The basic gist of it is that for the first 2 years of the contract RUAG would continually deliver the ammo according to a set schedule, in addition to any extra ammo that Prime requested. This ammo would not need to be paid for until after it had been sold by Prime, at which point payment for it was due within 7 business days. After the first 2 years Prime would be required to pay for products within 30 days of delivery, but would own the ammo immediately upon payment instead of RUAG owning the ammo until it was sold. The contract took effect on April 1st in 2015, with the first ammo shipment in August of 2015.
Prime wasn't able to sell all of the ammo delivered by RUAG before the end of the 2 years, but they also could not pay for the remainder they had in inventory as of August 9th, 2017. RUAG claimed that once the two year period ended, all ammunition currently in Prime's inventory would need to be paid within 30 days based on the wording of the contract. There was no specific language in the original contract concerning inventory received but not sold prior to this 2 year deadline, it simply said that after 2 years Prime will be required to follow RUAG's standard commercial 30 day payment terms.
In August of 2017, 4 months after the 2 year pay as you sell period expired, RUAG and Prime created an addendum to the original contract to specifically address this ambiguity in the original contract. This addendum specified that Prime had until September 30th to pay for all of the ammo remaining in inventory as of April 4th, 2017 - this was when payments from the pay as you sell agreement ceased and negotiations for the remaining inventory started.
Both Prime and RUAG signed the addendum, meaning that Prime was obligated to pay in full for all ammo that had been delivered. The addendum additionally stated that if Prime couldn't pay for the ammo by September 30, 2017 then RUAG would have the right to sell, transfer, or dispose of the remaining product inventory as it saw fit. It also specifically stated that Prime waives the right to claim any intellectual property, goodwill, or other infringement/violation that resulted from RUAG selling, transferring or disposing of the remaining unpaid product. This included RUAG using the Prime name and any other trademarks associated with Prime during the sale, transfer, or disposal of unpaid product.
Prime did not, or could not, pay by September 30th , and up until January 2018 Prime had continued to pay RUAG under the previous pay as you sell agreement. Prime claims the two companies created a second addendum finalized in January 2018 to handle the remaining unpaid balance. by converting it into a 3-year loan with quarterly interest payments (based on current inventory levels of unpaid ammo) and yearly payments towards the principal. RUAG says that no further agreements were reached regarding payment for the ammo they had already delivered. Prime has not shown this second addendum in evidence and says it was created with a handshake deal and finalized with emails between CEOs, so it may or may not be legally enforceable.
In 2018 Prime kept selling ammo and sending sales reports to RUAG (to prove inventory levels for interest payments) and RUAG kept sending invoices to Prime (to collect under the pay as you sell agreement from the first 2 years). No copies of these invoices are publicly available, likely for business reasons, but Prime does acknowledge receipt of these invoices from March 2018 until August 2018. Prime denies owing the amounts shown on the invoices, however, and claims that both companies agreed to and were operating under the second addendum during this time. To this end, Prime claims that up until November 7, 2018 they had paid $593,216.46 towards the principal of this loan in addition to the first of the scheduled interest payments alongside relevant excise taxes.
On July 19, 2018 RUAG sent a Notice of Default to Prime saying that Prime had failed to pay the past-due balance for delivered ammo, which was originally supposed to be paid in full prior to October 1, 2017 according to the first addendum to the original contract. In this Notice of Default RUAG claims that Prime conceded in writing on July 12 that the money from the first addendum was owed (this concession was not included in evidence with RUAG's complaint). RUAG accordingly demanded that all unsold inventory of ammo was to be immediately turned over to RUAG, with RUAG's lawyer noting, "It is our understanding that you have already agreed to this." RUAG also demanded payment in full of the balance owed within 10 days, stating that no further addenda or terms were ever fully agreed upon since execution of the first addendum in August 2017.
On July 31, 2018 RUAG sent a Notice of Termination for the original contract between Prime and RUAG. The Notice of Termination stated that Prime had failed to pay all or any portion of the overdue payment from the first addendum. It also claims that Prime sold an additional $87,737.83 of inventory while ignoring the July 30, 2018 payment date. RUAG's lawyers claimed that Prime stated, both in writing and during telephone calls, that it did not presently have the funds to pay any of the overdue amounts including emails on July 5th and July 12th. This Notice of Termination was issued based on a clause in the original contract that allowed for termination of the contract with 5 days notice if Prime "admits in writing its inability to pay its debts as they mature." Accordingly, RUAG stated that they were terminating the original contract effective August 5, 2018 and would file suit if payment for the balance owed was not made immediately made.
At this time RUAG also exercised its right, under section 3 of the first addendum to the original contract, to take possession of Prime inventory to sell, transfer, or dispose of as it saw fit. Notification of this action to Prime was included in the Notice of Termination sent on July 31, 2018.
On August 21, 2018 RUAG claims they entered into an agreement to manufacture 6.5 SAUM and 6 Creedmoor ammunition for Prime in an effort to help Prime raise capital for their outstanding debt. They accepted a purchase order for 155,000 round of 6.5 SAUM and 200,000 rounds of 6 Creedmoor in exchange for pre-payment of $399,360. Prime raised funding for this order and paid RUAG the requested sum on August 22, 2018. As of November RUAG claimed to still be in the production process for the ammunition that was pre-paid.
RUAG then sued Prime in November 2018, for debts owed alongside interest, damages, and legal fees. The total was estimated to be in excess of one million dollars, but the specific amount requested was simply, "in excess of $772,147.27 together with interest, attorneys' fees and costs of suit" as well as judgement confirming RUAG's right to sell or otherwise transfer all remaining Prime inventory as it saw fit. In the lawsuit RUAG also requested a declaration from the court allowing them to hold the $399,360 pre-payment alongside the produced 6.5 SAUM and 6 Creedmoor ammunition in escrow until the lawsuit was resolved or Prime paid its debt to RUAG.
No such declaration has been made yet, nor has any delivery of ammunition to Prime been made. RUAG claims in the lawsuit that it was never paid anything after January of 2018.
Prime's response and counterclaim was filed on April 15th and alleged that RUAG management had conspired to put Prime out of business. Prime contended that the second addendum had been agreed upon and the two companies were operating under its terms.
According to Prime, RUAG's Swiss-government ownership wanted to leave the US civilian ammunition market by selling off the associated RUAG brands because they were concerned with the optics of the situation. RUAG management then supposedly conspired to put the major competitor to RUAG's US ammunition division, Prime, out of business to increase the RUAG market share. At the same time, putting Prime out of business would show lost revenue from the same RUAG business division as well as unpaid invoices. This would have the effect of lowering the value of RUAG's US ammunition division, allowing RUAG management to purchase the businesses at a lower price and with a larger market share.
Prime now claims that RUAG was paid $608,695.79 in total throughout 2018 under the supposed second addendum in seventeen separate payments, and $399,360 for the ordered 6.5 SAUM and 6 Creedmoor ammunition. Importantly Prime states that the calculated interest payment of $15,479.33 was paid according to the second addendum and accepted without question by RUAG. In addition, Prime states that RUAG confiscated all remaining Prime inventory at the end of July and still has yet to deliver the 355,000 rounds that were paid for in advance.
Prime made 14 different claims in their countersuit against RUAG, demanding judgement in its favor and against RUAG "in an amount in excess of ONE MILLION DOLLARS, together with interest, attorneys' fees and costs of suit" for each count.