or render any advice or services to, any
other business which is competitive with that of the Company, nor remove from
the Company's premises either originals or copies in any form of the names,
addresses or telephone numbers of any customers or employees of the Company or
any other confidential or proprietary information; provided, however, that
the foregoing restriction shall not preclude the Executive from the ownership of
less than two (2%) percent of the voting securities of any company whose
securities are traded on a national securities exchange or in the over the
counter market, even if its business competes with that of the Company.
Further, the Executive agrees that, in the event he shall violate any of the
restrictions of this Section, Company will be without adequate remedy at law and
will therefore be entitled to enforce such restrictions by temporary or
permanent injunctive or mandatory relief obtained in action or proceeding
instituted in any court of competent jurisdiction without the necessity of
proving damage without prejudice to any other remedies it may have at law or in
equity.
6. Notices.
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party
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<PAGE>
by personal delivery or by certified mail, postage prepaid, or recognized
overnight delivery services;
If to Company:
Everest Funding Corporation
50 Broad Street
Suite 437
New York, NY
10004
If to Executive:
Frank Bauer
4090 122 Drive North
Royal Palm Beach, FL
33411
7. Final Agreement.
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
8. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws of
the state of Florida.
9. Headings.
Headings used in this Agreement are provided for convenience only and shall not
be used to construe meaning or intent.
10. No Assignment.
Neither this Agreement nor any or interest in this Agreement may be assigned by
Executive without the prior express written approval of Company, which may be
withheld by Company at Company's absolute discretion.
11. Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
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<PAGE>
12. Arbitration.
The parties agree that they will use their best efforts to amicably resolve any
dispute arising out of or relating to this Agreement. Any controversy, claim or
dispute that cannot be so resolved shall be settled by final binding arbitration
in accordance with the rules of the American Arbitration Association and
judgment upon the award rendered by the arbitrator or arbitrators may be entered
in any court having jurisdiction thereof. Any such arbitration shall be
conducted in Florida, or such other place as may be mutually agreed upon by the
parties. Within fifteen (15) days after the commencement of the arbitration,
each party shall select one person to act as arbitrator, and the two arbitrators
so selected shall select a third arbitrator within ten (10) days of
their appointment. The prevailing party shall be entitled to costs plus
expenses, including attorney fees, associated with arbitration.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Everest Funding Corporation
By /s/ Robert Knight
Robert Knight
/s/ Frank Bauer
Frank Bauer
G.M. CAPITAL PARTNERS, LTD.
Hirzel House, Smith Street
St. Peter Port. Guernsey
GY1 2NG Channel Islands
October 1, 1995
Everest Funding Corporation
Mr. Robert Knight, President
50 Broad Street, Suite 437
New York, NY 10004
Dear Mr. Knight
This letter confirms the engagement agreement (the "Agreement") between G.M.
Capital Partners, Ltd. ("GMC") and Everest Funding Corporation, a Nevada
Corporation, (hereinafter "Everest" or the "Company") pursuant to which GMC
will furnish management consulting, financial advisory and investor relations
services. GMC will assist Everest in the capacity as detailed below.
1. RESPONSIBILITY OF GMC
A. Subject to the terms and conditions hereof, GMC services will include, among
other things, a due diligence overview of the Company including; reviewing
Everest's current financial position and projections relating to Everest's
capital requirements, analyzing the proforma effects of the financing on such
projections, and rendering advice on methods of structuring such financing
("Financing").
B. It is expressly acknowledged and agreed by the parties hereto that GMC's
obligations do not insure the successful negotiation of or obtaining of any type
of Financing for Everest and any efforts for obtaining Financing shall be on a
"best efforts" basis only. GMC is not a registered broker dealer.
C. The central task of GMC will be attracting suitable entities who are in the
business of or interested in making equity or debt investments in companies such
as Everest. Our role will include assisting the Company in proposing an equity
or debt investment in Everest to prospective investors, presenting your
analysis in support of the investment, and structuring and negotiating the
financial terms of the investment.
D. We will also assist in the coordination of the many parties involved and
attend to the numerous technical details required in arranging and finalizing
any transaction. These tasks often present substantive issues or other
difficulties and constitute the most time-consuming aspects of a Financing,
requiring an anticipation of problems and experienced coordination of attorneys
and other parties, as appropriate.
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2. INFORMATION
A. GMC will perform services for the Company in all areas generally considered
to be management consulting, financial advisory and investor relations,
including but not limited to the preparation and dissemination of financial
publicity, annual and interim reports for stockholders and the financial
community, preparation and dissemination of information concerning the Company's
operations, and consultation with respect to financial negotiations with
investment banking firms, lenders and private investors.
B. Information to be released by GMC will be disseminated to general, financial
and trade media, the investment banking community, banks and statistical
organizations, all as deemed necessary or appropriate by GMC and the Company.
C. All information to be disseminated through GMC will be based upon material
furnished by the Company and will be released only after receipt by GMC of final
approval from the Company. The Company recognizes that GMC may have, either at
the present time or in the future, obligations imposed upon it by the federal
securities laws to verify independently certain of the information contained in
release being made through it. Accordingly, the Company agrees that GMC shall
have the right to make such reasonable inquiries as it shall deem necessary or
appropriate of officers and employees of the Company and its counsel and
auditors with respect to information being released by GMC. The Company
recognizes that the accuracy and completeness of all information contained in
release ultimately rests with the Company and agrees to indemnify and hold GMC
harmless from and against any loss and expense arising out of a claim that any
information released by GMC is inaccurate or incomplete.
D. You acknowledge and understand that GMC, in order to perform its services
effectively under this agreement, and to satisfy such obligation as may be
imposed upon it by the federal securities laws, requires the prompt receipt of
all material information with respect to the Company, its operations and its
prospects. Accordingly, you agree to furnish promptly to GMC copies of all
reports and other filings with the Securities and Exchange Commission, all
communications with Stockholders and all reports received from your auditors.
Furthermore, you recognize the necessity of promptly notifying GMC of all
material developments concerning the Company, its business and prospects and to
supply GMC with sufficient information necessary for GMC to make a determination
as to its compliance with its own procedures as well as any legal requirements.
3. COMPENSATION TO GMC
In consideration of our services as set forth above, GMC shall be entitled to
receive, and Everest agrees to pay to GMC the following:
A. GMC will receive an initial payment of $10,000 to paid with the execution of
this Agreement.
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<PAGE>
B. GMC will receive a success fee ("Success Fee") in the form of a cash payment
in the amount of ten percent (10%) of the gross proceeds of any private
Financing, including any form of equity, convertible debt, debt with warrants,
debt with equity incentives to the lender, or any other form of equity, debt or
guarantees obtained by or invested in Everest payable upon closing or receipt of
funds by Everest or any entity described in Paragraph 6., whichever is earlier.
In the event Everest does a public financing or sells more than five (5%)
percent of Everest to any party, GMC will be entitled to a cash payment in the
amount of three (3%) percent of the gross proceeds of the investment.
C. Everest shall have sole discretion in determining what constitutes an
acceptable Financing as contemplated by this Agreement. GMC shall earn the
Success Fee only upon the closing or receipt of funds from a Financing as
described in 3.B, above, and not merely for presenting a financing option or
prospective investor which in Everest's sole discretion is unacceptable.
D. GMC will be retained as Financial Advisor, Management Consultant and
Investors Relations firm for the Company at a fee of $10,000 per month.
Excluding the initial payment, monthly payments will commence on the November 1,
1995, and will be payable on the 1st of each month for twelve (12) consecutive
months.
E. GMC or its assigns will receive an option with the execution of this
Agreement to purchase shares of the Company's common stock (the "Option"). The
number of shares subject to the Option shall be equal to four point nine (4.9%)
percent of the number of issued and outstanding shares of the Company's common
stock, on a fully diluted basis, immediately prior to the grant of the Option.
The Option shall expire five (5) years from the date of grant and shall have a
per share exercise price equal to fifty (50%) percent of the average Bid Price
of the Company's common stock for the previous 30 days as listed on the NASD
Electronic Bulletin Board, OTC Market prior to the signing of this Agreement.
The number of shares subject to the Option shall only be adjusted in the event
of; (i) a subdivision or combination of Everest's outstanding common stock; and
(ii) any distribution by Everest of a stock dividend to the holders of Everest's
common stock.
4. EXPENSE REIMBURSEMENT
Everest agrees to reimburse GMC all amounts due and owing GMC, under the terms
of this Agreement, no later than fifteen (15) days after receiving an invoice
for all customary or reasonable out-of-pocket expenses, including but not
limited to, the cost of telephone calls, travel, facsimile transmission,
translation, interpretation, paper duplication, due diligence reports, postage
and delivery services, or fees of counsel incurred in connection with the
performance by GMC of its duties as contemplated by this Agreement. All
out-of-town travel, counsel, or third party consultant fees, and other
significant expenses (Over $250) will be approved by Everest in advance. Everest
will make arrangements directly with and be responsible for cost of accountants,
appraisers, counsel and other experts and for the costs of printing and
circulating a business plan, memorandum or other documents prepared in
connection with performing appropriate due diligence of this Financing. If we
must file a lawsuit to collect any outstanding
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fees, out-of-pocket expenses, or other expenses due from Everest, Everest agrees
to pay reasonable costs and attorney's fees for such action.
5. EXCLUSIVITY
A. From the effective date of this Agreement, Everest and its officers will not
engage any other person or entity to serve as its agent or representative to
provide services similar to those to be provided by GMC through the term of this
Agreement without the prior written consent to GMC.
B. If for a period of five (5) years after successfully closing a Financing, as
contemplated under this Agreement, Everest desires to commence any Transaction
(as hereinafter defined), GMC shall have the right of first refusal to act as
Everest's financial advisors, to arrange for placement agents or underwriters,
as the case may be, with respect to any such Transaction or Transactions. For
purposes of this Agreement, the term "Transaction" shall include each of the
following; the purchase, sale, merger, consolidation or any other business
combination, in one or a series of transactions involving Everest or any sale of
securities of Everest or a New Entity as described below, effected pursuant to a
private sale or an underwritten public offering.
C. If Everest decides to actively pursue any such Transaction and GMC exercises
the right of first refusal provided hereunder, GMC and Everest will enter into
an agreement appropriate to the circumstances containing provisions for among
other things, compensation, indemnification, contribution, and representations
and warranties which are usual and customary for similar agreements entered into
by GMC or other investment bankers of national standing acting in similar
transactions. Everest agrees that it will not enter into any such Transaction,
unless GMC has waived their right of first refusal with respect thereto or prior
to or simultaneously with the consummation of such Transaction, until adequate
provision is made with respect to the payment of compensation to GMC as
contemplated hereby.
6. ASSIGNMENT AND TRANSFER OF OBLIGATION
In the event that Everest contributes, pledges, guarantees or otherwise conveys
any of its assets (including without limitation the assets of its subsidiaries
or affiliates) to, or incurs any liabilities on behalf of, or grants the
authority to operate its business(es) or affiliated business(es) to a new
entity, whether a corporation, partnership, sole proprietorship, or national
person ("New Entity") for the purpose of obtaining Financing as contemplated by
this Agreement, then GMC will be compensated by Everest for whatever funds were
received by the New Entity on the same basis as if the funds were invested
directly in Everest. The parties further agree that all Everest's rights and
obligations under the Agreement will be equally binding upon New Entity and that
Everest will not enter into or create any agreement, undertaking or legal
obligation with a New Entity without requiring said New Entity to accept and
satisfy Everest's right and obligations under this Agreement as if they were
their own.
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7. TWO YEAR PROVISION
If, within two (2) years from the termination of this Agreement, Everest or its
officers consummate any Financing with any party to whom Everest or its officers
were introduced by GMC or who was contacted by GMC in connection with its
services for Everest hereunder, or who received information prepared by GMC in
connection with the Financing, then Everest shall pay to GMC the agreed upon
compensation.
8. TERMINATION
This Agreement shall terminate twelve (12) months from the above written date of
this Agreement unless extended in writing and signed by both parties. GMC shall
be paid by Everest all fees earned through Termination Date together with
reimbursement of all expenses due hereunder. All such fees and reimbursement due
GMC shall be paid on or before the Termination Date. Notwithstanding anything
expressed or implied herein to the contrary, the terms and provisions of Section
2, 3, 4, 5, 6, 7, 9, 10, 11, 12, 13, 14, 15, and 16 shall survive the
termination of this Agreement.
9. INDEMNIFICATION
Since we will be acting on your behalf it is our practice to receive
indemnification. Everest agree to indemnify and hold harmless GMC against any
and all losses, claims, damages, liabilities or costs (and all actions in
respect thereof and any reasonable legal or other expenses in giving testimony
or furnishing documents in response to a subpoena or otherwise), including the
costs of investigating, preparing or defending any such action or claim whether
or not in connection with litigation in which GMC is a party, as and when
incurred, directly or indirectly, caused by, relating to, based upon, or arising
out of; (a) any Financing (as defined in or contemplated by this engagement
letter agreement, as it may be amended from time to time (the "Agreement")); or
(b) GMC's acting for Everest including without limitation, any act or omission
by GMC in connection with its acceptance of or of the performance or
nonperformance of its obligations under the Agreement; provided, however such
indemnity agreement shall not apply to any such loss, claim, damage, liability
or cost to the extent it is found to have resulted primarily and indirectly from
the gross negligence or willful misconduct of GMC. Everest also agrees that GMC
shall not have any liability (whether direct or indirect, in contract or tort or
otherwise) to Everest for or in connection with the engagement of GMC, except
for any such liability for losses, claims, damages, liabilities or expense that
is found to have resulted primarily and directly from GMC's gross negligence or
willful misconduct.
This Indemnification Agreement shall be in addition to any liability which
Everest may otherwise have to GMC or its affiliates, and the indemnification
provided for shall extend to J.A. Michie (North American Business Agent) GMC's
officers, employees, agents, legal counsel and controlling persons of GMC within
the meaning of the Securities Act of 1933, as amended. All references to GMC in
this Indemnification Agreement shall be understood to include any of the
foregoing.
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If any action proceeding, or investigation is commenced or claim is made as to
which GMC proposes to demand indemnification, it will notify Everest with
reasonable promptness. Everest reserves the right to assume the defense of GMC
with counsel of its choosing, which counsel shall be reasonably acceptable to
GMC. Everest will be liable for any settlement of any claim against GMC made
without its written consent. GMC may not settle any claim without the consent of
Everest.
No person found liable for fraudulent misrepresentations shall be entitled to
contribution from any person who is not also found liable for such fraudulent
misrepresentation. Notwithstanding the foregoing, GMC shall not be obligate to
contribute an amount under this Agreement that exceeds the amount of fees GMC
previously received pursuant to this Agreement.
If the indemnification provided for in this Indemnification Agreement shall for
any reason be unavailable to GMC in respect of any loss, claim, damage, or
liability, or any action in respect thereof, referred to therein, then each
Indemnifying Party shall, in lieu of indemnifying such Indemnified Party,
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage, or liability, or any action in respect thereof; (i)
in such proportion as shall be appropriate to reflect the relative benefits
received by Everest from the applicable Financing; or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in such
clause (i) but also the relative fault of GMC with respect to the actions or
inactions (including statements and omissions) that resulted in such loss,
claim, damage, or liability, or any action in respect thereof, as well as any
other relevant equitable considerations.
10. ENTIRE AGREEMENT
The Parties agree that the Agreement embodies the entire agreement and
understanding of the Parties and that no understanding or agreements, verbal or
otherwise, exists between the Parties excepts set forth in the Agreement. Any
modification to the Agreement must be reduced to writing, signed by both
Parties, and attached to the Agreement to be effective.
11. SEVERABILITY
Should any section or any part of any section of the Agreement be rendered void,
invalid, or unenforceable by any court of law for any reason such determination
shall not render void, invalid, or unenforceable any other section or any part
of any section in the Agreement.
12. SURVIVAL OF REPRESENTATIONS
Each Party, for itself, and its successors, heirs, executors, administrators,
representatives, insures, agents, and assigns, covenants and agrees that all
representations made hereunder and obligations created hereunder shall apply to
their successors and assigns provided however, that GMC shall not assign this
Agreement to a third party without the prior written consent of a duly
authorized representative of Everest which consent shall not be unreasonable
withheld.
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13. NOTICES
Any required notices under this Agreement shall be made by overnight courier or
certified mail, postage prepaid and return receipt requested as follows:
If to GMC:
G.M. Capital Partners, Ltd.
Hirzel House, Smith Street
St. Peters Port, Guernsey
Channel Islands, GY1 2NG
With copies to:
Mr. J.A. Michie
North American Business Agent
G.M. Capital Partners, Ltd.
P.O. Box 231
Port Coquitlam, B.C.
V3C 3V7 Canada
If to Everest:
Mr. Robert Knight
Everest Funding Corporation
50 Broad Street, Suite 437
New York, NY 10004
14. CHOICE OF LAW
The validity and interpretation of this Agreement shall be governed by the laws
of the State of Nevada, without giving effect to the State of Nevada's choice of
law principle and all actions arising under this Agreement or arising out of the
operative facts represented by services performed pursuant to this Agreement
shall be resolved in the courts of the State of Nevada.
15. HEADINGS
The headings are for informational purposes only and shall not constitute a part
of this Agreement.
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16. NO WAIVER OF BREACH
Waiver of any one breach of the provisions of this Agreement shall not be deemed
a waiver of any other breach of the same or any other provision of this
Agreement.
AGREED AND ACCEPTED:
Please confirm that the foregoing correctly sets forth our mutual understanding
by signing and returning the copy of this Agreement provided for that purpose.
Everest Funding Corporation G.M. Capital Partners, Ltd
Robert Knight J.A. Michie
North America Business Agent
By: /s/ Robert Knight By: /s/ J.A. Michie
------------------------- -------------------------
Title: President Title: N.A. Business Agent
----------------------- ----------------------
Date: October 1, 1995 Date: October 1, 1995
------------------------ -----------------------
8
EVEREST SECURITY SYSTEMS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
Everest Security Systems Corporation, a Nevada corporation ("EVST"), hereby
grants to G.M. Capital Partners, Ltd., ("Optionee") an option to purchase up to
74,720 shares of the Common Stock of EVST (the "Shares"), at an exercise price
of $2.00 per share, said option to expire on December 31, 2000.
This Agreement is executed by EVST and Optionee pursuant to the Everest
Security Systems Corporation 1995 Stock Option Plan as amended (the "Plan").
EVST recognizes that the Optionee has performed services for EVST which
services fall within the eligibility provisions set forth in Section 3(a) of the
Plan.
EVST and Optionee agree that the number of options issued to Optionee, and
the exercise terms, were determined by EVST and are fair and reasonable.
Optionee acknowledges that he has received and read a copy of EVST's 1995 Stock
Option Plan, as amended; Optionee understands and agrees to abide by the terms
and conditions of said Plan.
This Employee Stock Option Agreement ("Agreement") may be executed
simultaneously in two or more counter parts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Execution and deliver of this Agreement by exchange of facsimile
copies bearing the facsimile signature of a party hereto shall constitute a
valid and binding execution and delivery of the Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.
The validity, construction and enforceability of this Agreement shall be
governed in all respects by the laws of the State of Delaware without regard to
its rules concerning conflicts of laws.
This Agreement shall be binding upon the parties hereto and inure to the
benefits of the parties, their respective heirs, administrators, executors,
successors and assigns.
IN WITNESS WHEREOF, this Employee Stock Option Agreement has been executed
effective as of October 31, 1995.
EVEREST SECURITY OPTIONEE
SYSTEMS CORPORATION
BY: /s/ Robert Knight /s/ J.A. Michie
----------------------------- ------------------------------
EVEREST SECURITY SYSTEMS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
Everest Security Systems Corporation, a Nevada corporation ("EVST"), hereby
grants to Frank Bauer ("Optionee") an option to purchase up to 100,000 shares of
the Common Stock of EVST (the "Shares"), at an exercise price of $2.00 per
share, said option to expire on December 31, 2000.
This Agreement is executed by EVST and Optionee pursuant to the Everest
Security Systems Corporation 1995 Stock Option Plan as amended (the "Plan").
EVST recognizes that the Optionee has performed services for EVST which
services fall within the eligibility provisions set forth in Section 3(a) of the
Plan.
EVST and Optionee agree that the number of options issued to Optionee, and
the exercise terms, were determined by EVST and are fair and reasonable.
Optionee acknowledges that he has received and read a copy of EVST's 1995 Stock
Option Plan, as amended; Optionee understands and agrees to abide by the terms
and conditions of said Plan.
This Employee Stock Option Agreement ("Agreement") may be executed
simultaneously in two or more counter parts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Execution and delivery of this Agreement by exchange of facsimile
copies bearing the facsimile signature of a party hereto shall constitute a
valid and binding execution and delivery of the Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.
The validity, construction and enforceability of this Agreement shall be
governed in all respects by the laws of the State of Delaware without regard to
its rules concerning conflicts of laws.
This Agreement shall be binding upon the parties hereto and inure to the
benefits of the parties, their respective heirs, administrators, executors,
successors and assigns.
IN WITNESS WHEREOF, this Employee Stock Option Agreement has been executed
effective as of October 16, 1995.
EVEREST SECURITY OPTIONEE
SYSTEMS CORPORATION
BY: /s/ Robert Knight /s/ Frank Brauer
--------------------------- ---------------------------
TO COME
EXHIBIT 28
EVEREST SECURITY SYSTEMS CORPORATION
INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan. This Incentive Stock Option Plan (hereinafter
called the "Plan") is intended to encourage ownership of stock of EVEREST
SECURITY SYSTEMS CORPORATION (hereinafter called the "Corporation") by key
employees of the Corporation and its corporate subsidiaries and to provide
additional incentive for them to promote the success of the business of
the Corporation.
2. Eligibility. (a) Options may be granted only to persons who at the
time of the grant are key employees of the Corporation or any subsidiary (who
may also be officers of the Corporation or of any such subsidiary). Members of
the Board of Directors who are not employed as regular salaried employees of the
Corporation or any subsidiary shall not be eligible to participate in the Plan.
For purposes of the Plan, the terms "subsidiary" means any corporation of which
the Corporation owns, directly or indirectly, stock possessing 50% or more of
the total combined voting power of all classes of stock of such corporation, as
more particularly defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"). (The Corporation and its subsidiaries
are sometimes hereinafter called "Employer Corporations" and
individually "Employer Corporation").
(b) No option shall be granted to an employee who
owns more than ten (10%) percent of the total combined voting power
of all classes of stock of the Corporation or any subsidiary,
unless the option meets the requirements of Section 422(c)(5) of
the Code.
3. Stock Subject to the Plan. The stock subject to the
options to be granted pursuant to the Plan (hereinafter called
"Options") shall be the common stock, par value $.001 per share, of
the Corporation (the "Stock"). There shall be reserved for
issuance upon the exercise of Options an aggregate of 1,000,000
shares of authorized but unissued Stock. If any Options granted
hereunder shall expire unexercised or otherwise shall terminate,
the shares covered thereby shall be restored to the shares reserved
for issuance under the Plan and used for the purpose of granting
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other Options under the Plan.
4. Administration of the Plan. (a) The Plan shall be administered
by the Board of Directors of the Corporation; provided, however, that
commencing at such time as the shares of Stock of the Corporation are required
to be registered under Section 12(g) of the Securities Exchange Act of 1934,
the Plan shall be administered by a Committee appointed by the Board of
Directors of the Corporation consisting of not less than a sufficient
number of disinterested members of such Board so as to qualify the Committee to
administer the Plan as contemplated by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (or any successor rule). The administering body
is hereinafter called the "Administrator".
(b) The Administrator will determine the time or times at which
Options shall be granted, the key employees to be granted Options, the number of
shares subject to each Option, and the time or times during the term of each
Option when such Option may be exercised. In making such determination, the
Administrator may take into consideration the employees present and potential
contribution to the Corporation's success and any other factors which the
Administrator may deem relevant. The Administrator shall have the exclusive
authority to construe the terms of the Plan and any Options granted under it.
5. Term of Option. Subject to earlier termination as hereafter
provided, each Option shall expire on such date as the Administrator shall
determine, provided that in no event shall an Option be exercisable after the
expiration of ten (10) years from the date of grant thereof. Nothing contained
in Paragraphs 11 or 12 hereof shall operate to extend the term of an Option
beyond the expiration date set forth in such Option.
6. Option Price. The purchase price of each share of Stock under each
option shall be determined by the Administrator but in no event shall be less
than the fair market value of such share of Stock at the time of the grant of
such Option.
7. Exercise of Options. (a) (i) Each Option shall be exercisable as
to all or any part of the shares subject thereto at any time, or from time to
time, or in such amounts of shares and at such time or times as the
Administrator may determine, on or after
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the date of grant and on or prior to the expiration date of the Option. Each
exercise of an Option shall be effected by the delivery of written notice of
exercise to the Corporation at its principal office together with payment of the
purchase price for the number of shares as to which the Option is exercised.
(ii) The purchase price of shares of Stock as to which an
Option shall be exercised may be paid: (x) in United States dollars in cash or
by check, bank draft or money order payable to the order of the Corporation, or
(y) at the discretion of the Administrator, through the delivery of shares of
Common Stock of the Corporation with a value equal to the Option price, or (z)
by a combination of both (x) and (y) above. The Administrator shall determine
acceptable methods for tendering Common Stock as payment upon exercise of an
Option and may impose such limitations and prohibitions on the use of Common
Stock to exercise an Option as it deems appropriate.
(iii) Except as provided in Paragraphs 11 or 12 hereof, an
Option may be exercised only if the optionee shall have been in the continuous
employ of an Employer Corporation from the date of grant of the Option to the
date of its exercise. No person to whom an Option is granted shall have any of
the rights of a shareholder of the Corporation with respect to the shares of
Stock covered by the Option, except to the extent that one or more certificates
for such shares of Stock shall have been issued upon the due exercise of the
Option.
(b) The obligation of the Corporation to issue, or transfer or
deliver shares of Stock for Options exercised under the Plan shall be subject to
all applicable laws, regulations, rules and orders which shall be in effect.
The Administrator may require the person exercising an Option to make such
representations and furnish such information as it may deem appropriate in
connection with the issuance of the shares of Stock in compliance with
applicable law or sound corporate practice.
8. Notice of Grant. When any grant of an Option under this Plan is
made to any employee, the employee shall be promptly notified of such grant and
a written notice of such grant shall be sent to the employee at his last known
address. As soon thereafter as practicable, a formal option agreement shall be
executed by and
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between the Corporation and the employee, which agreement shall be substantially
in the form approved by the Administrator and shall be subject to the conditions
and limitations of the Plan.
9. Action to Prevent Dilution. If any change is made in the Stock
subject to the Plan by reason of a stock dividend, stock split,
recapitalization, merge, consolidation, sale or exchange of assets or other
change in the Stock of the Corporation at the time outstanding, the Board of
Directors of the Corporation may take such action as it determines to be
appropriate to adjust the kind and number of shares or price per share or both
of the Stock subject to the Plan or any Option granted hereunder. Any such
determination by the Board of Directors shall be conclusive.
10. Non-Transferability of Options. Except as provided in Paragraph
12, an Option shall be exercisable during the lifetime of the person to whom it
is issued only by such person. It shall not be assigned, pledged or
hypothecated in any way, shall not be subject to execution and shall not be
transferable otherwise than by will or the laws of descent and distribution.
Any attempt or assignment, transfer, pledge, hypothecation or other disposition
of any Option granted hereunder contrary to the provisions hereof, and the levy
of any attachment or similar proceedings upon any Option, shall be null and
void.
11. Termination of Employment. Subject to the provisions of
Paragraph 5, if the holder of an Option shall cease to be employed by an
Employer Corporation by reason of death or any other reason other than
voluntarily quitting, discharge for cause or permanent and total disability as
defined in Section 22(e)(3) of the Code (hereinafter called a "Disability"), as
determined by the Administrator, the holder may, but only within the three
months next succeeding such cessation of employment, exercise such Option to the
extent that the holder would have been entitled to do so on the date of such
cessation of his employment. If a holder of an Option voluntarily quits or is
discharged for cause, such Option shall terminate on the date of cessation of
employment.
12. Disability. Subject to the provisions of Paragraph 5, if the
holder of an Option shall cease to be employed by an Employer Corporation by
reason of a Disability, the Option shall be exercisable by the holder or the
Holder's duly appointed guardian or other legal representative, to the extent
that the holder would
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have been entitled to do so on the date of such cessation of employment, but
only within one year following such cessation of employment due to said
Disability.
13. Liquidation. Except in connection with any event described in
Paragraph 9 as to which the Board of Directors has determined to make an
appropriate adjustment, upon the complete liquidation of the Corporation, any
unexercised Options shall be deemed cancelled. In the event of the complete
liquidation of an Employer Corporation (other than the Corporation) employing
an Option holder or in the event such corporation ceases to be an Employer
Corporation, any unexercised part of any Option granted hereunder shall be
deemed cancelled unless the holder thereof shall become employed by another
Employer Corporation (including the Corporation) concurrently with such event.
14. Amendment to the Plan. The Board of Directors of the Corporation
may at any time terminate or from time to time modify or suspend the Plan,
provided that no such termination, modification or suspension shall adversely
affect any rights or obligations of the holders of any Option granted prior to
the effective date of termination, modification or suspension, and further
provided that no such modification, without the approval of the shareholders,
shall:
(a) except as provided in Paragraph 9, increase the maximum
number of shares of Stock as to which Options may be granted under the Plan;
(b) decrease the minimum Option price per share;
(c) extend the period during which Options may be granted;
(d) materially increase benefits accruing to optionee; or
(e) change the designation or class of employees eligible to
participate in the Plan.
15. Employment Obligations. The grant of an Option hereunder shall
not impose any obligation on any Employer Corporation to continue the
employment of any person.
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16. Stockholder Approval and Effective Dates. Upon approval by the
shareholders of the Corporation, the Plan shall become unconditionally effective
as of September 1, 1994. No Option shall be granted after August 30, 2020;
provided, however, that the Plan and all outstanding Options granted under the
Plan prior to such date shall remain in effect until the applicable Options have
expired. If the shareholders shall not approve the Plan, the Plan shall not be
effective and any and all actions taken prior thereto shall be null and void or
shall, if necessary, be deemed to have been fully rescinded.
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