Private Placement Notice

Private Placement Notice

[The following Notice is a draft of the document to be circulated as part of a private placement document (a non-stock transfer agreement) for a disposable corporation to prospective investors and sets out the specific aspects of functionality and operation which may be of concern. Properly it can be a part of an SEC Regulation A filing which is substantially broader and which would include detailed financial information. The fourty percent (40%) lower limit in paragraph 3 on the patent holder's interest is to insure that enough interest is retained to continue to stimulate his or her interest in the undertaking. Note that a royalty-related offering does not offer stock but participation in potential patent royalty income. It is believed that the wording in paragraph 9 allows a participant to receive proceeds as royalty income and thus claim capital gains treatment for such income; there are no rulings on this however and an opinion by your lawyer or accountant should be sought in this regard.]

NOTICE OF CONDITIONS AND STIPULATIONS

Comes now The Company (SSH) and states as follows:

1. SSH is a subchapter S Nevada corporation being formed for the principal purpose of developing and marketing the Device now subject to protection by a pending US patent application (number 10/_____).

2. SSH is wholly owned by Mr. Jones (RWA), a resident of _________, California, who is also the inventor of said Device. He will hold all offices in SSH and is the sole member of the board of directors of SSH. The first meeting of the board of directors will be held in due course when the Articles of Incorporation have been accepted by the Nevada Secretary of State. The bylaws require only the shareholder and board of director's meetings which are needed to comply with state regulations.

3. Participation by investors with RWA in patent royalties payable by SSH will constitute the sole compensation for participants and for RWA, except as set out below for RWA. The participation of RWA in net royalties, as defined herein below, from SSH is no less than forty percent (40%). SSM therefore will, on a private placement basis, subscribe no more than sixty percent (60%) to all other participants and the rates for all other participants for participation will be the same. This rate will be $5,000.00 (USD) for each percentage point ($300,000.00 (USD) being the total subscription). Participation with be for full points only. Funds advanced by a participant, are advanced in full to SSH and payment of net royalties to a participant are by RWA. SSH will subscribe participants as is necessary and convenient for the conduct of business and SSH may under subscribe the undertaking. In the event that said maximum of 60% is not sold over a period of not less than 6 months following the most recent sale, the rate for subscription can be changed by SSH.

4. A formal meeting will be held and a resolution made and documented in writing by the board of directors of SSH whenever a third party is licensed to independently produce and market the mounts. Said license will be made by RWA to said third party. Notice of the creation of such a license together with its terms and conditions will be given in writing to all participants. Additional licenses for the production of the Device to, through and/or by companies and/or agencies in the EEC and elsewhere will be sought. A PCT filing to protect the associated foreign patent rights will be made in due course.

5. SSH will open a Nevada bank account and will comply with all state and federal statutes. A Nevada business license will be obtained. The law firm of ______, Reno, NV 89502, is the registered agent for SSH.

6. RWA has non-exclusively licensed SSH to produce and market the Device in the USA and elsewhere at a rate of 110% of the net profits earned by SSH. Net royalties are defined as (1) royalties obtained directly from other, non-SSH licensees, domestic and foreign, and (2) the net corporate profits of SSH. SSH will receive and hold all funds obtained from other licensees, domestic and foreign, and will hold said net profits in trust until disbursed to RWA. RWA holds all funds which are subject to disbursal in trust until disbursed to said participants. Participants expressly waive all management and supervisory provisions of the Uniform Trustees Act with regard to said funds when held in trust by RWA or by SSH. SSH will disburse said net royalties to RWA within 30 days of receipt, provided however that for the calculation of said net corporate profits, an unaudited accounting will be made no less frequently than quarterly. SSH may establish reasonable reserves for legitimate business purposes. RWA will disburse said net royalties to participants within 30 days of receipt from SSH.

7. Although SSH will have a liability insurance policy and other assets, it is anticipated that serious tort product liability litigation arising from the sale and use of a handgun mount may occur and that as a result, the need may arise to liquidate the company. In anticipation of such an event or for other reasonable business related reasons, the contracts let by and undertaken by SSH for the production and marketing of the handgun mounts will assumable by a new entity which RWA may form or may be deemed suitable by him. Such an entity will normally be a new Nevada corporation.

8. As part of his compensation for work done and to be done for SSH and RWA, twelve percent (12%) of the gross foreign licenses fees (royalties) will be paid to Mr. Smith. Further, twelve percent (12%) of the net income arising from all non-licensed foreign sales will be paid to him. The burden of corporate supervision to be used in calculating the net income from such sources is eighty percent (80%) or actual costs, which ever is less. Restated, the minimum payable rate to him is 2.4%. Contracts will be let, as is deemed suitable and appropriate by SSH at commercially competitive rates, for the production, marketing and distribution of said mounts domestically and abroad. All of said production, marketing and distribution contracts will be reassignable by RWA, at his sole discretion, in the event that SSH is or becomes insolvent, bankrupt or is subject to prospective serious losses arising from litigation over the use or misuse of a mount by members of the public. No unusual costs or expenses are foreseen, however for foreign sales and/or licenses, however said sums payable to Mr. Smith are in addition to reasonable foreign brokerage fees, not to exceed six (6%) of a given license. A safety engineer will be retained to evaluate the product and to write such reports as are necessary to insure that an adequate safety review has been performed. Employment of individuals will, whenever possible, be done by contract using consultants or temporary agency personnel.

9. Participants are not joint venturers or partners of RWA or of SSH nor do they have any ownership rights in SSH. All rights of participants, as created herein, are contract rights to demand and obtain payment of said net royalties according to their respective participation, if and when such payments are due, in exchange for having advancing funds to SSH. Notwithstanding this however, the rights obtained are proportional undivided partial interests in said patent as to royalty income only.

10. However in the event of a profitable sale of SSH or of its successor(s) participants, including RWA, will share in the proceeds of such a sale in proportion to their respective participation in said net royalties. Such a sale will be for value, at commercially reasonable rates and terms.

11. Said participants and their heirs and assigns and RWA and his heirs and assigns hold each other harmless for any error, omission, mistake and/or loss arising from the acts or omissions of SSH or of RWA in regard to the management, supervision and/or sale of SSHMI or which results in any loss of revenue for SSH or for losses or reductions in income from licenses.

12. In the event that gross revenue from all sources exceed $500,000.00 (USD) for a given year, then direct compensation by SSH to RWA will be paid, for that year, in the amount of $50,000.00 (USD) and said sum shall be in addition to his participation in said net royalties.

13. RWA, by and through SSH, will undertake to make the venture profitable and to make the Device safe and reliable. Signed below by the president and endorsed by the board of directors of SSH:

Date: ____________

By: Mr. Jones, Pres., SSH: ________________

By: Mr. Jones, for and on behalf of the B/D of SSH: _____________

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