-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qd/5IS/zxqWCoFUAI6hX71e+mL2m47WNZgNOcxOkzTgr17X+rEnSr0CHXe/gIBXE vHZ6a5ir86aBo3E251oBHQ== 0001144204-05-008648.txt : 20050324 0001144204-05-008648.hdr.sgml : 20050324 20050324113326 ACCESSION NUMBER: 0001144204-05-008648 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050322 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050324 DATE AS OF CHANGE: 20050324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY INTELLIGENCE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001117258 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 650928369 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-31779 FILM NUMBER: 05700847 BUSINESS ADDRESS: STREET 1: 145 HUGUENOT STREET CITY: NEW ROCHELLE STATE: NY ZIP: 10801 BUSINESS PHONE: 9146548700 MAIL ADDRESS: STREET 1: 145 HUGUENOT STREET STREET 2: SUITE __ CITY: NEW ROCHELLE STATE: NY ZIP: 10801 FORMER COMPANY: FORMER CONFORMED NAME: HIPSTYLE COM INC DATE OF NAME CHANGE: 20001016 8-K 1 v014812_8k.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) March 22, 2005 SECURITY INTELLIGENCE TECHNOLOGIES, INC. Exact name of Company as specified in its charter) Florida 000-31779 65-0928369 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) Formation) 145 Huguenot Street, New Rochelle, NY 10801 (Address of principal executive offices) (Zip Code) Company's telephone number, including area code (914)-654-8700 Item 1.01 Material Definitive Agreement. See "Item 2.01 Completion of Acquisition or Disposition of Assets" for information relating to an agreement dated March 22, 2005, pursuant to which the Company sold to Menahem Cohen ("Cohen"), all of the stock in the Company's subsidiary, CCS International, Inc. ("CCS"). In connection with the sale of the stock to CCS, the Company entered into a consulting agreement with Cohen through December 31, 2007, pursuant to which the Company will pay Cohen compensation at the annual rate of $108,000. Item 2.01 Completion of Acquisition or Disposition of Assets. On March 22, 2005, the Company and Cohen, who was the Company's vice president and a director, entered into an agreement whereby the Company agreed to sell all of the stock of CCS to Cohen. The sale was consummated contemporaneously with the execution of the agreement. The consideration consisted of $100, which was paid at the closing, and contingent consideration consisting of 5% of CCS's and its subsidiaries' net sales through March 31, 2015. CCS's subsidiaries, all of which are wholly owned by CCS, consist of: Spy Shop, Ltd. d/b/a Counter Spy Shop of Delaware, a Delaware corporation (formerly a retail store closed on January 31, 2004); Security Design Group, Inc., a New York corporation (formerly a manufacturing operation, which is currently inactive); Counter Spy Shop of Mayfair London, Ltd., a District of Columbia corporation (formerly a retail store which was closed on July 1, 2003); CCS Counter Spy Shop of Mayfair London, Ltd., a California corporation (formerly a retail store which was closed on January 1, 2004); and Counter Spy Shop of Mayfair, Ltd., a Florida corporation (formerly a sales office/retail store that ceased operations on March 31, 2004). Prior to 2004, the Company's retail operations were conducted almost exclusively through CCS, although modest retail sales were made from the Company's main office and its London office. As noted above and in the Company's filings with the Securities and Exchange Commission, the Company has discontinued all of its retail stores. The Company does not believe that the operations conducted by CCS are material to the Company's business and, accordingly, it was in the best interest of the Company to sell the stock of CCS to Cohen. In determining the purchase price, the Company considered the negative net worth of CCS and the fact that substantially all of the business that had been conducted by CCS has been terminated. In connection with the Company's sale of the CSS stock to Cohen, Cohen resigned as vice president and director of the Company. Prior to the sale of CCS, Mr. Ben Jamil, the Company's president and chief executive office, had advanced to CCS the sum of $738,644. Pursuant to Mr. Jamil's employment agreement with the Company, the Company guaranteed CCS obligations to Mr. Jamil to the maximum amount of $738,000. Pursuant to Mr. Jamil's employment agreement, the Company's obligations under this guaranty are payable only from cash flow from operations not required for the Company's business. Because of CCS' financial condition, the guaranteed obligations will be reflected as a liability of the Company's balance sheet. Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. On March 22, 2005, in connection with his purchase of CCS, Cohen resigned as an officer and director of the Company. Item 9.01 Financial Statements and Exhibits. (b) Pro forma Financial Statements (c) Exhibits 99.1 Stock Sale Agreement between the Company and Menahem Cohen. 99.2 Consulting agreement dated March 22, 2005, between the Company and Menahem Cohen 2 SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements have been provided to show the effects on the financial statements of the sale of CCS as if the disposition had been completed on the dates set forth below. The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with the accompanying notes and assumptions. The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and are not necessarily indicative of our operating results or financial position if the pending disposition had been completed on the dates set forth below, nor are they indicative of its future operating results or financial position. These pro forma condensed consolidated financial statements are based on, and should be read in conjunction with, our historical consolidated financial statements and the related notes thereto contained in our Annual Report on Form 10-KSB for the fiscal ended June 30, 2004 and our Form 10-QSB for the six months ended December 31, 2004. The unaudited pro forma condensed consolidated balance sheet at December 31, 2004 was prepared from the unaudited consolidated balance sheet of the Company as of December 31, 2004, as adjusted to show the effect of the sale of CCS as if the sale had been completed on December 31, 2004. The unaudited pro forma condensed consolidated statement of operations for the six months ended December 31, 2004 and the fiscal year ended June 30, 2004 are presented as if the sale of CCS had been completed on July 1, 2003 and July 1, 2004, respectively. These results are not necessarily indicative of the results that the Company would have realized if the sale of CCS had occurred on such dates. Actual accounting adjustments related to the disposition may differ from the pro forma adjustments. The pro forma financial information assumes that the Company will not receive any additional proceeds from the sale of CCS. 3 SECURITY INTELLIGENCE TECHNOLOGIES, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS December 31, 2004
Pro Forma Security Intelligence Pro Forma Technologies, Historical Adjustments Inc. -------------- --------------- --------------- ASSETS Current Assets: Cash $ 33,084 $ 100 (c) $ 33,184 Accounts receivable 422,039 -- 422,039 Inventory 795,087 (172,022) (a) 623,065 Other current assets 176,848 (12,821) (a) 164,027 -------------- --------------- -------------- Total current assets 1,427,058 (184,743) 1,242,315 -------------- --------------- -------------- Intercompany receivable from CCS International, Ltd. 2,755,738 (a) -- (2,755,738) (b) -- Investment in CCS International, Ltd. 5,100 (a) -- (5,100) (c) -- Property and Equipment, at cost less accumulated depreciation and amortization of $174,134 15,918 (15,918) (a) -- Other assets 32,125 (26,612) (a) 5,513 -------------- --------------- -------------- Total assets $ 1,475,101 $ (227,273) $ 1,247,828 ============== =============== ============== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued expenses $ 4,682,900 $ (3,211,551) (a) $ 1,068,889 (402,460) (f) Note payable - CEO/stockholder 1,820,899 (738,644) (a) 1,820,255 738,000 (e) Convertible notes payable 494,000 -- 494,000 Notes payable - officers 125,000 -- 125,000 Notes payable - other 20,000 -- $ 20,000 Customer deposits 1,280,628 (1,009,622) (a) $ 271,006 Deferred revenue 1,355,237 (682,314) (a) $ 672,923 -------------- --------------- -------------- Total current liabilities 9,778,664 (5,306,591) 4,472,073 -------------- --------------- -------------- Stockholders' deficit: Preferred stock, $.0001 par value, 10,000,000 shares authorized: Series A Convertible-$1.00 per share liquidation preference 3,500,000 shares authorized, issued and outstanding 350 -- 350 Series B Convertible-$1.00 per share liquidation preference 1,500,000 shares authorized, issued and outstanding 150 -- 150 Common stock, $.0001 par value, 100,000,000 shares authorized, 22,462,700 shares issued and outstanding 2,270 -- 2,270 Additional paid in capital 6,335,253 (42,555) (a) 6,292,698 Accumulated deficit (14,630,437) 8,620,611 (a) (9,508,564) (2,755,738) (b) (5,000) (c) (738,000) (e) Other comprehensive loss (11,149) -- (11,149) -------------- --------------- -------------- Total stockholders' deficit (8,303,563) 5,079,318 (3,224,245) -------------- --------------- -------------- Total liabilities and stockholders' deficit $ 1,475,101 $ (227,273) $ 1,247,828 ============== =============== ==============
The accompanying notes are an integral part of these pro forma financial statement. 4 SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS Six Months Ended December 31, 2004
Pro Forma Security Intelligence Pro Forma Technologies, Historical Adjustments Inc. ---------------- ---------------- -------------- Sales $ 2,170,077 $ (100,000) (d) $ 2,070,077 ---------------- ---------------- -------------- Costs and expenses: Cost of sales 745,987 (64,738) (d) 681,249 Compensation and benefits 1,091,413 (52,463) (d) 1,038,950 Professional fees and legal matters 218,609 (108,304) (d) 110,305 Stock based compensation 134,957 134,957 Selling, general and administrative expenses 686,759 (11,123) (d) 3,431,374 2,755,738 (b) Unrealized loss on financial guarantees 402,460 (402,460) (f) -- Depreciation and amortization 6,330 (6,330) (d) -- --------------- --------------- ------------- 3,286,515 2,110,320 5,396,835 --------------- --------------- ------------- Operating loss (1,116,438) (2,210,320) (3,326,758) Loss on sale of subsidiary 5,000 (c) 743,000 738,000 (e) --------------- --------------- ------------- Loss before debt issuance and interest expense (1,116,438) (2,953,320) (4,069,758) Debt issuance and interest expense: Debt issuance expense 2,304,455 2,304,455 Interest expense 72,673 (18,551) (d) 54,122 --------------- --------------- ------------- 2,377,128 (18,551) 2,358,577 --------------- --------------- ------------- Net loss $ (3,493,566) $ (2,934,769) $ (6,428,335) =============== =============== ============= Loss per share, basic and diluted $ (0.16) $ (0.13) $ (0.29) =============== =============== ============= Weighted average number of shares 22,431,369 22,431,369 $ 22,431,369 =============== =============== =============
The accompanying notes are an integral part of these pro forma financial statement. 5 SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended June 30, 2004
Pro Forma Security Intelligence Pro Forma Technologies, Historical Adjustments Inc. --------------- --------------- ------------- Sales $ 3,013,332 $ (1,696,760) (d) $ 1,316,572 --------------- --------------- ------------- Costs and expenses: Cost of sales 1,402,980 (919,190) (d) 483,790 Compensation and benefits 2,227,767 (944,550) (d) 1,283,217 Professional fees and legal matters 933,576 (845,623) (d) 87,953 Stock based compensation 1,282,060 (674) (d) 1,281,386 Selling, general and administrative expenses 1,743,625 (891,229) (d) 3,507,940 2,655,544 (b) Unrealized (gain) on financial guarantees (135,590) 135,590 (f) -- Depreciation and amortization 100,142 (100,142) (d) -- --------------- --------------- ------------- 7,554,560 (910,274) 6,644,286 --------------- --------------- ------------- Operating loss (4,541,228) (786,486) (5,327,714) Loss on sale of subsidiary 5,000 (c) 725,371 720,371 (e) --------------- --------------- ------------- Loss before debt issuance and interest expense (4,541,228) (1,511,857) (6,053,085) Debt issuance and interest expense: Debt issuance expense 326,798 -- 326,798 Interest expense 131,046 (88,614) (d) 42,432 --------------- --------------- ------------- 457,844 (88,614) 369,230 --------------- --------------- ------------- Net loss $ (4,999,072) $ (1,423,243) $ (6,422,315) =============== =============== ============= Loss per share, basic and diluted $ (0.25) $ (0.07) $ (0.32) =============== =============== ============= Weighted average number of shares 20,036,902 20,036,902 20,036,902 =============== =============== =============
The accompanying notes are an integral part of these pro forma financial statement. 6 SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Pro Forma Adjustments a. Eliminates the accounts of CCS. b. Establishes a full reserve for uncollectible amounts on the intercompany receivable from CCS. c. Records the receipt of $100 for the stock of CCS and the write-off of the Company's investment in CSS. d. Eliminates the operations of CCS. e. Reflects the guarantee by the Company of CCS' liability to the Company's chief executive officer. Because of CCS' financial condition, the guaranteed obligation is treated as a liability. f. Represents the elimination of the unrealized gain or loss on financial guarantees. These guarantees were made by CCS in connection with settlements with creditors, and relate to obligation of CCS to make certain payments if our stock price does not reach certain levels or if the creditor is unable to realize a specified amount from the sale of the Company's common stock that was issued in the settlement. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly authorized and caused the undersigned to sign this Report on the Registrant's behalf. SECURITY INTELLIGENCE TECHNOLOGIES, INC. By: /s/ BEN JAMIL ------------- Name: Ben Jamil Title: President and Chief Executive Officer Dated: March 24, 2005 7 EX-99.1 2 v014812_ex99-1.txt Exhibit 99.1 STOCK SALE AGREEMENT AGREEMENT, dated this 22nd of March, 2005, by and between Security Intelligence Technologies, Inc., a Florida corporation with offices at 145 Huguenot Street, Ste. 310, New Rochelle, NY 10801 ("Seller"), and Menahem Cohen, whose address is Hatasia Street #3, P.O. Box 3073, Ra'anana 43214 Israel ("Purchaser"). W I T N E S S E T H: WHEREAS, Seller owns all of the issued and outstanding capital stock of CCS International, Inc., a Delaware corporation (the "Company"); and WHEREAS, Seller is a former officer and director of both the Company and Seller and is familiar with the business and financial condition of the Company; and WHEREAS, Purchaser desires to purchase all of the outstanding capital stock from Seller, and Seller desires to sell all of the outstanding capital stock of the Company to Purchaser, on and subject to the terms of this Agreement; WHEREAS, the Company has five wholly-owned subsidiaries; Spy Shop, Ltd. d/b/a Counter Spy Shop of Delaware, a Delaware corporation (formerly a retail store closed on January 31, 2004); Security Design Group, Inc., a New York corporation (formerly a manufacturing operation, currently inactive); Counter Spy Shop of Mayfair London, Ltd., a District of Columbia corporation (formerly a retail store closed on July 1, 2003); CCS Counter Spy Shop of Mayfair London, Ltd., a California corporation (formerly a retail store closed on January 1, 2004); and Counter Spy Shop of Mayfair, Ltd., a Florida corporation (formerly a sales office/retail store that ceased operations on March 31, 2004); WHEREFORE, the parties do hereby agree as follows: 1. Seller hereby agrees to sell, convey, transfer and deliver to Purchaser, and Purchaser agrees to purchase from such Seller, all of the outstanding capital stock of the Company, which consists of eleven million nine hundred thousand (11,900,000) shares of common stock (the "Stock"). 2. The purchase price for the Stock shall consist of an initial payment of one hundred dollars ($100), payable at the Closing, as hereinafter defined, plus the Contingent Consideration, has hereinafter provided. 3. The sale of the Stock shall take place at a closing (the "Closing") to be held at the offices of Seller contemporaneously with the execution of this Agreement or at such other place and time as may be agreed upon by the parties. The date on which the Closing occurs is referred to as the "Closing Date." At the Closing, Seller shall deliver a certificate for the Shares against payment of the initial payment provided in Section 2 of this Agreement. 4. (a) The Contingent Consideration shall consist of five percent (5%) of the Company's and its wholly-owned subsidiaries net sales for the years 2005 through and including 2015. Payment of the Contingent Consideration shall be made on a quarterly basis, with the Contingent Consideration for each calendar quarter to be payable no later than the twentieth (20th) day of the month following the end of the calendar quarter. Thus, the payment for the quarter ending March 31, 2005 shall be payable no later than April 20, 2005. Each payment shall be accompanied by a certificate from the Company's chief financial officers setting forth the computation of net sales. (b) Net sales shall mean consolidated sales, less returns and allowances, of the Company and its subsidiaries, including subsidiaries, divisions and businesses acquired after the date of this Agreement, determined on an accrual basis in accordance with generally accepted accounting principles consistently applied. Purchaser shall provide Seller with unaudited quarterly financial statements, not later than forty five (45) days after the end of each 8 calendar quarter, and audited year-end financial statements, not later than ninety (90) days after the end of the year. The quarterly and annual financial statements shall be prepared in accordance with generally accepted accounting principles consistently applied, provided, however, that the unaudited quarterly financials need not contain any material which would not be required in the financial statements that are included in a Form 10-QSB quarterly report under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). To the extent that the audited year-end financial statements reflect net sales which are different from the net sales set forth on the certificates of the Company's chief financial officer pursuant to Section 4(a) of this Agreement for the applicable year, the next quarterly payment shall reflect any required adjustment; provided, however, that with respect to the payment for the quarter ended December 31, 2014, any adjustment shall be settled by a final payment from Seller to Purchaser or from Purchaser to Seller, as the case may be. (c) Seller shall have the right, on reasonable notice and during normal business hours to audit, by its own personnel or by accountants engaged by Seller, to review the Company's books and records to ascertain that the Contingent Consideration is being computed and paid as provided in this Agreement. Seller may exercise this right only one time in any calendar year. The audit shall be at Seller's cost and expense, provided, however, that that if the audit reveals that the Contingent Consideration due for any year is more than ten percent (10%) greater than the amount set forth in Purchaser's reports pursuant to Section 4(b) of this Agreement, the cost of audit shall be paid by Purchaser. The Company agrees, by signing this Agreement, to provide the access required by this Section 4(c). 5. Seller represents and warrants as follows: (a) Seller is a corporation organized and existing under the laws of the State of Florida. All corporate and other proceedings required to be taken on the part of Seller to authorize Seller to enter into and carry out this Agreement and to sell the Stock have been duly and properly taken. Seller has full right, power and authority to enter into this Agreement and to perform fully its obligations hereunder. This Agreement has been duly executed and delivered by Seller and is the valid and binding obligation of Seller enforceable against it in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency and other laws of general application affecting the rights of creditors and equitable principles limiting the right to obtain specific performance or other equitable remedies. (b) The authorized common stock of the Company consists of fifty million (50,000,000) shares of common stock, par value $.0001 per share, of which eleven million nine hundred thousand (11,900,000) shares are issued and outstanding, and 10,000,000 shares of preferred stock, par value $.0001 per share, none of are issued or outstanding, all such formerly issued and outstanding shares of preferred stock having been cancelled as of December 31, 2004. (c) Seller is the sole legal, beneficial and record owner of the Stock, and has title thereto, free and clear of any claim, lien, pledge, option, charge, security interest or encumbrance of any nature and has the right to sell the Stock to Purchaser pursuant to this Agreement. (d) Since January 1, 2004, Seller has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission (the "Commission") under the Exchange Act (all of the foregoing filed prior to the date hereof or amended after the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the "SEC Documents"). The SEC Documents are available on EDGAR through the Commission's website at http://www.sec.gov. As of their respective dates, the financial statements of the Company incluced in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and, fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments); provided, however, that the SEC Documents do not reflect the separate financial statements of the Company and its subsidiaries. (e) Seller has not retained any broker or finder in connection with the transactions contemplated by this Agreement and is not obligated and has not agreed to pay any brokerage or finder's commission, fee or similar compensation. Seller shall indemnify Purchaser and hold Purchaser harmless from and against all manner of loss, liability, damage or expense (including reasonable legal fees and disbursements) which Seller may sustain as a result of a violation by Seller of the representation contained in this Section 5(e). This representation shall survive the Closing. 9 6. Purchaser represents and warrants to Seller as follows: (a) Purchaser is an accredited investor, as defined in Rule 501 of the Commission pursuant to the Securities Act of 1933, as amended, and he has been advised by counsel, to the extent he deems necessary as to the meaning of the term "accredited investor." (b) Purchaser has been actively involved in the activities of the Company for more than the past ten years, in the capacity of a consultant, officer and/or director and he is fully familiar with the business, financial condition and prospects of the Company. Accordingly, he understands that: (i) The Company has incurred continuing losses, has significant obligations to Seller, has a substantial working capital deficit. (ii) The Company has closed substantially all of its retail business. (iii) Seller plans to continue to engage in its present business, and that some of the business activities presently conducted by Seller may have been conducted by the Company and its subsidiaries in the past; and (iv) The Company may never operate profitably, and if it does not operate properly, without significant additional funding, it may not be able to continue in operations. (c) Purchaser confirms that Seller has made no representation and warranties whatsoever concerning the Company, its financial condition or its prospects, and his knowledge and understanding of the Company's business and financial condition is reflected in the purchase price. (d) Purchaser has not retained any broker or finder in connection with the transactions contemplated by this Agreement and is not obligated and has not agreed to pay any brokerage or finder's commission, fee or similar compensation. Purchaser shall indemnify Seller and hold Seller harmless from and against all manner of loss, liability, damage or expense (including reasonable legal fees and disbursements) which Purchaser may sustain as a result of a violation by Purchaser of the representation contained in this Section 6(d). This representation shall survive the Closing. 7. This Agreement constitutes the entire agreement of the parties, superseding and terminating any and all prior or contemporaneous oral and written agreements, understandings or letters of intent between or among the parties with respect to the subject matter of this Agreement. No part of this Agreement may be modified or amended, nor may any right be waived, except by a written instrument which expressly refers to this Agreement, states that it is a modification or amendment of this Agreement and is signed by authorized officers of the parties to this Agreement, or, in the case of waiver, by the party granting the waiver. No course of conduct or dealing or trade usage or custom and no course of performance shall be relied on or referred to by any party to contradict, explain or supplement any provision of this Agreement, it being acknowledged by the parties to this Agreement that this Agreement is intended to be, and is, the complete and exclusive statement of the agreement with respect to its subject matter. 8. Except as expressly provided in this Agreement, the representations and warranties of the parties shall terminate at the Closing and shall not survive the Closing. 9. All notices provided for in this Agreement shall be made in writing and shall be sent by certified or registered mail, return receipt requested, or delivered by hand or overnight courier service which provided evidence of delivery against receipt or sent by telecopier or other similar means of communication if receipt is confirmed or transmission is confirmed as provided in this Section 9. Notice, other than by telecopier, shall be deemed given on receipt or attempted delivery, and notice by telecopier shall be deemed given when receipt is acknowledged. Notices shall be sent to the parties at the addresses set forth in the introductory paragraph of this Agreement or, if by telecopier, to the telecopier number set forth on the signature page of this Agreement. Either party may, by like notice, change the address or telecopier number to which notice shall thereafter be sent. 10 10. This Agreement shall be governed and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed wholly within such state without regard to principals of conflicts of law. Each of the parties hereby (a) irrevocably consent and agrees that any legal or equitable action or proceeding arising under or in connection with this Agreement shall be brought exclusively in any federal or state court in the County of New York or Westchester, State of New York, (b) by execution and delivery of this Agreement, irrevocably submits to and accepts, with respect to its properties and assets, generally and unconditionally, the jurisdiction of the aforesaid courts, and (c) agrees that service may be made against such party either (i) in the manner set forth in Section 11 of this Agreement other than by telecopier or (ii) in any manner permitted under applicable law. 11. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. 12. Each of the parties hereto agrees, at its own cost and expense, to execute and deliver, or to cause to be executed and delivered, all such instruments (including all necessary endorsements) and to take all such action as the other party may reasonably request in order to (a) effectuate the intent and purposes of, and to carry out the terms of this Agreement, and (b) further effect the transfer of legal, beneficial and record ownership of the Stock to Purchaser. 13. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 5 OR 6 OF THIS AGREEMENT, NO PARTY IS MAKING ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO ANY OTHER PARTY WITH RESPECT TO THE STOCK OR THE COMPANY. [Signatures on following page] 11 IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first aforesaid. Seller: Security Intelligence Technologies, Inc. By: /s/ Ben Jamil -------------------------- Name: Ben Jamil Title: Chief Executive Officer Purchaser: By: /s/ Menahem Cohen -------------------------- Name: Menahem Cohen The Company agrees to be bound by the provisions of Section 4(c) of this Agreement. CCS INTERNATIONAL, INC. By: /s/ Menahem Cohen ---------------------- Name: Menahem Cohen Title: Purchaser 12 EX-99.2 3 v014812_ex99-2.txt Exhibit 99.2 CONSULTING AGREEMENT THIS CONSULTING AGREEMENT, dated as of March 22, 2005, by and between Security Intelligence Technologies, Inc., a Florida corporation whose address is 145 Huguenot Street; Suite 310, New Rochelle, New York 10801 (the "Company"), and Menahem Cohen, whose address is Hatasia Street #3, P.O. Box 3073, Ra'anana 43214 Israel ("Consultant"), the Company and Consultant being referred to collectively as the "Parties" and each, individually, as a "Party." RECITALS WHEREAS, Consultant has served as an executive officer of the Company, and has resigned from such position in connection with the sale by the Company to him of the stock of its wholly-owned subsidiary, CCS International, Inc. ("CCS"); and WHEREAS, Consultant is familiar with the Company's products and has experience in marketing such products, and is willing to provide consulting services to the Company on and subject to the terms of this Agreement; and WHEREAS, the Company is willing to engage Consultant to perform the consulting services for it, on and subject to the terms of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Parties agree as follows: 1. Services. (a) The Company hereby engages Consultant to perform and provide strategic marketing and other general corporate consulting services ("Services"), including but not limited to: (i) identifying prospective strategic partners and strategic alliances; (ii) planning, strategizing and assisting the Company in negotiating with potential strategic business partners; (iii) assisting the Company with business development; (iv) advising the Company as to developments concerning the security industry which may be relevant or of interest or concern to the Company; (v) assisting the Company in developing strategic marketing and planning plans and programs; (vi) assisting in a review of the Company's performance and methods of enhancing its performance, and (vii) other general management consulting services. The Company shall not require or request Consultant to raise debt or equity capital on behalf of the Company or any of its affiliates, and Consultant shall not perform any such services. (b) Consultant accepts the engagement provided in this Agreement and agrees to perform the Services in a professional manner, diligently, in good faith, in a manner consistent with the best interests of the Company. Consultant shall not be required to devote his full time and attention to the Services. Consultant shall perform Services at the Company's offices, at his offices in Israel or at such other locations as may be reasonably acceptable to the Company. 2. Term. This Agreement shall, subject to Section 5 of this Agreement, have a term commencing on the date of this Agreement and ending on December 31, 2007. 3. Compensation. In consideration of the Services to be provided by the Consultant during the Term, as hereinafter defined, the Company shall pay Consultant at the rate of one hundred eight thousand dollars ($108,000) per annum, payable in weekly installments. 4. Expenses. The Company shall reimburse Consultant for all reasonable and necessary expenses incurred by Consultant on behalf of the Company upon presentation of appropriate vouchers and back-up documentation in accordance with the Company's expense reimbursement policy. Consultant will not incur any expenses for which he will seek reimbursement without the prior written approval of the Company. 5. Termination of Agreement. (a) This Agreement and the Term shall terminate immediately upon the death or disability of Consultant. The term "disability" shall mean any illness, disability, incapacity or condition of the Consultant which prevents him from substantially performing the Services for a period of two (2) consecutive months or four (4) months, even though not consecutive, in any eighteen (18) month period. (b) The Company may terminate this Agreement, immediately and without notice, for Cause, in which event no further Commissions shall be payable to Consultant. The term "Cause" shall mean (i) a material breach by the Consultant of the provisions of Paragraph 6, 7 or 8 of this Agreement, (ii) acts of dishonesty or deliberate misconduct on the part of Consultant, (iii) breach of trust or other action by which Consultant obtains personal gain at the expense of or to the detriment of the Company, (iv) failure by Consultant to perform the Services after written notice by the Company, (v) conviction of or plea of nolo contendere by the Consultant of any felony or (vi) conviction of or plea of nolo contendere by the Consultant of any other crime relating to the performance of Consultant's or Consultant's duties. 6. Assignment of Rights. (a) Consultant shall have no proprietary interest in the work performed by Consultant (hereinafter referred to as "work product") during the course of performing Services, whether during or after working hours, and Consultant agrees that such work product (whether performed during or after working hours and whether performed at the Company's premises, Consultant's home or office or otherwise) is work made for hire and that the Company shall have all proprietary rights in such work product and any derivative work product throughout the world. (b) With respect to any work which is developed by Consultant with respect to the Services during the Term and which is not deemed to be work made for hire, Consultant hereby irrevocably assigns and transfers to the Company, its successors, assigns or nominees, in perpetuity throughout the world all of Consultant's right, title and interest in and to all such work product. (c) Consultant's work product, whether the work product is described in Paragraph 6(a) or 6(b) of this Agreement, may be used by the Company for any purpose or in any media whatsoever, whether now known or developed in the future in perpetuity and throughout the world, and Consultant hereby release the Company from any payments for any use of the work product other than the payments provided pursuant to this Agreement. It is further agreed that, without charge to the Company, but at the Company's expense, Consultant will execute and deliver all such further papers as may be necessary, in any and all countries, to vest title of the work product in the Company. 7. Confidential Information. (a) Consultant recognizes and acknowledges that during the course of performing the Services he will acquire, and as an officer and director of the Company prior to the execution of this Agreement, he has acquired, information regarding the Company and the Company's business methods, technology, products, plans and clients and other information which is not publicly known and which the Company regards as proprietary to it ("Confidential Information"). Without limiting the generality of the foregoing, Confidential Information includes all proprietary know-how, use and applications know-how, technical information, product formulae and formulations and other trade secrets relating to the Company's business, products, proposed products, strategy, pricing structure, relationships with joint venture partners, customers and suppliers, financial information and projections which have not been publicly disclosed by the Company, any information or other information contained in any patent application, regardless of whether a patent is ever issued with respect to such application, results of studies and surveys, in any stage of development, including, without limitation, modifications, enhancements, designs, concepts, techniques, methods, ideas, flow charts and all other information relating to the Company's products and proposed products. (b) Consultant agree that he will not, at any time, whether during or after the Term, disclose to any person or use, directly or indirectly, for Consultant's own benefit or the benefit of others, or aid or assist others in using any Confidential Information, or permit any person to examine or make copies of any document which may contain or is derived from Confidential Information, whether prepared by Consultant or otherwise coming into Consultant's possession or control. (c) The provisions of Sections 7(a) and (b) shall not apply to any information or material which Consultant can demonstrate by documentary or other evidence: (i) Is or becomes generally known to and available for use by the public other than as a result of disclosure by an Consultant or by any other person bound by a duty of confidentiality to the Company, or (ii) Was disclosed to Consultant by a person who either (i) was not under an obligation of confidentiality to the Company or (ii) did not, directly or indirectly, acquire or obtain such information or material from a person who was under an obligation of confidentiality to the Company. (d) Consultant understands that, in connection with his performance of the Services, he may have access to material non-public information concerning the Company. Consultant understands that the disclosure of such information to a third party or the use of such information in purchasing or selling the Company's securities is a violation of federal and state law, and he agrees to indemnify and hold harmless the Company, its officers, directors and counsel from and against any manner of loss, liability, damages or expense (including reasonable fees and expenses of counsel) which they may incur as a result of a breach by Consultant of the provisions of this Section 7(d). This indemnity is in addition to any other rights which the Company may have against Consultant. (e) In the event that Consultant is, pursuant to, or required by, applicable law, regulation or legal process, to disclose any of the Confidential Information, Consultant will notify the Company promptly so that the Company may, at its cost, seek a protective order or other appropriate remedy or, its sole discretion, waive compliance with the terms of this Section 7. Consultant shall not disclose any Confidential Information until the court has made a ruling. In the event that no such protective order or other remedy is obtained, or in the event that the disclosing party waives compliance with the terms of this Section 7, Consultant will furnish only that portion of the Confidential Information which it is advised by counsel is legally required and will exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information. (f) Consultant shall, upon completion of the Services or upon termination of Consultant's engagement with the Company, or earlier at the request of the Company, turn over to the Company all documents, papers, computer disks or other material in Consultant's possession or under Consultant's control which may contain or be derived from Confidential Information, together with all documents, notes or other work products which are connected with or derived from the Services. To the extent that any Confidential Information is on Consultant's hard drive or other storage media, he shall, upon the request of the Company, cause such information to be erased from his computer disks and all other storage media. 8. Non-Competition. (a) During the Term and for a period one (1) year following the expiration or termination of the Term, Consultant will not, directly or indirectly: (i) persuade or attempt to persuade any person or entity which is or was a customer or supplier of the Company to cease doing business with the Company, or to reduce the amount of business it does with the Company (the terms "customer," as used in this Section 8(a) includes any potential customer to whom the Company submitted bids or proposals, or with whom the Company conducted negotiations, during the Term); (ii) solicit for himself or any other person or entity other than the Company the business of any person or entity which is a customer of the Company, or was a customer of the Company during the Term for any product sold by the Company (each, a "Competing Product"), except that CCS may continue to sell security products to retail customers and to other customers which are not customers or prospects of the Company, and Consultant shall not use any Confidential Information in identifying such prospects and potential customers; (iii) persuade or attempt to persuade any employee of the Company to leave the Company's employ, or to become employed by any person or entity other than the Company; or (iv) engage in any business in the United States whether as an officer, director, consultant, partner, guarantor, principal, agent, employee, advisor, guarantor or in any manner, which is engaged in the manufacture, marketing and sale of any Competing Product, provided, however, that nothing in this Section 8 shall not be construed to prohibit Consultant from (x) owning an interest of not more than five (5%) percent of any public company engaged in such activities or (y) owning an interest in or serving as an officer or directors of CCS. (b) Consultant acknowledge that the restrictive covenants (the "Restrictive Covenants") contained in this Section 8 are a condition of Consultant's engagement by the Company and are reasonable and valid in geographical and temporal scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part of any of the Restrictive Covenants, is invalid or unenforceable, the remainder of the Restrictive Covenants and parts thereof shall not thereby be affected and shall remain in full force and effect, without regard to the invalid portion. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable because of the geographic or temporal scope of such provision, such court shall have the power to reduce the geographic or temporal scope of such provision, as the case may be, and, in its reduced form, such provision shall then be enforceable. 9. Injunctive Relief. Consultant acknowledge that the violation or threatened violation by him of any of the provisions of Sections 6, 7 and 8 of this Agreement shall cause immediate and irreparable harm to the Company. In the event of any breach or threatened breach of any of said provisions, Consultant consent to the entry of preliminary and permanent injunctions by a court of competent jurisdiction prohibiting them from any violation or threatened violation of such provisions and compelling them to comply with such provisions. This Section 9 shall not affect or limit, and the injunctive relief provided in this Section 9 shall be in addition to, and not in lieu of, any other remedies available to the Company at law or in equity for any such violation by Consultant. 10. Representations and Warranties. Consultant hereby represents and warrants to the Company that: (a) He has a right to enter into this Agreement, that he is not a party to any agreement or understanding, oral or written, which would prohibit performance of his obligations under this Agreement, and that he will not use in the performance of his obligations hereunder any proprietary information of any other party which he is legally prohibited from using. (b) The execution, delivery and performance of this Agreement does not and will not conflict with, violate or breach any agreement, decree, order or judgment or any law or regulation to which it is a party or subject or by which it or any of its properties or assets is bound. 11. Independent Contractors. It is expressly agreed that the Company and Consultant are acting hereunder as independent contractors. Neither Party shall be deemed to an employer, employee, agent, partner or joint venturer of the other. No Party has authority to enter into agreements on behalf of the other Party or to bind any other Party in any way. Consultant shall maintain liability insurance, workman's compensation and any other required insurance and shall be liable for any personal injury or damages to property which occurs as a result of his actions during the performance of the Services. Consultant acknowledges he shall be solely responsible for payment of all taxes relating to his compensation or any other payments made to him pursuant to this Agreement. 12. Notices. Any notices required or permitted to be sent hereunder shall be in writing and shall be sent, by certified or registered mail, return receipt requested, or by messenger or overnight courier which provides evidence of delivery, or by telecopier or similar means of communication if the receipt is acknowledged or if a copy thereof is sent in the manner provided in this Section 12. Notices shall be sent to the addresses first set forth above or to such other address as a party may designate by notice pursuant hereto, of, if sent by telecopier, to the telecopier number set forth on the signature page of this Agreement. Notices shall be effective upon the date when delivery is either effected or refused. 13. Survival. The provisions of Sections 6, 7, 8 and 9 of this Agreement shall survive any termination of this Agreement or the Term. 14. Miscellaneous. (a) This Agreement, and the respective rights, duties and obligations of the parties pursuant to this Agreement, shall be governed and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed wholly within such state without regard to principles of conflicts of law. Each party hereby (i) irrevocably consents and agrees that any legal or equitable action or proceeding arising under or in connection with this Agreement may be brought in any federal or state court situated in New York or Westchester County, New York, (ii) irrevocably submits to and accepts, with respect to its properties and assets, generally and unconditionally, the in personam jurisdiction of the aforesaid courts and waives the defense of an inconvenient forum to the maintenance of such action or proceeding, and (iii) agrees that service in any such action may be made either (x) by mailing or delivering a copy of such process to such party in the manner set forth in Section 12 of this Agreement, other than by facsimile transmission, or (y) by any other manner permitted by law. (b) This Agreement shall bind and inure to the benefit of the parties, and their respective executors, administrators, successors and assigns; provided, however, that neither party may assign his or its obligations under this Agreement except that this Agreement may be assigned by the Company in connection with a merger, consolidation or sale by the Company of all or substantially all of its business. (c) If any provision of this Agreement is found to be void or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement, shall, nevertheless, be binding upon the parties with the same force and effect as though the unenforceable part has been severed and deleted. (d) Each of the parties to this Agreement shall execute and deliver to the other party, without charge to the other party, any further instruments and documents and take such other action as may be requested by the other party in order to provide for the other party the benefits of this Agreement. (e) This Agreement may be executed in one or more counterparts, all of which shall be deemed to be duplicate originals. IN WITNESS WHEREOF, the Parties hereto have executed this instrument the date first above written. SECURITY INTELLIGENCE TECHNOLOGIES, INC. By: /s/ Ben Jamil ---------------------------------- Ben Jamil, Chief Executive Officer By: /s/ Menahem Cohen ---------------------------------- Menahem Cohen -----END PRIVACY-ENHANCED MESSAGE-----