U.S. Securities and Exchange Commission
Washington, D.C. 20549
________________
FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-11968
SAF T LOK INCORPORATED
(Name of small business issuer in its charter)
FLORIDA 65-0142837
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
18245 S.E. Federal Highway
Tequesta, Florida 33469
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 743-5625
________________
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes X No__
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B if not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or in
formation statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ended December 31, 1996 were $57,349.
The aggregate market value of the Company's voting stock held by non-affiliates
was approximately $15,500,000 based upon the average bid and asked prices of
such stock on March 31, 1997 as reported on the NASDAQ SmallCap Market.
On March 31, 1997 there were 5,656,223 shares of the registrant's common stock
outstanding.
SAF T LOK INCORPORATED
1996 ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business 1
Item 2. Description of Property 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security
Holders 9
PART II
Item 5. Market for Common Equity and Related Shareholder
Matters 9
Item 6. Management's Discussion and Analysis or Plan of
Operations 10
Item 7. Financial Statements 13
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
PART III
Item 9. Directors, Executive Officers, Promoters and Con-
trol Persons; Compliance with Section 16(a) of
the Exchange Act 14
Item 10. Executive Compensation 15
Item 11. Security Ownership of Certain Beneficial Owners
and Management 18
Item 12. Certain Relationships and Related Transactions 19
Item 13. Exhibits and Reports on Form 8-K 19
<PAGE>
PART I
ITEM 1. Description Of Business.
General
Saf T Lok Incorporated (the "Company"), through its subsidiary
STL Lock, Inc. ("STL") (the Company and STL are jointly referred
to herein as the "Company"), designs, develops, manufactures and
distributes patented and proprietary safety locks for guns. The
Company's other subsidiary, RGB Video, Inc. which had been in the
business of assembling, marketing and selling personal computer-
based video editing systems, was dormant in 1996.
On February 13, 1996 the Company acquired Saf T Lok Corporation,
a Florida corporation, through merger with a newly-formed special
purpose subsidiary. Such acquisition marked the end of the Com
pany's involvement in the video editing business and the commence
ment of the Company's involvement in the lock business.
Organization, Initial Public Offering and Merger
The Company was incorporated in Florida in July 1989 under the
name of RGB Sales and Marketing, Inc. In September 1989, Robert
L. Gilbert, III and his wife Cynthia T. Gilbert purchased certain
of the assets and assumed certain of the liabilities of RGB Video
Creations, Inc. These assets were contributed to the Company as
its initial capitalization. In October 1989 the Company com
menced the business of its predecessor, which had operated a re-
tail store that sold the Amiga computer and had produced a series
of tutorial programs used with software written for the Amiga
platform. The Company did not continue the other lines of the
predecessor's business.
The Company completed an initial public offering of its common
stock on June 23, 1993. In total, the Company sold 1,340,000
shares of its common stock at an offering price to the public of
$7.00 per share. Of the shares sold, 1,160,000 were sold pursu
ant to the initial offering and an additional 180,000 shares were
sold under the same terms and conditions by the exercise in full
of the underwriter's option granted solely for the purpose of
covering over-allotments. The gross proceeds to the Company from
the offering, before deducting expenses of the offering and after
underwriting discounts and commissions, was $8,160,600. The net
proceeds to the Company from the offering, after deducting expen-
ses of the offering and after underwriting discounts and commis
sions, was $7,349,867.
Pursuant to an Agreement and Plan of Merger (the "Plan") dated
January 10, 1996 among the Company, STL and Sphere Enterprises,
Inc. ("Sphere"), Sphere, a wholly-owned subsidiary of the Compa
ny, merged with and into STL with the STL shareholders receiving
the Company's common shares in a reverse triangular merger. Un-
der the Plan each STL common share was converted into the right
to receive 15.54 common shares of the Company. On February 13,
1996, the effective date of the merger, former STL shareholders
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owned approximately 40 percent of the Company's outstanding com
mon shares. In addition, the Plan provided for Franklin W.
Brooks, the chief executive officer and majority shareholder of
STL, to become Chairman of the Board of Directors of the Company.
The Company's principal executive offices are located at 18245
S.E. Federal Hwy., Tequesta, Florida 33469. Its telephone number
is (561) 743-5625.
THE GUN LOCK BUSINESS
General
STL was organized to design, develop, manufacture and market pro-
prietary combination locks to prevent unauthorized use of fire-
arms, including unintentional discharge by children and assail
ants. The Saf T LokTM, the Company's initial product, and the
Company's as-yet-unnamed second product, which is in the proto-
type stage of production, are easily installed, removed and oper
ated by consumers .
As a development stage entity, STL has been engaged in product
and market research and development since its incorporation in
1989. STL dedicated six years to confirming the initial Saf T
LokTM concept and then developing and refining a prototype pro-
duct that it could use to demonstrate the appearance and function
ality of the new product to investors, consumers and retail-ers.
In 1996 the Company conceived, developed and produced a prototype
of its second product (hereinafter, the "magazine lock") and is
currently engaged in the market acceptance process.
Product development of the Saf T LokTM incorporated handgun deal-
er and customer comments and suggestions concerning product de-
sign, appearance, operation and use. Intensive assessment of
component composition, manufacturing costs and projected retail
pricing confirmed the economic feasibility of the concept.
The Initial Product
The Saf T LokTM is a mechanical combination lock that attaches to
a gun. When unlocked, it does not hamper or interfere with the
use of the gun. When the Saf T LokTM is engaged it locks the
"safety" in the "no fire" position, blocking the normal operation
of the gun and preventing the gun from being fired. (Guns with-
out safeties are locked using the basic Saf T LokTM to block op-
eration of other internal gun components.) There are no keys,
batteries or other gadgets to lose or fail. The lock's body is
positioned under and concealed by the gun grip. The lock's com
bination mechanism is located at the top of the grip, where it is
easily accessible.
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Approximately two dozen variations of the Saf T LokTM and the
magazine lock (discussed below) fit approximately 1,500,000 of
the handguns sold yearly in the U.S. These variations also fit a
significant portion of the over 70 million handguns estimated to
exist in the U.S. retrofit market.
Installation of the Saf T LokTM requires no modification to a
gun. It is mounted on a plate placed under the gun's grip. The
lock is installed simply by removal of the grip, insertion of the
mounting plate and replacement of the manufacturer's grip with
custom rubber grips. The process typically requires removal and
replacement of two screws; mounting the lock takes about three
minutes. When locked, the Saf T LokTM engages an interlock on
the mounting plate and cannot be removed without special tools or
damage to the gun, even if the grips are removed.
To lock the gun, the operator need only move the safety slide
backwards with one finger while moving the reset slide forward
with another finger. The need for this simultaneous action elim
inates the possibility of accidental locking.
To unlock the gun, the operator depresses three individually pro-
grammed buttons in any order without the need to look at the gun
or the lock. The lock can be released in about three seconds
while holding the gun in firing position. The combination can be
entered short of one keystroke, permitting accelerated unlocking,
for example, when a police officer is concerned that his gun may
be taken from him and yet wants it readily usable. The incidence
of police officers being shot with their own weapons could be sig
nificantly decreased as a result of installation and utilization
of the Saf T LokTM, or for that matter, the magazine lock (di
scussed below).
Although each lock comes with a pre-set combination, the combi
nation is changeable; the Company markets combination changing
kits separate from the lock and mounting hardware.
Technical Specifications
The Saf T LokTM is designed to ensure reliable operation and long
lock life under firing conditions. Gaps in the casing are de
signed to prevent sand and dirt infiltration. The lock mechan-
ism's nickel-plated zinc alloy composition makes it highly cor
rosion-resistant. The design and layout of the mechanical parts
shunt forces from firing recoil and mishandling to the lock cas
ing, diminishing the potential for small parts breakage. The Saf
T LokTM has passed a series of punishing tests. It has been
mechanically cycled through 36,525 openings and closings without
failure or indication of wear. This is the equivalent of one use
per day for 100 years. It was subjected to the firing of 5000
rounds while mounted on a .45 caliber semi-automatic pistol with-
out problem. The Saf T LokTM has also passed numerous tests for
impact resistance and immersion in corrosive liquids and dirt.
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The Company owns seven U.S. patents as assignee of Franklin W.
Brooks, the inventor. Three U.S. patents are pending, as are 32
foreign patent applications. Patents cover revolvers, long-arms
and semi-automatic pistols and extend coverage to externally
mounted locks which act on a gun's external firing mechanism to
block operation. Other patent claims cover incorporation of a
lock into a gun's grip assembly, into a magazine and the use of
an adapter plate to mount a lock.
The Second Product
Historically, handguns have been made with a metal frame, which
requires an expensive multi-step machining process. In the late
1980s an Austrian gun manufacturer revolutionized the field by
introducing plastic frame semi-automatic pistols. The plastic
frame guns are lighter and can accommodate higher cartridge maga-
zines. Law enforcement agencies worldwide embraced the new de-
sign, which reportedly now accounts for over 60 percent of the
police handgun market in the U.S. Virtually all gun manufactur-
ers soon thereafter entered the field of polymer frame pistols,
resulting in the redesign of traditional pistols to accommodate
high capacity magazines through enlargement of gun handles.
One-piece molded plastic gun handles have no grips or screw holes
to which the Saf T LokTM mounting plate can be attached. Mr.
Brooks consequently proceeded to invent a magazine-mounted Saf T
LokTM as the Company's second product.
The magazine lock is a precision miniaturized all-mechanical com-
bination lock that functions the same as the Saf T LokTM. It has
two buttons that function in both directions, yielding 10,000
combinations. The magazine lock is housed in the bottom of the
magazine, occupying the space of two to four cartridges depending
on the caliber. Otherwise the magazine functions the same in
feeding cartridges as a magazine without the lock. The lock in-
stalls to the gun merely by inserting the Saf T LokTM magazine.
A lever runs from the lock up the side of the magazine. When the
lock is in the locked position the lever will engage the trigger
bar, and either pull it away from the sear mechanism or block the
rearward movement as necessary and appropriate. The lever also
locks over the trigger bar, preventing the magazine from being
removed.
When the four digit combination is entered with the lock buttons
and the manual safety is turned, the lock snaps open allowing the
lever to be disengaged from the trigger bar. The gun can then be
fired or the magazine removed.
The magazine lock will also be subjected to vigorous testing.
4
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The Market
Many reported injuries and deaths from the accidental discharge
of firearms involve guns purchased for protection and stored
loaded at home. Half of all U.S. households have at least one
gun. Two-thirds of teen suicides involve shootings. Further-
more, police officers and military personnel as well as individu-
al gun owners are at risk of being shot by their own weapons
grabbed by assailants.
Americans own over 70,000,000 handguns. In the 1990s, an average
of 2,500,000 new handguns have been sold annually. The Company
markets its products to handgun owners and buyers.
The Company's market includes both new and previously manufac
tured guns (the "retrofit market"). One time sales could exceed
$3 billion if all these guns are equipped with the Company's pro-
ducts. These figures exclude longarms and foreign sales, both
potentially significant markets. STL's initial market is the gun
owner who bought or is planning to buy a gun for home defense/
self-protection and law enforcement at all levels.
Manufacturing
The Company's manufacturing process is designed to produce low-
cost reliable products and to minimize overhead through subcon-
tracting to specialists. Die manufacturers cast the lock compon-
ents. A grip manufacturer injection-molds gun grips to house the
Saf T LokTM components. An assembly shop assembles the grips and
locks. All of the Company's subcontractors are recognized lead-
ers in their fields and have achieved or are about to achieve ISO
9000 certification. After quality assurance testing, packaging
and handling, the Saf T LokTM is ready for distribution. While
the magazine lock is not yet in production, the manufacturing
process for it will replicate that of the Saf T LokTM.
The lock housing is cast with channels to hold the individual com
ponents. Assembly requires the lock parts to be inserted in the
housing in a particular order. If incorrectly assembled, the
lock will not lock. Assembly is estimated to take five minutes
and testing about 30 seconds. By using contract labor, the Com
pany benefits from the efficiency of volume production without
the need to maintain a large staff or incur the costs and inef-
ficiencies associated with a large facility.
Parts are die cast in zinc alloy, then nickel plated for addition
al strength and lubricity. The Company believes that an am-ple
supply of the raw materials used in the manufacture of its
products is available from numerous sources at reasonable prices.
The Company utilizes a centralized distribution system for its
products to assure quality.
5
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The Company is committed to a high level of customer service,
both to its retailers and consumer purchasers. It maintains an
inventory of components and finished products to cover anticipa-
ted orders. The Company has a toll-free assistance line to re-
ceive comments from its customers. These comments and other is-
sues will be used in determining prospective improvements to ex-
isting products and development of new product concepts.
Marketing
The Company's target market consists of two major groups whose
ownership of a handgun is primarily for home defense or to carry
for self defense. Legitimate handguns for these purposes gener-
ally range from .38 to .45 caliber, not .22 caliber target guns
or high-powered hunting guns. Also outside the targeted market
are the small caliber, inexpensive "Saturday Night Special", guns
that sell mostly for under $100; the Company foresees little de-
mand from those customers whose primary buying decision was based
on price. Sales of this class of handguns have deteriorated in
the past few years to a much smaller share of the market.
The two major target market groups are law enforcement personnel
and individual gun owners. The first step was to "fill the dis
tribution pipeline" so the consumer would not be inconvenienced
in finding a place to purchase a gun lock. Consumers purchasing
a gun must do so from a federally licensed dealer; there are ap
proximately 12,000 firearms dealers in the U.S. Of these, ap
proximately 8000 have annual sales in excess of $200,000 and thus
are targeted by the Company. The Company exhibited at six na
tional trade shows in 1996. As a result of these efforts, by
year end over 1000 gun dealers had signed up to sell the Saf T
LokTM. A lock was submitted to the 11,000 member Safe and Vault
Technicians of America ("SAVTA") for testing and evaluation.
SAVTA endorsed the Saf T LokTM as "the most important advancement
in firearm safety in this century". There are approximately
35,000 locksmiths in the U.S. Contact was initiated with the
largest retail locksmiths. Over 300 locksmiths have signed on as
Saf T LokTM dealers. The Company's goal is to double the dealer
base with qualified active retailers by the end of 1997 and has
implemented several programs to accomplish that.
As the next step in the sales campaign, in December a search be-
gan for manufacturers' sales representatives. These "reps" typi
cally have up to 10 related products from a variety of manufac
turers that they sell to gun and sporting goods dealers and dis
tributors. Reps are an important part of the sales team in that
they have established long term relationships with buyers. Reps
also work on commission only, thus requiring no cash outlays un-
til sales are made. To date the Company has engaged five large
rep agencies covering 44 states and are interviewing agencies to
cover the remaining six states.
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Buttressing the Company's marketing efforts, there is an increas
ing volume of handgun-related legislative activity in many local
jurisdictions as well as at state and federal levels. At the
federal level, President Clinton has directed "that every federal
agency shall require child safety locking devices with every
handgun issued". He also stated that "Congress should pass my
proposal to require these locks with every handgun in the very
near future". Other legislation activity at state and local lev-
els call for similar requirements. Resulting new laws are expec-
ted to have a positive effect on the Company's sales.
The Company has also marketed its products directly to firearm
manufacturers. To date, the response has been underwhelming.
The Company believes the manufacturers are waiting to see if leg-
islation is enacted.
Competition
The Company's products compete with other products which attempt
to achieve similar objectives, such as lock boxes, trigger locks,
cable locks and ring locks. Lock boxes are clumsy and therefore
of little practical use to gun owners, the police or armed for-
ces. If they open via a push-button mode they are difficult to
operate in the dark. If they open via a key, the key must be hid
den for security, thereby complicating access to the gun. Trig
ger locks are difficult to operate in the dark and require
separate key storage for reliable security. They are recommended
only for unloaded guns, which seriously erodes the protection
function of the gun. Cable locks are slow to operate and diffi
cult to use in the dark. Ring locks (a magnetic lock) are very
expensive (approximately $1000), require modification of a gun,
require the owner to wear a special ring and give no positive
indication of unlocking.
While the Company will aggressively protect its products from in-
fringement, it is possible for others to copy the patented fea
tures of the Company's products or the functions they serve. The
Company expects that competitors will attempt to develop compar-
able products, possibly reducing the Company's sales or profit
margins or both. The Company's business strategy emphasizes in
creasing consumer awareness of its products as well as enhancing
brand name recognition. Competitors such as Master Lock Inc.,
maker of a trigger lock, are larger, better capitalized companies
with existing distribution channels.
The Company's products will also compete at the retail store lev-
el for shelf space, advertising space and promotional displays.
Governmental Regulation
The Company knows of no governmental regulation of gun safety de
vices.
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The Company believes that the demand for its products will in
crease as media attention continues to focus on firearm-related
accidents. This media attention has kept firearm safety at the
forefront of public awareness. To the extent firearm safety leg-
islation results from such publicity, demand for the Company's
products will in all likelihood increase.
Employees
Including its executive officers, the Company had seven full-time
employees, two of whom are related, as of December 31, 1996.
None of the Company's employees are covered by a collective bar
gaining agreement. Management believes that the Company's rela
tionship with its employees is good.
Patents, Trademarks and Proprietary Information
The Company owns seven U.S. patents. Three patents are pending.
Patent applications have also been filed for protection in Canada
and other countries.
The issued patents are dated January 29, 1991 through October 7,
1995, thus giving the Company protection with all patents until
the year 2008.
The Company's patent numbers are permanently molded into adapter
plates and lock housings in order to give warning to potential
infringers.
Patents were obtained or applied for sequentially during the dev-
elopment period of the lock. The attributes and function of the
whole locking system for a gun utilize coverage from all patents.
Together the issued and pending patents cover a variety of ways
of locking a variety of firearms.
The Company has applied for trademark protection of its logo
which includes the words "Saf T LokTM" and "Lock for Life".
These applications are expected to be approved.
ITEM 2. Description Of Property.
The Company moved its executive office to 18245 S.E. Federal
Hwy., Tequesta, Florida 33469 in February, 1996 where it leases
approximately 3200 square feet at an annual rental of $48,000.
The lease term is through February 1999. The Company believes
such facility is adequate to meet its foreseeable requirements
and it does not anticipate relocating to different facilities dur
ing the remaining lease term.
ITEM 3. Legal Proceedings.
In April 1996 the Company settled a lawsuit filed in October 1995
against the Company and two of its directors and largest individ-
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ual shareholders, Robert and Cynthia Gilbert, by Barington Capi
tal Group, L.P. ( Barington ) by and through its general partner,
LNA Capital Corp. Barington was the Company's underwriter in its
initial public offering. Although not clear from the manner in
which the original Complaint was pled, Barington apparently claim
ed mismanagement by the Gilberts as directors of the Compa-ny,
for which Barington requested money damages. In the same lawsuit
Barington claimed injunctive relief on the basis that the harm
allegedly done to the Company was not compensable by money
damages. The settlement included relinquishment on Barington's
part of its right to appoint a director to the Company's Board of
Directors.
In December 1996 Lisa Broderick Fogel and her husband Bruce Fogel
sued the Company and Franklin Brooks for defamation and loss of
consortium arising out of her brief tenure in November 1996 as
president of the Company. The Company's insurance company Reli-
ance Insurance Company is defending the Company and Mr. Brooks.
In April 1997 the Company settled a lawsuit filed by Engineering
Analyses & Solutions Inc. for money damages arising out of an al-
leged breach of contract for engineering services. The settle
ment included issuance of a nominal number of restricted shares
of common stock.
The Company is not a party in any other ongoing or pending legal
proceedings, nor are any of the Company's properties the subject
of litigation, and the Company is not aware of any pending or con
templated proceeding against it by governmental authorities con
cerning environmental matters. The Company knows of no legal pro
ceedings, pending or threatened, or judgments entered against any
director or officer of the Company in his capacity as such.
ITEM 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of 1996, no matters were submitted to a
vote of security holders through the solicitation of proxies or
otherwise.
PART II
ITEM 5. Market for Common Equity and Related Shareholder Mat
ters.
The Company's shares of common stock are listed and traded on the
NASDAQ SmallCap Market under the symbol LOCK. The continuation
of quotation on NASDAQ is subject to certain conditions. The
failure to meet these conditions may prevent the Company's common
stock from continuing to be quoted on NASDAQ and may have an ad-
verse effect on the market for the Company's common stock. No
assurance can be given that a trading market will be maintained
for the Company's common stock.
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As of March 31, 1997, there were approximately 161 holders of re
cord of the Company's shares of common stock. The high and low
bid prices for the Company's common shares for each quarter of
1996 and 1995 (and the first quarter of 1997) were as follows:
<TABLE>
<CAPTION>
Closing Bids
HIGH LOW
<S> <C> <C>
1997
First Quarter $ 6.75 $2.13
1996
Fourth Quarter $10.38 $1.44
Third Quarter $14.00 $5.00
Second Quarter $20.00 $4.88
First Quarter $ 9.25 $0.25
1995
Fourth Quarter $ .63 $ .50
Third Quarter $ .72 $ .63
Second Quarter $ .50 $ .50
First Quarter $ .75 $ .50
</TABLE>
Such prices reflect inter-dealer prices and do not reflect retail
mark-ups, mark-downs or commissions.
Although there are no restrictions on the Company's ability to
pay dividends to date, the Company has not declared any cash div-
idends on any class of security nor does it anticipate doing so
in the foreseeable future. The Company intends to retain its
earnings, if any, to finance the expansion of its business and
for general corporate purposes.
ITEM 6. Management's Discussion and Analysis
The Company was organized in 1989 and, prior to the merger with
STL, was principally engaged in the development, sale, marketing
and assembling of computer-based video editing systems. Because
of the Company's redirection since the merger, small size and
lack of long-term operating history, period to period comparisons
of the Company's financial results are not necessarily meaningful
and future results of operations may fluctuate significantly.
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The following discussion should be read in conjunction with the
Company's financial statements and notes thereto included in Item
13 below.
Year Ended December 31, 1996 Compared to Year Ended December 31,
1995.
1996 revenues of $57,349 derived from the sales of gun lock pro-
ducts. Sales and expenses from the discontinued video production
and editing business are consolidated in the entry "discontinued
operations" appearing in the financial statements.
1996 was a year of transition from a video production and editing
business to a lock business since the February merger. Expenses
of the merger and the costs associated with closing out one busi
ness and entering another were approximately $500,000.
Except for an immaterial amount of remaining inventory to be dis
posed, the video production and editing business was completely
phased out, resulting in a net loss of $433,626 in 1996 as com
pared with $1,260,240 in 1995. Although the Company's explicit
warranty obligations on the Amilink systems expired, the Company
arranged for a large dealer to provide continued service and sup
port. This arrangement will be cost-free to the Company and pro-
vide a means to dispose of remaining inventory at the highest
possible returns.
The roll out plan for the Saf T LokTM called for step by step
procedures to ensure manufacturing capability, build inventory in
anticipation of orders, fill the distribution pipeline and pro-
mote and sell locks to the public. Significant up front expenses
for tooling, advertising and promotional activities were in
curred. Plan milestones were achieved in that adequate inventor-
ies of salable goods exist, the planned number of gun model lock
variations were developed, a network of over 1400 stocking deal-
ers nationwide were furnished with point of purchase displays and
starter kits and a sales force of independent manufacturer's rep-
resentatives is in place. The net financial result was an oper-
ating loss of $2,841,716 representing substantially promotional
efforts, salaries and holding company expenses not specifically
attributable to operations, leaving an overleveraged ratio of pay
ables to cash. In November, salaried overhead expenditures were
significantly reduced as a result of downsizing of personnel and
a management wage freeze. Gross profits, at 10% of sales, were
lower than normal as a result of initial promotional pricing efforts
and inclusion of essential point of purchase displays in retail
dealer starter packages.
Advertising efforts in 1996 were directed at gun dealers with the
goal of inducing them to carry a new product. To establish cred-
ibility the Company advertised in well-known gun and locksmith
publications and exhibited at gun and locksmith trade shows. In
addition to dealers, this advertising also reached the small "gun
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enthusiast" segment of the market who read industry publications.
Gun owners who purchased handguns for home/self protection will
be targeted in 1997.
Engineering and prototyping of the magazine lock itself is essen
tially completed. Tooling must be ordered. As with the Saf T
LokTM, the magazine lock itself will be the same for all gun mod-
els. It is the magazine that will have to be adapted to the var-
ious gun models. While the lock tooling is being built, efforts
will be devoted to engineering and developing the magazine adapta
tions for various models of the most popular pistols. The Com-
pany hopes to minimize tooling expenses by coordinating with mag-
azine manufacturers to use standard magazines with a few minor
modifications.
Year Ended December 31, 1995 Compared to Year Ended December 31,
1994.
The Company's net sales for 1995 decreased by $1,526,814, or 81%,
to $353,918 compared to $1,880,732 for 1994. This decrease pri-
marily resulted from Commodore Electronics Ltd., owner of the Com
modore Amiga computer, who on May 2, 1994 claimed insolvency and
requested the Supreme Court in the Commonwealth of the Baham-as
to supervise the winding up of that company. Commodore's
insolvency claim had a dramatically negative impact on the mar-
ketability and sales of the Company's Amiga based products. Ad-
ditionally, the Company did not realize significant sales in non-
Amiga based products during the year.
Gross profit decreased $848,664, or 81%, to $199,930 in 1995 from
$1,048,594 in 1994. As a percentage of net sales, gross profit
remained constant at 56% in 1995 and 1994.
Operating expenses decreased 61%, to $1,252,043 in 1995 from
$3,252,217 in 1994. Operating expenses, as a percentage of net
sales, increased to 354% for 1995 from 173% in 1994. This is
mainly attributable to the greatly decreased sales in 1995.
Selling expenses decreased 84%, or $962,248, to $187,080 in 1995
from $1,149,328 in 1994. In general, selling expenses decreased
because net sales decreased. The Company's sales force was sys-
tematically downsized during the year as the Commodore-based pro-
ducts lost market stability during the year.
General and administrative expenses decreased 54%, or $1,043,725,
to $890,642 in 1995 from $1,934,367 in 1994. This decrease was
primarily attributable to a sales decrease and the systematic
downsizing during the year.
The decrease in research and development was primarily attribut-
able to finalizing the Company's development efforts on the Mic-
rosoft Windows, CIP and PAL versions of its products in the previ
ous year.
12
<PAGE>
The net of non-operating income and expense for 1995 totaled
$208,127 compared to the net of non-operating income and expense
of $72,539 for 1994. Included in the net expense for 1995 was a
write-off of inventory in the amount of $200,593. As a result,
the net loss for 1995 was $1,260,240 compared with a net loss of
$2,276,162 in 1994.
Liquidity and Capital Resources
The Company has a working capital deficiency and is contemplating
an offering of equity securities to obtain additional needed work
ing capital. $3,000,000 is needed to finance development of the
magazine lock and to provide working capital. The Company has no
commitments for any such financing and there can be no assurances
that any such financing will be available on terms acceptable to
the Company or at all. The Company had past due re-ceivables at
December 31, 1996 in the amount of $30,000.
The Company received no monies in 1996 from the sale of common
stock, options or warrants, although the Gilberts contributed
$200,000 as additional capital in November 1996. Although out
standing options to acquire shares of common stock contain exer
cise prices that are 50% to 70% of the NASDAQ market quotation
trading bid price, no monies have been paid to the Company from
the exercise of options.
In October 1996 the Gilberts lent the Company $400,000. Effec
tive December 31, 1996 such loan was converted into equity with
the issuance of 129,032 shares of common stock at $3.10 per
share.
ITEM 7. Financial Statements.
Financial statements are submitted below in Item 13.
ITEM 8. Changes In And Disagreements With Accountants on Ac
counting And Financial Disclosure.
On January 30, 1997 the Company dismissed Michaelson & Co., P.A.
as its principal independent accountant and engaged Weinberg Per-
shes & Company, P.A. to audit its financial statements for 1996.
Michaelson had previously reported on the financial statements of
the Company for 1994 and 1995. Neither of those reports con
tained an adverse opinion or disclaimer of opinion or was modif-
ied as to uncertainty, audit scope or accounting principles. The
Company and Michaelson had no disagreements on any matter of ac-
counting principles or practices, financial statement disclosure
or auditing scope or procedure which, if not resolved to Michael-
son's satisfaction, would have caused it to make reference to the
subject matter of the disagreements in connection with its re-
ports.
13
<PAGE>
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act.
The directors and executive officers of the Company are as fol
lows:
Name Age Position
Franklin W. Brooks............. 62 Chairman of the Board,
President, Director
Jeffrey W. Brooks.............. 36 Secretary, Treasurer,
Director
Robert L. Gilbert, III......... 45 Director
Eugene V. Horanoff............. 65 Director
William M. Schmidt............. 54 Director
Franklin W. Brooks, the inventor of the Company's products,
serves as the Company's Chairman and President. He formed STL in
1989 and has actively participated in all organizational and fin-
ancial aspects of that company. Mr. Brooks is a long-time gun
owner and father of four children, the protection of whom provid-
ed the impetus for the invention of the Saf T LokTM. Mr. Brooks
owns Palm Beach Business Services, Inc. d/b/a Ding-A-Ling Answer
ing Service in West Palm Beach, Florida, a leader in the Fort
Lauderdale to Orlando market, with 85 employees.
Jeffrey W. Brooks, the son of Franklin Brooks, serves as Secre-
tary, Treasurer and as a director of the Company. He joined STL
in 1989 at its inception as Manager of Research & Development.
Mr. Brooks has also served as General Manager of Palm Beach Busi
ness Services, Inc. since 1985 and was promoted to President in
1994.
Robert L. Gilbert, III, a director since 1989, founded the Com
pany in July 1989. Mr. Gilbert was the President and Chief Exec-
utive Officer of the Company until he relinquished that post on
November 1, 1996. Mr. Gilbert was President of RGB Video Crea-
tions, Inc., the Company's predecessor, from its inception in
December 1987 until he formed the Company.
Eugene V. Horanoff serves as a director and Chief Engineer of the
Company. He joined STL in 1989 at the commencement of prototype
development. He was instrumental in designing and engineering
the Company's products. He spent 28 years with the Naval Surface
Warfare Center in Silver Spring, Maryland, retiring in 1982 as a
Senior Aerospace Design Engineer.
14
<PAGE>
William M. Schmidt serves as a director of the Company. He
joined STL in September 1995 from Ilco Unican Inc.'s Simplex
Safelock Division in Greensboro, North Carolina where he was Vice
President and General Manager, accountable for two commercial
lock divisions with sales of $35 million.
Each of the Company's directors is elected to a one year term and
until his successor is duly elected and qualified. There are no
family relationships between any of the Company's directors and
officers except between Franklin Brooks and Jeffrey Brooks, who
are father and son. Meetings of the Board of Directors are held
as necessary. Directors receive no cash compensation for their
services. Directors are eligible to receive 5000 shares of com
mon stock annually but no shares have been issued for such ser-
vices in 1996.
In November 1996 Robert Gilbert resigned as Company President and
Cynthia Gilbert resigned as Company Vice President and as a dir-
ector. The Company has not yet filled the vacancy on the Board
of Directors.
ITEM 10. Executive Compensation.
The following table sets forth certain information with respect
to the annual compensation of the Company's officers for the year
ended December 31, 1996. (The Company has no long-term compensa
tion arrangements with any of its personnel.) No executive offi-
cer received compensation exceeding $100,000.
<TABLE>
Annual Compensation
<CAPTION>
Name and Other Annual
Principal Position Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
F.W. Brooks 1996 $54,167 0 $ 6,200<F3>
Chairman, President<F1> 1995 N/A N/A N/A
1994 N/A N/A N/A
R.L. Gilbert, Director<F2> 1996 $68,662 0 $19,500<F4>
1995 $85,000 0 $16,900<F4>
1994 $85,000 $7500 $ 8,000<F4>
J.W. Brooks, Secretary, 1996 $27,756 0 0
Treasurer, Director 1995 N/A N/A N/A
1994 N/A N/A N/A
<FN>
<F1>
Assumed the position of Chairman in February 1996 and of
President in November 1996.
<F2>
Served as President until November 1996.
<F3>
Represents non-cash compensation in the form of premiums for
$1,000,000 in life insurance on the life of Mr. Brooks for
the benefit of his wife. The life insurance policy has
since been cancelled.
<F4>
Represents non-cash compensation in the form of use of a car
and related expenses and premiums for $2,000,000 in life in
surance on the life of Mr. Gilbert for the benefit of his
wife. The life insurance policy has since been cancelled.
</FN>
</TABLE>
15
<PAGE>
The Company has not paid any compensation to any person for ser-v
ing as a director. The Company does not intend to compensate non-
employee directors for serving as directors except to reimburse
them for expenses incurred in connection with their service as
directors. Directors who are employees receive no compensation
for serving as directors.
Employment and Consulting Agreements
On February 13, 1996 the Company entered into a five-year Employ
ment Agreement with Franklin Brooks at an initial annual base
salary of $100,000. On November 1, 1996, Robert Gilbert and Cyn-
thia Gilbert resigned from the Company, terminating their employ
ment agreements. In April 1997 the Company entered into a Con
sulting Agreement with Mr. Gilbert pursuant to which he agreed to
provide consulting services to the Company on an as-needed basis.
Stock Plan
In March 1993, the Company established a 1993 Stock Plan (the
"Plan") for employees, consultants and directors covering 150,000
shares of Common Stock. At the Annual Meeting of Shareholders
held in July 1996 the shareholders authorized an increase to
500,000 shares. The Plan provides for the grant to employees of
incentive stock options ("ISOs") within the meaning of Section
422 of Internal Revenue Code of 1986, as amended, and for the
grant of non-qualified stock options (collectively "Options"),
bonus shares ("Awards") and stock purchase rights ("Rights") to
employees, consultants and non-employee directors of the Company.
The Plan provides for an automatic grant of 5000 non-qualified
options upon election or appointment to the Board, such options
vesting semi-annually on June and December 1st, to any non-emp-
loyee director and expire 10 years thereafter, provided that they
are still serving as a director on the vesting date. A new grant
of 5000 options is granted automatically upon reelection to the
Board after all options previously granted have vested.
The Plan is administered by the Board of Directors, which has the
power to determine eligibility to receive an Option, Award or
Right, the terms of any Options, Awards and Rights granted, in
cluding the exercise or purchase price, the number of shares sub
ject to the Option, Award or Right, the vesting schedule and the
term of any such Options and Rights. The exercise price of all
16
<PAGE>
Options granted under the Plan must be at least equal to the fair
market value of the shares of common stock on the date of grant.
With respect to any participant who owns stock possessing more
than 10% of the voting power of the Company's outstanding capital
stock, the exercise price of any ISO granted must equal at least
110% of the fair market value on the grant date and the maximum
term of the ISO must not exceed five years. The terms of all
other Options granted under the Plan may not exceed 10 years.
The Plan requires that the price to be paid upon exercise of
Rights must equal at least the fair market value of the shares as
of the date the Rights are granted.
As of December 31, 1996 the Company had outstanding a total of
2,536,198 options and warrants to purchase the Company's common
stock. Of these 1,600,000 are exercisable for $2.00 per share by
Franklin Brooks and Robert Gilbert only if certain financial
milestones are attained by December 31, 1998, 932,500 are exer-
cisable for $2.50 per share by non-affiliates of the Company
(including the underwriter of its inital public offering) and
3698 are exercisable for $7.50 per share by the Gilberts.
Limited Liability of Directors
Under Florida law, the Company's directors are protected against
personal liability for monetary damages from breaches of their
duty of care. As a result, the Company's directors will not be
liable for monetary damages from negligence and gross negligence
in the performance of their duties. They remain liable for mone-
tary damages for any breach of their duty of loyalty to the Com
pany and its shareholders, as well as acts or omissions not made
in good faith or which involve intentional misconduct or a know
ing violation of law and for transactions from which a director
derives improper personal benefit. They also remain liable under
another provision of Florida law which makes directors personally
liable for unlawful dividends, stock repurchases or redemptions
and expressly sets forth a negligence standard with respect to
such liability. The liability of the Company's directors under
federal or applicable state securities laws is also unaffected.
The Company does not carry any directors liability insurance.
While the Company's directors have protection from awards of mon-
etary damages for breaches of the duty of care, that does not el-
iminate their duty of care. Equitable remedies, such as an in
junction or rescission based upon a director's breach of the duty
of care, are still available.
No Delinquent Filings
To the best of the Company's knowledge, all filings of Forms 3, 4
and 5 required to be made with the Securities and Exchange Com
mission have been made.
17
<PAGE>
ITEM 11. Security Ownership Of Certain Beneficial Owners and
Management.
The following table sets forth information as of March 31, 1997
with respect to the beneficial ownership of shares of common
stock by (i) each person known by the Company to be the owner of
more than five percent of the outstanding shares of common stock,
(ii) each director of the Company, and (iii) all executive offi
cers and directors of the Company as a group. Except as other-
wise indicated, the beneficial owners of common stock listed be-
low, based on information furnished by such owners, have sole in-
vestment and voting power with respect to such shares, subject to
community property laws, where applicable.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent
Beneficial Owner Ownership of Class
<S> <C> <C>
Robert L. Gilbert, III ...... 1,228,358<F1><F2> 21.72%
18245 S.E. Federal Highway
Tequesta, FL 33469
Franklin W. Brooks .......... 636,700<F3> 11.26%
7689 S.E. Rivers Edge St.
Jupiter, FL 33458
William M. Schmidt .......... 220,596 3.90%
5275 S.E. Sweetbrier Terr.
Hobe Sound, FL 33455
Eugene V. Horanoff .......... 108,508 1.92%
322 Natchez Court
Jupiter, FL 33477
Jeffrey W. Brooks ........... 155,400 2.75%
1155 Lakeshore Dr.
Lake Park, FL 33403
All Directors and Executive 2,349,561 41.54%
Officers as a Group (Five
Persons)
<FN>
<F1>
Held by Safe-Tee Investment Group, Limited Partnership and
Locked Safely Investment Group, Limited Partnership
<F2>
Does not include option to acquire 600,000 common shares or
warrant to acquire 3698 shares
<F3>
Does not include option to acquire 1,000,000 common shares
</FN>
</TABLE>
18
<PAGE>
ITEM 12. Certain Relationships and Related Transactions.
The Company employs Franklin W. Brooks as its chairman and presi
dent and his son Jeffrey as its Secretary and Treasurer. The Com
pany believes that the compensation paid to these individuals is
no greater and no more beneficial than unrelated persons would re
ceive and is fair to the Company.
ITEM 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
Index
Exhibit
No. Description
1. Agreement and Plan of Merger filed January 19,1996 on Form 8-K
2. Amended and Restated Articles of Incorporation
filed June 26, 1996 as exhibit to Proxy Statement
3. Bylaws filed June 1993 as exhibit to Registration Statement
4. Employment Agreement for Franklin W. Brooks*
5. Modification to Employment Agreement for Robert L. Gilbert*
6. Modification to Employment Agreement for Cynthia T. Gilbert*
7. Consulting Agreement for Robert L. Gilbert*
8. Voting Trust Agreement*
9. Stock Option Agreement for Franklin Brooks*
10. Stock Option Agreement for Robert L. Gilbert*
11. Stock Option Agreement for Jon C. Moyle*
12. Stock Option Agreement for Joseph M. Stanton*
13. Stock Option Agreement for James O. Pasco*
14. Stock Option Agreement for J. Thomas Smith*
15. Stock Option Agreement for Moyle Flanigan, et al.*
16. Stock Option Agreement for Richard P. Stanton*
17. Stock Option Agreement for Timothy H. Scully Jr.*
18. Stock Option Agreement for Theodore M. Johnson*
19. Stock Purchase Warrant for Barington Capital Group
Inc. filed June 1993 as exhibit to Registration Statement
20. Stock Purchase Warrants for R.L. and C.T. Gilbert*
21. Letter on change in certifying accountants filed
February 12, 1997
22. List of subsidiaries*
23. Severance Agreement and Release with Richard and Jean Taylor*
24. Statement regarding computation of per share
earnings (included in Financial Statements)
25. Financial Statements*
__________
* filed herewith
19
<PAGE>
(b) Reports on Form 8-K
1. Form 8-K filed January 19, 1996 reporting on execution of
Agreement and Plan of Merger
2. Form 8-K filed February 26, 1996 reporting on consummation
of merger
3. Form 8-K/A filed August 9, 1996 reporting on charter amend
ments
4. Form 8-K/A filed October 3, 1996 including financial state
ments
5. Form 8-K filed November 14, 1996 reporting on Lisa Broder-
ick's employment
6. Form 8-K filed November 21, 1996 reporting on Ms. Broder-
ick's resignation
7. Form 8-K filed February 3, 1997 reporting on change of ac
counting firm
8. Form 8-K/A filed February 12, 1996 including accountant's
confirmation letter
20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SAF T LOK INCORPORATED
//Franklin W. Brooks
By:___________________________
Franklin W. Brooks
April 15, 1997 Chairman of the Board and
President
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
//Franklin W. Brooks
___________________________ Chairman of the April 15, 1997
Franklin W. Brooks Board, President
//Jeffrey W. Brooks Secretary, Treasur- April 15, 1997
___________________________ er and Director
Jeffrey W. Brooks
//Robert L. Gilbert
___________________________ Director April 15, 1997
Robert L. Gilbert, III.
//Eugene V. Horanoff
___________________________ Director April 15, 1997
Eugene V. Horanoff
//William M. Schmidt
___________________________ Director April 15, 1997
William M. Schmidt
21
<PAGE>
Exhibit
No. Description
1. Agreement and Plan of Merger filed January 19,1996 on Form 8-K
2. Amended and Restated Articles of Incorporation
filed June 26, 1996 as exhibit to Proxy Statement
3. Bylaws filed June 1993 as exhibit to Registration Statement
4. Employment Agreement for Franklin W. Brooks*
5. Modification to Employment Agreement for Robert L. Gilbert*
6. Modification to Employment Agreement for Cynthia T. Gilbert*
7. Consulting Agreement for Robert L. Gilbert*
8. Voting Trust Agreement*
9. Stock Option Agreement for Franklin Brooks*
10. Stock Option Agreement for Robert L. Gilbert*
11. Stock Option Agreement for Jon C. Moyle*
12. Stock Option Agreement for Joseph M. Stanton*
13. Stock Option Agreement for James O. Pasco*
14. Stock Option Agreement for J. Thomas Smith*
15. Stock Option Agreement for Moyle Flanigan, et al.*
16. Stock Option Agreement for Richard P. Stanton*
17. Stock Option Agreement for Timothy H. Scully Jr.*
18. Stock Option Agreement for Theodore M. Johnson*
19. Stock Purchase Warrant for Barington Capital Group
Inc. filed June 1993 as exhibit to Registration Statement
20. Stock Purchase Warrants for R.L. and C.T. Gilbert*
21. Letter on change in certifying accountants filed
February 12, 1997
22. List of subsidiaries*
23. Severance Agreement and Release with Richard and Jean Taylor*
24. Statement regarding computation of per share
earnings (included in Financial Statements)
25. Financial Statements*
__________
* filed herewith
22
<PAGE>
EXHIBIT 4.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made this ___ day of February, 1996 by and
between RGB COMPUTER & VIDEO, INC., a Florida corporation (the
"Company"), SAF T LOK CORPORATION, a Florida corporation ("STL"),
and FRANK W. BROOKS (the "Executive").
Recitals:
A. The Executive is currently the Chief Officer of STL, which
shall by merger become a wholly-owned subsidiary of the Company.
B. The Executive possesses intimate knowledge of the business
and affairs of STL, its policies, personnel and methods of doing
business.
C. The Board of Directors of the Company recognizes that the
Executive's contribution to the growth and success of STL has
been substantial and desires to assure the Company of the Execu
tive's continued employment by STL in an executive capacity and
for STL and to compensate the Executive therefor.
D. The Company's Board has determined that this Agreement will
reinforce and encourage the Executive's continued attention and
dedication to STL.
E. The Executive is willing to continue to make his services
available to STL on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the facts, mutual promises
and covenants contained herein, and intending to be legally bound
hereby, STL and the Executive hereby agree as follows:
1. Employment. STL hereby agrees to continue to employ the Ex
ecutive as Chief Officer of STL and the Executive hereby agrees
so to serve for the period and upon the terms and conditions con-
tained in this Agreement. The Company is agreeable to such emp-
loyment by STL.
2. Duties. The Executive shall perform duties of an executive
character consisting of administrative and managerial responsi-
bilities on behalf of STL and such further duties as shall, from
time to time, be reasonably delegated or assigned to him by STL's
Board consistent with the Executive's abilities. Throughout the
term of this Agreement, the Executive shall devote substantially
all of his working time and attention to the performance of his
duties hereunder in a manner which will faithfully and diligently
further the business and interests of STL.
3. Term. This Agreement shall be for a term of five (5) years,
commencing on the date hereof unless sooner terminated as herein-
after provided (the "Term").
4. Compensation.
(a) The Executive shall receive an annual base salary of
one hundred thousand dollars ($100,000), subject to adjustment in
accordance with subparagraph (c) hereof, payable in reasonable
periodic installments in accordance with the Company's regular
payroll practices in effect from time to time.
(b) In addition to the Executive's base salary, the Execu
tive shall also be entitled to such additional compensation, bo-
nuses and benefits, if any, as shall be determined from time to
time by STL's Board, in its sole authority and discretion, based
upon the performance of STL and the Executive to reflect the val-
ue of the Executive's services to STL.
(c) Commencing on the first anniversary hereof and on each
anniversary thereafter during the Term, the Executive's base sal-
ary shall be increased by an amount which shall be necessary to
adjust such salary to keep pace with the increase in the Consumer
Price Index (U.S. Average) for Urban Wage Earners and Clerical
Workers, All Items (1967 equals 100), as published by the U.S.
Bureau of Labor Statistics for February of each respective year
compared with February of the previous year.
(d) Throughout the Term and as long as they are kept in
force by the Company, the Executive shall be entitled to partici-
pate in and receive the benefits of any profit sharing or retire
ment plans and any health insurance plans or programs made avail
able to executive employees of the Company.
(e) The Executive shall be entitled to receive four (4)
weeks of paid vacation during each year of the Term.
(f) The Executive or his assignee shall be named as benefi
ciary of a disability insurance policy purchased by the Company
pursuant to which the Executive or his assignee shall receive in
surance proceeds equal to the base salary for a one (1) year per-
iod commencing on the date of the determination of disability of
the Executive.
(g) The Executive or his assignee shall be named as benefi
ciary of a life insurance policy purchased by the Company on the
life of the Executive pursuant to which the Executive or his as
signee shall receive life insurance proceeds equal to the annual
base salary in the event of the Executive's death during the
Term.
5. Expenses. STL shall reimburse the Executive for all reason-
able expenses incurred by the Executive in connection with the
performance of the Executive's duties hereunder upon receipt of
vouchers therefor and in accordance with STL's regular reimburse
ment procedures and practices in effect from time to time.
6. Discharge for Cause. STL may discharge the Executive at any
time upon written notice for (a) willful and continuing failure
to perform the Executive's duties and responsibilities hereunder,
(b) a conviction of the Executive for the commission of any fel-
ony or any crime involving moral turpitude, fraud or embezzle
ment, (c) a civil judgment against the Executive involving wilful
gross negligence or wilful gross misconduct resulting in either
case in material harm to STL, or (d) a civil judgment against the
Executive for misappropriation of STL funds or fraud perpetrated
against STL, in which event STL shall have no further obligations
or liabilities hereunder after the date of such discharge.
7. Termination Without Cause. If STL shall discharge the Execu
tive without cause, STL shall (a) pay to the Executive any unpaid
base salary accrued through the effective date of termination and
(b) continue to pay the Executive's base salary for the remainder
of the Term.
8. Company Property. All advertising, sales, manufacturers'
and other materials or articles of information, including, with-
out limitation, materials concerning the processes or products of
STL, data, reports, sales analyses, invoices, price lists or in-
formation, samples or any other materials or data of any kind
furnished to the Executive by STL or developed by the Executive
on behalf of STL or at STL's discretion or for STL's use or oth-
erwise in connection with the Executive's employment hereunder,
are and shall remain the sole and confidential property of STL;
if STL requests the return of such materials at any time during
or after the termination of the Executive's employment, the Execu
tive shall immediately deliver the same to STL.
9. Noncompetition, Trade Secrets, etc.
(a) During the Term and for a period of one (1) year after
the Executive's voluntary termination of his employment with STL
or the termination of the Executive's employment with STL for
cause pursuant to paragraph 6 hereof (but not if the Executive's
employment is terminated without cause pursuant to paragraph 7
hereof), the Executive shall not directly or indirectly induce or
attempt to influence any employee of STL to terminate his employ
ment with STL and shall not engage in (as a principal, partner,
director, officer, agent, employee, consultant or otherwise) or
be financially interested in any business operating in any metro-
politan area in the United States or elsewhere in which STL is
then conducting business, which business is involved in business
activities which are the same as, similar to or in competition
with business activities carried on by STL, or being definitely
planned by STL, at the time of the termination of the Executive's
employment. However, nothing contained in this paragraph shall
prevent the Executive from holding for investment no more than
five percent (5%) of any class of equity securities of a company
whose securities are traded on a national securities exchange.
(b) (i) During the Term and at all times thereafter, the
Executive shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect ben-
efit of any person, firm, association or company other than the
Company, any material referred to in paragraph 8 above or any
information regarding the business methods, business policies,
procedures, techniques, research or development projects or re-
sults, trade secrets or other knowledge or processes of or devel-
oped by STL or any names and addresses of customers or any data
on or relating to past, present or prospective customers or any
other confidential information relating to or dealing with the
business operations or activities of STL, made known to the Execu
tive or learned or acquired by the Executive while in the employ
of STL.
(ii) In the event that the Executive is required, by
oral questions, interrogatories, requests for information or doc-
uments, subpoena, civil investigative demand or similar process,
to disclose any confidential material, the Executive shall pro-
vide STL with prompt notice thereof so that STL may seek an ap
propriate protective order and/or waive compliance by the Execu
tive with the provisions hereof; provided, however, that if in
the absence of a protective order or the receipt of such a wai-
ver, the Executive is, in the opinion of counsel for STL, com
pelled to disclose confidential material not otherwise disclos-
able hereunder to any legislative, judicial or regulatory body,
agency or authority, or else to be exposed to liability for con
tempt, fine or penalty or to other censure, such confidential
material may be so disclosed.
(c) Any and all writings, inventions, improvements, proces-
ses, procedures and/or techniques which the Executive may make,
conceive, discover or develop, either solely or jointly with any
other person or persons, at any time during the Term, whether
during working hours or at any other time and whether at the re-
quest or upon the suggestion of STL or otherwise, which relate to
or are useful in connection with any business now or hereafter
carried on or contemplated by STL, including developments or ex-
pansions of its present fields of operations, shall be the sole
and exclusive property of STL. The Executive shall make full
disclosure to STL of all such writings, inventions, improvements,
processes, procedures and techniques, and shall do everything
necessary or desirable to vest the absolute title thereto in STL.
The Executive shall write and prepare all specifications and pro-
cedures regarding such inventions, improvements, processes, pro-
cedures and techniques and otherwise aid and assist STL so that
STL shall be the sole and absolute owner thereof in all countries
in which it may desire to have copyright or patent protection.
The Executive shall not be entitled to any additional or special
compensation or reimbursement regarding any and all such writ
ings, inventions, improvements, processes, procedures and techni
ques.
(d) During the periods in which the provisions of subpara
graph (a) shall be in effect, the Executive, directly or indir-
ectly, will not seek business from any Customer (as defined be-
low) on behalf of any enterprise or business other than STL, re-
fer business from any Customer to any enterprise or business oth-
er than STL or receive commissions based on sales or otherwise
from any Customer or any enterprise or business other than STL.
"Customer" means any person, firm, corporation, partnership, as-
sociation or other entity to which STL sold or provided goods or
services during the twelve (12) month period prior to the time at
which any determination is required to be made as to whether any
person, firm, corporation, partnership, association or other en-
tity is a Customer. The Executive further acknowledges and ag-
rees that no separate or additional payment will be required to
be made to the Executive in consideration of the Executive's un-
dertakings in this subparagraph (d).
(e) The Executive acknowledges that the restrictions con
tained in the foregoing subparagraphs, in view of the nature of
the business in which STL is engaged, are reasonable and neces-
sary in order to protect the legitimate interests of STL, and
that any violation thereof would result in irreparable injuries
to STL, and the Executive therefore acknowledges that, in the ev-
ent of his violation of any of these restrictions, STL shall be
entitled to obtain from any court of competent jurisdiction pre-
liminary and permanent injunctive relief as well as damages and
an equitable accounting of all earnings, profits and other bene-
fits arising from such violation, which rights shall be cumula
tive and in addition to any other rights or remedies to which STL
may be entitled.
(f) If the period of time or the area specified in subpara-
graph (a) above should be adjudged unreasonable in any proceed
ing, then the period of time shall be reduced by such number of
months or the area shall be reduced by the elimination of such
portion thereof or both so that such restrictions may be enforced
in such area and for such time as is adjudged to be reasonable.
If the Executive violates any of the restrictions contained in
the foregoing subparagraph (a), the restrictive period shall not
run in favor of the Executive from the time of the commencement
of any such violation until such time as such violation shall be
cured by the Executive to the satisfaction of STL.
10. Prior Agreements. The Executive represents to STL that (a)
there are no restrictions, agreements or understandings whatso-
ever to which the Executive is a party which would prevent or
make unlawful his execution of this Agreement or his employment
hereunder, (b) his execution of this Agreement and his employment
hereunder shall not constitute a breach of any contract, agree
ment or understanding, oral or written, to which he is a party or
by which he is bound, and (c) he is free and able to execute this
Agreement and to enter into employment by STL.
11. Miscellaneous.
(a) Neither the failure nor any delay on the part of either
party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privi-
lege preclude any other or further exercise of the same or of any
other right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occur
rence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall
be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.
(b) This Agreement and all questions relating to its valid-
ity, interpretation, performance, and enforcement (including,
without limitation, provisions concerning limitations of ac
tions), shall be governed by and construed in accordance with the
laws of the State of Florida, notwithstanding any conflict-of-
laws doctrines of such state or other jurisdiction to the con
trary, and without the aid of any canon, custom or rule of law
requiring construction against the draftsman.
(c) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received
when delivered (personally, by courier services or by other mes-
senger) against receipt or upon actual receipt of registered or
certified mail, postage prepaid, return receipt requested, ad
dressed as set forth below:
(i) If to the Executive: Frank W. Brooks
7689 S.E. Rivers Edge St.
Jupiter, FL 33458
(ii) If to the Company: RGB Computer & Video, Inc.
18245 S.E. Federal Hwy.
Tequesta, FL 33469
Attn: Robert L. Gilbert III
(iii) If to STL: Saf T Lok Corporation
18245 S.E. Federal Hwy.
Tequesta, FL 33469
Attn: William M. Schmidt
Any party may alter the address to which communications are to be
sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(d) This Agreement shall be binding upon and inure to the
benefit of STL and its successors and assigns and shall be bind
ing upon and inure to the benefit of the Executive, his heirs and
legal representatives. The Company and STL shall require any
successors (whether direct or indirect, by purchase, merger, con-
solidation or otherwise) to all or substantially all of the busi
ness and/or assets of the Company and STL to assume and agree to
perform this Agreement in the same manner and to the same extent
that the Company and STL would be required to perform if no such
succession had taken place. As used in this subparagraph, the
"Company" and "STL" shall mean the Company or STL, respectively,
as hereinbefore defined and any successor to their respective
businesses and/or assets as aforesaid which otherwise become
bound by all the terms and provisions of this Agreement by opera
tion of law and this Agreement shall be binding upon, and inure
to the benefit of, the Company or STL, respectively, as so def-
ined.
(e) This Agreement may be executed in counterparts, both of
which shall be deemed to be an original as against any party
whose signature appears thereon, and both of which shall together
constitute one and the same instrument. This Agreement shall be-
come binding when counterparts hereof, individually or taken to-
gether, shall bear the signatures of both the parties reflected
hereon as the signatories.
(f) The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or
rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unen-
forceable in whole or in part.
(g) This Agreement contains the entire understanding be-
tween the parties hereto with respect to the subject matter here-
of, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied,
oral or written, except as herein contained. The express terms
hereof control and supersede any course of performance and/or us-
age of the trade inconsistent with any of the terms hereof. This
Agreement may not be modified or amended other than by an agree
ment in writing.
(h) The paragraph headings in this Agreement are for con
venience only; they form no part of this Agreement and shall not
affect its interpretation.
(i) In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sun
days and holidays; provided, however, that if the final day of
any time period falls on a Saturday, Sunday or holiday on which
federal banks are or may elect to be closed, then the final day
shall be deemed to be the next day which is not a Saturday, Sun
day or such holiday.
(j) Except for any controversy or claim seeking equitable
relief as provided for in paragraph 9 of this Agreement, any
controversy or claim arising out of or relating to this Agree
ment, or to the interpretation, breach or enforcement thereof, or
any other dispute between the parties, shall be submitted to one
arbitrator and settled by arbitration in West Palm Beach, Flori
da, in accordance with the rules then in effect, of the American
Arbitration Association. Any award made by such arbitrator shall
be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having
jurisdiction thereof.
(k) In the event any controversy or claim arising out of or
relating to this Agreement, or to the interpretation, breach or
enforcement thereof, in any action or proceeding including that
in arbitration as provided for in this Agreement, is commenced to
enforce the provisions of this Agreement, the prevailing parties
shall be entitled to an award by the court or arbitrator, as ap-
propriate, of reasonable attorneys' fees, costs and expenses.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
SAF T LOK CORPORATION
By:________________________________
Frank W. Brooks, Chairman
EXECUTIVE:
___________________________________
FRANK W. BROOKS
The foregoing is agreeable to the
undersigned:
RGB COMPUTER & VIDEO, INC.
By:________________________________
Robert L. Gilbert III, President
EXHIBIT 5.
MODIFICATION TO EMPLOYMENT AGREEMENT
THIS MODIFICATION TO EMPLOYMENT AGREEMENT, effective
the 12th day of February, 1996, by and between RGB COMPUTER
& VIDEO, INC. whose address is 4152 Blue Heron Blvd., Suite
118, Riviera Beach, FL 33404, hereinafter referred to as
"Company" and ROBERT L. GILBERT, III of 50 E. Riverside
Drive, Jupiter, Florida 33469, hereinafter referred to as
the "Executive".
WITNESSETH
WHEREAS, on or about April 22, 1993, Company and
Executive executed that certain Employment Agreement; and
WHEREAS, the Company desires to amend the terms and
conditions of the employment of the Executive as contained
herein; and
WHEREAS, the Executive agrees to change the terms of
employment persuant to this Agreement.
NOW, THEREFORE, in consideration of the sum of TEN
DOLLARS ($10.00) and other good and valuable considerations,
the receipt of which is hereby acknowledged by the parties
hereto, together with the mutual covenants contained herein,
the parties agree as follows:
1. Paragraph 1(a), Terms of Employment, is amended by
deleting the last line of Subparagraph (a), Term, "five
years from the date hereof (the `Term')", and replacing it
with the following:
February 15, 2001 (the "Term")
2. Paragraph 2, Duties, Subparagraph (a), General
Duties, shall be amended by adding the following phrase to
the second sentence thereof, "The Executive will also
perform services for such subsidiaries as may be necessary",
as follows:
including acting as President of Saf T Lok, a
wholly owned subsidiary of the Company.
3. Paragraph 3, Compensation and Expenses,
Subparagraph (a), Salary, is amended to reflect the cost of
living adjustments set forth therein such that the annual
base salary commencing upon the effective date of this
Modification shall increase to $92,500.00 per annum from the
original annual base salary of $85,000.
4. Effective Date. The effective date of this
Agreement shall be February 12, 1996.
5. Except as otherwise specially modified by this
Modification to Employment Agreement, the Employment
Agreement dated on or about April 22, 1993 is hereby
reconfirmed and re-ratified, and shall otherwise remain in
full force and effect.
IN WITNESS WHEREOF, the Company and Executive have
executed this Agreement as of the effective date contained
herein.
COMPANY: RGB COMPUTER & VIDEO, INC.
By // Frank Brooks
-----------------------------
FRANK BROOKS
Chairman of the Board
Authorized Representative
By // Robert L. Gilbert III. President
------------------------------------
ROBERT L. GILBERT, III, President
EXECUTIVE: // Robert L. Gilbert III. President
------------------------------------
ROBERT L. GILBERT, III
EXHIBIT 6.
MODIFICATION TO EMPLOYMENT AGREEMENT
THIS MODIFICATION TO EMPLOYMENT AGREEMENT, effective
the 12th day of February, 1996, by and between RGB COMPUTER
& VIDEO, INC. whose address is 4152 Blue Heron Blvd., Suite
118, Riviera Beach, FL 33404, hereinafter referred to as
"Company" and CYNTHIA GILBERT of 50 E. Riverside Drive,
Jupiter, Florida 33469, hereinafter referred to as the
"Executive".
WITNESSETH:
WHEREAS, on or about April 22, 1993, Company and
Executive executed that certain Employment Agreement; and
WHEREAS, the Company desires to amend the terms and
conditions of the Executive as contained herein; and
WHEREAS, the Executive agrees to change the terms of
employment persuant to this Agreement.
NOW, THEREFORE, in consideration of the sum of TEN
DOLLARS ($10.00) and other good and valuable considerations,
the receipt of which is hereby acknowledged by the parties
hereto, together with the mutual covenants contained herein,
the parties agree as follows:
1. Paragraph 1(a), Term of Employment, is amended by
deleting the last line of Subparagraph (a), Term, "five
years from the date hereof (the `Term')", and replacing it
with the following:
February 15, 2001 (the "Term")
2. Paragraph 2, Duties, Subparagraph (a), General
Duties, shall be amended by adding the following phrase to
the second sentence thereof, "The Executive will also
perform services for such subsidiaries as may be necessary",
as follows:
including acting as Treasurer and Chief Financial
Officer of Saf T Lok, a wholly owned subsidiary of the
Company.
3. Paragraph 3, Compensation and Expenses,
Subparagraph (a), Salary, is amended to reflect the cost of
living adjustments set forth therein such that the annual
base salary commencing upon the effective date of this
Modification shall increase to $65,000.00 per annum from the
original annual base salary of $60,000.
4. Effective Date. The effective date of this
Agreement shall be February 12, 1996.
5. Except as otherwise specifially modified by this
Modification to Employment Agreement, the Employment
Agreement dated on or about April 22, 1993 is hereby
reconfirmed and re-ratified, and shall otherwise remain in
full force and effect.
IN WITNESS WHEREOF, the Company and Executive have
executed this Agreement as of the effective date contained
herein.
COMPANY;
COMPANY: RGB COMPUTER & VIDEO, INC.
By // Frank Brooks
-----------------------------
FRANK BROOKS
Chairman of the Board
Authorized Representative
By // Robert L. Gilbert III. President
------------------------------------
ROBERT L. GILBERT, III, President
EXECUTIVE: // Cynthia Gilbert
------------------------------------
CYNTHIA GILBERT
EXHIBIT 7.
CONSULTING AGREEMENT
CONSULTING AGREEMENT made this ___ day of April, 1997 by and be-
tween ROBERT L. and CYNTHIA T. GILBERT (the "Gilberts") and SAF T
LOK INCORPORATED, a Florida corporation (the "Company").
Recitals:
A. The Gilberts beneficially own more than ten percent (10%) of
the common stock of the Company.
B. Mr. Gilbert serves the Company as a director.
C. The Company owes the Gilberts four hundred thousand dollars
($400,000) for loans they made to the Company, which loans are
evidenced by convertible promissory notes dated __________ and
__________, 1996 (together, the "Notes").
D. Mr. Gilbert had been party to an employment agreement with
the Company (subsequently amended) and Mrs. Gilbert had been par-
ty to an employment agreement with the Company (subsequently am-
ended) (collectively, the "Old Agreements") until their resigna-
tions on November 1, 1996.
E. The Gilberts desire to convert the Notes into shares of the
Company's common stock in exchange for this Consulting Agreement.
F. The Gilberts have been using an automobile (vehicle identi-
fication number ________________) which is owned by the Company
(the "Car").
G. The Company owns miscellaneous video editing and computer
equipment formerly used or useful in the business conducted by
the Company's subsidiary RGB Video, Inc. (the "Equipment"), some
of which is in the possession of the Gilberts.
NOW, THEREFORE, in consideration of the covenants and promises
herein contained and other good and valuable consideration, the
parties agree as follows:
1. The Gilberts acknowledge and confirm their resignations rel-
ative to the Old Agreements and that the Old Agreements ceased
being effective and operative on November 1, 1996.
2. The Company acknowledges and confirms that Mr. Gilbert is a
director, which is the only position with the Company held by
either Mr. or Mrs. Gilbert.
3. The Notes are hereby converted into shares of the Company's
common stock at one half the conversion price set forth therein
and the original Notes are hereby returned to the Company marked
"CANCELLED" and all copies thereof destroyed. The Company does
not owe any sums to the Gilberts or any assignee of the Gilberts
following such conversation and cancellation.
4. Mr. Gilbert shall provide such business consulting services
and advice to the Company as the Company's Chairman or President
may from time to time request. Mr. Gilbert shall perform servic-
es hereunder as an independent contractor and not an employee of
the Company.
5. While providing consulting services to the Company Mr. Gil-
bert shall not engage in any activity that could be deemed to
conflict with his duties to the Company.
6. For consulting services rendered hereunder the Company shall
pay Mr. Gilbert the sum of one hundred dollars ($100) per hour in
which services are rendered.
7. The Company can terminate this Agreement only for gross neg-
ligence, wilful misconduct, insubordination, breach of fiduciary
duty or breach of this Agreement.
8. This Agreement may not be assigned or its consulting respon
sibilities delegated by Mr. Gilbert. The payment obligation of
the Company may be assigned to an affiliate.
9. The Company hereby agrees promptly to convey the Car to the
Gilberts, subject to the existing encumbrances thereon.
10. The Company hereby conveys the Equipment to the Gilberts,
"as is".
11. Outstanding stock purchase options and warrants made by the
Company in favor of the Gilberts remain in effect, unchanged by
this Agreement.
12. The parties hereby mutually release each other from any and
all claims they may have against the other in connection with the
Old Agreements and the Notes.
13. This Agreement constitutes the entire agreement of the par
ties with respect to the subject matter hereof. It may only be
amended by written instrument executed by the Chairman of the
Company and either Mr. or Mrs. Gilbert.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date set forth above.
SAF T LOK INCORPORATED
By:____________________________
Franklin W. Brooks, Chairman
_______________________________
ROBERT L. GILBERT III
_______________________________
CYNTHIA T. GILBERT
EXHIBIT 8.
VOTING TRUST AGREEMENT
THIS AGREEMENT effective this 13th day of february,
1996, by and between FRANK BROOKS, shareholder of certain
option rights to acquire up to One Million (1,000,000)
shares of RGB Computer & Video, Inc. ("RGB" or
"Corporation") common stock, whose address is 7389 S.E.
Rivers Edge Street, Jupiter, Florida 33458, hereinafter
referred to as "Shareholder"; and FRANK BROOKS, as Trustee,
whose address is 7689 S.E. Rivers Edge Street, Jupiter,
Florida 33458, hereinafter referred to as "Trustee".
WITNESSETH
WHEREAS, FRANK BROOKS is the owner and holder of
certain option rights to RGB common stock, based on certain
performance criteria, as more fully set out in that certain
Stock Option Agreement between Shareholder and RGB of even
date herewith (Performance Stock); and
WHEREAS, the Shareholder of the Corporation, and the
Corporation hereby agree it is in the best interest of all
concerned to allow this voting trust on the terms and
conditions set forth herein and that this Voting Trust
Agreement does not violate any Shareholder Agreement: and
WHEREAS, FRANK BROOKS, individually hereby does desire
to form a voting trust in favor of FRANK BROOKS, as Trustee,
for any portion of Performance Stock acquired by Shareholder
which he desires to asign to one or more of his children;and
WHEREAS, as a condition precedent to transferring andy
shares of such Performance Stock to any child of
Shareholder, RGB requires that inter alia, along with the
requirements of any shareholder, such shares to be
transferred be voted by Shareholder and be subject to this
Voting Trust Agreement.
NOW THEREFORE, in consideration of the premises and the
mutual covenants herein contained, each of the parties
hereto covenants and agrees as follows:
1. The foregoing recitals are true and correct and
are incorporated herein.
2. Upon acquiring Performance Stock, Shareholder will
deliver his certificate of stock representing those number
of such shares of stock owned by him, together with
appopriate executed stock powers with respect to such
certificates and stock power. Except as specifically
provided herein, the registered owners of such transferred
shares of Performance shall remain the legal owner of the
shares represented by such certificate and have all rights
and privileges attributed to said shares except as precluded
by this Agreement.
3. Notwithstanding anyting to the contrarty, the
Trustee shall have the following powers and is hereby
authorized to exercise such power:
A.Vote said shares of stock at any duly called meeting of
shareholders of the Corporation.
B.Take any action on behalf of the Shareholder by written
action in lieu of minutes.
C.Vote on any business matter coming before the
Corporation which Shareholder might have voted on had
he been present in person or by proxy.
4. In the event of the resignation, inability to act,
or removal of the the Trustee, a new Trustee shall be
selected by FRANK BROOKS. If he fails to select such
successor trustee within thirty (30) days of the triggering
event, Robert L. Gilbert, III and Cynthis Gilbert, or the
survivor of them, shall be the next successor Trustee. In
the event of the death, resignation, inability to act or
removal of the remaining next successor Trustee, the RGB's
Board of Directors shall select such next successor trustee.
5. This Agreement shall encompass all Performance
Stock owned by FRANK BROOKS, whether acquired directly or
indirectly, including all beneficial interest therein.
6. All stock held by Trustees shall bear a
restrictive legend in substantially the following form:
The rights of sale, assignment, transfer, pledge
or other disposition of the shares of stock evidenced by
this certificate are restricted and subject to compliance
with certain corporate documents including without
limitation that certain Voting Trust Agreement dated
effective the 12th day of February, 1996, maintained with
the books and records of the Corporation.
7. This Agreement shall terminate on the earlier of
ten years from the date of execution hereof or after the
death of Shareholder.
8. The Trustee hereby accepts and agrees to perform
the duties of the Trust herein posed subject to all the
terms, conditions and reservations herein contained. Trustee
agrees that he will exercise the powers to perform the
duties of Trustee as set forth herein. The Trustee agrees
that he will exercise the powers to perform the duties of
Trustee as set forth herein. The Trustee is accepting the
duties hereunder in order to benefit RGN and the
Shareholder, and thus, has expressly agreed, that he shall
not be liable for acts of ordinary negligence and shall be
responsible to RGB and its Shareholder only for gross
negligence or dishonest or fraudulent acts, misfeasance or
malfeasance.
9. All beneficial owners of Performance Stock now
existing or which hereafter are otherwise entitled to
acquire such shares of stock as a condition precedent to the
transfer of any shares of such Performance Stock from Frank
Brooks, shall indemnify, hold harmless and release RGB and
its subsidiaries and affiliates, upon documents to the
satisfation of RGB in its sole and absolute discretion from
all claims or causes of action arising from or connected
with the Voting Trust Agreement or the performance of the
Trustee hereunder, whether existing at the time of transfer,
or occurring thereafter.
10. The Trustee may at any time resign by giving
thirty (30) days notice in writing to the Secretary of RGB.
In thej event of the resignation of the Trustee, a new
trustee shall be appointed in the manner herein contained.
11. The Corporation is an interested third party
beneficiary hereunder and may enforce all the terms and
conditions herein to its benefit.
12. This Agreement shall be governed and construed
according to the laws of Florida, and venue of any
proceeding arising hereunder shall be in a Court of
competent jurisdiction in Palm Beach County, Florida.
IN WITNESS WHEREOF, the foregoing have set their
hands and seals effective the day first set forth above.
SHAREHOLDER:
// Frank Brooks
--------------------
FRANK BROOKS
TRUSTEE:
// Frank Brooks
---------------------
FRANK BROOKS
ACCEPTED AND AGREED TO effective the date first set forth
above.
RGB COMPUTER & VIDEO, INC.
by: // Robert L. Gilbert III. President
-----------------------------------------
ROBERT L. GILBERT, III, as President
EXHIBIT 9.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ___ day of February, 1996 by and
between RGB COMPUTER & VIDEO, INC., a Florida corporation (the
"Company"), and FRANK W. BROOKS.
Recitals:
A. Concurrently herewith, the Company, Sphere Enterprises Inc.,
a Florida corporation wholly-owned by the Company ("Sub"), and
Saf T Lok Corporation, a Florida corporation predominantly owned
by the Brooks family ("STL"), are consummating a merger (the
"Merger") pursuant to which Sub will be merged with and into STL
whereby (i) each common share of STL issued and outstanding im
mediately prior to the Merger shall be converted into the right
to receive common shares of the Company, and (ii) each common
share of Sub issued and outstanding immediately prior to the Mer-
ger shall be converted into a common share of STL.
B. Brooks holds an option to acquire STL common shares, which
he has agreed to surrender.
C. RGB has agreed to grant Brooks the Option (hereinbelow def-
ined) on the following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinbelow set forth and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Option to Purchase Shares.
1.1 Grant. The Company hereby grants to Brooks an irrevo-
cable option to purchase up to one million (1,000,000) shares of
its common stock, no par value ("Shares"), on the terms and sub
ject to the conditions set forth herein (the "Option").
1.2 Exercisability. The Option may be exercised by Brooks
on or before December 31, 1999 in accordance with the following
restrictions. The Option will become exercisable ("Vest") with
respect to three hundred thirty three thousand three hundred
thirty three and one third (333,333.33) Shares on January 1st of
each year beginning in 1997 (the "Annual Maximum"). On each Jan-
uary 1st beginning January 1, 1997 the Option shall Vest with
respect to the number of Shares, up to the Annual Maximum, cal
culated by multiplying
(a) the Annual Maximum by
(b) a fraction (which shall not exceed one (1)) the
numerator of which is STL's net income as determined in accor
dance with generally accepted accounting principals before inter
est, taxes, depreciation and amortization ("Earnings") for the
year most recently ended less the Low Earnings Target for such
year (set forth on the schedule below) and the denominator of
which is the difference obtained by subtracting the Low Earnings
Target for any year from the High Earnings Target for such year
(set forth on the schedule below).
Earnings Range
Year Low Earnings Target High Earnings Target
1996 $2,500,000 $ 4,500,000
1997 $4,000,000 $ 7,500,000
1998 $8,000,000 $15,000,000
In the event that Options with respect to the full one million
(1,000,000) Shares awarded have not Vested by January 1, 1999,
Options will Vest with respect to an additional number of Shares
calculated by multiplying
(a) one million (1,000,000) Shares by
(b) a fraction (which shall not exceed one (1)) the
numerator of which is the amount by which STL's aggregate Earn
ings for 1996, 1997 and 1998 exceed $14,500,000 (being the sum of
the Low Earnings Target for such three year period) and the den-
ominator of which is $12,500,000 (being the sum of the ranges for
such three year period)
and subtracting from that product the number of Shares with res-
pect to which Options have previously Vested in accordance with
the above.
1.3 Procedure. In the event Brooks wishes to exercise the
Option, he must send a written notice to the Company of his in
tention to exercise (a "Notice") specifying the number of Shares
to be purchased and the date, time and place of the closing of
such purchase (the "Closing Date" or the "Closing"), which date
shall not be less than twenty (20) days nor more than forty (40)
days from the date of delivery of the Notice. At the Closing the
Company shall deliver to Brooks all of the Shares purchased by
delivery of a certificate evidencing such Shares. Brooks shall,
at Closing, deliver to the Company an amount equal to two dollars
($2.00) (the "Exercise Price") multiplied by the number of Shares
purchased pursuant to this Section 1, which will be paid by
check.
2. Investment Representation. Any Shares acquired by Brooks
upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or other-
wise disposed of except in a transaction registered or exempt
from registration under federal and state securities laws.
3. Reservation Representation. The Company has taken all nec-
essary corporate and other action to authorize and reserve for
issuance, and to permit it to issue, and at all times from the
date hereof until such time as the obligation to deliver Shares
hereunder terminates, will have reserved for issuance, upon ex
ercise of the Option one million (1,000,000) Shares. All of such
Shares upon issuance pursuant hereto, shall be duly authorized,
validly issued, fully paid and non-assessable with no personal
liability attached to the ownership thereof, shall be delivered
free and clear of all claims, liens, encumbrances, security in
terests and charges of any nature whatsoever, and shall not be
subject to any preemptive right.
4. Adjustment Upon Changes in Capitalization. In the event of
any change in the number of issued and outstanding Shares by rea-
son of any stock dividend, split-up, merger, recapitalization,
combination, exchange of Shares, spin-off or other change in the
corporate or capital structure of the Company which could have
the effect of diminishing Brooks' rights hereunder, the number
and kind of Shares or other securities subject to the Option and
the Exercise Price therefor shall be appropriately adjusted so
that Brooks shall receive upon exercise (or, if such a change
occurs between exercise and Closing, upon Closing) of the Option
the number and kind of Shares or other securities or property
that Brooks would have received in respect of the Shares that
Brooks is entitled to purchase upon exercise of the Option if the
Option had been exercised (or the purchase thereunder had been
consummated, as the case may be) immediately prior to such event.
5. Registration of Shares Under the Securities Act.
5.1 Demand Registration. If the Option is exercised and if
Brooks shall request in writing on or before December 31, 1999,
the Company shall use its best efforts to effect the registration
under the Securities Act of 1933, as amended (the "Securities
Act"), or any successor statute then in effect, and any applic-
able state law (a "Demand Registration"), of such number of
Shares owned by Brooks as Brooks shall request and to keep such
Demand Registration effective for a period of not less than nine-
ty (90) days, unless, in the written opinion of counsel to the
Company, which opinion shall be delivered to Brooks and which
shall be satisfactory in form and substance to Brooks and his
counsel, such Demand Registration is not required in order law
fully to sell and distribute such Shares in the manner contempla-
ted by Brooks. The Company may delay the filing of a Demand Reg-
istration required hereunder for a period of up to ninety (90)
days if it believes in good faith that it would be disadvantag
eous to the Company for such Demand Registration to be effected
at the time requested by Brooks.
5.2 Shelf Registration. In lieu of effecting any Demand
Registration for Brooks, the Company may use its best efforts to
effect a "shelf" registration pursuant to Rule 415 under the Sec-
urities Act (or any similar rule that may be adopted) with res-
pect to such number of Shares owned by Brooks as Brooks shall re-
quest and to keep such registration continuously effective for a
period of at least two (2) years (a "Shelf Registration"). If
Brooks desires to sell or otherwise transfer any Shares pursuant
to the Shelf Registration during the period in which the Company
is required to keep the Shelf Registration effective pursuant to
this Section 5, Brooks shall notify the Company of his intention
to do so by written notice received by the Company at least ten
(10) days prior to such sale or transfer. Brooks may thereafter
effect such sale or transfer within forty (40) days of the deliv-
ery of such notice unless at least one (1) day prior thereto the
Company elects to delay such sale or transfer (for a period of up
to ninety (90) days) as a result of a good faith determination
that it would be disadvantageous to the Company to prepare a Pro-
spectus or any amendment to the Registration Statement with res-
pect to the Shelf Registration to permit such sale or transfer.
6. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto
shall execute and deliver such additional documents and take all
such further action as may be reasonably necessary or desirable
to consummate the transactions contemplated by this Agreement, in
cluding, without limitation, to vest in Brooks good title to any
Shares purchased hereunder.
7. Survival of Representations and Warranties. The respective
representations and warranties of the Company and Brooks con
tained in Sections 2 and 3 herein shall not be deemed waived or
otherwise affected by any investigation made by the other party
hereto and shall survive the Closing of the transactions contem-
plated hereby through December 31, 1999.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement (a) con
stitutes the entire agreement between the parties with respect to
the subject matter hereof and (b) shall not be assigned by opera
tion of law or otherwise, provided that Brooks may assign his
rights but not his obligations hereunder to any relative subject
to a Voting Trust Agreement of even date, and no such assignment
shall relieve Brooks of his obligations hereunder. Subject to
the foregoing, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by the parties hereto and their
respective successors (including any successor in interest by
merger, sale of all or substantially all of the assets or other-
wise) and assigns.
8.2 Amendments. This Agreement may not be modified, amen-
ded, altered or supplemented, except upon the execution and del-
ivery of a written agreement executed by the parties hereto.
8.3 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and
shall be deemed given if delivered personally or sent by over
night courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Brooks, to
Frank W. Brooks
7689 S.E. Rivers Edge St.
Jupiter, FL 33458
With a copy to
Mirkin & Woolf, P.A.
1700 Palm Beach Lakes Blvd. #580
West Palm Beach, FL 33401
Attn: Mark H. Mirkin, Esq.
(b) If to the Company, to
RGB Computer & Video, Inc.
18245 S.E. Federal Hwy.
Tequesta, FL 33469
Attn: Robert L. Gilbert III
With a copy to
Boose, Casey, Ciklin et al.
515 N. Flagler Dr. #1900
West Palm Beach, FL 33401
Attn: Jerald S. Beer, Esq.
8.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida,
regardless of the laws that might otherwise govern under applic-
able principles of conflicts of laws thereof.
8.5 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original,
but both of which shall constitute one and the same Agreement.
8.6 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation
of this Agreement.
8.7 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law but
if any provision or portion of any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provis-
ion or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such juris
diction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein. With-
out limiting the generality of the foregoing, in the event that
the number of Shares issuable upon exercise of the Option is held
to be invalid, illegal or unenforceable for any reason (including
as a result of the failure to obtain any required vote of share-
holders to authorize such issuance), the number of Shares so is-
suable shall be reduced to that number which could validly and
legally be issued.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
RGB COMPUTER & VIDEO, INC.
By:________________________________
Robert L. Gilbert III, President
___________________________________
FRANK W. BROOKS
EXHIBIT 10.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ___ day of February, 1996 by and
between RGB COMPUTER & VIDEO, INC., a Florida corporation (the
"Company"), and ROBERT L. GILBERT III.
Recitals:
A. Concurrently herewith, the Company, Sphere Enterprises Inc.,
a Florida corporation wholly-owned by the Company ("Sub"), and
Saf T Lok Corporation, a Florida corporation predominantly owned
by the Brooks family ("STL"), are consummating a merger (the
"Merger") pursuant to which Sub will be merged with and into STL
whereby (i) each common share of STL issued and outstanding im
mediately prior to the Merger shall be converted into the right
to receive common shares of the Company, and (ii) each common
share of Sub issued and outstanding immediately prior to the Mer-
ger shall be converted into a common share of STL.
B. RGB has agreed to grant Gilbert the Option (hereinbelow def-
ined) on the following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinbelow set forth and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Option to Purchase Shares.
1.1 Grant. The Company hereby grants to Gilbert an irrevo-
cable option to purchase up to six hundred thousand (600,000)
shares of its common stock, no par value ("Shares"), on the terms
and subject to the conditions set forth herein (the "Option").
1.2 Exercisability. The Option may be exercised by Gilbert
on or before December 31, 1999 in accordance with the following
restrictions. The Option will become exercisable ("Vest") with
respect to two hundred thousand (200,000) Shares on January 1st
of each year beginning in 1997 (the "Annual Maximum"). On each
January 1st beginning January 1, 1997 the Option shall Vest with
respect to the number of Shares, up to the Annual Maximum, cal
culated by multiplying
(a) the Annual Maximum by
(b) a fraction (which shall not exceed one (1)) the
numerator of which is STL's net income as determined in accor
dance with generally accepted accounting principals before inter
est, taxes, depreciation and amortization ("Earnings") for the
year most recently ended less the Low Earnings Target for such
year (set forth on the schedule below) and the denominator of
which is the difference obtained by subtracting the Low Earnings
Target for any year from the High Earnings Target for such year
(set forth on the schedule below).
Earnings Range
Year Low Earnings Target High Earnings Target
1996 $2,500,000 $ 4,500,000
1997 $4,000,000 $ 7,500,000
1998 $8,000,000 $15,000,000
In the event that Options with respect to the full six hundred
thousand (600,000) Shares awarded have not Vested by January 1,
1999, Options will Vest with respect to an additional number of
Shares calculated by multiplying
(a) six hundred thousand (600,000) Shares by
(b) a fraction (which shall not exceed one (1)) the
numerator of which is the amount by which STL's aggregate Earn
ings for 1996, 1997 and 1998 exceed $14,500,000 (being the sum of
the Low Earnings Target for such three year period) and the den-
ominator of which is $12,500,000 (being the sum of the ranges for
such three year period)
and subtracting from that product the number of Shares with res-
pect to which Options have previously Vested in accordance with
the above.
1.3 Procedure. In the event Gilbert wishes to exercise the
Option, he must send a written notice to the Company of his in
tention to exercise (a "Notice") specifying the number of Shares
to be purchased and the date, time and place of the closing of
such purchase (the "Closing Date" or the "Closing"), which date
shall not be less than twenty (20) days nor more than forty (40)
days from the date of delivery of the Notice. At the Closing the
Company shall deliver to Gilbert all of the Shares purchased by
delivery of a certificate evidencing such Shares. Gilbert shall,
at Closing, deliver to the Company an amount equal to two dollars
($2.00) (the "Exercise Price") multiplied by the number of Shares
purchased pursuant to this Section 1, which will be paid by
check.
2. Investment Representation. Any Shares acquired by Gilbert
upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or other-
wise disposed of except in a transaction registered or exempt
from registration under federal and state securities laws.
3. Reservation Representation. The Company has taken all nec-
essary corporate and other action to authorize and reserve for
issuance, and to permit it to issue, and at all times from the
date hereof until such time as the obligation to deliver Shares
hereunder terminates, will have reserved for issuance, upon ex
ercise of the Option six hundred thousand (600,000) Shares. All
of such Shares upon issuance pursuant hereto, shall be duly auth-
orized, validly issued, fully paid and non-assessable with no
personal liability attached to the ownership thereof, shall be
delivered free and clear of all claims, liens, encumbrances, sec-
urity interests and charges of any nature whatsoever, and shall
not be subject to any preemptive right.
4. Adjustment Upon Changes in Capitalization. In the event of
any change in the number of issued and outstanding Shares by rea-
son of any stock dividend, split-up, merger, recapitalization,
combination, exchange of Shares, spin-off or other change in the
corporate or capital structure of the Company which could have
the effect of diminishing Gilbert's rights hereunder, the number
and kind of Shares or other securities subject to the Option and
the Exercise Price therefor shall be appropriately adjusted so
that Gilbert shall receive upon exercise (or, if such a change
occurs between exercise and Closing, upon Closing) of the Option
the number and kind of Shares or other securities or property
that Gilbert would have received in respect of the Shares that
Gilbert is entitled to purchase upon exercise of the Option if
the Option had been exercised (or the purchase thereunder had
been consummated, as the case may be) immediately prior to such
event.
5. Registration of Shares Under the Securities Act.
5.1 Demand Registration. If the Option is exercised and if
Gilbert shall request in writing on or before December 31, 1999,
the Company shall use its best efforts to effect the registration
under the Securities Act of 1933, as amended (the "Securities
Act"), or any successor statute then in effect, and any applic-
able state law (a "Demand Registration"), of such number of
Shares owned by Gilbert as Gilbert shall request and to keep such
Demand Registration effective for a period of not less than nine-
ty (90) days, unless, in the written opinion of counsel to the
Company, which opinion shall be delivered to Gilbert and which
shall be satisfactory in form and substance to Gilbert and his
counsel, such Demand Registration is not required in order law
fully to sell and distribute such Shares in the manner contempla-
ted by Gilbert. The Company may delay the filing of a Demand
Registration required hereunder for a period of up to ninety (90)
days if it believes in good faith that it would be disadvantag
eous to the Company for such Demand Registration to be effected
at the time requested by Gilbert.
5.2 Shelf Registration. In lieu of effecting any Demand
Registration for Gilbert, the Company may use its best efforts to
effect a "shelf" registration pursuant to Rule 415 under the Sec-
urities Act (or any similar rule that may be adopted) with res-
pect to such number of Shares owned by Gilbert as Gilbert shall
request and to keep such registration continuously effective for
a period of at least two (2) years (a "Shelf Registration"). If
Gilbert desires to sell or otherwise transfer any Shares pursuant
to the Shelf Registration during the period in which the Company
is required to keep the Shelf Registration effective pursuant to
this Section 5, Gilbert shall notify the Company of his intention
to do so by written notice received by the Company at least ten
(10) days prior to such sale or transfer. Gilbert may thereafter
effect such sale or transfer within forty (40) days of the deliv-
ery of such notice unless at least one (1) day prior thereto the
Company elects to delay such sale or transfer (for a period of up
to ninety (90) days) as a result of a good faith determination
that it would be disadvantageous to the Company to prepare a Pro-
spectus or any amendment to the Registration Statement with res-
pect to the Shelf Registration to permit such sale or transfer.
6. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto
shall execute and deliver such additional documents and take all
such further action as may be reasonably necessary or desirable
to consummate the transactions contemplated by this Agreement, in
cluding, without limitation, to vest in Gilbert good title to any
Shares purchased hereunder.
7. Survival of Representations and Warranties. The respective
representations and warranties of the Company and Gilbert con
tained in Sections 2 and 3 herein shall not be deemed waived or
otherwise affected by any investigation made by the other party
hereto and shall survive the Closing of the transactions contem-
plated hereby through December 31, 1999.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement (a) con
stitutes the entire agreement between the parties with respect to
the subject matter hereof and (b) shall not be assigned by opera
tion of law or otherwise, provided that Gilbert may assign his
rights but not his obligations hereunder to any relative subject
to execution of a Voting Trust Agreement in the form attached
hereto, and no such assignment shall relieve Gilbert of his obli-
gations hereunder. Subject to the foregoing, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective successors (including any
successor in interest by merger, sale of all or substantially all
of the assets or otherwise) and assigns.
8.2 Amendments. This Agreement may not be modified, amen-
ded, altered or supplemented, except upon the execution and del-
ivery of a written agreement executed by the parties hereto.
8.3 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and
shall be deemed given if delivered personally or sent by over
night courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Gilbert, to
Robert L. Gilbert III
18245 S.E. Federal Hwy.
Tequesta, FL 33469
(b) If to the Company, to
RGB Computer & Video, Inc.
18245 S.E. Federal Hwy.
Tequesta, FL 33469
Attn: Frank W. Brooks
With a copy to
Boose, Casey, Ciklin et al.
515 N. Flagler Dr. #1900
West Palm Beach, FL 33401
Attn: Jerald S. Beer, Esq.
8.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida,
regardless of the laws that might otherwise govern under applic-
able principles of conflicts of laws thereof.
8.5 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original,
but both of which shall constitute one and the same Agreement.
8.6 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation
of this Agreement.
8.7 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law but
if any provision or portion of any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provis-
ion or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such juris
diction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein. With-
out limiting the generality of the foregoing, in the event that
the number of Shares issuable upon exercise of the Option is held
to be invalid, illegal or unenforceable for any reason (including
as a result of the failure to obtain any required vote of share-
holders to authorize such issuance), the number of Shares so is-
suable shall be reduced to that number which could validly and
legally be issued.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
RGB COMPUTER & VIDEO, INC.
By:________________________________
Frank W. Brooks, Chairman
___________________________________
ROBERT L. GILBERT III
EXHIBIT 11.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ____ day of April, 1997 by SAF T
LOK INCORPORATED, a Florida corporation (the "Company"), in favor
of JON C. MOYLE (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase ninety thousand (90,000) newly-issued shares (the
"Shares") of the Company's common stock, $0.01 par value (the
"Common Stock"), exercisable through December 31, 2001 (the "Op-
tion").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is two dollars and fifty cents ($2.50) (the "Exer
cise Price").
3. Exercise. The Option may be exercised by the Holder
upon delivery of written notice of intent to exercise in the form
attached hereto as Exhibit "A" to the Company at the following
address: 18245 S.E. Federal Highway, Tequesta, Florida 33469, or
such other address as the Company shall designate in a written
notice to the Holder, together with this Agreement and a check
payable to the Company for the aggregate Exercise Price of the
Shares so purchased. Upon exercise of the Option as aforesaid,
the Company shall, as promptly as practicable, and in any event
within thirty (30) days thereafter, execute and deliver to the
Holder a certificate or certificates for the total number of
whole Shares for which the Option is being exercised. If the
Option shall be exercised with respect to less than all of the
Shares, the Holder shall be entitled to receive a new Agreement
covering the number of Shares in respect of which the Option
shall not have been exercised, which new Agreement shall in all
other respects be identical to this Agreement. The Company cov-
enants and agrees that it shall pay when due any and all state
and federal issue taxes which may be payable in respect of the
issuance of the Option or the issuance of any Shares upon exer-
cise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evid-
ence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be exer-
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be exer-
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to ac-
quire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Op-
tion shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Franklin W. Brooks, Chairman
______________________________
JON C. MOYLE
Exhibit "A" to
Stock Option Agreement dated April ___, 1997
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated April ___, 1997 between the un-
dersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: April ___, 1997
B. Number of Shares covered by Agreement: 90,000
C. Number of Shares of Common Stock actually to be purchased at
this time (cannot be greater than 90,000):________
D. Exercise price per Share: $2.50
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
JON C. MOYLE
Residence:
231 Commodore Drive
Jupiter, FL 33477
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 12.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ____ day of April, 1997 by SAF T
LOK INCORPORATED, a Florida corporation (the "Company"), in favor
of JOSEPH M. STANTON (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase fifty thousand (50,000) newly-issued shares (the
"Shares") of the Company's Common Stock, $0.01 par value (the
"Common Stock"), exercisable at any time and from time to time
through December 31, 2001 (the "Option").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is two dollars and fifty cents ($2.50) (the "Exer
cise Price").
3. Exercise. The Option may be exercised by the Holder as
to all or in increments of ten thousand (10,000) Shares (or the
balance of the Shares if less than such number), upon delivery of
written notice of intent to exercise in the form attached hereto
as Exhibit "A" to the Company at the following address: 18245
S.E. Federal Highway, Tequesta, Florida 33469, or such other ad-
dress as the Company shall designate in a written notice to the
Holder, together with this Agreement and a check payable to the
Company for the aggregate Exercise Price of the Shares so pur
chased. Upon exercise of the Option as aforesaid, the Company
shall, as promptly as practicable, and in any event within thirty
(30) days thereafter, execute and deliver to the Holder a certif-
icate or certificates for the total number of whole Shares for
which the Option is being exercised. If the Option shall be ex-
ercised with respect to less than all of the Shares, the Holder
shall be entitled to receive a new Agreement covering the number
of Shares in respect of which the Option shall not have been ex-
ercised, which new Agreement shall in all other respects be iden-
tical to this Agreement. The Company covenants and agrees that
it shall pay when due any and all state and federal issue taxes
which may be payable in respect of the issuance of the Option or
the issuance of any Shares upon exercise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evi-
dence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be ex-er
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be ex-er
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this
Option shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Franklin W. Brooks, Chairman
_______________________________
JOSEPH M. STANTON
Exhibit "A" to
Stock Option Agreement dated April ___, 1997
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated April ___, 1997 between the un-
dersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: April ___, 1997
B. Number of Shares covered by Agreement: 50,000
C. Number of Shares of Common Stock actually to be purchased at
this time (must be 10,000 Shares or whole multiples thereof
and cannot be greater than 100,000):________
D. Exercise price per Share: $2.50
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
JOSEPH M. STANTON
Residence:
1310 19th St. N.W. #LL
Washington, D.C. 20036
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 13.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ____ day of March, 1997 by SAF T
LOK INCORPORATED, a Florida corporation (the "Company"), in favor
of JAMES O. PASCO JR. (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase fifty thousand (50,000) newly-issued shares (the
"Shares") of the Company's common stock, $0.01 par value (the
"Common Stock"), exercisable through March 31, 2002 (the "Op-
tion").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is two dollars and fifty cents ($2.50) (the "Exer
cise Price").
3. Exercise. The Option may be exercised by the Holder
upon delivery of written notice of intent to exercise in the form
attached hereto as Exhibit "A" to the Company at the following
address: 18245 S.E. Federal Highway, Tequesta, Florida 33469, or
such other address as the Company shall designate in a written
notice to the Holder, together with this Agreement and a check
payable to the Company for the aggregate Exercise Price of the
Shares so purchased. Upon exercise of the Option as aforesaid,
the Company shall, as promptly as practicable, and in any event
within thirty (30) days thereafter, execute and deliver to the
Holder a certificate or certificates for the total number of
whole Shares for which the Option is being exercised. If the
Option shall be exercised with respect to less than all of the
Shares, the Holder shall be entitled to receive a new Agreement
covering the number of Shares in respect of which the Option
shall not have been exercised, which new Agreement shall in all
other respects be identical to this Agreement. The Company cov-
enants and agrees that it shall pay when due any and all state
and federal issue taxes which may be payable in respect of the
issuance of the Option or the issuance of any Shares upon exer-
cise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evid-
ence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be exer-
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be exer-
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to ac-
quire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Op-
tion shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Franklin W. Brooks, Chairman
______________________________
JAMES O. PASCO JR.
Exhibit "A" to
Stock Option Agreement dated March ___, 1997
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated March ___, 1997 between the
undersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: March ___, 1997
B. Number of Shares covered by Agreement: 50,000
C. Number of Shares of Common Stock actually to be purchased at
this time (cannot be greater than 50,000):________
D. Exercise price per Share: $2.50
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
JAMES O. PASCO JR.
Residence:
1226 N. Wayne St. #709
Arlington, VA 22201
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 14.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this 29th day of October, 1996 by SAF
T LOK INCORPORATED, a Florida corporation (the "Company"), in fa-
vor of J. THOMAS SMITH (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase one hundred thousand (100,000) newly-issued shares
(the "Shares") of the Company's Common Stock, $0.01 par value
(the "Common Stock"), exercisable at any time and from time to
time through December 31, 2001 (the "Option").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is seven dollars ($7.00) (the "Exercise Price").
3. Exercise. The Option may be exercised by the Holder as
to all or in increments of ten thousand (10,000) Shares (or the
balance of the Shares if less than such number), upon delivery of
written notice of intent to exercise in the form attached hereto
as Exhibit "A" to the Company at the following address: 18245
S.E. Federal Highway, Tequesta, Florida 33469, or such other ad-
dress as the Company shall designate in a written notice to the
Holder, together with this Agreement and a check payable to the
Company for the aggregate Exercise Price of the Shares so pur
chased. Upon exercise of the Option as aforesaid, the Company
shall, as promptly as practicable, and in any event within thirty
(30) days thereafter, execute and deliver to the Holder a certif-
icate or certificates for the total number of whole Shares for
which the Option is being exercised. If the Option shall be ex-
ercised with respect to less than all of the Shares, the Holder
shall be entitled to receive a new Agreement covering the number
of Shares in respect of which the Option shall not have been ex-
ercised, which new Agreement shall in all other respects be iden-
tical to this Agreement. The Company covenants and agrees that
it shall pay when due any and all state and federal issue taxes
which may be payable in respect of the issuance of the Option or
the issuance of any Shares upon exercise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evi-
dence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be ex-er
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be ex-er
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this
Option shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Frank W. Brooks, Chairman
______________________________
J. THOMAS SMITH
Exhibit "A" to
Stock Option Agreement dated October 29, 1996
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated October 29, 1996 between the
undersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: October 29, 1996
B. Number of Shares covered by Agreement: 100,000
C. Number of Shares of Common Stock actually to be purchased at
this time (must be 10,000 Shares or whole multiples thereof
and cannot be greater than 100,000):________
D. Exercise price per Share: $7.00
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
J. THOMAS SMITH
Residence:
221 Commodore Dr.
Jupiter, FL 33477
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 15.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this 29th day of November, 1996 by
SAF T LOK INCORPORATED, a Florida corporation (the "Company"), in
favor of MOYLE, FLANIGAN, KATZ, KOLINS, RAYMOND & SHEEHAN, P.A.,
a Florida professional association (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase twenty two thousand five hundred (22,500) newly-
issued shares (the "Shares") of the Company's common stock, $0.01
par value (the "Common Stock"), exercisable through December 31,
2001 (the "Option").
2. Exercise Price. The exercise price per Share for which
the Shares may be purchased pursuant to the terms of the Option
is two dollares and fifty cents ($2.50) (the "Exercise Price").
3. Exercise. The Option may be exercised by the Holder
upon delivery of written notice of intent to exercise in the form
attached hereto as Exhibit "A" to the Company at the following
address: 18245 S.E. Federal Highway, Tequesta, Florida 33469, or
such other address as the Company shall designate in a written
notice to the Holder, together with this Agreement and a check
payable to the Company for the aggregate Exercise Price of the
Shares so purchased. Upon exercise of the Option as aforesaid,
the Company shall, as promptly as practicable, and in any event
within thirty (30) days thereafter, execute and deliver to the
Holder a certificate or certificates for the total number of
whole Shares for which the Option is being exercised. The Option
may not be exercised with respect to less than all of the Shares.
The Company covenants and agrees that it shall pay when due any
and all state and federal issue taxes which may be payable in
respect of the issuance of the Option or the issuance of any
Shares upon exercise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part.
6. Adjustment Upon Changes In Capitalization.
(a) If the Option shall be exercised subsequent to any
stock split, stock dividend, recapitalization, combination of
shares of the Company, or other similar event occurring after the
date hereof, then the Holder exercising the Option shall receive,
for the aggregate price paid upon the exercise, the aggregate
number and class of shares which the Holder would have received
if the Option had been exercised immediately prior to such stock
split, stock dividend, recapitalization, combination of shares,
or other similar event. If any adjustment under this paragraph
6(a) would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares subject to
the Option shall be the next higher number of shares, rounding
all fractions upward. Whenever there shall be an adjustment
pursuant to this paragraph 6(a), the Company shall forthwith
notify the Holder of such adjustment, setting forth in reasonable
detail the event requiring the adjustment and the method by which
such adjustment was calculated.
(b) If all or any portion of the Option shall be exer-
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to ac-
quire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Op-
tion shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Frank W. Brooks, Chairman
MOYLE, FLANIGAN, KATZ, KOLINS,
RAYMOND & SHEEHAN, P.A.
By:___________________________
Name:______________________
Title:_____________________
Exhibit "A" to
Stock Option Agreement dated November 29, 1996
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned ten thousand (10,000) shares of Common Stock (the
"Shares") at the price per Share specified below pursuant to the
exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated November 29, 1996 between the
undersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: November 29, 1996
B. Number of Shares covered by Agreement: 22,500
C. Number of Shares of Common Stock actually to be purchased at
this time: 22,500
D. Exercise price per Share: $2.50
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $56,250.00
Dated:________________________
Very truly yours,
MOYLE, FLANIGAN, KATZ, KOLINS,
RAYMOND & SHEEHAN, P.A.
By:___________________________
Name:______________________
Title:_____________________
Address: 625 N. Flagler Dr.
West Palm Beach, FL
33401-4025
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 16.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ____ day of April, 1997 by SAF T
LOK INCORPORATED, a Florida corporation (the "Company"), in favor
of RICHARD P. STANTON (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase fifty thousand (50,000) newly-issued shares (the
"Shares") of the Company's Common Stock, $0.01 par value (the
"Common Stock"), exercisable at any time and from time to time
through December 31, 2001 (the "Option").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is two dollars and fifty cents ($2.50) (the "Exer
cise Price").
3. Exercise. The Option may be exercised by the Holder as
to all or in increments of ten thousand (10,000) Shares (or the
balance of the Shares if less than such number), upon delivery of
written notice of intent to exercise in the form attached hereto
as Exhibit "A" to the Company at the following address: 18245
S.E. Federal Highway, Tequesta, Florida 33469, or such other ad-
dress as the Company shall designate in a written notice to the
Holder, together with this Agreement and a check payable to the
Company for the aggregate Exercise Price of the Shares so pur
chased. Upon exercise of the Option as aforesaid, the Company
shall, as promptly as practicable, and in any event within thirty
(30) days thereafter, execute and deliver to the Holder a certif-
icate or certificates for the total number of whole Shares for
which the Option is being exercised. If the Option shall be ex-
ercised with respect to less than all of the Shares, the Holder
shall be entitled to receive a new Agreement covering the number
of Shares in respect of which the Option shall not have been ex-
ercised, which new Agreement shall in all other respects be iden-
tical to this Agreement. The Company covenants and agrees that
it shall pay when due any and all state and federal issue taxes
which may be payable in respect of the issuance of the Option or
the issuance of any Shares upon exercise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evi-
dence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be ex-er
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be ex-er
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this
Option shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Franklin W. Brooks, Chairman
_______________________________
RICHARD P. STANTON
Exhibit "A" to
Stock Option Agreement dated April ___, 1997
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated April ___, 1997 between the un-
dersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: April ___, 1997
B. Number of Shares covered by Agreement: 50,000
C. Number of Shares of Common Stock actually to be purchased at
this time (must be 10,000 Shares or whole multiples thereof
and cannot be greater than 100,000):________
D. Exercise price per Share: $2.50
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
RICHARD P. STANTON
Residence:
1310 19th St. N.W. #LL
Washington, D.C. 20036
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 17.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this ____ day of March, 1997 by SAF T
LOK INCORPORATED, a Florida corporation (the "Company"), in favor
of TIMOTHY H. SCULLY JR. (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase fifty thousand (50,000) newly-issued shares (the
"Shares") of the Company's common stock, $0.01 par value (the
"Common Stock"), exercisable through March 31, 200_ (the "Op-
tion").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is two dollars and fifty cents ($2.50) (the "Exer
cise Price").
3. Exercise. The Option may be exercised by the Holder
upon delivery of written notice of intent to exercise in the form
attached hereto as Exhibit "A" to the Company at the following
address: 18245 S.E. Federal Highway, Tequesta, Florida 33469, or
such other address as the Company shall designate in a written
notice to the Holder, together with this Agreement and a check
payable to the Company for the aggregate Exercise Price of the
Shares so purchased. Upon exercise of the Option as aforesaid,
the Company shall, as promptly as practicable, and in any event
within thirty (30) days thereafter, execute and deliver to the
Holder a certificate or certificates for the total number of
whole Shares for which the Option is being exercised. If the
Option shall be exercised with respect to less than all of the
Shares, the Holder shall be entitled to receive a new Agreement
covering the number of Shares in respect of which the Option
shall not have been exercised, which new Agreement shall in all
other respects be identical to this Agreement. The Company cov-
enants and agrees that it shall pay when due any and all state
and federal issue taxes which may be payable in respect of the
issuance of the Option or the issuance of any Shares upon exer-
cise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evid-
ence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be exer-
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be exer-
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to ac-
quire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Op-
tion shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Franklin W. Brooks, Chairman
______________________________
TIMOTHY H. SCULLY JR.
Exhibit "A" to
Stock Option Agreement dated March ___, 1997
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated March ___, 1997 between the
undersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: March ___, 1997
B. Number of Shares covered by Agreement: 50,000
C. Number of Shares of Common Stock actually to be purchased at
this time (cannot be greater than 50,000):________
D. Exercise price per Share: $2.50
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
TIMOTHY H. SCULLY JR.
Residence:
619 Laura Dr.
Fals Church, VA 22046
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 18.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made this 29th day of October, 1996 by SAF
T LOK INCORPORATED, a Florida corporation (the "Company"), in fa-
vor of THEODORE M. JOHNSON (the "Holder").
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company has agreed, among
other things, to grant to Holder the Option (as herein defined).
1. Grant. The Company hereby grants to Holder the right
to purchase one hundred thousand (100,000) newly-issued shares
(the "Shares") of the Company's Common Stock, $0.01 par value
(the "Common Stock"), exercisable at any time and from time to
time through December 31, 2001 (the "Option").
2. Exercise Price. The exercise price per Share for which
all or any of the Shares may be purchased pursuant to the terms
of the Option is seven dollars ($7.00) (the "Exercise Price").
3. Exercise. The Option may be exercised by the Holder as
to all or in increments of ten thousand (10,000) Shares (or the
balance of the Shares if less than such number), upon delivery of
written notice of intent to exercise in the form attached hereto
as Exhibit "A" to the Company at the following address: 18245
S.E. Federal Highway, Tequesta, Florida 33469, or such other ad-
dress as the Company shall designate in a written notice to the
Holder, together with this Agreement and a check payable to the
Company for the aggregate Exercise Price of the Shares so pur
chased. Upon exercise of the Option as aforesaid, the Company
shall, as promptly as practicable, and in any event within thirty
(30) days thereafter, execute and deliver to the Holder a certif-
icate or certificates for the total number of whole Shares for
which the Option is being exercised. If the Option shall be ex-
ercised with respect to less than all of the Shares, the Holder
shall be entitled to receive a new Agreement covering the number
of Shares in respect of which the Option shall not have been ex-
ercised, which new Agreement shall in all other respects be iden-
tical to this Agreement. The Company covenants and agrees that
it shall pay when due any and all state and federal issue taxes
which may be payable in respect of the issuance of the Option or
the issuance of any Shares upon exercise of the Option.
4. Covenants and Conditions. The above provisions are
subject to the following:
(a) Neither the Option nor the Shares have been regis-
tered under the Securities Act of 1933, as amended (the "Securi
ties Act") or any state securities laws (the "Blue Sky Laws").
The Option has been acquired for investment purposes and not with
a view to distribution or resale and may not be pledged, hypothe-
cated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement under
the Securities Act and applicable Blue Sky Laws, or (ii) an opin-
ion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is
not required under the Securities Act or under any applicable
Blue Sky Laws. Transfer of the Shares issued upon the exercise
of the Option shall be restricted in the same manner and to the
same extent as the Option and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFI
CATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL
(I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH AP-
PLICABLE STATE SECURITIES LAW SHALL HAVE BECOME EFFEC
TIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
The Holder agrees to execute such other documents and instruments
as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of the Option and any Shares is-
sued upon exercise of the Option with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares
which may be issued upon exercise of the Option shall, upon is-
suance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights, if any, with respect there-
to or to the issuance thereof. The Company shall at all times
reserve and keep available for issuance upon the exercise of the
Option such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of the
Option.
5. Transfer of Option. The Option may not be transferred,
in whole or in part. In the event of the death or final deter-
mination of legal incapacity of the Holder during such time as
the Holder shall possess the Option granted hereunder, the per-
sonal representative of the Holder may, for a period of ninety
(90) days following the date of death or final determination of
legal incapacity, exercise the Option to the extent that the Hol-
der was entitled to exercise the Option on such date. Any person
so desiring to exercise the Option shall be required, as a condi
tion to the exercise of the Option, to furnish to the Company
such documentation as the Company shall deem necessary to evi-
dence the authority of such person to exercise the Option on be-
half of the Holder.
6. Adjustment Upon Changes In Capitalization.
(a) If all or any portion of the Option shall be ex-er
cised subsequent to any stock split, stock dividend, recapital
ization, combination of shares of the Company, or other similar
event occurring after the date hereof, then the Holder exercising
the Option shall receive, for the aggregate price paid upon the
exercise, the aggregate number and class of shares which the Hol-
der would have received if the Option had been exercised immedi-
ately prior to such stock split, stock dividend, recapitaliza
tion, combination of shares, or other similar event. If any ad-
justment under this paragraph 6(a) would create a fractional
share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares subject to the Option shall be the next higher
number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this paragraph 6(a), the Com-
pany shall forthwith notify the Holder of such adjustment, set-
ting forth in reasonable detail the event requiring the adjust
ment and the method by which such adjustment was calculated.
(b) If all or any portion of the Option shall be ex-er
cised subsequent to any merger, consolidation, exchange of
shares, separation, reorganization or liquidation of the Company
or other similar event occurring after the date hereof, as a re-
sult of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class
or classes of securities of the Company or another entity, then
the Holder exercising the Option shall receive, for the aggregate
price paid upon such exercise, the aggregate number and class of
shares which the Holder would have received if the Option had
been exercised immediately prior to such merger, consolidation,
exchange of shares, separation, reorganization or liquidation, or
other similar event. If any adjustment under this paragraph 6(b)
would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this
Option shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant
to this paragraph 6(b), the Company shall forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such ad-
justment was calculated.
7. Notices. The Company shall provide the Holder with a
copy of any notice that the Company is required to provide those
persons holding shares of the Common Stock on the same date such
persons receive such notice.
8. Loss, Destruction, Etc. of Agreement. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutila
tion or destruction of this Agreement, and in the case of any
such loss, theft or destruction, upon delivery of a bond of in-
demnity in such form and amount as shall be reasonably satisfac-
tory to the Company, or in the event of such mutilation, upon
surrender and cancellation of the Agreement, the Company shall
make and deliver a new Agreement of like tenor in lieu of such
lost, stolen, destroyed or mutilated Agreement. Any Agreement
executed and delivered under the provisions of this paragraph 8
in lieu of any Agreement alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Agreement, shall constitute an orig-
inal contractual obligation on the part of the Company.
IN WITNESS WHEREOF, the Company and the Holder have executed
this Stock Option Agreement as of the date first above written.
SAF T LOK INCORPORATED
By:
Frank W. Brooks, Chairman
______________________________
THEODORE M. JOHNSON
Exhibit "A" to
Stock Option Agreement dated October 29, 1996
NOTICE OF EXERCISE OF OPTION TO PURCHASE
SHARES OF COMMON STOCK
OF SAF T LOK INCORPORATED
The undersigned does by this notice request that Saf T Lok Incor-
porated, a Florida corporation (the "Company"), issue to the un-
dersigned that number of shares of Common Stock specified below
(the "Shares") at the price per Share specified below pursuant to
the exercise of the undersigned's option under the Stock Option
Agreement (the "Agreement") dated October 29, 1996 between the
undersigned and the Company.
Simultaneously herewith, the undersigned delivers to the Company
the purchase price for the Shares (i.e., that amount which is ob-
tained by multiplying the number of Shares for which the Option
is being exercised by the price specified), by good check.
The undersigned hereby represents and warrants that the under
signed is acquiring the Shares for the undersigned's own account
and not on behalf of any other person and without any present
view to making a public offering or distribution of same and
without any present intention of selling same at any particular
time or at any particular price or upon the occurrence of any
particular event or circumstance.
The undersigned acknowledges and understands that in connection
with the acquisition of the Shares by the undersigned:
1. The Company has informed the undersigned that the Shares are
not registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities or Blue Sky law or laws,
and thus the Shares may not be transferred or otherwise disposed
of until the Shares are subsequently registered under the Act and
the applicable state securities or Blue Sky law or laws or an
exemption from such registration requirements is available.
2. The undersigned has been informed that a legend referring to
the restrictions indicated herein on transferability and sale
will be placed upon the certificate(s) evidencing the Shares.
3. If the undersigned is required to file a Form 144 with the
Securities and Exchange Commission in connection with sales of
the Shares pursuant to Rule 144 under the Act, the undersigned
shall mail a copy of such Form to the Company at the same time
and each time the undersigned mails a copy to the Securities and
Exchange Commission.
A. Date of Stock Option Agreement: October 29, 1996
B. Number of Shares covered by Agreement: 100,000
C. Number of Shares of Common Stock actually to be purchased at
this time (must be 10,000 Shares or whole multiples thereof
and cannot be greater than 100,000):________
D. Exercise price per Share: $7.00
E. Aggregate price to be paid for Shares actually purchased (D
multiplied by C): $________
Dated:________________________
Very truly yours,
______________________________
THEODORE M. JOHNSON
Residence:
6223 Kennedy Dr.
Chevy Chase, MD 20815
ACCEPTED:
SAF T LOK INCORPORATED
By:___________________________
Title:_____________________
Dated:________________________
EXHIBIT 20.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REQUIREMENTS FOR SUCH
REGISTRATION FOR NON PUBLIC OFFERINGS. ACCORDINGLY,
THE SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THESE SECURITIES OR ANY PORTION THEREOF
OR INTEREST THEREIN MAY NOT BE ACCOMPLISHED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT OR AN
OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED.
COMMON STOCK PURCHASE WARRANT
For the Purchase of up to 1867 Shares of Common Stock,
$0.01 Par Value
of
SAF T LOK INCORPORATED
(A Florida corporation)
For Value Received, ROBERT L. and CYNTHIA T. GILBERT
(jointly, the "Holder"), as registered owner of this
Warrant, is entitled to at any time or from time to time
before 5:00 p.m., local time, on April 30, 1997 but not
thereafter, to subscribe for, purchase and receive up to
one thousand eight hundred thirty one (1831) fully paid
and nonassessable shares of the common stock, $0.01 par
value (the "Common Stock"), of Saf T Lok Incorporated, a Flo
rida corporation (the "Company"). The exercise price for
such shares shall be seven dollars and fifty cents ($7.50)
per share. The number of shares of Common Stock deliverable
hereunder, and the price to be paid for a share of Common
Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable hereunder
and as adjusted from time to time, are hereinafter
sometimes referred to as "Warrant Stock". The ex ercise
price of a share of Warrant Stock in effect at any time
and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price".
1. Exercise of Warrant. This Warrant shall become
exercisable upon, and only upon, Holder's deliver of
written notice of exercise and then this Warrant shall
only entitle Holder to purchase a number of shares of
Common Stock not exceeding the number of shares of Common
Stock issuable to Holder pursuant to such notice or, in
the event of multiple partial conversions by Holder,
pursuant to the notices delivered to date and as adjusted
from time to time as hereinafter set forth. Subject to the
foregoing, this Warrant may be exercised by presentation
and surrender of this Warrant and payment by cashier's
check of the Exercise Price for such shares of Common Stock
to the Company at the principal office of the Company. If
the subscription rights represented hereby are not
exercised at or before 5:00 p.m., local time, on April 30,
1997, this Warrant shall become and be void without
further force or effect, and all rights represented hereby
shall cease and expire. This Warrant may be exercised in ac
cordance with its terms in whole or in part (payment of a
portion of the Exercise Price shall proportionately reduce
the number of shares to be issued to Holder). In the event
of the exercise in part only, the Company shall cause to
be delivered to Holder a new Warrant of like tenor to
this Warrant in the name of Holder evidencing the right
of the Holder to purchase the number of
shares of Common Stock purchasable hereunder as to which
this Warrant has not been exercised or assigned.
2. Adjustments to Exercise Price and Number of
Shares. In
case the Company shall at any time issue Common Stock by
way of dividend or subdivide or combine the outstanding
shares of its Common Stock, the Exercise Price shall be
proportionately decreased in the case of such issuance (on
the date following the date fixed for determining
shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such subdivision
or increased in the case of such combination (on the date
that such subdivision or combination shall become effec
tive). Upon any adjustment of the Exercise Price, Holder
shall thereafter (until another such adjustment) be
entitled to pur chase, at the new Exercise Price, the
number of shares, calculated to the nearest full share,
obtained by (A) multiplying the number of shares of Common
Stock initially issuable upon exercise of this Warrant by
the Exercise Price in effect on the date hereof, and (B)
dividing the product so obtained by the new Exercise Price.
3. Transfer to Comply with the Securities Act of
1933.
(a) This Warrant and the Warrant Stock or any
other security issued or issuable upon exercise of this
Warrant may not be sold, transferred or otherwise disposed
of except to a person who, in the opinion of counsel for
the Company, is a person to whom this Warrant or such
Warrant Stock may legally be trans ferred without
registration and without the delivery of a current
prospectus under the Securities Act of 1933, as amended
(the "Act") with respect thereto and then only against
receipt of an agreement of such person to comply with the
provisions of this Section 3 with respect to any resale or
other disposition of such securities.
(b) The Company may cause the following legend
to be set forth on each certificate representing Warrant
Stock or any other security issued or issuable upon
exercise of this Warrant, unless counsel for the Company is
of the opinion as to any such certificate that such legend
is unnecessary:
"The securities represented by this
certificate may not be offered for sale, sold
or otherwise transferred except pursuant
to an effective registration statement
made under the Securities Act of 1933, as
amended (the "Act"), or pursuant to an
exemption from reg-istration under the Act,
the availability of which is to be
established to the satisfac tion of the
Company."
4. Registration Rights.
(a) In the event the Company proposes to file a
registration statement under the Act which relates to a current
offer ing of securities of the Company (except in connection
with an offering on Form S-8 or S-4 or any other
inappropriate form), such registration statement (and the
prospectus included therein) shall also, at the written request
to the Company by Holder, relate to and meet the requirements
of the Act with respect to any public offering of the Warrant
Stock shares so as to permit the public sale of all or some
portion of the Warrant Stock.
The
Company shall give written notice to Holder of its intention
to file a registration statement under the Act relating to a
current offering of securities of the Company not less than
fifteen (15) days prior to the filing of such registration
statement. Any
written request of Holder to include the Warrant Stock
shares held by Holder shall be given to the Company not less
than five (5) days prior to the date specified in the notice
as the date on which such registration statement is intended
to be filed with the Securities and Exchange Commission.
Neither the delivery of such notice by the Company nor of
such request by Holder shall obligate the Company to file such
registration statement and notwithstanding the filing of such
registration statement, the Com pany may, at any time prior
to the effective date thereof, determine to withdraw such
registration statement and not offer the securities intended
to be offered by the Company to which the registration
statement relate, without liability to Holder on account
thereof.
(b) In the event Holder elects to include the
Warrant Stock shares in a registration statement in accordance
with sub paragraph (a) of this Section 4, the Company shall:
(i) Supply to Holder a reasonable number
of copies of the preliminary, final and other prospectus in
confor mity with the requirements of the Act and the rules
and regula tions promulgated thereunder and such other
documents as Holder shall reasonably request;
(ii) Use its best efforts to cause the
War rant Stock to be registered, qualified or exempted under
the securities laws of such reasonable number and selection
of states selected by Holder and do any and all other acts and
things which may be necessary or advisable to enable Holder to
consummate the proposed sale or other disposition of the
Warrant Stock in such states; provided, however, that in no
event shall the Company be obligated, in connection therewith,
to qualify to do business or to file a general consent to
service of process in any jurisdic tion where it shall not then
be qualified;
(iii) Keep effective for a period of
ninety (90) days after the initial effectiveness thereof all
such registration statements, and cooperate in taking such
action as may be necessary to keep effective such other
registrations, qualifica tions or exemptions, and do any and
all other acts and things for such period, not to exceed such
ninety (90) days, as may be necessary to permit the public
sale or other disposition of such Warrant Stock by Holder;
and
(iv) Pay all costs of the registration
state ment and the public offering and such other
registrations, qualifications or exemptions, exclusive of (A)
brokers or sales commis sions on the sale of the Warrant
Stock; and (B) any legal fees incurred by Holder in
connection with the registration statement or public offering.
5. Cancellation. This Warrant has been issued to
Holder
as an inducement to Holder to lend the Company two hundred
thousand dollars ($200,000), which loan is evidenced by a
Promissory Note of even date. In the event of acceleration of
said Promis sory Note by Holder pursuant to paragraph 10
thereof, all rights hereunder shall immediately cease and no
longer have any force or effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed by its Chairman on this 30th day of October, 1996.
SAF T LOK INCORPORATED
By:___________________________
Frank W. Brooks, Chairman
EXHIBIT 22.
List of subsidiaries
RGB Video, Inc.
STL Lock, Inc.
EXHIBIT 23.
SEVERANCE AGREEMENT AND RELEASE
SEVERANCE AGREEMENT AND RELEASE made this ___ day of April, 1997
between RICHARD M. TAYLOR and JEAN TAYLOR (the "Taylors"), and
SAF T LOK INCORPORATED, a Florida corporation ("STL").
Recitals:
A. The Taylors were employed by STL until November 1996.
B. STL wishes to reward the Taylors for their efforts as
employees.
NOW, THEREFORE, based on the foregoing and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Share Issuance. STL hereby issues to the Taylors thirty
thousand (30,000) restricted shares of its common stock (the
"Shares").
2. Release.
(a) The Taylors, for and on behalf of themselves, their
heirs, distributees, executors, administrators, legal representa
tives and assigns, hereby WAIVE, RELEASE AND FOREVER DISCHARGE
AND ACQUIT STL and each of its Affiliates and the officers, dir-
ectors, shareholders, partners, employees, agents, attorneys and
representatives of STL and each of its Affiliates, past, present
and future, and the heirs, distributees, executors, administrat-
ors, legal representatives, successors and assigns of each of the
foregoing (STL and all of such persons and entities being collec
tively referred to as the "Releasees") from any and all actions,
causes of action, suits, debts, demands and claims (including,
without limitation, amounts for attorneys' fees and expenses),
known or unknown, asserted or unasserted, which the Taylors ever
had, now have or hereafter can, shall or may have against any of
the Releasees arising at any time directly or indirectly out of,
or in any way connected with the Taylors' employment with STL
and/or any other association, relationship or dealing with any of
the Releasees from the beginning of such employment (or, if ear
lier, such other association, relationship or dealing) to the
date of this Agreement, including, but not limited to:
(i) claims arising out of federal, foreign, state or
local employment discrimination laws, regulations or ordinances,
such as for sex, age, race, color, national origin, marital stat-
us, sexual orientation or preference, disability, religion, han-d
icap or status as a Vietnam or special disabled veteran, includ
ing, without limitation, the Federal Age Discrimination in Emp-
loyment Act, as amended ("ADEA"), the Employee Retirement Income
Security Act, the Family and Medical Leave Act of 1993, in each
case to the extent applicable to STL and the Taylors;
(ii) claims for wrongful or abusive discharge arising
at law or in equity;
(iii) claims for implied or express contracts, personal
injury or tort claims or claims arising under public policy;
(iv) claims for workers compensation, claims for con
tinued pay, accrued vacation pay or any other claim for wages,
compensation, fringe benefits or reinstatement to employment, in-
cluding, but not limited to, claims for bonuses or deferred or
incentive compensation;
(v) claims relating to any capital stock or other sec-
urities issued by STL; or
(vi) any other claim of any kind, nature or description
whatsoever, at law or in equity, which the Taylors or their
heirs, distributees, executors, administrators, legal representa
tives, successors or assigns had, now have or hereafter can,
shall or may have, for, upon or by reason of any matter, cause or
thing whatsoever.
(b) For purposes of this Agreement, an "Affiliate" of STL
shall mean any person, corporation, partnership, firm, associa
tion, trust or other entity, directly or indirectly through one
or more intermediaries, controlling, controlled by or under com
mon control with STL or any such person.
3. Certain Acknowledgements. The Taylors acknowledge and agree
that:
(a) subject to the provisions set forth in the next two
sentences, this Agreement constitutes a knowing and voluntary
waiver of all rights or claims they may have against STL under
ADEA, including, but not limited to, all claims of age discrim-
ination in employment and all claims of retaliation in violation
of ADEA. For a period of seven (7) days following their execu
tion of this Agreement, the Taylors may revoke this Agreement by
written notice to such effect to STL. In the event of such rev-
ocation, this Agreement shall be null and void ab initio as to
all parties. Accordingly, this Agreement shall not become en-
forceable until the expiration of such seven-day period occurs
without any such revocation by the Taylors;
(b) the Taylors acknowledge and agree that they have had
ample time in which to consider and review with an attorney of
their choosing this Agreement prior to its execution by them; and
(c) the consideration provided by STL to the Taylors under
the terms of this Agreement does not constitute an admission by
STL that it has violated any legal or other obligation to the
Taylors or has violated any law respecting the Taylors' employ
ment. The Taylors further understand and agree that all con
sideration paid hereunder is subject to any and all applicable
withholding for income taxes, FICA and other such deductions.
4. Complete Agreement; Modification. This Agreement constit-
utes the complete understanding between the Taylors and STL with
respect to the subject matter hereof and supersedes any and all
prior agreements between them with respect thereto. This Agree
ment may not be modified unless such modification is set forth in
a writing signed by the party against whom or which enforcement
of such modification is sought.
IN WITNESS WHEREOF the undersigned have executed this Agreement
as of the date first above written.
SAF T LOK INCORPORATED
By:____________________________
Franklin W. Brooks, Chairman
_______________________________
RICHARD M. TAYLOR
_______________________________
JEAN TAYLOR
EXHIBIT 25.
FINANCIAL STATEMENTS
SAF T LOK, INCORPORATED
F/K/A RGB COMPUTER & VIDEO, INC.
REPORT
AS OF DECEMBER 31, 1996
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONTENTS
PAGE 1 - 2 INDEPENDENT AUDITORS' REPORT
PAGE 3 - 4 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER
31, 1996 AND 1995
PAGE 5 CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995
PAGE 6 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
PAGE 7 - 8 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995
PAGE 9 - 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of :
Saf T Lok Incorporated
We have audited the accompanying consolidated balance sheet of Saf T Lok
Incorporated and Subsidiaries, F/K/A RGB Computer & Video, Inc. as of December
31, 1996 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the year ended December 31, 1996.
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. The consolidated financial statements
of Saf T Lok Incorporated and Subsidiaries as of December 31, 1995 and for the
year ended December 31, 1995, were audited by other auditors whose opinion
dated March 20, 1996 expressed an unqualified opinion on those statements.
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 consolidated financial statement presentation. We
believe that 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 consolidated financial position of Saf T
Lok Incorporated and Subsidiaries, F/K/A RGB Computer & Video, Inc. as of
December 31, 1996 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Page Two
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has suffered recurring
losses from operations and currently has a shortage of working capital. These
factors indicate that the Company may be unable to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
WEINBERG, PERSHES & COMPANY, P.A.
Boca Raton, Florida
April 10, 1997
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 88,956 $ 1,981,217
Securities - 518,362
Accounts receivable (net of allowance
for doubtful accounts of $23,000 and
-0-, respectively) 10,419 7,331
Inventories 466,680 282,471
Loans receivable - 8,516
Prepaid expenses 21,111 -
Total Current Assets 587,166 2,797,897
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION 932,028 408,827
OTHER ASSETS
Patents, (net of accumulated
amortization of $28,000) 374,147 -
Loans receivable 199,842 213,976
Loans receivable (officers) - 18,100
Other assets 975 2,070
Total Other Assets 574,964 234,146
TOTAL ASSETS $ 2,094,158 $ 3,440,870
</TABLE>
See independent auditors' report and
notes to consolidated financial statements.
3
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CURRENT LIABILITIES
Notes payable - current portion $ 67,353 $ -
Accounts payable and accrued
expenses 836,402 153,810
Current maturities of capital
lease obligations - 14,515
Total Current Liabilities 903,755 168,325
LONG TERM LIABILITIES
Notes payable, net of current portion 58,061 -
TOTAL LIABILITIES 961,816 168,325
SHAREHOLDERS' EQUITY
Common Stock, $.01 par
value, 20,000,000 and
10,000,000 shares authorized,
5,651,089 and 3,263,100 shares
issued and outstanding, in 1996
and 1995 respectively, of which
1,500 shares were held in
treasury 56,511 32,631
Capital in excess of par 9,167,898 8,056,639
Deficit (8,092,067) (4,816,725)
TOTAL SHAREHOLDERS' EQUITY 1,132,342 3,272,545
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,094,158 $3,440,870
</TABLE>
See independent auditors' report and
notes to consolidated financial statements.
4
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Capital
Common Stock In Excess
Shares Amount of Par Deficit Total
<S> <C> <C> <C> <C> <C>
Balance -
January 1,
1995 3,268,032 $ 32,680 $8,060,043 $(3,556,485) $4,536,238
Purchase of
treasury
stock (4,932) (49) (3,404) - (3,453)
Net loss - - - (1,260,240) (1,260,240)
Balance-
December 31,
1995 3,263,100 32,631 8,056,639 (4,816,725) 3,272,545
Issuance of
common stock
for Saf T Lok
merger 2,238,957 22,390 504,149 - 526,539
Issuance of
stock for
settlement of
lawsuit 20,000 200 8,400 - 8,600
Capital
Contribution - - 200,000 - 200,000
Issuance of
common stock 129,032 1,290 398,710 - 400,000
Net loss - - - (3,275,342) (3,275,342)
BALANCE -
DECEMBER 31,
1996 5,651,089 $ 56,511 $9,167,898 $(8,092,067) $1,132,342
</TABLE>
See independent auditors' report and
notes to consolidated financial statements.
5
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenue $ 57,349 $ -
Cost of Sales 51,615 -
Gross Profit 5,734 -
Selling, General and Administrative
Expenses 2,751,306 -
Depreciation 96,144 -
Loss from continuing operations (2,841,716) -
Loss from discontinued operations (433,626) (1,260,240)
Net (loss) $(3,275,342) $(1,260,240)
Loss per common share
Loss from continuing operations $(.54) $ -
Loss from discontinued operations (.08) (.36)
Net (loss) $(.62) $(.36)
Weighted average number of
common shares outstanding 5,243,936 3,508,799
</TABLE>
See independent auditors' report and
notes to consolidated financial statements.
6
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $(2,841,716) $ -
Loss from discontinued operations (433,626) (1,260,240)
Adjustments to reconcile net (loss)
to net cash (used in) operating
activities:
Depreciation and amortization 232,938 150,481
Amortization of research and
development costs - 23,840
Common stock issued in settlement
of lawsuit 8,600 -
Bad debt expense 23,000 235,000
Loss on sale and disposal of
fixed assets 159,125 35,142
Gain on sale of home - (25,863)
Impairment loss on fixed assets - 25,666
Impairment loss on research and
development cost - 49,483
Change in assets and liabilities:
(Increase)decrease in:
Accounts receivable (26,088) 134,844
Inventories (173,029) 222,698
Prepaid and other current assets (16,235) 22,229
Increase (decrease)in:
Accounts payable and accrued
expenses 468,809 (10,319)
NET CASH (USED IN)
OPERATING ACTIVITIES (2,598,222) (397,039)
Cash flows from investing activities:
Capitalization of patent costs (20,814) -
Purchase of property and equipment (524,150) (28,914)
Purchase of securities - (518,362)
Proceeds from sale of securities 518,362 -
Proceeds from sale of fixed assets - 52,890
(Increase) in loans receivable 22,650 (213,976)
Proceeds from sale of home - 225,473
</TABLE>
See independent auditors' report and
notes to consolidated financial statements.
7
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
(Increase) decrease in loans
receivable-officers 18,100 (7,100)
(Increase) decrease in other assets 1,345 (200)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 15,493 (490,189)
Cash flows from financing activities:
Principal payments on borrowings,
including capital lease obligations (21,218) (51,689)
Repurchase of common stock - (3,453)
Capital contribution 200,000 -
Proceeds from sale of common stock 511,686 -
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 690,468 (55,142)
NET DECREASE IN CASH (1,892,261) (942,370)
CASH AND CASH EQUIVALENTS, AT
BEGINNING OF YEAR 1,981,217 2,923,587
CASH AND CASH EQUIVALENTS, AT
END OF YEAR $ 88,956 $ 1,981,217
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash payments for:
Interest $ 6,982 $ 22,911
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
In February 1996, the Company merged with Saf T Lok, Incorporated by
issuing 2,238,957 shares of the Company's common stock in exchange for
100% of the outstanding stock of Saf T Lok Corporation. The transaction
was recorded under the purchase method and the common stock was valued at
$527,000.
See independent auditors' report and
notes to consolidated financial statements.
8
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 1 - GOING CONCERN
The accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has discontinued its previous core business and acquired a new business
and has minimal cash to operate at December 31, 1996. The Company's
continuation as a going-concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to obtain
financing as may be required, and ultimately attain profitable operations.
The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset amounts that
might be necessary should the Company be unable to continue as a going
concern.
NOTE 2 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of business
Saf T Lok Incorporated F/K/A RGB Computer & Video, Inc. (the "Company")
was incorporated in Florida in July 1989 under the name RGB Sales and
Marketing, Inc. In 1993, the Company completed an initial public offering
of common stock. The Company was principally engaged in the development,
sale, marketing and assembling of computer based editing systems until the
merger with Saf T Lok Corporation in February 1996 (See Note 17).
Saf T Lok Corporation was organized to design, develop, manufacture and
market a patented and proprietary combination lock for firearms known as
the Saf T Lok (TM). The initial production of the Saf T Lok (TM) products
is designed to prevent the unauthorized use of firearms, including
unintentional discharge by children or intentional discharge by
assailants. The management of the Company intends to focus the Company's
resources on marketing and developing the Saf T Lok (TM) products due to
management's positive expectation of the performance and future
profitability of these products. Furthermore, as a direct result of the
Company's historical operating losses and lack of competitiveness,
management has discontinued its old business.
9
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 2 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
B. Principles of consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its 100% wholly owned subsidiaries, RGB Video, Inc. and
Saf T Lok, Inc. All material intercompany transactions, accounts and
profits have been eliminated.
C. Revenue recognition
The Company recognizes revenue when products are sold and shipped.
D. Statement of cash flows
For purposes of this statement, the Company considers all liquid
investments purchased an original maturity of three months or less to be
cash equivalents.
E. Securities, available for sale
Securities consisted of long term corporate bonds which management had
classified as available for sale in accordance with FASB Statement No. 115
as of December 31, 1995. These securities were stated at market value
which approximated cost.
F. Inventories
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market, whichever is less.
G. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided on
accelerated and straight-line methods over the estimated useful lives of
the respective assets. Maintenance and repairs are charged to expense as
incurred;
10
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 2 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
major renewals and betterments are capitalized. When items of property or
equipment are sold or retired, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is
included in the results of operations.
Years
Furniture and fixtures 7 - 10
Automobile 5
Equipment 3 - 10
Leasehold improvements 1 - 2
Software 3 - 5
H. Income Taxes
Deferred income taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities
and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not
that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
I. Loss Per Common Share
Loss per common share is calculated by dividing net loss by the weighted
average number of common shares outstanding. Warrants, stock options, and
underwriter's options are antidilutive.
11
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 2 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
J. Significant Concentration of Credit Risk
The Company had concentrated its credit risk for cash by maintaining
deposits in banks located within the same geographic region. The maximum
loss that would have resulted from risk totalled $5,000 and $52,923 as of
December 31, 1996 and 1995 for the excess of the deposit liabilities
reported by the banks over the amounts that would have been covered by
federal insurance.
K. Discontinued Operations
The Company experienced a substantial drop in sales in 1996 and 1995.
This is largely the result of the discontinuation of production of the
Amiga Computer by Commodore Electronics Ltd. after claiming insolvency in
May 1994 and the decision
by the Company's management to discontinue these operations and acquire a
company in another line of business that would provide better long term
prospects. In February 1996, the Company acquired Saf T Lok Corporation
as described in Note 17. As of December 31, 1996, all remaining inventory
from the discontinued operations and related fixed assets have been
written off and included in discontinued operations.
L. Reclassification of Financial Statement Presentation
Certain reclassifications have been made to the 1995 financial statement
presentation to conform to 1996. Such reclassifications had no effect on
net loss as previously reported.
NOTE 3 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprised the following as of December 31, 1996
and 1995:
1996 1995
Cash in Banks $88,956 $ 119,638
Treasury Bills - 1,844,907
Money Market Funds - 16,672
$88,956 $1,981,217
12
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 4 - SECURITIES AVAILABLE FOR SALE
Securities available for sale consisted of long-term corporate bonds
maturing in April 2022. Since fair value approximated the amortized cost
of these debt securities, no unrealized gains or losses are reflected as a
component of shareholders' equity as required by the Financial Accounting
Standards Board Statement No. 115.
NOTE 5 - INVENTORIES
Inventories are comprised of the following as of December 31, 1996 and
1995:
1996 1995
Raw Materials and
Furnished goods $466,680 $282,471
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following as of December 31,
1996 and 1995:
1996 1995
Equipment $373,344 $640,522
Furniture and fixtures 52,997 109,210
Automobile 34,000 28,914
Tools and dies 762,560 -
Software 37,214 48,340
Leasehold improvements 11,436 -
1,271,551 826,986
Less accumulated
depreciation 339,523 418,159
$ 932,028 $408,827
13
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 6 - PROPERTY AND EQUIPMENT (CONTINUED)
Due to the scaling back of operations and the obsolescence of certain
equipment, an impairment loss derived by measuring the excess of the
carrying amount of the assets over the fair value of the assets, $25,666
was recognized in 1995, as required by Financial Accounting Standards
Board Statement No. 121.
On May 1, 1995, the Company sold the former president's home for $262,000
whereby the Company realized a gain of $25,863.
NOTE 7 - SOFTWARE DEVELOPMENT COSTS
During 1995, $23,840 of software development costs were amortized. The
remaining balance of $49,483 was expensed as an impairment loss in
accordance with FASB Statement No. 121. These software development costs
were not expected to produce positive cash flows in the future.
NOTE 8 - LICENSE ARRANGEMENT
During 1993 and 1992, the Company entered into agreements for the use of
certain technology in assembling computer circuit boards for its systems.
These agreements required one time fixed payments and royalties to be paid
for each circuit board assembled. Royalty expense relating to these
agreements was $-0- and $103,607 in 1996 and 1995, respectively.
NOTE 9 - LOANS RECEIVABLE
Loans receivable consisted of a promissory note due from Opal Technologies
("Opal"). The note had an original interest rate of eight percent and an
annual interest rate of eighteen percent after the note becomes due.
However, no interest had been accrued due to the fact that it seemed
doubtful that the interest would be received.
14
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 9 - LOANS RECEIVABLE (CONTINUED)
Although the Company continued to aggressively try to collect on the note
receivable from Opal, the ability to collect seemed doubtful. Therefore,
the note has been written off to bad debt expense as of December 31, 1995.
In 1996, the Company located the principals of Opal and renegotiated the
note receivable calling for total payments of $248,000 including interest
over a five year period. The Company will recognize income as payments
are received.
Pursuant to a settlement agreement dated September 27, 1995, Pride
Integrated Services, Inc. agreed to pay the Company $310,000, including
interest over a ten year period with the payments beginning in October
1995. The settlement resulted from a suit filed by the Company against
Pride Integrated Services, Inc. in October, 1993, alleging copyright
infringement and misappropriation of trade secrets. The note receivable
was discounted as required by Accounting Principle Bulletin No. 21 using
an 8% imputed interest rate. The discount on the note equaled $93,024 as
of December 31, 1995. The balance of the note receivable net of discount
is $199,842 and $213,976, as of December 31, 1996 and 1995, respectively.
NOTE 10 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are comprised of the following as of
December 31, 1996 and 1995:
1996 1995
Accounts payable $714,215 $ 51,252
Royalties payable - 101,547
Accrued payroll and
payroll taxes 122,187 -
Other - 1,011
$836,402 $153,810
15
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 11 - NOTES PAYABLE
1996 1995
Note Payable - Bank
collateralized by
an automobile, payable
in monthly installments
of $549 including interest
at 8% due October 25, 1998 $ 11,201 $ -
Note Payable - shareholder,
collateralized by patents,
payable in monthly
installments of $3,738
including interest at 7%, due
March 1999 114,213 -
Total Long-Term Debt 125,414 -
Current Portion 67,353 -
Total Long-Term Debt, net
of Current Portion $ 58,061 $ -
The aggregate amount of long-term debt maturing in each of the next three years
subsequent to December 31, 1996 is as follows:
1996 $ 67,353
1997 47,752
1998 10,309
$125,414
NOTE 12 - INCOME TAXES
The components of the provision (benefit) for income taxes for the years
ended December 31, 1996 and 1995 are comprised of the following:
16
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 12 - INCOME TAXES (CONTINUED)
1996 1995
Current:
Federal $ - $ -
State - -
- -
Deferred:
Federal - -
State - -
- -
$ - $ -
The components of the net deferred tax assets and liabilities and the
related tax effects as of December 31, 1996 and 1995 are comprised of
the following:
1996 1995
Deferred tax assets:
Inventories $ - $ 34,748
Loss carryforwards 2,640,000 1,520,899
2,640,000 1,555,647
Less valuation
allowance 2,640,000 1,530,647
- 25,000
Deferred tax
liabilities:
Property and
equipment - 25,000
Net deferred tax
liability $ - $ -
17
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 12 - INCOME TAXES (CONTINUED)
The following table summarizes the differences between the Company's
statutory federal income tax provisions and the reported income tax
provision for the years ended December 31, 1996 and 1995:
1996 1995
Provision (benefit) at
statutory rate $(1,100,000) $(405,624)
Effect of income taxes
at lower rate 12,000 11,589
State income taxes, net
of federal benefit - -
Utilization of net
operating loss carry-
forwards - -
Valuation allowance 1,088,000 388,734
Other 5,301
$ - $ -
As of December 31, 1996 and 1995, the Company had net operating loss
carryforwards subject to Code Section 382 limitations of $4,345,426 to
offset future taxable income. These carryforwards expire in 2009.
NOTE 13 - SHAREHOLDERS' EQUITY
Increase in Authorized Shares and Change in Par Value
On July 18, 1996, the shareholders of the Company approved the increase of
the number of shares authorized from 10,000,000 to 20,000,000 and changed
the par value from no par value to $.01 per share. The Company has
retroactively adjusted the 1995 financial statements for the change in par
value.
18
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 13 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Options, Issuances and Contributions
In March 1993, the Company established a stock option plan for employees,
consultants and directors for 150,000 shares of common stock. The plan
provides for an automatic grant of options for 5,000 shares vesting
semiannually for one year to each nonemployee director provided that the
director is still serving as a director on the vesting date.
The exercise price of all options granted under the plan must be at least
equal to the fair market value of the shares of common stock on the date
of the grant. The exercise price for any participant possessing more than
10% of the voting power of the Company's outstanding common stock must
equal at least 110% of the fair market value on the grant date. As of
December 31, 1996, no shares have been issued under this plan.
Prior to 1996, the Company issued warrants to Barington Capital Group,
L.P., the Company's underwriter in its initial public offering, to
purchase 120,000 shares of the Company's common stock at an exercise price
of $2.00. These warrants are outstanding as of December 31, 1996.
In October 1996, the Company issued warrants to a major
shareholder/officer at an exercise price of $7.50 per share.
In October 1996, one of the major shareholders/officer of the Company
contributed $200,000.
In February 1997, the Company issued options to purchase 812,500 shares of
the Company's common stock at an exercise price of $2.50 per share to
various individuals and a law firm for consulting and other services.
In April 1997, effective, December 31, 1996, the Company sold 129,032
shares of the Company's common stock to the major shareholder/officer of
the Company for $400,000 or $3.10 per share.
See Note 17 for additional stock options.
19
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SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 14 - LEASING ARRANGEMENTS
Capital Leases
The Company leases office and computer hardware equipment under leases
accounted for as capital leases as follows:
1996 1995
Leased equipment $ 77,501 $ 105,030
Less accumulated
amortization (67,624) (73,458)
$ 9,877 $ 31,572
Interest expense on capital leases for the years ended December 31, 1996
and 1995 was $1,306 and $10,583, respectively.
Operating Leases
In February 1996, the Company entered into a three year lease for its
operating facility. The Company is required to pay $144,000 over the
three year period. The Agreement also provided for a renewal option for
three years at a base rent totalling $166,830. The following are the net
future minimum rental payments required under this operating lease as of
December 31, 1996:
1997 $ 48,000
1998 50,400
$ 98,400
The total rent expense charged to operations was $61,069 and $49,552 for
the years ending December 31, 1996 and 1995, respectively.
20
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 15 - RELATED PARTY TRANSACTIONS
Loans Receivable (officers) as of December 31, 1995 was $18,100 which was
due from the former Chairman and Chief Executive Officer of the Company
and his wife. In 1996, these loans were repaid.
The Company paid $31,000 in consulting fees to Mark Golden in 1995.
During 1995, Mark Golden was an officer, director and shareholder of the
Company.
A relative of certain shareholders and officers is paid $200 a month for
janitorial services and was also paid for various repair and maintenance
work that did not exceed $10,000 during 1996 and 1995.
NOTE 16 - LITIGATION
On April 3, 1996, the Company settled a lawsuit filed in October 1995
against the Company and two of its directors and largest individual
shareholders, Robert and Cynthia Gilbert, by Barington Capital Group,
L.P.("Barington") by and through its general partner, LNA Capital Corp.
Barington was the Company's underwriter in its initial public offering. In
1996, Barington settled the lawsuit for 20,000 shares of the Company's
restricted common stock.
The Company and the current Chief Executive Officer are being sued by the
former Chief Executive Officer for liable and slander arising from the
appointment and termination of the former Chief Executive Officer. The
Company is being represented by an Insurance Company. The case is in its
initial stages and the Company does not anticipate a material effect on
the financial statements.
The Company is being sued for alleged breach of contract for engineering
service. The case is in the initial stages and the Company does not
anticipate a material effect on the financial statements.
21
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 17 - BUSINESS COMBINATION
As of February 13, 1996, a newly formed 100% wholly owned subsidiary of
the Company, Sphere Enterprises, Inc., was merged with Saf T Lok
Corporation, a Florida corporation, with the subsidiary continuing under
the name of Saf T Lok
Corporation. The merger was achieved by converting all of the outstanding
shares of Saf T Lok Corporation into 2,238,957 shares of the Company,
thereby allowing the original shareholders of RGB to own approximately 60%
of the combined entity after the merger with a total number of shares
outstanding after the merger of approximately 5.6 million shares. Also,
in connection with the merger, the Company issued performance stock
options for 1,000,000 shares to Frank Brooks and 600,000 shares to Robert
Gilbert at an exercise price of $2 per share. The options will vest if
the performance standards are reached at a rate of 1/3 annually beginning
January 1, 1997 with the last third vesting January 1, 1999. In order to
calculate the amount of shares that will vest each year, the annual
maximum as stated above is multiplied by a fraction, the numerator of
which is STL's net income as determined in accordance with generally
accepted accounting principles consistently applied before interest,
taxes, depreciation and amortization less the low earnings target for each
year and the denominator of which is the difference obtained by
subtracting the low earnings target for any year from the high earnings
target for such year as set forth in the schedule below:
Year Low Earnings Target High Earnings Target
1996 $ 2,500,000 $ 4,500,000
1997 4,000,000 7,500,000
1998 8,000,000 15,000,000
22
<PAGE>
SAF T LOK INCORPORATED AND SUBSIDIARIES
F/K/A RGB COMPUTER & VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 17 - BUSINESS COMBINATION (CONTINUED)
In the event that options with respect to the full one million shares
awarded Frank Brooks and 600,000 shares awarded Robert Gilbert have not
vested by January 1, 1999, the remaining options will vest based on a
fraction derived from the amount by which Saf T Lok's aggregate earnings
from 1996 through 1998 exceed $14,500,000 which is the total of the low
earnings target.
NOTE 18 - SUBSEQUENT EVENT
On April 9, 1997, the Company issued to two former employees 30,000 shares
of the Company's common stock for services rendered.
23
