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AGREEMENT
THIS AGREEMENT entered into this 26th day of October, 2000, by and between
Ballistic Recovery Systems, Inc. ("BRSI"), with its principal place of business
located at 300 Airport Rd., South St. Paul, MN, and Charles F. Parsons
("Parsons"), of 14040 Shultz Rd., Ft. Myers, FL, as follows:
WITNESSETH
WHEREAS, BRSI manufactures certain whole aircraft parachute recovery
systems including that certified for use on the Cessna-150 aircraft (the
"GARD-150"), which has been the subject of a prior September 8, 2000, Agreement
between the parties;
WHEREAS, BRSI is seeking funding for development and certification for a
whole aircraft parachute recovery system for the Cessna-172 aircraft and,
without limitation, other similar aircraft within allowable FAA certification
(the "GARD-172"). To that end and as a point of clarification, it is the
intention of BRSI to explore the possibility of and request certification of
other like kind aircraft along with the Cessna 172, however, no assurances can
be made as to the success of such a request. In the event that other like kind
aircraft are not allowed or included reasonably within the certification sought
under this agreement, then this agreement shall include certification for the
Cessna 172 aircraft only;
WHEREAS, Parsons has, pursuant to this Agreement, agreed to provide certain
funding, partly in the form of equity, to BRSI for development and certification
of the GARD-172 in exchange for certain stock in BRSI, royalties on future BRSI
parachute recovery systems delivered by BRSI, and certain exclusive purchase and
sale rights for the GARD-172, subject to all of the terms and conditions
contained herein;
NOW THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the mutual promises, agreements, terms, provisions and conditions
contained herein, and other good and valuable consideration in hand paid and
delivered, the parties agree as follows:
1. In consideration of Parsons' exclusive sales and marketing efforts relating
to the GARD-150, Parsons' interest and desire to be given certain exclusive
purchase/sale rights for the GARD-172, and in further consideration of BRSI's
and Parsons' desire that Parsons be given certain royalty rights pursuant to the
terms and conditions of this Agreement, promptly upon the effective date of this
Agreement, Parsons shall tender and deliver to BRSI the sum of Two Hundred
Thousand Dollars ($200,000.00). In consideration thereof, BRSI shall immediately
cause Parsons to be issued Two Hundred Thousand (200,000) shares of restricted
stock in BRSI.
2. In further consideration of all of the terms and conditions of this
Agreement, and the relationship between the parties, Parsons is hereby granted
the right to receive royalty
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payments as follows: Parsons shall be entitled to receive and shall receive a
royalty of One Thousand Dollars ($1,000.00) for each of the first One Hundred
and Thirty (130) GARD-172 units sold by either BRSI or Parsons, whereupon
Parsons' right to receive royalty payments shall cease and be extinguished.
Notwithstanding the foregoing, if for any reason the GARD-172 is not certified
within thirty-six (36) months of the effective date of this Agreement or it is
determined prior to that date that certification will not be forthcoming,
Parsons shall be entitled to receive royalty payments of One Thousand Dollars
($1,000.00) for each GARD-150 Unit of a total of 196 GARD-150 Units sold by
Parsons pursuant to the September 8, 2000, Agreement between the parties, or by
BRSI, whereupon his right to receive royalty payments shall cease and be
extinguished. If after thirty (36) months, the GARD-172 later becomes certified
by the FAA, Parsons may be entitled to receive royalty payments for both the
GARD-172 and GARD-150 sold by either Parsons or BRSI for a total of 196 units
for both products. At Parsons' option, royalty payments may be in the form of a
reduced GARD-172 or GARD-150 unit purchase price to Parsons or in the form of
direct cash payments from BRSI to Parsons. The parties acknowledge that Parsons
has presently elected to receive royalties in the form of direct cash payments
from BRSI.
3. The parties acknowledge and agree that BRSI has, as part of an established
funding program initiated prior to the date of this Agreement, sought to acquire
funding, in the form of refundable deposit moneys for GARD-172s, for the
development, testing and certification of the GARD-172, from owners or contract
purchasers of Cessna 172 aircraft. BRSI may at its option continue this program
but only to the earlier of twelve (12) months from the effective date of this
Agreement or until no more than fifty (50) units are sold by BRSI as part of its
program. At the earliest of either of the two foregoing circumstances to occur,
BRSI shall immediately cease and discontinue its program.
4. In further consideration of all of the terms and conditions contained in this
Agreement, throughout the term of this Agreement and any extension thereof,
Parsons shall have the exclusive purchase/sale rights for all GARD-172 Units
excepting those identified in Paragraph 5 below. Notwithstanding the foregoing,
BRSI shall be free to receive and fulfill any sales order made directly to it by
a customer, at the customer's request, provided as follows:
A. The purchase price to any such customer shall be at the then existing
published retail price;
B. Upon its receipt of such an order, BRSI shall immediately notify
Parsons in writing of said order, and include the name and address of
the customer, the quoted purchase price, the identified or projected
delivery date and any and all other relevant terms and conditions
incidental to said sale. Parsons shall have five (5) business days
from his receipt of said notice within which to solidify any pending
orders and to make any additional orders or specify delivery dates to
BRSI which shall be in priority over any orders received and fulfilled
directly by BRSI;
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C. Upon its receipt of the purchase price from a customer for a direct
order, BRSI shall immediately remit to Parsons the difference between
the Unit cost to Parsons and the purchase price to the customer, less
a $250.00 service fee.
5. Nothing in this Agreement shall preclude BRSI from conducting direct sales
activities of the GARD-172, without right or obligation to Parsons for any
commission, but excluding Parsons' right to receive royalties as provided in
Paragraph 2 above, to the following:
i. Embry Riddle;
ii. University of North Dakota;
iii. The United States Military;
iv. Newly Manufactured Cessna or other newly manufactured aircraft
covered under the certification of the GARD-172; and
v. The first fifty (50) customers providing refundable deposits as
identified herein Paragraph 3 above.
6. The rights, title and interests granted to Parsons by BRSI pursuant to this
Agreement for the GARD-172 are exclusive, subject to Paragraph 5 above. Although
any and all sales and marketing efforts relating to the GARD-172 and pursuant to
this Agreement are the responsibility of Parsons, BRSI shall make it and its
agents and employees available to Parsons for the purpose of providing
reasonable and necessary information, existing literature, brochures and other
information and documents, which might reasonably aid in these efforts, and is
free to pursue independent marketing efforts for the GARD-172 in conjunction
with its direct sale rights.
7. BRSI agrees to supply Parsons with, and Parsons agrees to order from BRSI, no
less than a minimum number of GARD-172 units, with said minimum unit levels to
be determined over three (3) separate periods (each hereinafter referred to as
"Period") following the delivery to Parsons of the first GARD-172 Unit delivered
to Parsons following final approval and certification by the FAA, as follows:
<TABLE>
<CAPTION>
PERIOD UNIT
<S> <C>
1: 10
2: 25
3: 40
</TABLE>
Immediately upon BRSI's receipt of certification and approval from the FAA for
the GARD-172, it shall begin production of no less than one (1) GARD-172 Unit,
and BRSI shall deliver one (1) Unit to Parsons on an ASAP basis. The first
Period shall commence on the first day after BRSI tenders and delivers the first
Unit to Parsons.
A. Each Period shall be twelve (12) months in length and, except for the
first Period, shall commence one (1) day after the last day of the
proceeding
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Period; provided that during the initial three (3) Periods of this
Agreement (the "Initial Term"), Parsons is granted an additional
twelve (12) months, on a cumulative basis, in which to extend any
Period, but no Period may be extended for a time greater than six (6)
months from the last day of said Period. In the event of any
extension, the next Period shall commence one (1) day after the last
date of the extended Period.
B. The minimum purchase/sale levels provided for each Period shall be
determined by taking an average of total purchases/sales over the
applicable Period and each prior Period during the term or any
extension thereof this Agreement.
8. It is the intention of the parties that the term of this Agreement be
extended indefinitely so long as no less than the minimum purchase/target levels
are being met. Accordingly, Parsons shall at all times have the continuing
right, subject to the approval of BRSI, which shall not be unreasonably
withheld, to extend the term of this Agreement for separate and distinct twelve
(12) month Periods beyond the Initial Term of this Agreement. It shall at all
times and on a continuing basis throughout the term of this Agreement or any
extended term be conclusively presumed that Parsons has elected to extend this
Agreement for an additional Period unless he first provides notice to BRSI in
writing within thirty (30) days of the last day of the prior Period indicating
his election not to continue or extend this Agreement. In the event Parsons
elects not to extend this Agreement for any Period, this Agreement shall
terminate and Parsons shall have no right to reinstate this Agreement for a
subsequent Period. Subject to averaging as provided in Paragraph 7.B. above, the
minimum Unit purchase/sale levels for each separate twelve (12) months being an
extended Period identified herein shall be as follows:
A. 50 Units in Period 4;
B. 58 Units in Period 5;
C. A 10% increase over each prior Period's minimum Unit purchase/sale level
for the next five (5) Periods;
D. For Periods 11 and beyond, the minimum Unit purchase/sale levels shall
be no more than that minimum purchase/sale level for Period 10.
9. In the event that the minimum target orders are not met by Parsons for any
Period of this Agreement, BRSI's sole and exclusive right, option, and cause
shall be to terminate Parsons' exclusive purchase and sale rights of the
GARD-172 under this Agreement; provided that notwithstanding the failure to meet
minimum target orders, Parsons may continue to sell GARD-172 Units on a
non-exclusive basis until such time as no less than One Hundred and Thirty (130)
GARD-172 Units have been purchased from BRSI by Parsons on the price and
delivery and related terms and conditions provided hereby this Agreement.
Notwithstanding the foregoing, Parsons shall have thirty (30) days after his
receipt of notice to him advising him of said failure in which to cure said
failure and in which such case said termination of exclusivity shall be
ineffective. In the event of any termination, BRSI agrees to fulfill and
complete any existing orders previously made by Parsons and outstanding.
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10. No less than within fourteen (14) days of the beginning of each separate
annual period Parsons agrees that he shall provide BRSI with a production
forecast and estimated delivery schedule for that respective annual period.
Delivery dates for each Period must be specified for a date occurring within
each respective Period, or any extension thereof. The minimum delivery date for
any Unit orders shall be one hundred and twenty (120) days from the date of
ordering. At any time more than one hundred and twenty (120) from the date of
any previously identified delivery date, Parsons shall be entitled to change a
delivery date for any Unit Order. Should Parsons change a delivery date on or
less than one hundred and twenty (120) days from a previously identified
delivery date, a deposit of 50% of the purchase price shall be required and
shall be paid by Parsons to BRSI no less than ninety (90) days from the prior
identified delivery date, notwithstanding the extension. Otherwise, a fifty
percent (50%) deposit is due from Parsons to BRSI no less than ninety (90) days
from the identified delivery date for each GARD-172 ordered.
11. Parsons may make more than one order during any given annual period, and
there shall be no limit to the number of orders which may be made by Parsons
during any given annual period. The balance of the Purchase Price for each Unit
ordered shall be paid and delivered to BRSI by Parsons at the time of shipment
by BRSI.
12. Nothing in this Agreement shall be construed to limit the number of GARD-172
Units which Parsons may order from BRSI during any given Period.
13. BRSI represents and warrants that it shall use its best efforts to make
shipment by all delivery dates determined by Parsons. BRSI further represents
and warrants, and promises and agrees, that it shall at all times have
sufficient capability and capacity to meet production requirements for any Unit
orders made by Parsons, the same resulting from the sales and marketing efforts
and costs incurred by Parsons in furtherance of his sales efforts. Should BRSI
at any time not be able to meet any delivery date for any Unit orders, it shall
at the first available date so advise Parsons in writing and identify the cause
of the delay, provide reasonable assurance of meeting a reasonably delayed ship
date and the anticipated ship date. Parsons shall have the right to cancel any
Unit Orders, without fault or liability, should any delayed ship date be in
excess of forty-five (45) days from the delivery date specified by Parsons. In
the event of any cancellation of any Unit Orders, Parsons shall so notify BRSI
in writing, and BRSI shall immediately return any paid deposits to Parsons.
Notwithstanding the foregoing, and as provided herein this Paragraph, BRSI
acknowledges and agrees that it will have no material or substantive inability
to meet Parsons' Unit orders.
14. The initial sale price of the GARD-172 to Parsons for any Unit orders made
for the first annual Period shall be no more than $13,333.00 per unit, excluding
installation and shipping charges and further excluding any deduction to the
purchase price arising from royalty payments due Parsons which Parsons might
elect to be attributed to a reduced purchase price. Installation charges are the
responsibility of Parsons.
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15. The purchase price identified herein Paragraph 14 is calculated on the basis
of a projected manufacturing cost of $7,600.00 per unit and a computed gross
margin of the GARD-172 of 43%. BRSI shall attempt to improve its gross margin up
for the GARD-172 through improvements in purchasing and production labor
efficiencies. The 43% 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, marketing, general and
administrative costs, research and development costs and other non-operating
income and expenses. The parties have agreed that in the event that there is a
decrease in the outside costs of producing the GARD-172 (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). In the event
the outside costs increase, BRSI shall be free to raise Parson's purchase price
so as to maintain BRSI's gross margin of 43%, provided that it shall also
increase the GARD-172 published sale price in an amount sufficient to maintain
Parsons' gross margin in effect prior to the Parsons' cost increase. After the
first annual period, BRSI shall determine the change in outside price annually,
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.
16. BRSI agrees that its initial published sale price for the GARD-172 shall be
$15,995.00, and that it shall not at any time during the term of this Agreement
or any extension(s) thereof, lower said published sale price below this amount.
BRSI promises and agrees that the published sale price for the GARD-172 shall be
increased in an amount equal to or greater than, on a proportional basis, any
increase in the GARD-172 purchase price to Parsons.
17. Notwithstanding Paragraphs 14, 15 and 16 above, for any fleet sales
involving more than five (5) Units (hereinafter referred to as "Fleet Sales"),
whether initiated by Parsons or by BRSI, Parsons shall be entitled to a net
commission of no less than ten percent (10%) of the total per Unit customer
sales price unless mutually agreeable to by both Parsons and BRSI. In the event
of any Fleet Sales by either Parsons or BRSI, Parsons shall be entitled to a net
commission either10% of the total sale price or the difference between the total
per Unit purchase price to Parsons and the total sale price for any Fleet Sales,
whichever is greater. Said amount shall be due and payable to Parsons
immediately upon BRSI's receipt of any money received either on deposit or as
balance payment for said order.
18. Parsons shall have the right to assign any and all of his rights,
obligations and liabilities under this Agreement to a corporation, limited
liability company or other entity formed by him, subject to the approval of BRSI
and said approval shall not be unreasonably withheld by BRSI. In the event of
said assignment, the assignee shall immediately assume all of Parsons' rights,
obligations and liabilities under this Agreement, and all and any other rights,
titles and interests thereto, and BRSI shall be bound to fulfill all of its
obligations under this Agreement to said assignee as if said
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assignee had been the party in interest under this Agreement. In the event of
said assignment, Parsons shall be immediately upon said assignment personally
relieved and released of any and all claims, debts, demands, causes, causes of
action and liabilities, of any type or kind, whether existing prior to, at or
subsequent to said assignment, under this Agreement.
19. BRSI acknowledges that monetary damages arising from any breach by BRSI with
respect to the exclusive rights granted to Parsons hereby this Agreement shall
be difficult to calculate and that, in addition to any of such damages, Parsons
shall have the right to pursue equitable claims and remedies including, without
limitation, specific performance and/or an injunction.
20. At all relevant times, BRSI shall commence and/or continue its best efforts
to develop, test and acquire certification and approval of the GARD-172 from the
FAA. It is estimated that development and testing for purposes of certification
shall take approximately eighteen (18) months from the effective date of this
Agreement. Should development or testing of the GARD-172 prove unsuccessful or
should the FAA deny certification of the GARD-172, BRSI shall immediately notify
Parsons in writing.
21. BRSI promises and agrees that it shall at all times maintain the highest
standards for producing the GARD-172, and shall provide the GARD-172 and its
components according to those certified specifications approved and in
conformity to FAA certification and approval hereafter existing. Parsons shall
have the right, but not the obligation, to inspect any and all GARD-172 Units
delivered to him and, upon consulting with BRSI, to reject same should any of
said Units be determined not to conform with the certified specifications. In
the event of said rejection, Parsons shall immediately notify BRSI in writing
and BRSI shall immediately cause said Unit(s) to be returned to BRSI at its sole
cost and expense, and it shall, at Parsons' option, either provide a timely
replacement Unit(s) or immediately return all paid Purchase Price for any
returned ordered Units to Parsons, plus shipping costs previously paid by
Parsons for shipment of the subject Unit(s).
22. This Agreement, and the effective date of this Agreement (herein this
Agreement referred to as the "effective date of the Agreement") shall be that
date identified and provided at the space provided below following the
acceptance and execution of this Agreement by BRSI. The parties acknowledge and
agree that this Agreement is subject to final approval by BRSI's board of
directors and a site visit to Parsons' retro-fitting facility in Illinois.
Should BRSI's board of directors fail to approve of this Agreement and authorize
its execution, BRSI shall immediately notify Parsons in writing. Acceptance and
execution of this Agreement by BRSI constitutes BRSI's and its board of
directors' unconditional acceptance of this Agreement and Parsons' retro-fitting
facility.
23. Each person who signs this Agreement warrants that he or she does so with
the full and legal authority to execute this Agreement for and on behalf of the
respective parties to this Agreement.
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24. The parties do hereby acknowledge and consent to jurisdiction in the State
of Minnesota and the parties do hereby agree to waive any objection to venue in
said State.
IN WITNESS WHEREOF, this Agreement has been agree to and entered into on
the date first above written by the parties hereto.
CHARLES F. PARSONS BALLISTIC RECOVERY SYSTEMS, INC.
/s/ Charles F. Parsons /s/ Mark B. Thomas
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Signature Signature
Mark B. Thomas
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Printed Name
President and CEO
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Title
Dated: October 26, 2000
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