Document:

Exhibit 4.5

EXHIBIT 4.5

 

FORM OF UNDERWRITER'S UNIT WARRANT AGREEMENT

     UNDERWRITER'S UNIT WARRANT AGREEMENT dated as of ________, 2003, between Flight Safety Technologies, Inc., a Nevada corporation (the "Company"), and The Shemano Group, Inc. (hereinafter referred to as the "Underwriter").

W I T N E S S E T H:

     WHEREAS, pursuant to the terms of an Underwriting Agreement dated as of _______, 2003 (the  "Underwriting Agreement") between the Underwriter and the Company, the Underwriter has agreed to purchase, in a public offering under the Securities Act of 1933, as amended (the "Act"), on a firm commitment basis (the "Offering"),  _________ units (the "Offered Units") at a public offering price of $___ per Offered Unit, each Offered Unit consisting of two (2) shares of the Company's common stock, par value $.001 per share (the "Common Shares") (each Common Share constituting part of an Offered Unit referred to as an "Offered Share"), and one (1) Common Share purchase warrant to purchase one (1) Common Share ("Offered Warrant"), with an option to purchase up to an additional _____ Offered Units for the purpose of covering over-allotments; and

     WHEREAS, as additional consideration to the Underwriter for its services pursuant to the Underwriting Agreement, the Company has agreed to issue to the Underwriter a warrant ("Underwriter's Unit Warrant") to purchase up to an aggregate of  ________ units  (the "Underwriter's Units") with an exercise price equal to $_______ [120% of the Offered Unit price], each Underwriter's Unit consisting of two (2) Common Shares ("Underwriter's Shares") and one (1) warrant to purchase one Common Share ("Underwriter's Warrant"), having the same terms as the Offered Warrants; and          

     NOW, THEREFORE, in consideration of the foregoing premises, the payment by the Underwriter to the Company of an aggregate of One Hundred Dollars and No Cents  ($100.00), the agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1.      Grant.  The Underwriter, and/or its designees who are officers or partners (not directors) of the Underwriter or members of the selling group (the "Underwriter's Designees"), in connection with the Offering, are hereby granted the right to purchase, at any time from ______, 2004 [one year from the Effective Date] until 5:00 P.M., Eastern time, on ____, 2008 [five years from the Effective Date] (the "Warrant Exercise Term"), up to an aggregate of _________ Underwriter's Units at the initial exercise price (subject to adjustment as provided in Section 8 hereof) of $____ per Underwriter's Unit (the "Unit Exercise Price")[120% of the Offered Unit price].  Notwithstanding the foregoing, the Warrants shall become immediately exercisable upon a change in control of the Company.  The Underwriter's Shares issuable upon exercise of the Underwriter's Warrants are in all respects identical to the Common Shares being purchased by the Underwriter for resale to the public pursuant to the terms and provisions of the Underwriting Agreement.

     2.      Underwriter's Unit Warrant Certificates.  The Underwriter's warrant certificates (the "Underwriter's Unit Warrant Certificates") delivered and to be delivered pursuant to this Agreement shall be in the form set forth in Exhibit A, attached hereto and made a part hereof, with such appropriate insertions, omissions, substitutions, and other variations as required or permitted by this Agreement.

     3.      Exercise of Underwriter's Unit Warrants.  The Underwriter's Unit Warrants initially are exercisable at an initial exercise price per Underwriter's Unit as set forth in Section 6 hereof, payable by cash or certified check, subject to adjustment as provided in Section 8 hereof.  Upon surrender at the Company's principal offices (presently located at 28 Cottrell Street, Mystic, CT 06355), of an Underwriter's Unit Warrant and a completed and executed form of Election to Purchase (in the form of Exhibit B attached hereto), together with payment of the purchase price for the number of Underwriter's Units purchased, the registered holder of an Underwriter's Unit Warrant ("Holder" or "Holders") shall be entitled to receive a certificate or certificates for the Underwriter's Units so purchased.  The Underwriter's Shares and the Underwriter's Warrants comprising the Underwriter's Units shall consist of the same Offered Shares and Offered Warrants as being sold to the public in the Offering, and shall contain the same terms and conditions and rights, and the Underwriter's Warrant obtained upon exercise of the Underwriter's Unit Warrant shall have an exercise price of $_____ per Underwriter's Warrant  (the "Warrant Exercise Price") [the Offered Warrant exercise price].  The purchase rights represented by each Underwriter's Unit Warrant are exercisable at the option of the Holder thereof, in whole or in part.  In the case of the purchase of less than all the Underwriter's Units purchasable under any Underwriter's Unit Warrant, the Company shall cancel the Underwriter's Unit Warrant upon the surrender thereof and shall execute and deliver a new Underwriter's Unit Warrant of like tenor for the balance of the Underwriter's Units purchasable thereunder.  The Unit Exercise Price and the Warrant Exercise Price are hereinafter sometimes collectively referred to as the "Exercise Price."

     4.      Issuance of Certificates.  Upon the exercise of the Underwriter's Unit Warrant, the issuance of certificates for the Underwriter's Warrants and Underwriter's Shares or other securities, properties or rights underlying such Underwriter's Unit Warrant shall be made forthwith (and in any event within five (5) business days thereafter) without charge to the Holder thereof including, without limitation, any tax which may be payable in respect of the issuance thereof, and such certificates shall (subject to the provisions of Sections 5 and 7 hereof) be issued in the name of, or in such names as may be directed by, the Holder thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificates in a name other than that of the  Underwriter and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

     The Underwriter's Unit Warrants and the certificates representing the Underwriter's Warrants and Underwriter's Shares issuable upon exercise of the Underwriter's Unit Warrant shall be executed on behalf of the Company in the same manner as the certificates for the Offered Shares and Offered Warrants.  The Underwriter's Unit Warrants shall be dated the date of the execution by the Company upon initial issuance, division, exchange, substitution or transfer.  The certificates representing the Underwriter's Shares and Underwriter's Warrants issuable upon exercise of the Underwriter's Unit Warrants shall be identical in form and substance to the Offered Shares and Offered Warrants, including the terms of redemption for the Offered Warrants sold to the public.

     5.      Restriction on Transfer of Underwriter's Unit Warrant.  The Holder of a Underwriter's Unit Warrant, by its acceptance thereof, covenants and agrees that the Underwriter's Unit Warrant is being acquired as an investment and not with a view to the distribution thereof; and that the Underwriter's Unit Warrant may not be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, for a period of one year from _______, 2003, the effective date of the Offering (the "Effective Date"), except to the Underwriter's Designees and/or their officers or partners as  required for compliance with NASD Rule 2710(c)(7)(A), and upon presentment of a properly executed Form of Assignment in the form set forth on Exhibit C attached hereto and made a part hereof.

     6.      Exercise Price.

          6.1     Initial and Adjusted Exercise Price.  Except as otherwise provided in Section 8 hereof, the initial exercise price of each Underwriter's Unit Warrant shall be $___  [120% of the Offered Unit price] per Underwriter's Unit.  The exercise price of the Underwriter's Warrant and the number of Underwriter's Shares to be received upon exercise of the Underwriter's Unit Warrant shall be subject to adjustment as provided in Section 8 hereof. 

     7.      Registration Rights.

          7.1     Demand Registration Under the Securities Act of 1933.  At any time commencing after  _________, 2004 [one (1) year from the Effective Date] through and including ___________, 2008 [five (5) years from the Effective Date], the Underwriter and all other Holders of the Underwriter's Unit Warrants, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, representing a majority of the Common Shares issuable upon the exercise of the Units (assuming the exercise of all of the Underwriter's Unit Warrants) shall have the right (which right is in addition to the registration rights under Section 7.2 hereof), exercisable by written notice to the Company, to have the Company prepare and file with the Securities and Exchange Commission (the "Commission"), on one occasion, a registration statement and such other documents,  including a prospectus, as may be necessary in the opinion of both counsel for the Company and counsel for the Underwriter and the Holders, in order to comply with the provisions of the Act, so as to permit a public offering and sale of their respective Underwriter's Shares or Underwriter's Warrants and during a period equal to the longer of: (i) nine (9) months or (ii) the unexpired term of the Underwriter's Warrants by such Holders and any other Holders of the Underwriter's Unit Warrant who shall notify the Company within ten (10) days after receiving notice from the Company of such request.

          7.2     Piggyback  Registration.  If, at any time commencing after ______, 2004 [one year from the Effective Date], through and including  ________, 2010 [seven (7) years from the Effective Date], the Company proposes to register any of its securities under the Act  (other than in connection with a merger or similar transaction with a filing on a Form S-4 or pursuant to Form S-8 or similar form) it will give written notice by registered or certified mail, at least thirty (30) days prior to the filing of each such registration statement, to the Underwriter and to all other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, of its intention to do so.  If the Underwriter or any of the other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants notify the Company within twenty (20) days after receipt of any such notice of its or their desire to include any such securities in such proposed registration statement, the Company shall afford each of the Underwriter and such Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, the  opportunity to have any of such securities registered under such registration statement.

     Notwithstanding the provisions of this Section 7.2, the Company shall have the right at any time after it shall have given written notice pursuant to this Section 7.2 (irrespective of whether a written request for inclusion of any such securities shall have been made) to elect not to file any such proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. 

          7.3.      Notice to Be Delivered.  The Company covenants and agrees to give written notice of any registration request under Section 7.1 by the Underwriter or any Holder or Holders to the Underwriter and to all other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants and the Common Shares underlying the Underwriter's Warrants within ten (10) days from the date of the receipt of any such registration request.

          7.4.      Covenants of the Company With Respect to Registration.  In connection with any registration under Section 7.1 or 7.2 hereof, the Company covenants and agrees as follows:

               (a)      The Company shall use its best efforts to file a registration statement within forty-five  (45) days of receipt of any demand therefor in accordance with Section 7.1, shall use its best efforts to have any registration statement declared effective at the earliest practicable time, and shall furnish to the Underwriter and each Holder desiring to sell the Underwriter's  Shares, Underwriter's Warrants, the Common Shares underlying the  Underwriter's Warrants or any other securities held by the Underwriter or the other Holders as a result of any adjustment made pursuant to the provisions of Sections 8.1 or 8.2 hereof (collectively, the "Registrable Securities"), such number of prospectuses as shall reasonably be requested.

               (b)      The Company shall pay all costs  (excluding fees and expenses of the Underwriter's and the other Holders' counsel and any underwriting or selling commissions), fees and expenses in connection with all registration statements filed pursuant to Sections 7.1 and 7.2 hereof including, without limitation, the Company's legal and accounting fees, printing expenses, and blue sky fees and expenses.  If the Company shall fail to comply with the provisions of Section 7.4, the Company shall, in addition to any other equitable or other relief available to the Underwriter and the other Holders, be liable for any or all actual damages (which may include damages due to a loss of profit). 

               (c)      The Company will take all necessary action which may be required in qualifying or registering the Registrable Securities included in a registration statement for offering and sale under the securities or blue sky laws of such states as reasonably are requested by the Underwriter and the other Holders, provided that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. 

               (d)      The Company shall indemnify the Underwriter and all other Holders of  the Registrable Securities to be sold pursuant to any registration statement and each person, if any, who controls such Underwriter or Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the 1934 Act or otherwise, arising from such  registration  statement  to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriter in Section 5 of the Underwriting Agreement and to provide for just and equitable contribution as set forth in Section 6 of the Underwriting Agreement.

               (e)      The Underwriter and all other Holders of the Registrable Securities to be sold pursuant to a registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the 1934 Act, against all loss, claim, damage or expense or liability (including all expenses reasonably  incurred in investigating, preparing or defending against any claim whatsoever)  to which they may become  subject under the Act, the 1934 Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5 of the Underwriting Agreement pursuant to which the Underwriter has agreed to indemnify the Company and to provide for just and equitable contribution as set forth in Section 6 of the Underwriting Agreement.

               (f)      Nothing contained in this Agreement shall be construed as requiring the Underwriter or other Holders to exercise their Underwriter's Unit Warrants or the Underwriter's Warrants prior to the initial filing of any registration statement or the effectiveness thereof.

               (g)      The Company shall deliver promptly to the Underwriter and all other Holders of the Registrable Securities participating in the offering copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit the Underwriter and the other Holders of the Registrable Securities to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of the National Association of Securities Dealers, Inc. ("NASD"); provided that the Underwriter and each such holder of the Registrable Securities agrees not to disclose such information without the prior consent of the Company.  Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as the Underwriter and any other Holder of the Registrable Securities shall reasonably request.

               (h)      If required by the underwriters in connection with an underwritten offering which includes Registrable Securities pursuant to this Section 7, the Company shall enter into an underwriting agreement with one or more underwriters selected for such underwriting.  Such underwriting agreement shall be satisfactory in form and substance to the Company, the Underwriter and each other Holder of the Registrable Securities, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the underwriters.  If required by the underwriters, the Underwriter and the other Holders of the Registrable Securities shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations and warranties of the Company to or for the benefit of such underwriters shall, to the extent that they may be applicable, also be made to and for the benefit of the Underwriter and the other Holders of the Registrable Securities.  The Underwriter and the other Holders of the Registrable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to the Underwriter and the other Holders of the Registrable Securities and their intended methods of distribution.

               (i)      In connection with any registration statement filed pursuant to Section 7 hereof, the Company shall furnish, or cause to be furnished, to the Underwriter and each Holder participating in any underwritten offering and to each underwriter, a signed counterpart, addressed to the Underwriter, such Holder or underwriter, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), and (ii) a "cold comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have issued a report on the Company's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities.

               (j)      The Company shall promptly notify the Underwriter and each Holder of the Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and upon receipt of such notice the Underwriter and each Holder shall not effect any sale of securities and shall immediately cease utilizing or distributing such prospectus.  At the request of the Underwriter or any such Holder, the Company shall promptly prepare and furnish to the Underwriter or such Holder and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made.

               (k)      For purposes of this Agreement, the term "majority" in reference to the Underwriter and the other Holders of the Underwriter's Unit Warrants, Underwriter's Units, Underwriter's Shares, Underwriter's Warrants or the Common Shares underlying the Underwriter's Warrants, shall mean in excess of fifty percent (50%) of the then outstanding Underwriter's Warrants and Underwriter's Shares that have not been resold to the public pursuant to Rule 144 under the Act or a  registration statement filed with the Commission under the Act.

     8.      Adjustments to Exercise Price and Number of Securities.

          8.1     Adjustments to Underwriter's Warrants.  The Exercise Price of the Underwriter's Warrants and number of securities issuable with respect to the Underwriter's Warrants shall be adjusted on the same terms and conditions, and at the same time, as any adjustments in the Exercise Price and number of shares issuable with respect to the Offered Warrants required by the terms of the Offered Warrants.

          8.2     Adjustment to Number of Underwriter's Shares.  The number of Underwriter's Shares to be received upon exercise of the Underwriter's Unit Warrants shall be subject to adjustment as follows:

                (a)      In the event that the number of outstanding Common Shares is increased by a stock dividend payable in Common Shares or by a subdivision of the outstanding Common Shares, then, from and after the effective time of such increase by reason of such dividend or subdivision, the number of Common Shares issuable upon the exercise of each Underwriter's Unit Warrant shall be increased in proportion to such increase in outstanding shares.  In the event that the number of Common Shares outstanding is decreased by a combination of the outstanding Common Shares, then, from and after the effective time of such decrease by reason of such combination, the number of Common Shares issuable upon the exercise of each Underwriter's Unit Warrant shall be decreased in proportion to such decrease in the outstanding Common Shares.

                (b)      In case of any reorganization or reclassification of the outstanding Common Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination), or in case of any consolidation of the Company with, or merger of the Company into, another corporation  (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding Common Shares), or in case of any sale or  conveyance  to  another corporation of the property of the Company as an entirety or substantially as an entirety, the Holder of each Underwriter's  Unit Warrant then outstanding  shall thereafter have the right to purchase the kind and amount of Common Shares and other securities and property receivable upon such reorganization, reclassification, consolidation, merger, sale or conveyance by a holder of the number of Common Shares that the Holder of such Underwriter's Unit Warrant shall then be entitled to purchase;  such adjustments shall apply with respect to all such changes occurring between the date of this Agreement and the date of exercise of such Underwriter's Unit Warrant.

                (c)      Subject to the provisions of this Section 8, in case the Company shall, at any time prior to the exercise of the Underwriter's Unit Warrants or Underwriter's Warrants, make any distribution of its assets to holders of its Common Shares as a liquidating or a partial liquidating dividend, then the Holders of Underwriter's Unit Warrants or Underwriter's Warrants who exercises its Underwriter's Unit Warrants or Underwriter's Warrants after the record date for the determination of those holders of Common Shares entitled to such distribution of assets as a liquidating or partial liquidating dividend shall be entitled to receive for the Unit Exercise Price per Underwriter's Unit or the Warrant Exercise Price per Underwriter's Warrant,  in addition to each Common Share, the  amount of such distribution or, at the option of the Company, a sum equal to the value of any such  assets at the time of such  distribution as determined by the Board of Directors of the Company in good faith,  which would have been  payable to such Holder had such Holder been the holder of record of the Common Shares receivable upon exercise of its Underwriter's Unit Warrant or Underwriter's Warrant on the record date for the determination of those entitled to such distribution.

                (d)      In case of the dissolution, liquidation or winding up of the Company, all rights under the Underwriter's Unit Warrants shall terminate on a date fixed by the Company, such date to be no earlier than ten (10) days prior to the effectiveness of such dissolution, liquidation or winding up and not later than five (5) days prior to such effectiveness.  Notice of such termination of purchase rights shall be given to the last registered holder of the Underwriter's Unit Warrants, as the same shall appear on the books of the Company maintained by the Warrant Agent, by registered mail at least thirty (30) days prior to such termination date.

                (e)      In case the Company shall, at any time prior to the expiration of the Underwriter's Unit Warrants and prior to the exercise thereof, offer to the holders of its Common Shares any rights to subscribe for additional shares of any class of capital stock of the Company, then the Company shall give written notice thereof to the registered holders of the Underwriter's Unit Warrants not less than thirty (30) days prior to the date on which the books of the Company are closed or a record date is fixed for the determination of the stockholders entitled to such  subscription  rights.  Such notice shall specify the date as to which the books shall be closed or the record date fixed with respect to such offer of subscription and the right of the holders of the Underwriter's Unit Warrants to participate in such offer of subscription shall terminate if the Underwriter's Unit Warrant shall not be exercised on or before the date of such closing of the books or such record date.

                (f)      Any adjustment pursuant to the aforesaid provisions of this Section 8 shall be made on the basis of the number of Common Shares that the holder thereof would have been entitled to acquire upon the exercise of the Underwriter's Unit Warrant immediately prior to the event giving rise to such adjustment.

     9.      Exchange and Replacement of Underwriter's Unit Warrants.  Each Underwriter's Unit Warrant is exchangeable without expense, upon the surrender thereof by the registered Holder at the principal executive office of the Company, for a new Underwriter's Unit Warrant of like tenor and date representing in the aggregate the right to purchase the same number of Underwriter's Shares and Underwriter's Warrants as provided in the original Underwriter's Unit Warrant in such denominations as shall be designated by the Holder thereof at the time of such surrender.

     Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Underwriter's Unit Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Underwriter's Unit Warrant, if mutilated, the Company will make and deliver a new Underwriter's Unit Warrant of like tenor, in lieu thereof. 

     10.      Elimination of Fractional Interests.  The Company shall not be required to issue certificates representing fractions of Underwriter's Shares upon the exercise of the Underwriter's Unit Warrant.  However, if a holder of an Underwriter's Unit Warrant exercises all warrants then owned of record by such holder and such exercise would result in the issuance of a fractional share, the Company will pay to such holder, in lieu of the issuance of any fractional share otherwise issuable, an amount of cash based on the market value of the Common Shares of the Company on the last trading day prior to the exercise date.

     11.      Reservation and Listing of Securities.  The Company shall at all times reserve and keep available out of its authorized Common Shares, solely for the purpose of issuance upon the exercise of the Underwriter's Unit Warrant and Underwriter's Warrants, such number of Common Shares or other securities, properties or rights as shall be issuable upon the exercise thereof.  The Company covenants and agrees that, upon exercise of the Underwriter's Unit Warrant and/or the Underwriter's Warrants and payment of the Exercise Price therefor, all Underwriter's Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any stockholder.  As long as the Underwriter's Unit Warrant and/or Underwriter's Warrants shall be outstanding, the Company shall use its best efforts to cause all Underwriter's Units, Underwriter's Shares, Underwriter's Warrants and all Common Shares issuable upon the exercise of the Underwriter's Warrants to be listed  (subject to official notice of issuance) on all securities exchanges on which the Common Shares may then be listed and/or quoted on the American Stock Exchange (the "AMEX).

     12.      Notices to Underwriter's Unit Warrant Holders.  Nothing contained in this Agreement shall be construed as conferring upon the Holders the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholders for the election of directors or any other matter, or any rights whatsoever as a stockholder of the Company.  If, however, at any time prior to the expiration of the Underwriter's Unit Warrant or Underwriter's Warrants and their exercise, any of the following events shall occur: 

                (a)      the Company shall take a record of the holders of its Common Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or

                (b)      the Company shall offer to all the holders of its Common Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or

                (c)      a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business as an entirety shall be proposed; or

                (d)      a Change in Control of the Company occurs; 

then, in any one or more of such events the Company shall give written notice of such event at least twenty (20) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale.  Such notice shall specify such record date or the date of closing the transfer books, as the case may be.  Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend, distribution or the issuance of any convertible or exchangeable securities, or subscription rights, options or warrants, or any proposed dissolution, liquidation, winding up or sale.  A "Change of Control" occurs when (a) the Company merges or consolidates with another corporation or entity; (b) a person or group other than certain of the Company's existing stockholders becomes the beneficial owner of 25% or more of the aggregate voting power of the Company; or (c) during any period of two consecutive calendar years, certain changes in the composition of the Company's present Board of Directors occur, including any plans or proposals to change the number or term of Directors or to fill any existing vacancies on the Board, except for the possible addition by the Company of one or more independent directors to its Board of Directors.

     13.      Notices.  All notices requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested:

                (a)      If to the registered Holder of Registrable Securities, to the address of such Holder as shown on the books of the Company; or

                (b)      If to the Underwriter, to the address set forth in Section 12 of the Underwriting Agreement; or

                (b)      If to the Company, to the address set forth in Section 3 hereof or to such other address as the Company may designate by notice to the Holders.

     14.      Supplements and Amendments.  The Company and the Underwriter may from time to time supplement or amend this Agreement without the approval of any holders of Underwriter's Unit Warrants (other than the Underwriter) in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Underwriter may deem necessary or desirable and which the Company and the Underwriter deem shall not adversely affect the interests of the Holders of Registrable Securities.

     15.      Successors.  All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the Company, the Underwriter, the Holders of Registrable Securities and their respective successors and assigns hereunder.

     16.      Termination.  This Agreement shall terminate at the close of business on _________, 2010.  Notwithstanding the foregoing, the indemnification provisions of Section 7 shall survive such termination until the close of business on ____, 2011.

     17.      Governing Law; Submission to Jurisdiction.

                (a)      This Agreement and each Underwriter's Unit Warrant issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of such State without giving effect to the rules of said State governing the conflicts of laws.

                (b)      The Company, the Underwriter and the Holders hereby agree that any action, proceeding or claim against it arising out of, or relating in any way to, this Agreement shall be brought and enforced in the New York State Supreme Court, County of New York, or of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.  The Company, the Underwriter and the Holders hereby irrevocably waive any objection to such exclusive jurisdiction or inconvenient forum.  Any such process or summons to be served upon any of the Company, the Underwriter and the Holders (at the option of the party bringing such action, proceeding or claim) may be served by transmitting a copy thereof, by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address determined in accordance with Section 13 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the party so served in any action, proceeding or claim.  The Company, on the one hand, and the Underwriter and the Holders, on the other hand, agree that the prevailing party(ies) in any such action or proceeding shall be entitled to recover from the other party(ies) all of its/their reasonable legal costs and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

     18.      Entire Agreement; Modification.  This Agreement  (including the Underwriting Agreement to the extent portions thereof are referred to herein) contains the entire understanding between the parties hereto with respect to the subject matter hereof and, except as provided in Section 14 hereof, may not be modified or amended except by a writing duly signed by the party against whom enforcement of the modification or amendment is sought.  Any terms not otherwise defined herein shall have the meaning ascribed to such term in the Underwriting Agreement.

     19.      Severability.  If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement.

     20.      Captions.  The caption headings of the Sections of this Agreement are for convenience of reference only and are not intended, nor should they be construed as, a part of this Agreement and shall be given no substantive effect.

     21.      Benefits of this Agreement.  Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Underwriter and any other registered Holders of the Registrable Securities any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and the Underwriter and any other Holders of the Registrable Securities.

     22.      Preservation of Rights. The Company will not, by amendment of its articles of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or the Underwriter's Unit Warrants or the Underwriter's Warrants or the rights represented hereby or thereby, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Underwriter and all other Holders of the Underwriter's Unit Warrants and the Underwriter's Warrants against dilution or other impairment.

     23.      Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Underwriter's Unit Warrant Agreement to be duly executed, as of the day and year first above written.

	
[SEAL]
	
FLIGHT SAFETY TECHNOLOGIES, INC.

By:                                                                    

Name:

Title

	
Attest:

	 
	
Secretary

Agreed and accepted as of

the date first above written

THE SHEMANO GROUP, INC.,

     the Underwriter

By:                                                                 

     Name:

     Title:
	 

 

EXHIBIT A

[FORM OF UNDERWRITER'S UNIT WARRANT CERTIFICATE]

THE UNDERWRITER'S UNIT WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE. 

THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S UNIT WARRANT REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE UNDERWRITER'S UNIT WARRANT AGREEMENT FOR UNITS REFERRED TO HEREIN. 

 

EXERCISABLE ON OR BEFORE

5:00 P.M., EASTERN TIME, ____, 2008

 

	
No.
	
             Underwriter's Unit Warrant

UNDERWRITER'S UNIT WARRANT

     This Underwriter's Unit Warrant certifies that The Shemano Group, Inc., or registered assigns, is the registered holder of ________ Underwriter's Unit Warrants to purchase initially, at any time from ______, 2004 until 5:00 p.m.  Eastern time on _______, 2008 (the "Expiration Date"), up to ______ Units (the "Underwriter's Units") of Flight Safety Technologies, Inc., a Nevada corporation (the "Company"), at an initial exercise price, subject to adjustment in certain events  (the  "Exercise Price"), of $____ per Underwriter's Unit [120% of the exercise price of an Offered Unit] upon surrender of this Underwriter's Unit Warrant and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions set forth herein and in the Underwriter's Unit Warrant Agreement dated  as of ______,  2003, between the Company and The Shemano Group, Inc. (the  "Underwriter's Unit Warrant  Agreement").  Payment of the Exercise Price shall be made by cash or certified check, payable to the order of the Company.

     No Underwriter's Unit Warrant may be exercised after 5:00 p.m., Eastern time, on the Expiration Date, at which time all Underwriter's Unit Warrants evidenced hereby, unless exercised prior thereto, shall thereafter be void. 

     The Underwriter's Unit Warrant evidenced by this Underwriter's Unit Warrant Certificate are part of a duly authorized issue of Underwriter's Units pursuant to the Underwriter's Unit Warrant Agreement, which Underwriter's Unit Warrant Agreement is hereby incorporated by reference herein and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the Holders (the words "Holders" or "Holder" meaning the registered holders or registered holder) of the Underwriter's Unit Warrant.

     The Underwriter's Unit Warrant Agreement provides that upon the occurrence of certain events the exercise prices and/or number of the Company's securities issuable thereupon may, subject to certain conditions, be adjusted.  In such event, the Company will, at the request of the holder, issue a new Underwriter's Unit Warrant Certificate evidencing the adjustment in the exercise price and the number and/or type of securities issuable upon the exercise of the Underwriter's Unit Warrant; provided, however, that the failure of the Company to issue such new Underwriter's Unit Warrants shall not in any way change, alter or otherwise impair, the rights of the holder as set forth in the Underwriter's Unit Warrant Agreement.

     Upon due presentment for registration of transfer of this Underwriter's Unit Warrant at an office or agency of the Company, a new Underwriter's Unit Warrant or Underwriter's Unit Warrants of like tenor and evidencing in the aggregate a like number of Underwriter's Unit Warrants shall be issued to the transferee(s) in exchange for this Underwriter's Unit Warrant, subject to the limitations provided herein and in the Underwriter's Unit Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection with such transfer.

     Upon the exercise of less than all of the Underwriter's Unit Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Underwriter's Unit Warrant Certificate representing such number of unexercised Underwriter's Unit Warrants.

     The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Underwriter's Unit Warrant (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary.

     All terms used in this Underwriter's Unit Warrant that are defined in the Underwriter's Unit Warrant Agreement shall have the meanings assigned to them in the Underwriter's Unit Warrant Agreement.

[SIGNATURE PAGE FOLLOWS]

 

     IN WITNESS WHEREOF, the Company has caused this Underwriter's Unit Warrant to be duly executed under its corporate seal.

Dated as of _____, 2003

	
[SEAL]
	
FLIGHT SAFETY TECHNOLOGIES, INC.

By:                                                                 

     Name:

     Title:

	
Attest:

	 
	
Secretary
	 

 

 

 

EXHIBIT B

[FORM OF ELECTION TO PURCHASE]

 

     The undersigned hereby irrevocably elects to exercise the right, represented by this Underwriter's Unit Warrant, to purchase ______ Units and herewith tenders in payment for such securities cash or a certified check payable to the order of Flight Safety Technologies, Inc. in the amount of $_____, all in accordance with the terms hereof.  The undersigned requests that a certificate for such securities be registered in the name of _________________ whose address is  _________________________ and that such certificate be delivered to  _________________ whose address is _______________________.

	
Dated:
	
                                                                          

Name of Registered Owner

                                                                          

Signature of Registered Owner

(Signature must conform in all respects to name of holder as specified on the face of the Underwriter' Unit Warrant.)

                                                                          

Street Address

                                                                          

City, State, Zip

                                                                          

IRS Identification Number/Social Security Number

 

EXHIBIT C

[FORM OF ASSIGNMENT]

(To be executed by the registered holder if such holder desires to transfer the Underwriter's Unit Warrant Certificate.)

     FOR VALUE RECEIVED, the undersigned registered owner of this Underwriter's Unit Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights, title and interest therein of the undersigned under the within Underwriter's Unit Warrant, with respect to the number of Underwriter's Units set forth below:

	
NAME OF ASSIGNEE
	
ADDRESS
	
NUMBER OF UNITS

	 	 	 

 

and does hereby irrevocably constitute and appoint __________________________, Attorney, to transfer the within Underwriter's Unit Warrant Certificate on the books of Flight Safety Technologies, Inc., maintained for the purpose, with full power of substitution in the premises.  The undersigned understands that compliance with the provisions of the Underwriter's Unit Warrant is necessary to effect any assignment or transfer.

	
Dated:
	
                                                                          

Signature of Registered Owner

(Signature must conform in all respects to name of holder as specified on the face of the Underwriter' Unit Warrant Certificate.)

                                                                          

Name of Registered Owner

                                                                          

IRS Identification Number/Social Security NumberExhibit 10.7

Exhibit 10.7

GEORGIA TECH APPLIED RESEARCH CORPORATION

Cost Reimbursement Research Project Agreement

Research Proposal No. 01,205,072,04,96874

Research Project No.

THIS AGREEMENT is made by and between GEORGIA TECH APPLIED RESEARCH CORPORATION, a Georgia corporation, having principal offices at Research Administration Building, Georgia Institute of Technology, Atlanta, Georgia, 30332-0420 (hereinafter known as "GTARC") and FLIGHT SAFETY TECHNOLOGIES, INC. having a business address of 63 Mountain Green Circle, Candlewood, Quail Meadows Estate, Windsor Mill, MD 21244-2602 (hereinafter known as "FST").

In consideration of the mutual premises and covenants herein contained and intending to be legally bound, the parties hereto agree as follows:

Section 1.     Definitions.

1.1     "Research Project" shall refer to the performance of the scope of work set forth in GTARC's Research Proposal entitled "UNICORN Antenna Evaluations and Modeling" dated August 12, 2003.  The aforesaid scope of work is incorporated herein by reference as if set forth in full text as Attachment A.

1.2     "Staff Member" shall mean employees, independent contractors, subcontractors, consultants and student assistants of the Georgia Institute of Technology (hereinafter "GIT"), a unit of the University System of Georgia, who shall perform the Research Project.

1.3     "GTARC" is a wholly controlled non-profit subsidiary of the Georgia Tech Research Corporation ("GTRC").  GTARC and GTRC are tax-exempt under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("Code") and are supporting organizations of the GIT under Section 509(a)(3) of the Code.  GTARC was formed for the purpose of entering into sponsored research agreements for Georgia Tech Research Institute (GTRI).  GTRC owns and administers intellectual property developed at GIT/GTRI.  GTARC may enter into contractual agreements regarding intellectual property owned by GTRC that are in accordance with GIT policy.

1.4     "Intellectual Property" means any intellectual property, including, without limitation, any ideas, inventions, know-how, design rights, analysis techniques, discoveries and modifications and improvements to any of the foregoing including all computer software, works, material and data, whether or not protectable by patent, trade secret or copyright.

1.5     "Background Intellectual Property" means all GTARC and FST Intellectual Property, including but not limited to inventions, designs, patents, trademarks, copyrights, computer software, analysis techniques and trade secrets conceived and/or first reduced to practice either prior to or outside the scope of this agreement and subsequent modifications and improvements thereto.

1.6     "Joint Intellectual Property" means any Intellectual Property that is jointly developed by at least one or more employees, agents or consultants of both GTARC and FST.  A joint invention requires an inventive contribution to the conception or reduction to practice of the invention by each inventor (not merely an implementation, modification or improvement to or of the suggestion or instructions of the inventor); and can be made even though the inventors did not physically work together or at the same time, did not each make the same or amount of contribution, or did not each make a contribution to the subject matter of every claim of any patent covering the invention.

1.7     "Proprietary Information" means any technical data or information that is disclosed to GTARC by FST or by FST to GTARC pursuant to the execution of this Research Project, and under the terms and conditions of a Proprietary Information Agreement dated March 12, 2003.

1

Section 2.     Term.

2.1     GTARC shall undertake the Research Project during the term of this Agreement which shall commence upon September 1, 2003, and shall continue for a period of nine (9) months unless sooner terminated or extended in accordance with the terms hereof.

Section 3.     Compensation and Expenses; Contract Cost Limitation.

3.1     FST agrees to reimburse GTARC for the actual direct and indirect costs incurred by GTARC in the performance of the Research Project.

3.2     GTARC reserves the right to modify its direct and indirect rates effective July 1, each year.

3.3     GTARC will render its invoices as indicated in 3.4 below.  FST agrees to pay each invoice within thirty days of the invoice date.  Any invoice not paid within thirty days of the invoice date will be considered delinquent and subject to a one-and-a-half percent (1.5%) per month fee for each month or fraction thereof, until the payment is received.

	
BILLING ADDRESS:

ATTN:

PHONE NO.
	
Flight Safety Technologies, Inc

1 Spar Yard

New London, Connecticut 06320

David Cryer

860-443-7768

3.4     FST agrees to pay the sum of Ninety-five Thousand, One Hundred Twenty-two Dollars and Fifty-eight Cents ($95,122.58) ("Contract Cost Limitation") for the Research Project which includes Option 1 in the amount of Fifty-six Thousand, Three Hundred Eighty-one Dollars and Thirty-three Cents ($56,381.33); plus Sub-Option 3 of Option 2 in the amount of Thirty-One Thousand, Six Hundred Thirty-three Dollars and Ninety-eight Cents ($31,633.98); and Sub-Option 4 of Option 2 in the amount of Seven Thousand, One Hundred Seven Dollars and Twenty-seven Cents ($7,107.27).  GTARC will not invoice FST in excess of Contract Cost Limitation without first obtaining the approval of FST.  FST shall make two payments.  The first payment of Forty-seven Thousand, Five Hundred Sixty-one Dollars and Twenty-nine Cents ($47,561.29) will be due upon contract execution.  The second payment of Forty-seven Thousand, Five Hundred Sixty-one Dollars and Twenty-nine Cents ($47,561.29) will be due within one hundred twenty (120) days of execution.  Any unused funds will be returned to FST.  Payments are to be made to:

Georgia Tech Applied Research Corporation,

P.O. Box 277004,

Atlanta, GA  30384-7004.

3.5     GTARC reserves the right to discontinue the Research Project if FST fails to pay any GTARC invoice within the time herein specified.  GTARC shall not be obligated to incur costs in excess of the Contract Cost Limitation.

Section 4.     Reports.

4.1     GTARC agrees to render to FST Monthly Status Reports and a Final Report summarizing the results of the Research Project.

Section 5.     Publicity.

5.1     Each party agrees not to authorize or commission the publication of any promotional materials containing any reference to the other party without the prior written approval of the other party; provided, GTARC and GIT may include FST's name and Research Project title in published listings of research sponsors and FST may include GTARC and GIT's name and the purpose of this Research Project in its public filings with the Securities and Exchange Commission.  The provisions of this Section 5 shall survive termination of this Agreement.

 

 

 

2

Section 6.     Publication.

6.1     GTARC and GIT may catalog and place reports of the Research Project in the GIT Library.  Further, GTARC and GIT may issue publications based on the Research Project and use the research results in their research and education programs.

6.2     FST recognizes that the results of the Research Project must be publishable and agrees that Staff Members engaged in the Research Project shall be permitted to present at symposium, national, or regional professional meetings, and to publish in journals, thesis or dissertations, or otherwise of their own choosing, results of the Research Project, provided, however, that FST shall been furnished copies of any proposed publication or presentation at least sixty (60) days in advance of the proposed submission of such publication or presentation to a journal, editor, or other third party.  FST shall have sixty (60) days, after receipt of such copies, to advise if the proposed submission discloses patentable subject matter which needs protection, or discloses FST Proprietary Information.  If FST so advises, the researchers shall refrain from publication or presentation of such submission until the filing of patent application(s) on any patentable subject matter contained in the proposed submission or the excision of FST's Proprietary Information.  In no event shall any such submission, publication, or presentation disclose FST's Proprietary Information.

Section 7.     Intellectual Property.

7.1     Intellectual Property Rights.

a.          Background Intellectual Property.  All Background Intellectual Property is the separate property of FST or GTARC respectively, and is not affected by this Agreement.  Neither Party shall have any claims to or rights in such Background Intellectual Property except for an internal research and development use that has been identified as necessary to conduct the research contemplated by this Agreement for the term of this Agreement subject to any third party rights.

b.          FST New Intellectual Property.  All rights, title and interest to all Intellectual Property which is made, created, or conceived solely by employees or personnel of FST in the course of performance of this Agreement, whether or not protectable by patent, trade secret or copyright, shall be owned solely and exclusively by and vested entirely in FST.

c.          GTARC New Intellectual Property.  All rights, title and interest to Intellectual Property including improvements thereto which are made, created, or conceived solely by employees or personnel of GTARC in the course of performance of a Task Order issued under this Agreement, shall be owned solely and exclusively by and vested entirely in GTARC ("GTARC Intellectual Property").

d.          Joint Intellectual Property.  All rights, title and interest to Intellectual Property covering inventions, know-how, designs, analysis techniques and discoveries including computer software, works, material and data jointly made or developed by one or more employees, agents or consultants of both parties shall be jointly owned by the parties with each party owning an equal undivided interest in the right, title, and interest thereto.

e.          Based on existing FST Background Intellectual Property, it is anticipated by the parties that the work contemplated herein is fully covered under FST's UNICORN patent (US 6,211,808 B1) and by additional patent protection which FST is attempting to obtain on the information that FST has previously provided to GTARC under the terms of the Proprietary Information Agreement dated March 12, 2003 and that it is anticipated that no New GTARC Intellectual Property or Joint Intellectual Property will be created under the terms of this Agreement.  If GTARC at any time believes it is or will be creating new GTARC Intellectual Property or Joint Intellectual Property, it will notify FST in advance of any such anticipated creation and FST shall have the option of either continuing work under this Agreement or terminating in accordance with Section 11 of this Agreement.  If FST does not terminate this Agreement in accordance with this section, then rights relative to the GTARC New Intellectual Property or Joint Intellectual Property will be determined in accordance with this Agreement.

 

 

 

 

 

3

7.2     Intellectual Property Protection.

a.          All inventions and discoveries may by one or more GTARC employees or personnel related to the work performed during this Agreement, shall be promptly and fully made known to FST in writing within 30 days from the time that such invention has been disclosed to GTARC and at least two months prior to any bar dates that would preclude acquiring intellectual property protection.  The notice of invention shall specify the names of the inventors and a brief description of the subject matter of the invention.

b.          In the event that FST believes that patent protection would be desirable for any of the inventions and discoveries made by employees or personnel of GTARC, FST shall have the right to submit a written request to GTARC to seek patent protection to such GTARC intellectual property for the invention at FST's expense.  Any such request shall identify the invention and the countries in which patent protection is desired.  GTARC reserves the right to seek intellectual property protection in those countries or regions in which FST does not have interest in filing for patent protection.  GTARC shall file such patent application within one hundred eight (180) days of such request.  In the event GTARC has not filed for patent protection for any invention as provided in this Section 7.2(b) within one hundred eight (180) days after receiving a written request to do so, GTARC's subject Intellectual Property will be considered abandoned.  FST shall then have the right to seek patent protection for the invention(s) in question, and FST shall be the owner of the resulting patent rights.  In such event, GTARC shall execute or cause to be executed all assignments, patent applications, and other papers relating to the invention which FST claims necessary or proper.

c.          GTARC shall provide FST with a copy of any patent application filed under the provisions of 7.2.b above as soon as it is filed and shall furnish FST with progress reports when requested by FST which summarize the status of any such patent application.

d.          In the event that FST elects not to submit such written request under the provisions of 7.2.b, GTARC shall have the right and option to prosecute and maintain appropriate intellectual property protection at GTARC's expense in such geographical locations.

e.          For GTARC owned patents the out of pocket expenses for patent maintenance shall be borne by GTARC.  It shall be up to the discretion of GTARC to determine if GTARC desires to pay for maintenance of now licensed GTARC patents.  For GTARC owned patents which are nonexclusively licensed to FST hereunder, the patent maintenance fees shall be borne by FST Technologies, Inc. and to the extent GTARC has extended nonexclusive licenses to third parties, such patent maintenance expenses shall be apportioned among and borne by all nonexclusive licensees in equal amounts.

             For jointly owned patents the out of pocket expenses of patent maintenance shall be borne by FST.  If a party decides to assign, sell or otherwise transfer any portion of its share of jointly owned Intellectual Property to a prospective buyer it shall first offer such ownership interest to the other party in writing.  The other party shall have a right of first refusal to purchase such assets provided such party acts within ninety days and agrees to pay substantially the monetary consideration offered by the prospective buyer.

7.3     Licensing Rights for GTARC Intellectual Property.

a.          GTARC and FST shall enter into a separate license agreement in which GTARC shall grant FST a royalty-free non-exclusive, world-wide license to practice or have practiced on their behalf GTARC New Intellectual Property, resulting from the provisions outlined in 7.2.b.  Such license shall be subject to any third party rights.  To the extent FST practices under the above-referenced license agreement, GTARC hereby agrees that it shall not pursue any claim or damages against FST so long as FST restricts its practice to the rights granted in such license agreement.

b.          GTARC hereby grants FST a right of first option to negotiate an exclusive license with the right to sublicense under GTARC patent rights and jointly owned patent rights resulting from the provisions outlined in 7.2b, subject to any third party rights.  The value of the royalty rate will be negotiated in good faith on fair and reasonable terms by both parties.  This option shall commence upon the date of this Agreement and shall expire twelve (12) months after disclosure of such GTARC Intellectual Property.

4

c.          In the event FST fails to exercise its option to obtain an exclusive license under Section 7.3.b, each party shall have the royalty-free right to practice under and use Joint Intellectual Property including the right to sublicense Joint Intellectual Property for all purposes and applications.

Section 8.     Disclaimer.

8.1     GTARC AND GIT DISCLAIM ANY AND ALL WARRANTIES BOTH EXPRESS AND IMPLIED WITH RESPECT TO THE SERVICES TO BE PERFORMED HEREUNDER AND ANY DELIVERABLES RESULTING THEREFROM, INCLUDING THEIR CONDITION, CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION, THE EXISTENCE OF ANY LATENT OR PATENT DEFECTS THEREIN, AND THEIR MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.

Section 9.     Confidential Information.

9.1     Any Proprietary Information which is exchanged between the parties shall be governed by the terms set forth in the PROPRIETARY INFORMATION AGREEMENT previously entered into between the parties dated March 12, 2003 and incorporated herein by reference.

Section 10.     Limitation of Liability.

10.1     The cumulative liability of GTARC to FST for all claims, demands or actions arising out of or relating to this Agreement, the services to be performed hereunder and any deliverables resulting therefrom, shall not exceed the total amount paid to GTARC hereunder during the twelve months immediately preceding such claim, demand or action.  Without limiting the foregoing, in no event shall GTARC be liable for any business expense, machine down time, loss of profits, any incidental, special, exemplary or consequential damages, or any claims or demands brought against FST or FST's customers, even if GTARC has been advised of the possibility of such claims or demands.  The foregoing limitations of liability, damages and claims are intended to survive termination of this Agreement and apply without regard to any other provisions of this Agreement which have been breached or proven ineffective.

Section 11.     Termination.

11.1     FST may terminate this Agreement for any reason upon thirty (30) days written notice to GTARC.

11.2     GTARC may terminate this Agreement upon thirty (30) days prior written notice in the event of a material breach by FST of any term or provision hereof, provided such breach remains uncured at the end of said thirty (30) day period.  Such notice of a breach shall include a reasonable description of the facts surrounding the alleged breach and a proposed course of action to cure said breach.

11.3     FST shall pay GTARC any costs which have accrued or been encumbered up to the actual date of termination under this Section 10 and shall not be relieved of the obligation to pay such costs because of termination under this Section 10.

Section 12.     Indemnity.

12.1     FST agrees to and does hereby indemnify, hold harmless and save from liability GTARC, Staff Members, and the Board of Regents of the University System of Georgia, including their officers, and employees from and against any and all claims, demands and actions arising out of or relating to FST's commercial use of intellectual property which may be licensed to FST under Section 7 of this Agreement.

Section 13.     Miscellaneous.

13.1     All notices and other communication required or permitted to be given under this Agreement and will be effective five (5) days following deposit in the United States mail, postage prepaid and addressed to the parties at their respective addresses set forth below unless by such notice a different person or address shall have been designated.

 

 

 

 

 

5

 

	
To GTARC for administrative matters:

Georgia Tech Applied Research Corporation

Office of Contract Administration

Georgia Institute of Technology

Atlanta, Georgia 30332-0420

Attn:  Ms. Sherry A. Levy

To GTARC for technical matters:

Georgia Tech Applied Research Corporation

Georgia Institute of Technology

Atlanta, Georgia 30332-0852

Attn:  Mr. Jacob Leverett
	
To FST for administrative matters:

Flight Safety Technologies, Inc.

1 Spar Yard

New London, Connecticut 06320

Attn:  Mr. David Cryer

To FST for technical matters:

Flight Safety Technologies, Inc.

63 Mountain Green Circle, Quail Meadow Estates

Windsor Mill, Maryland 21244

Attn:  Mr. Frank Rees

13.2     The parties to this Agreement are and shall remain independent contractors and nothing herein shall be construed to create a partnership, agency or joint venture between the parties.  Each party shall be responsible for wages, hours and conditions of employment of its personnel during the term of, and under, this Agreement.

13.3     All questions concerning the validity, operation, interpretation and construction of this Agreement will be governed by and determined in accordance with the laws of the State of Georgia.

13.4     No waiver by either party of any breach of any provision hereof shall constitute a waiver of any other breach of that provision or any other provision hereof.

13.5     This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them; and neither party shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein.  This Agreement may not be modified or altered except in writing by an instrument duly executed by authorized officers of both parties.  Provided, however, that no provision appearing in any standard form document originated by FST including but not limited to any purchase order or confirmation order, shall be applicable, even if signed by both parties, unless the parties also execute a separate instrument expressly modifying this agreement to include such provision as set forth above.  No other terms and conditions, oral or written, be they consistent, inconsistent, or additional to those contained herein, shall be binding upon the parties, unless and until such terms and conditions shall have been specifically accepted in writing by the parties.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers the day and year set forth below.

	
GEORGIA TECH APPLIED RESEARCH CORPORATION
	
FLIGHT SAFETY TECHNOLOGIES, INC.

	

By:
	

/s/ James W. Berkowitz
	

By:
	

/s/ Samuel A. Kovnat

	
	
	
	

	
Typed Name:  James W. Berkowitz

Title:  Asst. to General Manager

Date:  
	
Typed Name:  Samuel A. Kovnat

Title:  Chief Executive Officer

Date:  August 29, 2003

	

By:
	

/s/ G. Duane Hutchison
	 
	
	
	

	
Typed Name:  G. Duane Hutchison

Title:  Assistant Secretary

Date:  September 4, 2003
	 

6

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