<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
-------------------------
COMMISSION FILE NUMBER O-17580
-------------------------
FIRETECTOR INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2941299
(State or jurisdiction of (IRS Employer identification
incorporation or organization) Number)
262 Duffy Avenue, Hicksville, New York 11801
(Address of principal executive offices Zip Code)
(516) 433-4700
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that Registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: As of May 14, 1996, 3,243,400 shares of Registrant's
Common Stock were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE>
Part I - FINANCIAL INFORMATION
Firetector Inc. and Subsidiaries
Consolidated Balance Sheet
Unaudited
<TABLE>
<CAPTION>
March 31,
1996
----------------
<S> <C>
ASSETS
Current assets:
Cash $ 235,797
Accounts receivable, principally
trade, less allowance for
doubtful accounts of $175,445 3,952,982
Accounts receivable from affilitaed companies 351,212
Inventories 2,130,198
Prepaid expenses and other current assets 216,286
-------------
Total current assets 6,886,475
-------------
Property, Plant and Equipment at cost, less
accumulated depreciation and
amortization of $480,097 510,224
Software Development Costs, net 77,038
Other Assets 428,812
Deferred Taxes 255,000
-------------
Total assets $8,157,549
=============
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Balance Sheet (continued)
Unaudited
<TABLE>
<CAPTION>
March 31,
1996
------------------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable bank $1,938,509
Other notes payable 125,725
Accounts payable and accrued expenses 1,743,663
Unearned service revenue 328,449
Current portion of capital lease obligations 6,329
---------------
Total current liabilities 4,142,675
Notes payable to bank 321,430
Other notes payable, less current portion 344,073
Capital lease obligations, less current portion 5,072
Due to affiliated companies 191,839
--------------
Total liabilities 5,005,089
--------------
Stockholders' equity:
Convertible preferred stock, 2,000,000
shares authorized - 675,000 shares issued
and outstanding 675,000
Common stock, 25,000,000 shares authorized,
$.001 par value; issued and outstanding
3,243,400 shares 3,243
Capital in excess of par 5,310,551
Deficit (2,836,334)
-----------
Total stockholders' equity 3,152,460
-----------
Total liabilities and stockholders' equity $8,157,549
===========
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
March 31,
1996 1995
---------------------
<S> <C> <C>
Net sales $2,285,009 $2,461,929
Service revenues 1,310,269 1,065,587
-----------------------
Total revenues 3,595,278 3,527,516
-----------------------
Cost of sales 1,251,504 1,731,889
Cost of service 715,655 533,268
Selling, general and administrative 1,017,770 1,058,512
Interest expense 72,283 86,763
Depreciation and amortization expense 64,262 63,303
Statutory insurance refund (97,923)
Gain on sale of servcie contracts (208,571)
Other (income) net (6,520)
----------------------
2,808,460 3,473,735
----------------------
Income from continuing operations before
provision (credit) for income taxes 786,818 53,781
Provision (credit) for income taxes:
Current
Deferred (77,000)
----------------------
Net income $ 863,818 $ 53,781
======================
Per share data: ----------------------
Net income $ 0.13 $ 0.02
======================
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
March 31,
1996 1995
------------------------
<S> <C> <C>
Net sales $4,214,130 $4,506,597
Service revenues 2,323,264 2,094,819
------------------------
Total revenues 6,537,394 6,601,416
------------------------
Cost of sales 2,410,625 2,936,673
Cost of service 1,311,007 1,198,559
Selling, general and administrative 2,020,128 2,113,423
Interest expense 148,765 163,810
Depreciation and amortization expense 126,056 115,287
Statutory insurance refund (97,923)
Gain on sale of servcie contracts (208,571)
Other (income) net (11,267)
------------------------
5,698,820 6,527,752
------------------------
Income from continuing operations before
provision (credit) for income taxes 838,574 73,664
Provision (credit) for income taxes:
Current
Deferred (95,000)
----------------------
Net income $ 933,574 $ 73,664
========================
Per share data: -------------------------
Net income $ 0.14 $ 0.02
=========================
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
<PAGE>
Firetector Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For The Six Months Ended
March 31,
1996 1995
-----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $933,574 $ 73,664
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 144,462 115,287
Provision for doubtful accounts 40,000 30,000
Changes in operating assets and liabilities:
Accounts receivable (197,577) 79,310
Inventories, prepaid expenses and other
current assets (293,825) (241,297)
Accounts receivable from affiliated
company (54,600)
Other assets 32,091 (105,684)
Accounts payable and accrued expenses (235,879) 61,020
Unearned service revenue 4,311 (66,796)
Due to affiliated companies 52,874 5,665
---------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 425,431 (48,831)
INVESTING ACTIVITIES
Purchases of property and equipment (110,812) (82,987)
Software development costs (800)
---------------------
NET CASH USED IN INVESTING ACTIVITIES (111,612) (82,987)
FINANCING ACTIVITIES
Principal payments on revolving line of
credit, long term debt, notes payable
and capital lease obligations (173,245) (271,170)
Proceeds from revolving line of credit,
notes payable and capital
lease obligations 95,223 369,296
---------------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (78,022) 98,126
---------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 235,797 (33,692)
Cash and cash equivalents at beginning
of period 94,258
---------------------
Cash and cash equivalents at end of period $235,797 $60,566
=====================
<FN>
See accompanying Notes to the Consolidated Financial Statements.
/TABLE
<PAGE>
FIRETECTOR INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Results for the six
months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending September
30, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Registrant Company and Subsidiary's annual report on Form
10-KSB for the year ended September 30, 1995.
2. INVENTORY
Inventories are priced at the lower of cost (first- in,
first-out) or market and consist primarily of raw materials.
3. LONG TERM DEBT
The Registrant has a credit facility with a New York City bank
for $2,500,000. The credit facility provides for a $500,000 three
year term loan (with a seven year amortization) and a $2,000,000
revolving line of credit through March 31, 1997. The credit
facility provides for interest at prime plus 2% on outstanding
balances. Advances under the credit facility are measured against
a borrowing base calculated on eligible receivables and
inventory. The credit facility is secured by all of the assets of
the Registrant and all of its operating subsidiaries, as well as
a $500,000 letter of credit provided by the Registrant's majority
shareholder, Mirtronics Inc. ("Mirtronics").
An affiliate of Mirtronics guaranteed minimum increases in
retained earnings of $100,000 for fiscal 1994 (with a maximum
guarantee of $100,000) and $250,000 for fiscal 1995 (with a
maximum guarantee of $250,000). Due to the loss in fiscal 1994,
the guarantor loaned the Registrant the required $100,000 which
is subordinated to the bank. This loan bears interest at a rate
of 5% above the prime rate of The Royal Bank of Canada and is
payable upon demand subject to its subordination.
The credit facility includes certain restrictive covenants, which
among other things, impose limitations on declaring or paying
dividends, acquisitions and capital expenditures. The Registrant
is also required to maintain various financial ratios. At
FIRETECTOR INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
SIX MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
September 30, 1995, and continuing through March 31, 1996, the
Registrant was not in default of any of its financial covenants.
4. TRANSACTIONS WITH RELATED PARTIES
At March 31, 1996, the Registrant was indebted to Mirtronics and
its subsidiaries for materials, loans, and miscellaneous advances
in the aggregate amount of $191,838. This indebtedness is secured
by a pledge of all of the Registrant's assets and is subordinate
to debt payable to the Registrant's bank. The Registrant is also
indebted, on a demand basis to First Corporate Equity Ltd., an
affiliate of a director of Mirtronics, for notes payable in the
aggregate amount of $198,468 at March 31, 1996. The Registrant
has a receivable from Mirtronics and its subsidiaries in the
amount of $351,211 at March 31, 1996.
In July 1994, in consideration of Mirtronics extending the term
of its letter of credit in connection with the Company's credit
facility (see Note 6) and making further advances to the Company,
the Company's Board of Directors restated the price, terms and
conditions of previously granted conversion rights and options to
Mirtronics. In addition, the Board also granted Mirtronics
500,000 additional options. Presently, Mirtronics has the right
to acquire up to an aggregate of 1,840,000 shares of common stock
at an exercise price of $.30 per share. The options expire on
December 31, 1998.
5. LEGAL PROCEEDINGS
On December 29, 1994 Casey Systems, Inc. ("Casey") filed suit in
the United States District Court for the Southern District of New
York against its largest competitor in the New York City life
safety market, Firecom, Inc. and a number of its affiliates. The
suit, which sought legal damages in excess of $10,000,000 and
certain equitable remedies, was based on numerous Federal and
State claims including, without limitations, violation of Federal
and New York State anti-trust statutes, unfair competition,
unlawful theft of proprietary information, deceptive trade
practices, tortious interference with contract and other claims.
The suit also set forth a breach of contract claim against a
customer of Casey who breached a contract with Casey. On March
28, 1996 the litigation was settled with agreements relating to
cross-licensing, royalty payments and other considerations.
6. OTHER
On March 29, 1996, Systems Service Technology Corp. ("SST"), a
FIRETECTOR INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - Continued
SIX MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
wholly owned subsidiary of the Registrant, sold selected assets
to Sirina Protection Systems Corp. ("Sirina") which included the
right to certain SST contracts to provide service or maintenance
to selected buildings. As consideration for the purchase of such
assets Sirina paid SST an aggregate of $378,000.
For the years 1990 through and including 1995, the Registrant,
upon review, discovered it had been overcharged by a statutory
employee related insurance fund in the amount of approximately
$250,000. The fund has confirmed this amount and intends to make
payment within the next fiscal quarter. The Registrant continues
to investigate and negotiate similar overcharges by other funds
which should also be resolved during the next fiscal quarter.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Unaudited)
Liquidity and Capital Resources
The Registrant has a credit facility with a New York City bank
for $2,500,000. At March 31, 1996 the Registrant owed $2,259,939
under the terms of the credit facility. The credit facility
provides for a $500,000 three year term loan (with a seven year
amortization) and a $2,000,000 revolving line of credit through
March 31, 1997. The credit facility provides for interest at
prime plus 2% on outstanding balances. Advances under the credit
facility are measured against a borrowing base calculated on
eligible receivables and inventory. The credit facility is
secured by all of the assets of the Registrant and all of its
operating subsidiaries, as well as a $500,000 letter of credit
provided by the Registrant's majority shareholder. An affiliate
of Mirtronics had guaranteed minimum increases in retained
earnings of $100,000 for fiscal 1994 (with a maximum guarantee of
$100,000) and, if the credit facility was renewed, $250,000 for
fiscal 1995 (with a maximum guarantee of $250,000). Due to the
loss in fiscal 1994, the guarantor loaned the Registrant the
required $100,000 which is subordinated to the bank. This loan
bears an interest rate of 5% above the prime rate of The Royal
Bank of Canada and is payable upon demand subject to its
subordination.
The credit facility includes certain restrictive covenants, which
among other things, impose limitations on declaring or paying
dividends, acquisitions and capital expenditures. The Registrant
is also required to maintain various financial ratios. At
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Unaudited)
(continued)
Liquidity and Capital resources (continued)
September 30, 1995, and continuing through March 31, 1996, the
Registrant was not in default of any of its financial covenants.
Net cash provided by operations for the six months ended March
31, 1996 amounted to $425,431 as compared to net cash used by
operations of $48,831 for the comparable prior year period. The
primary reason for the provision of cash was net income from
operations of $933,574 as compared to $73,664 for the comparable
prior year period. The reduction in trade accounts receivable of
approximately $342,000 was also a primary factor in the provision
of cash for the six months ended March 31, 1996. Although the
settlement of litigation occurred prior to March 31, 1996 related
payments were not made until after the balance sheet date,
therefore artificially inflating accounts receivable. In
addition, the refund due from statutory insurance has been
confirmed, but not paid, therefore also inflating the nontrade
portion of accounts receivable. The decrease in trade accounts
receivable was primarily due to a program of negotiation of terms
prior to the beginning of a project, the monitoring of its terms
during a project and completing projects in a more timely
fashion, resulting in faster final payments. It is the intention
of the Registrant to continue this program throughout fiscal
1996.
Results of Operations
The Registrant's product revenues during the three and six month
periods ended March 31, 1996 decreased to $2,285,009 and
$4,214,130 respectively, as compared to $2,461,929 and
$4,506,597, respectively, for the comparable period of the prior
year. The decrease in product sales was primarily the result of
delays in customer requirement/capacity to accept shipment on
current orders for transit and school projects. The Registrant
expects to commence shipments of these large projects within the
next fiscal quarter. Service revenues during the three and six
month periods increased to $1,310,269 and $2,323,264 as compared
to $1,065,587 and $2,094,819. Service revenues include initial
licensing and royalty payments relating to settlement of the
litigation (net of legal expenses).
Gross profit on product revenues for the three and six month
periods ended March 31, 1996 was 45% and 43% respectively, as
compared with 30% and 35% respectively, for the comparable 1995
period. The significant increase is due to previously announced
cost reductions, improved operating methods designed to reduce
material usage and labor cost, as well as the movement of product
mix from lower margin distributed life safety products to higher
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Unaudited)
(continued)
Results of Operations (continued)
margin integrated systems (sound, security, life safety etc.),
which carry a higher gross profit percentage.
Gross profit on service revenues for the three and six month
periods ended March 31, 1996 was 45% and 44%, respectively, as
compared with 50% and 43%, respectively, for the comparable 1995
period due to the downward pressure on prices resulting from the
highly competitive New York City service market.
Net income from operating activities for the three and six month
periods ended March 31, 1996 increased to $786,818 and $838,574,
respectively, as compared to net income of $53,781 and $73,664,
respectively, for the comparable 1995 period. This increase is
primarily attributable to improved product gross profit, initial
licensing and royalty payments resulting from litigation
settlement (net of legal expenses) and approximately $252,000 in
statutory insurance refunds and a gain of $208,571 on the sale of
selected service contracts. Management elected to dispose of
these service contracts which it considered marginal in order to
focus resources on priority business segments and to raise cash
to fund performance of the order backlog. The realization of the
impact of personnel reductions, lower occupancy costs and other
cost reductions also contributed to the increase in net income.
Results in the period were impacted by approximately $46,000
of full year vacation and similar benefit accruals.
Results from the operating units were the highest in the
Registrant's history (after discounting statutory refunds, gain
on sale of service contracts and litigation settlement(net of
legal expense)), notwithstanding a sales level far lower than
Management's current estimate for the balance of the fiscal year.
The backlog of orders at March 31, 1996 amount to $8,508,079
compared to $7,186,000 at December 31, 1995 and $6,200,000 at
September 30, 1995. Management expects to improve profitability
as the Registrant ships from its increased product backlog. It
is anticipated that at least 50% of the current backlog will be
completed by the end of fiscal 1996. Management also expects
profits to be impacted positively due to further improvement in
operating efficiencies, avoidance of probable direct and indirect
costs related to continued litigation and further focus on higher
margin niche marketing.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable
Item 2. Changes in Securities.
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 10.1 Contract Purchase Agreement by and
between Systems Service Technology and Sirina Protection Systems
Corp., dated March 29, 1996
Ex-27 Financial data Schedule
b. Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter
ended March 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRETECTOR, INC.
(Registrant)
Date: May 15, 1996 MARC PALKER
------------------------------------
MARC PALKER, SECRETARY
CONTRACT PURCHASE AGREEMENT
by and between
SYSTEMS SERVICE TECHNOLOGY CORPORATION
and
SIRINA PROTECTION SYSTEMS CORP.
Parties
This Contract Purchase Agreement ("Agreement") is made as of
March 29, 1996 by and between Systems Service Technology
Corporation, a New York corporation having an office at 5 Penn
Plaza, New York, New York ("SST"), and Sirina Protection System
Corp., a New York corporation having an office at 128 Charlotte
Avenue, Hicksville, New York ("Sirina").
Recital
Sirina desires to enter into the business (the "Business")
of servicing fire, life safety and security systems as installed
in certain buildings (each, a "Building"), and desires to acquire
from SST, and SST desires to sell to Sirina certain of SST's
contracts related to the Business.
Terms of Agreement
In consideration of the mutual premises, covenants, terms
and conditions provided below, the parties hereby agree as
follows:
ARTICLE I
Purchase and Sale of Assets and Business
1.1 Purchase and Sale. Subject to, and upon, the terms of
this Agreement, SST hereby agrees to sell and Sirina hereby
agrees to purchase as of March 29, 1996 (the "Closing Date"),
free and clear of any liens, charges, encumbrances or
liabilities, excepting from the foregoing only those
obligations expressly assumed by Sirina, all of SST's right,
title and interest in, to or under the following assets (the
"Assets"):
1.1.1 Service Contracts. The right to all of SST's
contracts to provide service or maintenance listed on Schedule
1.1.1 attached hereto (the "Service Contracts").
1.1.2 Schematics, Drawings, Etc. All schematics,
drawings, instructions, blueprints, charts, diagrams, layouts,
plans or similar documents, in whatever form the same may take,
necessary or beneficial to the Business relating to the systems
to be serviced pursuant to the Service Contracts.
1.2 Consideration As consideration for the purchase and
sale of the Assets contemplated by this Agreement, Sirina shall
pay, on the Closing Date, an aggregate of $378,000 by certified
or bank check.
ARTICLE II
Closing
2.1 Closing Actions. The closing of the purchase and sale
of the Assets (the "Closing") will be effective upon the
execution of this Agreement and delivery of the documents
referred to in this Section 2.1.
2.1.1 By SST.
2.1.1.1 Instruments of Transfer. SST will
execute and deliver to Sirina an assignment in the form annexed
hereto as Exhibit A.
2.1.1.2 Resolutions. SST will deliver to Sirina
copies of the resolutions of SST's Board of Directors authorizing
the execution, delivery and performance of this Agreement and the
transactions contemplated therein.
2.1.1.3 General. Sirina shall have received such
other documents, instruments and certificates as counsel for
Sirina may reasonably request.
2.1.2 By Sirina.
2.1.2.1 Certified Check. Sirina shall deliver a
certified or bank check, payable to SST, in the amount of
$378,000.
2.1.2.2 Resolutions. Sirina will deliver to SST
copies of the resolutions of the Boards of Directors of Sirina
authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated therein.
2.1.2.3 General. SST shall have received such
other documents, instruments and certificates as counsel for SST
may reasonably request.
ARTICLE III
Representations and Warranties of SST
3.1 Organization and Good Standing. SST is a corporation
duly organized and in good standing under the laws of the State
of New York and has the
corporate power and authority to carry on its business as
presently conducted.
3.2 Authorization. The execution, delivery and performance
of this Agreement by SST has been duly authorized by all
necessary action, and this Agreement constitutes a valid and
binding obligation of SST in accordance with its terms (except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement ofcreditor's rights generally). The execution and
carrying out of the transactions contemplated by this Agreement
and compliance with the provisions hereof and thereof by SST will
not violate any provision of law.
3.3 No Violation. Neither the execution and delivery of
this Agreement by SST nor the consummation of the transactions it
contemplates will violate or conflict with SST's Certificate of
Incorporation or By-Laws or any statute, law, decree, regulation,
or order of any government authority applicable to SST.
3.4 Assignment. The Service Contracts are assignable by
SST to Sirina.
3.5 Cancellation, SST has not received, with respect to any
of the Service Contracts, a notice of cancellation and has no
knowledge of any pending or threatened cancellation. All Service
Contract payments are current, in accordance with SST's terms,
except for the Service Contracts for 59 West 46th Street and 270
Madison Avenue.
3.6 Officers, Directors and Shareholders. The officers,
directors and shareholder of SST are listed on Schedule 3.6
attached hereto.
ARTICLE IV
Representations and Warranties of Sirina
4.1 Organization and Good Standing. Sirina is a
corporation duly organized and in good standing under the laws of
the State of New York and has the corporate power and authority
to enter into this Agreement and perform its obligations
contemplated herein.
4.2 Authorization. The execution, delivery and performance
of this Agreement by Sirina has been duly authorized by all
necessary action, and this Agreement constitutes a valid and
binding obligation of Sirina in accordance with its terms (except
as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditor's rights generally). The execution
and carrying out of the transactions contemplated by this
Agreement and compliance with the provisions hereof and thereof
by Sirina will not violate any provision of law.
4.3 Officers, Directors and Shareholders. The officers,
directors and shareholder of Sirina are listed on Schedule 4.3
attached hereto.
ARTICLE V
Brokers
Neither Sirina nor SST has employed the services of any
broker or finder and has made no commitment to pay a broker's or
finder's fee in respect of this Agreement or the transactions
contemplated under it. SST and Sirina hereby agree to indemnify
and hold harmless the other (and its parent and affiliates)
against any other obligation or liability, contingent or
otherwise, for brokerage or finder's fees or agent s commissions
or other like payments in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE VI
Survival of Representations and Warranties
All representations, warranties, covenants and agreements of
the parties made in this Agreement, or in any Exhibit annexed
hereto, or in any certificate, document, instrument or agreement
delivered hereunder, shall survive the execution and delivery of
this Agreement, the Closing and any investigation at any time
made by Sirina or on Sirina's behalf.
ARTICLE VII
Notices
Any notice or communication given by any party hereto to the
other party or parties shall be in writing and personally
delivered, sent by facsimile or mailed, by registered or
certified mail, return receipt requested, postage prepaid, to the
addresses provided in sections 9.1 and 9.2. Except as
otherwise provided herein, mailed notices shall be deemed given
three daysafter being duly mailed.
7.1 Notice to SST shall be addressed to:
Systems Service Technology Corporation
262 Duffy Avenue
Hicksville, New York 11801
Attention: Marc Palker
Facsimile: (516) 433-1131
with a copy to:
Dolgenos Newman & Cronin LLP
96 Spring Street
New York, New York 10012
Attn: Dennis P. McConnell, Esq.
Facsimile: (212) 925-0690
7.2 Notice to Sirina shall be addressed to:
Sirina Protection Systems Corp.
128 Charlotte Avenue
Hicksville New York 11801
Attention: Mr. Anthony Florez
Facsimile: (516) 942-0415
with a copy to:
Albanese, Albanese & Fiore LLP
1050 Franklin Avenue
Garden City, New York 11530
Attention: Joseph Albanese, Esq.
Facsimile: (516) 747-7777
7.3 Any person entitled to receive notice (or a copy
thereof) may designate in writing to the others such other
address to which notices shall thereafter be sent.
ARTICLE VIII
Non-Competition
8.1 SST In consideration of the purchase by Sirina of the
Service Contracts and other Assets of SST, SST, its officers,
directors and shareholders agree, for themselves and for any
entity they hold a substantial interest in, that for a period of
two (2) years they shall not, without the prior written consent
of Sirina, directly or indirectly, solicit and/or engage
in the servicing or maintenance of any fire alarm, life safety
system in any Building set forth in Schedule 1.1.1.
8.2 Sirina In connection with the purchase of the Assets,
Sirina its officers, directors and shareholders agree, for
themselves and for any entity hey hold a controlling interest
in, that for a period of two (2) years they shall not, without
the prior written consent of SST, directly or indirectly,
engage in the servicing or maintenance of any fire alarm, life
safety system manufactured, sold, installed, serviced or
maintained by SST or its affiliates in the buildings set forth on
Schedule 8.2 hereto. Nothing herein shall prohibit Sirina from
soliciting and/or providing services to any such building
with respect to automatic sprinkler and fire suppression systems.
Sirina agrees that it shall maintain Schedule 8.2 in accordance
with the terms of the Confidentiality Agreement executed by SST
and Sirina.
ARTICLE IX
Miscellaneous
9.1 Further Assurances. SST covenants and agrees that at
any time and from time to time after the Closing Date, upon the
request of Sirina, it will execute, acknowledge, deliver and
perform, or cause to be executed, acknowledged, delivered or
performed, all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may
be required for the better vesting and confirming to Sirina of
the title toand possession of the Assets.
9.2 Parts. Sirina shall be entitled to purchase from SST
and SST shall sell to Sirina parts necessary to the Business on
terms no less favorable than such provided to any other
distributor or authorized representative.
9.3 Entire Agreement. This Agreement, including the
Exhibits annexed hereto and other documents referred to herein,
contains the entire understanding of the parties hereto in
respect of its subject matter. There are no restrictions,
promises, warranties, covenants, or undertakings, other
than those expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
9.4 Expenses. Each of the parties will pay its own fees
and expenses,including its own counsel fees and accountant s fees
incurred in connection with this Agreement or any transaction
contemplated by this Agreement.
9.5 Amendment; Waiver. This Agreement may not be amended,
supplemented, canceled or discharged except by written instrument
executed by the party affected thereby No failure to exercise,
and no delay in exercising, of any right, power or privilege
hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or
privilege hereunder preclude the exercise of any other right,
power or privilege (hereunder or otherwise). No waiver of any
breach of any agreement hereunder or any other agreement shall be
deemed to be a waiver of any preceding or succeeding breach of
the same or any other agreement. No extension of time
for performance of any obligations or other acts hereunder or
under any other agreement shall be deemed to be an extension of
the time for performance of any other obligations or any other
acts. The rights and remedies of the parties under this
Agreement, and the Exhibits hereto, are in addition to all
other rights and remedies, at law or in equity, that they may
have against the other.
9.6 Binding Effect; Assignment. This Agreement and the
rights and obligations of the parties hereto shall bind and inure
to the benefit of each of the parties hereto, and to the benefit
of either party's successor or successors by reorganization,
merger or consolidation or any assignee of all or substantially
all of its business and properties.
9.7 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
9.8 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.9 Governing Law; Interpretation. This Agreement shall be
construed in accordance with and governed for all purposes by the
laws and public policy of the State of New York applicable to
contracts executed and wholly performed within such State.
9.10 Severability. In case any one or more of the
provisions contained in this Agreement, shall for any reason, be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, but this Agreement
shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
9.11 "Blue Pencil" Clause. If, moreover, any one or more
of the provisions contained in this Agreement shall for any
reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed,
by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
<PAGE>
Execution
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers in
their respective representative capacities on the date first
above written.
SYSTEMS SERVICE TECHNOLOGY
CORPORATION
By:______________________________
SIRINA PROTECTION SYSTEMS CORP.
By:______________________________
For Purposes of Section 8.1 only:
Joseph Williams
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Consolidated Statement of Financial Condition at March
31, 1996 (Unaudited) and the Consolidated Statement of Income for
the Six Months Ended March 31, 1996 (Unaudited) and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 235,797
<SECURITIES> 0
<RECEIVABLES> 4,128,427
<ALLOWANCES> 175,445
<INVENTORY> 2,130,198
<CURRENT-ASSETS> 6,886,475
<PP&E> 990,321
<DEPRECIATION> 480,097
<TOTAL-ASSETS> 8,157,549
<CURRENT-LIABILITIES> 4,142,675
<BONDS> 0
<COMMON> 3,243
0
675,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,157,549
<SALES> 6,537,394
<TOTAL-REVENUES> 6,537,394
<CGS> 3,721,632
<TOTAL-COSTS> 5,698,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148,765
<INCOME-PRETAX> 838,574
<INCOME-TAX> 95,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 933,574
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
