PURCHASE AND SUPPLY AGREEMENT
1. PURPOSE AND SCOPE
Cirrus Design Corporation (herein after referred to as Cirrus) desires
that a certain type of FAA certified ballistically deployed Cirrus
Airframe Parachute System be available for use in its manufacturing
process for its SR20 aircraft. Ballistic Recovery Systems, Inc. (herein
after referred to as BRSI) desires to sell to Cirrus a certain type of
FAA certified ballistically deployed Cirrus Airframe Parachute System
(hereinafter referred to as "CAPS") which it produces and to support
Cirrus's production and aftermarket requirements for such CAPS.
2. CONTRACT/AGREEMENT
Cirrus agrees to buy and a BRSI agrees to supply a supporting inventory
of the CAPS for use by Cirrus in the production of the Certified
Aircraft produced by Cirrus and designated the SR20. Further, BRSI
agrees to sell to Cirrus at the lowest price which BRSI can sell the
CAPS and still maintain its expected "gross margins". The Parties have
agreed to accept the pricing structure as outlined in this Agreement,
which structure contains terms for modification of the price of the
CAPS as more costing information becomes available as well as higher
quantities of components can be purchased by BRSI. At all times, BRSI
has agreed to maintain the highest standards for producing the CAPS and
shall provide the CAPS and its components according to the certified
specifications.
3. PRICING
BRSI agrees to sell and Cirrus agrees to buy CAPS from BRSI at the
prices set forth in Appendix "A". BRSI agrees to supply Cirrus all of
its "needs" for inclusion in the production of the SR20, even though
this Agreement is for an indefinite quantity of product being purchased
by Cirrus during the term of this Agreement. Prices set forth in
Appendix "A" are to remain firm/fixed for orders required through the
end of this Agreement, unless modified pursuant to the terms of
Appendix "A". Additionally, BRSI agrees to sell component parts for the
CAPS to Cirrus according to the pricing schedule outlined in Addendum
A-1. At such time as either BRSI or Cirrus may request a more detailed
component price list, BRSI shall prepare and submit to Cirrus such a
list, which pricing list shall become an additional Appendix to this
Agreement.
4. TERM
The term of this Agreement shall be from the date of the execution of
this Agreement until July 1, 2004. This Agreement shall be
automatically
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renewed after the initial term for a "rolling period" of eighteen
(18) months until such time as either Party gives the other Party
written notice of the Party's intent to terminate the Agreement. The
notice must be receive by the other Party at least eighteen (18)
months before the noticed date of termination (by way of example, if
Cirrus were to properly notify BRSI of its intent to terminate the
agreement on May 1, 2004, the Agreement would not terminate until
November 1,2005, which is 18 months after the date of notice).
Except in the event of termination due to default or in the event of
written agreement of the Parties will this Agreement terminate prior
to July 1, 2004.
5. SUPPORT
At no additional cost to Cirrus, BRSI will use its best efforts to
provide the engineering support to Cirrus to continue to develop and
improve the CAPS and its installation into the SR20 and the derivatives
(i.e. the SR22 and the SRX). Cirrus has certified the SR 20 aircraft to
include the BRSI CAPS being sold/purchased under this contract. If the
derivatives require a different CAPS configuration, BRSI and Cirrus
will discuss the development of a CAPS for the derivatives, taking into
consideration the costs involved and how the development costs will be
shared or absorbed. At no additional cost to Cirrus, BRSI will provide
any and all reasonably necessary support for the certification of the
product in present and future use. Cirrus will not modify system
requirements from current FAA approved configuration without prior
discussions with BRSI. BRSI will not modify components or system
requirements without prior written consent of Cirrus. In the event that
such modifications result in re-engineering of the already certified
CAPS system or its components, Cirrus and BRSI will discuss how the
cost of re-certification will be allocated or absorbed. BRSI agrees to
make all reasonable efforts to comply with such modification requests,
but does not agree to bear the costs of said modifications or a portion
thereof without prior written approval between BRSI and Cirrus. BRSI
will continue to use its best efforts to assure that their product
meets all FAA standards and regulations Cirrus has certified to, to
meet all quality control requirements and to not fall out of compliance
or require recertification, unless the change is mutually agreed upon
with Cirrus in advance. The list of parts and suppliers thereof for
production of the CAPS (Appendix "B") is also incorporated as a part of
this Agreement.
6. STRATEGIC INVENTORY MANAGEMENT
BRSI agrees to maintain a production schedule for the CAPS being
supplied to Cirrus which shall be determined to meet the delivery
schedule provided and updated by Cirrus for the SR20 CAPS installation
program. Cirrus will place all orders for the CAPS with BRSI at least
ninety (90) days prior to the specified delivery date and shall also
provide BRSI a production forecast for a Two Hundred Seventy (270) day
advance period. The forecast shall be
2
updated every thirty (30) days. In order to qualify for increased
volume discounts, Cirrus understands and acknowledges that it may be
necessary to place purchase orders for CAPS deliveries and component
deliveries in advance of the ninety (90) days set forth in this
clause. Such purchase orders will become binding on both parties
upon signing. BRSI will timely fill all orders and shall ship the
CAPS to be received on or within a few days prior to the requested
delivery date. In the event that BRSI anticipates a delay in
delivery for any reason, BRSI is under an affirmative duty to
immediately notify Cirrus of the delay, the cause of the delay, the
"fix" for the cause of the delay and the anticipated ship date.
7. INVOICING AND TERMS
The Parties agree that the terms contained in Cirrus's General Terms
and Conditions of Purchase (a copy of which is attached to this
Agreement as Appendix "C") shall be made a part of this Agreement. In
the event of any inconsistencies or conflicts between the terms
contained in this Agreement and the terms contained in the attached
General Terms and Conditions of Purchase, the terms of this Agreement
shall be controlling.
8. PAYMENT TERMS
Terms of payment for all CAPS delivered before the date of this
Agreement and for all future delivers shall be C.O.D. until such time
as BRSI is delivering and Cirrus is accepting a quantity greater than
four (4) CAPS per calendar month. At such time as Cirrus has placed
purchase orders which require delivery of more than four (4) per month
for the SR20, the Parties agree to "sit down" and discuss the payment
terms in good faith to determine if the payment terms should be
modified. At that time, the Parties shall consider progressive payment
terms which might result in vendor discounts leading to reduction in
the CAPS pricing, as well as considering continuation of the C.O.D.
payment arrangement.
9. QUALITY CONTROL FOR COMPONENTS OF CERTIFIED AIRCRAFT
The Parties acknowledge that the CAPS is being provided by BRSI to
Cirrus for inclusion in producing a FAA fully certified aircraft
designated the SR20. As part of the certification, all component parts
must be consistently manufactured to stringent standards subject to
specific quality control procedures and must include supporting
documentation as may be required by the FAA or by Cirrus as determined
in good faith, following discussions with BRSI. BRSI agrees that it
shall conform to these standards and shall meet the requirements of the
FAA or Cirrus as may be required. Failure to do so shall be considered
a material breach of this Agreement. The conditions of this clause are
not intended to require the disclose of proprietary technology, trade
secrets or formulations used in the production of CAPS systems and
components by BRSI. The requirements of the FAA
3
and/or Cirrus will not be construed to require such disclosure as long
as BRSI is able to establish with the FAA that the disclosure is not
necessary.
10. ADDITION OF NEW PRODUCT
BRSI offers Cirrus the opportunity to add additional product to this
Agreement under the same terms. Cirrus also agrees to evaluate BRSI
product for any new models of aircraft, including derivatives of the
SR20 (i.e. the SR22 and the SRX).
11. WARRANTY
BRSI warrants to Cirrus that products sold for installation into new
OEM aircraft will at the time of delivery be free from defects in
design, material, and workmanship. The BRSI Warranty for the registered
product begins on the date of registration to the retail customer and
continues for twelve (12) months from the date of registration. All
other warranty terms are as stated in Appendix C. In the event that
Cirrus does not immediately delivery the SR20 to the retail customer,
BRSI provides Cirrus a shelf life warranty (not to exceed 12 months or
100 hours [▇▇▇▇▇]) from date of delivery to Cirrus Dealers (whichever
comes first) which shelf life warranty will expire upon activation of
the retail purchaser's warranty. In the event that Cirrus does not
deliver the SR20 within the period of the shelf life warranty, the
retail Warranty will begin to run at the end of the shelf life warranty
period, until expired.
12. STOCK WARRANTS
During the process of developing the CAPS for use in the certification
of the ▇▇▇▇, ▇▇▇▇▇▇ contributed professional time as well as funds to
BRSI for completing the development. In partial consideration of the
financial and technical assistance of Cirrus, BRSI has agreed to enter
into the "Warrant Issuance and Debt Forgiveness Agreement" (a copy of
which is attached as Appendix "D") and to issue the related Warrant (a
copy of which shall be substantially in the form of Appendix "D -1")
with the Registration Rights (a copy of which shall be substantially in
the form of Appendix "D - 2"). Any terms inconsistent or in conflict
with this Agreement shall be controlled by this Agreement.
13. FAILURE OF BRSI TO PRODUCE
The purpose of this clause is to set forth the remedy available to
Cirrus in the event that BRSI is unwilling (such as a result of a
business decision not to produce the CAPS system for Cirrus) or unable
(such as a result of business liquidation or business incapacitation)
to produce the CAPS system and its components for Cirrus.
4
BRSI acknowledges that the CAPS system and its components are essential
to the delivery of the Cirrus SR20 aircraft as certified by the FAA.
BRSI also acknowledges that the denial of access to the CAPS system and
its components will cause undo hardship to Cirrus by not providing
access to key design components of the CAPS. Specifically, two
components are deemed to be critical to the production of the CAPS
system. The first is the patented Slider Ring (US Patent no. 4,863,119)
(hereafter referred to as the "Technology") and the ballistic
propellant formula (hereafter referred to as the "Formula").
Cirrus acknowledges that BRSI intends to be Cirrus' sole supplier of
the CAPS system for the Cirrus SR20 and other derivatives if possible.
Cirrus also acknowledges that if Cirrus has the CAPS system produced by
another supplier while BRS still has the willingness and ability to
produce said CAPS systems under terms consistent with the terms of this
Agreement and terms of the Warrant and Debt Forgiveness Agreement, that
Cirrus has no rights to BRSI's Technology or Formula.
In so far as Cirrus has fulfilled its obligations under this Agreement
and as required under terms of the Warrant Issuance and Debt
Forgiveness Agreement, BRSI grants to Cirrus a nonexclusive license to
the Technology. In order to perfect Cirrus' right to the nonexclusive
license in the event of bankruptcy or receivership, the parties agree
to execute a security agreement with the requisite government agencies
as may be reasonably required in a form acceptable to the parties. The
Formula is protected under an agreement between Vulcan Systems, Inc.
(hereafter "Vulcan") and BRSI that includes a non-assignability clause,
and non-disclosure and non-compete agreements. The Formula is the
proprietary property of Vulcan and cannot be divulged or assigned by
BRSI. In so far as Cirrus has fulfilled its obligations under this
Agreement and as required under terms of the Warrant Issuance and Debt
Forgiveness Agreement, BRSI will make its best efforts to secure an
agreement with Vulcan for Vulcan to provide ballistic propellant to
Cirrus under contract in the event of BRSI's unwillingness or inability
to provide such propellant. BRSI will not assign its rights to the
Formula as part of this Agreement.
In the event that BRSI terminates this Agreement or otherwise refuses
or fails to produce and deliver CAPS to Cirrus, which failure is not
caused by Cirrus (directly or indirectly) Cirrus shall have the right
to use the Technology (hereinafter referred to as a "Triggering
Event"). In order to qualify as a Triggering Event, the cause, as
determined in good faith, can not be in the control of Cirrus to have
created (or avoided) the Triggering Event, or alleviate the Triggering
Event (payment of a substantially higher price for the CAPS is excluded
as a cure). The Parties acknowledge that Cirrus has provided
professional, technical and financial support to BRSI, for which Cirrus
has not been adequately compensated; in light of the partial
consideration previously provided by Cirrus, Cirrus shall be permitted
the use
5
of this license at the reduced royalty rate of Five Hundred Dollars
($500) per CAPS unit produced by, through, or on the behalf of
Cirrus after the occurrence of a Triggering Event. Cirrus shall
provide BRSI a monthly "Statement of Use" and shall make monthly
payments to BRSI of the amounts due. Payment shall be made monthly.
This right is exclusively for the use by Cirrus in its production of
its own aircraft and shall not be a right to "resell" or manufacture
for others. Prior to Cirrus exercising its right to use the
Technology, Cirrus shall notify BRSI of its claim to do so under
this Agreement. Thereafter, BRSI shall have thirty (30) days in
which to object in writing or to initiate a lawsuit requesting an
injunction. If an objection is made to Cirrus in writing within the
time specified, the Parties agree to meet and discuss in good faith
the issues. If no resolution can be reached in twenty (20) days from
the date of the objection, Cirrus shall have the right to proceed,
unless otherwise stopped by BRSI filing of an action and the
issuance of an injunction thereunder. In the event that Cirrus
terminates this Agreement (other than for reasons related to an
uncured default by BRSI) or otherwise has an uncured default under
this Agreement, Cirrus will no longer have the right to use of the
Technology under this Agreement. BRS will continue to make all
reasonable efforts to accommodate Cirrus' needs for product and
support.
14. ADDITIONAL TESTING
BRSI shall perform regular and routine testing of the CAPS and its
components as may be required by the FAA or as may be reasonably
requested by Cirrus after discussions with BRSI. The cost of such
routine testing for compliance and quality control shall be the sole
responsibility of BRSI, unless expressly assumed by Cirrus. The
performance and the costs of all other non-routine tests shall be
agreed upon by the Parties in good faith. The costs of the upcoming
"cold chute test" shall be paid by BRSI up to a cost of Five Thousand
Dollars ($5,000). Any costs above and beyond said amount shall be paid
by Cirrus. All test results shall be immediately provided to and
discussed with Cirrus or its representatives. Prior to the performance
of tests, BRSI shall timely notify Cirrus so that it may have an
observer present to witness the test if it desires.
15. NOTICES AND CHANGES
All communications regarding this Agreement including Purchase Orders,
changes, revisions, engineering change orders (ECO's) or engineering
change notices (ECN's) shall be made in advance and in writing and sent
by United States Mail, or by FAX, or by overnight delivery service, to
the party to be affected at the addresses as follows:
(a) In the case of Cirrus:
Cirrus Design Corporation
6
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Manager of Purchasing
(b) In the case of BRSI:
Ballistic Recovery Systems, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: OEM Sales Manager
Any desired changes to this Agreement shall be negotiated and mutually
agreed to, in writing, by Cirrus and BRSI before said changes are
implemented.
16. CONFIDENTIALITY
Any knowledge of information disclosed between Cirrus and BRSI, which
relates in any way to the products and services of this Agreement,
unless otherwise agreed to in writing, shall be deemed proprietary and
confidential. BRSI shall keep confidential any technical, process, or
economic information derived from Cirrus in connection with this
Agreement and shall not divulge such information, directly or
indirectly, for the benefit of any party. The parties agree to not
disclose any material terms of this agreement without mutual consent
unless otherwise compelled by federal or state bodies or their agencies
as may be required by law or statute.
17. EXCLUSIVITY PERIOD
For and in consideration of entering into this Agreement and Cirrus
providing the professional, technical and financial support that Cirrus
has provided to BRSI, BRSI hereby grants Cirrus an exclusive period in
which BRSI shall not enter into or announce its intention to enter into
an agreement to design, develop or produce a ballistically deployed
parachute recover system for another general aviation aircraft. This
exclusive period shall expire upon March 1, 2000. The terms of this
provision shall be construed as broadly as possible to permit Cirrus to
market its exclusive rights as an OEM aircraft manufacturer and
distributor. Nothing contained in this provision shall be interpreted
in any way to prohibit BRSI from designing, developing and
manufacturing such systems for the non-OEM "after market".
18. DEFAULT
Failure by BRSI to make timely deliveries or to ship acceptable quality
of product or to provide the agreed upon support, or to comply with any
of the other material
7
terms of this Agreement shall constitute a default of this
Agreement. Delays to Cirrus's production and deliveries requiring
extra time, including overtime, will be documented and invoiced to
BRSI. Failure by Cirrus to make payment according to the agreed upon
terms shall constitute a default. Failure of any other provision of
this Agreement by either party shall constitute a default. Any
proven default that is not remedied to the satisfaction of both
parties within a reasonable time may result in an uncured default of
this Agreement. Prior to enforcing a claimed default, the claiming
Party must give written notice to the other Party of the default
with specifically stating the reasons and the anticipated cure and
the reasonable time in which the cure should be effected. Both
Parties understand that delays due to the normal Force Majeure
terminology are not defaults unless a reasonable remedy is not
accomplished.
In the event that deliveries under outstanding purchase orders are
delayed by Cirrus and in the event that BRS has committed to the
inventory for the underlying CAPS systems and/or components, Cirrus
will be obligated to pay BRS for said inventory components. In the
event that completed CAPS systems have been manufactured or partially
manufactured, Cirrus shall be obligated to pay BRS for its inventory,
labor and anticipated gross margin for all completed work or partially
completed work. BRS is to make every reasonable effort to mitigate the
obligation of Cirrus under this clause, but the obligation of Cirrus
will not be negated by said efforts. All obligations of Cirrus will be
paid to BRS within thirty (30) days of receipt of notice by BRSI.
19. COMPLIANCE WITH LAW, INTERPRETATION AND JURISDICTION
Cirrus and BRSI agree that in the performance hereof, each will comply
with all applicable federal, state, and local laws and regulations.
This Agreement shall be interpreted under the laws of the State of
Minnesota. All actions shall be brought in the State of Minnesota.
20. ENFORCEMENT
In the event that either Party must seek judicial or administrative
enforcement of this Agreement, the prevailing Party shall receive all
of its costs of enforcement, including actual attorney fees, together
with interest of one percent (1%) per month on all outstanding
balances, until paid in full.
21. ENTIRE AGREEMENT
This Agreement, together with any documents referred to on the face
hereof, constitutes the complete Agreement between Cirrus and BRSI. All
prior and contemporaneous agreements, understandings, and proposals,
written or oral, between Cirrus and BRSI relating to this subject area
are null and void and superseded by this Agreement.
8
IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
officer as of the day and year last signed.
Cirrus BRSI
By: By:
---------------------------- ---------------------------
Title: Title:
---------------------------- ---------------------------
Date: Date:
---------------------------- ---------------------------
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APPENDIX A
PRICE ADJUSTMENTS
IT IS THE INTENTION OF THE PARTIES THAT BRSI SHALL RECEIVE A GROSS PRODUCT
MARGIN OF PRODUCING THE CAPS, OF 30% BEFORE BEING BURDENED. THE 30% GROSS MARGIN
WILL BE CALCULATED USING A STANDARD FINANCIAL STATEMENT PRESENTATION. THE
CALCULATION WILL BE BASED ON TAKING THE SELLING PRICE AND DEDUCTING DIRECT
MATERIAL COSTS, DIRECT LABOR COSTS, AND PRODUCTION OVERHEAD. THE CALCULATION
WILL EXCLUDE SELLING, GENERAL AND ADMINISTRATIVE COSTS, RESEARCH AND DEVELOPMENT
COSTS AND OTHER NON-OPERATING INCOME AND EXPENSES. THE INITIAL PRICE IS
CALCULATED BY THE PARTIES BASED UPON BRSI RECEIVING A 30% GROSS MARGIN. THE
PARTIES HAVE AGREED THAT IN THE EVENT THAT THERE IS A DECREASE IN THE OUTSIDE
COSTS OF PRODUCING THE CAPS (MATERIAL OR SUPPLIER COSTS), THEY SHALL SHARE
EQUALLY IN SUCH COST REDUCTIONS. THE PARTIES ANTICIPATE THAT AS PRODUCTION
QUANTITIES INCREASE, SUCH SAVING MAY BE READILY RECEIVED. THE PARTIES AGREE THAT
SUCH SAVINGS SHALL BE SHARED EQUALLY (50/50). LIKEWISE, IN THE EVENT THE OUTSIDE
COSTS INCREASE, THE PARTIES SHALL SHARE THE ADDITIONAL COST EQUALLY (BRSI SHALL
NOT ADD ITS MARGIN PERCENTAGE TO THE INCREASED COSTS BEING SHARED). BRSI SHALL
DETERMINE THE CHANGE IN OUTSIDE COSTS QUARTERLY, AND SHALL ADJUST THE PRICE UP
OR DOWN FOR FUTURE ORDERS RECEIVED BASED UPON ITS RESULTS. BRSI SHALL SUPPLY ALL
REASONABLY REQUESTED DETAIL OF SUPPLY INFORMATION AND CALCULATIONS USED IN
MAKING ITS DETERMINATION.
▇▇
▇▇▇▇▇▇▇▇ ▇
MAJOR SUBCONTRACTED PARTS
NAME OF PART
------------
PARACHUTE ASSEMBLY
ROCKET FUEL PROPELLANT
KEVLAR AND WEBBING
METAL COMPONENTS
REEFING LINE CUTTERS
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APPENDIX C
CIRRUS'S GENERAL TERMS AND CONDITIONS OF PURCHASE
SEE ATTACHED PAGES
THE PARTIES ACKNOWLEDGE THAT "CIRRUS'S GENERAL TERMS AND CONDITIONS OF PURCHASE"
ARE AN INTEGRAL PART OF THIS AGREEMENT. THE TERMS OF SAID GENERAL TERMS AND
CONDITIONS OF PURCHASE ARE BEING NEGOTIATED SEPARATELY BETWEEN THE PARTIES AND
WILL BE COMPLETED WITHIN THIRTY (30) DAYS FROM THE SIGNING OF THIS AGREEMENT.
UPON COMPLETION OF NEGOTIATIONS, THAT DOCUMENT WILL BECOME PART OF THE AGREEMENT
HEREIN SIGNED BY THE PARTIES.
12
APPENDIX D
WARRANT ISSUANCE AND DEBT FORGIVENESS AGREEMENT
SEE ATTACHED PAGES AND APPENDICES D - 1 AND D - 2
13
Appendix D-1
WARRANT ISSUANCE AND DEBT FORGIVENESS AGREEMENT
THIS WARRANT ISSUANCE AND DEBT FOREGIVENESS AGREEMENT, dated as of
September _____, 1999, by and between Ballistic Recovery Systems, Inc., a
Minnesota corporation, ("BRS") and Cirrus Industries, Inc., a Delaware
corporation, ("Cirrus").
RECITALS
WHEREAS, BRS is in the business of developing and manufacturing,
among other items, parachute recovery systems for general aviation aircraft
(the "Recovery Units");
WHEREAS, Cirrus is in the business of developing and manufacturing,
among other items, general aviation aircraft known as the SR-20 model (
"Aircraft Units");
WHEREAS, BRS and Cirrus entered into an agreement dated as of June 30,
1994, pursuant to which Cirrus funded approximately $549,295 (the
"Development Advance") to BRS for the development of a Recovery Unit that
would be utilized with the SR-20 Aircraft Units (the "Development Agreement");
WHEREAS, pursuant to the Development Agreement, the Development
Advance would be repaid pursuant to aggregate discounts of approximately
$604,225 off the purchase price of Recovery Units sold to Cirrus (the
"Development Advance Discount");
WHEREAS, Cirrus has agreed to utilize the Recovery Units as standard
equipment on the Aircraft Units; and
WHEREAS, the parties hereto desire to herein a) cancel the
obligation of BRS to provide the Development Advance Discount and b) provide
for the issuance by BRS to Cirrus of warrants (the "Warrants") to purchase
BRS Common Stock (the "Warrant Shares"), the vesting of which would be based
upon Cirrus fulfilling certain purchase commitments of Recovery Units based
upon the schedule contained herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and conditions contained herein, the parties hereto agree as
follows:
1. CANCELLATION OF DEVELOPMENT ADVANCE DISCOUNT. The parties hereto
agree that BRS's obligation to provide the Development Advance Discount is
hereby terminated. BRS has no obligation to Cirrus, its successors or
assigns,
14
to repay the Development Advance. Cirrus agrees to immediately release BRS
from any security interests or liens related to the Development Advance.
2. ISSUANCE OF WARRANTS.
2.1 BRS hereby agrees to issue to Cirrus four Warrants in the form
attached hereto as Annex A.
2.2 The parties agree that each Warrant will only vest and become
exercisable i) within each Warrant's respective exercise period (the
"Exercise Period") AND ii) AFTER Cirrus has met certain purchase commitments
of the Recovery Units as provided herein (the "Purchase Commitment").
2.3 The Warrant terms are as follows:
Warrant Warrant Exercise Price per Purchase
# Exercise Period Shares Warrant Share Commitment
------- --------------- ------ ------------- ----------
1 January 1, 2002- 250,000 $1.00 250 Recovery
February 28, 2003 Units in year 2002
2 January 1, 2003- 250,000 $1.00 400 Recovery
February 28, 2004 Units in year 2003
3 January 1, 2003- 250,000 $1.25 400 Recovery
February 28, 2004 Units in year 2003
4 January 1, 2004- 650,000 $1.25 500 Recovery
February 28, 2005 Units in year 2004
2.4 Purchases by Cirrus of Recovery Units that exceed the Purchase
Commitment in any given year may be utilized in the calculation for the
Purchase Commitment for the subsequent calendar year, provided, however, that
Purchases of Cirrus of Recovery Units in 1999 through 2001 may not be
utilized to satisfy the Purchase Commitment for the Warrants.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CIRRUS. In connection
with the issuance of the Warrants and any subsequent sale of the Warrant
Shares (the Warrants and the Warrant Shares shall be collectively known
herein as the "Securities"), Cirrus hereby acknowledges, represents, warrants
and covenants as follows:
3.1 In purchasing the Securities, Cirrus has not relied on any
information or representation other than that which is publicly disclosed or
that which is contained in this Agreement.
15
3.2 Cirrus has been given access to full and complete information
regarding BRS (including the opportunity to meet with BRS officers) and has
utilized such access to its satisfaction for the purpose of obtaining
information regarding BRS.
3.3 Cirrus is experienced and knowledgeable in financial and
business matters, and is capable of evaluating the merits and risks of
investing in the Securities.
3.4 Cirrus believes the investment is suitable for it based on its
investment objectives and financial needs. Cirrus can bear the economic risk
of an investment in the Securities for an indefinite period of time and can
afford a complete loss of such investment.
3.5 Cirrus understands that there will be no market for the
Warrants and the Warrant Shares, that there are significant restrictions on
the transferability of the Securities, and that for these and other reasons,
Cirrus may not be able to liquidate an investment in the Securities for an
indefinite period.
3.6 Cirrus acknowledges that it is not acquiring the Warrants or
the Warrant Shares for the purpose of exerting any control over BRS.
3.7 Cirrus is not subscribing for the Securities as a result of or
pursuant to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio.
3.8 Cirrus acknowledges that it would not be able to exercise the
Warrants unless the Purchase Commitment is satisfied.
3.9 Cirrus represents and warrants that it is purchasing the
Securities for its own account, for investment and without the current
intention of reselling or redistributing the Securities except pursuant to
the terms of this Agreement and pursuant to an effective registration
statement under the Federal and state securities laws or pursuant to an
exemption from such registration. Cirrus has made no arrangement or agreement
with others regarding any of the Securities.
3.10 Cirrus understands that the Securities have not been
registered as of the date of the closing of this offering under the
Securities Act of 1933, as amended (the "1933 Act"), or applicable state
securities laws (the "State Laws"), and are being offered and sold pursuant
to exemptions from registration under the 1933 Act and the State Laws. Cirrus
understands that BRS's reliance on such exemptions is predicated in part on
its representations and warranties contained herein.
3.11 Cirrus understands that neither the Securities nor the
underlying Common Shares may be sold by it except pursuant to an effective
registration statement under the Federal and state securities laws, or an
exemption from such registration and that
16
neither the Warrants nor the Warrant Shares may be sold without registration
or exemption.
3.12 Cirrus understands that any transfer of the Warrant Shares by
it will be further restricted by a legend placed on the certificate(s)
representing the Warrant Shares containing substantially the following
language:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAW
OF ANY STATE. THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND WITHOUT A VIEW TO THEIR
DISTRIBUTION AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF ANY
EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT OF 1933 OR
UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE UNDER THE SECURITIES LAWS."
4. MISCELLANEOUS.
4.1 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived by a writing signed by the party against which enforcement
of the amendment or waiver is sought.
4.2 CHOICE OF LAW. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Minnesota, without
regard to its choice of law provisions, as though all acts and omissions
related to this Agreement occurred in the State of Minnesota.
4.3 SEVERABILITY. The provisions of this Agreement shall, where
possible, be interpreted so as to sustain their legality and enforceability,
and for that purpose the provisions of this Agreement shall be read as if
they cover only the specific situation to which they are being applied. The
invalidity or unenforceability of any provision of this Agreement in a
specific situation shall not affect the validity or enforceability of that
provision in other situations or of other provisions of this Agreement.
4.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be considered an original. This Agreement may be executed
by one or more of the parties by facsimile transmitted signature and all
parties agree that the reproduction of signatures by way of telecopying
device will be treated as though such reproductions were executed originals.
17
4.5 INTERPRETATION. All references herein to Articles and Sections
refer to Articles and Sections of this Agreement. All Article and Section
headings are for reference purposes only and shall not affect the
interpretation of this Agreement. Within this Agreement, the singular shall
include the plural and the plural shall include the singular, and any gender
shall include all other genders, all as the meaning and the context of this
Agreement shall require.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
written above.
BALLISTIC RECOVERY SYSTEMS, NC.
----------------------------------------
By, ▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO
CIRRUS INDUSTRIES, INC.
----------------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇, Vice-President-Finance
18
Warrant No. 1
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED UNLESS REGISTERED
UNDER THE ACT, EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE HOLDER HEREOF QUALIFIES AS AN EXEMPT TRANSACTION
UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF
COMMON STOCK OF
BALLISTIC RECOVERY SYSTEMS, INC.
THIS CERTIFIES THAT, for good and valuable consideration, Cirrus
Industries, Inc. a Delaware corporation (hereafter "Cirrus"), is entitled to
subscribe for and purchase from Ballistic Recovery Systems, Inc., a Minnesota
corporation (the "Corporation"), at any time during the period beginning
[ ] and ending [ ] (the "Exercise Period"), up to [ ]
of fully paid and nonassessable shares of Common Stock of the Corporation at
a price of [ ] Dollars ($[ ]) per share (the "Warrant
Exercise Price"), subject to the antidilution provisions set forth in Section 5
of this Warrant provided that Cirrus [ ] purchases [ ]
recovery units relating to Cirrus' SR-20 aircraft from [ ] to
[ ] as provided in that certain Warrant Issuance and Debt Forgiveness
Agreement by and between Cirrus and the Corporation dated as of [___________],
1999 (the "Agreement"). The shares which may be acquired upon exercise of
this Warrant are referred to herein as the "Warrant Shares." As used herein,
the term "Holder" means the initial holder, or any record holder or holders
of the Warrant Shares issued upon exercise, whether in whole or in part, of
the Warrant; the term "Common Stock" means and includes the Corporation's
presently authorized Common Stock, $.01 par value per share; and the term
"Convertible Securities" means any stock or other securities convertible
into, or exchangeable for, Common Stock.
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE. Subject to purchase commitment provisions of the
Agreement, the rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not
19
as to a fractional share of Common Stock), during the Exercise Period by
written notice of exercise (in the form attached hereto) delivered to the
Corporation at the principal office of the Corporation and accompanied or
preceded by the surrender of this Warrant along with cash, a certified check
or bank draft in payment of the Warrant Exercise Price for such shares.
2. EXCHANGE AND REPLACEMENT. Upon receipt by the Corporation of
evidence reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Warrant, and upon surrender and cancellation of this
Warrant, if mutilated, the Corporation will make and deliver a new Warrant of
like tenor, in lieu of this Warrant. This Warrant shall be promptly canceled
by the Corporation upon the surrender hereof in connection with any exchange
or replacement. The Corporation shall pay all expenses, taxes (other than
stock transfer or income taxes), and other charges payable in connection with
the preparation, execution, and delivery of Warrants pursuant to this Section 2.
3. ISSUANCE OF THE WARRANT SHARES.
(a) The Corporation agrees that the shares of Common Stock
purchased hereby shall be and are deemed to be issued to the Holder as of the
close of business on the date on which this Warrant shall have been
surrendered, the payment made for such Warrant Shares as aforesaid is
remitted to the Corporation. Subject to the provisions of the next section,
certificates for the Warrant Shares so purchased shall be delivered to the
Holder within a reasonable time, not exceeding fifteen (15) days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the right to purchase
the number of Warrant Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the Holder
within such time.
(b) Notwithstanding the foregoing, however, the Corporation
shall not be required to deliver any certificate for Warrant Shares upon
exercise of this Warrant except in accordance with exemptions from the
applicable securities registration requirements or registrations under
applicable securities laws. Nothing herein, however, shall obligate the
Corporation to effect registrations under federal or state securities laws,
except as provided in Section 8. If registrations are not in effect and if
exemptions are not available when the Holder seeks to exercise the Warrant,
the Warrant exercise period will be extended, if need be, to prevent the
Warrant from expiring, until such time as either registrations become
effective or exemptions are available, and the Warrant shall then remain
exercisable for a period of at least 30 calendar days from the date the
Corporation delivers to the Holder written notice of the availability of such
registrations or exemptions. The Holder agrees to execute such documents and
make such representations, warranties, and agreements as may be required
solely to comply with the exemptions relied upon by the Corporation, or the
registrations made, for the issuance of the Warrant Shares.
20
4. COVENANTS OF THE CORPORATION. The Corporation covenants and
agrees that all Warrant Shares will, upon issuance, be duly authorized and
issued, fully paid, nonassessable, and free from all taxes (except stock
transfer and income taxes), liens, and charges with respect to the issue
thereof. The Corporation further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Corporation will at all times have authorized and reserved for the purpose of
issue or transfer upon exercise of the subscription rights evidenced by this
Warrant a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant.
5. ANTIDILUTION ADJUSTMENT. The provisions of this Warrant are
subject to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be subject to adjustment
from time to time such that in case the Corporation shall hereafter:
(i) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(ii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately
prior to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of
Common Stock issuable in respect of any securities convertible into Common
Stock), and the resulting quotient shall be the adjusted Warrant Exercise
Price per share. An adjustment made pursuant to this Subsection shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification. If, as a
result of an adjustment made pursuant to this Subsection, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock and
other capital stock of the Corporation, the Board of Directors (whose
determination shall be conclusive) shall determine the allocation of the
adjusted Warrant Exercise Price between or among shares of such classes of
capital stock or shares of Common Stock and other capital stock. All
calculations under this Subsection shall be made to the nearest cent or to
the nearest 1/100 of a share, as the case may be. In the event that at any
time as a result of an adjustment made pursuant to this Subsection, the
Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive any shares of the Corporation
21
other than shares of Common Stock, thereafter the Warrant Exercise Price of
such other shares so receivable upon exercise of any Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to Common Stock contained in
this Section.
(b) Upon each adjustment of the Warrant Exercise Price pursuant
to Section 5(a) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the adjusted Warrant
Exercise Price the number of shares, calculated to the nearest full share,
obtained by multiplying the number of shares specified in such Warrant (as
adjusted as a result of all adjustments in the Warrant Exercise Price in
effect prior to such adjustment) by the Warrant Exercise Price in effect
prior to such adjustment and dividing the product so obtained by the adjusted
Warrant Exercise Price.
(c) In case of any consolidation or merger to which the
Corporation is a party other than a merger or consolidation in which the
Corporation is the continuing corporation, or in case of any sale or
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange
effected in connection with a merger of a third corporation into the
Corporation), there shall be no adjustment under Subsection (a) of this
Section above but the Holder of each Warrant then outstanding shall have the
right thereafter to convert such Warrant into the kind and amount of shares
of stock and other securities and property which the Holder would have owned
or have been entitled to receive immediately after such consolidation,
merger, statutory exchange, sale, or conveyance had such Warrant been
converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section with respect to the rights and interests
thereafter of any Holders of the Warrant, to the end that the provisions set
forth in this Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the
Warrant. The provisions of this Subsection shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then,
and in each such case, the Corporation shall give written notice thereof, by
first class mail, postage prepaid, addressed to the Holder as shown on the
books of the Corporation, which notice shall state the Warrant Exercise Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares of Common Stock purchasable at such price upon the exercise
of this Warrant, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
22
6. NO VOTING RIGHTS. This Warrant shall not entitle the Holder to
any voting rights or other rights as a shareholder of the Corporation.
7. FRACTIONAL SHARES. Fractional shares shall not be issued upon
the exercise of this Warrant, but in any case where the Holder would, except
for the provisions of this Section, be entitled under the terms hereof to
receive a fractional share, the Corporation shall, upon the exercise of this
Warrant for the largest number of whole shares then called for, pay a sum in
cash equal to the sum of (a) the excess, if any, of the Fair Value of such
fractional share over the proportional part of the Warrant Exercise Price
represented by such fractional share, plus (b) the proportional part of the
Warrant Exercise Price represented by such fractional share. For purposes of
this Section, the term "Fair Value" with respect to shares of Common Stock of
any class or series means the last reported sale price or, if none, the
average of the last reported closing bid and asked prices on any national
securities exchange or listed in the National Association of Securities
Dealers, Inc.'s Automated Quotations System (Nasdaq).
IN WITNESS WHEREOF, Ballistic Recovery Systems, Inc. has caused this
Warrant to be signed by its duly authorized officers this [ ] day of
September, 1999.
BALLISTIC RECOVERY SYSTEMS, INC.
By:
------------------------------
▇▇▇▇ ▇▇▇▇▇▇, President and CEO
23
NOTICE OF WARRANT EXERCISE
(To be signed only upon exercise of Warrant)
TO: Ballistic Recovery Systems, Inc.
The undersigned hereby irrevocably elects to exercise the attached
Warrant to purchase for cash, _____________ of the shares issuable upon the
exercise of such Warrant, and requests that certificates for such shares
(together with a new Warrant to purchase the number of shares, if any, with
respect to which this Warrant is not exercised) shall be issued in the name of
--------------------------------------------------------------------------------
Printed Name
--------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------
Tax ID Number or other identifying number of registered holder of certificate
--------------------------------------------------------------------------------
Date
--------------------------------------------------------------------------------
Signature*
*The signature of the Notice of Exercise of Warrant must correspond to the
name as written upon the face of the Warrant in every particular without
alteration or enlargement or any change whatsoever. When signing on behalf of
a corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
24
APPENDIX D -2
REGISTRATION RIGHTS DECLARATION
1. PIGGYBACK REGISTRATIONS.
(a) If not otherwise prohibited by law or regulation, the Company
shall notify the Holder in writing at least thirty (30) days prior to the
filing of any registration statement under the Securities Act for purposes
of a public offering of securities of the Company (including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating
to employee benefit plans and corporate reorganizations) and will afford
the Holder an opportunity to include in such registration statement all or
part of such Warrant Shares. If the Holder of Warrant Shares decides not to
include all of its Warrant Shares in any registration statement thereafter
filed by the Company, such Holder shall nevertheless continue to have the
right to include any Warrant Shares in any subsequent registration
statement or registration statements as may be filed by the Company with
respect to offerings of its securities, all upon the terms and conditions
set forth herein.
(b) If the registration statement under which the Company gives
notice under this Section 2 is for an underwritten offering, the Company
shall so advise the Holders. In such event, the right of the Holder to be
included in a registration pursuant to this Section 1 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Warrant Shares in the underwriting to the extent provided
herein. Notwithstanding any other provisions of this Agreement, if the
underwriter determines in good faith that marketing factors require a
limitation of the number of shares to be underwritten, the number of
Warrant Shares that may be included in the underwriting may be reduced.
2. EXPENSES OF REGISTRATION. All registration expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1 shall be borne by the Company other than Holder's attorney's fees
and broker commissions.
3. INDEMNIFICATION. In the event any Warrant Shares are included in a
registration statement under Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each
Holder and each person, if any, who controls such Holder within the meaning
of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation") by the
25
Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the
offering covered by such registration statement; and the Company will
reimburse each such Holder, partner, officer or director, or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement
contained in this Section 3(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder,
partner, officer, director, or controlling person of such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning
of the Securities Act, and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or
any such director, officer, controlling person, or other such Holder, or
partner, director, officer or controlling person of such other Holder may
become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation,
in each case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information
furnished by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in
this Section 3(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided further that in no event shall any indemnity under this
Section 3.4(b) exceed the gross proceeds from the offering received by such
Holder unless the Violation is the result of fraud on the part of such
Holder.
26
(c) Promptly after receipt by an indemnified party under this Section
3 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this Section 4, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party provided however,
that if there is more than one indemnified party, the indemnifying party
shall pay for the fees and expenses of one counsel for any and all
indemnified parties to be mutually agreed upon by such indemnified parties,
if representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 3, but the omission
so to deliver written notice to the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than
under this Section 3.
(d) If the indemnification provided for in this Section 3 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
Violation(s) that resulted in such loss, claim, damage or liability, as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or
by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
(e) The obligations of the Company and Holders under this Section 3
shall survive the completion of any offering of Warrant Shares in a
registration statement.
4. Assignment of Registration Rights. The rights to cause the Company to
register Warrant Shares pursuant to this Declaration may be assigned by a
Holder to a transferee or assignee of the Warrant or the Warrant Shares
27
5. Limitation on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent
of the Holder, enter into any agreement with any person or persons
providing for the granting to such holder of piggyback registration rights
senior to those granted to Holder pursuant to this Declaration, or of
registration rights which might cause a reduction in the number of shares
includable by the Holder in any offering pursuant to Section 1.
28