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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
COMMISSION FILE NUMBER: 0-21773
FIREARMS TRAINING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 57-0777018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7340 MCGINNIS FERRY ROAD
SUWANEE, GEORGIA 30024
(Address of principal executive offices)
TELEPHONE NUMBER (770) 813-0180
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of July 30, 1998, there were (1) 18,974,575 shares of the
Registrant's Class A Common Stock and (2) 1,694,569 shares of the Registrant's
Class B nonvoting Common Stock outstanding.
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FIREARMS TRAINING SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statements of Operations
Three months ended June 30, 1998 and 1997......................... 3
Condensed Consolidated Balance Sheets
June 30, 1998 and March 31, 1998 ................................. 4
Condensed Consolidated Statements of Cash Flows
Three months ended June 30, 1998 and 1997 ........................ 5
Notes to Condensed Consolidated Financial Statements ............. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ........................................ 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................................ 12
ITEM 2. CHANGES IN SECURITIES ............................................ 12
ITEM 5. OTHER INFORMATION................................................. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................. 14
SIGNATURES ....................................................... 16
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues $ 12,265 $ 18,609
Cost of revenues 7,551 8,241
-------- --------
Gross profit 4,714 10,368
-------- --------
Operating expenses:
Selling, general and administrative expenses 3,175 3,932
Research and development expenses 1,534 1,363
Depreciation and amortization 477 176
Non-recurring restructuring charge 870 --
-------- --------
Total operating expenses 6,056 5,471
-------- --------
Operating income (loss) (1,342) 4,897
-------- --------
Other (expense) income, net:
Interest (expense) income, net (1,611) (1,454)
Other (expense) income, net (104) (27)
-------- --------
Total other (expense) income, net (1,715) (1,481)
-------- --------
Income (loss) before income taxes (3,057) 3,416
Provision (benefit) for income taxes (1,039) 1,230
-------- --------
Net income (loss) $ (2,018) $ 2,186
======== ========
Basic earnings (loss) per common share $ (0.10) $ 0.11
======== ========
Diluted earnings (loss) per common share $ (0.10) $ 0.10
======== ========
Weighted average common shares outstanding - basic 20,664 20,403
======== ========
Weighted average common and common
equivalent shares outstanding - diluted 20,664 21,691
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
3
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FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1998
----------- ---------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,970 $ 3,395
Accounts receivable, net 20,900 22,710
Inventories 18,226 17,725
Income taxes receivable 1,195 --
Prepaid expenses and other current assets 862 594
Deferred income taxes, net -- 1,050
--------- ---------
Total current assets 43,153 45,474
Property and equipment, net 4,118 3,971
Goodwill, net 5,048 2,751
Deferred financing costs, net 2,838 3,007
Deferred income taxes 1,036 1,065
Other assets 97 112
--------- ---------
$ 56,290 $ 56,380
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,490 $ 3,389
Accrued liabilities 9,070 11,060
Income taxes payable -- 390
Deferred income taxes, net 747 --
Deferred revenue 3,906 6,428
Current maturities of long-term debt 6,000 5,300
--------- ---------
Total current liabilities 22,213 26,567
--------- ---------
Long-term debt, less current maturities 62,200 57,700
--------- ---------
Other noncurrent liabilities 298 344
--------- ---------
Stockholders' equity:
Class A common stock -- --
Additional paid-in-capital 114,257 112,390
Accumulated (deficit) earnings (142,587) (140,569)
Cumulative foreign currency translation adjustment (91) (52)
--------- ---------
Total stockholders' (deficit) equity (28,421) (28,231)
--------- ---------
$ 56,290 $ 56,380
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
4
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FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30,
--------------------
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $(2,018) $ 2,186
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 647 315
Deferred income taxes 1,826 (10)
Non-cash compensation expense 71 --
Employee stock compensation plan 42 --
Changes in assets and liabilities
(excluding effects of businesses acquired):
Accounts receivable, net 1,927 5,069
Inventories (369) (3,823)
Income taxes receivable (1,195) --
Prepaid expenses and other current assets (239) 174
Escrow and other deposits 15 (4)
Accounts payable (1,037) (791)
Accrued liabilities (2,286) (712)
Income taxes payable (390) 627
Deferred revenue (2,521) 773
Noncurrent liabilities (69) (50)
------- -------
Total adjustments (3,578) 1,568
------- -------
Net cash provided by (used in) operating activities (5,596) 3,754
------- -------
Cash flows from investing activities:
Payments for business acquisition, net of cash acquired (394) (2,150)
Additions to property and equipment, net (422) (461)
------- -------
Net cash used in investing activities (816) (2,611)
------- -------
Cash flows from financing activities:
Borrowings of long-term debt 6,000 2,000
Repayments of long-term debt (899) --
Proceeds from sales of common stock -- 7
Retirement of common stock (75) --
------- -------
Net cash used in financing activities 5,026 2,007
------- -------
Effect of changes in foreign exchange rates (39) (4)
------- -------
Net increase (decrease) in cash (1,425) 3,146
Cash, beginning of period 3,395 1,663
------- -------
Cash, end of period $ 1,970 $ 4,809
======= =======
Supplemental disclosures of cash paid (received) for:
Interest $ 1,334 $ 1,316
======= =======
Income taxes $(1,253) $ 647
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
5
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FIREARMS TRAINING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for
the three month period ended June 30, 1998 are not necessarily indicative
of the results that may be expected for the year ended March 31, 1999. For
further information, refer to the company's consolidated financial
statements and footnotes thereto for the year ended March 31, 1998.
2. ACQUISITIONS.
On April 1, 1998, FATS, Inc. acquired the outstanding stock of Dart
International, Inc. ("Dart"), a Colorado-based hunter and sports simulation
company, in exchange for 257,577 Class A common shares of the Company. The
Company recorded the acquisition using the purchase method of accounting
with approximately $2.4 million of the purchase price allocated to
goodwill. The results of the operations of Dart have been included in the
Company's consolidated statements of operations since the effective date of
the acquisition.
The following unaudited pro forma consolidated results of operations of the
Company for the three months ended June 30, 1997 is presented as if the
purchase of Dart, as well as the purchases of the ICAT Judgmental Use of
Force Business from SBS Technologies, Inc., FSS, Inc., and Simtran
Technologies, Inc. described in Note 2 of the Company's consolidated
financial statements for the year ended March 31, 1998, had occurred on
April 1, 1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30, 1997
-------------
<S> <C>
Revenues $19,912
Net income $ 1,656
Basic earnings per share $ 0.08
Diluted earnings per share $ 0.08
</TABLE>
The operating results of all of the acquisitions noted above are included
in the accompanying consolidated statement of operations for the three
months ended June 30, 1998.
6
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FIREARMS TRAINING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. INVENTORY.
Inventories consist primarily of simulators, computer hardware, projectors,
and component parts. Inventories are valued at the lower of cost (on a
first-in, first-out basis) or market. Cost includes materials, labor, and
manufacturing overhead. Market is defined as net realizable
value. Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, March 31,
1998 1998
------- --------
<S> <C> <C>
Raw materials $11,233 $11,635
Work in progress 5,228 3,341
Finished Goods 1,765 2,749
------- -------
$18,226 $17,725
======= =======
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's most recently filed Form 10-K.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 and 1997
Net Revenues. Revenues decreased $6.3 million, or 34.1%, to $12.3 million for
the three months ended June 30, 1998 as compared to the $18.6 million for the
three months ended June 30, 1997. Sales to U.S. military customers for the three
months ended June 30, 1998, decreased by $6.6 million, or 72.0%, to $2.6
million, primarily due to decreased sales to the U.S. Marine Corps. Sales to
U.S. law enforcement customers for the three months ended June 30, 1998
decreased by $298,000, or 17.2%, to $1.4 million. Sales to international
customers for the three months ended June 30, 1998 increased $56,000, or 0.8%,
to $7.4 million, including $2.5 million from Simtran. Sales to U.S.
hunter/sports customers for the three months ended June 30, 1998 increased
$502,000, or 141.0%, to $858,000 primarily attributable to the acquisition of
Dart.
Cost of Revenues. Cost of revenues decreased $0.7 million, or 8.4%, to $7.6
million for the three months ended June 30, 1998 as compared to $8.2 million for
the three months ended June 30, 1997. As a percentage of revenues, cost of
revenues increased to 61.6% for the three months ended June 30, 1998 as compared
to 44.3% for the three months ended June 30, 1997. The increase in cost of
revenues as a percentage of revenues is attributable to the higher costs of
Simtran's products under development, as well as, the lower volume of revenues
to cover the fixed portion of cost of goods sold.
Gross Profit. As a result of the foregoing, gross profit decreased $5.7 million,
or 54.5%, to $4.7 million, or 38.4% of revenues, for the three months ended June
30, 1998 as compared to $10.4 million, or 55.7% of revenues, for the three
months ended June 30, 1997.
Total Operating Expenses. Total operating expenses increased $0.6 million, or
10.7%, to $6.1 million for the three months ended June 30, 1998 as compared to
$5.5 million for the three months ended June 30, 1997. As a percentage of
revenues, total operating expenses increased to 49.4% for the three months ended
June 30, 1998 as compared to 29.4% for the three months ended June 30, 1997. A
significant portion of the increase is attributable to the non-recurring
restructuring charge of $0.9 million. The non-recurring restructuring charge was
related to a workforce reduction and certain other measures incurred by the
Company in the first quarter of fiscal 1999. Selling, general and administrative
("S,G&A") expenses decreased $0.8 million or 19.3%. This decrease in S,G&A is
due primarily to a decrease in agents' commissions. Operating expenses also
increased due to a $0.3 million increase in depreciation and amortization
expense primarily attributable to an increase in goodwill amortization from the
Company's recent purchases. Operating expenses also increased due to a $0.2
million increase in research and development ("R&D") expenses primarily
attributable to the Company's development of new products and improvement of
existing products, as well as, the products under development at it's newly
acquired Simtran subsidiary.
8
<PAGE> 9
Operating Income (Loss). As a result of the foregoing, operating income
decreased $6.2 million, or 127.4%, to an operating loss of $1.3 million, or
(10.9)% of revenues, for the three months ended June 30, 1998 as compared to
26.3% of revenues, for the three months ended June 30, 1997.
Other (Expense) Income, net. Net interest expense totaled $1.6 million, or 13.1%
of revenues for the three months ended June 30, 1998 as compared to $1.5
million, or 7.8% of revenues for the three months ended June 30, 1997. The
increase in interest expense is attributable to the increase in borrowings
incurred in connection with the Company's acquisitions and for the Company's
working capital needs.
Provision (Benefit) for Income Taxes. The effective tax rate decreased to 34.0%
of income before taxes for the three months ended June 30, 1998 as compared to
36.0% of income before taxes for the three months ended June 30, 1997. This
decrease was primarily attributable to the increase in international revenues as
a percentage of revenues, which increased the tax benefits derived from the
Company's foreign sales subsidiary.
Net Income (Loss). As a result of the foregoing, net income as reported
decreased $4.2 million, or 192.3%, to a net loss of $2.0 million ($0.10 per
share), or (16.5)% of revenues for the three months ended June 30, 1998 as
compared to $2.2 million ($0.10 per share), or 11.7% of revenues for the three
months ended June 30, 1997.
BACKLOG
Backlog represents customer orders that have been contracted for future
delivery. Accordingly, these orders have not yet been recognized as revenue, but
represent potential revenue. As of June 30, 1998, the Company had a backlog of
approximately $44.0 million, comprised of $25.2 million from FATS international
customers, $16.4 from Simtran's Canadian customers and $1.8 million from FATS
U.S. military customers. Recognition of Simtran's backlog will be dependent upon
delivery and acceptance of its products currently under development.
Approximately $30.1 million of the contracted orders are scheduled for delivery
during fiscal year 1999.
U.S. ARMY EST PROCUREMENT PROCESS
The Company has been actively participating in a competitive bidding process for
the proposed U.S. Army Engagement Skills Trainer ("EST") program, a U.S.
military procurement award anticipated to be at least as large as the Company's
current U.S. Marine Corps Contract 2014. On May 14, 1998, the Company received
notification on behalf of the U.S. Army that its proposal in response to the
ongoing competition had been excluded from further consideration. On June 2,
1998, the Company filed an action in the United States Court of Federal Claims
to protest this decision, and to obtain an injunction against any award of the
EST contract until the Court can rule on the Company's protest. As part of this
action, the Company has requested that the Court order the procurement authority
to continue its consideration of the Company's proposal and to engage in
meaningful discussions with the Company. Although the Company intends to pursue
this matter vigorously, there can be no assurance that the Court will grant the
relief requested. Furthermore, even if the Company is successful in securing the
right to continue in the competitive bidding process, there can be no assurance
that the Company would
9
<PAGE> 10
ultimately be successful in securing the EST contract award. In view of the
Company's substantial completion of Marine Corps Contract 2014 and the more
limited scope of other U.S. military opportunities, the failure to secure an
award of the U.S. Army EST contract could have a material adverse effect on the
Company's future revenues from the U.S. military, particularly as compared with
the U.S. military revenues during fiscal 1997 and 1998, and on results of
operations and financial condition of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity and capital resource needs currently and for
the near future are to fund working capital, debt service and capital
expenditures necessary to support its business. The Company's primary sources of
liquidity and capital resources are cash generated from operating activities and
the senior bank debt. Net working capital was $20.9 million at June 30, 1998 and
$18.9 million at March 31, 1998.
As of June 26, 1998, the Company amended the NationsBank credit agreement to
provide for an increase in interest rates and for a temporary relaxation of
certain restrictive covenants. These covenant changes were based on the
Company's business outlook at that time which assumed delivery of orders from
new and existing customers and delivery of $35.6 million of the $49.4 million in
backlog as of March 31, 1998. However, there can be no assurance that the
Company will meet these covenants and that further bank debt borrowings will be
available should it fail to do so. As of August 5, 1998, the Company had
borrowings of $14 million and has outstanding letters of credit of approximately
$1.5 million under the $25 million revolving credit facility. The Company
believes that the cash flow from operations combined with the borrowings under
the senior bank debt, will be sufficient to meet the Company's presently
anticipated working capital, capital expenditure and debt service needs for at
least the next 12 months.
The Company's operating activities used cash of $5.6 million in the three months
ended June 30, 1998 and generated $3.8 million in the three months ended June
30, 1997. The $9.4 million decrease in net cash provided by operations was
primarily due to the net loss during the quarter and the decrease in deferred
revenues, accounts payable and accrued liabilities.
The Company's investing activities used cash of $0.8 million for the three
months ended June 30, 1998 and $2.6 million for the three months ended June 30,
1997. The Company's primary investing activity in the three month period ended
June 30, 1998 was for capital expenditures that were primarily for equipment
used in manufacturing, R&D and general administration. The Company's other use
of cash for investing activities for the three months ended June 30, 1998 was
for transaction and other costs associated with the purchase of Dart on April 1,
1998, net of cash acquired.
The Company's financing activities generated cash of $5.0 million for the three
months ended June 30, 1998. The Company's primary financing activity in the
three month period ended June 30, 1998, was the net borrowing of $5.1 million
from its credit facility in connection with the Company's recent acquisitions
and capital expenditures and the working capital needs to fund the operations of
the Company.
The Company's indebtedness and the related covenants will have several important
effects on its future operations, including, but not limited to, the following:
(i) a portion of the Company's
10
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cash flow from operations must be dedicated to the payment of interest on and
principal of its indebtedness and will not be available for other purposes; (ii)
the Company's ability to obtain additional financing in the future for working
capital, capital expenditures, R&D, acquisitions, general corporate purposes or
other purposes may be limited; and (iii) the Company's level of indebtedness
could limit its flexibility in reacting to business developments and changes in
its industry and economic conditions generally.
Concentration of Credit Risk
At June 30, 1998, approximately $12.2 million in accounts receivable was due
from four international customers, of which approximately $6.5 million was
secured by performance letters of credit.
YEAR 2000
The Company expects to incur certain costs during the next two years to address
the impact of the Year 2000 problem on its information systems. The Year 2000
problem, which is common to most businesses, concerns the inability of
information systems, primarily computer software programs, to properly recognize
and process data-sensitive information on and beyond January 1, 2000. The
Company currently believes that it will be able to modify or replace its
affected systems in time to minimize any detrimental effects on operations. The
Company's products currently delivered to customers are designed to be Year 2000
compliant. Previously delivered customer products have minor issues relating to
computer printouts. These issues are corrected in all new releases of software
that are purchased by customers. The incremental costs of the Year 2000 project
are estimated between $50,000 and $100,000. These costs will be expensed as
incurred, unless new software is purchased that will be capitalized in
accordance with the Company's policy. The Company does not expect that the Year
2000 problem will have a material impact on the results of operations, liquidity
or consolidated financial position of the Company.
CERTAIN FORWARD LOOKING STATEMENTS
The foregoing forward-looking statements are subject to a number of factors
which could cause actual results to differ as described above and under Item 5
"Other Information". No assurance can be given that actual revenues, operating
income or net income will not be materially different than those anticipated
above.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been actively participating in a competitive bidding process for
the proposed U.S. Army Engagement Skills Trainer ("EST") program, a U.S.
military procurement award anticipated to be at least as large as the Company's
current U.S. Marine Corps Contract 2014. On May 14, 1998, the Company received
notification on behalf of the U.S. Army that its proposal in response to the
ongoing competition had been excluded from further consideration. On June 2,
1998, the Company filed an action in the United States Court of Federal Claims
to protest this decision, and to obtain an injunction against any award of the
EST contract until the Court can rule on the Company's protest. As part of this
action, the Company has requested that the Court order the procurement authority
to continue its consideration of the Company's proposal and to engage in
meaningful discussions with the Company. Although the Company intends to pursue
this matter vigorously, there can be no assurance that the Court will grant the
relief requested. Furthermore, even if the Company is successful in securing the
right to continue in the competitive bidding process, there can be no assurance
that the Company would ultimately be successful in securing the EST contract
award. In view of the Company's substantial completion of Marine Corps Contract
2014 and the more limited scope of other U.S. military opportunities, the
failure to secure an award of the U.S. Army EST contract could have a material
adverse effect on the Company's future revenues from the U.S. military,
particularly as compared with the U.S. military revenues during fiscal 1997 and
1998, and on results of operations and financial condition of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- U.S. Army EST Procurement Process"
On October 3, 1997, Dart, a Company subsidiary, was sued by Advanced Interactive
Systems, Inc. ("AIS") for alleged infringement of a patent owned by AIS, U.S.
Patent No. 5,649,706 (the "706 Patent"). Dart filed its answer on December 2,
1997, denying all material allegations, asserting numerous affirmative defenses,
and counterclaiming for a judicial declaration of noninfringement, patent
invalidity, patent unenforceability, and for damages for unjust enrichment.
Discovery is ongoing at this time, and no dispositive motions have been filed or
heard. In the opinion of the Company's management, this proceeding will not have
a material adverse effect on the Company's financial position, liquidity, or
results of operations.
The Company is involved in legal proceedings from time to time in the ordinary
course of its business which, in the opinion of management, will not have a
materially adverse effect on the Company's financial position, liquidity, or
results of operation.
ITEM 2. CHANGES IN SECURITIES - RECENT SALES OF UNREGISTERED SECURITIES
On April 1, 1998, FATS, Inc. acquired the outstanding stock of Dart in exchange
for 257,577 Class A common shares of the Company. The Company issued the 257,577
non-registered Class A common shares to the stockholders of Dart in a private
placement pursuant to Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933, as amended.
12
<PAGE> 13
ITEM 5. OTHER INFORMATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain statements in this filing, and elsewhere (such as in other filings by
the Company with the Commission, press releases, presentations by the Company or
its management and oral statements) constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, (i) those described above including the
timing and size of, and the Company's success in competing for, new contracts
awarded by military and other government customers; (ii) significant variability
in the Company's quarterly revenues and results of operations as a result of
variations in the number and size of the Company's shipments in a particular
quarter while a significant percentage of its operating expenses are fixed in
advance; (iii) concentrations of revenues from a few large customers who vary
from one period to the next; (iv) the high percentage of sales to military and
law enforcement authorities whose orders are subject to extensive government
regulations, termination for a variety of factors and budgetary constraints; (v)
a significant and increasing proportion of international sales which may be
subject to political, monetary and economic risks, including greater credit
risks; (vi) the relatively undeveloped nature of the market for small and
supporting arms training simulators and the need for continued adoption of
simulation training systems if the market is to expand; (vii) the potential for
increased competition; (viii) the Company's ability to attract and retain key
personnel and adapt to changing technologies; and (ix) other factors described
in the Company's Form 10-K for the fiscal year ended March 31, 1998 under the
caption Part I and in the Company's Prospectus under the caption "Risk Factors".
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following documents are filed with this report as exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.01 Resignation Agreement, dated as of May 8, 1998, between FATS, Inc. and
David A. Apseloff.
10.02 Resignation Agreement, dated as of June 26, 1998, between FATS, Inc.
and Robert B. Terry, Jr.
10.03 Resignation Agreement, dated as of July 10, 1998, between FATS, Inc.
and Gregory F. Echols.
10.04 Consulting Agreement, dated as of August 1, 1997, between the Company
and Craig I. Fields, Ph.D.
10.05 First Amendment to Stock Option Agreement Series A, dated as of
September 18, 1996, between the Company and David A. Apseloff.
10.06 First Amendment to Stock Option Agreement Series B, dated as of
September 18, 1996, between the Company and David A. Apseloff.
10.07 Stock Option Agreement Series D, dated as of April 17, 1997, between
the Company and David A. Apseloff.
10.08 First Amendment to Stock Option Agreement Series D, dated as of April
17, 1997, between the Company and David A. Apseloff.
10.09 First Amendment to Stock Option Agreement Series A, dated as of
September 18, 1996, between the Company and Gregory F. Echols.
10.10 First Amendment to Stock Option Agreement Series B, dated as of
September 18, 1996, between the Company and Gregory F. Echols.
10.11.01 Stock Option Agreement Series D, dated as of April 17, 1997, between
the Company and Gregory F. Echols.
10.11.02 First Amendment to Stock Option Agreement Series D, dated as of
April 17, 1997, between the Company and Gregory F. Echols. Amendments
identical in all material respects were adopted for three Stock Option
agreements Series D, dated as of April 17, 1998, between the Company
and Gregory F. Echols.
10.12 First Amendment to Stock Option Agreement Series A, dated as of
September 18, 1996, between the Company and Robert B. Terry, Jr.
10.13 First Amendment to Stock Option Agreement Series B, dated as of
September 18, 1996, between the Company and Robert B. Terry, Jr.
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
10.14.01 Stock Option Agreement Series D, dated as of April 17, 1997, between
the Company and Robert B. Terry, Jr.
10.14.02 First Amendment to Stock Option Agreement Series D, dated as of April
17, 1997, between the Company and Robert B. Terry, Jr. Amendments
identical in all material respects were adopted for three Stock
Option Agreements Series D, dated as of April 17, 1998, between the
Company and Robert B. Terry, Jr.
10.15 Stock Subscription and Purchase Agreement, dated as of April 23,
1998, between the Company and Centre Capital Investors II, L.P.,
Centre Partners Coinvestment, L.P., Centre Capital Offshore
Investments II, L.P., and Centre Capital Tax-Exempt Investors II, L.P.
10.16.01 First Amendment to Stock Option Agreement Series B, dated as of
September 15, 1996 between the Company and Robert F. Mecredy.
10.16.02 Schedule identifying each First Amendment to Stock Option Agreement
Series B, dated as of September 18, 1996, substantially identical in
all material respects to Schedule 10.16.01 (filed as Exhibit 10.15.01
to the Company's Registration Statement No. 333-13105.
11.01 Statement regarding computation of net income per common share.
27.01 Financial Data Schedule. (for SEC use only).
</TABLE>
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1998.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: August 12, 1998
FIREARMS TRAINING SYSTEMS, INC.
(Registrant)
\s\ Peter A. Marino
------------------------------------------------
Peter A. Marino
Chief Executive Officer and President
\s\ Emory O. Berry
------------------------------------------------
Emory O. Berry
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
16
<PAGE> 1
EXHIBIT 10.01
CONFIDENTIAL RESIGNATION AGREEMENT
This Confidential Resignation Agreement ("Agreement") is
entered into by and between David A. Apseloff ("Apseloff") and FATS, Inc.
("FATS"), Apseloff's employer, on this 8th day of May, 1998.
WHEREAS, Apseloff and FATS desire to enter into an agreement
that sets forth the terms and conditions of Apseloff's resignation of
employment.
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the adequacy and sufficiency of which are hereby
acknowledged, Apseloff and FATS agree as follows:
1. Apseloff shall continue to perform his normal, full-time duties as
Chief Financial Officer ("CFO") for FATS through July 31, 1998 (the "Active
Severance Date"). Such duties shall include, but not be limited to:
a. Coordinating preparation and filing of the Fiscal Year 1998
Form 10-K,
b. Coordinating preparation of the 1998 Annual Report and Proxy
Statement,
c. Coordinating preparation and filing of 1998 tax returns,
d. Assisting with review and structuring of corporate
transactions,
e. Assisting with corporate budget and financial analysis,
f. Training and providing transition assistance for successor
CFO,
g. Coordinating all activities of FATS' independent auditors, and
h. Coordinating analysts' calls, providing guidance for Fiscal
Year 1999 interaction with analysts, participating in analyst
and investor visits, and providing general oversight of
investor relations.
<PAGE> 2
Notwithstanding the foregoing, FATS may release Apseloff from his obligation to
provide these services prior to the Active Severance Date if FATS' Chief
Executive Officer ("CEO") determines, in his sole discretion, that these
services have been completed.
2. During the period prior to the Active Severance Date, FATS will allow
Apseloff to be absent up to one day per week to conduct job search activities.
3. Apseloff shall continue to be employed by FATS through October 31, 1998
or until Apseloff commences employment with another employer, whichever is
earlier (the "Final Severance Date"). During the period between the Active
Severance Date and the Final Severance Date, Apseloff agrees that he will make
himself available to answer questions and to provide consultation to FATS on
matters in which he was involved prior to the Active Severance Date. FATS agrees
that it will schedule such communications with Apseloff at such times and under
such circumstances that will not unreasonably interfere with Apseloff's future
employment or his efforts to obtain employment with another employer. Apseloff's
employment with FATS will cease for all purposes on the Final Severance Date.
4. Effective as of the Active Severance Date, Apseloff shall resign from
his position as an officer or a director, as the case may be, of FATS and all
related entities including (i) Firearms Training Systems, Inc., (ii) FATS Canada
Holdings, Inc., (iii) Simtran Technologies, Inc., (iv) Dart International, Inc.,
(v) Firearms Training Systems Netherlands, B.V. and (vi) FSS, Inc.
5. FATS will pay Apseloff his current bi-weekly salary of $4,807.70, less
withholding for income and employment taxes to the extent required by law,
through the Final Severance Date. Such payments will be made to Apseloff on
FATS' regularly scheduled pay dates.
6. Apseloff shall be entitled to continue to participate in FATS'
established employee benefit plans and programs through the Final Severance Date
on the same terms and conditions as comparable executive-level FATS employees.
Following the Final Severance Date, Apseloff shall have the right to continue to
participate in the FATS group health plan, at his own expense, in accordance
with, and to the extent provided by, part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
2
<PAGE> 3
7. Apseloff shall continue to earn vacation benefits under FATS'
established vacation policy through his Active Severance Date. He will not earn
any further vacation benefits during the period between his Active Severance
Date and the Final Severance Date. Apseloff shall be paid for any earned but
unused vacation benefits that he may have as of the Active Severance Date on the
first FATS pay date following his Active Severance Date.
8. Apseloff shall be paid a bonus for FATS' fiscal year ended March 31,
1998 in an amount equal to $50,000 (less withholding for income and employment
taxes to the extent required by law). Such bonus shall be payable as soon as
administratively practicable after execution of this Agreement. Apseloff shall
not be entitled to a bonus from FATS on account of services performed in any
subsequent fiscal year.
9. As of the date of this Agreement, the following stock option agreements
shall be modified by execution of amendments thereto:
a. Stock Option Agreement Series A, dated September 18, 1996 (a copy
of such agreement and a copy of the form of amendment setting forth
the modifications thereto are attached hereto as Exhibit A1 and
Exhibit A2, respectively);
b. Stock Option Agreement Series B, dated September 18, 1996 (a copy
of such agreement and a copy of the form of amendment setting forth
the modifications thereto are attached hereto as Exhibit B1 and
Exhibit B2, respectively); and
c. Stock Option Agreement Series D, dated April 17, 1997 (a copy of
such agreement and a copy of the form of amendment setting forth
the modifications thereto are attached hereto as Exhibit C1 and
Exhibit C2, respectively).
10. a. Apseloff, on his own behalf and on behalf of anyone claiming through
him, hereby agrees and promises not to sue, file an administrative charge (other
than any claim for unemployment benefits that can be claimed for any period
following the Final Severance Date in the event that Apseloff is unable to
secure future employment), or otherwise initiate any legal proceeding against,
and further agrees to release and discharge FATS and its parents, owners,
divisions, subsidiaries, partnerships, affiliates and/or other related entities,
including the entities
3
<PAGE> 4
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996 as the "Centre Entities," and each of these entities' past, present,
and future trustees, fiduciaries, shareholders, administrators, directors,
officers, agents, partners, members, employees, attorneys, and the predecessors,
successors, and assigns of each of them (hereinafter collectively referred to as
the "Released Parties") with respect to any and all claims, rights, or causes of
action that Apseloff now has, has ever had, or may ever have, whether currently
known or unknown, against any of the Released Parties arising from any act or
omission of any nature or kind from the beginning of time through the date
Apseloff executes this Agreement including, but not limited to, claims, rights,
or causes of action related in any way to Apseloff's employment, hiring,
conditions of employment, or termination from employment in accordance with the
terms of this Agreement, and including, but not limited to, any claims, rights,
or causes of action arising under any federal, state, or local law, regulation,
or ordinance or the common law including, but not limited to, Title VII of the
Civil Rights Act of 1964 as amended, the Civil Rights Act of 1991, the Americans
with Disabilities Act, ERISA, and the Family and Medical Leave Act of 1993.
Apseloff represents and warrants that he has not filed or initiated any legal,
equitable, administrative, or other proceeding against any of the Released
Parties and that no such proceedings have been initiated against any of the
Released Parties on his behalf. Apseloff will not cause or encourage any legal,
equitable, administrative or other proceeding to be maintained or instituted
against any of the Released Parties, and he will not participate in any manner
in any such proceedings against any of the Released Parties, except as required
by law, and except for any claim for unemployment benefits as described above.
b. Notwithstanding the provisions of paragraph 10(a) of this
Agreement, nothing herein is intended to release, discharge, or extinguish any
rights that Apseloff may have under the Firearms Training Systems, Inc. 401(k)
Profit Sharing Plan, in accordance with the terms of such plan.
11. Apseloff represents and warrants that he is the sole owner of the
actual or alleged claims, rights, causes of action, and other matters that are
released herein; that the same have not been transferred or assigned or caused
to be transferred or assigned to any other person, firm, corporation or other
legal entity; and that he has the full right and power to grant, execute and
deliver the releases, undertakings, and agreements contained herein.
4
<PAGE> 5
12. Apseloff agrees that he has no present or future right to employment
with the Released Parties and that he will not apply or seek consideration for
any employment, engagement, or contract with the Released Parties.
13. Apseloff agrees and acknowledges that he continues to be bound by the
terms and conditions contained in the Agreement that he entered into with FATS
on March 14, 1996 (the "Non-Compete Agreement"), a copy of which is attached
hereto as Exhibit D. The Non-Compete Agreement is hereby incorporated herein,
subject to the following modifications:
a. Paragraph 1(b) is amended to read as follows:
"Termination Date" - the Final Severance Date defined in the
Confidential Resignation Agreement, dated May 8, 1998, between
Employee and FATS.
b. Paragraph 4 is amended to read as follows:
Solicitation of Customers. During Employment and for three years
after the Termination Date, Employee will not solicit Customers for
the purpose of providing Services or for the purpose of selling
products identical to or reasonably substitutable for FATS
Products.
c. Paragraph 5 is amended to read as follows:
Solicitation of FATS Employees. During employment and for three
years after the Termination Date, Employee will not solicit for
employment with another Person anyone who is or was, anytime during
the year preceding the Termination Date, a FATS employee.
d. Paragraph 6 is amended to read as follows:
Limitations on Post-Termination Competition. During employment and
for three years after the Termination Date, Employee will not
provide Services within the Territory to any Person selling
products identical to or reasonably substitutable for FATS
Products.
e. Paragraph 9 is amended to read as follows:
Future Employment Opportunities. At any time before, and for three
years after, the Termination Date, Employee shall provide any
prospective
5
<PAGE> 6
employer with a copy of this Agreement, and upon accepting any
employment with another Person, provide FATS with the employer's
name and a description of the services Employee will provide.
14. Apseloff agrees that, on or before the Final Severance Date, he will
submit any claims for reimbursement of business expenses actually
incurred by him. FATS will reimburse Apseloff for such expenses in
accordance with FATS' policy on reimbursement for business expenses.
Apseloff agrees that FATS will have no obligation to reimburse him for
any expenses that are not submitted to FATS on or prior to the Final
Severance Date.
15. Apseloff agrees that he will not disclose the existence or terms of
this Agreement to any third parties with the exception of his
accountants, attorneys, spouse, future employers, and FATS employees
with a need to know, each of whom shall be bound by this
confidentiality provision, or as may be required to comply with legal
process. Apseloff understands and agrees that this promise of
confidentiality is a material inducement to FATS to enter into this
Agreement.
16. Nothing in this Agreement is intended to or shall be construed as an
admission by FATS or any of the other Released Parties that it has
violated any law, interfered with any right, breached any obligation,
or otherwise engaged in any improper or illegal conduct with respect to
Apseloff or otherwise, and the Released Parties expressly deny any such
illegal or wrongful conduct.
17. In the event the CEO of FATS determines, in his sole discretion, that
Apseloff has breached or failed to comply with any of his obligations
under this Agreement or under the Non-Competition Agreement, as amended
herein, at any time during the three-year period commencing on the
Final Severance Date (the "Compliance Period"), then FATS, in addition
to any other remedies that it may have either in law or in equity, may
declare that Apseloff is not in compliance with this Agreement;
provided that nothing contained herein shall require Apseloff to return
to FATS any salary, bonus or benefits that have accrued hereunder prior
to the Final Severance Date. In such an event FATS shall have no
further obligations under this Agreement. Apseloff's duties and
obligations under the Non-Compete Agreement, as amended herein, shall
continue in full force and effect.
6
<PAGE> 7
18. For all purposes, including without limitation the stock option
agreements referenced in Paragraph 9 above, Apseloff's termination of
employment hereunder shall be deemed to be a termination by the Company
other than for "Cause" (as defined in such stock option agreements),
provided the terms and conditions of this Agreement are complied with.
19. This Agreement embodies the entire agreement and understanding of the
parties hereto with regard to the matters described herein. This
Agreement shall inure to the benefit of FATS and its successors and
assignees, and shall be binding upon Apseloff and Apseloff's heirs,
administrators, executors, and personal representatives.
20. This Agreement shall be construed and interpreted in accordance with
the laws of the State of Georgia. Only courts in the State of Georgia
shall have jurisdiction over any controversy or claim arising under or
related to this Agreement. Each party irrevocable (a) consents to the
jurisdiction and venue of the courts of the State of Georgia, including
federal courts in Georgia, in any action arising under or relating to
this Agreement, and (b) waives any jurisdictional defenses (including
personal jurisdiction and venue) to any such action.
21. This Agreement may be modified only in writing, and any party's failure
to enforce this Agreement in the event of one or more events that
violate this Agreement shall not constitute a waiver of any right to
enforce this Agreement against subsequent violations.
This Agreement may be executed in two counterparts each of which shall
be deemed an original and both of which together shall constitute one and the
same instrument.
FATS, INC.
By: /s/ Peter A. Marino
Peter A. Marino
Its: President
/s/ David A. Apseloff
DAVID A. APSELOFF
7
<PAGE> 1
EXHIBIT 10.02
CONFIDENTIAL RESIGNATION AGREEMENT
This Confidential Resignation Agreement ("Agreement") is entered into
by and between Robert B. Terry, Jr. ("Terry") and FATS, Inc. ("FATS"), Terry's
employer, on this 26th day of June, 1998.
WHEREAS, Terry and FATS desire to enter into an agreement that sets
forth the terms and conditions of Terry's resignation of employment.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
and FATS agree as follows:
1. Terry's full-time duties as Vice President, Operations for FATS ended on June
20, 1998 (the "Active Severance Date").
2. [ OMITTED ]
3. Terry shall continue to be employed by FATS through January 1, 1999 or until
Terry commences full-time employment with another employer, whichever is earlier
(the "Final Severance Date"). During the period between the Active Severance
Date and the Final Severance Date, Terry agrees that he will make himself
available to answer questions and to provide consultation to FATS on matters in
which he was involved prior to the Active Severance Date. FATS agrees that it
will schedule such communications with Terry at such times and under such
circumstances that will not unreasonably interfere with Terry's future
employment or his efforts to obtain employment with another employer. Terry's
employment with FATS will cease for all purposes on the Final Severance Date.
4. Effective as of the Active Severance Date, Terry shall resign from his
position as an officer of FATS and all related entities, including Firearms
Training Systems, Inc.
5. FATS will pay Terry his current bi-weekly salary of $3,846.15 (to be reduced
by any part-time earnings received by Terry during the period between the Active
Severance Date and the Final Severance Date), less withholding for income and
employment taxes to the extent required by law, through the Final Severance
Date. Such payments will be made to Terry on FATS' regularly scheduled pay
dates.
<PAGE> 2
6. Terry shall be entitled to continue to participate in FATS' established
employee benefit plans and programs through the Final Severance Date on the same
terms and conditions as comparable executive-level FATS employees. Following the
Final Severance Date, Terry shall have the right to continue to participate in
the FATS group health plan, at his own expense, in accordance with, and to the
extent provided by, part 6 of Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
7. Terry has earned vacation benefits under FATS' established vacation policy
through his Active Severance Date. He will not earn any further vacation
benefits during the period between his Active Severance Date and the Final
Severance Date. Terry shall be paid for any earned but unused vacation benefits
that he may have as of the Active Severance Date on the first FATS pay date
following his Active Severance Date.
8. As of the date of this Agreement, the following stock option agreements shall
be modified by execution of amendments thereto:
a. Stock Option Agreement Series A, dated September 18, 1996 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit A1 and Exhibit A2,
respectively);
b. Stock Option Agreement Series B, dated September 18, 1996 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit B1 and Exhibit B2,
respectively); and
c. Stock Option Agreement Series D, dated April 17, 1997 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit C1 and Exhibit C2,
respectively).
d. Stock Option Agreement Series D, dated April 17, 1998 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit D1 and Exhibit D2,
respectively).
e. Stock Option Agreement Series D, dated April 17, 1998 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are
2
<PAGE> 3
attached hereto as Exhibit E1 and Exhibit E2, respectively).
f. Stock Option Agreement Series D, dated April 17, 1998 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit F1 and Exhibit F2,
respectively).
9. a. Terry, on his own behalf and on behalf of anyone claiming through him,
hereby agrees and promises not to sue, file an administrative claim, or
otherwise initiate any legal proceeding against, and further agrees to release
and discharge FATS and its parents, owners, divisions, subsidiaries,
partnerships, affiliates and/or other related entities, including the entities
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996 as the "Centre Entities," and each of these entities' past, present,
and future trustees, fiduciaries, shareholders, administrators, directors,
officers, agents, partners, members, employees, attorneys, and the predecessors,
successors, and assigns of each of them (hereinafter collectively referred to as
the "Released Parties") with respect to any and all claims, rights, or causes of
action that Terry now has, has ever had, or may ever have, whether currently
known or unknown, against any of the Released Parties arising from any act or
omission of any nature or kind from the beginning of time through the date Terry
executes this Agreement including, but not limited to, claims, rights, or causes
of action related in any way to Terry's employment, hiring, conditions of
employment, or termination from employment in accordance with the terms of this
Agreement, and including, but not limited to, any claims, rights, or causes of
action arising under any federal, state, or local law, regulation, or ordinance
or the common law including, but not limited to, Title VII of the Civil Rights
Act of 1964 as amended, the Civil Rights Act of 1991, the Americans with
Disabilities Act, ERISA, and the Family and Medical Leave Act of 1993. Terry
represents and warrants that he has not filed or initiated any legal, equitable,
administrative, or other proceeding against any of the Released Parties and that
no such proceedings have been initiated against any of the Released Parties on
his behalf. Terry will not cause or encourage any legal, equitable,
administrative or other proceeding to be maintained or instituted against any of
the Released Parties for the claims released hereunder, and he will not
participate in any manner in any such proceedings against any of the Released
Parties, except as required by law, and except for any claim for unemployment
benefits as described above.
3
<PAGE> 4
b. Notwithstanding the provisions of paragraph 9(a) of this Agreement, nothing
herein is intended to release, discharge, or extinguish any rights that
Terry may have under the Firearms Training Systems, Inc. 401(k) Profit
Sharing Plan, in accordance with the terms of such plan.
10. Terry represents and warrants that he is the sole owner of the actual or
alleged claims, rights, causes of action, and other matters that are released
herein; that the same have not been transferred or assigned or caused to be
transferred or assigned to any other person, firm, corporation or other legal
entity; and that he has the full right and power to grant, execute and deliver
the releases, undertakings, and agreements contained herein.
11. Terry agrees that he has no present or future right to employment with the
Released Parties, except as specifically described above, and that he will not
apply or seek consideration for any employment, engagement, or contract with the
Released Parties, unless requested to do so by any of the said Released Parties.
12. Terry agrees and acknowledges that he continues to be bound by the terms and
conditions contained in the Agreement that he entered into with FATS on March
14, 1996 (the "Non-Compete Agreement"), a copy of which is attached hereto as
Exhibit G. The Non-Compete Agreement is hereby incorporated herein, subject to
the following modifications:
a. Paragraph 1(b) is amended to read as follows:
"Termination Date" - the Final Severance Date defined in the Confidential
Resignation Agreement, dated June ___, 1998, between Employee and FATS.
b. Paragraph 4 is amended to read as follows:
Solicitation of Customers. During Employment and for three years after the
Termination Date, Employee will not solicit Customers for the purpose of
providing Services or for the purpose of selling products identical to or
reasonably substitutable for FATS Products.
c. Paragraph 5 is amended to read as follows:
Solicitation of FATS Employees. During employment and for three years after
the Termination Date, Employee will not solicit for employment with another
Person anyone who is or was, anytime during the year preceding the
Termination Date, a FATS employee.
4
<PAGE> 5
d. Paragraph 6 is amended to read as follows:
Limitations on Post-Termination Competition. During employment and for
three years after the Termination Date, Employee will not provide Services
within the Territory to any Person selling products identical to or
reasonably substitutable for FATS Products.
e. Paragraph 9 is amended to read as follows:
Future Employment Opportunities. At any time before, and for three years
after, the Termination Date, Employee shall provide any prospective
employer with a copy of this Agreement, and upon accepting any employment
with another Person, provide FATS with the employer's name and a
description of the services Employee will provide.
13. Terry agrees that, on or before the Final Severance Date, he will
submit any claims for reimbursement of business expenses actually incurred by
him. FATS will reimburse Terry for such expenses in accordance with FATS' policy
on reimbursement for business expenses. Terry agrees that FATS will have no
obligation to reimburse him for any expenses that are not submitted to FATS on
or prior to the Final Severance Date.
14. Terry agrees that he will not disclose the existence or terms of this
Agreement to any third parties with the exception of his accountants, attorneys,
spouse, future employers, and FATS employees with a need to know, each of whom
shall be bound by this confidentiality provision, or as may be required to
comply with legal process. Terry understands and agrees that this promise of
confidentiality is a material inducement to FATS to enter into this Agreement.
15. Nothing in this Agreement is intended to or shall be construed as an
admission by FATS or any of the other Released Parties that it has violated any
law, interfered with any right, breached any obligation, or otherwise engaged in
any improper or illegal conduct with respect to Terry or otherwise, and the
Released Parties expressly deny any such illegal or wrongful conduct.
16. In the event the CEO of FATS determines, in his reasonable discretion, that
Terry has breached or failed to comply with any of his obligations under this
Agreement or under the Non-Competition Agreement, as
5
<PAGE> 6
amended herein, at any time during the three-year period commencing on the Final
Severance Date (the "Compliance Period"), then FATS, in addition to any other
remedies that it may have either in law or in equity, may declare that Terry is
not in compliance with this Agreement. In such an event FATS shall have no
further obligations under this Agreement. However, Terry's duties and
obligations under this Agreement and the Non-Compete Agreement, as amended
herein, shall continue in full force and effect.
17. For all purposes, including without limitation the stock option agreements
referenced in Paragraph 8 above, Terry's termination of employment hereunder
shall be deemed to be a termination by the Company other than for "Cause" (as
defined in such stock option agreements), provided that the terms and conditions
of this Agreement are complied with.
18. This Agreement embodies the entire agreement and understanding of the
parties hereto with regard to the matters described herein. This Agreement shall
inure to the benefit of FATS and its successors and assignees, and shall be
binding upon Terry and Terry's heirs, administrators, executors, and personal
representatives.
19. This Agreement shall be construed and interpreted in accordance with the
laws of the State of Georgia. Only courts in the State of Georgia shall have
jurisdiction over any controversy or claim arising under or related to this
Agreement. Each party irrevocable (a) consents to the jurisdiction and venue of
the courts of the State of Georgia, including federal courts in Georgia, in any
action arising under or relating to this Agreement, and (b) waives any
jurisdictional defenses (including personal jurisdiction and venue) to any such
action.
20. This Agreement may be modified only in writing, and any party's failure to
enforce this Agreement in the event of one or more events that violate this
Agreement shall not constitute a waiver of any right to enforce this Agreement
against subsequent violations.
6
<PAGE> 7
This Agreement may be executed in two counterparts each of which shall
be deemed an original and both of which together shall constitute one and the
same instrument.
FATS, INC.
By: /s/ Peter A. Marino
Peter A. Marino
Its: President
/s/ Robert B. Terry, Jr.
ROBERT B. TERRY, JR.
7
<PAGE> 1
EXHIBIT 10.03
CONFIDENTIAL RESIGNATION AGREEMENT
This Confidential Resignation Agreement ("Agreement") is entered into by
and between Gregory F. Echols ("Echols") and FATS, Inc. ("FATS"), Echols'
employer, on this 10th day of July, 1998.
WHEREAS, Echols and FATS desire to enter into an agreement that sets forth
the terms and conditions of Echols' resignation of employment.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
and FATS agree as follows:
1. Echols performed his normal, full-time duties as Vice President,
Engineering for FATS through June 20, 1998 (the "Active Severance Date").
2. [ DELETED ]
3. Echols shall continue to be employed by FATS through January 1, 1999 or
until Echols commences employment with another employer, whichever is earlier
(the "Final Severance Date"). During the period between the Active Severance
Date and the Final Severance Date, Echols agrees that he will make himself
available to answer questions and to provide consultation to FATS on matters in
which he was involved prior to the Active Severance Date. FATS agrees that it
will schedule such communications with Echols at such times and under such
circumstances that will not unreasonably interfere with Echols's future
employment or his efforts to obtain employment with another employer. Echols's
employment with FATS will cease for all purposes on the Final Severance Date.
4. Effective as of the Active Severance Date, Echols shall resign from his
position as an officer or a director, as the case may be, of FATS and all
related entities, including Firearms Training Systems, Inc.
5. FATS will pay Echols his current bi-weekly salary of $4,230.77, less
withholding for income and employment taxes to the extent required by law,
through the Final Severance Date. Such payments will be made to Echols on FATS'
regularly scheduled pay dates.
<PAGE> 2
6. Echols shall be entitled to continue to participate in FATS' established
employee benefit plans and programs through the Final Severance Date on the same
terms and conditions as comparable executive-level FATS employees. Following the
Final Severance Date, Echols shall have the right to continue to participate in
the FATS group health plan, at his own expense, in accordance with, and to the
extent provided by, part 6 of Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
7. Echols shall continue to earn vacation benefits under FATS' established
vacation policy through his Active Severance Date. He will not earn any further
vacation benefits during the period between his Active Severance Date and the
Final Severance Date. Echols shall be paid for any earned but unused vacation
benefits that he may have as of the Active Severance Date on the first FATS pay
date following his Active Severance Date.
8. As of the date of this Agreement, the following stock option agreements
shall be modified by execution of amendments thereto:
a. Stock Option Agreement Series A, dated September 18, 1996 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit A1 and Exhibit A2,
respectively);
b. Stock Option Agreement Series B, dated September 18, 1996 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit B1 and Exhibit B2,
respectively); and
c. Stock Option Agreement Series D, dated April 17, 1997 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit C1 and Exhibit C2,
respectively).
d. Stock Option Agreement Series D, dated April 17, 1998 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit D1 and Exhibit D2,
respectively).
e. Stock Option Agreement Series D, dated April 17, 1998 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are
2
<PAGE> 3
attached hereto as Exhibit E1 and Exhibit E2, respectively).
f. Stock Option Agreement Series D, dated April 17, 1998 (a copy of such
agreement and a copy of the form of amendment setting forth the
modifications thereto are attached hereto as Exhibit F1 and Exhibit F2,
respectively).
9. a. Echols, on his own behalf and on behalf of anyone claiming through him,
hereby agrees and promises not to sue, file an administrative claim, or
otherwise initiate any legal proceeding against, and further agrees to release
and discharge FATS and its parents, owners, divisions, subsidiaries,
partnerships, affiliates and/or other related entities, including the entities
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996 as the "Centre Entities," and each of these entities' past, present,
and future trustees, fiduciaries, shareholders, administrators, directors,
officers, agents, partners, members, employees, attorneys, and the predecessors,
successors, and assigns of each of them (hereinafter collectively referred to as
the "Released Parties") with respect to any and all claims, rights, or causes of
action that Echols now has, has ever had, or may ever have, whether currently
known or unknown, against any of the Released Parties arising from any act or
omission of any nature or kind from the beginning of time through the date
Echols executes this Agreement including, but not limited to, claims, rights, or
causes of action related in any way to Echols' employment, hiring, conditions of
employment, or termination from employment in accordance with the terms of this
Agreement, and including, but not limited to, any claims, rights, or causes of
action arising under any federal, state, or local law, regulation, or ordinance
or the common law including, but not limited to, Title VII of the Civil Rights
Act of 1964 as amended, the Civil Rights Act of 1991, the Americans with
Disabilities Act, ERISA, and the Family and Medical Leave Act of 1993. Echols
represents and warrants that he has not filed or initiated any legal, equitable,
administrative, or other proceeding against any of the Released Parties and that
no such proceedings have been initiated against any of the Released Parties on
his behalf. Echols will not cause or encourage any legal, equitable,
administrative or other proceeding to be maintained or instituted against any of
the Released Parties, and he will not participate in any manner in any such
proceedings against any of the Released Parties, except as required by law, and
except for any claim for unemployment benefits as described above.
3
<PAGE> 4
b. Notwithstanding the provisions of paragraph 9(a) of this Agreement, nothing
herein is intended to release, discharge, or extinguish any rights that
Echols may have under the Firearms Training Systems, Inc. 401(k) Profit
Sharing Plan, in accordance with the terms of such plan.
10. Echols represents and warrants that he is the sole owner of the actual or
alleged claims, rights, causes of action, and other matters that are released
herein; that the same have not been transferred or assigned or caused to be
transferred or assigned to any other person, firm, corporation or other legal
entity; and that he has the full right and power to grant, execute and deliver
the releases, undertakings, and agreements contained herein.
11. Echols agrees that he has no present or future right to employment with the
Released Parties and that he will not apply or seek consideration for any
employment, engagement, or contract with the Released Parties, unless requested
by the Released Parties.
12. Echols agrees and acknowledges that he continues to be bound by the terms
and conditions contained in the Agreement that he entered into with FATS on
March 19, 1998(the "Non-Compete Agreement"), a copy of which is attached hereto
as Exhibit G. The Non-Compete Agreement is hereby incorporated herein, subject
to the following modifications:
a. Paragraph 1(b) is amended to read as follows:
"Termination Date" - the Final Severance Date defined in the Confidential
Resignation Agreement, dated July 10, 1998, between Employee and FATS.
b. Paragraph 4 is amended to read as follows:
Solicitation of Customers. During Employment and for three years after the
Termination Date, Employee will not solicit Customers for the purpose of
providing Services or for the purpose of selling products identical to or
reasonably substitutable for FATS Products.
c. Paragraph 5 is amended to read as follows:
Solicitation of FATS Employees. During employment and for three years after
the Termination Date, Employee will not solicit for employment with another
Person anyone who is or was, anytime during the year preceding the
Termination Date, a FATS employee.
4
<PAGE> 5
d. Paragraph 6 is amended to read as follows:
Limitations on Post-Termination Competition. During employment and for
three years after the Termination Date, Employee will not provide Services
within the Territory to any Person selling products identical to or
reasonably substitutable for FATS Products.
e. Paragraph 9 is amended to read as follows:
Future Employment Opportunities. At any time before, and for three years
after, the Termination Date, Employee shall provide any prospective
employer with a copy of this Agreement, and upon accepting any employment
with another Person, provide FATS with the employer's name and a
description of the services Employee will provide.
13. Echols agrees that, on or before the Final Severance Date, he will submit
any claims for reimbursement of business expenses actually incurred by him. FATS
will reimburse Echols for such expenses in accordance with FATS' policy on
reimbursement for business expenses. Echols agrees that FATS will have no
obligation to reimburse him for any expenses that are not submitted to FATS on
or prior to the Final Severance Date.
14. Echols agrees that he will not disclose the existence or terms of this
Agreement to any third parties with the exception of his accountants, attorneys,
spouse, future employers, and FATS employees with a need to know, each of whom
shall be bound by this confidentiality provision, or as may be required to
comply with legal process. Echols understands and agrees that this promise of
confidentiality is a material inducement to FATS to enter into this Agreement.
15. Nothing in this Agreement is intended to or shall be construed as an
admission by FATS or any of the other Released Parties that it has violated any
law, interfered with any right, breached any obligation, or otherwise engaged in
any improper or illegal conduct with respect to Echols or otherwise, and the
Released Parties expressly deny any such illegal or wrongful conduct.
16. In the event the CEO of FATS determines, in his reasonable discretion, that
Echols has breached or failed to comply with any of his obligations under this
Agreement or under the Non-Competition Agreement, as
5
<PAGE> 6
amended herein, at any time during the three-year period commencing on the Final
Severance Date (the "Compliance Period"), then FATS, in addition to any other
remedies that it may have either in law or in equity, may declare that Echols is
not in compliance with this Agreement. In such an event FATS shall have no
further obligations under this Agreement. However, Echols's duties and
obligations under this Agreement and the Non-Compete Agreement, as amended
herein, shall continue in full force and effect.
17. For all purposes, including without limitation the stock option agreements
referenced in Paragraph 8 above, Echols's termination of employment hereunder
shall be deemed to be a termination by the Company other than for "Cause" (as
defined in such stock option agreements), provided that the terms and conditions
of this Agreement are complied with.
18. This Agreement embodies the entire agreement and understanding of the
parties hereto with regard to the matters described herein. This Agreement shall
inure to the benefit of FATS and its successors and assignees, and shall be
binding upon Echols and Echols' heirs, administrators, executors, and personal
representatives.
19. This Agreement shall be construed and interpreted in accordance with the
laws of the State of Georgia. Only courts in the State of Georgia shall have
jurisdiction over any controversy or claim arising under or related to this
Agreement. Each party irrevocable (a) consents to the jurisdiction and venue of
the courts of the State of Georgia, including federal courts in Georgia, in any
action arising under or relating to this Agreement, and (b) waives any
jurisdictional defenses (including personal jurisdiction and venue) to any such
action.
20. This Agreement may be modified only in writing, and any party's failure to
enforce this Agreement in the event of one or more events that violate this
Agreement shall not constitute a waiver of any right to enforce this Agreement
against subsequent violations.
6
<PAGE> 7
This Agreement may be executed in two counterparts each of which shall
be deemed an original and both of which together shall constitute one and the
same instrument.
FATS, INC.
By: /s/ Peter A. Marino
Peter A. Marino
Its: President
/s/ Gregory F. Echols
GREGORY F. ECHOLS
7
<PAGE> 1
EXHIBIT 10.04
CONSULTING AGREEMENT
This Consulting Agreement (hereinafter, the "Agreement") is made this
1st day of August, 1997, between Firearms Training Systems, Inc.., 7340 McGinnis
Ferry Road, Suwanee, Georgia 30174, (hereinafter "FATS") and Craig I. Fields,
Ph.D., 2737 Devonshire Place, #226 Washington, D.C. 20008 ("CONSULTANT").
WHEREAS FATS seeks to retain the consulting services of CONSULTANT, and
CONSULTANT is agreeable to providing such services to the Company;
NOW, THEREFORE, in good and valued consideration of the mutual
covenants set forth within this Agreement, the parties hereto agree to the
following:
1. Consulting Services. The consulting services to be provided by CONSULTANT
shall consist of evaluation, review, and strategic advice to FATS in connection
with (i) the submission of various government contract proposals; (ii) corporate
acquisitions; and (iii) technology development, which services shall be provided
in response to FATS' request for such services.
2. Performance Standards. CONSULTANT shall perform his duties under this
Agreement to the best of his abilities and in accordance with all applicable
standards of professional ethics and practices.
3. Notice to Consultant. FATS shall provide CONSULTANT with at least seventy-two
(72) hours prior notice that his services are requested. CONSULTANT agrees that
he will attempt to respond to such request(s) within the time period requested
by FATS, but it is recognized by the parties that it may not always be practical
for CONSULTANT to do do.
4. Necessary Information. FATS shall provide CONSULTANT with appropriate
information as necessary for the support of CONSULTANT's services; provided
however that FATS reserves the right, in its sole discretion, to determine the
content, release, and availability of such information.
5. Payment to Consultant. From time to time, as circumstances warrant, FATS
shall compensate CONSULTANT for services rendered by awarding CONSULTANT a
certain number of nonqualified Series C options to purchase shares of FATS'
Class A common stock (the "Common Stock") at an exercise price equal to the
then-current market price of the Common Stock. Such award shall be made pursuant
to the existing FATS Stock Option Plan. The exact number of options to be
awarded shall be determined by Compensation Committee of the FATS Board of
Directors based on the nature of the consulting services provided and the
recommendation of the Chief Executive Officer of FATS.
<PAGE> 2
6. Independent Contractor. The parties agree and understand that CONSULTANT is
not functioning as an employee of FATS under this Agreement, but that CONSULTANT
instead is performing the consulting services hereunder solely as an independent
contractor, with absolute control regarding the methods used to perform such
services.
7. Term and Termination. This Agreement shall have an initial term of one (1)
year from the effective date set forth above, and shall be renewable for an
additional one year term upon written notice from either party, acknowledged by
the other party. Either party may terminate this Agreement without penalty upon
thirty (30) days? prior written notice, at any time, without cause.
IN WITNESS WHEREOF, the parties have signed this Agreement, or caused this
Agreement to be signed by their duly authorized representatives, as follows:
ACCEPTED AND AGREED:
FIREARMS TRAINING SYSTEMS, INC. CONSULTANT
By: /s/ Peter A. Marino By: /s/ Craig I. Fields
Name: Peter A. Marino Name: Craig I. Fields
2
<PAGE> 1
EXHIBIT 10.05
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES A
WHEREAS, Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), has heretofore granted to the optionee named below (the "Optionee")
a non-qualified option to purchase from the Company shares of its Class A Common
Stock upon and subject to the terms and conditions of a Stock Option Agreement,
Series A dated September 18, 1996 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement is amended effective as of May 8, 1998 in the
following respects:
1. Section 2.2(a) of the Agreement is amended to add two new sentences at
the end thereof to read as follows:
Notwithstanding the foregoing, if the Optionee's active employment ceases
in accordance with the Confidential Resignation Agreement (as hereinafter
defined), then (i) the Optionee's employment shall be deemed to have
terminated on October 31, 1998 for purposes of the preceding sentence, (ii)
such termination shall be deemed to be a termination by the Company other
than for Cause (as defined herein), provided the terms and conditions of
the Confidential Resignation Agreement are complied with and (iii) subject
to Section 2.5 below, the Option shall become exercisable with respect to
15,000 of the remaining shares of Stock subject to the Option (the
"Transition Shares") at the end of the Compliance Period (as defined in the
Confidential Resignation Agreement). For purposes of this Agreement,
"Confidential Resignation Agreement" means the resignation agreement
between the Company and the Optionee dated May 8, 1998.
<PAGE> 2
2. Section 2.2(e) of the Agreement is amended in its entirety to read as
follows:
(e) If the Optionee terminates employment with the Company for any
reason other than as described in subsection (b), (c) or (d) above, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment (except for the
Transition Shares, which shall remain exercisable as set forth in this
Agreement) and may thereafter be exercised by the Optionee or the
Optionee's Legal Representative until and including the latest to occur of
(i) the date that is 90 days after the effective date of the Optionee's
termination of employment (ii) the date on which the Optionee is determined
to be noncompliant with Paragraph 17 thereof, and (iii) if no violation of
Paragraph 17 of the Confidential Resignation Agreement occurs during the
Compliance Period, the date that is twelve months after the end of the
Compliance Period; provided that if the Optionee's employment is terminated
by the Company for Cause at any time, the Option shall terminate
automatically on the effective date of the Optionee's termination of
employment, and the Optionee shall be subject to the provisions of Section
2.5.
3. Section 2.5 of the Agreement is amended in the following respects:
(i) to insert the phrase "In the event of a determination of the Optionee's
noncompliance with the Confidential Resignation Agreement on account of the
Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 17 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of noncompliance
or" before the phrase "the date the Optionee engages in such activity" as it
appears twice in subsection (a) thereof, and before the phrase "the date on
which the Optionee engaged in such activity" as it appears in subsection (a)
thereof, and
<PAGE> 3
(iii) to add the parenthetical phrase "(or in the case of a breach of the
Confidential Resignation Agreement, the Chief Executive Officer)" after the word
"Committee" as it appears in subsection (b) thereof.
4. Section 3.5 of the Agreement is amended in the following respects:
(i) to substitute the phrase "there shall be substituted for each
share of Stock for which this Option is exercisable as of the date of the
Change in Control" for the phrase "all outstanding options shall
immediately be exercisable in full and there shall be substituted for each
share of Stock available under this Plan, whether or not then subject to an
outstanding option," as it appears in the first sentence of the first
paragraph thereof,
(ii) to substitute the phrase "the Option" for the phrase "each
option" as it appears in the second sentence of the first paragraph
thereof,
(iii) to add the phrase "for which the Option is exercisable as of the
date of occurrence of such Change in Control" after the phrase "a cash
payment from the Company in an amount equal to the number of shares of
Stock then subject to such option" as it appears in the second paragraph
thereof, and
(iv) to add a new paragraph at the end thereof to read as follows:
In the event of a Change in Control prior to the end of the
Compliance Period, the portion of the Option attributable to the
Transition Shares shall be deemed to be exercisable for purposes of
this Section 3.5 with respect to the number of shares determined by
multiplying 15,000 by a fraction, the numerator of which is the number
of whole and partial months between the date of the Optionee's
termination of employment and the date of the Change in Control, and
the denominator of which is 36. Furthermore, if such Change in Control
occurs prior to September 19, 1998, then this Option will be deemed,
for purposes of this
<PAGE> 4
Section 3.5, to be exercisable as of the date of such Change in
Control as to all those shares identified in the second sentence of
Section 2.2(a) above, subject to the provisions of Section 2.5 above.
This instrument may be executed in two counterparts, each of which
shall be deemed an original and both of which together shall constitute one
and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
Peter A. Marino
President
Accepted this 8th day of May, 1998.
/s/ David A. Apseloff
David A. Apseloff
<PAGE> 1
EXHIBIT 10.06
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES B
WHEREAS, Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), has heretofore granted to the optionee named below (the "Optionee")
a non-qualified option to purchase from the Company shares of its Class A Common
Stock upon and subject to the terms and conditions of a Stock Option Agreement,
Series B dated September 18, 1996 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement is amended effective as of May 8, 1998 in the
following respects:
1. Section 2.2(a) of the Agreement is amended to delete the phrase
"Section 3.5 below (relating to a change in control of the Company) and" as it
appears therein.
2. Section 2.2(e) of the Agreement is amended (i) to delete the phrase "the
earliest to occur of (i) the date which is 90 days after the effective date of
the Optionee's termination of employment and (ii) the Expiration Date" as it
appears therein, and to substitute therefore a new phrase to read as follows:
the latest to occur of (i) the date that is 90 days after the effective
date of the Optionee's termination of employment (ii) the date on which the
Optionee is determined to be noncompliant with the Confidential Resignation
Agreement, pursuant to Paragraph 17 thereof, and (iii) if no violation of
Paragraph 17 of the Confidential Resignation Agreement occurs during
<PAGE> 2
the Compliance Period (as defined therein), the date that is twelve months
after the end of the Compliance Period
and (ii) to add a new sentence at the end thereof to read as follows:
For purposes of this Agreement, "Confidential Resignation Agreement"
means the resignation agreement between the Company and the Optionee
dated May 8, 1998.
3. Section 2.5 of the Agreement is amended in the following respects:
(i) to insert the phrase "In the event of a determination of the Optionee's
noncompliance with the Confidential Resignation Agreement on account of the
Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 17 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of noncompliance
or" before the phrase "the date the Optionee engages in such activity" as it
appears twice in subsection (a) thereof, and before the phrase "the date on
which the Optionee engaged in such activity" as it appears in subsection (a)
thereof, and
(iii) to add the parenthetical phrase "(or in the case of a breach of the
Confidential Resignation Agreement, the Chief Executive Officer)" after the word
"Committee" as it appears in subsection (b) thereof.
4. The first paragraph of Section 3.5 of the Agreement is amended to delete
the last sentence thereof.
<PAGE> 3
This instrument may be executed in two counterparts, each of which shall be
deemed an original and both of which together shall constitute one and the same
instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
Peter A. Marino
President
Accepted this 8th day of May, 1998.
/s/ David A. Apseloff
David A. Apseloff
<PAGE> 1
EXHIBIT 10.07
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), hereby grants to David A. Apseloff (the "Optionee") as of April 17,
1997 (the "Option Date"), pursuant to the provisions of the Firearms Training
Systems, Inc. Stock Option Plan (the "Plan"), a non-qualified option to purchase
from the Company (the "Option") 20,000 shares of its Class A Common Stock,
$0.000006 par value ("Stock"), at the price of $11.75 per share upon and subject
to the terms and conditions set forth below. References to employment shall also
mean an agency or independent contractor relationship and references to
employment by the Company shall also mean employment by a Subsidiary.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1. Option Subject to Acceptance of Agreement. The Option shall
be null and void unless the Optionee shall accept this Agreement by executing it
in the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after the seventh anniversary of the Option Date
(the "Expiration Date").
2.2. Exercise of Option. (a) Except as otherwise provided in
Section 3.5 below (relating to a change in control of the Company), the Option
shall become exercisable with respect to thirty three and one-third percent
(33-1/3%) of the shares of Stock subject to the Option on the first anniversary
of the Option Date, and an additional thirty three and one-third (33-1/3%) of
the shares of Stock subject to the Option Date on each of the second and third
anniversaries of the Option Date on a cumulative basis, so that the Option is
exercisable with respect to one hundred percent (100%) of the shares of Stock
subject to the Option on the third anniversary of the Option Date.
(b) If the Optionee terminates employment with the Company by
reason of Disability, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee's termination of employment
<PAGE> 2
and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until the Expiration Date.
(c) If the Optionee terminates employment with the Company by
reason of retirement on or after age 62 or with the consent of the Company, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until the
Expiration Date.
(d) If the Optionee's employment with the Company terminates
by reason of the Optionee's death, the Option shall be exercisable only to the
extent it is exercisable on the date of death and may thereafter be exercised by
the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until the Expiration Date.
(e) If the Optionee terminates employment with the Company for
any reason other than as described in subsection (b), (c) or (d) above, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until and
including the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date; provided that if the Optionee's employment is terminated by the
Company for Cause, the Option shall terminate automatically on the effective
date of the Optionee's termination of employment, and the Optionee shall be
subject to the provisions of Section 2.5.
(f) For purposes of this Agreement, "Cause" shall mean the
Optionee's willful and continued failure to substantially perform the Optionee's
duties with the Company (other than a failure resulting from the Optionee's
Disability), or the direct or indirect engaging in any activity which is
contrary, inimical or harmful to the interests of the Company or any Subsidiary,
monetarily or otherwise, as determined by a majority of the members of the
Board, including (I) conduct that, in the reasonable judgment of the Company,
fails to conform with any material standard of conduct applicable to the
Company's executives, including gross violations of material Company policies,
(II) any act of dishonesty, (III) commission of a felony, (IV) a significant
violation of any statutory or common law duty of loyalty to the Company, or (V)
the disclosure or misuse of any confidential or competitively sensitive
information or trade secrets of the Company or a Subsidiary or affiliate.
2
<PAGE> 3
2.3. Method of Exercise. Subject to the limitations set forth
in this Agreement, the Option may be exercised by the Optionee (1) by giving
written notice to the Company, the form of which is set forth on Exhibit A to
this Agreement, specifying the number of whole shares of Stock to be purchased
and accompanied by payment therefor in full (or arrangement made for such
payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of
previously owned whole shares of Stock (which the Optionee has held for at least
six months prior to the delivery of such shares or which the Optionee purchased
on the open market and in each case for which the Optionee has good title, free
and clear of all liens and encumbrances) having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable
pursuant to the Option by reason of such exercise, (iii) in cash by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (iv) a combination of (i), (ii) and (iii), and
(2) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (iv). Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Stock shall be delivered until the full purchase price therefor has
been paid.
2.4. Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 business days of the Optionee's
delivery of this Agreement to the Company, either (i) mark this Agreement to
indicate the extent to which the Option has expired or been exercised, cancelled
or forfeited or (ii) issue to the Optionee a substitute option agreement
applicable to such rights, which agreement shall otherwise be substantially
similar to this Agreement in form and substance.
3
<PAGE> 4
2.5 Termination of Option and Forfeiture of Option Gain. (a) If at any
time prior to the earliest to occur of (i) the Expiration Date, (ii) the date
which is two years after the effective date of the Optionee's termination of
employment for any reason other than death and (iii) the date which is two years
after the Optionee exercises any portion of the Option, the Optionee:
(1) directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) owns, manages, operates,
controls, participates in, performs services for, or otherwise carries
on, a business substantially similar to or competitive with the
business conducted by the Company or any Subsidiary (it being
understood by the parties hereto that the prohibited activities are not
limited to any particular region because such business may be engaged
in effectively from any location in the United States); provided, that
nothing set forth in this Section 2.5(a)(1) shall prohibit the Optionee
from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and
listed on any national or regional stock exchange or on the Nasdaq
Stock Market; or
(2) directly or indirectly induces or tempts to persuade any
employee, agent or customer of the Company or any Subsidiary to
terminate such employment, agency or business relationship in order to
enter into any such relationship on behalf of any other business
organization in competition with the business conducted by the Company
or any Subsidiary;
(3) is terminated for Cause, or, in the event the Optionee is
no longer employed with the Company, directly or indirectly engages in
any activity which is contrary, inimical or harmful to the interests of
the Company or any Subsidiary, including the disclosure or misuse of
any confidential or competitively sensitive information or trade
secrets of the Company or a Subsidiary or affiliate; or
(4) participates in any activity not approved by the Board
which contributes to or results in the initiation of an action or
transaction which, if consummated, would result in a Change in Control
of the Company,
then the Option shall terminate automatically on the date the Optionee engages
in such activity and (x) with respect to any shares of Stock owned by the
Optionee as of such date as the result of any exercise of the Option, the
Optionee
4
<PAGE> 5
shall, within five business days of receipt by the Optionee of a written demand
therefor, sell such shares to the Company at a price equal to the lesser of (i)
the Fair Market Value of a share of Stock on the date the Optionee engages in
such activity and (ii) the purchase price per share of Stock set forth in the
first paragraph of this Agreement, and (y) with respect to any shares of Stock
acquired by the Optionee as a result of any exercise of the Option which were
subsequently sold or otherwise disposed of by the Optionee prior to the date on
which the Optionee engaged in such activity, the Optionee shall pay the Company,
within five business days of receipt by the Optionee of a written demand
therefor, an amount in cash determined by multiplying the number of shares of
Stock purchased pursuant to each exercise of the Option (without reduction for
any shares of Stock delivered by the Optionee or withheld by the Company
pursuant to Section 2.3 or Section 3.3) by the difference between (i) the Fair
Market Value of a share of Stock on the date of such exercise (or on the date of
any subsequent sale or other disposition, if greater) and (ii) the purchase
price per share of Stock set forth in the first paragraph of this Agreement.
(b) The Optionee may be released from the Optionee's
obligations under Sections 2.2(e) and 2.5(a) only if and to the extent the
Committee determines in its sole discretion that such a release is in the best
interests of the Company.
(c) The Optionee agrees that by executing this Agreement the
Optionee authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the Optionee pursuant to Section 2.2(e) or 2.5(a) from any
amounts payable by the Company or any Subsidiary to the Optionee, including,
without limitation, any amount payable to the Optionee as salary, wages,
vacation pay or bonus. This right of setoff shall not be an exclusive remedy and
the Company's or a Subsidiary's election not to exercise this right of setoff
with respect to any amount payable to the Optionee shall not constitute a waiver
of this right of setoff with respect to any other amount payable to the Optionee
or any other remedy.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act.
Except to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the
5
<PAGE> 6
Option is exercisable only by the Optionee or the Optionee's
Legal Representative. Except to the extent permitted by the foregoing, the
Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered
or otherwise disposed of (whether by operation of law or otherwise) or be
subject to execution, attachment or similar process. Upon any attempt to so
sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
the Option, the Option and all rights hereunder shall immediately become null
and void.
3.2. Investment Representation and Restrictions. The Optionee
hereby represents and covenants that (a) any share of Stock purchased upon
exercise of the Option will be purchased for investment and not with a view to
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; (c) to the extent required by an
agreement between one or more underwriters and the Company in connection with an
offering of shares of Stock pursuant to a registration statement under the
Securities Act, the Optionee shall not offer, sell, contract to sell or
otherwise dispose of any shares of Stock purchased upon exercise of the Option
for the period specified in such agreement; and (d) if requested by the Company,
the Optionee shall submit a written statement, in form satisfactory to the
Company, to the effect that such representation (x) is true and correct as of
the date of purchase of any shares hereunder or (y) is true and correct as of
the date of any sale of any such shares, as applicable. As a further condition
precedent to any exercise of the Option, the Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance or delivery of the shares and, in connection
therewith, shall execute any documents which the Board or the Committee shall in
its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect
6
<PAGE> 7
to such exercise of the Option. If the Optionee shall fail to advance the
Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and in each case for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) authorizing the Company to withhold whole shares of Stock which
would otherwise be delivered to the Optionee upon exercise of the Option having
a Fair Market Value, determined as of the Tax Date, equal to the Required Tax
Payments, (4) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (5) any
combination of (1), (2) and (3). The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5); provided, however,
that if the Optionee exercises the option on the Expiration Date, is employed as
of such date, and the shares of Stock are not traded on a national securities
exchange or are not quoted on the Nasdaq National Market as of such date, the
Company shall take reasonable efforts to permit an Optionee to use, in whole or
in part, the method described in clause (3) above. Shares of Stock to be
delivered or withheld may not have a Fair Market Value in excess of the minimum
amount of the Required Tax Payments. Any fraction of a share of Stock which
would be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.
(c) Unless the Committee otherwise determines, if the Optionee
is subject to Section 16 of the Exchange Act, the following provisions shall
apply to the Optionee's election to deliver to the Company whole shares of Stock
or to authorize the Company to withhold whole shares of Stock purchasable upon
exercise of the Option in payment of all or a portion of the Optionee's tax
liability in connection with such exercise:
7
<PAGE> 8
(1) The Optionee may deliver to the Company
previously owned whole shares of Stock in accordance with Section
3.3(b), if such delivery is in connection with the delivery of shares
of Stock in payment of the exercise price of the Option.
(2) The Optionee may authorize the Company to
withhold whole shares of Stock purchasable upon exercise of the Option
in accordance with Section 3.3(b); provided, that the following
provisions shall apply to such election:
(i) Such election may apply only
to the Option or any or all options held by the Optionee,
shall be filed with the Committee at least six months prior to
the exercise date of the Option and may not take effect during
the six-month period beginning on the date of grant of the
Option (other than in the event of the Optionee's death) or
(ii) such election (A) shall be subject to approval by the
Committee, (B) may not take effect during the six-month period
beginning on the date of grant of the Option (other than in
the event of the Optionee's death), (C) must be filed with the
Committee during (or must be filed with the Committee in
advance of, but take effect during) the 10 business day period
beginning on the third business day following the date of
release of the Company's quarterly or annual summary
statements of sales and earnings and (D) the exercise of the
Option must occur during such 10 business day period. Unless
the Committee otherwise determines, any election pursuant to
clause (i) may be revoked or changed only if such revocation
or change is made at least six months prior to the exercise of
the Option. Any election made pursuant to clause (ii) may be
revoked or changed prior to the exercise of the Option during
the 10 business day period.
3.4. Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Stock other than a
regular cash dividend, the number and class of securities subject to the Option
and the purchase price per security shall be appropriately adjusted by the
Committee without an increase in the aggregate purchase price. If any adjustment
would result in a fractional security being subject to the Option, the Company
shall pay the Optionee, in connection with the first exercise of the
8
<PAGE> 9
Option occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Change in Control. (a) Notwithstanding any provision in
this Agreement, in the event of the occurrence of a Change in Control as defined
in paragraph (b)(3) or (4) of Section 3.8 of the Plan in connection with which
the holders of Stock receive shares of common stock that are registered under
Section 12 of the Exchange Act, all outstanding options shall immediately be
exercisable in full and there shall be substituted for each share of Stock
available under this Plan, whether or not then subject to an outstanding option,
the number and class of shares into which each outstanding share of Stock shall
be converted pursuant to such Change in Control. In the event of any such
substitution, the purchase price per share of each option shall be appropriately
adjusted by the Committee, such adjustments to be made without an increase in
the aggregate purchase price or base price.
(b) Notwithstanding any provision in this Agreement, in the
event of the occurrence of a Change in Control pursuant to paragraph (b)(1) or
(2) of Section 3.8 of the Plan, or in the event of the occurrence of a Change in
Control pursuant to paragraph (b)(3) or (4) of Section 3.8 of the Plan in
connection with which the holders of Stock receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange Act,
each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be cancelled by the Company, and
the holder shall receive, within 10 business days of the occurrence of a Change
in Control pursuant to paragraph (b)(1) or (2) of Section 3.8 of the Plan or
within 10 business days of the approval of the stockholders of the Company
contemplated by paragraph (b)(3) or (4) of Section 3.8 of the Plan, a cash
payment from the Company in an amount equal to the number of shares of Stock
then subject to such option, multiplied by the excess, if any, of the Fair
Market Value of a share of Stock on the date of occurrence of the Change in
Control over (ii) the purchase price per share of Stock subject to the option.
The Company may, but is not required to, cooperate with any person who is
subject to Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance with Section
16 and the rules and regulations thereunder.
9
<PAGE> 10
3.6. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.7. Delivery of Information to Optionee. The Company shall
forward to the Optionee annual reports to shareholders and annual or quarterly
financial statements of the Company, including the consolidated balance sheet
and related consolidated statements of operations and cash flows for a fiscal
year, fiscal quarter or period of a fiscal year, as applicable, as soon as
administratively practicable after such materials are prepared and distributed
or filed, as the case may be, by the Company. The Optionees shall have the same
rights as holders of shares of Stock to notice with respect to annual or special
meetings of shareholders of the Company, and shall have the right to attend any
such meetings.
3.8. Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of shares purchased against
full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.3.
3.9. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to shares of
Stock subject to the Option unless and until purchased and delivered upon the
exercise of the Option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered shares; and the Optionee
shall not be considered a stockholder of the Company with respect to any such
shares not so purchased and delivered.
3.10. Option Confers No Rights to Continued Employment. In no
event shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the
10
<PAGE> 11
Optionee any right to continued employment by the Company or any affiliate of
the Company.
3.11. Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.
3.12. Company to Reserve Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Stock, the full number of shares subject to the Option from time to time.
3.13. Agreement Subject to the Plan. This Agreement is subject
to the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The Option is
hereby designated as not constituting an "incentive stock option" within meaning
of section 422 of the Internal Revenue Code of 1986, as amended (the "Code");
this Agreement shall be interpreted and treated consistently with such
designation.
4.2. Meaning of Certain Terms. (a) As used herein, employment
by the Company shall include employment by an affiliate of the Company.
References in this Agreement to sections of the Code shall be deemed to refer to
any successor section of the Code or any successor internal revenue law.
(b) As used herein, the term "Legal Representative" shall
include an executor, administrator, legal representative, guardian or similar
person and the term "Permitted Transferee" shall include any transferee (i)
pursuant to a transfer permitted under Section 3.4 of the Plan and Section 3.1
hereof or (ii) designated pursuant to beneficiary designation procedures
approved by the Company.
4.3. Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
11
<PAGE> 12
4.4. Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to Firearms
Training Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia 30024,
Attention: Corporate Secretary, and if to the Optionee, to Charles N. Bowen, 700
Collier Commons Circle, Atlanta, Georgia 30318. All notices, requests or other
communications provided for in this Agreement shall be made in writing either
(a) by personal delivery to the party entitled thereto, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission or
upon receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a notice, request or other
communication sent to the Company is not received during regular business hours,
it shall be deemed to be received on the next succeeding business day of the
Company.
4.5. Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Delaware and construed in accordance therewith without giving
effect to principles of conflicts of laws.
12
<PAGE> 13
4.6. Counterparts. This Agreement may be executed in two counterparts each of
which shall be deemed an original and both of which together shall constitute
one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ Peter A. Marino
-----------------------------------
Peter A. Marino
President & Chief Executive Officer
Accepted this 17th day of
April, 1997.
/s/ David A. Apseloff
- ---------------------
David A. Apseloff
13
<PAGE> 1
EXHIBIT 10.08
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
WHEREAS, Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), has heretofore granted to the optionee named below (the "Optionee")
a non-qualified option to purchase from the Company shares of its Class A Common
Stock upon and subject to the terms and conditions of a Stock Option Agreement,
Series D dated April 17, 1997 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the Agreement in
certain respects;
NOW, THEREFORE, the Agreement is amended effective as of May 8, 1998 in the
following respects:
1. Section 2.2(a) of the Agreement is amended to delete the phrase "Except as
otherwise provided in Section 3.5 below (relating to a change in control of the
Company)," as it appears at the beginning thereof.
2. Section 2.2(e) of the Agreement is amended (i) to delete the phrase "the
earliest to occur of (i) the date which is 90 days after the effective date of
the Optionee's termination of employment and (ii) the Expiration Date" as it
appears therein, and to substitute therefore a new phrase to read as follows:
the latest to occur of (i) the date that is 90 days after the effective
date of the Optionee's termination of employment (ii) the date on which the
Optionee is determined to be noncompliant with the Confidential Resignation
Agreement, pursuant to Paragraph 17 thereof, and (iii) if no violation of
Paragraph 17 of
<PAGE> 2
the Confidential Resignation Agreement occurs during the Compliance Period
(as defined therein), the date that is twelve months after the end of the
Compliance Period
and (ii) to add a new sentence at the end thereof to read as follows:
For purposes of this Agreement, "Confidential Resignation Agreement"
means the resignation agreement between the Company and the Optionee
dated May 8, 1998.
3. Section 2.5 of the Agreement is amended in the following respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 17 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of noncompliance
or" before the phrase "the date the Optionee engages in such activity" as it
appears twice in subsection (a) thereof, and before the phrase "the date on
which the Optionee engaged in such activity" as it appears in subsection (a)
thereof, and
(iii) to add the parenthetical phrase "(or in the case of a breach of the
Confidential Resignation Agreement, the Chief Executive Officer)" after the word
"Committee" as it appears in subsection (b) thereof.
4. Section 3.5 of the Agreement is amended (i) to delete the phrase "all
outstanding options shall immediately be exercisable in full and" as it appears
in the first paragraph thereof and (ii) to add the phrase "for which the Option
is exercisable as of the date of occurrence of such Change in Control" after the
phrase "a cash payment from the Company in an amount equal to the number of
shares of Stock
<PAGE> 3
then subject to such option" as it appears in the second paragraph thereof.
5. Section 4.4 of the Agreement is amended to substitute the address "4600
North Springs Court, Dunwoody, Georgia 30338" for the address "c/o Firearms
Training Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia 30174" as it
appears after the name "David A. Apseloff."
This instrument may be executed in two counterparts, each of which shall be
deemed an original and both of which together shall constitute one and the same
instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
Peter A. Marino
President
Accepted this 8th day of May, 1998.
/s/ David A. Apseloff
David A. Apseloff
<PAGE> 1
EXHIBIT 10.09
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES A
WHEREAS, Firearms Training Systems, Inc., a Delaware
corporation (the "Company"), has heretofore granted to the optionee named below
(the "Optionee") a non-qualified option to purchase from the Company shares of
its Class A Common Stock upon and subject to the terms and conditions of a Stock
Option Agreement, Series A dated September 18, 1996 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of July
10, 1998 in the following respects:
1. Section 2.2(a) of the Agreement is amended by deleting the
words "and with respect to an additional sixteen and two-thirds percent
(16-2/3%) of the shares of Stock subject to the Option if such termination
occurs after the second anniversary of the Option Date.", and by adding two new
sentences at the end thereof to read as follows:
Notwithstanding the foregoing, if the Optionee's active employment
ceases in accordance with the Confidential Resignation Agreement (as
hereinafter defined), then (i) the Optionee's employment shall be
deemed to have terminated on January 1, 1999 for purposes of this
paragraph, (ii) such termination shall be deemed to be a termination by
the Company other than for Cause (as defined herein), provided the
terms and conditions of the Confidential Resignation Agreement are
complied with and (iii) subject to Section 2.5 below, the Option shall
become exercisable with respect to 39,000 of the remaining shares of
Stock subject to the Option (the "Transition Shares") at the end of the
Compliance Period (as defined in the Confidential Resignation
Agreement). For purposes of this Agreement, "Confidential Resignation
Agreement" means the
<PAGE> 2
resignation agreement between the Company and the Optionee dated July
10, 1998.
2. Section 2.2(e) of the Agreement is amended in its entirety to
read as follows:
(e) If the Optionee terminates employment with the
Company for any reason other than as described in subsection (b), (c)
or (d) above, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee's termination of
employment (except for the Transition Shares, which shall remain
exercisable as set forth in this Agreement) and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until
and including the latest to occur of (i) the date that is 90 days after
the effective date of the Optionee's termination of employment (ii) the
date on which the Optionee is determined to be noncompliant with
Paragraph 16 thereof, and (iii) if no violation of Paragraph 16 of the
Confidential Resignation Agreement occurs during the Compliance Period,
the date that is twelve months after the end of the Compliance Period;
provided that if the Optionee's employment is terminated by the Company
for Cause at any time, the Option shall terminate automatically on the
effective date of the Optionee's termination of employment, and the
Optionee shall be subject to the provisions of Section 2.5.
3. Section 2.5 of the Agreement is amended in the following
respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 16 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of
noncompliance or" before the phrase "the date the Optionee engages in such
activity" as it appears twice in subsection (a) thereof, and before the phrase
"the
<PAGE> 3
date on which the Optionee engaged in such activity" as it appears in subsection
(a) thereof, and (iii) to add the parenthetical phrase "(or in the case of a
breach of the Confidential Resignation Agreement, the Chief Executive Officer)"
after the word "Committee" as it appears in subsection (b) thereof.
4. Section 3.5 of the Agreement is amended in the following
respects:
(i) by adding at line four of Section 3.5, after the words "Section 3.8
of the Plan", the phrase "which results in a sale by the Centre Entities (as
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996) of all or substantially all of the assets of the Company or the shares
held by the Centre Entities (a "Qualifying Change in Control")", and to replace
the words "Change in Control" with "Qualifying Change in Control" throughout
Section 3.5 thereafter,
(ii) to substitute the phrase "there shall be substituted for each
share of Stock for which this Option is exercisable as of the date of the
Qualifying Change in Control" for the phrase "all outstanding options shall
immediately be exercisable in full and there shall be substituted for each share
of Stock available under this Plan, whether or not then subject to an
outstanding option," as it appears in the first sentence of the first paragraph
thereof,
(iii) to substitute the phrase "the Option" for the phrase "each
option" as it appears in the second sentence of the first paragraph thereof,
(iv) to add the phrase "for which the Option is exercisable as of the
date of occurrence of such Qualifying Change in Control" after the phrase "a
cash payment from the Company in an amount equal to the number of shares of
Stock
<PAGE> 4
then subject to such option" as it appears in the second paragraph thereof, and
(v) to add a new paragraph at the end thereof to read as follows:
In the event of a Qualifying Change in Control prior to the
end of the Compliance Period, the portion of the Option which is
attributable to the Transition Shares shall be deemed to be exercisable
for purposes of this Section 3.5
This instrument may be executed in two counterparts, each of which
shall be deemed an original and both of which together shall constitute one and
the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
-------------------
Peter A. Marino
President
Accepted this 10th day of July, 1998.
/s/ Gregory F. Echols
- ---------------------
Gregory F. Echols
<PAGE> 1
EXHIBIT 10.10
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES B
WHEREAS, Firearms Training Systems, Inc., a Delaware
corporation (the "Company"), has heretofore granted to the optionee named below
(the "Optionee") a non-qualified option to purchase from the Company shares of
its Class A Common Stock upon and subject to the terms and conditions of a Stock
Option Agreement, Series B dated September 18, 1996 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of July
10, 1998 in the following respects:
1. Section 2.2(a) of the Agreement is amended to delete the
phrase "Section 3.5 below (relating to a change in control of the Company) and"
as it appears therein.
2. Section 2.2(e) of the Agreement is amended (i) to delete the
phrase "the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date" as it appears therein, and to substitute therefore a new phrase
to read as follows:
the latest to occur of (i) the date that is 90 days after the effective
date of the Optionee's termination of employment (ii) the date on which
the Optionee is determined to be noncompliant with the Confidential
Resignation Agreement, pursuant to Paragraph 16 thereof, and (iii) if
no violation of Paragraph 16 of the Confidential Resignation Agreement
occurs during
<PAGE> 2
the Compliance Period (as defined therein), the date that is twelve
months after the end of the Compliance Period
and (ii) to add a new sentence at the end thereof to read as follows:
For purposes of this Agreement, "Confidential Resignation Agreement"
means the resignation agreement between the Company and the Optionee
dated July 10, 1998.
3. Section 2.5 of the Agreement is amended in the following
respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 16 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of
noncompliance or" before the phrase "the date the Optionee engages in such
activity" as it appears twice in subsection (a) thereof, and before the phrase
"the date on which the Optionee engaged in such activity" as it appears in
subsection (a) thereof, and
(iii) to add the parenthetical phrase "(or in the case of a breach of
the Confidential Resignation Agreement, the Chief Executive Officer)" after the
word "Committee" as it appears in subsection (b) thereof.
4. The first paragraph of Section 3.5 of the Agreement is amended
to delete the last sentence thereof.
<PAGE> 3
This instrument may be executed in two counterparts, each of
which shall be deemed an original and both of which together shall constitute
one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
-------------------
Peter A. Marino
President
Accepted this 10th day of July, 1998.
/s/ Gregory F. Echols
- ---------------------
Gregory F. Echols
<PAGE> 1
EXHIBIT 10.11.01
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), hereby grants to Gregory F. Echols (the "Optionee") as of April 17,
1997 (the "Option Date"), pursuant to the provisions of the Firearms Training
Systems, Inc. Stock Option Plan (the "Plan"), a non-qualified option to purchase
from the Company (the "Option") 10,000 shares of its Class A Common Stock,
$0.000006 par value ("Stock"), at the price of $11.75 per share upon and subject
to the terms and conditions set forth below. References to employment shall also
mean an agency or independent contractor relationship and references to
employment by the Company shall also mean employment by a Subsidiary.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1. Option Subject to Acceptance of Agreement. The Option shall
be null and void unless the Optionee shall accept this Agreement by executing it
in the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after the seventh anniversary of the Option Date
(the "Expiration Date").
2.2. Exercise of Option. (a) Except as otherwise provided in
Section 3.5 below (relating to a change in control of the Company), the Option
shall become exercisable with respect to thirty three and one-third percent
(33-1/3%) of the shares of Stock subject to the Option on the first anniversary
of the Option Date, and an additional thirty three and one-third (33-1/3%) of
the shares of Stock subject to the Option Date on each of the second and third
anniversaries of the Option Date on a cumulative basis, so that the Option is
exercisable with respect to one hundred percent (100%) of the shares of Stock
subject to the Option on the third anniversary of the Option Date.
(b) If the Optionee terminates employment with the Company by
reason of Disability, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee's termination of employment
<PAGE> 2
and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until the Expiration Date.
(c) If the Optionee terminates employment with the Company by
reason of retirement on or after age 62 or with the consent of the Company, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until the
Expiration Date.
(d) If the Optionee's employment with the Company terminates
by reason of the Optionee's death, the Option shall be exercisable only to the
extent it is exercisable on the date of death and may thereafter be exercised by
the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until the Expiration Date.
(e) If the Optionee terminates employment with the Company for
any reason other than as described in subsection (b), (c) or (d) above, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until and
including the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date; provided that if the Optionee's employment is terminated by the
Company for Cause, the Option shall terminate automatically on the effective
date of the Optionee's termination of employment, and the Optionee shall be
subject to the provisions of Section 2.5.
(f) For purposes of this Agreement, "Cause" shall mean the
Optionee's willful and continued failure to substantially perform the Optionee's
duties with the Company (other than a failure resulting from the Optionee's
Disability), or the direct or indirect engaging in any activity which is
contrary, inimical or harmful to the interests of the Company or any Subsidiary,
monetarily or otherwise, as determined by a majority of the members of the
Board, including (I) conduct that, in the reasonable judgment of the Company,
fails to conform with any material standard of conduct applicable to the
Company's executives, including gross violations of material Company policies,
(II) any act of dishonesty, (III) commission of a felony, (IV) a significant
violation of any statutory or common law duty of loyalty to the Company, or (V)
the disclosure or misuse of any confidential or competitively sensitive
information or trade secrets of the Company or a Subsidiary or affiliate.
2
<PAGE> 3
2.3. Method of Exercise. Subject to the limitations set forth
in this Agreement, the Option may be exercised by the Optionee (1) by giving
written notice to the Company, the form of which is set forth on Exhibit A to
this Agreement, specifying the number of whole shares of Stock to be purchased
and accompanied by payment therefor in full (or arrangement made for such
payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of
previously owned whole shares of Stock (which the Optionee has held for at least
six months prior to the delivery of such shares or which the Optionee purchased
on the open market and in each case for which the Optionee has good title, free
and clear of all liens and encumbrances) having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable
pursuant to the Option by reason of such exercise, (iii) in cash by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (iv) a combination of (i), (ii) and (iii), and
(2) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (iv). Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Stock shall be delivered until the full purchase price therefor has
been paid.
2.4. Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 business days of the Optionee's
delivery of this Agreement to the Company, either (i) mark this Agreement to
indicate the extent to which the Option has expired or been exercised, cancelled
or forfeited or (ii) issue to the Optionee a substitute option agreement
applicable to such rights, which agreement shall otherwise be substantially
similar to this Agreement in form and substance.
3
<PAGE> 4
2.5 Termination of Option and Forfeiture of Option Gain. (a) If at any
time prior to the earliest to occur of (i) the Expiration Date, (ii) the date
which is two years after the effective date of the Optionee's termination of
employment for any reason other than death and (iii) the date which is two years
after the Optionee exercises any portion of the Option, the Optionee:
(1) directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) owns, manages, operates,
controls, participates in, performs services for, or otherwise carries
on, a business substantially similar to or competitive with the
business conducted by the Company or any Subsidiary (it being
understood by the parties hereto that the prohibited activities are not
limited to any particular region because such business may be engaged
in effectively from any location in the United States); provided, that
nothing set forth in this Section 2.5(a)(1) shall prohibit the Optionee
from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and
listed on any national or regional stock exchange or on the Nasdaq
Stock Market; or
(2) directly or indirectly induces or tempts to persuade any
employee, agent or customer of the Company or any Subsidiary to
terminate such employment, agency or business relationship in order to
enter into any such relationship on behalf of any other business
organization in competition with the business conducted by the Company
or any Subsidiary;
(3) is terminated for Cause, or, in the event the Optionee is
no longer employed with the Company, directly or indirectly engages in
any activity which is contrary, inimical or harmful to the interests of
the Company or any Subsidiary, including the disclosure or misuse of
any confidential or competitively sensitive information or trade
secrets of the Company or a Subsidiary or affiliate; or
(4) participates in any activity not approved by the Board
which contributes to or results in the initiation of an action or
transaction which, if consummated, would result in a Change in Control
of the Company,
then the Option shall terminate automatically on the date the Optionee engages
in such activity and (x) with respect to any shares of Stock owned by the
Optionee as of such date as the result of any exercise of the Option, the
Optionee
4
<PAGE> 5
shall, within five business days of receipt by the Optionee of a written demand
therefor, sell such shares to the Company at a price equal to the lesser of (i)
the Fair Market Value of a share of Stock on the date the Optionee engages in
such activity and (ii) the purchase price per share of Stock set forth in the
first paragraph of this Agreement, and (y) with respect to any shares of Stock
acquired by the Optionee as a result of any exercise of the Option which were
subsequently sold or otherwise disposed of by the Optionee prior to the date on
which the Optionee engaged in such activity, the Optionee shall pay the Company,
within five business days of receipt by the Optionee of a written demand
therefor, an amount in cash determined by multiplying the number of shares of
Stock purchased pursuant to each exercise of the Option (without reduction for
any shares of Stock delivered by the Optionee or withheld by the Company
pursuant to Section 2.3 or Section 3.3) by the difference between (i) the Fair
Market Value of a share of Stock on the date of such exercise (or on the date of
any subsequent sale or other disposition, if greater) and (ii) the purchase
price per share of Stock set forth in the first paragraph of this Agreement.
(b) The Optionee may be released from the Optionee's
obligations under Sections 2.2(e) and 2.5(a) only if and to the extent the
Committee determines in its sole discretion that such a release is in the best
interests of the Company.
(c) The Optionee agrees that by executing this Agreement the
Optionee authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the Optionee pursuant to Section 2.2(e) or 2.5(a) from any
amounts payable by the Company or any Subsidiary to the Optionee, including,
without limitation, any amount payable to the Optionee as salary, wages,
vacation pay or bonus. This right of setoff shall not be an exclusive remedy and
the Company's or a Subsidiary's election not to exercise this right of setoff
with respect to any amount payable to the Optionee shall not constitute a waiver
of this right of setoff with respect to any other amount payable to the Optionee
or any other remedy.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act.
Except to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the
5
<PAGE> 6
Option is exercisable only by the Optionee or the Optionee's
Legal Representative. Except to the extent permitted by the foregoing, the
Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered
or otherwise disposed of (whether by operation of law or otherwise) or be
subject to execution, attachment or similar process. Upon any attempt to so
sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
the Option, the Option and all rights hereunder shall immediately become null
and void.
3.2. Investment Representation and Restrictions. The Optionee
hereby represents and covenants that (a) any share of Stock purchased upon
exercise of the Option will be purchased for investment and not with a view to
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; (c) to the extent required by an
agreement between one or more underwriters and the Company in connection with an
offering of shares of Stock pursuant to a registration statement under the
Securities Act, the Optionee shall not offer, sell, contract to sell or
otherwise dispose of any shares of Stock purchased upon exercise of the Option
for the period specified in such agreement; and (d) if requested by the Company,
the Optionee shall submit a written statement, in form satisfactory to the
Company, to the effect that such representation (x) is true and correct as of
the date of purchase of any shares hereunder or (y) is true and correct as of
the date of any sale of any such shares, as applicable. As a further condition
precedent to any exercise of the Option, the Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance or delivery of the shares and, in connection
therewith, shall execute any documents which the Board or the Committee shall in
its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect
6
<PAGE> 7
to such exercise of the Option. If the Optionee shall fail to advance the
Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and in each case for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) authorizing the Company to withhold whole shares of Stock which
would otherwise be delivered to the Optionee upon exercise of the Option having
a Fair Market Value, determined as of the Tax Date, equal to the Required Tax
Payments, (4) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (5) any
combination of (1), (2) and (3). The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5); provided, however,
that if the Optionee exercises the option on the Expiration Date, is employed as
of such date, and the shares of Stock are not traded on a national securities
exchange or are not quoted on the Nasdaq National Market as of such date, the
Company shall take reasonable efforts to permit an Optionee to use, in whole or
in part, the method described in clause (3) above. Shares of Stock to be
delivered or withheld may not have a Fair Market Value in excess of the minimum
amount of the Required Tax Payments. Any fraction of a share of Stock which
would be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.
(c) Unless the Committee otherwise determines, if the Optionee
is subject to Section 16 of the Exchange Act, the following provisions shall
apply to the Optionee's election to deliver to the Company whole shares of Stock
or to authorize the Company to withhold whole shares of Stock purchasable upon
exercise of the Option in payment of all or a portion of the Optionee's tax
liability in connection with such exercise:
7
<PAGE> 8
(1) The Optionee may deliver to the Company
previously owned whole shares of Stock in accordance with Section
3.3(b), if such delivery is in connection with the delivery of shares
of Stock in payment of the exercise price of the Option.
(2) The Optionee may authorize the Company to
withhold whole shares of Stock purchasable upon exercise of the Option
in accordance with Section 3.3(b); provided, that the following
provisions shall apply to such election:
(i) Such election may apply only
to the Option or any or all options held by the Optionee,
shall be filed with the Committee at least six months prior to
the exercise date of the Option and may not take effect during
the six-month period beginning on the date of grant of the
Option (other than in the event of the Optionee's death) or
(ii) such election (A) shall be subject to approval by the
Committee, (B) may not take effect during the six-month period
beginning on the date of grant of the Option (other than in
the event of the Optionee's death), (C) must be filed with the
Committee during (or must be filed with the Committee in
advance of, but take effect during) the 10 business day period
beginning on the third business day following the date of
release of the Company's quarterly or annual summary
statements of sales and earnings and (D) the exercise of the
Option must occur during such 10 business day period. Unless
the Committee otherwise determines, any election pursuant to
clause (i) may be revoked or changed only if such revocation
or change is made at least six months prior to the exercise of
the Option. Any election made pursuant to clause (ii) may be
revoked or changed prior to the exercise of the Option during
the 10 business day period.
3.4. Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Stock other than a
regular cash dividend, the number and class of securities subject to the Option
and the purchase price per security shall be appropriately adjusted by the
Committee without an increase in the aggregate purchase price. If any adjustment
would result in a fractional security being subject to the Option, the Company
shall pay the Optionee, in connection with the first exercise of the
8
<PAGE> 9
Option occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Change in Control. (a) Notwithstanding any provision in
this Agreement, in the event of the occurrence of a Change in Control as defined
in paragraph (b)(3) or (4) of Section 3.8 of the Plan in connection with which
the holders of Stock receive shares of common stock that are registered under
Section 12 of the Exchange Act, all outstanding options shall immediately be
exercisable in full and there shall be substituted for each share of Stock
available under this Plan, whether or not then subject to an outstanding option,
the number and class of shares into which each outstanding share of Stock shall
be converted pursuant to such Change in Control. In the event of any such
substitution, the purchase price per share of each option shall be appropriately
adjusted by the Committee, such adjustments to be made without an increase in
the aggregate purchase price or base price.
(b) Notwithstanding any provision in this Agreement, in the
event of the occurrence of a Change in Control pursuant to paragraph (b)(1) or
(2) of Section 3.8 of the Plan, or in the event of the occurrence of a Change in
Control pursuant to paragraph (b)(3) or (4) of Section 3.8 of the Plan in
connection with which the holders of Stock receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange Act,
each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be cancelled by the Company, and
the holder shall receive, within 10 business days of the occurrence of a Change
in Control pursuant to paragraph (b)(1) or (2) of Section 3.8 of the Plan or
within 10 business days of the approval of the stockholders of the Company
contemplated by paragraph (b)(3) or (4) of Section 3.8 of the Plan, a cash
payment from the Company in an amount equal to the number of shares of Stock
then subject to such option, multiplied by the excess, if any, of the Fair
Market Value of a share of Stock on the date of occurrence of the Change in
Control over (ii) the purchase price per share of Stock subject to the option.
The Company may, but is not required to, cooperate with any person who is
subject to Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance with Section
16 and the rules and regulations thereunder.
9
<PAGE> 10
3.6. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.7. Delivery of Information to Optionee. The Company shall
forward to the Optionee annual reports to shareholders and annual or quarterly
financial statements of the Company, including the consolidated balance sheet
and related consolidated statements of operations and cash flows for a fiscal
year, fiscal quarter or period of a fiscal year, as applicable, as soon as
administratively practicable after such materials are prepared and distributed
or filed, as the case may be, by the Company. The Optionees shall have the same
rights as holders of shares of Stock to notice with respect to annual or special
meetings of shareholders of the Company, and shall have the right to attend any
such meetings.
3.8. Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of shares purchased against
full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.3.
3.9. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to shares of
Stock subject to the Option unless and until purchased and delivered upon the
exercise of the Option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered shares; and the Optionee
shall not be considered a stockholder of the Company with respect to any such
shares not so purchased and delivered.
3.10. Option Confers No Rights to Continued Employment. In no
event shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the
10
<PAGE> 11
Optionee any right to continued employment by the Company or any affiliate of
the Company.
3.11. Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.
3.12. Company to Reserve Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Stock, the full number of shares subject to the Option from time to time.
3.13. Agreement Subject to the Plan. This Agreement is subject
to the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The Option is
hereby designated as not constituting an "incentive stock option" within meaning
of section 422 of the Internal Revenue Code of 1986, as amended (the "Code");
this Agreement shall be interpreted and treated consistently with such
designation.
4.2. Meaning of Certain Terms. (a) As used herein, employment
by the Company shall include employment by an affiliate of the Company.
References in this Agreement to sections of the Code shall be deemed to refer to
any successor section of the Code or any successor internal revenue law.
(b) As used herein, the term "Legal Representative" shall
include an executor, administrator, legal representative, guardian or similar
person and the term "Permitted Transferee" shall include any transferee (i)
pursuant to a transfer permitted under Section 3.4 of the Plan and Section 3.1
hereof or (ii) designated pursuant to beneficiary designation procedures
approved by the Company.
4.3. Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
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<PAGE> 12
4.4. Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to Firearms
Training Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia 30024,
Attention: Corporate Secretary, and if to the Optionee, to Charles N. Bowen, 700
Collier Commons Circle, Atlanta, Georgia 30318. All notices, requests or other
communications provided for in this Agreement shall be made in writing either
(a) by personal delivery to the party entitled thereto, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission or
upon receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a notice, request or other
communication sent to the Company is not received during regular business hours,
it shall be deemed to be received on the next succeeding business day of the
Company.
4.5. Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Delaware and construed in accordance therewith without giving
effect to principles of conflicts of laws.
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<PAGE> 13
4.6. Counterparts. This Agreement may be executed in two counterparts each of
which shall be deemed an original and both of which together shall constitute
one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ Peter A. Marino
-----------------------------------
Peter A. Marino
President & Chief Executive Officer
Accepted this 17th day of
April, 1997.
/s/ Gregory F. Echols
- ---------------------
Gregory F. Echols
13
<PAGE> 1
EXHIBIT 10.11.02
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
WHEREAS, Firearms Training Systems, Inc., a Delaware
corporation (the "Company"), has heretofore granted to the optionee named below
(the "Optionee") a non-qualified option to purchase from the Company shares of
its Class A Common Stock upon and subject to the terms and conditions of a Stock
Option Agreement, Series D dated April 17, 1997 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of July
10, 1998 in the following respects:
1. Section 2.2(a) is amended to add two new sentences at the end
thereof to read as follows:
Notwithstanding the foregoing, if the Optionee's active employment
ceases in accordance with the Confidential Resignation Agreement (as
hereinafter defined), then (i) the Optionee's employment shall be
deemed to have terminated on January 1, 1999 for purposes of this
paragraph, (ii) such termination shall be deemed to be a termination by
the Company other than for Cause (as defined herein), provided the
terms and conditions of the Confidential Resignation Agreement are
complied with and (iii) subject to Section 2.5 below, the Option shall
become exercisable with respect to all of the
<PAGE> 2
remaining shares of Stock subject to the Option (the "Transition
Shares") at the end of the Compliance Period (as defined in the
Confidential Resignation Agreement). For purposes of this Agreement,
"Confidential Resignation Agreement" means the resignation agreement
between the Company and the Optionee dated July 10, 1998.
2. Section 2.2(e) of the Agreement is amended (i) to add at line
five after the words "termination of employment" the words "(except for the
Transition Shares, which shall remain exercisable as set forth in this
Agreement)" (ii) to delete the phrase "the earliest to occur of (i) the date
which is 90 days after the effective date of the Optionee's termination of
employment and (iii) the Expiration Date" as it appears therein, and to
substitute therefore a new phrase to read as follows:
the latest to occur of (i) the date that is 90 days after the effective
date of the Optionee's termination of employment (ii) the date on which
the Optionee is determined to be noncompliant with the Confidential
Resignation Agreement, pursuant to Paragraph 16 thereof, and (iii) if
no violation of Paragraph 16 of the Confidential Resignation Agreement
occurs during the Compliance Period (as defined therein), the date that
is twelve months after the end of the Compliance Period
3. Section 2.5 of the Agreement is amended in the following
respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations
<PAGE> 3
thereunder as described in Paragraph 16 thereof, or" at the beginning
of subsection (a) thereof,
(ii) to insert the phrase "the date of such determination of
noncompliance or" before the phrase "the date the Optionee engages in
such activity" as it appears twice in subsection (a) thereof, and
before the phrase "the date on which the Optionee engaged in such
activity" as it appears in subsection (a) thereof, and
(iii) to add the parenthetical phrase "(or in the case of a
breach of the Confidential Resignation Agreement, the Chief Executive
Officer)" after the word "Committee" as it appears in subsection (b)
thereof.
4. Section 3.5 of the Agreement is amended:
(i) by adding at line four of Section 3.5, after the words "Section 3.8
of the Plan", the phrase "which results in a sale by the Centre Entities (as
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996) of all or substantially all of the assets of the Company or the shares
held by the Centre Entities (a "Qualifying Change in Control")", and to replace
the words "Change in Control" with "Qualifying Change in Control" throughout
Section 3.5 thereafter;
(ii) by deleting the phrases "all outstanding options shall immediately
be exercisable in full and", and "available under this Plan, whether or not then
subject to an outstanding option" as they appear in the first paragraph thereof;
(iii) by adding the phrase "for which this Option is exercisable as of
the date of occurrence of such Qualifying Change in Control" (a) after the
phrase "there shall be substituted for each share of Stock", and (b) after the
phrase "a cash payment from the Company in an amount equal to the number of
shares of Stock then subject to such option" as it appears in the second
paragraph thereof; and
<PAGE> 4
(iv) by adding a new paragraph at the end thereof to read as follows:
In the event of a Qualifying Change in Control prior to the
end of the Compliance Period, the portion of the Option which is
attributable to the Transition Shares shall be deemed to be exercisable
for purposes of this Section 3.5
This instrument may be executed in two counterparts, each of which
shall be deemed an original and both of which together shall constitute one and
the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
-------------------
Peter A. Marino
President
Accepted this 10th day of July, 1998.
/s/ Gregory F. Echols
- ---------------------
Gregory F. Echols
<PAGE> 1
EXHIBIT 10.12
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES A
WHEREAS, Firearms Training Systems, Inc., a Delaware
corporation (the "Company"), has heretofore granted to the optionee named below
(the "Optionee") a non-qualified option to purchase from the Company shares of
its Class A Common Stock upon and subject to the terms and conditions of a Stock
Option Agreement, Series A dated September 18, 1996 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of June
26, 1998 in the following respects:
1. Section 2.2(a) of the Agreement is amended by deleting the
words "and with respect to an additional sixteen and two-thirds percent
(16-2/3%) of the shares of Stock subject to the Option if such termination
occurs after the second anniversary of the Option Date.", and by adding two new
sentences at the end thereof to read as follows:
Notwithstanding the foregoing, if the Optionee's active employment
ceases in accordance with the Confidential Resignation Agreement (as
hereinafter defined), then (i) the Optionee's employment shall be
deemed to have terminated on January 1, 1999 for purposes of this
paragraph, (ii) such termination shall be deemed to be a termination by
the Company other than for Cause (as defined herein), provided the
terms and conditions of the Confidential Resignation Agreement are
complied with and (iii) subject to Section 2.5 below, the Option shall
become exercisable with respect to 45,000 of the remaining shares of
Stock subject to the Option (the "Transition Shares") at the end of the
Compliance Period (as defined in the Confidential Resignation
Agreement). For purposes of this Agreement, "Confidential Resignation
Agreement" means the
<PAGE> 2
resignation agreement between the Company and the Optionee dated June
26, 1998.
2. Section 2.2(e) of the Agreement is amended in its entirety to
read as follows:
(e) If the Optionee terminates employment with the Company for
any reason other than as described in subsection (b), (c) or (d) above,
the Option shall be exercisable only to the extent it is exercisable on
the effective date of the Optionee's termination of employment (except
for the Transition Shares, which shall remain exercisable as set forth
in this Agreement) and may thereafter be exercised by the Optionee or
the Optionee's Legal Representative until and including the latest to
occur of (i) the date that is 90 days after the effective date of the
Optionee's termination of employment (ii) the date on which the
Optionee is determined to be noncompliant with Paragraph 16 thereof,
and (iii) if no violation of Paragraph 16 of the Confidential
Resignation Agreement occurs during the Compliance Period, the date
that is twelve months after the end of the Compliance Period; provided
that if the Optionee's employment is terminated by the Company for
Cause at any time, the Option shall terminate automatically on the
effective date of the Optionee's termination of employment, and the
Optionee shall be subject to the provisions of Section 2.5.
3. Section 2.5 of the Agreement is amended in the following
respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 16 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of
noncompliance or" before the phrase "the date the Optionee engages in such
activity" as it appears twice in subsection (a) thereof, and before the phrase
"the
<PAGE> 3
date on which the Optionee engaged in such activity" as it appears in
subsection (a) thereof, and
(iii) to add the parenthetical phrase "(or in the case of a breach of
the Confidential Resignation Agreement, the Chief Executive Officer)" after the
word "Committee" as it appears in subsection (b) thereof.
4. Section 3.5 of the Agreement is amended in the following respects:
(i) by adding at line four of Section 3.5, after the words "Section 3.8
of the Plan", the phrase "which results in a sale by the Centre Entities (as
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996) of all or substantially all of the assets of the Company or the shares
held by the Centre Entities (a "Qualifying Change in Control")", and to replace
the words "Change in Control" with "Qualifying Change in Control" throughout
Section 3.5 thereafter,
(ii) to substitute the phrase "there shall be substituted for each
share of Stock for which this Option is exercisable as of the date of the
Qualifying Change in Control" for the phrase "all outstanding options shall
immediately be exercisable in full and there shall be substituted for each share
of Stock available under this Plan, whether or not then subject to an
outstanding option," as it appears in the first sentence of the first paragraph
thereof,
(iii) to substitute the phrase "the Option" for the phrase "each
option" as it appears in the second sentence of the first paragraph thereof,
(iv) to add the phrase "for which the Option is exercisable as of the
date of occurrence of such Qualifying Change in Control" after the phrase "a
cash payment from the Company in an amount equal to the number of shares of
Stock
<PAGE> 4
then subject to such option" as it appears in the second paragraph
thereof, and
(v) to add a new paragraph at the end thereof to read as follows:
In the event of a Qualifying Change in Control prior to the
end of the Compliance Period, the portion of the Option which is
attributable to the Transition Shares shall be deemed to be exercisable
for purposes of this Section 3.5
This instrument may be executed in two counterparts, each of which
shall be deemed an original and both of which together shall constitute one and
the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
-------------------
Peter A. Marino
President
Accepted this 26th day of June, 1998.
/s/ Robert B. Terry, Jr.
- ------------------------
Robert B. Terry, Jr.
<PAGE> 1
EXHIBIT 10.13
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES B
WHEREAS, Firearms Training Systems, Inc., a Delaware
corporation (the "Company"), has heretofore granted to the optionee named below
(the "Optionee") a non-qualified option to purchase from the Company shares of
its Class A Common Stock upon and subject to the terms and conditions of a Stock
Option Agreement, Series B dated September 18, 1996 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of June
26, 1998 in the following respects:
1. Section 2.2(a) of the Agreement is amended to delete the
phrase "Section 3.5 below (relating to a change in control of the Company) and"
as it appears therein.
2. Section 2.2(e) of the Agreement is amended (i) to delete the
phrase "the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date" as it appears therein, and to substitute therefore a new phrase
to read as follows:
the latest to occur of (i) the date that is 90 days after the effective
date of the Optionee's termination of employment (ii) the date on which
the Optionee is determined to be noncompliant with the Confidential
Resignation Agreement, pursuant to Paragraph 16 thereof, and (iii) if
no violation of Paragraph 16 of the Confidential Resignation Agreement
occurs during
<PAGE> 2
the Compliance Period (as defined therein), the date that is twelve
months after the end of the Compliance Period
and (ii) to add a new sentence at the end thereof to read as follows:
For purposes of this Agreement, "Confidential Resignation Agreement"
means the resignation agreement between the Company and the Optionee
dated June 26, 1998.
3. Section 2.5 of the Agreement is amended in the following
respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations thereunder as
described in Paragraph 16 thereof, or" at the beginning of subsection (a)
thereof,
(ii) to insert the phrase "the date of such determination of
noncompliance or" before the phrase "the date the Optionee engages in such
activity" as it appears twice in subsection (a) thereof, and before the phrase
"the date on which the Optionee engaged in such activity" as it appears in
subsection (a) thereof, and
(iii) to add the parenthetical phrase "(or in the case of a breach of
the Confidential Resignation Agreement, the Chief Executive Officer)" after the
word "Committee" as it appears in subsection (b) thereof.
4. The first paragraph of Section 3.5 of the Agreement is amended
to delete the last sentence thereof.
<PAGE> 3
This instrument may be executed in two counterparts, each of
which shall be deemed an original and both of which together shall constitute
one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
-------------------
Peter A. Marino
President
Accepted this 26th day of June, 1998.
/s/ Robert B. Terry, Jr.
- ------------------------
Robert B. Terry, Jr.
<PAGE> 1
EXHIBIT 10.14.01
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), hereby grants to Robert B. Terry Jr. (the "Optionee") as of April
17, 1997 (the "Option Date"), pursuant to the provisions of the Firearms
Training Systems, Inc. Stock Option Plan (the "Plan"), a non-qualified option to
purchase from the Company (the "Option") 10,000 shares of its Class A Common
Stock, $0.000006 par value ("Stock"), at the price of $11.75 per share upon and
subject to the terms and conditions set forth below. References to employment
shall also mean an agency or independent contractor relationship and references
to employment by the Company shall also mean employment by a Subsidiary.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1. Option Subject to Acceptance of Agreement. The Option shall
be null and void unless the Optionee shall accept this Agreement by executing it
in the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after the seventh anniversary of the Option Date
(the "Expiration Date").
2.2. Exercise of Option. (a) Except as otherwise provided in
Section 3.5 below (relating to a change in control of the Company), the Option
shall become exercisable with respect to thirty three and one-third percent
(33-1/3%) of the shares of Stock subject to the Option on the first anniversary
of the Option Date, and an additional thirty three and one-third (33-1/3%) of
the shares of Stock subject to the Option Date on each of the second and third
anniversaries of the Option Date on a cumulative basis, so that the Option is
exercisable with respect to one hundred percent (100%) of the shares of Stock
subject to the Option on the third anniversary of the Option Date.
(b) If the Optionee terminates employment with the Company by
reason of Disability, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee's termination of employment
<PAGE> 2
and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until the Expiration Date.
(c) If the Optionee terminates employment with the Company by
reason of retirement on or after age 62 or with the consent of the Company, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until the
Expiration Date.
(d) If the Optionee's employment with the Company terminates
by reason of the Optionee's death, the Option shall be exercisable only to the
extent it is exercisable on the date of death and may thereafter be exercised by
the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until the Expiration Date.
(e) If the Optionee terminates employment with the Company for
any reason other than as described in subsection (b), (c) or (d) above, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until and
including the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date; provided that if the Optionee's employment is terminated by the
Company for Cause, the Option shall terminate automatically on the effective
date of the Optionee's termination of employment, and the Optionee shall be
subject to the provisions of Section 2.5.
(f) For purposes of this Agreement, "Cause" shall mean the
Optionee's willful and continued failure to substantially perform the Optionee's
duties with the Company (other than a failure resulting from the Optionee's
Disability), or the direct or indirect engaging in any activity which is
contrary, inimical or harmful to the interests of the Company or any Subsidiary,
monetarily or otherwise, as determined by a majority of the members of the
Board, including (I) conduct that, in the reasonable judgment of the Company,
fails to conform with any material standard of conduct applicable to the
Company's executives, including gross violations of material Company policies,
(II) any act of dishonesty, (III) commission of a felony, (IV) a significant
violation of any statutory or common law duty of loyalty to the Company, or (V)
the disclosure or misuse of any confidential or competitively sensitive
information or trade secrets of the Company or a Subsidiary or affiliate.
2
<PAGE> 3
2.3. Method of Exercise. Subject to the limitations set forth
in this Agreement, the Option may be exercised by the Optionee (1) by giving
written notice to the Company, the form of which is set forth on Exhibit A to
this Agreement, specifying the number of whole shares of Stock to be purchased
and accompanied by payment therefor in full (or arrangement made for such
payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of
previously owned whole shares of Stock (which the Optionee has held for at least
six months prior to the delivery of such shares or which the Optionee purchased
on the open market and in each case for which the Optionee has good title, free
and clear of all liens and encumbrances) having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable
pursuant to the Option by reason of such exercise, (iii) in cash by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (iv) a combination of (i), (ii) and (iii), and
(2) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (iv). Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Stock shall be delivered until the full purchase price therefor has
been paid.
2.4. Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 business days of the Optionee's
delivery of this Agreement to the Company, either (i) mark this Agreement to
indicate the extent to which the Option has expired or been exercised, cancelled
or forfeited or (ii) issue to the Optionee a substitute option agreement
applicable to such rights, which agreement shall otherwise be substantially
similar to this Agreement in form and substance.
3
<PAGE> 4
2.5 Termination of Option and Forfeiture of Option Gain. (a) If at any
time prior to the earliest to occur of (i) the Expiration Date, (ii) the date
which is two years after the effective date of the Optionee's termination of
employment for any reason other than death and (iii) the date which is two years
after the Optionee exercises any portion of the Option, the Optionee:
(1) directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) owns, manages, operates,
controls, participates in, performs services for, or otherwise carries
on, a business substantially similar to or competitive with the
business conducted by the Company or any Subsidiary (it being
understood by the parties hereto that the prohibited activities are not
limited to any particular region because such business may be engaged
in effectively from any location in the United States); provided, that
nothing set forth in this Section 2.5(a)(1) shall prohibit the Optionee
from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and
listed on any national or regional stock exchange or on the Nasdaq
Stock Market; or
(2) directly or indirectly induces or tempts to persuade any
employee, agent or customer of the Company or any Subsidiary to
terminate such employment, agency or business relationship in order to
enter into any such relationship on behalf of any other business
organization in competition with the business conducted by the Company
or any Subsidiary;
(3) is terminated for Cause, or, in the event the Optionee is
no longer employed with the Company, directly or indirectly engages in
any activity which is contrary, inimical or harmful to the interests of
the Company or any Subsidiary, including the disclosure or misuse of
any confidential or competitively sensitive information or trade
secrets of the Company or a Subsidiary or affiliate; or
(4) participates in any activity not approved by the Board
which contributes to or results in the initiation of an action or
transaction which, if consummated, would result in a Change in Control
of the Company,
then the Option shall terminate automatically on the date the Optionee engages
in such activity and (x) with respect to any shares of Stock owned by the
Optionee as of such date as the result of any exercise of the Option, the
Optionee
4
<PAGE> 5
shall, within five business days of receipt by the Optionee of a written demand
therefor, sell such shares to the Company at a price equal to the lesser of (i)
the Fair Market Value of a share of Stock on the date the Optionee engages in
such activity and (ii) the purchase price per share of Stock set forth in the
first paragraph of this Agreement, and (y) with respect to any shares of Stock
acquired by the Optionee as a result of any exercise of the Option which were
subsequently sold or otherwise disposed of by the Optionee prior to the date on
which the Optionee engaged in such activity, the Optionee shall pay the Company,
within five business days of receipt by the Optionee of a written demand
therefor, an amount in cash determined by multiplying the number of shares of
Stock purchased pursuant to each exercise of the Option (without reduction for
any shares of Stock delivered by the Optionee or withheld by the Company
pursuant to Section 2.3 or Section 3.3) by the difference between (i) the Fair
Market Value of a share of Stock on the date of such exercise (or on the date of
any subsequent sale or other disposition, if greater) and (ii) the purchase
price per share of Stock set forth in the first paragraph of this Agreement.
(b) The Optionee may be released from the Optionee's
obligations under Sections 2.2(e) and 2.5(a) only if and to the extent the
Committee determines in its sole discretion that such a release is in the best
interests of the Company.
(c) The Optionee agrees that by executing this Agreement the
Optionee authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the Optionee pursuant to Section 2.2(e) or 2.5(a) from any
amounts payable by the Company or any Subsidiary to the Optionee, including,
without limitation, any amount payable to the Optionee as salary, wages,
vacation pay or bonus. This right of setoff shall not be an exclusive remedy and
the Company's or a Subsidiary's election not to exercise this right of setoff
with respect to any amount payable to the Optionee shall not constitute a waiver
of this right of setoff with respect to any other amount payable to the Optionee
or any other remedy.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act.
Except to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the
5
<PAGE> 6
Option is exercisable only by the Optionee or the Optionee's
Legal Representative. Except to the extent permitted by the foregoing, the
Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered
or otherwise disposed of (whether by operation of law or otherwise) or be
subject to execution, attachment or similar process. Upon any attempt to so
sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
the Option, the Option and all rights hereunder shall immediately become null
and void.
3.2. Investment Representation and Restrictions. The Optionee
hereby represents and covenants that (a) any share of Stock purchased upon
exercise of the Option will be purchased for investment and not with a view to
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; (c) to the extent required by an
agreement between one or more underwriters and the Company in connection with an
offering of shares of Stock pursuant to a registration statement under the
Securities Act, the Optionee shall not offer, sell, contract to sell or
otherwise dispose of any shares of Stock purchased upon exercise of the Option
for the period specified in such agreement; and (d) if requested by the Company,
the Optionee shall submit a written statement, in form satisfactory to the
Company, to the effect that such representation (x) is true and correct as of
the date of purchase of any shares hereunder or (y) is true and correct as of
the date of any sale of any such shares, as applicable. As a further condition
precedent to any exercise of the Option, the Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance or delivery of the shares and, in connection
therewith, shall execute any documents which the Board or the Committee shall in
its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect
6
<PAGE> 7
to such exercise of the Option. If the Optionee shall fail to advance the
Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and in each case for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) authorizing the Company to withhold whole shares of Stock which
would otherwise be delivered to the Optionee upon exercise of the Option having
a Fair Market Value, determined as of the Tax Date, equal to the Required Tax
Payments, (4) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (5) any
combination of (1), (2) and (3). The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5); provided, however,
that if the Optionee exercises the option on the Expiration Date, is employed as
of such date, and the shares of Stock are not traded on a national securities
exchange or are not quoted on the Nasdaq National Market as of such date, the
Company shall take reasonable efforts to permit an Optionee to use, in whole or
in part, the method described in clause (3) above. Shares of Stock to be
delivered or withheld may not have a Fair Market Value in excess of the minimum
amount of the Required Tax Payments. Any fraction of a share of Stock which
would be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.
(c) Unless the Committee otherwise determines, if the Optionee
is subject to Section 16 of the Exchange Act, the following provisions shall
apply to the Optionee's election to deliver to the Company whole shares of Stock
or to authorize the Company to withhold whole shares of Stock purchasable upon
exercise of the Option in payment of all or a portion of the Optionee's tax
liability in connection with such exercise:
7
<PAGE> 8
(1) The Optionee may deliver to the Company
previously owned whole shares of Stock in accordance with Section
3.3(b), if such delivery is in connection with the delivery of shares
of Stock in payment of the exercise price of the Option.
(2) The Optionee may authorize the Company to
withhold whole shares of Stock purchasable upon exercise of the Option
in accordance with Section 3.3(b); provided, that the following
provisions shall apply to such election:
(i) Such election may apply only
to the Option or any or all options held by the Optionee,
shall be filed with the Committee at least six months prior to
the exercise date of the Option and may not take effect during
the six-month period beginning on the date of grant of the
Option (other than in the event of the Optionee's death) or
(ii) such election (A) shall be subject to approval by the
Committee, (B) may not take effect during the six-month period
beginning on the date of grant of the Option (other than in
the event of the Optionee's death), (C) must be filed with the
Committee during (or must be filed with the Committee in
advance of, but take effect during) the 10 business day period
beginning on the third business day following the date of
release of the Company's quarterly or annual summary
statements of sales and earnings and (D) the exercise of the
Option must occur during such 10 business day period. Unless
the Committee otherwise determines, any election pursuant to
clause (i) may be revoked or changed only if such revocation
or change is made at least six months prior to the exercise of
the Option. Any election made pursuant to clause (ii) may be
revoked or changed prior to the exercise of the Option during
the 10 business day period.
3.4. Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Stock other than a
regular cash dividend, the number and class of securities subject to the Option
and the purchase price per security shall be appropriately adjusted by the
Committee without an increase in the aggregate purchase price. If any adjustment
would result in a fractional security being subject to the Option, the Company
shall pay the Optionee, in connection with the first exercise of the
8
<PAGE> 9
Option occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Change in Control. (a) Notwithstanding any provision in
this Agreement, in the event of the occurrence of a Change in Control as defined
in paragraph (b)(3) or (4) of Section 3.8 of the Plan in connection with which
the holders of Stock receive shares of common stock that are registered under
Section 12 of the Exchange Act, all outstanding options shall immediately be
exercisable in full and there shall be substituted for each share of Stock
available under this Plan, whether or not then subject to an outstanding option,
the number and class of shares into which each outstanding share of Stock shall
be converted pursuant to such Change in Control. In the event of any such
substitution, the purchase price per share of each option shall be appropriately
adjusted by the Committee, such adjustments to be made without an increase in
the aggregate purchase price or base price.
(b) Notwithstanding any provision in this Agreement, in the
event of the occurrence of a Change in Control pursuant to paragraph (b)(1) or
(2) of Section 3.8 of the Plan, or in the event of the occurrence of a Change in
Control pursuant to paragraph (b)(3) or (4) of Section 3.8 of the Plan in
connection with which the holders of Stock receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange Act,
each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be cancelled by the Company, and
the holder shall receive, within 10 business days of the occurrence of a Change
in Control pursuant to paragraph (b)(1) or (2) of Section 3.8 of the Plan or
within 10 business days of the approval of the stockholders of the Company
contemplated by paragraph (b)(3) or (4) of Section 3.8 of the Plan, a cash
payment from the Company in an amount equal to the number of shares of Stock
then subject to such option, multiplied by the excess, if any, of the Fair
Market Value of a share of Stock on the date of occurrence of the Change in
Control over (ii) the purchase price per share of Stock subject to the option.
The Company may, but is not required to, cooperate with any person who is
subject to Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance with Section
16 and the rules and regulations thereunder.
9
<PAGE> 10
3.6. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.7. Delivery of Information to Optionee. The Company shall
forward to the Optionee annual reports to shareholders and annual or quarterly
financial statements of the Company, including the consolidated balance sheet
and related consolidated statements of operations and cash flows for a fiscal
year, fiscal quarter or period of a fiscal year, as applicable, as soon as
administratively practicable after such materials are prepared and distributed
or filed, as the case may be, by the Company. The Optionees shall have the same
rights as holders of shares of Stock to notice with respect to annual or special
meetings of shareholders of the Company, and shall have the right to attend any
such meetings.
3.8. Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of shares purchased against
full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.3.
3.9. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to shares of
Stock subject to the Option unless and until purchased and delivered upon the
exercise of the Option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered shares; and the Optionee
shall not be considered a stockholder of the Company with respect to any such
shares not so purchased and delivered.
3.10. Option Confers No Rights to Continued Employment. In no
event shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the
10
<PAGE> 11
Optionee any right to continued employment by the Company or any affiliate of
the Company.
3.11. Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.
3.12. Company to Reserve Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Stock, the full number of shares subject to the Option from time to time.
3.13. Agreement Subject to the Plan. This Agreement is subject
to the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The Option is
hereby designated as not constituting an "incentive stock option" within meaning
of section 422 of the Internal Revenue Code of 1986, as amended (the "Code");
this Agreement shall be interpreted and treated consistently with such
designation.
4.2. Meaning of Certain Terms. (a) As used herein, employment
by the Company shall include employment by an affiliate of the Company.
References in this Agreement to sections of the Code shall be deemed to refer to
any successor section of the Code or any successor internal revenue law.
(b) As used herein, the term "Legal Representative" shall
include an executor, administrator, legal representative, guardian or similar
person and the term "Permitted Transferee" shall include any transferee (i)
pursuant to a transfer permitted under Section 3.4 of the Plan and Section 3.1
hereof or (ii) designated pursuant to beneficiary designation procedures
approved by the Company.
4.3. Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
11
<PAGE> 12
4.4. Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to Firearms
Training Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia 30024,
Attention: Corporate Secretary, and if to the Optionee, to Charles N. Bowen, 700
Collier Commons Circle, Atlanta, Georgia 30318. All notices, requests or other
communications provided for in this Agreement shall be made in writing either
(a) by personal delivery to the party entitled thereto, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission or
upon receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a notice, request or other
communication sent to the Company is not received during regular business hours,
it shall be deemed to be received on the next succeeding business day of the
Company.
4.5. Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Delaware and construed in accordance therewith without giving
effect to principles of conflicts of laws.
12
<PAGE> 13
4.6. Counterparts. This Agreement may be executed in two counterparts each of
which shall be deemed an original and both of which together shall constitute
one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ Peter A. Marino
-----------------------------------
Peter A. Marino
President & Chief Executive Officer
Accepted this 17th day of
April, 1997.
/s/ Robert B. Terry, Jr.
- ------------------------
Robert B. Terry, Jr.
13
<PAGE> 1
EXHIBIT 10.14.02
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
WHEREAS, Firearms Training Systems, Inc., a Delaware
corporation (the "Company"), has heretofore granted to the optionee named below
(the "Optionee") a non-qualified option to purchase from the Company shares of
its Class A Common Stock upon and subject to the terms and conditions of a Stock
Option Agreement, Series D dated April 17, 1997 (the "Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of June
26, 1998 in the following respects:
1. Section 2.2(a) is amended to add two new sentences at the end
thereof to read as follows:
Notwithstanding the foregoing, if the Optionee's active employment
ceases in accordance with the Confidential Resignation Agreement (as
hereinafter defined), then (i) the Optionee's employment shall be
deemed to have terminated on January 1, 1999 for purposes of this
paragraph, (ii) such termination shall be deemed to be a termination by
the Company other than for Cause (as defined herein), provided the
terms and conditions of the Confidential Resignation Agreement are
complied with and (iii) subject to Section 2.5 below, the Option shall
become exercisable with respect to all of the
<PAGE> 2
remaining shares of Stock subject to the Option (the "Transition
Shares") at the end of the Compliance Period (as defined in the
Confidential Resignation Agreement). For purposes of this Agreement,
"Confidential Resignation Agreement" means the resignation agreement
between the Company and the Optionee dated June 26, 1998.
2. Section 2.2(e) of the Agreement is amended (i) to add at line
five after the words "termination of employment" the words "(except for the
Transition Shares, which shall remain exercisable as set forth in this
Agreement)" (ii) to delete the phrase "the earliest to occur of (i) the date
which is 90 days after the effective date of the Optionee's termination of
employment and (iii) the Expiration Date" as it appears therein, and to
substitute therefore a new phrase to read as follows:
the latest to occur of (i) the date that is 90 days after the effective
date of the Optionee's termination of employment (ii) the date on which
the Optionee is determined to be noncompliant with the Confidential
Resignation Agreement, pursuant to Paragraph 16 thereof, and (iii) if
no violation of Paragraph 16 of the Confidential Resignation Agreement
occurs during the Compliance Period (as defined therein), the date that
is twelve months after the end of the Compliance Period
3. Section 2.5 of the Agreement is amended in the following
respects:
(i) to insert the phrase "In the event of a determination of the
Optionee's noncompliance with the Confidential Resignation Agreement on account
of the Optionee's breach or failure to comply with his obligations
<PAGE> 3
thereunder as described in Paragraph 16 thereof, or" at the beginning of
subsection (a) thereof,
(ii) to insert the phrase "the date of such determination of
noncompliance or" before the phrase "the date the Optionee engages in such
activity" as it appears twice in subsection (a) thereof, and before the phrase
"the date on which the Optionee engaged in such activity" as it appears in
subsection (a) thereof, and
(iii) to add the parenthetical phrase "(or in the case of a breach of
the Confidential Resignation Agreement, the Chief Executive Officer)" after the
word "Committee" as it appears in subsection (b) thereof.
4. Section 3.5 of the Agreement is amended:
(i) by adding at line four of Section 3.5, after the words "Section 3.8
of the Plan", the phrase "which results in a sale by the Centre Entities (as
described in the Prospectus for Firearms Training Systems, Inc. dated November
26, 1996) of all or substantially all of the assets of the Company or the shares
held by the Centre Entities (a "Qualifying Change in Control")", and to replace
the words "Change in Control" with "Qualifying Change in Control" throughout
Section 3.5 thereafter;
(ii) by deleting the phrases "all outstanding options shall immediately
be exercisable in full and", and "available under this Plan, whether or not then
subject to an outstanding option" as they appear in the first paragraph thereof;
(iii) by adding the phrase "for which this Option is exercisable as of
the date of occurrence of such Qualifying Change in Control" (a) after the
phrase "there shall be substituted for each share of Stock", and (b) after the
phrase "a cash payment from the Company in an amount equal to the number of
shares of Stock then subject to such option" as it appears in the second
paragraph thereof; and
<PAGE> 4
(iv) by adding a new paragraph at the end thereof to read as follows:
In the event of a Qualifying Change in Control prior to the
end of the Compliance Period, the portion of the Option which is
attributable to the Transition Shares shall be deemed to be exercisable
for purposes of this Section 3.5
5. Section 4.4 of the Agreement is amended to substitute the
address " 4744 Watson Mill Court, Loganville, Georgia 30249" for the address
"c/o Firearms Training Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, Georgia
30174" as it appears after the name "Robert B. Terry, Jr.."
This instrument may be executed in two counterparts, each of which
shall be deemed an original and both of which together shall constitute one and
the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By:/s/ Peter A. Marino
-------------------
Peter A. Marino
President
Accepted this 26th day of June, 1998.
/s/ Robert B. Terry, Jr.
- ------------------------
Robert B. Terry, Jr.
<PAGE> 1
EXHIBIT 10.15
STOCK SUBSCRIPTION AND PURCHASE AGREEMENT
DATED AS OF APRIL 23, 1998
BETWEEN
FIREARMS TRAINING SYSTEMS, INC.
AND
CENTRE CAPITAL INVESTORS II, L.P.,
CENTRE PARTNERS COINVESTMENT, L.P.,
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P., AND
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
<PAGE> 2
STOCK SUBSCRIPTION AND PURCHASE AGREEMENT
STOCK SUBSCRIPTION AND PURCHASE AGREEMENT (the "Agreement"),
dated as of April 23, 1998, between Centre Capital Investors II, L.P., Centre
Partners Coinvestment, L.P., Centre Capital Offshore Investors II, L.P., and
Centre Capital Tax-exempt Investors II, L.P., as buyers (each a "Buyer" and,
collectively, "Buyers") and Firearms Training Systems, Inc., a Delaware
corporation, as seller ("Seller" or the "Company").
PRELIMINARY STATEMENTS
Buyers own beneficially and of record 10,594,060 shares of
Class A Common Stock, par value $.000006 per share ("Class A Common Stock"), of
the Company, with full voting rights. Centre Partners Management LLC and Centre
Partners II, L.P., which are affiliates of the Buyers (referred to herein
collectively with the Buyers as the "Centre Entities"), may be deemed to own
beneficially 571,181 shares of Class A Common Stock as a result of the terms and
provisions relating to voting rights contained in the Co-Investment Agreement.
Buyers desire to reduce the voting power in the Company maintained by the Centre
Entities such that the Centre Entities hold less than 50% of the total voting
power associated with the Class A Common Stock.
Buyers desire to purchase from the Company, and the Company is
willing to issue and sell to the Buyers, shares of the Class B Non-voting Common
Stock, par value $.000006 per share ("Class B Common Stock"), of the Company in
the amounts as set forth herein for consideration consisting of and in exchange
for an equal number of shares of Class A Common Stock and on the terms and
subject to the conditions set forth herein.
In connection with the issuance, sale and purchase of the
shares of Class B Common Stock, the Buyers are willing to waive irrevocably and
agree not to exercise any right to elect to convert the shares of Class B Common
Stock held by Buyers to shares of Class A Common Stock if, as a result of such
conversion, the Centre Entities would have the power to vote 50% or more of the
outstanding shares of Class A Common Stock, unless concurrently with such
conversion the shares of Class A Common Stock are transferred to an unaffiliated
Person; and the Buyers are willing to grant to the Company the right not to
recognize or carry out any such election to convert the shares of Class B Common
Stock. The Buyers will retain rights and obligations pursuant to the Buyer
Registration Rights Agreement in connection with the shares of Class B Common
Stock or shares of Class A Common Stock into which such shares of Class B Common
Stock can be converted.
<PAGE> 3
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, Buyers and Seller agree as follows: 1. DEFINITIONS. In
this Agreement, the following terms have the meanings specified or referred to
in this Section 1 and shall be equally applicable to both the singular and
plural forms.
"AGREEMENT" has the meaning set forth on the first paragraph.
"BUYER" has the meaning specified in the first paragraph of
this Agreement.
"BUYER REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement dated as of July 31, 1996 between the Company and the Buyers,
as amended, supplemented or otherwise modified from time to time.
"CENTRE ENTITIES" has the meaning specified in the Preliminary
Statements.
"CLASS A COMMON STOCK" has the meaning specified in the
Preliminary Statements.
"CLASS B COMMON STOCK" has the meaning specified in the
Preliminary Statements. "CLOSING" has the meaning specified in Section 4.
"CLOSING DATE" has the meaning specified in Section 4.
"CO-INVESTMENT AGREEMENT" means the Co-Investment Agreement
dated as of September 25, 1996 among the Buyers, Centre Partners II LLC, a
Delaware limited liability company, Centre Partners Management LLC, a Delaware
limited liability company, and certain other persons, related to the rights and
restrictions of the parties thereto with respect to the shares of Class A Common
Stock acquired from the Buyers by such persons, as amended, supplemented or
otherwise modified from time to time.
"COMPANY" has the meaning specified in the Preliminary
Statements.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"PURCHASE PRICE" has the meaning specified in Section 3.
"SECURITIES ACT" has the meaning specified in Section 7(f).
<PAGE> 4
"SELLER" has the meaning specified in the first paragraph of
this Agreement.
1. INTERPRETATION. As used in this Agreement, the word
"including" means without limitation, the word "or" is not exclusive and the
words "herein", "hereof", "hereby", "hereto" and "hereunder" refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(i) to Sections and Exhibits mean the Sections of and the Exhibits attached to
this Agreement; (ii) to an agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and by this
Agreement; and (iii) to a statute means such statute as amended from time to
time and includes any successor legislation thereto. Titles to Sections are
inserted for convenience of reference only and shall not be deemed a part of or
to affect the meaning or interpretation of this Agreement.
1. AGREEMENTS TO PURCHASE AND SELL CLASS B COMMON STOCK IN
EXCHANGE FOR CLASS A COMMON STOCK. The Company hereby agrees to issue and sell
to each Buyer on the basis of the representations and warranties contained in
this Agreement, and each Buyer hereby severally subscribes for and agrees to
purchase from the Company the number of shares of Class B Common Stock set forth
next to its name on Schedule I hereto, with each Buyer acquiring such shares of
Class B Common Stock for consideration consisting of and in exchange for one
share of Class A Common Stock for each share of Class B Common Stock being
purchased by such Buyer (such aggregate consideration being the "Purchase Price"
with respect to such Buyer).
1. CLOSING DATE. The sale and purchase provided in this Agreement
shall be consummated at a closing (the "Closing") to be held at 10:00 A.M.,
local time, on April 24, 1998, or such later date as may be agreed upon by
Buyers and the Company, at the offices of Sidley & Austin, 875 Third Avenue, New
York, New York 10022, or at such other place or at such other time as shall be
agreed upon by Buyers and the Company. The time and date on which the Closing is
actually held are sometimes referred to herein as the "Closing Date." The
failure of any Buyer to consummate the sale and purchase of such Buyer's shares
shall not relieve any other Buyer or the Company (except as to such failed
Buyer) of its or their obligations hereunder.
1. PAYMENT OF PURCHASE PRICE; DELIVERIES AT CLOSING.
(a) Subject to fulfillment or waiver of the conditions set forth
in Section 9, at or prior to the Closing, each Buyer shall deliver the shares of
Class A Common Stock representing the Purchase Price and appropriate stock
powers or a completed and executed Stock Assignment Separate from Certificate,
in the form of Exhibit A hereto, with respect to the number of shares of Class A
Common Stock
<PAGE> 5
constituting the Purchase Price, together with all documents required to be
delivered pursuant to Section 10 of this Agreement.
(a) Subject to fulfillment or waiver of the conditions set forth
in Section 10, the Company shall deliver to such Buyer (i) one or more
certificates representing the shares of Class B Common Stock being purchased by
such Buyer, registered in such name and issued in such denominations as set
forth on Schedule I hereto or, if different, as the Buyer requests in writing
not later than two business days prior to the Closing, and (ii) the documents
required to be delivered pursuant to Section 9 of this Agreement.
1. REPRESENTATIONS AND WARRANTIES OF BUYERS. As an inducement to
the Company to enter into this Agreement and to consummate the transactions
contemplated hereby, each Buyer individually represents and warrants as to
itself to the Company:
(a) Each of Centre Capital Investors II, L.P., Centre Partners
Coinvestment, L.P., and Centre Capital Tax-exempt Investors II, L.P. is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware. Centre Capital Offshore Investors II, L.P. is
a limited partnership duly organized, validly existing and in good standing
under the laws of Bermuda.
(a) Each Buyer has all requisite partnership power and authority
to execute, deliver and perform this Agreement and the Stock Assignment Separate
From Certificate. This Agreement and the Stock Assignment Separate From
Certificate have been duly authorized, executed and delivered by Buyer and are
the legal, valid and binding obligations of Buyer enforceable in accordance with
its terms.
(a) The execution and delivery of this Agreement and the Stock
Assignment Separate From Certificate do not, and the consummation of the
transactions contemplated herein will not, conflict with, or result in any
violation of any material agreement or instrument, or any material term of any
judgment, decree, order, statute, rule or governmental regulation applicable to
Buyer, the violation of which would have any material adverse consequence on the
ability of Buyer to perform its obligations hereunder, or result in the creation
of any mortgage, lien, charge or encumbrance on the shares of Class A Common
Stock being paid in consideration to the Company.
(a) Buyer is not required to obtain the consent, approval, or
authorization of, or to make any declaration or filing with, any governmental
authority as a condition precedent to the valid execution, delivery and
performance of this Agreement or the Stock Assignment Separate From Certificate.
(a) Buyer is the owner of the shares of Class A Common Stock being
paid as consideration for the shares of Class B Common Stock being purchased by
such Buyer and will transfer such shares of Class A Common Stock to the Company
free and
<PAGE> 6
clear of any liens, claims, charges, security interests or encumbrances, and has
full power and authority to possess and to transfer such shares of Class A
Common Stock in accordance with the terms and provisions of this Agreement.
(a) Neither Buyer nor any Person acting on its behalf has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated in this
Agreement.
(a) The shares of Class B Common Stock are being acquired by Buyer
for its own account for investment purposes, and with no present intention of
selling or otherwise distributing the shares of Class B Common Stock within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to registration, or an applicable exemption from registration under the
Securities Act. Buyer is an "accredited investor," as such term is defined in
Regulation D promulgated under the Securities Act and/or Buyer has sufficient
knowledge and experience in financial and business matters to enable it to
evaluate the merits and risks of investment in the Class B Common Stock,
including the risks of owning non-voting shares. Buyer acknowledges that the
shares of Class B Common Stock being acquired have not been registered under the
Securities Act or any state securities laws, and are offered and sold pursuant
to exemptions therefrom; and will contain a prominent legend with respect to the
restrictions specified in this Section 6(g). Buyer acknowledges that in making
the investment decision to purchase the shares of Class B Common Stock it is not
relying on any representations, warranties or statements of the Company, other
than the representations, warranties and statements of the Company contained in
this Agreement. Buyer has been supplied with, or had access to, information to
which a reasonably prudent investor would attach significance in making
investment decisions sufficient to enable it to make its decision to purchase
the shares of Class B Common Stock.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As an
inducement to Buyers to enter into this Agreement and to consummate the
transactions contemplated herein, the Company hereby represents and warrants to
Buyers:
(a) The Company is duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, and has full corporate power and authority to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company have been duly authorized and approved by all necessary
corporate action, and do not require any further authorization or consent of any
other Person. This Agreement has been duly authorized, executed and delivered by
the Company and is the legal, valid and binding agreement of the Company
enforceable in accordance with its terms.
(a) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated herein will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under,
<PAGE> 7
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under the certificate of
incorporation or bylaws of the Company, any material agreement or instrument, or
any material term of any judgment, decree, order, statute, rule or governmental
regulation applicable to the Company, the violation of which would have any
material adverse consequence on the ability of the Company to perform its
obligations hereunder or thereunder, or result in the creation of any mortgage,
lien, charge or encumbrance on the shares of Class B Common Stock being sold by
the Company.
(a) The Company is not required to obtain the consent, approval,
or authorization of, or to make any declaration or filing with, any governmental
authorization as a condition precedent to the valid execution, delivery and
performance of this Agreement.
(a) The certificates representing the Class B Common Stock to be
delivered under this Agreement are or will be in due and proper form under
Delaware law, and when duly countersigned by the Company's transfer agent and
registrar, and delivered to the Buyer against payment of the Purchase Price
therefor in accordance with the provisions of this Agreement, the Class B Common
Stock represented thereby will be duly authorized and validly issued, fully paid
and nonassessable, and will not have been issued in violation of any preemptive
rights or other rights to subscribe for or purchase securities.
(a) The Company acknowledges that the shares of Class B Common
Stock acquired by the Buyers pursuant to this Agreement shall be subject to the
Buyer Registration Rights Agreement.
1. EXPENSES; TRANSFER TAXES. The Company shall pay all costs and
expenses incident to the negotiation and preparation of this Agreement. Except
as set forth in the preceding sentence, each party hereto shall pay all costs
and expenses incident to its performance and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including the fees, expenses and disbursements of its counsel and accountants.
The Company will pay all stock transfer or similar taxes, if any, in connection
with the initial issuance of the shares of Class B Common Stock pursuant to this
Agreement.
1. CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of each
Buyer to purchase the shares of Class B Common Stock pursuant to this Agreement
shall be subject to the satisfaction, on or prior to the Closing Date, of the
following condition, which may be waived, in whole or in part, at the sole
discretion of such Buyer:
There shall have been no material breach by the Company in the
performance of any of their covenants and agreements herein; each of
the representations and warranties of the Company contained or referred
to herein shall be true and
<PAGE> 8
correct on the Closing Date as though made on the Closing Date, except
for changes resulting from any transaction expressly consented to in
writing by Buyers.
1. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to sell the shares of Class B Common Stock to each Buyer pursuant to
this Agreement shall be subject to the satisfaction, on or prior to the Closing
Date, of the following conditions, which may be waived, in whole or in part, at
the sole discretion of the Company:
(a) There shall have been no material breach by such Buyer in the
performance of any of its covenants and agreements herein; each of the
representations and warranties of such Buyer contained or referred to in this
Agreement shall be true and correct on the Closing Date as though made on the
Closing Date, except for changes resulting from any transaction expressly
consented to in writing by the Company.
(a) Buyer shall have executed and delivered or caused to be
delivered the following to the documents:
(i) the Stock Assignment Separate from Certificate or stock powers
related to the shares of Class A Common Stock constituting the Purchase Price;
(i) such additional supporting documents and certificates with
respect to the transactions contemplated herein as the Company may reasonably
request.
1. IRREVOCABLE WAIVER OF CONVERSION RIGHTS.
(a) Buyers acknowledge that the Class B Common Stock has no voting
rights, but in other respects is entitled to the same rights and powers as the
Class A Common Stock, and pursuant to the Fourth Article of the Certificate of
Incorporation of the Company, a holder of Class B Common Stock is entitled to
convert at the holder's election and at any time any or all of such holder's
Class B Common Stock into shares of Class A Common Stock at the rate of one
share of Class B Common Stock for one share of Class A Common Stock.
(a) Notwithstanding the provisions of the Certificate of
Incorporation of the Company establishing conversion rights with respect to the
Class B Common Stock, the Company and the Buyers each severally agree as
follows:
(i) the Buyers will not exercise, and hereby waive irrevocably,
any right to elect to convert shares of Class B Common Stock issued and sold
pursuant to this Agreement to shares of Class A Common Stock if, as a result of
such conversion, the Centre Entities would hold, of record or beneficially with
power to vote, more than 50% of the shares of Class A Common Stock outstanding
immediately following such
<PAGE> 9
conversion, unless concurrently with such conversion the shares of Class A
Common Stock are transferred to an unaffiliated Person;
(i) the Company shall be entitled to refuse to honor and carry out
an election to convert shares of Class B Common Stock in violation of clause (i)
above; and
(i) the limitations on the conversion of the Class B Common Stock
issued and sold pursuant to this Agreement shall apply only so long as the
shares of Class B Common Stock are owned by any of the Centre Entities and do
not apply to a conversion exercised in connection with a sale or transfer of
shares of Class B Common Stock by the Buyers to a Person that is not an
affiliate of the Centre Entities.
1. TERMINATION.
(a) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(i) by the mutual consent of any Buyer as to such Buyer and the
Company;
(i) by any Buyer as to such Buyer or by the Company if the Closing
shall not have occurred as to such Buyer on or before April 30, 1998 (or such
later date as may be mutually agreed to by such Buyer and the Company);
(i) by any Buyer as to such Buyer in the event of any material
breach by the Company of any of the Company's agreements, representations or
warranties contained herein; or
(i) by the Company in the event of any material breach by any
Buyer as to such Buyer of any of such Buyer's agreements, representations or
warranties contained herein.
(a) Any party desiring to terminate this Agreement pursuant to
this Section 12 shall give notice of such termination to the each other party to
this Agreement.
(a) In the event that this Agreement shall be terminated pursuant
to this Section 12 all further obligations of the parties under this Agreement
shall be terminated without further liability of any party to the other,
provided that nothing herein shall relieve any party from liability for its
willful breach of this Agreement.
<PAGE> 10
1. SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants, agreements and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement.
1. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally, (ii) if transmitted by Fax when confirmation of
transmission is received, or (iii) if sent by registered or certified mail,
return receipt requested, or by private courier when received; and shall be
addressed as follows:
If to a Buyer, to:
Centre Partners Management LLC
30 Rockefeller Plaza
New York, New York 10020
Attention: Scott Perekslis
Facsimile No: 212-332-5801
If to the Company, to:
Firearms Training Systems, Inc.
7340 McGinnis Ferry Road
Suwanee, Georgia 30174
Attention: President
Facsimile No: 770-813-0741
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
1. SUCCESSORS AND ASSIGNS. The rights of the Buyers under this
Agreement shall not be assignable by such party hereto prior to the Closing
without the written consent of the Company. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
or shall be construed to confer upon any Person other than the parties and
successors and permitted assigns any right, remedy or claim under or by reason
of this Agreement.
1. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Exhibits
referred to herein and the documents delivered pursuant hereto contain the
entire understanding of the parties hereto with regard to the subject matter
contained herein or therein, and supersede all prior agreements, understandings
or letters of intent between or among any of the parties hereto. This Agreement
shall not be amended, modified or supplemented except by a written instrument
signed by an authorized representative of each of the parties hereto.
<PAGE> 11
1. WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently given for the purposes of this Agreement if, as to any party, it is
in writing signed by an authorized representative of such party. The failure of
any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
2. PARTIAL INVALIDITY. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such provision or provisions or any other provisions hereof,
unless such a construction would be unreasonable.
1. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when one or more counterparts have been signed by each of
the parties hereto and delivered to the Company and each of the Buyers.
1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of New York.
1. SUBMISSION TO JURISDICTION. The Company and Buyers hereby
irrevocably submit in any suit, action or proceeding arising out of or related
to this Agreement or any of the transactions contemplated hereby or thereby to
the non-exclusive jurisdiction of the United States District Court for the
Southern District of New York and the jurisdiction of any court of the State of
New York located in the city and county of New York and waive any and all
objections to jurisdiction that they may have under the laws of the State of New
York or the United States and any claim or objection that any such court is an
inconvenient forum.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
BUYERS
CENTRE CAPITAL INVESTORS
II L.P.,
CENTRE CAPITAL OFFSHORE INVESTORS
II, L.P.
CENTRE CAPITAL TAX-EXEMPT
INVESTORS II, L.P.
by: Centre Partners II, L.P. as general partner of such partnerships
by: Centre Partners Management LLC, attorney-in-fact
by: /s/ Jonathan H. Kagan
--------------------------------
Jonathan H. Kagan
Managing Director
CENTRE PARTNERS
COINVESTMENT, L.P.
by: Centre Partners II LLC, as general partner
by: /s/ Jonathan H. Kagan
--------------------------------
Jonathan H. Kagan
Managing Director
SELLER
FIREARMS TRAINING SYSTEMS, INC.
by: /s/ Peter A. Marino
--------------------------------
Name: Peter A. Marino
Title: President and CEO
<PAGE> 13
SCHEDULE I
<TABLE>
<CAPTION>
Buyer Number of Shares
- ----- ----------------
<S> <C>
CENTRE CAPITAL INVESTORS II, L.P., 1,162,360
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P. 230,322
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P. 129,942
CENTRE PARTNERS COINVESTMENT, L.P. 171,945
</TABLE>
<PAGE> 1
EXHIBIT 10.16.01
FIRST AMENDMENT TO
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES B
WHEREAS, Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), has heretofore granted to the optionee named below (the "Optionee")
a non-qualified option to purchase from the company shares of its Class A Common
Stock upon and subject to the terms and conditions of a Stock Option Agreement,
Series B dated September 18, 1996 (the "Series B Agreement"); and
WHEREAS, the Company and the Optionee desire to amend the Series B
Agreement in certain respects;
NOW, THEREFORE, the Agreement is amended effective as of 4/17/97 in the
following respects:
1. Subsection ( c ) of Section 3.3 of the Agreement is deleted.
2. Section 3.5 of the Agreement is amended in the following respects:
(i) The title of such Section is amended to read as follows: "Change in
Control; Disposition of Stock".
(ii) The first paragraph of such Section is amended to insert " ( a) ( 1 )
" at the beginning thereof, and to delete the phrase "based on its reasonable
judgment regarding whether or the extent to which the Company has achieved the
EBITDA Targets set forth in Section 2.2 ( a ) " as it appears in the last
sentence thereof.
(iii) A new subsection ( b ) shall be added at the end thereof to read as
follows:
<PAGE> 2
( b ) ( 1 ) In the event of a sale to unaffiliated third parties by the
entities described in the Company's Prospectus dated November 26, 1996 as the
"Centre Entities" or their affiliates of a material percentage of the common
stock of the Company then owned by the Centre Entities (a "Disposition"), the
Option may become exercisable, in part or in full, to the extent prescribed by
the Committee in its sole discretion.
( 2 ) The Committee, in its sole discretion, shall determine whether a
Disposition warranting the acceleration of vesting of this Option, in part or in
full, has occurred for purposes of this subsection, based on such factors as it
deems appropriate including, but not limited to, the extend to which the
Disposition involves more than ten percent ( 10% ) of the then outstanding
common stock of the Company.
This instrument may be executed in two counterparts, each of which shall be
deemed an original and both of which together shall constitute one and the same
instrument.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ Peter A. Marino
----------------------------
Peter A. Marino
Accepted this 11th day of
August, 1998.
/s/ Robert F. Mecedy
- -------------------------------
Optionee
Print Name: Robert F. Mecredy
2
<PAGE> 1
EXHIBIT 11.01
FIREARMS TRAINING SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE (1) DILUTED EARNINGS PER SHARE (1)
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 20,664 20,403 20,664 20,403
Shares issued upon assumed exercise of
outstanding options -- -- -- 1,288
-------- ------- -------- -------
Weighted average common and common
equivalent shares outstanding 20,664 20,403 20,664 21,691
======== ======= ======== =======
Net income $ (2,018) $ 2,186 $ (2,018) $ 2,186
======== ======= ======== =======
Earnings per share $ (0.10) $ 0.11 $ (0.10) $ 0.10
======== ======= ======== =======
- ---------
</TABLE>
(1) Shares reflect a 100,000-for-one stock split in July 1996 in connection
with the recapitalization and a split of 1.66-for-one in October 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,970
<SECURITIES> 0
<RECEIVABLES> 21,000
<ALLOWANCES> 100
<INVENTORY> 18,226
<CURRENT-ASSETS> 43,153
<PP&E> 7,690
<DEPRECIATION> 3,572
<TOTAL-ASSETS> 56,290
<CURRENT-LIABILITIES> 22,213
<BONDS> 62,498
0
0
<COMMON> 114,257
<OTHER-SE> (142,678)
<TOTAL-LIABILITY-AND-EQUITY> 56,290
<SALES> 12,265
<TOTAL-REVENUES> 12,265
<CGS> 7,551
<TOTAL-COSTS> 7,551
<OTHER-EXPENSES> 6,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,611
<INCOME-PRETAX> (3,057)
<INCOME-TAX> (1,039)
<INCOME-CONTINUING> (2,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,018)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
