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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of earliest event reported: February 10, 1998
SAF T LOK, INCORPORATED
(Exact name of registrant as specified in its charter)
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Florida 1-11968 65-0142837
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
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18245 S.E. Federal Highway, Tequesta, Florida 33469
(Address of registrant's principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 743-5625
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ITEM 5: OTHER EVENTS.
On February 10, 1998, Saf T Lok Incorporated (the "Company") accepted a
purchase order from an independent wholesaler (the "Wholesaler") for the
purchase of $6,000,000 of the Company's gun locks and received a $1,000,000
advance payment on the purchase order. The Wholesaler is a well established
business, but has no prior experience at selling gun locking devices. The terms
of the purchase order provide that $1,000,000 worth of gun locks are to be
shipped within 120 days of the purchase order. Upon the delivery of the first
$1,000,000 of gun locks under the purchase order, the Company is to receive
another advance payment of $1,000,000 for the next $1,000,000 worth of gun locks
with deliveries at the rate of approximately $625,000 per month. Thereafter,
deliveries of gun locks will be on a net 30 day payment basis. After a total of
$2,000,000 worth of gun locks have been shipped, the balance of the purchase
order will be shipped on an as needed basis at the rate of approximately
$625,000 per month.
On February 11, 1998, the Company entered into a distribution agreement
(the "Distribution Agreement") with a newly formed, unaffiliated, distribution
company (the "Distributor") for the sale and purchase of $20,000,000 of the
Company's Saf T Lok(TM) and magazine lock products over a period of three years
from the date of the Distribution Agreement. Deliveries for the first $7,000,000
of this order are specified to take place throughout the first year, commencing
at the end of February, 1998 (the "Initial Order"). Following fulfillment of the
obligations under the Initial Order of the Distribution Agreement, the
Distributor may terminate the Distribution Agreement, without cause, and cancel
any orders pending that have not been shipped upon 90 days prior written notice.
The purchase order from the Wholesaler described above satisfies and takes the
place of $6,000,00 of the Initial Order under the Distribution Agreement.
Subsequent to the Company's fulfillment of the Initial Order, the Distributor
may provide releasing orders to the Company for the purchase and delivery of the
remaining $13,000,000 gun locks pursuant to the Distribution Agreement. A copy
of the Agreement is attached hereto as Exhibit 10.1.
The Distribution Agreement provides that, while the Distribution Agreement
is in effect, the Distributor has the exclusive right to sell the Company's
products throughout the world to wholesalers, retailers and end users except for
law enforcement agencies, governmental entities, military organizations and
original equipment manufacturers ("OEMs") (such as gun manufacturers).
The Distributor is obligated to create and place certain types of
advertising pursuant to an advertising plan to be approved by the Company for a
total of $5,000,000 over the next two years. The Company has delivered to the
Distributor 1,000,000 shares of its common stock in connection with the
Distribution Agreement. The Distributor has pledged this stock to the Company
as security for the Distributor's obligation to place the advertising. As the
Distributor meets its obligation to place advertising, the Company will release
pledged shares to the Distributor at the rate of one share for each $5.00 of
advertising placed by the Distributor. It is the Distributor's obligation to
pay for this advertising.
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The Company decided to grant this exclusive arrangement to the Distributor
so that the Company can focus its efforts on the law enforcement, governmental
entity, military and OEM markets.
In connection with the Distribution Agreement, on February 11, 1998, the
Company entered into an agreement with three unaffiliated companies, granting
the three companies stock purchase warrants for an aggregate total of 2,000,000
shares of common stock with an exercise price of $5.00 per share and a term of 5
years. These companies were instrumental in assisting the Company in finding the
Wholesaler and the Distributor.
In addition, and in connection with the Distribution Agreement, on February
11, 1998, the Company entered into a commission agreement with a consulting
company which helped the Company structure the transaction with the
Distributor. This commission agreement provides that the consulting company
will receive a 15% commission from the sale of the products in accordance with
the Distribution Agreement and a 15% fee upon the exercise of the stock purchase
warrants described above.
The Distributor is a newly formed corporation with no direct experience in
selling gun locking devices.
EXHIBITS
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Exhibit Number Exhibit Table
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10.1 Distribution Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Saf T Lok Incorporated
Date: March 12, 1998
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By: /s/ John L. Gardner
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John L. Gardner, President and
Chief Executive Officer
INDEX TO EXHIBITS
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Exhibit Description
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10.1 Distribution Agreement
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Exhibit 10.1
NON-EXCLUSIVE DISTRIBUTION AND PRICING AGREEMENT
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THIS AGREEMENT is made this 11th day of February, 1998, by and between SAF
T LOK, INCORPORATED, a Florida corporation ("STL") and UNITED SAFETY ACTION,
INC., a New York corporation ("United").
Background of This Agreement
----------------------------
STL manufactures and sells gun-locking devices, primarily for handguns, and
is the owner of several patents and patent applications pertaining to these
devices. STL desires to engage United as a distributor of its products (the
"Products"). United is willing to place a substantial initial order and to
purchase a substantial number of Products from STL for resale over the next two
years. STL is willing to provide its most favored nation pricing to United
based on the size of the initial order and United's obligation to purchase at
least Twenty Million Dollars ($20,000,000) in Products from STL over the course
of the next two years.
STL desires to reserve the law enforcement agencies, original equipment
manufacturers, and all governmental organizations, as defined below, as a
separate marketing channel and United is willing to have these markets exempted
from United's selling activities.
Agreement
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The parties to this Agreement agree as follows:
1. Distributorship.
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1.1 Appointment of Distributor and its Territory. For the term of
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this Agreement, as defined below, STL appoints United as its distributor for all
of STL's Products as described on Schedule 1.1 throughout the world except for
sales, directly or indirectly, to all customers meeting the definition of law
enforcement agencies as defined in Schedule 1.1 ("Law Enforcement Agencies"),
original equipment manufacturers ("OEMs") and any governmental organization (the
"STL Reserved Markets"). In consideration of the Initial Order, defined below,
STL grants to United the right to purchase the Products for the most favored
prices set forth in Schedule 1.1 (the "Most Favored Prices") so long as this
Agreement is in effect.
1.2 No Sales by STL Other Than to the STL Reserved Markets. Unless
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United otherwise consents in writing, STL agrees that so long as this Agreement
is in effect and United is not in default under this Agreement, it will not sell
Products to customers other than customers in the STL Reserved Markets. In
addition, STL agrees that so long as this Agreement is in effect and United is
not in default under this Agreement, it will not sell
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identical Products to OEMs for less than the Most Favored Prices.
2. Purchase Requirements.
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2.1 Initial Order; Initial Release. United hereby agrees to purchase
------------------------------
from STL Products in the amount of Twenty Million Dollars ($20,000,000) on the
terms set forth in this Agreement with the mix of Products purchased and the
delivery dates for such Products set forth on Schedule 2.1 ("Initial Order").
Of the Initial Order, United hereby releases for specified delivery within six
months of the date of this Agreement, that part of the Initial Order identified
on Schedule 2.1 for a total of $2,200,000 (the "Initial Release"). Within 10
days after the date of this Agreement, United shall make payment in the amount
of $330,000, representing a 15% deposit on the Initial Order. As the Products
in the Initial Release are delivered to United and STL issues an invoice for
such delivered Products to United, United shall pay in full, less 15% of the
amount set forth on the invoice, such remaining 15% having been paid to STL in
the form of the 15% deposit on the Initial Release.
At the end of the six month Initial Release period, United shall
release for specified delivery with the second six month period from the date of
this Agreement, that part of the Initial Order identified on Schedule 2.1 for a
total of $4,800,000 (the "Second Release"). Within 10 days after the date six
months from the date of this Agreement, United shall make payment in the amount
of $720,000, representing a 15% deposit on the Initial Order. As the Products
in the Second Release are delivered to United and STL issues an invoice for such
delivered Products to United, United shall pay in full, less 15% of the amount
set forth on the invoice, such remaining 15% having been paid to STL in the form
of the 15% deposit on the Second Release.
United shall make payment for the Initial Order, including the
Initial Release and the Second Release, in accordance with the terms of this
Agreement.
2.2 Releasing Orders for the Balance of the Initial Order. United
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shall issue releasing orders to STL for the balance of the Initial Order with
mix of Product quantities and delivery dates at least 90 days prior to any
required deliveries ("Releasing Orders"). United shall make a deposit of 15% of
the amount of each Releasing Order with such Releasing Order. United shall
issue Releasing Orders complying with Section 5.2 to meet the cumulative
delivery requirements for Products shown on Schedule 2.2.
2.3 United's Purchase Requirements to be Credited. Notwithstanding
---------------------------------------------
the foregoing, if STL receives a non-cancelable order from any customer, not
including any orders received from STL Reserved Markets, United's purchase
requirement obligations under this Agreement shall be credited for the amount of
such a non-cancelable order. In the event STL receives such an order within one
year of the date of this agreement, the order shall be credited against United's
Initial Order obligation.
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3. Duties of United. So long as this Agreement is in effect, United
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shall have the following duties:
3.1 United, as to the market it serves, shall use its best efforts to
locate purchasers for the Products and in all feasible and reasonable ways,
promote the sale of the Products throughout the world. United shall meet the
advertising requirements set forth in Section 8.2.
3.2 United shall not use the name or logo of STL in any manner not
approved in writing by STL, including without limitation, the STL name or logo
in brochures, World Wide Web pages or advertisements in any media.
3.3 United may purchase from STL, at STL's cost, brochures, catalogs,
circulars and promotion materials prepared by STL, for use in United's selling
efforts. United may produce its own brochures, catalogs, circulars and
promotional materials referring to STL Products, provided that all such
materials are approved in writing by STL prior to the use of any such materials.
Subject to STL's right to protect the integrity and value of its name and
trademarks, such approval shall not be unreasonably withheld.
3.4 United shall not solicit any Law Enforcement Agencies, OEMs or
governmental organizations for the sale of Products during the term of this
Agreement and shall refer to STL any inquiries it receives with respect to the
Products from any Law Enforcement Agencies, OEMs or governmental organizations.
3.5 United shall conduct its own business in its own name, maintain
its own offices, pay its own expenses and carry adequate liability insurance for
its business, not including product liability insurance.
3.6 United shall have no authority to commit STL in any manner
whatsoever, without the prior written consent of STL, and United shall be solely
responsible for its own salesmen and representatives, if any, and for their acts
and the things done by them. United shall have no authority to receive monies
payable to STL, endorse checks made payable to STL or to maintain bank accounts
in the name of STL. United shall purchase Products from STL only in accordance
with the terms set forth in this Agreement and such terms may not be modified
except by an instrument in writing signed by the president of United and the
president of STL.
3.7 United shall submit to STL Releasing Orders and new purchase
orders such that STL is provided lead time prior to the delivery of goods
pursuant to such new purchase orders in accordance with those lead times set
forth on Schedule 3.8 attached hereto.
4. Duties of STL Under This Agreement. So long as this Agreement is in
----------------------------------
effect, STL shall have the following duties:
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4.1 STL will provide technical support to United as is reasonably
necessary, provided that, United shall pay the reasonable travel expenses
incurred by any STL employee or consultant requested by United to deliver
technical assistance in any location outside of the State of Florida.
4.2 STL shall produce, at the reasonable request of United, any sales
catalogs, circulars and promotional materials for the Products for purchase by
United as set forth in Section 3.3.
4.3 STL shall refer to United all inquiries from customers other than
the STL Reserved Markets.
4.4 STL will not make modifications or improvements to any of its
Products without first consulting with United with a view to not causing
obsolescence of any inventory owned by United and with a further view of
allowing United adequate time to change its sales or marketing strategy with
respect to such modified or improved Products.
4.5 STL shall meet with representatives of United on at least a
monthly basis, at the request of United, to discuss product development and any
other issues reasonably related to this Agreement or the activities of United.
4.6 STL shall promptly advise United of any endorsements that STL
receives for its Products, shall keep United apprised of STL's efforts to obtain
endorsements and STL's plans to attend and/or participate in trade shows related
to STL's Products. STL shall consult with and coordinate with United as to any
advertising or Product public relations campaigns to be conducted by STL and
shall promptly provide copies of any articles, news reports or other references
to STL Products in any media as such articles, reports or references become
known to STL.
5. Terms of Purchase and Sale of the Products. United shall purchase
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from STL and STL shall sell to United Products pursuant to the terms set forth
in this Section 5.
5.1 Specifications. The specifications for each of the Products are
--------------
set forth in Schedule 5.1 ("Specifications"). As new Products are introduced by
STL, STL shall add Specifications for each of such Products to this Agreement by
amendment.
5.2 Written Orders by United and Acknowledged by STL. In order to
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make purchases beyond the Initial Order, United shall submit a purchase order in
writing to STL containing the quantity of each Product and the delivery dates
for each portion of the order. The delivery dates shall not require delivery by
STL earlier than four (4) weeks from the receipt of the purchase order by STL or
as determined by Schedule 3.8, whichever requires the least quantity for
delivery. The purchase prices shall be in accordance with this Agreement. Upon
receipt of such purchase orders, STL shall promptly acknowledge such purchase
order(s) in writing. In the event that any purchase order submitted by United to
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STL does not meet the requirements in this Section 5.2, STL and United shall
promptly negotiate a means of resolving these differences presented by such
purchase order.
5.3 Priority of Manufacturing and Delivery. So long as this
--------------------------------------
Agreement is in effect, STL shall use its best efforts to give priority in
manufacturing and delivery of Products to United, any Law Enforcement Agency
customers any OEMs and any governmental organizations (on an equal basis). That
is, in the event that STL is not able to manufacture or deliver on the date
specified any Products for United, any Law Enforcement Agency customers, any
OEMs and any governmental organizations, STL shall delay manufacturing and
delivery of Products for any other customers until the Products ordered by
United, any Law Enforcement Agencies, any OEMs and any governmental
organizations have been delivered per their required delivery dates.
5.4 Test Units. STL will ship to United 10 test units of each of the
----------
Products ordered by United at least 2 weeks prior to shipping the first
production run of such Products. United shall have the right to have these test
units independently tested by United pursuant to a written protocol setting
forth the testing procedure and results needed for acceptance, with such
protocol to be agreed to by United and STL in writing prior to STL placing any
orders for Products (the written protocols for the Products ordered pursuant to
the Initial Order are attached hereto as Schedule 5.4). The test units to be
evaluated by United shall be actual Production units of the Products taken
directly off the assembly line, without special assembly or handling. United
shall notify STL of any defects in the test units according to the protocol
within ten working days after receiving the test units. In the event that one
or more of the test units fail the applicable protocol for testing, STL shall
have 30 days within which to submit another test unit for testing. In the event
that the second test unit for any Product fails the test according to the
protocol, United shall have the right to cancel that portion of the order
relating to such Product (the "Canceled Product"). If the portion of the
purchase order covered by the Canceled Product exceeds 20% percent of the
purchase order, United shall have the right to declare STL in breach, cancel the
entire purchase order and terminate this Agreement pursuant to Section 15.3 of
this Agreement.
5.5 Acceptance/Rejection of Products by United. Within 30 days of
------------------------------------------
receipt of Products ordered by United (other than test units), United shall
inspect samples of all shipments of Products (each shipment shall be referred to
as a "lot") to ensure compliance with the Specifications. At United's
discretion, lot sampling may take place at the FOB point, as defined below, for
which STL shall provide full and complete cooperation. United may reject any
total lot received if more than twenty percent (20%) of the lot does not comply
with the Specifications, or portions of the lot, at United's sole discretion, as
to those Products that do not comply with the Specifications. Rejected Products
shall be promptly returned to STL in bulk, not more frequently than once per
month. STL shall bear all costs of freight, duty, insurance and all other costs
incurred in returning the Products to STL and shipping new Products to replace
the rejected Products. In the event that STL disputes that the returned
Products do not meet the Specifications, such dispute shall be submitted to
arbitration pursuant to Section 16. If STL prevails, STL shall be entitled to
recover all costs incurred by
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it for freight, duty, insurance and other costs for the return of the Products
and the shipment of the replacement Products.
5.6 Payment for Products by United. The Most Favored Prices shall
------------------------------
be: (a) FOB STL's assembly plant if in the United States, or (b) FOB any U.S.
port (determined by STL) in the Continental United States if assembly is done
outside the United States, and includes all packaging, instructions, import
duties, taxes, and handling costs of whatever nature incurred by STL. United
shall pay for insurance and shipping costs, and shall select the carrier. The
Most Favored Price shall apply for gross purchases of the Products by United
during the Term, as defined below, for up to $100,000,000. For gross purchases
of the Products within the Term exceeding $100,000,000, United and STL agree to
negotiate a new pricing schedule in good faith. Invoices for the Products shall
contain, at a minimum, the purchase price, purchase order number, invoice date,
quantity, description, address, bill to name and address, remit to name and
address, and method and name of carrier (as designated by United). All payments
shall be made by United on a net 30 days basis from the invoice date, less 15%
of the amount set forth on the invoice, such remaining 15% having been paid to
STL in the form of the 15% deposit. The invoice date shall be as near as
reasonably possible to the delivery date of the Products by STL to United.
6. Delivery Dates. The delivery dates for Products purchased under this
--------------
Agreement by United shall be as set forth on Schedule 2.1 for the Initial Order
and shall be as set forth in the purchase orders provided by STL pursuant to the
requirements of Section 5.2 of this Agreement. Subject to the terms of this
Agreement, STL agrees to use its best efforts to deliver Products to United to
meet United's required delivery dates. Title to the Products being delivered to
STL and risk of loss or damages shall pass from STL to United upon STL's
delivery to the carrier at the FOB point.
6.1 Rescheduling Shipment Dates. Scheduled shipment dates of all
---------------------------
Products ordered by United may be rescheduled by United to delay any shipment up
to 30 working days beyond the scheduled shipment date upon 14 working days prior
written notice to STL. United may request that STL accelerate shipment dates
upon written notice and STL shall use its commercially reasonable efforts to
accommodate requests for such acceleration, but shall not be in default under
this Agreement if it is unable to meet such requests.
6.2 Method of Shipment. STL shall, at its sole expense, provide all
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crating, packaging and packing in shipping containers that are designed to
provide adequate protection for the Products during shipping. Each Product is
to be packaged separately with its necessary parts, screws, and instructions in
a package, as agreed to by STL and United. Products shall be packaged in bulk in
quantities of 100-500 units for each Product.
6.3 Late Deliveries. Any delivery of Products ordered pursuant to
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this Agreement in an amount exceeding $10,000 which is more than 30 days late as
to the scheduled delivery date and is not excused pursuant to any provision of
this Agreement, shall be deemed to be a late delivery. As to any late delivery,
United shall be entitled to payment by
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STL, or an offset against any amount owed by United to STL, in an amount
determined by the formula set forth on Schedule 6.3.
6.4 Right of STL to Stop Shipment. In the event that United fails to
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pay any obligation United has to STL on or before the due date, STL shall have
the right to notify United in writing of this failure, giving United 30 days
within which to pay such obligation. If within the 30 day cure period, United
fails to pay such obligation, STL shall have the right to stop all shipments of
Products to United until such payment has been made.
7. Warranty by STL. STL hereby warrants to United that the Products meet
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the Specifications and are free from defects in workmanship and materials
("Warranty"). This Warranty shall be valid so long as the ultimate user of the
Product own the gun onto which the Product is installed ("Warranty Period").
STL also warrants the merchantability of the Products and the fitness of the
Products to serve as gun locking devices for the guns for which each Product is
designed, subject to proper use in accordance with the instructions provided
with each Product. STL will repair any Products or, at its sole option, replace
such Products, that are defective under this Warranty for the Warranty Period at
the expense of STL. STL's liability under this Warranty shall be limited to the
retail purchase price of any defective Product and shall not include, under any
circumstances or theories of action, including tort, contract, strict liability
or absolute liability any consequential or incidental damages.
7.1 STL shall provide with each Product, the written Warranty of STL,
including the statement as to limitation of liability to every purchaser of
Products from United or from others in the chain of distribution reaching back
to United. United shall not modify in any way the written Warranty provided by
STL for delivery with each of its Products to the users of Products without the
written consent of STL. STL shall include the written Warranty with each
packaged Product. United shall not be responsible for providing a written
warranty independent of the written Warranty which STL includes with each
packaged Product, and shall not be responsible if STL fails to include such
written Warranty in each packaged Product.
7.2 Any Products that are repaired or replaced during the Warranty
period shall be warranted for the time remaining under the original Warranty
Period. During the Warranty Period, STL shall bear all out of pocket costs to
repair or replace defective Products, including without limitation, all costs of
returning the Products to STL and shipping repair or replacement Products to
United or its customers.
8. Name, Trademarks and Advertising.
--------------------------------
8.1 Name and Trademarks. During the Term, United shall have the
-------------------
right to use all of STL's tradenames, trademarks, service marks, logos,
advertising and informational, instructional and promotional materials in
connection with any and all advertising, public relations and promotional
campaigns conducted in connection with the advertising, promotion
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and sale of the Products ("Trademarks"), all with the prior written consent of
STL, which shall not be unreasonably withheld. The Product packaging for each
Product sold to United customers shall prominently display the STL name and logo
and shall identify United as an authorized distributor of the Products. All
packaging used for display purposes and sales to customers and end users shall
be subject to the written approval of STL, which approval shall not be
unreasonably withheld.
8.2 Advertising.
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(a) United may conduct all advertising, public relations and
promotional campaigns, of any nature whatsoever, which it deems fit, necessary
and desirable ("Advertising"). STL shall provide United all assistance and
cooperation reasonably required by United for Advertising and shall provide
those graphics, drawings, artwork, plans, schematics, blueprints, engineering
materials and reports, lab reports, testing reports, computer renderings and
simulations, and any and all other materials which STL has available to it or
which become available to STL and which United requests in connection with
Advertising, provided that STL shall not be required to create, prepare or
purchase any such graphics, drawings, artwork, plans, schematics, blueprints,
engineering materials and reports, lab reports, testing reports, computer
renderings and simulations or other materials. On or before July 1, 1998,
United shall present its Advertising campaign to STL for STL's approval, which
shall be in writing (the "Advertising Campaign"). Substantially all of the
Advertising Campaign shall consist of Advertising in print and other media
within the United States in order to create demand for the STL Products. Once
STL approves the Advertising Campaign, no further written approval from STL
shall be required.
(b) Within 24 months from the date of this Agreement, United
shall place or book $5,000,000 of Advertising ("Advertising Expenditures") to be
published within the 24 month period, pursuant to the Advertising Campaign.
9. Delivery of Shares of Common Stock to United; Pledge of Stock to
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Secure Obligations; Registration Rights.
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9.1 Delivery of Shares of Common Stock to United. As an inducement
--------------------------------------------
to United to commit to the Initial Order and to perform its obligations under
this Agreement, including the obligation to make Advertising Expenditures of at
least $5,000,000 within the first 24 months under this Agreement, STL hereby
transfers and delivers to United 1,000,000 shares of common stock (the
"Shares"). United agrees that it is purchasing and taking delivery of these
Shares for its own account and not for the account of any other, that United has
no present intent of making a public distribution of the Shares, and that United
understands that the Shares are not registered under the Securities Act of 1933
(the "Securities Act"), as amended or any states' securities laws. United
understands that an appropriate legend will be placed on the back of the stock
certificate representing the Shares indicating that the Shares are not
registered under the Securities Act and that the Shares cannot be resold except
pursuant to an effective registration statement or an exemption from
registration. United agrees that it will not sell the Shares except pursuant to
an effective registration statement or an exemption from registration.
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United represents and warrants to STL that it has received the information
required to be delivered by STL under Regulation D promulgated by the Securities
and Exchange Commission under the Securities Act, that it has had an opportunity
to ask questions of and receive answers from the officers and directors of STL,
and has had full access to all material contracts, financial records, and
information pertaining to STL. United understands that investment in the Shares
carries with it a high risk of loss because STL is a development stage company,
has substantial stock options and warrants outstanding, and has not shown a
profit since it entered into the development of gun locks. United represents and
warrants that it has carefully reviewed all of the filings STL has made with the
Securities and Exchange Commission since January 1, 1996.
9.2 Pledge of Stock to Secure Obligations. In order to secure the
-------------------------------------
obligation of United to expend the Advertising Expenditures and to perform its
other obligations under this Agreement, United hereby pledges the Shares to STL
pursuant to the Stock Pledge Agreement, a copy of which is attached hereto as
Exhibit A. As United makes Advertising Expenditures and reports such
expenditures to STL, STL will release stock from the pledge agreement according
to the release schedule contained in the Stock Pledge Agreement.
9.3 Registration Rights. The Shares of common stock delivered to
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United by STL in accordance with Section 9.1 above shall have the following
registration rights.
(a) Piggyback Registration Rights. If STL proposes to file a
-----------------------------
registration statement with the Securities and Exchange Commission (the
"Commission") on a general form for registration under the Securities Act and
relating to securities issued or to be issued by it, then it shall give written
notice of such proposed filing to United. If, within 10 days after the giving
of such notice, United shall request in writing that all or any of the shares of
common stock delivered to United pursuant to Section 9.1 above be included in
such proposed registration, STL will also register such shares as shall have
been requested in writing. If all such shares have been so registered, the
rights described in Section 9.3(b) below shall be of no force or effect.
(b) Demand Registration Rights. In addition, if United shall
--------------------------
give notice to STL at any time to the effect that United desires to register,
for sale under the Securities Act, any shares of common stock delivered to
United pursuant to Section 9.1 above, then STL will promptly, on one occasion
only, no later than 60 days after receipt of such notice, file a post-effective
amendment to any current registration statement or a new registration statement,
to the end that the shares designated in such notice may be publicly sold under
the Securities Act as promptly as practicable thereafter, and STL will use its
best efforts to cause such registration statement to become and remain effective
(including the taking of such steps as are necessary to obtain the removal of
any stop order); provided, that United shall furnish STL with such appropriate
information in connection therewith as STL may reasonably request in writing,
and provided further that, if such notice is received more than four weeks
before STL is required to file its current financial statements with the
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<PAGE>
Commission, STL may delay filing the registration statement until the date on
which such financial statements are required to be filed with the Commission.
(c) Registration by United. In the event STL does not file a
----------------------
registration statement pursuant to the terms of Sections 9.3(a) or (b) above,
United may file a registration statement with the Commission on a general form
for registration under the Securities Act and relating to securities issued to
it for resale. STL shall pay the reasonable costs incurred by United in
connection with their filing of such a registration statement.
Nothing in this Section 9 shall prevent United from filing a
registration statement with the Commission on a general form for registration
under the Securities Act and relating to securities issued to it for resale,
provided, however, that in the event United files a registration statement at
such a time when STL is not in violation of Sections 9.3(a) or (b) above, United
shall bear all costs associated with the preparation and filing of the
registration statement and any post-effective amendments, and shall be
responsible for using its best efforts to cause such registration statement to
become and remain effective for that period of time as determined by United.
(d) Registration By STL. If STL proposes to file a registration
-------------------
statement with the Commission on a general form for registration under the
Securities Act and relating to securities issued or to be issued by it, prior to
the delivery of any shares of common stock to United pursuant to Section 9.1,
STL may, at its sole discretion, include such shares of common stock within the
proposed registration statement. If all such shares have been so registered for
resale and STL keeps such registration statement effective until two years from
the date of this Agreement, the rights described in Sections 9.3 (a) and (b)
above shall not be available.
(e) Restriction on Demand Registration Rights. United may give the
-----------------------------------------
notice requiring the filing of a registration statement under the Securities Act
as set forth in Section 9.3(b) above on not more than one occasion.
(f) Notice. In connection with the filing of a registration
------
statement pursuant to this Section 9.3, except Section 9.3(c), STL shall:
(i) notify United as to the filing and status thereof and of
all amendments thereto filed prior to the effective date of said registration
statement;
(ii) notify United promptly after it shall have received notice
of the time when the registration statement becomes effective or any supplement
to any prospectus forming a part of the registration statement has been filed;
(iii) prepare and file without expense to United any necessary
amendment or supplement to such registration statement or prospectus as may be
necessary to comply with the Securities Act or advisable in connection with the
proposed distribution of
13
<PAGE>
the securities by United;
(iv) take all reasonable steps to qualify the shares of common
stock for sale under the securities or blue sky laws of such reasonable number
of states as United may designate in writing and to register or obtain the
approval of any federal or state authority which may be required in connection
with the proposed distribution, except, in each case, in jurisdictions in which
STL must either qualify to do business or file a general consent to service of
process as a condition of the qualification of such securities;
(v) notify United of any stop order suspending the
effectiveness of the registration statement and use its reasonable best efforts
to remove such stop order;
(vi) undertake to keep such registration statement and
prospectus effective for a period of nine months after its effective date;
(vii) furnish to United as soon as available, copies of any such
registration statement and each preliminary or final prospectus and any
supplement or amendment required to be prepared pursuant to the foregoing
provisions of this Section 9.3, except Section 9.3(c), all in such quantities as
United may from time to time reasonably request.
(g) Allocation of Expenses Associated with the Preparation and Filing
-----------------------------------------------------------------
of the Registration Statement. United agrees to pay any underwriting discounts
- -----------------------------
and commissions, transfer taxes, and United's own counsel fees with respect to
the shares of common stock being registered. STL will pay all other costs and
expenses in connection with a registration statement to be filed pursuant to
this Section 9.3, except as set forth in Section 9.3(c), including, without
limitation, the fees and expenses of its counsel, the fees and expenses of its
accountants, and all other costs and expenses incident to the preparation,
printing and filing under the Securities Act of any such registration statement,
each prospectus and all amendments and supplements thereto, the costs incurred
in connection with the qualification of such securities for sale in such
reasonable number of states as United designated, including fees and
disbursements of counsel for STL, and the costs of supplying a reasonable number
of copies of the registration statement, each preliminary, final prospectus and
any supplements or amendments thereto to United.
(h) Indemnification of Underwriter. STL agrees to enter into an
------------------------------
appropriate cross-indemnity agreement with any underwriter (as defined in the
Securities Act) for United in connection with the filing of a registration
statement pursuant to this Section 9.3, except Section 9.3(c).
(i) Indemnification of STL and United. If STL shall file any
---------------------------------
registration statement including therein all or any part of the shares of common
Stock held by United, STL and United shall enter into an appropriate cross-
indemnity agreement whereby
14
<PAGE>
STL shall indemnify and hold United harmless against any losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
statements therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished or required
to be furnished by United, and United shall indemnify and hold STL harmless,
each of its directors and officers who have signed the registration statement
and each person, if any, who controls STL, within the meaning of the Securities
Act against any losses, claims, damages or liabilities (or actions in respect
thereof) arising out of or based upon any untrue statement or alleged untrue
statement of any material fact contained in such registration statement, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with written
information furnished or required to be furnished by United expressly for use in
such registration statement.
(j) Filing of Post-Effective Amendments. For a period of one year
-----------------------------------
after the effective date of the registration statement filed pursuant to this
Section 9.3, except as set forth in Section 9.3(c), STL, at its expense, will
file such post-effective amendments as may be necessary to make available for
use a prospectus meeting the requirements of the Securities Act. STL will cause
copies of such prospectus to be delivered to any person selling the shares of
common stock as may be required by the Securities Act and the rules and
regulations of the Commission.
10. Damages. Without affecting STL's right to claim ordinary damages for
-------
United's breach of this Agreement, in no event shall United be liable for
incidental, consequential or special damages, including without limitation,
frustration of economic or business expectations, loss of profits, or loss of
sales, arising under or related to this Agreement or by reason of United's
purchase or failure to purchase Products hereunder.
11. Indemnification.
---------------
11.1 Indemnification by STL. On demand, STL shall indemnify, defend
----------------------
and hold harmless United and each corporation, partner, shareholder, officer,
director, affiliate, subsidiary, parent, joint venturer, agent, employee,
representative, Customer, successor and assign of United ("Indemnified United
Parties") from and against all Losses to the extent that such Losses result from
or arise, directly or indirectly, out of (a) any act or omission of STL, or
STL's affiliates, subsidiaries, parent, agents, employees, representatives,
manufacturers, designers, directors and officers, in connection with this
Agreement, or the Products or services provided under this Agreement, (b) any
breach of warranty or representation made by STL under this Agreement, including
any warranty or representation made under Section 12 of this Agreement, and (c)
the failure of the Products, including but not limited to claims of product
liability, strict liability, design defect, or third party or customer claims of
breach of Warranty ("Product Claim"). "Losses" shall mean any loss, claim,
Product Claim, demand,
15
<PAGE>
damage, award, liabilities, suits, penalties, increases in insurance premiums as
a result of claims made, forfeitures, cost or expense, including without
limitations attorneys, consultants, experts or other professional fees,
disbursements and costs of every kind, nature and description.
11.2 Indemnification by United. On demand, United shall indemnify,
-------------------------
defend and hold harmless STL and each corporation, partner, shareholder,
officer, director, affiliate, subsidiary, parent, joint venturer, agent,
employee, representative, successor and assign of STL from and against all
Losses to the extent that such Losses result from or arise, directly or
indirectly, out of any act or omission of United, or United's agents, employees,
manufacturers, designers, directors and officers, in connection with this
Agreement, or the services provided by United under this Agreement.
11.3 Proprietary Rights Indemnification.
----------------------------------
(a) On demand, STL shall indemnify, defend and hold harmless the
Indemnified United Parties from and against any Losses resulting or arising,
directly or indirectly, from or in connection with the violation or alleged
violation or infringement or alleged infringement of any third party's claimed
trade secrets, proprietary information, trademarks, tradenames, copyrights,
patents, or patent rights ("Proprietary Rights Claim") in connection with
services, work, Products, Advertising or the Trademarks, or the patents and
patent applications owned by STL and set forth on Schedule 11.3.
(b) If United is enjoined or otherwise prevented by
administrative or judicial order or judgment from using or selling the Products,
or engaging in Advertising, due to any Proprietary Rights Claims, STL shall take
such action as is necessary to clear any such Proprietary Rights Claims,
including but not limited to:
(i) Replacing the Products, without additional charge,
with a compatible, functionally equivalent and non-violating and non-infringing
Product;
(ii) Modifying the Products to avoid the violation or
infringement;
(iii) Obtaining a license for United's continued use or
sale of the Products and paying the fee for any such license;
(iv) If the alternative set forth in Section 11.3(b)(i),
(ii) and (iii) are not available despite STL's best efforts, purchasing back
from United and its customers, to the extent necessary, all infringing or
violative Products at the Purchase Price for such Products, provided that in the
event such re-purchase is made, United shall not thereby waive any other rights,
remedies or claims it may have against STL at law or in equity or under this
Agreement.
11.4 Survival. The parties' obligations to indemnify under this
--------
Section 11 shall survive the expiration or termination of this Agreement.
16
<PAGE>
11.5 Cooperation. Each party agrees to promptly notify the other of
-----------
any Losses and to cooperate fully in the defense thereof or any negotiations
related to any Losses, and neither shall enter into any settlement without the
consent of the other party.
12. Noninfringement. STL represents and warrants that it owns the
---------------
Trademarks, Patents, all technology, know-how, copyrights and intellectual
property rights used in producing the Products or as otherwise necessary to
consummate the transactions contemplated by this Agreement.
13. Insurance. At all times during the Term of this Agreement, STL, at
---------
its sole expense, shall maintain in full force and effect a policy of commercial
general liability insurance, including claims for bodily injury, personal
injury, death, property damage and advertising injury caused by or occurring in
conjunction with the operation of STL's business including all activities
authorized or required to be performed under this Agreement. In connection with
any such application for insurance, STL shall provide to the insurance agent and
company providing any such insurance to STL a true executed copy of this
Agreement instructing the insurance agent and company to provide coverage to
cover any liabilities and Losses which may arise under this Agreement as well as
from sales of the Products. The insurance coverage obtained under this Section
13 shall designate United and its agents, employees, general partners, officers,
and directors as additional insureds. The insurance coverage shall provide
liability protection for product liability and design defect with a minimum
overall aggregate limit of $2,000,000. STL shall give United prompt written
notice of any material modification, cancellation, or non-renewal or any
insurance required by this Agreement. United may terminate this Agreement
immediately without notice to STL if any insurance required by this Agreement is
cancelled or materially modified without the express written consent of United.
14. Notices. Any notice, request or demand required to be made or given
-------
hereunder must be in writing and shall be given, deemed given or made one day
after it has been sent by overnight or express mail courier and fax, at the
addresses and the fax numbers set forth below, or at such other address as any
party shall subsequently provide to the other party in writing, as follows:
If to STL:
Saf T Lok Incorporated
18245 SE Federal Highway
Tequesta, Florida 33469
Attn: John Gardner, President
Fax: 407-745-6601
With a copy to:
William A. Grimm, Esq.
17
<PAGE>
Gray, Harris & Robinson, P.A.
201 E. Pine Street, Suite 1200
P.O. Box 3068
Orlando, FL 32802-3068
Fax: 407-244-5690
If to United:
United Safety Action, Inc.
c/o Edward H. Burnbaum
Lynch Rowin Novack Burnbaum & Crystal, P.C.
300 East 42nd Street
New York, New York 10017
Attn: Arthur Braun, President
Fax: 212-986-2907
With a copy to:
Edward H. Burnbaum, Esq.
Lynch Rowin Novack Burnbaum & Crystal, P.C.
300 East 42nd Street
New York, New York 10017
Fax: 212-986-2907
15. Term and Termination.
--------------------
15.1 Term. The Term of this Agreement shall be three years from the
----
date this Agreement is executed ("Term"). The Term of this Agreement shall be
extended for successive two year periods unless either party gives the other
written notice of termination within 90 days prior to the expiration of the Term
or any successive Term.
15.2 Termination Without Cause. Following the fulfillment of United's
-------------------------
obligations under the Initial Order, United may terminate this Agreement,
without cause, and cancel any orders for additional Products that have been
ordered but not shipped, upon 90 days prior written notice.
15.3 For Breach. The appropriate party may, by written notice to the
----------
other, terminate this Agreement without prejudice to any rights that it may
have, whether under the provisions of this Agreement, in law or in equity, or
otherwise, upon the occurrence of any of the following events:
(a) By United, if STL makes a late delivery, as defined in
Section 6.3; or
18
<PAGE>
(b) By United, if 20% or more of the Products received in any
Lot or 10% of all Lots received to date or notice if given within the Warranty
Period do not meet the Specifications, following 30 days written notice and
opportunity to cure within such notice period; or
(c) By United, if a government agency with jurisdiction over the
operation, function, production or sale of the Products or over United's
services or operations has determined that the Products or any of the Products
are defective; or
(d) Except for the breaches set forth in Section 15.3(a), (b) or
(c), by either United or STL, if there is a material breach or default in the
other's performance of its obligations hereunder, following 30 days written
notice and opportunity to cure within such notice period; or
(e) By either United or STL, if the other party files or has
filed against it a petition under any bankruptcy or insolvency act or has
appointed a trustee, receiver or liquidator of its properties.
16. Arbitration. All disputes that may arise under this Agreement, except
-----------
for disputes which may necessitate extraordinary equitable or injunctive relief,
that are not adjusted by the parties themselves, shall be submitted to binding
arbitration in New York City, New York before the American Arbitration
Association under its Commercial Rules then prevailing. All costs of
arbitration, including each party's attorneys fees and the fees of the
arbitrators, shall be paid by the non-prevailing party.
17. Miscellaneous.
-------------
17.1 Relationship of Parties. This Agreement does not constitute a
-----------------------
partnership or joint venture between STL and United. Both parties acknowledge
that the relationship of STL to United shall be one of an independent
contractor.
17.2 Governing Law. This Agreement and any dispute or claim arising
-------------
under this Agreement shall be governed by the laws of the State of New York
without regard to principles of conflicts of law.
17.3 Jurisdiction. The parties hereby consent to the personal
------------
jurisdiction of an arbitrator or court located in New York City, New York and of
the United States District Court for the Southern District of New York. Service
of process may be made by certified mail/return receipt requested or any other
method of service of process authorized by law. Each party agrees that it shall
not assert venue as a defense to any action or proceeding or make any argument
based on principles of forum non conveniens or similar legal principles or
doctrines.
17.4 Assignment. Neither party may assign its rights under this
----------
Agreement
19
<PAGE>
without the express written consent of the other, except that United may assign
this Agreement to a person or entity which is controlled by United without the
consent of STL and that STL may assign the Agreement to a purchaser of
substantially all of its assets without the consent of United, provided in
either case, that the assignee accepts and assumes all of the obligations of
this Agreement
17.5 No Waiver. Failure of any party to insist upon the strict
---------
performance of this Agreement, or a delay in exercising any remedy provided
under this Agreement, shall not constitute a waiver of any rights, remedies,
terms, conditions or provisions of this Agreement.
17.6 Survival of Obligations. Obligations which, by their nature,
-----------------------
would continue beyond termination or expiration of this Agreement, including by
way of illustration only and not limitation, sections related to warranty and
indemnification, shall survive termination or expiration of this Agreement by
either party for any reason.
17.7 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding between the parties as to the subject matter of this
Agreement and supersedes all previous written or oral communications,
representations or agreements. This Agreement may not be modified except by a
written instrument executed by both parties.
17.8 Remedies. Any remedies available to either party for breach of
--------
this Agreement are cumulative and may be exercised concurrently or separately,
and the exercise of any one remedy shall not be deemed an election of such
remedy to the exclusion of other remedies.
17.9 Headings. The paragraph headings used in this Agreement are for
--------
convenience of reference only and shall not in any way limit or amplify the
terms and provisions hereof, nor enter into the interpretation of this
Agreement.
17.10 Binding Agreement. The persons executing this Agreement on
-----------------
behalf of the parties have been duly and validly authorized to do so, and this
Agreement is a valid and binding obligation of the parties. Simultaneously with
the execution of this Agreement, STL shall deliver to United a resolution of its
Board of Directors authorizing STL to enter into this Agreement and consummate
the transactions contemplated hereunder.
17.11 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original and all of which shall constitute one
and the same Agreement.
17.12 Severability. If any term of this Agreement shall be unlawful,
------------
void or unenforceable, such term shall be deemed omitted to the extent
prohibited or invalid, but the remainder of this Agreement shall not be
invalidated and shall be given effect to the extent possible.
17.13 Force Majeure. Either party shall be excused from its
-------------
obligations
20
<PAGE>
hereunder for so long as is reasonably necessary in the event such party is
prevented from performing under this Agreement by matters beyond its reasonable
control including, but not limited to, war, strike, fire, flood, storm, acts of
God, embargo, impossibility of performance, or any of the foregoing affecting
one or more of its suppliers or customers.
17.14 Applicability of the Uniform Commercial Code. To the extent not
--------------------------------------------
modified in this Agreement, the provisions of the Uniform Commercial Code shall
apply to this Agreement.
This Agreement has been executed as of the date first above written.
SAF T LOK INCORPORATED
A Florida Corporation
By:_______________________________
John Gardner, President
UNITED SAFETY ACTION, INC.
A New York Corporation
By:_______________________________
Arthur Braun, President
21
<PAGE>
SCHEDULE 1.1
Definition of Law Enforcement Agencies
--------------------------------------
The term "Law Enforcement Agencies" means any, throughout the world,
federal, state, local or private police, security or law enforcement
organization and any military organization where such organizations are
purchasing for their own use or the use of their members, and not for subsequent
sale into the public market.
Description of the Products
---------------------------
Grip Locks
Model - Colt 1911 Government
Model - Colt 1911 Officer
Model - Smith & Wesson J
Model - Smith & Wesson K
Model - Taurus J
Model - Rossi J
Metal Magazine Lock
Model - Beretta 92
Model - Beretta 96
Plastic Magazine Lock
Model - Glock 17, 22
Model - Glock 19, 23
<TABLE>
<CAPTION> MOST FAVORED PRICE
GUN LOCK PER UNIT
- --------------------------------- ------------------
<S> <C>
GRIP Lock - All Models *
Metal Magazine Lock - All Models *
Plastic Magazine Lock - All Models *
</TABLE>
*This information has been omitted from this Current Report on Form 8-K and has
been filed separately with the Securities and Exchange Commission under
application for Confidential Treatment pursuant to Rule 24b-2.
22
<PAGE>
SCHEDULE 2.1
The number and types of Products to be purchased by United and the delivery
dates are as follows, unless otherwise agreed to, in writing, by both STL and
United:
<TABLE>
<CAPTION>
Production/Delivery Schedule for 1998
- ------------------------------------------------------------------------------------------
Grip Locks (1) Mag Locks Mag Locks Total Production
GLOCK BERETTA
(1) (1)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 31, 1998
- ------------------------------------------------------------------------------------------
February 28, 1998 5,000
- ------------------------------------------------------------------------------------------
March 31, 1998 5,000 5,000
- ------------------------------------------------------------------------------------------
April 30, 1998 10,000 5,000
- ------------------------------------------------------------------------------------------
May 31, 1998 10,000 5,000
- ------------------------------------------------------------------------------------------
June 30, 1998 10,000 5,000
- ------------------------------------------------------------------------------------------
July 31, 1998 10,000 10,000 10,000
- ------------------------------------------------------------------------------------------
August 31, 1998 30,000
- ------------------------------------------------------------------------------------------
September 30, 1998 35,000
- ------------------------------------------------------------------------------------------
October 31, 1998 40,000
- ------------------------------------------------------------------------------------------
November 30, 1998 40,000
- ------------------------------------------------------------------------------------------
December 31, 1998 45,000
- ------------------------------------------------------------------------------------------
280,000
- ------------------------------------------------------------------------------------------
</TABLE>
(1) At least 60 days prior to the applicable delivery date, United shall notify
STL of the exact number of gun locks by model number within each category
of gun locks.
23
<PAGE>
SCHEDULE 2.2
Cumulative Delivery Requirements Under the Initial Order
--------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative Amount
Goods Delivered By: (including the Initial Release)
------------------- -------------------------------
<S> <C>
December 31, 1998 $10,000,000
June 30, 1999 $15,000,000
December 31, 1999 $20,000,000
</TABLE>
24
<PAGE>
SCHEDULE 3.8
Lead Times for Deliveries under Releasing Orders
------------------------------------------------
and New Purchase Orders
-----------------------
Unless otherwise expressly agreed to in writing by STL, no Releasing Order
or new purchase order issued by United shall require the delivery of Products
commencing sooner than three months from the receipt of the purchase order by
STL or require STL to deliver more than $1,500,000 of Products (based on the
Minimum Prices) in any given month.
25
<PAGE>
SCHEDULE 5.1
Specifications for the Products
-------------------------------
Specifications for Grip Lock
----------------------------
1. Lock finish should be a satin or black nickel in appearance and be
consistent in color, with only minor surface imperfections.
2. Grips to be consistent in finish, with only minor surface defects and
when installed must fit lock and gun frame without large gaps at any
location.
3. Mounting plate and screws to fit gun frame, lock and grips properly.
4. Lock releases the safety slide only when the proper combination is
entered and at no other combination.
5. Interlock strength at top to be a minimum of 50 lbs.
6. Interlock strength at bottom to be a minimum of 25 lbs.
7. Force to actuate combination buttons to be less than 5 lbs.
8. Force to actuate reset button to be less than 6 lbs.
9. Force to actuate safety slide to locked position to be less than 4 lbs.
10. Time for safety slide to unlock to be less than 1/2 second.
11. Revolvers only - when locked - no damage to lock when trigger pull is
less than 50 lbs.
12. With lock unlocked firearm should function normal.
13. Lock unit including mounting plates should weigh less than 3 ounces.
14. Lock should operate 10,000 lock-unlock cycles without failure.
15. Lock should accept combinations of any number from 0 - 9 up to 1000
variations.
Specifications for Magazine Lock
--------------------------------
1. Finish of magazine and lock module should be consistent, with only minor
surface imperfections.
2. Magazine and levers to be acceptable in appearance when compared to
standard factory supplied magazine.
3. Lock releases the safety slide only when the proper combination is
entered and at no other combination.
4. Force to actuate combination buttons to be less than 6 lbs.
5. Force to actuate reset button to be less than 6 lbs.
6. Force to depress manual safety to be less than 4 lbs. and less than 1/4
inches to rotate to the safe position.
7. Force to rotate the manual safety to the off safe position should take
less than 2 lbs.
8. When in the locked position, a minimum force of 75 lbs. is required to
remove
26
<PAGE>
the magazine. (Magazine will be damaged and no longer useable.)
9. When in the locked position, a minimum trigger pull of 75 lbs. is
required to override the lock. (Magazine will be damaged and no longer
useable.)
10. Magazine should be capable of holding up to 10 rounds of various
caliber cartridges.
11. When unlocked, firearm should function as normal.
12. Lock should weigh less than 2 ounces.
13. Lock should not increase the weight of the magazine by more than 2
ounces.
14. Lock should operate 10,000 lock-unlock cycles without failure.
15. Lock should accept combinations of any number from 0 - 9 up to 10,000
variations.
27
<PAGE>
SCHEDULE 5.4
Written protocols for testing the Products ordered pursuant to the Initial Order
- --------------------------------------------------------------------------------
Attached hereto are the testing protocols for each of the models of Products.
28
<PAGE>
SCHEDULE 6.3
Formula for Determining Payment to United for Late Delivery by STL
------------------------------------------------------------------
In an effort to determine damages incurred by United in the event of a
delivery of an amount of Products exceeding $10,000 ("Late Delivered Products")
later than 30 days from the scheduled delivery date, not otherwise excused, STL
shall pay to United within 30 days after the scheduled delivery date, or United
may offset amounts owed by United to STL, the following amounts:
<TABLE>
<CAPTION>
Days Beyond the Percentage of Purchase
30 Day Grace Period Price of Late Delivered Products
- --------------------- ---------------------------------
<S> <C>
1-10 5%
11-30 10%
Greater than 30 50%
</TABLE>
29
<PAGE>
SCHEDULE 11.3
Trademarks, Patents and Patent Applications
-------------------------------------------
30
