EXHIBIT 10.06
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PLEDGE AND SECURITY AGREEMENT
DATED AS OF JULY 31, 1996
AMONG
THE GRANTORS NAMED HEREIN
AND
NATIONSBANK, N.A. (SOUTH),
AS AGENT
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TABLE OF CONTENTS
Article Section Page
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ARTICLE I DEFINITIONS 1
SECTION 1.01. Terms Defined in the Credit Agreement............. 1
SECTION 1.02. Definition of Certain Terms Used Herein........... 1
SECTION 1.03. UCC Definitions................................... 7
SECTION 1.04. Terms Generally................................... 7
ARTICLE II SECURITY INTERESTS................................... 7
SECTION 2.01. The Security Interests............................ 7
SECTION 2.02. Continuing Liability of each Grantor.............. 8
SECTION 2.03. Delivery of Pledged Securities and Chattel Paper.. 9
SECTION 2.04. Security Interests Absolute....................... 9
SECTION 2.05. Sales and Collections............................. 10
SECTION 2.06. Segregation of Proceeds........................... 11
SECTION 2.07. Verification of Receivables....................... 12
SECTION 2.08. Release of Collateral............................. 12
SECTION 2.09. Amendment of Schedules............................ 13
ARTICLE III REPRESENTATIONS AND WARRANTIES...................... 14
SECTION 3.01. Pledged Securities................................ 14
SECTION 3.02. Validity, Perfection, Assignment and
Priority of Security Interests.................... 14
SECTION 3.03. Patents, Trademarks and Copyrights................ 15
SECTION 3.04. Enforceability of Receivables and
General Intangibles............................... 15
SECTION 3.05. Place of Business, Location of
Collateral........................................ 15
SECTION 3.06. Trade Names....................................... 15
SECTION 3.07. Outstanding Interests............................. 16
SECTION 3.08. Licensor Consents................................. 16
SECTION 3.09. Motor Vehicles and Other Rolling Stock............ 16
SECTION 3.10. Accounts.......................................... 16
SECTION 3.11. Government Contracts.............................. 16
ARTICLE IV COVENANTS............................................ 17
SECTION 4.01. Perfection of Security Interests.................. 17
SECTION 4.02. Further Actions................................... 17
SECTION 4.03. Change of Name, Identity or Structure............. 20
SECTION 4.04. Place of Business and Collateral.................. 20
SECTION 4.05. Fixtures.......................................... 21
SECTION 4.06. Maintenance of Records............................ 21
SECTION 4.07. Compliance with Laws, etc......................... 21
SECTION 4.08. Payment of Taxes, etc............................. 21
SECTION 4.09. Compliance with Terms of Accounts,
Contracts and Licenses............................ 22
SECTION 4.10. Limitation on Liens on Collateral................. 22
SECTION 4.11. Limitations on Modifications of
Receivables and General Intangibles; No
Waivers or Extensions............................. 22
SECTION 4.12. Maintenance of Insurance.......................... 22
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SECTION 4.13. Limitations on Dispositions of
Collateral........................................ 23
SECTION 4.14. Periodic Certification............................ 23
SECTION 4.15. Notices........................................... 23
SECTION 4.16. Change of Law..................................... 24
SECTION 4.17. Right of Inspection............................... 24
SECTION 4.18. Maintenance of Equipment.......................... 24
SECTION 4.19. Covenants Regarding Patent, Trademark
and Copyright Collateral.......................... 24
SECTION 4.20. Reimbursement Obligation.......................... 26
SECTION 4.21. Bank Accounts..................................... 26
SECTION 4.22. Amendments to Schedules........................... 26
SECTION 4.23. Government Contracts.............................. 26
ARTICLE V DISTRIBUTIONS ON PLEDGED SECURITIES; VOTING........... 26
SECTION 5.01. Right to Receive Distributions on
Pledged Collateral; Voting........................ 26
ARTICLE VI REMEDIES; RIGHTS UPON DEFAULT........................ 28
SECTION 6.01. UCC Rights........................................ 28
SECTION 6.02. Payments on Collateral............................ 28
SECTION 6.03. Possession of Collateral.......................... 29
SECTION 6.04. Sale of Collateral................................ 29
SECTION 6.05. Rights of Purchasers.............................. 30
SECTION 6.06. Additional Rights of the Agent.................... 30
SECTION 6.07. Securities Act, etc............................... 31
SECTION 6.08. Remedies Not Exclusive............................ 32
SECTION 6.09. Waiver and Estoppel............................... 33
SECTION 6.10. Power of Attorney................................. 33
SECTION 6.11. Application of Proceeds........................... 35
SECTION 6.12. Grant of License or Sub-License to Use
Patent, Trademark, Copyright and
License Collateral................................ 36
ARTICLE VII MISCELLANEOUS....................................... 37
SECTION 7.01. Notices........................................... 37
SECTION 7.02. Survival of Agreement............................. 37
SECTION 7.03. Counterparts...................................... 37
SECTION 7.04. Amendments, Etc................................... 38
SECTION 7.05. Assignments....................................... 38
SECTION 7.06. Savings Clause.................................... 38
SECTION 7.07. Supplemental Agreement............................ 38
SECTION 7.08. GOVERNING LAW..................................... 39
SECTION 7.09. Entire Agreement.................................. 39
SECTION 7.10. No Waiver; Remedies............................... 39
SECTION 7.11. Headings.......................................... 39
SECTION 7.12. NO ORAL AGREEMENTS................................ 39
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Schedules
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Schedule 1 List of Subsidiary Grantors
Schedule 2 Chief Executive Office and Principal Place of Business;
Locations of Records of Receivables and General Intangibles
Schedule 3 Pledged Securities
Schedule 4 Locations of Equipment and Inventory
Schedule 5 Trade Names, Division Names, etc.
Schedule 6 Required Filings and Recordings
Schedule 7 Patents and Patent Applications
Schedule 8 Trademarks and Trademark Applications
Schedule 9 Copyrights and Copyright Applications
Schedule 10 Licenses
Schedule 11 Motor Vehicles and other Rolling Stock
Schedule 12 Accounts
Schedule 13 Government Contracts
Exhibits
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Exhibit A Form of Assignment of Security Interests in United States Patent
and Trademarks
Exhibit B Form of Assignment of Security Interests in United States Copyrights
Exhibit C Form of Landlord's Waiver and Consent
Exhibit D-1 Form of Instrument of Assignment
Exhibit D-2 Form of Notice of Assignment
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PLEDGE AND SECURITY AGREEMENT dated as of July 31, 1996, among FIREARMS
TRAINING SYSTEMS, INC., a Delaware corporation (the "Borrower"), the
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Subsidiaries that are listed on Schedule 1 hereto, and such other Subsidiaries
as shall become parties hereto in accordance with Section 7.07 hereof (such
Subsidiaries being referred to herein individually as a "Subsidiary Grantor" and
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collectively as the "Subsidiary Grantors"), and NATIONSBANK, N.A. (SOUTH), as
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Agent (in such capacity, the "Agent") for the Lenders (as defined herein).
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Reference is made to the Credit Agreement dated as of July 31, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
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Agreement"), among the Borrower, the financial institutions party thereto as
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lenders (the "Lenders") and NationsBank, N.A. (South), as Issuing Bank, as
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Swingline Lender and as Agent. The Lenders and the Swingline Lender have
respectively agreed to extend credit to the Borrower, and the Issuing Bank has
agreed to issue Letters of Credit for the account of the Borrower, pursuant to,
and upon the terms and subject to the conditions set forth in, the Credit
Agreement. The obligations of the Lenders and the Swingline Lender to extend
credit and of the Issuing Bank to issue Letters of Credit under the Credit
Agreement are conditioned on, among other things, the execution and delivery by
each of the Borrower and the Subsidiary Grantors (such parties being referred to
herein individually as a "Grantor" and collectively as the "Grantors") of a
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Pledge and Security Agreement in the form hereof.
Accordingly, the Grantors, intending to be legally bound, hereby agree with
the Agent, for the ratable benefit of the Secured Parties, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Terms Defined in the Credit Agreement. Terms used herein and
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not otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
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following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become obligated to
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any Grantor under, with respect to or on account of any Receivable or General
Intangible.
"Agency Account" of any Grantor shall mean an account of such Grantor
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maintained for the benefit of the Agent and the Secured Parties pursuant to an
Agency Account Agreement in the form of Exhibit F to the Credit Agreement.
"Cash Collateral Accounts" shall have the meaning assigned to such term in
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Section 2.06(b).
"Collateral" shall have the meaning assigned to such term in Section 2.01.
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"Contract Rights" shall mean all choses in action and causes of action and all
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other rights of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor pursuant to (a) all contracts under which Receivables or
General Intangibles arise, (b) all Interest Rate Protection Agreements, (c) the
Recapitalization Agreement, including the Escrow Agreement, (d) all Government
Contracts, (e) all Material Contracts and (f) all other contract rights of any
Grantor.
"Copyright License" shall mean any written agreement (a) granting any right to
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any third party under any Copyright of any Grantor or (b) granting any right to
any Grantor under any Copyright of any third party.
"Copyrights" shall mean all right, title and interest of any person in and to
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all of the following, whether now owned or hereafter acquired:
(a) the federally registered United States and foreign copyrights
described on Schedule 9 hereto and any renewals thereof, as such schedule
may be amended from time to time;
(b) all other United States and foreign copyrights;
(c) all registrations and applications for registration of any such
copyright in the United States or any other country, including
registrations, recordings, supplemental derivative or collective work
registrations and pending applications for registrations in the United
States Copyright Office;
(d) all computer programs, computer data bases, computer program flow
diagrams, source codes and object codes related to any or all of the
foregoing; and
(e) all tangible property embodying or incorporating any or all of the
foregoing.
"Deposit Accounts" shall mean (a) all Agency Accounts, (b) all Cash
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Collateral Accounts, (c) all Government Contract Cash Collateral Accounts and
(d) all other deposit or investment accounts of each Grantor, all funds held
therein and all certificates and instruments, if any, from time to time
representing, evidencing or deposited into such accounts.
"Documents" shall mean all of the books, ledgers, records, computer
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programs, tapes, discs, punch cards, data processing software, transaction
files, master files, documents of title, Government Contracts, bills of lading
and warehouse receipts and related property and rights (including computer and
peripheral
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equipment) of any Grantor pertaining to or referencing the Collateral.
"Equipment" shall mean all equipment now owned or hereafter acquired by any
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Grantor, including all items of machinery, equipment, revolvers, semi-automatic
pistols, shotguns, bolt action rifles, archery bows, semi-automatic and
burst/automatic rifles, submachine guns, machine guns, anti-tank/anti-personnel
rocket launchers, single shot and automatic grenade launchers, automatic
cannons, mortars, weapons, simulators, tools, parts, supplies, firing range and
testing equipment, furnishings, computer programs, computer data bases, computer
program flow diagrams and fixtures of every kind, whether affixed to real
property or not, as well as all automobiles, trucks and vehicles of every
description, trailers, handling and delivery equipment, all additions to,
substitutions for, replacements of or accessions to any of the foregoing, all
attachments, components, parts (including spare parts) and accessories whether
installed thereon or affixed thereto and all fuel for any thereof.
"General Intangibles" shall mean all accounts, accounts receivable,
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Contract Rights, Documents, instruments, chattel paper, money, general
intangibles, intellectual or other property of any kind or nature now owned or
hereafter acquired by any Grantor, including, without limitation, permits,
federal and state tax refunds, reversionary interests in pension plan assets,
inventions, designs, Patents, Copyrights, Licenses, Trademarks and associated
goodwill, trade secrets, confidential or proprietary technical and business
information, customer lists, including all records pertaining to know-how, show-
how or other data or information, software, databases and related documentation,
registrations, franchises, and all other intellectual or other similar property
rights not otherwise described above, but excluding Receivables.
"Government Contract Cash Collateral Account" shall have the meaning
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assigned to such term in Section 2.06(a).
"Inventory" shall mean all inventory now owned or hereafter acquired by any
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Grantor, including (a) all goods and other personal property (including, without
limitation, FATS I, FATS III, FATS III LE, ▇▇▇▇ ▇▇, the Vessel Weapons
Engagement Training Simulator, revolvers, semi-automatic pistols, shotguns, bolt
action rifles, archery bows, semi-automatic and burst/automatic rifles,
submachine guns, machine guns, anti-tank/anti-personnel rocket launchers, single
shot and automatic grenade launchers, automatic cannons, mortars, weapons and
simulators) which are held for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in such
Grantor's business, (b) all inventory, wherever located, evidenced by negotiable
and non-negotiable documents of title, warehouse receipts and bills of lading,
(c) all of such Grantor's rights in, to and under all purchase orders now owned
or hereafter received or acquired by it for goods or services and
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(d) all rights of such Grantor as an unpaid seller, including rescission,
replevin, reclamation and stopping in transit.
"License" shall mean (a) any Patent License, Trademark License, Copyright
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License or other license or sublicense as to which any Grantor is now or
hereafter a party and (b) any license, permit, certificates of need,
authorization, certification, accreditation, franchise approval, or grant of
rights by any Governmental Authority, or any other party necessary or
appropriate for the Borrower or any Subsidiary to own, maintain or operate its
business, properties and assets.
"Patent License" shall mean any written agreement (a) granting any right to
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any third party under any Patent of any Grantor or (b) granting any right to any
Grantor under any Patent of any third party.
"Patents" shall mean all right, title and interest of any person in and to
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all of the following, whether now owned or hereafter acquired:
(a) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters
patent of the United States or any other country, including registrations,
recordings and pending applications in the United States Patent and
Trademark Office or any other country, all as described on Schedule 7
hereto, as such schedule may be amended from time to time;
(b) all other letters patent of the United States or any other country
and all other applications for letters patent of the United States or any
other country; and
(c) all reissues, continuations, divisions, continuations-in-part or
extensions thereof and the inventions disclosed therein, including the
right to make, use and/or sell the inventions disclosed therein.
"Pledged Debt" shall mean (a) the debt securities listed and described in
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Part II of Schedule 3 hereto, payable to such Grantor listed therein, and the
instruments evidencing such debt securities, (b) all additional debt securities
hereafter issued and payable to any Grantor and the instruments evidencing such
debt securities, (c) the Intercompany Notes and (d) all payments of principal or
interest, cash, instruments or other property from time to time received,
receivable or otherwise distributed, in respect of, in exchange for or upon the
conversion of the debt securities referred to in clause (a), (b) and (c) above.
"Pledged Interests" shall mean (a) the Capital Stock listed and described
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in Part I of Schedule 3 hereto, and the certificates, if any, representing such
Capital Stock, (b)(i) all additional Capital Stock of any issuer of the Pledged
Interests
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from time to time acquired by any Grantor in any manner and (ii) all Capital
Stock of any other person hereafter acquired by any Grantor (which Capital Stock
referred to in the foregoing clauses (i) and (ii) shall be considered to be
Pledged Interests under this Agreement), together in each case with the
certificates representing such additional Capital Stock, and (c) all dividends,
liquidating dividends, stock dividends, distributions, stock or partnership
rights, options, rights to subscribe, cash, instruments and other property and
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such listed Capital Stock referenced
in clause (a) above or such additional Capital Stock referenced in clause (b)
above; provided, however, that no shares of Capital Stock of any issuer
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incorporated in a jurisdiction outside of the United States of America shall be
included hereunder to the extent that the aggregate amount of shares of Capital
Stock of such issuer pledged hereunder would exceed 65% of the Capital Stock of
such issuer to the extent, and for so long as, the pledge of any greater
percentage would have adverse tax consequences for such Grantor.
"Pledged Securities" shall mean the Pledged Interests and the Pledged Debt.
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"Proceeds" shall mean all proceeds, including (a) whatever is received upon
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any collection, exchange, sale or other disposition of any of the Collateral and
any property into which any of the Collateral is converted, whether cash or non-
cash, (b) any and all payments or other property (in whatever form) made or due
and payable on account of any insurance, indemnity, warranty or guaranty payable
to any Grantor with respect to any of the Collateral, (c) any value received as
a consequence of the possession of any Collateral and any payment received from
any insurer or other person as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property which
constitutes Collateral, (d) any and all payments (in any form whatsoever) made
or due and payable in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority, (e) any claim of any Grantor against third parties (i)
for past, present or future infringement of any Patent now or hereafter owned by
such Grantor or licensed under a Patent License, (ii) for past, present or
future infringement or dilution of any Trademark now or hereafter owned by such
Grantor or licensed under a Trademark License or injury to the goodwill
associated with any Trademark now or hereafter owned by such Grantor, (iii) for
past, present or future infringement of any Copyright now or hereafter owned by
such Grantor or licensed under a Copyright License and (iv) for past, present or
future breach of any other License and (f) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Real Estate" shall mean all real property and all buildings, furnishings
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or fixtures or other improvements to or
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construction on real property now owned or hereafter acquired by any Grantor,
and all leasehold interests now owned or hereafter acquired by any Grantor in
real property.
"Receivables" shall mean all accounts now or hereafter owing to any
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Grantor, and all accounts receivable, Contract Rights, Documents, instruments or
chattel paper representing amounts payable or monies due or to become due to any
Grantor, arising from the sale of Inventory or the rendition of services in the
ordinary course of business or otherwise, whether or not earned by performance,
or arising from or in connection with any Copyright, Patent, Trademark or
License, together with all Inventory to be returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, Contract
Right, Document, instrument or chattel paper.
"Secured Obligations" of any Grantor shall mean (a) in the case of the
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Borrower, all the Obligations and (b) in the case of any Subsidiary Grantor, all
amounts now or hereafter payable by such Subsidiary Grantor under the
Subsidiaries Guarantee Agreement, and (c) in the case of any Grantor, all
expenses (including reasonable counsel fees and expenses) incurred in enforcing
any rights of the Agent and the Secured Parties against such Grantor under this
Agreement.
"Trademark License" shall mean any written agreement (a) granting any right
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to any third party under any Trademark of any Grantor or (b) granting any right
to any Grantor under any Trademark of any third party.
"Trademarks" shall mean all of the following now or hereafter owned by any
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person (a) all trademarks, service marks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, trade dress,
logos, other source or business identifiers, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all applications filed in connection therewith,
including registrations and applications in the United States Patent and
Trademark Office, any State of the United States or any other country or any
political subdivision thereof, and all extensions or renewals thereof, and (b)
all goodwill associated therewith.
"UCC" shall mean at any time the Uniform Commercial Code as the same may
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from time to time be in effect in the State of New York; provided that if, by
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reason of mandatory provisions of law, the validity or perfection of any
security interest granted herein is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than New York, then, as to the validity or
perfection of such security interest, "UCC" shall mean the Uniform Commercial
Code in effect in such other jurisdiction.
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SECTION 1.03. UCC Definitions. The uncapitalized terms "account",
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"account debtor", "chattel paper", "contract right", "document", "warehouse
receipt", "▇▇▇▇ of lading", "document of title", "instrument", "inventory",
"equipment", "general intangible", "money", "proceeds", "products" and "purchase
money security interest" as used in Section 1.02 or elsewhere in this Agreement
shall have the meanings ascribed thereto in the UCC.
SECTION 1.04. Terms Generally. The definitions in Section 1.02 shall
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apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Unless otherwise
expressly provided herein, the word "day" means a calendar day.
ARTICLE II
SECURITY INTERESTS
SECTION 2.01. The Security Interests. To secure the due and punctual
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payment of all Secured Obligations of such Grantor, howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing or due or to become due, in accordance with the terms
thereof, (a) each Grantor hereby grants to the Agent, its successors and its
assigns, for the ratable benefit of the Secured Parties, a security interest in,
and (b) each Grantor hereby pledges, and with respect to all Deposit Accounts,
pledges and assigns, to the Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, all of such Grantor's right, title and interest
in, to and under the following, whether now existing or hereafter acquired (all
of which are herein collectively called the "Collateral"):
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(i) all Receivables (other than rights to receive payments in
connection with (A) Government Contracts existing as of the Closing Date to
the extent that a grant of a security interest in such rights is prohibited
by the terms of such Government Contract (and any renewals, extensions or
replacements thereof or additional contracts with the same customers as are
parties to such existing Government Contracts, provided that the applicable
Grantor shall have used its reasonable, good faith efforts to cause any
such renewals, extension, replacements or additional contracts to be
included in the Collateral), (B) Government Contracts entered into after
the Closing Date that collectively have an aggregate value of less than
$100,000 to the extent that a grant of a security
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interest in such rights is prohibited by the terms of such Government
Contract or (C) Government Contracts to the extent that a grant of a
security interest in such rights is prohibited by applicable law);
(ii) all General Intangibles (other than rights to receive payments in
connection with (A) Government Contracts existing as of the Closing Date to
the extent that a grant of a security interest in such rights is prohibited
by the terms of such Government Contract (and any renewals, extensions or
replacements thereof or additional contracts with the same customers as are
parties to such existing Government Contracts, provided that the applicable
Grantor shall have used its reasonable, good faith efforts to cause any
such renewals, extension, replacements or additional contracts to be
included in the Collateral), (B) Government Contracts entered into after
the Closing Date that collectively have an aggregate value of less than
$100,000 to the extent that a grant of a security interest in such rights
is prohibited by the terms of such Government Contract or (C) Government
Contracts to the extent that a grant of a security interest in such rights
is prohibited by applicable law);
(iii) all Equipment;
(iv) all Inventory;
(v) all Pledged Securities;
(vi) all Deposit Accounts;
(vii) to the extent not included in the foregoing (and except to the
extent expressly excluded from the foregoing), all other personal property,
whether tangible or intangible, and wherever located; and
(viii) to the extent not otherwise included, all Proceeds and products
of any or all of the foregoing, whether existing on the date hereof or
arising hereafter.
SECTION 2.02. Continuing Liability of each Grantor. Anything herein to
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the contrary notwithstanding, each Grantor shall remain liable to observe and
perform all the terms and conditions to be observed and performed by it under
any contract, agreement, warranty or other obligation with respect to the
Collateral, and shall do nothing to impair the security interests herein
granted. Neither the Agent nor any Secured Party shall have any obligation or
liability under any such contract, agreement, warranty or obligation by reason
of or arising out of this Agreement or the receipt by the Agent or any Secured
Party of any payment relating to any Collateral, nor shall the Agent or
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any Secured Party be required to perform or fulfill any of the obligations of
any Grantor with respect to any of the Collateral, to make any inquiry as to the
nature or sufficiency of any payment received by it or the sufficiency of the
performance of any party's obligations with respect to any Collateral.
Furthermore, neither the Agent nor any Secured Party shall be required to file
any claim or demand to collect any amount due or to enforce the performance of
any party's obligations with respect to the Collateral.
SECTION 2.03. Delivery of Pledged Securities and Chattel Paper. All
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certificates or instruments representing or evidencing the Pledged Securities
shall be delivered to and held by or on behalf of the Agent, for the ratable
benefit of the Secured Parties, pursuant hereto and shall be in suitable form
for transfer by delivery, duly endorsed and shall be accompanied by duly
executed instruments of transfer or assignment in blank with signatures
appropriately guaranteed, and accompanied in each case by any required transfer
tax stamps, all in form and substance satisfactory to the Agent. The Agent
shall have the right, at any time in its discretion and without notice to any
Grantor after the occurrence and during the continuance of an Event of Default,
to cause any or all of the Pledged Interests and other Pledged Securities to be
transferred of record into the name of the Agent or its nominee.
SECTION 2.04. Security Interests Absolute. All rights of the Agent and
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the Secured Parties hereunder, and all obligations of each Grantor hereunder,
shall be absolute and unconditional and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any Secured Obligation, Note or any other document evidencing or
securing any Secured Obligation, by operation of law or otherwise;
(b) any modification or amendment or supplement to the Credit Agreement,
any Note, any Collateral Document or any other document evidencing or
securing any Secured Obligation;
(c) any release, non-perfection or invalidity of any direct or indirect
security for any Secured Obligation;
(d) any change in the existence, structure or ownership of the Borrower,
any Grantor or any other Loan Party, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, any
Grantor or any other Loan Party or its assets or any resulting
disallowance, release or discharge of all or any portion of the Secured
Obligations;
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(e) the existence of any claim, set-off or other right which any Grantor
may have at any time against the Borrower, any Grantor, any other Loan
Party, the Agent, any Secured Party or any other corporation or person,
whether in connection herewith or any unrelated transactions; provided that
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nothing herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(f) any invalidity or unenforceability for any reason of any Secured
Obligation relating to or against the Borrower, any Grantor or any other
Loan Party, or any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower, any Grantor or any other Loan Party
of the Secured Obligations;
(g) any failure by the Agent or any Secured Party (i) to file or enforce
a claim against the Borrower, any Grantor or any other Loan Party or its
estate (in a bankruptcy or other proceeding), (ii) to give notice of the
existence, creation or incurrence by the Borrower, any Grantor or any other
Loan Party of any new or additional indebtedness or obligation under or
with respect to the Secured Obligations, (iii) to commence any action
against the Borrower, any Grantor or any other Loan Party, (iv) to disclose
to the Borrower, any Grantor or any other Loan Party any facts which the
Agent or any Secured Party may now or hereafter know with regard to the
Borrower, any Grantor or any other Loan Party or (v) to proceed with due
diligence in the collection, protection or realization upon any collateral
securing the Secured Obligations; or
(h) any other act or omission to act or delay of any kind by the
Borrower, any Grantor, any other Loan Party, the Agent, any Secured Party
or any other person or any other circumstance whatsoever which might, but
for the provisions of this clause, constitute a legal or equitable
discharge of any Grantor's obligations hereunder.
SECTION 2.05. Sales and Collections. (a) Each Grantor is authorized (i)
---------------------
to sell Collateral in accordance with the Credit Agreement and (ii) to use and
dispose of the Collateral in any lawful manner not inconsistent with the
provisions of this Agreement, the Credit Agreement and the other Loan Documents.
Notwithstanding the foregoing, the Agent may, upon the occurrence of any Event
of Default, without cause or notice, curtail or terminate such authority at any
time.
(b) Each Grantor is authorized to collect amounts owing to it with respect
to the Collateral, subject to the rights of the Agent under Section 2.06 and
Article VI of this Agreement.
-10-
SECTION 2.06. Segregation of Proceeds. (a) Each Grantor authorizes the
-----------------------
Agent to establish and maintain at the principal office of the Agent a bank
account (a "Government Contract Cash Collateral Account") which will contain
-------------------------------------------
moneys paid by a Governmental Authority to the Agent under a Government Contract
and pursuant to an Instrument of Assignment, substantially in the form of
Exhibit D-1, or any other equivalent instrument of assignment executed and
delivered by such Grantor. Any moneys received by the Agent directly from a
Governmental Authority obligated to make payments under a Government Contract to
such Grantor or from such Grantor pursuant to clause (c) of this Section 2.06,
whether consisting of checks, notes, drafts, bills of exchange, money orders,
commercial paper, wire transfer, ACH method or other form of cash Proceeds
received as moneys paid pursuant to a Government Contract, shall be deposited
promptly in the applicable Government Contract Cash Collateral Account, and
until so deposited shall be held in trust for the Agent and the Secured Parties.
Such moneys received, when deposited, shall continue to be security for the
Secured Obligations (until withdrawn by the Agent and transferred to the
applicable Grantor) and shall not constitute payment thereof until applied as
hereinafter provided. Except as provided in this Section 2.06, the Agent shall
have sole dominion and control over the funds deposited in each of the
Government Contract Cash Collateral Accounts, and such funds may be withdrawn
therefrom only by the Agent, provided, however, so long as no Event of Default
-------- -------
shall have occurred and be continuing, the Agent shall transfer to an account
designated by the applicable Grantor any funds that have been deposited in a
Government Contract Cash Collateral Account (i) on the same Business Day of such
deposit therein if such deposit is made on or prior to 12:00 (noon), Charlotte
time, and (ii) on the next Business Day of such deposit therein if such deposit
is made after 12:00 (noon), Charlotte time. Upon the occurrence and during the
continuance of an Event of Default, all rights of each Grantor to receive funds
from the Government Contract Cash Collateral Account shall be terminated and the
Agent shall have sole dominion and control over the funds (including all rights
under Article VI of this Agreement with respect to such funds) deposited in the
Government Contract Cash Collateral Accounts.
(b) Upon the occurrence and during the continuance of an Event of Default,
the Agent shall have the right to cause to be opened and maintained at the
principal office of the Agent bank accounts (the "Cash Collateral Accounts")
------------------------
which will contain only Proceeds of Collateral (other than Proceeds from
Government Contracts that are being deposited into a Government Contract Cash
Collateral Account) of a particular Grantor. Any cash proceeds (as such term is
defined in Section 9-306(1) of the UCC) received by the Agent directly from
Account Debtors obligated to make payments under Receivables or General
Intangibles to such Grantor or from such Grantor pursuant to clause (c) of this
Section 2.06, whether consisting of checks, notes, drafts, bills of exchange,
money orders, commercial paper or other Proceeds received on account of any
Collateral, shall be promptly
-11-
deposited in the Cash Collateral Account, and until so deposited shall be held
in trust for the Agent and the Secured Parties and shall not be commingled with
any funds not constituting Proceeds of the Collateral. Each Cash Collateral
Account shall be designated with the title "NationsBank, N.A. (South), as Agent
under the Credit Agreement dated as of July 31, 1996 among Firearms Training
Systems, Inc., the Lenders party thereto and the Agent." Such Proceeds, when
deposited, shall continue to be security for the Secured Obligations and shall
not constitute payment thereof until applied as hereinafter provided. The Agent
shall have sole dominion and control over the funds (including all rights under
Article VI of this Agreement with respect to such funds) deposited in the Cash
Collateral Account, and such funds may be withdrawn therefrom only by the Agent.
(c) Each Grantor shall cause all money received or collected by it with
respect to a Government Contract subject to an Instrument of Assignment,
substantially in the form of Exhibit D-1, or any other equivalent instrument of
assignment to be delivered to the Agent forthwith upon receipt by such Grantor,
and upon notice by the Agent to the Borrower, that a Cash Collateral Account has
been opened, each Grantor shall cause all other cash Proceeds collected by it to
be delivered to the Agent forthwith upon receipt, in each case, in the original
form in which received (with such endorsements or assignments as may be
necessary to permit collection thereof by the Agent), and for such purpose each
Grantor hereby irrevocably authorizes and empowers the Agent, its officers,
employees and authorized agents to endorse and sign the name of such Grantor on
all checks, drafts, money orders or other media of payment so delivered, and
such endorsements or assignments shall, for all purposes, be deemed to have been
made by such Grantor prior to any endorsement or assignment thereof by the
Agent. The Agent may use any convenient or customary means for the purpose of
collecting such checks, drafts, money orders or other media of payment.
SECTION 2.07. Verification of Receivables. Upon the occurrence and
---------------------------
during the continuance of an Event of Default, the Agent shall have the right to
make test verifications of Receivables in any manner and through any medium that
it considers advisable, and each Grantor agrees to furnish all such assistance
and information as the Agent may require in connection therewith. Upon the
occurrence and during the continuance of an Event of Default, each Grantor, at
its own expense, will cause its financial officer to furnish to the Agent at any
time and from time to time promptly upon the Agent's request, the following
reports: (a) a reconciliation of all Receivables, (b) an aging of all
Receivables, (c) trial balances and (d) a test verification of such Receivables
as the Agent may request.
SECTION 2.08. Release of Collateral. (a) Each Grantor may sell or
---------------------
realize upon or transfer or otherwise dispose of Collateral to the extent
expressly permitted by, and in accordance with, Section 2.05, and the security
interests of the Agent and the Secured Parties in such Collateral so sold,
-12-
realized upon or disposed of (but not in the Proceeds arising from such sale,
realization or disposition) shall cease immediately upon such sale, realization
or disposition, without any further action on the part of the Agent or the
Secured Parties, provided that the Permitted Drop Down Transaction permitted
--------
under Section 6.05(a)(iv)(E) of the Credit Agreement shall not constitute a
release of the security interests granted hereunder in the Collateral (such
security interests remaining vested (i) in the Collateral regardless of whether
title passes to Newco after FATS' contribution to Newco pursuant to the
Permitted Drop Down Transaction, (ii) in any Collateral retained by FATS after
such contribution and (iii) in the Collateral acquired by Newco after such
contribution). The Agent, if requested in writing by any Grantor, but at the
expense of such Grantor, is hereby authorized and instructed to deliver to the
Account Debtor or the purchaser or other transferee of any such Collateral,
applicable UCC termination statements for such Collateral and a certificate
stating that the Agent and the Secured Parties no longer have a security
interest therein, and such Account Debtor or such purchaser or other transferee
shall be entitled to rely conclusively on such certificate for any and all
purposes.
(b) Upon (i) the indefeasible payment in full in cash of all of the Secured
Obligations, (ii) the termination of the Commitments, (iii) the cancellation or
expiration of all Letters of Credit and the reimbursement in full of all Letter
of Credit Disbursements and (iv) the satisfaction by the Borrower of all terms
and conditions hereof, the Credit Agreement, the Notes, the Collateral Documents
and all other documents or agreements governing the Secured Obligations, the
Agent will (as soon as reasonably practicable after receipt of notice from any
Grantor requesting the same, but at the expense of such Grantor) (A) execute and
deliver to such Grantor for each filing made under Section 4.01 or 4.02 to
perfect the security interests granted to the Agent and the Secured Parties
hereunder, a termination statement prepared by such Grantor and furnished to the
Agent to the effect that the Agent and the other Secured Parties no longer claim
a security interest under such filing and (B) deliver to such Grantor all
documents and instruments previously pledged to the Agent hereunder.
SECTION 2.09. Amendment of Schedules. Each Grantor hereby authorizes the
----------------------
Agent to modify this Agreement by amending Schedules 7, 8, 9 and 10 hereto or to
add additional schedules hereto to include any asset or item that may be
Copyrights, Patents, Trademarks, Licenses or any other type of Collateral, as
the case may be, under this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to the Agent and
each of the Secured Parties that:
SECTION 3.01. Pledged Securities. All Pledged Securities have been duly
------------------
authorized and validly issued by the issuers thereof and, in the case of Pledged
Securities consisting of Capital Stock, are fully paid and nonassessable. None
of the Pledged Securities are subject to options to purchase or similar rights
of any person. No Grantor is or will become a party to or otherwise bound by
any agreement, other than this Agreement, which restricts in any manner the
rights of any present or future holder of any of the Pledged Interests with
respect thereto.
SECTION 3.02. Validity, Perfection, Assignment and Priority of Security
---------------------------------------------------------
Interests. (a) By complying with Section 4.01 and by delivering all
---------
certificates or instruments, if any, representing or evidencing the Collateral
to the Agent, each Grantor will have created a valid and duly perfected security
interest in favor of the Agent for the benefit of the Secured Parties as
security for the due and punctual payment of all Secured Obligations of such
Grantor in all Collateral and identifiable Proceeds of such Collateral, as to
which a security interest may be perfected by (i) filing UCC financing
statements, (ii) filing at the United States Patent and Trademark Office or the
United States Copyright Office pursuant to 35 U.S.C. (S)1060 and 17 U.S.C.
(S)205, as applicable and (iii) possession. Continuing compliance by each
Grantor with the provisions of Section 4.02 will also (A) create and duly
perfect valid security interests in all Collateral acquired or otherwise coming
into existence after the date hereof and in all identifiable Proceeds of such
Collateral as security for the due and punctual payment of all Secured
Obligations of such Grantor and (B) cause such security interests in all
Collateral and in all Proceeds which are (I) identifiable cash Proceeds of
Collateral covered by financing statements required to be filed hereunder, (II)
identifiable Proceeds in which a security interest may be perfected by such
filing under the UCC and (III) any Proceeds in the Deposit Accounts to be duly
perfected under the UCC. By complying with Section 4.01(d), each Grantor shall
have assigned to the Agent all moneys due or to become due under each such
Government Contract referred to in such Section.
(b) The security interests of the Agent in the Collateral rank first in
priority, except that the priority of the security interests may be subject to
Liens permitted under Section 6.02 of the Credit Agreement. Other than
financing statements or other similar documents perfecting the security
interests or deed of trust liens of the Agent and the protective filings filed
by the lessors of certain equipment leased by the Grantors, no financing
statements, deeds of trust, mortgages or similar documents covering all or any
part of the Collateral other than with
-14-
respect to Liens permitted under Section 6.02 of the Credit Agreement are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any person (other
than a Grantor) asserting any claim thereto or security interest therein.
SECTION 3.03. Patents, Trademarks and Copyrights. Schedules 7, 8 and 9
----------------------------------
correctly set forth all of each Grantor's registered Patents, Trademarks and
Copyrights, respectively and Schedule 10 correctly sets forth all of each
Grantor's material Licenses. Each of the Patents, Trademarks and Copyrights are
subsisting, other than those Patents, Trademarks and Copyrights indicated as
"abandoned" or "dropped" on Schedules 8, 9 and 10, respectively, as of the date
hereof, and have not been adjudged invalid or unenforceable, in whole or in
part.
SECTION 3.04. Enforceability of Receivables and General Intangibles. To
-----------------------------------------------------
the knowledge of each Grantor, each Receivable and General Intangible is a valid
and binding obligation of the related Account Debtor in respect thereof,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general provisions of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and complies with any
applicable legal requirements.
SECTION 3.05. Place of Business, Location of Collateral. Schedule 2
-----------------------------------------
correctly sets forth (a) each Grantor's chief executive office and principal
place of business and (b) the offices of each Grantor where records concerning
Receivables and General Intangibles are kept. Schedule 4 correctly sets forth
the location of all Equipment and Inventory of each Grantor, other than rolling
stock, vessels, aircraft and goods in transit. Except for goods in transit and
except as otherwise specified in Schedule 4, all Inventory and Equipment has
been located at the addresses specified on Schedule 4 at all times during the
four-month period prior to the date hereof while owned by the applicable
Grantor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or ▇▇▇▇ of lading. No non-negotiable document of title, warehouse
receipt or ▇▇▇▇ of lading has been issued to any person other than a Grantor,
and such Grantor has retained possession of all of such non-negotiable
documents, warehouse receipts and bills of lading. No amount payable under or
in connection with any of the Collateral is evidenced by promissory notes or
other instruments other than instruments evidencing the Pledged Debt which have
been delivered to the Agent hereunder.
SECTION 3.06. Trade Names. Any and all trade names, division names,
-----------
assumed names or other names under which any Grantor transacts, or at any time
during the past five years
-15-
prior to the date hereof has transacted, business are specified on Schedule 5.
SECTION 3.07. Outstanding Interests. The Capital Stock listed on
---------------------
Schedule 3 constitutes (i) 100% of the Capital Stock of all Domestic
Subsidiaries and (ii) 65% of the Capital Stock of all Foreign Subsidiaries.
SECTION 3.08. Licensor Consents. Each Grantor has obtained all requisite
-----------------
material consents or approvals by the licensor of each License (including each
License involving Material Intellectual Property) to which such Grantor is a
licensee (other than any consent or approval for any such License that cannot be
obtained on or prior to the Closing Date) to effect the assignment of all of
such Grantor's right, title and interests thereunder to the Agent or its
designee and to effect the sub-license contemplated under Section 6.12 upon and
during the continuance of an Event of Default, and such consents are listed on
Schedule 10.
SECTION 3.09. Motor Vehicles and Other Rolling Stock. Schedule 11
--------------------------------------
correctly sets forth all of each Grantor's motor vehicles and other rolling
stock.
SECTION 3.10. Accounts. Each primary collection account, each primary
--------
operating account and each primary investment account of the Borrower and each
Subsidiary Grantor is an Agency Account. Schedule 12 correctly sets forth all
of each Grantor's collection, operating and investment accounts, the financial
institutions therewith, the address of such financial institutions, the account
number of each account and the purpose for which such account is used.
SECTION 3.11. Government Contracts. Schedule 13 correctly sets forth (i)
--------------------
each Government Contract with a current or potential dollar value in excess of
$500,000, (ii) the corresponding Contract No. (if applicable) of each such
Government Contract, (iii) the corresponding contracting Governmental Authority,
the contracting officer or agency head and the disbursing officer of each such
Government Contract and (iv) the dollar value of each such Government Contract
(including, if applicable, current and potential dollar values thereof). Except
as set forth on Schedule 13 hereof, all U.S. federal Government Contracts with a
current or potential value in excess of $500,000 and in existence on the date
hereof are in compliance with clauses (i), (ii) and (iii) of Section 4.23.
-16-
ARTICLE IV
COVENANTS
Each Grantor covenants and agrees with the Agent that until (a) all the
Secured Obligations have been indefeasibly paid in full in cash, (b) the
Commitments have been terminated, (c) the cancellation or expiration of all
Letters of Credit and the reimbursement in full of all Letter of Credit
Disbursements and (d) all terms and conditions hereof, the Credit Agreement, the
Notes, the Collateral Documents and all other documents or agreements governing
the Secured Obligations have been satisfied, each Grantor will comply with the
following:
SECTION 4.01. Perfection of Security Interests. (a) Each Grantor will,
--------------------------------
at its expense, cause all filings and recordings and other actions specified on
Schedule 6 to have been completed and filed on or prior to the Closing Date.
(b) Each Grantor, at its expense, will cause fully executed Assignments of
Security Interests, substantially in the forms of Exhibits A and B hereto, as
applicable, to have been completed and filed within 30 days after the Closing
Date by the United States Patent and Trademark Office and the United States
Copyright Office pursuant to 35 U.S.C. (S) 261, 15 U.S.C. (S) 1060 or 17 U.S.C.
(S) 205, as applicable, to perfect the security interests granted to the Agent
in the federally registered Copyrights, Patents, Trademarks and Licenses.
(c) Each Grantor, at its expense, will cause each of the accounts listed on
Schedule 12 to be Agency Accounts on or prior to the Closing Date.
(d) Each Grantor, at its expense, will use its best efforts to cause to be
delivered to the Agent within 60 days after the Closing Date, fully executed
acknowledgment copies by the applicable Governmental Authority of each Notice of
Assignment, substantially in the form of Exhibit D-2, as required under the
Assignment of Claims Act of 1940, as amended, in order to assign all moneys due
or to become due under each Governmental Contract (other than (i) those
Government Contracts identified as completed, (ii) Government Contract 65-02F-
0414D with the General Services Administration and (iii) those Government
Contracts identified on Schedule 13 as non-assignable) with a total current or
potential value exceeding $500,000, as set forth on Schedule 13, and entered
into by such Grantor with any U.S. federal Governmental Authority.
SECTION 4.02. Further Actions. (a) At all times after the Closing Date,
---------------
each Grantor will, at its own expense, comply with the following:
(i) as to all Receivables, General Intangibles, Equipment, Inventory,
Pledged Securities and Deposit Accounts, it will cause UCC financing
statements and
-17-
continuation statements to be filed and to be on file in all applicable
jurisdictions (except with respect to goods in transit) as required to
perfect the security interests granted to the Agent for the ratable benefit
of the Secured Parties hereunder, to the extent that applicable law permits
perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to
include a statement or a checked box indicating that Proceeds of all items
of Collateral described therein are covered;
(iii) upon the request of the Agent, it will ensure that the provisions
of Section 2.06 are complied with;
(iv) as to any Capital Stock owned or hereafter acquired by any Grantor,
the applicable Grantor will immediately pledge and deliver the
corresponding certificates, upon the acquisition or certification thereof,
or other instruments to the Agent for the benefit of the Secured Parties as
part of the Pledged Interests duly endorsed in a manner satisfactory to the
Agent;
(v) as to any amount payable under or in connection with any of the
Collateral which shall be or shall become evidenced by any promissory note,
chattel paper or other instrument, the applicable Grantor will immediately
pledge and deliver such note or other instrument to the Agent for the
benefit of the Secured Parties as part of the Pledged Debt duly endorsed in
a manner satisfactory to the Agent;
(vi) as to all Real Estate leased by a Grantor after the date hereof,
such Grantor shall use commercially reasonable efforts to obtain waivers
from the landlords of all such real estate, substantially in the form of
Exhibit C hereto or in such other form as shall be acceptable to the Agent;
(vii) as to all federally registered Patents, Trademarks, Copyrights
and Licenses hereafter acquired by any Grantor, it will cause fully
executed Assignments of Security Interests, substantially in the forms of
Exhibits A and B hereto, as applicable, to be received and recorded within
three months after any such acquisition with respect to Patents and
Trademarks and within one month after any such acquisition with respect to
Copyrights by the United States Patent and Trademark Office and the United
States Copyright Office pursuant to 35 U.S.C. (S) 261, 15 U.S.C. (S) 1060
or 17 U.S.C. (S) 205, as applicable, to protect the validity
-18-
and first priority of and to perfect a valid first priority security
interest in favor of the Agent in respect of such hereafter acquired
Patents, Trademarks, Copyrights and Licenses to the extent that a security
interest may be perfected by filing in the United States and its political
subdivisions, territories and possessions pursuant to applicable federal
law;
(viii) as to all material Licenses entered into after the date hereof
with any third party licensor, the applicable Grantor will use its best
efforts to obtain all requisite consents or approvals by the licensor to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Agent or its designee and to effect the sub-license
contemplated under Section 6.12 upon and during the continuance of an Event
of Default and such Grantor shall provide immediate written notice to the
Agent upon failure to obtain such consent or approval; and
(ix) as to any motor vehicles or other rolling stock acquired by any
Grantor after the date hereof (other than motor vehicles and rolling stock
of all such Grantors that collectively have an aggregate fair market value
of less than $350,000), such Grantor shall cause the security interests
granted hereunder to be noted on the certificate of title thereof and
immediately deliver such certificate of title to the Agent and take any
other actions necessary in order to perfect the Agent's security interests
in such certificate of title.
(x) as to any Government Contract entered into by any Grantor after the
date hereof, such Grantor shall (A) notify the Agent of such Contract and
provide information thereof to the Agent as required by Schedule 13 and (B)
take all such action reasonably requested by the Agent in order to (I)
perfect the security interests granted hereunder in such Government
Contract, (II) assign any right of payment or moneys due or to become due
under such Government Contract to the Agent (including executing and
delivering fully completed Instruments of Assignment, substantially in the
form of Exhibit D-1) or (III) realize any equivalent objective of the
foregoing clauses (I) and (II) for any Government Contract that has a value
(potential or current) exceeding $500,000 or for any other Government
Contract that the Agent may reasonably request.
(b) Each Grantor will, from time to time and at its own expense, execute,
deliver, file or record such financing statements pursuant to the UCC,
applications for certificates of title and such other statements, assignments,
instruments, documents, agreements or other papers and take any other action
-19-
that may be necessary or desirable, or that the Agent may reasonably request, in
order to create, preserve, perfect, confirm or validate the security interests,
to enable the Agent and the Secured Parties to obtain the full benefits of this
Agreement or to enable the Agent to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral, and will use its best efforts to obtain such
waivers from landlords and mortgagees as the Agent may request.
(c) To the fullest extent permitted by law, each Grantor authorizes the
Agent (i) to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon and, (ii)
to the fullest extent permitted by law, file this Agreement in any UCC filing
jurisdiction as a financing statement with respect to the Collateral. In
furtherance of the foregoing, each Grantor hereby irrevocably constitutes and
appoints the Agent, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor, or in its own name, from
time to time in the Agent's reasonable discretion, to execute, deliver, file or
record financing statements pursuant to the UCC as may be necessary or
desirable, in order to create, preserve, perfect, confirm or validate the
security interests.
SECTION 4.03. Change of Name, Identity or Structure. No Grantor will
-------------------------------------
change its name, identity or corporate structure in any manner except to the
extent expressly permitted under Section 6.05 of the Credit Agreement.
Furthermore, no Grantor shall take any such action permitted under Section 6.05
of the Credit Agreement unless it shall have given the Agent at least 30 days'
prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or desirable or as
may be reasonably requested by the Agent, to amend any financing statement or
continuation statement relating to the security interests granted hereby in
order to preserve such security interests and to effectuate or maintain the
priority thereof against all persons.
SECTION 4.04. Place of Business and Collateral. No Grantor will change
--------------------------------
the location of (a) any of its places of business, (b) its chief executive
office or (c) any of the offices or other locations where it keeps or holds any
Collateral or any records relating thereto from the applicable location listed
on Schedule 2 or 5 hereto (including the establishment of any new office or
facility) unless, prior to such change, (i) it notifies the Agent of such
change, (ii) makes all UCC filings required by Section 4.02 and (iii) takes all
other action necessary or desirable or that the Agent may reasonably request, to
preserve, perfect, confirm and protect the security interests granted hereby.
No Grantor will change the location of any Collateral if such change would cause
the security interest granted hereby in such Collateral to lapse or cease to be
perfected.
-20-
SECTION 4.05. Fixtures. No Grantor will permit any Equipment to become a
--------
fixture to real property not covered by a Mortgage unless it shall have given
the Agent at least 10 days' prior written notice thereof and shall have taken
all such action and delivered or caused to be delivered to the Agent all
instruments and documents, including, without limitation, waivers and
subordination agreements by any landlords and mortgagees, and filed all
financing statements necessary or reasonably requested by the Agent, to preserve
and protect the security interest granted herein and to effectuate or maintain
the priority thereof against all persons.
SECTION 4.06. Maintenance of Records. Each Grantor will keep and
----------------------
maintain at its own cost and expense complete books and records relating to the
Collateral which are satisfactory to the Agent, including, without limitation, a
record of all payments received and all credits granted with respect to the
Collateral and all of its other dealings with the Collateral. Each Grantor will
▇▇▇▇ its instruments and chattel paper to evidence this Agreement and the
security interests granted hereby. For the further security of the Agent and
the other Secured Parties, each Grantor agrees that the Agent shall have a
special property interest in each Grantor's Documents and chattel paper and,
upon the occurrence and during the continuance of an Event of Default, such
Grantor shall deliver and turn over any Document or chattel paper to the Agent
or to its representatives at any time on demand of the Agent, unless such
Document is a Government Contract that expressly prohibits possession thereof by
any party other than such Grantor and the applicable Governmental Authority.
SECTION 4.07. Compliance with Laws, etc. Each Grantor will comply in all
-------------------------
material respects with all applicable statutes, rules, regulations, and orders
of, and all applicable restrictions imposed by, the United States of America,
foreign countries, states, provinces and municipalities, and of or by any
Governmental Authority, including any court, arbitrator or grand jury, in
respect of the Collateral (including Environmental Laws), except such as are
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made therefor or the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.
SECTION 4.08. Payment of Taxes, etc. Each Grantor will pay all taxes,
---------------------
assessments and other governmental charges or levies imposed upon the Collateral
or in respect of any of its income or profits therefrom when the same become due
and payable, but in any event before any penalty or interest accrues thereon,
and all claims (including claims for labor, services, materials and supplies)
for sums which have become due and payable and which by law have or might become
a Lien upon any of its properties or assets, and promptly reimburse the Agent or
any Secured Party for any such taxes, assessments, charges or claims paid by
them;
-21-
provided that no such tax, assessment, charge or claim need be paid or
--------
reimbursed if being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted and if such reserves or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor
and be adequate in the good faith judgment of such Grantor.
SECTION 4.09. Compliance with Terms of Accounts, Contracts and Licenses.
---------------------------------------------------------
Each Grantor will perform and comply in all material respects with all of its
obligations under all agreements relating to the Collateral to which it is a
party or by which it is bound.
SECTION 4.10. Limitation on Liens on Collateral. No Grantor will create,
---------------------------------
permit or suffer to exist, but will defend the Collateral and each Grantor's
rights with respect thereto against and take such other action as is necessary
to remove, any security interest, encumbrance, claim or other Lien in respect of
the Collateral other than the security interests created hereunder and the Liens
permitted under Section 6.02 of the Credit Agreement.
SECTION 4.11. Limitations on Modifications of Receivables and General
-------------------------------------------------------
Intangibles; No Waivers or Extensions. No Grantor will (a) other than in the
-------------------------------------
ordinary cause of business, amend, modify, terminate or waive any provision of
any Receivable or General Intangible in any manner which might have a material
adverse effect on the value of such Receivable or General Intangible, (b) fail
to exercise or pursue promptly and diligently each and every material right
which it may have under each material Receivable and General Intangible or (c)
fail to deliver to the Agent a copy of each material demand, notice or document
received by it relating in any way to any material Receivable or General
Intangible. No Grantor will, without the prior written consent of the Secured
Parties, grant any extension of the time of payment of any material Receivable
or amounts due under any material General Intangible, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof or allow any credit or
discount whatsoever thereon other than trade discounts granted in the normal
course of business, except such as in the reasonable judgment of such Grantor is
advisable to enhance the collectability thereof.
SECTION 4.12. Maintenance of Insurance. The Grantors, at their own
------------------------
expense, shall maintain or cause to be maintained insurance covering physical
loss or damage to the Inventory and Equipment in accordance with Section 5.02 of
the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints
the Agent (and all officers, employees or agents designated by the Agent) as
such Grantor's true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and adjusting
claims in respect of Collateral under policies of insurance, endorsing the name
of such Grantor on any check, draft, instrument or other
-22-
item of payment for the proceeds of such policies of insurance and for making
all determinations and decisions with respect thereto. In the event that any
Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Agent may, without waiving or releasing any obligation or
liability of the Grantors hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Agent deems advisable.
All sums disbursed by the Agent in connection with this Section 4.12, including
reasonable and invoiced attorneys' fees, court costs, out-of-pocket expenses and
other charges relating thereto, shall be payable, upon demand, by the Grantors
to the Agent and shall be additional Secured Obligations secured hereby.
SECTION 4.13. Limitations on Dispositions of Collateral. No Grantor will
-----------------------------------------
directly or indirectly (through the sale of stock, merger or otherwise) sell,
transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer
or contract to do so, except as permitted under Section 2.05. The inclusion of
Proceeds of the Collateral under the security interests granted under Section
2.01 shall not be deemed a consent by the Agent to any sale or disposition of
any Collateral other than as permitted by this Section 4.13.
SECTION 4.14. Periodic Certification. Each year, at the time of delivery
----------------------
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.04(a) of the Credit Agreement, the Borrower shall deliver
to the Agent a certificate executed by a financial officer of the Borrower (a)
setting forth the information required pursuant to Section 2 of the Perfection
Certificate, (b) certifying that all UCC financing statements or other
appropriate filings, recordings or registrations, including all refilings,
rerecordings and reregistrations, containing a description of the Collateral
have been filed of record in each governmental, municipal or other appropriate
office in each jurisdiction identified pursuant to clause (a) above to the
extent necessary to protect and perfect the security interests created under
Section 2.01 for a period of not less than 18 months after the date of such
certificate and (c) certifying that the Borrower and each Grantor have complied
with all actions required to be taken by the Borrower or such Grantor under
Section 4.02(a).
SECTION 4.15. Notices. Each Grantor will advise the Agent promptly and
-------
in reasonable detail after it becomes aware of, (a) any security interest,
material encumbrance or material claim made or other Lien asserted against any
of the Collateral, (b) any material change in the composition of the Collateral
and (c) the occurrence of any other event which would have a material adverse
effect on the aggregate value of the Collateral or on the security interests
granted to the Agent in this Agreement.
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SECTION 4.16. Change of Law. Each Grantor shall promptly notify the
-------------
Agent in writing of any change in law known to it which (a) adversely affects or
will adversely affect the validity, perfection or priority of the security
interests granted hereby, (b) requires or will require a change in the
procedures to be followed in order to maintain and protect such validity,
perfection and priority or (c) could result in the Agent not having a perfected
security interest in any of the Collateral.
SECTION 4.17. Right of Inspection. Each Grantor will, at such Grantor's
-------------------
cost and expense, permit any representatives designated by the Agent or the
Required Lenders to visit and inspect the financial records, the Documents or
any of the other Collateral of such Grantor at reasonable times and as often as
reasonably requested, and to make extracts from and copies of such financial
records or Documents, and permit any representatives designated by the Agent or
the Required Lenders to discuss the affairs, finances and condition of such
Grantor with the officers thereof and independent accountants therefor (with
representatives of the Borrower present unless an Event of Default or Default
has occurred and is continuing).
SECTION 4.18. Maintenance of Equipment. Each Grantor will, at its
------------------------
expense, in all material respects maintain the Equipment in standard industry
operating condition, ordinary wear and tear excepted.
SECTION 4.19. Covenants Regarding Patent, Trademark and Copyright
---------------------------------------------------
Collateral. (a) Each Grantor (either itself or through its licensees or its
----------
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of federal registration to the extent required by applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(b) Each Grantor (either itself or through licensees) will, for each
Patent, not do any act, or omit to do any act, whereby any Patent which is
material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and shall continue to ▇▇▇▇ any products covered by a
Patent with the relevant patent number as required by the Patent laws.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as required under the
copyright laws.
(d) Each Grantor shall notify the Agent in writing immediately if it knows
or has reason to know that any Patent,
-24-
Trademark or Copyright material to the conduct of its business may become
abandoned or dedicated to the public, or of any material adverse determination
or development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
United States Copyright Office or any court) regarding such Grantor's ownership
of any Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright with the United States Patent and Trademark Office, United States
Copyright Office or any office or agency in any political subdivision of the
United States or in any other country or any political subdivision thereof,
unless it promptly informs the Agent in writing, and, upon request of the Agent,
executes and delivers any and all agreements, instruments, documents and papers
as may be required or the Agent may request to evidence the Agent's security
interest in such Patent, Trademark or Copyright of such Grantor relating thereto
or represented thereby, and each Grantor hereby appoints the Agent its attorney-
in-fact to execute and file such writings for the foregoing purposes, all acts
of such attorney being hereby ratified and confirmed; such power, being coupled
with an interest, is irrevocable until the Secured Obligations are indefeasibly
paid in full in cash, the Commitments are terminated, the cancellation or
expiration of all Letters of Credit and the reimbursement in full of all amounts
drawn thereunder and all terms and conditions hereof, the Credit Agreement, the
Notes, the Collateral Documents and all other documents or agreements governing
the Secured Obligations have been satisfied.
(f) Each Grantor will take all necessary steps that are consistent with the
practice in any proceeding before the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each registration of the Patents, Trademarks
and Copyrights which is material to the conduct of such Grantor's business,
including the filing of applications for renewal, affidavits of use, affidavits
of incontestability and maintenance fees, and, if consistent with good business
judgment, to initiate opposition, interference and cancellation proceedings
against third parties.
(g) In the event that any Collateral consisting of a Patent, Trademark or
Copyright material to the conduct of any Grantor's business is believed
infringed, misappropriated or diluted by a third party, such Grantor shall
notify the Agent promptly after it learns thereof and shall, if consistent with
good business judgment, promptly ▇▇▇ for infringement,
-25-
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
SECTION 4.20. Reimbursement Obligation. Should any Grantor fail to
------------------------
comply with the provisions of this Agreement or any other agreement relating to
the Collateral (including any Capital Lease Obligation or other lease
obligation) such that the value of any Collateral, any leased Equipment or the
validity, perfection, rank or value of any security interest granted to the
Agent hereunder or thereunder is thereby diminished or potentially diminished in
any material respect or put at risk in any material respect (as reasonably
determined by the Agent), the Agent on behalf of such Grantor may, but shall not
be required to, effect such compliance on behalf of such Grantor, and such
Grantor shall reimburse the Agent for the costs thereof on demand, and interest
shall accrue on any such unpaid reimbursement obligation from the date the
relevant costs are incurred until reimbursement thereof in full at the default
rate provided in Section 2.07 of the Credit Agreement.
SECTION 4.21. Bank Accounts. None of the Grantors will establish after
-------------
the date hereof or permit to exist any demand, time, savings, passbook,
collection, operating, investment or other like type of account relating in any
way to its assets or business (except any Cash Collateral Accounts or other cash
collateral accounts with the Agent required under, and maintained in accordance
with, the Credit Agreement) without immediately causing such account to be an
Agency Account.
SECTION 4.22. Amendments to Schedules. Each Grantor has a continuing
-----------------------
obligation hereunder to amend, revise and update, as need be, any and all
schedules hereto so that such schedules accurately reflect the information set
forth therein.
SECTION 4.23. Government Contracts. As to any Government Contract to be
--------------------
entered into after the date hereof, the applicable grantor will use its
reasonable best efforts to insure that such Government Contract (i) includes a
"no set-off commitment" (as referenced pursuant to 48 CFR 32.803(d)), (ii) does
not include advance progress payment financing with a Governmental Authority and
(iii) does not include an anti-assignment of claims provision (as referenced
pursuant to 48 CFR 32.803(b)) that prohibits moneys due or to become due
thereunder from being assigned to the Agent.
ARTICLE V
DISTRIBUTIONS ON PLEDGED SECURITIES; VOTING
SECTION 5.01. Right to Receive Distributions on Pledged Collateral;
-----------------------------------------------------
Voting. (a) So long as no Event of Default shall have occurred and be
------
continuing:
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(i) Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Interests or any part
thereof for any purpose permitted by the terms of this Agreement and the
Credit Agreement.
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest and principal paid in cash on the Pledged Securities to
the extent and only to the extent that such cash dividends, interest and
principal are permitted by, and otherwise paid in accordance with, the
terms and conditions of the Credit Agreement and applicable laws. Other
than pursuant to the first sentence of this paragraph (a)(ii), all
principal, all noncash dividends, interest and principal, and all
dividends, interest and principal paid or payable in cash or otherwise in
connection with a partial or total liquidation or dissolution, return of
capital, capital surplus or paid-in surplus, and all other distributions
made on or in respect of Pledged Securities, whether paid or payable in
cash or otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding Capital Stock of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any
part thereof, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such issuer
may be a party or otherwise, shall be and become part of the Collateral,
and, if received by a Grantor, shall not be commingled by such Grantor with
any of its other funds or property but shall be held separate and apart
therefrom, shall be held in trust for the benefit of the Agent and shall be
forthwith delivered to the Agent in the form in which received (with any
necessary endorsement).
(iii) The Agent shall execute and deliver (or cause to be executed and
delivered) to each Grantor all such proxies, powers of attorney, consents,
ratifications and waivers and other instruments as each Grantor may
reasonably request for the purpose of enabling each Grantor to exercise the
voting and other rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends or interest payments which
it is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) All rights of any Grantor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to Section 5.01(a)(ii) shall cease, and all such rights
-27-
shall thereupon become vested in the Agent which shall thereupon have the
sole right to receive and hold as Collateral such dividends and interest
payments.
(ii) All dividends and interest payments which are received by any
Grantor contrary to the provisions of paragraph (i) of this Section 5.01(b)
shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Agent as Collateral in the same form as so received (with any
necessary endorsement).
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of each Grantor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 5.01(a)(i)
shall cease, and all such rights shall thereupon become vested in the Agent,
which shall thereupon have the sole right to exercise such voting and other
consensual rights.
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
SECTION 6.01. UCC Rights. If any Event of Default shall have occurred,
----------
the Agent may, in addition to all other rights and remedies granted to it in
this Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, exercise all rights and remedies of a
secured party under the UCC and all other rights available to the Agent at law
or in equity.
SECTION 6.02. Payments on Collateral. Without limiting the rights of the
----------------------
Agent under any other provision of this Agreement, if an Event of Default shall
occur and be continuing:
(a) The Agent may, or upon the request of the Agent each Grantor shall,
notify Account Debtors obligated to make payments under any or all
Receivables or General Intangibles that the Agent and the other Secured
Parties have a security interest in such Collateral and that payments shall
be made directly to, or to a Cash Collateral Account designated by, the
Agent. Each Grantor will use all reasonable efforts to cause each Account
Debtor to comply with the foregoing instruction. In furtherance of the
foregoing, each Grantor authorizes the Agent (i) to ask for, demand,
collect, receive and give acquittances and receipts for any and all amounts
due and to become due under any Collateral and, in the name of such Grantor
or its own name or otherwise, (ii) to take possession of, endorse and
collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due under
-28-
any Collateral (including by filing a Notice of Assignment, substantially
in the form of Exhibit D-2, or any other instrument of document with any
Governmental Authority) and (iii) to file any claim or take any other
action in any court of law or equity or otherwise which it may deem
appropriate for the purpose of collecting any amounts due under any
Collateral;
(b) all payments received by any Grantor under or in connection with any
of the Collateral shall be held by such Grantor in trust for the Agent,
shall be segregated from other funds of such Grantor and shall forthwith
upon receipt by such Grantor be turned over to the Agent, in the same form
as received by such Grantor (duly indorsed by each Grantor to the Agent, if
required to permit collection thereof by the Agent); and
(c) all such payments received by the Agent (whether from a Grantor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent
as collateral security for, and/or then or at any time thereafter be
applied in whole or in part by the Agent to the payment of the expenses and
Secured Obligations as set forth in Section 6.11.
SECTION 6.03. Possession of Collateral. In furtherance of the foregoing,
------------------------
each Grantor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (a) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located, and without charge or liability to the Agent
seize and remove such Collateral from such premises and (b) have access to and
use of such Grantor's Documents.
SECTION 6.04. Sale of Collateral. (a) Each Grantor expressly agrees
------------------
that if an Event of Default shall occur and be continuing, the Agent, without
demand of performance or other demand or notice of any kind (except the notice
specified below of the time and place of any public or private sale) to any
Grantor or any other person (all of which demands and/or notices are hereby
waived by each Grantor), may forthwith collect, receive, appropriate and realize
upon the Collateral and/or forthwith sell, lease, assign, give an option or
options to purchase or otherwise dispose of and deliver the Collateral (or
contract to do so) or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any office of the Agent or
elsewhere in such manner as is commercially reasonable and as the Agent may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Agent or any Secured Party shall have the right upon any such
public sale and, to the extent permitted by law, upon any such private sale, to
purchase the whole or any part of the Collateral so sold. Each Grantor further
agrees, at the Agent's request, to assemble the Collateral, and to make it
-29-
available to the Agent at places which the Agent may reasonably select. To the
extent permitted by applicable law, each Grantor waives all claims, damages and
demands against the Agent or any Secured Party arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Unless the Collateral threatens to decline quickly in value or is of a
type customarily sold in a recognized market, the Agent shall give such Grantor
10 days' written notice of its intention to make any such public or private sale
or sale at a broker's board or on a securities exchange. Such notice shall (i)
in the case of a public sale, state the time and place fixed for such sale, (ii)
in the case of a sale at a broker's board or on a securities exchange, state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or any portion thereof being sold, will first be offered for sale
and (iii) in the case of a private sale, state the day after which such sale may
be consummated. The Agent shall not be required or obligated to make any such
sale pursuant to any such notice. The Agent may adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In the case of any sale of all or
any part of the Collateral for credit or for future delivery, the Collateral so
sold may be retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in case of
failure of such purchaser to pay for the Collateral so sold and, in the case of
such failure, such Collateral may again be sold upon like notice.
SECTION 6.05. Rights of Purchasers. Upon any sale of the Collateral
--------------------
(whether public or private), the Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent and the other Secured Parties) at any such sale shall hold
the Collateral so sold free from any claim or right of whatever kind, including
any equity or right of redemption of any Grantor, and each Grantor, to the
extent permitted by law, hereby specifically waives all rights of redemption,
including the right to redeem the Collateral under (S) 9-506 of the UCC, and any
right to a judicial or other stay or approval which it has or may have under any
law now existing or hereafter adopted.
SECTION 6.06. Additional Rights of the Agent. Upon the occurrence and
------------------------------
during the continuance of an Event of Default:
(a) The Agent shall have the right and power to institute and maintain
such suits and proceedings as it may deem appropriate to protect and
enforce the rights vested in it by this Agreement and may proceed by suit
or suits at law or in equity to enforce such rights and to foreclose upon
and sell the Collateral or any part thereof pursuant to the judgment or
decree of a court of competent jurisdiction.
-30-
(b) The Agent shall, to the extent permitted by law and without regard to
the solvency or insolvency at the time of any person then liable for the
payment of any of the Secured Obligations or the then value of the
Collateral, and without requiring any bond from any party to such
proceedings, be entitled to the appointment of a special receiver or
receivers (who may be the Agent or any other Secured Party) for the
Collateral or any part thereof and for the rents, issues, tolls, profits,
royalties, revenues and other income therefrom, which receiver shall have
such powers as the court making such appointment shall confer, and to the
entry of an order directing that the rents, issues, tolls, profits,
royalties, revenues and other income of the property constituting the whole
or any part of the Collateral be segregated, sequestered and impounded for
the benefit of the Agent and the other Secured Parties, and each Grantor
irrevocably consents to the appointment of such receiver or receivers and
to the entry of such order.
SECTION 6.07. Securities Act, etc. (a) In view of the position of the
-------------------
applicable Grantor in relation to its Pledged Securities, or because of other
present or future circumstances, a question may arise under the Securities Act
of 1933, as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being herein called the "Federal Securities Laws"), with
-----------------------
respect to any disposition of the Pledged Securities permitted hereunder. Each
Grantor understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Agent if the Agent were to attempt
to dispose of all or any part of the Pledged Securities, and might also limit
the extent to which or the manner in which any subsequent transferee of any such
Pledged Securities could dispose of the same. Similarly, there may be other
legal restrictions or limitations affecting the Agent and the other Secured
Parties in any attempt to dispose of all or part of the Pledged Securities under
applicable blue sky or other state securities laws or similar laws analogous in
purpose or effect.
Accordingly, each Grantor expressly agrees that the Agent is authorized, in
connection with any sale of the Pledged Securities, if the Agent deems it
advisable so to do, (a) to restrict the prospective bidders on or purchasers of
any of the Pledged Securities to a limited number of sophisticated investors who
will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Securities, (b) to cause to be placed on certificates for any or all of
the Pledged Securities or on any other securities pledged hereunder a legend to
the effect that such security has not been registered under the Federal
Securities Laws and may not be disposed of in violation of the provision of the
Federal Securities Laws and (c)
-31-
to impose such other limitations or conditions in connection with any such sale
as the Agent deems necessary or advisable in order to comply with the Federal
Securities Laws or any other law. Each Grantor covenants and agrees that, upon
the occurrence and during the continuance of an Event of Default, it will
execute and deliver such documents and take such other action as the Agent deems
necessary or advisable in order to comply with the Federal Securities Laws or
any other law. Each Grantor acknowledges and agrees that such limitations may
result in prices and other terms less favorable to the seller than if such
limitations were not imposed, and, notwithstanding such limitations, agrees that
any such sale shall be deemed to have been made in a commercially reasonable
manner, it being the agreement of each Grantor, the Agent and the other Secured
Parties that the provisions of this Section 6.07 will apply notwithstanding the
existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Agent sells the Pledged
Securities. The Agent shall be under no obligation to delay a sale of any
Pledged Securities for a period of time necessary to permit the issuer of any
securities contained therein to register such securities under the Federal
Securities Laws, or under applicable state securities laws, even if the issuer
would agree to do so.
(b) Borrower hereby acknowledges the provisions of each Section 6.05 set
forth in the Buyer Pledge Agreement, the Seller Pledge Agreement and the Parent
Pledge Agreement and agrees to comply with the requirements set forth in such
sections as they relate to the Borrower.
SECTION 6.08. Remedies Not Exclusive. (a) No remedy conferred upon or
----------------------
reserved to the Agent in this Agreement is intended to be exclusive of any other
remedy or remedies, but every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law, in equity or by statute.
(b) If the Agent shall have proceeded to enforce any right, remedy or power
under this Agreement and the proceeding for the enforcement thereof shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent, each Grantor and the Agent shall, subject to any
determination in such proceeding, severally and respectively be restored to
their former positions and rights under this Agreement, and thereafter all
rights, remedies and powers of the Agent shall continue as though no such
proceedings had been taken.
(c) All rights of action under this Agreement may be enforced by the Agent
without the possession of any instrument evidencing any Secured Obligation or
the production thereof at any trial or other proceeding relative thereto, and
any suit or proceeding instituted by the Agent shall be brought in its name and
any judgment shall be held as part of the Collateral.
-32-
SECTION 6.09. Waiver and Estoppel. (a) Each Grantor, to the extent it
-------------------
may lawfully do so, agrees that it will not at any time in any manner whatsoever
claim or take the benefit or advantage of any appraisement, valuation, stay,
extension, moratorium, turnover or redemption law, or any law now or hereafter
in force permitting it to direct the order in which the Collateral shall be sold
which may delay, prevent or otherwise affect the performance or enforcement of
this Agreement and each Grantor hereby waives the benefits or advantage of all
such laws, and covenants that it will not hinder, delay or impede the execution
of any power granted to the Agent in this Agreement but will permit the
execution of every such power as though no such law were in force; provided that
--------
nothing contained in this Section 6.09 shall be construed as a waiver of any
rights of such Grantor under any applicable federal bankruptcy law.
(b) Each Grantor, to the extent it may lawfully do so, on behalf of itself
and all who may claim through or under it, including any and all subsequent
creditors, vendees,
assignees and lienors, waives and releases all rights to demand or to have any
marshalling of the Collateral upon any sale, whether made under any power of
sale granted herein or pursuant to judicial proceedings or upon any foreclosure
or any enforcement of this Agreement and consents and agrees that all of the
Collateral may at any such sale be offered and sold as an entirety.
(c) Each Grantor, to the extent it may lawfully do so, waives presentment,
demand, protest and any notice of any kind (except notices explicitly required
hereunder) in connection with this Agreement and any action taken by the Agent
with respect to the Collateral.
SECTION 6.10. Power of Attorney. Each Grantor hereby irrevocably
-----------------
constitutes and appoints the Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of such Grantor and in the name of such Grantor or in its own
name, from time to time in the Agent's reasonable discretion for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives the Agent the power and right, on
behalf of such Grantor, without notice to or assent by such Grantor to do the
following:
(a) upon the occurrence and during the continuance of any Event of
Default, to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(b) upon the occurrence and during the continuance of any Event of
Default, to effect any
-33-
repairs or any insurance called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs thereof; and
(c) upon the occurrence and continuance of any Event of Default and
otherwise to the extent provided in this Agreement, (i) to direct any party
liable for any payment under any of the Collateral to make payment of any
and all moneys due and to come due thereunder directly to the Agent or as
the Agent shall direct; (ii) to receive payment of and receipt for any and
all moneys, claims and other amounts due and to become due at any time in
respect of or arising out of any Collateral; (iii) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with accounts and other documents relating to the Collateral;
(iv) to commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral
or any thereof and to enforce any other right in respect of any Collateral;
(v) to defend any suit, action or proceeding brought against such Grantor
with respect to any Collateral; (vi) to settle, compromise and adjust any
suit, action or proceeding described above and, in connection therewith, to
give such discharges or releases as the Agent may deem appropriate; (vii)
to assign any Patent, Trademark or Copyright (along with the goodwill of
the business to which such Trademark pertains), for such term or terms, on
such conditions, and in such manner, as the Agent shall in its sole
discretion determine; (viii) to license or, to the extent permitted by any
applicable law, sub-license, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any Patent, Trademark or
Copyright, throughout the world for such term or terms, on such conditions,
and in such manner, as the Agent shall determine (other than in violation
of any then existing licensing arrangements to the extent that waivers or
other adequate provision cannot be secured therefor); and (ix) generally to
sell, transfer, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the Agent
were the absolute owner thereof for all purposes, and to do, at the option
of the Agent and each Grantor's expense, at any time, or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in
order to effect the intent of this Agreement, all as fully and effectively
as such Grantor might do.
-34-
Each Grantor hereby ratifies all that such attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
Except as provided for by law or the UCC or its equivalent, nothing herein
contained shall be construed as requiring or obligating the Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Agent, or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby, and no action
taken by the Agent or omitted to be taken with respect to the Collateral or any
part thereof shall give rise to any defense, counterclaim or offset in favor of
any Grantor or to any claim or action against the Agent. It is understood and
agreed that the appointment of the Agent as the agent of each Grantor for the
purposes set forth above in this Section 6.10 is coupled with an interest and is
irrevocable. The provisions of this Section 6.10 shall in no event relieve any
Grantor of any of its obligations hereunder with respect to the Collateral or
any part thereof or impose any obligation on the Agent to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Agent of any other or further right which it may
have on the date of this Agreement or hereafter, whether hereunder or by law or
otherwise.
SECTION 6.11. Application of Proceeds. (a) The Agent shall apply the
-----------------------
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Agent (in its capacity as such hereunder or under any other Loan
Document) and the Lenders in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Secured
Obligations, including all court costs and the reasonable fees and expenses
of their respective agents and legal counsel, the repayment of all
reasonable advances made by the Agent and the Lenders hereunder or under
any other Loan Document and all reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Loan Document;
SECOND, to the payment in full of the Secured Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Secured Obligations owed to them on the date of any
such distribution); and
-35-
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Agent shall have absolute discretion as to the time of application of any
such proceeds, moneys or balances in accordance with this Agreement. Upon any
sale of the Collateral by the Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the Agent or
of the officer making the sale shall be a sufficient discharge to the purchaser
or purchasers of the Collateral so sold and such purchaser or purchasers shall
not be obligated to see to the application of any part of the purchase money
paid over to the Agent or such officer or be answerable in any way for the
misapplication thereof.
(b) In the event that the proceeds of any collection, recovery, receipt,
appropriation, realization or sale as aforesaid are insufficient to pay all
amounts to which the Agent or any or all of the Lenders are legally entitled,
the Grantors will be jointly and severally liable for the deficiency, together
with interest thereon, at the Default Rate, and the reasonable fees of any
attorneys employed by the Agent or any or all of the Lenders to collect such
deficiency, pursuant to the Credit Agreement.
SECTION 6.12. Grant of License or Sub-License to Use Patent, Trademark,
---------------------------------------------------------
Copyright and License Collateral. For the purpose of enabling the Agent to
--------------------------------
exercise rights and remedies under this Article VI at such time as the Agent
shall be lawfully entitled to exercise such rights and remedies, each Grantor
hereby grants to the Agent an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to such Grantor) to use,
license or sub-license any Patent, Trademark, Copyright or License now owned or
licensed or hereafter acquired or licensed by such Grantor, and wherever the
same may be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof.
The use of such license or sub-license by the Agent shall be exercised, at the
option of the Agent, upon the occurrence and the continuance of an Event of
Default; provided that any license, sub-license or other transaction entered
--------
into by the Agent in accordance herewith shall be binding upon the applicable
Grantor notwithstanding any subsequent cure of an Event of Default. The Agent
agrees to apply the net proceeds received from any such license as provided in
Section 6.11 hereof; provided that no such license shall be conferred hereby
--------
with respect to any Patents, Trademarks and Copyrights licensed by the Grantors
if and to the extent that the terms of the applicable License to which such
Grantor is a party would prohibit such license to the Agent.
-36-
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices. Unless otherwise specified herein, all notices,
-------
requests or other communications to any party hereunder shall be in writing,
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy and shall be given to such party at its
address or telecopy number set forth, in the case of the Borrower and the Agent,
in Section 9.01 of the Credit Agreement and, in the case of the other Grantors,
on the signature pages hereof or at any other address or telecopy number which
such party shall have specified for the purpose of communications hereunder by
notice to the other parties hereunder. All notices and other communications
given to any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt if delivered by hand
or overnight courier service or sent by telecopy or on the date five Business
Days after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 7.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 7.01.
SECTION 7.02. Survival of Agreement. All covenants, agreements,
---------------------
representations and warranties made by each Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Agent and the Secured Parties and shall survive the making by the Lenders of the
Loans and the execution and delivery to the Lenders of the Notes evidencing such
Loans, regardless of any investigation made by the Lenders or on their behalf,
and shall continue in full force and effect until the Secured Obligations have
been indefeasibly paid in full in cash, the Commitments have been terminated,
the cancellation or expiration of all Letters of Credit and the reimbursement in
full of all amounts drawn thereunder and all terms and conditions hereof, the
Credit Agreement, the Notes, the Collateral Documents and all other documents or
agreements governing the Secured Obligations have been satisfied. This
Agreement shall terminate when the security interests granted hereunder have
terminated and the Collateral has been released as provided in Section 2.08(b);
provided that the obligations of each Grantor under Section 4.20 shall survive
--------
any such termination.
SECTION 7.03. Counterparts. This Agreement may be executed by the
------------
parties hereto in several counterparts and each such counterpart shall be deemed
to be an original, admissible into evidence, but all such counterparts shall
together constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by
-37-
telefacsimile shall also deliver a manually executed counterpart of this
Agreement, but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of this Agreement.
SECTION 7.04. Amendments, Etc. No amendment, modification or waiver of
---------------
any provision of this Agreement and no consent to any departure by any Grantor
therefrom shall in any event be effective unless the same shall be in writing
and shall be executed and delivered in accordance with Section 9.08 of the
Credit Agreement, and then such amendment, modification, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that this Agreement may be amended, modified or
--------
waived with respect to any Grantor, including by releasing any Grantor
hereunder, without the approval of any other Grantor and without affecting the
obligations of any other Grantor hereunder.
SECTION 7.05. Assignments. This Agreement and the terms, covenants and
-----------
conditions hereof shall be binding upon each Grantor and its successors and
shall inure to the benefit of the Agent and the Secured Parties and their
respective successors and assigns. Upon the assignment by any Lender of all or
any portion of its rights and obligations under the Credit Agreement (including
all or any portion of its Commitment and the Loans owing to it) to any other
person, such other person shall thereupon become vested with all the benefits in
respect thereof granted to such transferor or assignor herein or otherwise.
Except as permitted by the Permitted Drop Down Transaction, none of the Grantors
shall be permitted to assign, transfer or delegate any of its rights or
obligations under this Agreement (and any such purported assignment, transfer or
delegation without such consent shall be void).
SECTION 7.06. Savings Clause. In the event any one or more of the
--------------
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect with respect to any Grantor, no party hereto shall
be required to comply with such provision with respect to such Grantor for so
long as such provision is held to be invalid, illegal or unenforceable, and the
validity, legality and enforceability of the remaining provisions contained
herein, and of such invalid, illegal or unenforceable provision with respect to
any other Grantor, shall not in any way be affected or impaired. The parties
shall endeavor in good-faith negotiations to replace any invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.07. Supplemental Agreement. Upon execution and delivery by the
----------------------
Agent and a Subsidiary of a Supplemental Agreement substantially in the form of
Exhibit I to the Credit Agreement, such Subsidiary shall become a Grantor
hereunder with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any such instrument shall
-38-
not require the consent of any other Grantor hereunder. The rights and
obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
SECTION 7.08. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.09. Entire Agreement. This Agreement, the other Loan
----------------
Documents, and the Fee Letter constitute the entire contract between the parties
relative to the subject matter hereof. Any previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement, the
other Loan Documents and the Fee Letter. Nothing in this Agreement, expressed
or implied, is intended to confer upon any party other than the parties hereto
and the Secured Parties, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
SECTION 7.10. No Waiver; Remedies. No failure on the part of the Agent
-------------------
or any Secured Party to exercise, and no delay in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy by such person preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. All remedies hereunder and under the Loan Documents are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 7.11. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 7.12. NO ORAL AGREEMENTS. THIS AGREEMENT AND THE INSTRUMENTS AND
------------------
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
-39-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first written above.
FIREARMS TRAINING SYSTEMS, INC.,
as Grantor
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: President and Chief
Operating Officer
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
NATIONSBANK, N.A. (SOUTH),
as Agent
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Attorney-in-Fact
-40-
SCHEDULE 1
----------
SUBSIDIARY GRANTORS
-------------------
None.
SCHEDULE 2
----------
CHIEF EXECUTIVE OFFICES AND
---------------------------
PRINCIPAL PLACE OF BUSINESS
---------------------------
1. Firearms Training Systems, Inc.
Gwinnett County
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
2. Borrower maintains its books and records relating to Receivables and
General Intangibles at:
7340 ▇▇▇▇▇▇▇▇ Ferry Road
Gwinnett County
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 3
----------
PLEDGED SECURITIES
------------------
Part I Pledged Interests
------ -----------------
The Borrower holds the following Capital Stock:
1. 1000 shares of Common Stock of Firearms Training Systems Limited;
2. 200,000 shares of Common Stock of F.A.T.S. Singapore PTE LTD.;
3. 1000 shares of Common Stock of F.A.T.S. Foreign Sales Corporation;
4. 2000 shares of Common Stock of Firearms Training Systems Netherlands B.V.;
5. 1 share of Common Stock of FATS Canada, Inc.
Part II Pledged Debt
------- ------------
1. Intercompany Note with Firearms Training Systems Limited
2. Intercompany Note with Firearms Training Systems Netherlands B.V.
3. Intercompany Note with F.A.T.S. Singapore PTE LTD.
4. Intercompany Note with F.A.T.S. Foreign Sales Corporation
5. Intercompany Note with FATS Canada, Inc.
6. Letter of Credit in the amount of $284,266 issued by Banca Nazionale del
Lavoro with an expiration date of September 9, 1996.
7. Letter of Credit in the amount of $478,881 issued by Banca Nazionale del
Lavoro with an expiraton date of May 10, 1997.
SCHEDULE 4
----------
LOCATIONS OF EQUIPMENT AND INVENTORY
------------------------------------
Firearms Training Systems, Inc.
Gwinnett County
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 5
----------
TRADE NAMES
-----------
During the preceding five-year period, the Borrower has used the following
names:
Firearms Training Systems, Inc.
F.A.T.S.
FATS
F.A.T.S., Inc.
FATS, Inc.
SCHEDULE 6
----------
REOUIRED FILINGS AND RECORDINGS
-------------------------------
UCC-1 financing statement to be filed in any county in Georgia.
SCHEDULE 7
----------
U.S. PATENTS & PATENT APPLICATIONS
----------------------------------
----------------------------------
Patent Serial/Patent No. Filing/Issue Date
------ ----------------- -----------------
A Multiple Weapon, 08/427,110 April 21, 1995
Firearms Training System (Filing Date)
Utilizing Image Shape
Recognition (Recorded on
June 26, 1995)
Inventors: Wenlonn ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇ ▇▇▇▇▇
FOREIGN PATENTS AND PATENT APPLICATIONS
---------------------------------------
Patent Serial/Patent No. Filing/Issue Date
------ ----------------- -----------------
None.
SCHEDULE 8
----------
U.S. TRADEMARKS AND TRADEMARK APPLICATIONS
------------------------------------------
▇▇▇▇ Reg./App. No. Reg./App. Date
---- ------------- --------------
FATS (Stylized) 75/076,582 March 21, 1996
FATS and Design 75/076,581 March 21, 1996
FOREIGN TRADEMARKS AND TRADEMARK APPLICATIONS
---------------------------------------------
Foreign trademarks application in each of the countries listed below were
filed as follows:
▇▇▇▇ Country Reg./App. No. Reg./App. Date
---- ------- ------------- --------------
FATS Argentina 2.034.284 May 22, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ May 15, ▇▇▇▇
▇▇▇▇▇▇ May 18, ▇▇▇▇
▇▇▇▇▇▇ May 23, 1996
Indonesia May 15, ▇▇▇▇
▇▇▇▇▇▇ 105,306 May 19, ▇▇▇▇
▇▇▇▇▇ May 16, ▇▇▇▇
▇▇▇▇▇ May 15, 1996
▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇ May 22, 1996
The ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ May 21, 1996
Singapore 5014/96 May 17, 1996
▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ May 13, 1996
FATS & Argentina Class 9: 2.037.285 May 22, 1996
DESIGN Argentina Class 41: 2.034.286 May 22, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ May 15, ▇▇▇▇
▇▇▇▇▇▇ May 13, ▇▇▇▇
▇▇▇▇▇▇ May 23, 1996
Indonesia May 15, ▇▇▇▇
▇▇▇▇▇▇ Class 9: 105,307 May 19, ▇▇▇▇
▇▇▇▇▇▇ Class 41: 105,308 May 19, ▇▇▇▇
▇▇▇▇▇ May 16, ▇▇▇▇
▇▇▇▇▇ May 15, 1996
▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇ May 22, 1996
The ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ May 21, 1996
Singapore Class 9: ▇▇▇▇/▇▇ ▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ Class 41: 5016/96 May 17, 1996
▇▇▇▇▇▇ ▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ May 13, 1996
SCHEDULE 9
----------
U.S. COPYRIGHTS AND COPYRIGHT APPLICATIONS
------------------------------------------
Title Reg./App. No. Reg./App. Date
----- ------------- --------------
None.
FOREIGN COPYRIGHT AND COPYRIGHT APPLICATIONS
--------------------------------------------
Title Country Reg./App. No. Reg./App. Date
----- ------- ------------- --------------
None.
SCHEDULE 10
-----------
LICENSES
--------
The following licenses, permits and authorizations have been
issued or granted to the Borrower:
1. The Borrower has a Class 11 license from the ATF to import destructive
devices, ammunition for destructive devices or armor piercing ammunition.
2. The Borrower has a Class 10 license from the ATF that authorizes the Company
to be a manufacturer of destructive devices, ammunition for destructive
devices, or armor piercing ammunition.
3. The Borrower is registered with the Director of ATF as a person engaged in
the business of importing articles enumerated on the U.S. Munitions Import
List. The Company currently has a valid ATF Form 4587 which reflects this
status.
4. The Borrower is registered with the Department of state, Office of Defense
Trade Controls ("ODTC"), as an exporter of Munitions List articles.
5. The Borrower is subject to the export licensing jurisdiction of the State
Department and the Department of Commerce ("Commerce") for the temporary or
permanent export of its products and the import of weapons for modification.
The jurisdiction is based on the Arms Export Control Act and the Export
Administration Act. The Borrower initially approached the office of Defense
Trade Controls ("DTC") in 1987 as to whether its proprietary system
required licensing by the Department of State under the auspices of the Arms
Export Control Act. DTC subsequently advised the Borrower that in their view,
the products were under the export licensing jurisdiction of Commerce.
The Borrower subsequently obtained formal commodity classifications from
Commerce for the modified firearms simulation devices and for the firearms
training simulators. In late 1995, DTC challenged Commerce jurisdiction with
respect to export licensing of the Borrower's products. The Borrower has made
substantial filings and an oral presentation to DTC on this subject.
It now appears that the firearms simulators (for which the Borrower has sua
sponte for some time obtained DTC licenses) and those disks going to military
customers overseas will require DTC licenses. The simulator system itself and
disks going to civilian entities will remain within the jurisdiction of Commerce
for export licensing purposes. This result is tentative and subject to formal
confirmation by DTC.
6. The Borrower is federally registered as an employer.
7. The Borrower is not required to hold any Food & Drug Administration ("FDA")
permits, but is required to file a report annually (regarding laser
compliance) which specifies the type and quantity of basic products
produced. FDA has not questioned the Borrower's contention that its products
are Laser Class 1. Laser Class 1 is "not considered to be hazardous" (21 CFR
(S) 1040.10(b)(5), n.1).
8. The Borrower has filed registration for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as a registered
lobbyist in the United States Congress, Form LD-1, Jan. 1996, pursuant to
the Lobbying Disclosure Act of 1995.
9. The Borrower is registered as a foreign corporation in Alaska, California,
Florida, Georgia, Indiana and Maryland.
10. The Borrower has a Forsyth County (Georgia) business license and a City of
Spokane (Washington) business license.
11. The Borrower has EPA ID number GA000901074.
12. With respect to the ATF and ODTC licenses and registrations, notices of
change of control will be submitted within 5 or 30 days of the Closing Date,
as applicable. Any subsequent change of control will also require post-
change notice.
The Borrower also has the following licenses or other agreements:
1. A license Agreement with Acceleration Technology, Inc., to use its "Nucleus
RTX" software and associated documentation.
2. The Borrower is required to purchase from Microware a license label for each
of its ▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇ FX, FATS L.E. and FATS III Model Systems in
accordance with its agreement regarding the use of Microware's OS9 software
package.
SCHEDULE 11
-----------
MOTOR VEHICLES AND OTHER ROLLING STOCK
--------------------------------------
REGISTRATION TITLE
----------------------------------------------------------------------------------
YR MAKE MODEL VIN# STATE TAG# STATE TITLE #
----------------------------------------------------------------------------------
96 Ford E250 Van ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA YXP 511 GA 30811041
----------------------------------------------------------------------------------
96 Ford E250 Van ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA QK 13966 GA 30670360
----------------------------------------------------------------------------------
95 Ford E150 Van ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA XFC 203 GA 29548444
----------------------------------------------------------------------------------
95 Ford ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ XFB 986 GA 29553237
----------------------------------------------------------------------------------
95 Ford E150 Van ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA XFC 202 GA 29548443
----------------------------------------------------------------------------------
95 Ford E150 Van ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA XEC 204 GA 29548445
----------------------------------------------------------------------------------
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA QE 75443 GA 27060251
----------------------------------------------------------------------------------
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA QE 75442 GA 27060253
----------------------------------------------------------------------------------
92 Ford ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇ GA 30574955
----------------------------------------------------------------------------------
92 Ford ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------------------------------------------
92 Ford E350 Cutaway ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA QF 58286 GA 30574953
----------------------------------------------------------------------------------
91 Ford E150 Van ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA QK 12689 GA 29965910
----------------------------------------------------------------------------------
88 Ford Aerostar Van 1FTCA14UOJZB27955 GA SSY 557 GA 26977302
----------------------------------------------------------------------------------
85 GMC TM ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇ 3910 GA 13740590
----------------------------------------------------------------------------------
93 Mercedes 600SEL ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ GA SBX 656 GA 25320750
----------------------------------------------------------------------------------
SCHEDULE 12
-----------
ACCOUNTS
--------
Firearms Training Systems, Inc. maintains the following accounts with Lloyds
Bank plc, ▇▇▇ ▇▇▇▇▇'▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇:
FATS Inc. ▇▇▇▇▇▇▇
Contact: Mr. ▇▇▇ Swanns
Tel: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇
FATS Inc. VAT Account ▇▇▇▇▇▇▇
Contact: Mr. ▇▇▇ Swanns
Tel: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇
FATS Inc. US Checking ▇▇▇▇▇▇▇
Contact: Mr. ▇▇▇ Swanns
Tel: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇
Firearms Training Systems, Inc. maintains the following accounts with Lloyds
Bank plc, Commerical Service, ▇▇/▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇:
FATS & Airgroup Ltd. ▇▇▇▇▇▇▇
Contact: Ms. ▇▇▇▇▇ ▇▇▇ Spring
Tel: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇▇
FATS & Airgroup (Escrow) ▇▇▇▇▇▇▇
Contact: Ms. ▇▇▇▇▇ ▇▇▇ Spring
Tel: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇▇▇
Firearms Training Systems, Inc. maintains the following account with ABN Amro,
Kneuterdijk 1, Den ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇:
FATS, Inc. 44.09.33.242
Contact: Ms. van Leftsanburg
Tel: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇
Firearms Training Systems, Inc. maintains the following accounts with
NationsBank (main banking activity):
Operating Account 2321252356
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The following accounts are zero balance accounts, which are funded by
the Operating Account:
Accounts Payable Checking 9563806
Manual Checking 9563946
Payroll Checking 9563938
Section 125 Plan Checking 9569103
USMC Funding Deposit Account 3251728830
SCHEDULE 13
-----------
GOVERNMENT CONTRACTS
--------------------
The contracts listed below are those contracts as of the Closing Date, with a
value as indicated. The list does not include any prior contracts the Borrower
may have had which have been completed or amounts outstanding that are lower
than the dollar thresholds indicated. The list will be updated to reflect new
contracts.
The following U.S. Government contracts whose current total value is in excess
of $500,000:
Contracting Current Dollar
Party Contract Value Administered by
----------- -------- -------------- ---------------
USMC/1/ M67854-94-C-2014 $36,854,594.08 D.C.M.A.O. Atlanta
USMC/1/ M67854-94-C-2013 $ 1,189,432.40 D.C.M.A.O. Atlanta
USMC/1/ M67004-96-C-0028 $ 590,910.39 D.C.M.A.O. Atlanta
USAF (PACAF)/2/ F64605-96-C-0006 $ 953,038.00 ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
The following U.S. government contracts whose total potential value is in excess
of $500,000:
General Services Administration/1/ GS-02F-0414D General Procurement
Division, New York
----------
/1/ Do not contain a "no set-off commitment" (as referenced pursuant to 48
C.F.R. 32.803 (d)).
/2/ Obligations of the Borrower have been completed.
The following foreign government contracts whose current ▇▇▇▇ value is in excess
of $500,000:
Current Dollar
Contracting Party Contract Value
----------------- -------- --------------
British (MoD) SAT LWS21A/706 $1,221,000
Netherlands (Army) 852.2221.6042.12 $7,600,000
Italy (Finanza) SO#96032 $1,785,798 (Not Assignable)
Italy (Carabinieri)/3/ SO#96031 $7,177,044 (Not Assignable)
----------
/3/ Obligations of the Borrower have been completed.
IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the
____ day of __________________, 1996.
ATTEST: [NAME OF GRANTOR], as Assignor
____________________________ By:_________________________________
___________ Secretary Title:
[Corporate Seal]
ATTEST: NATIONSBANK, N.A. (SOUTH),
as Agent
____________________________ By:_________________________________
___________ Secretary Title:
[Bank Seal]
STATE OF __________
________ OF _______
The foregoing instrument was acknowled before me this ______ day of
_____________, 19___ by _____________________________________ as [title] of
_____________________________, a _____________________ cororation, on behalf of
the Corporation.
My commission expires:
Notarial Seal
____________________________________
Notary Public
EXHIBIT A
to
Pledge and Security Agreement
-----------------------------
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES PATENTS AND TRADEMARKS
---------------------------------------
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are
hereby acknowledged, [NAME OF GRANTOR], a [Jurisdiction] [entity] (the
"Assignor"), having its chief executive office at [address], hereby assigns and
--------
grants to NATIONSBANK, N.A. (SOUTH), as Agent (in such capacity, the "Agent"),
with offices at NationsBank Corporate Center, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, a security interest in (all of which are herein
collectively referred to as the "PTO Collateral") (i) all of the Assignor's
--------------
right, title and interest in and to the United States trademarks, trademark
registrations and trademark applications set forth on Schedule A attached hereto
----------
(the "Marks"), (ii) all of the Assignor's right, title and interest in and to
-----
the United States patents set forth on Schedule B attached hereto (the
----------
"Patents"), in each case together with (iii) all Proceeds (as such term is
defined in the Security Agreement referred to below) and products of the Marks
and Patents, (iv) the goodwill of the businesses symbolized by the Marks and (v)
all causes of action arising prior to or after the date hereof for infringement
of any of the Marks and Patents or unfair competition regarding the same.
THIS ASSIGNMENT is made to secure the full and prompt performance and payment
of all the Secured Obligations of the Assignor, as such term is defined in the
Pledge and Security Agreement, dated as of July __, 1996, among the Assignor,
the Agent and the other parties thereto (as amended, supplemented or modified
from time to time, the "Security Agreement"). Upon the satisfaction of the
-------- ---------
conditions set forth in Section 2.08(b) of the Security Agreement, the Agent
shall execute, acknowledge, and deliver to the Grantor an instrument in writing
releasing the security interest in the PTO Collateral acquired under this
Assignment.
THIS ASSIGNMENT has been granted in conjunction with the security interest
granted to the Agent for the benefit of the Secured Parties under the Security
Agreement. The rights and remedies of the Agent with respect to the security
interest granted herein are without prejudice to, and are in addition to, those
set forth in the Security Agreement, all terms and provisions of which are
incorporated herein by reference. In the event that any provision of this
Assignment is deemed to conflict with the Security Agreement, the provisions of
the Security Agreement shall govern.
SCHEDULE A
----------
TRADEMARKS AND TRADEMARK APPLICATIONS
-------------------------------------
Serial No. or Issue or
Registration No. Country Filing Date ▇▇▇▇
---------------- ------- ----------- ----
SCHEDULE B
----------
PATENTS AND PATENT APPICATIONS
------------------------------
Serial No. or Issue or
Patent No. Inventor Country Filing Date Title
---------- -------- ------- ----------- -----
IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the
____ day of ___________, 1996.
ATTEST: [NAME OF GRANTOR], as Assignor
_______________________________ By:________________________
____________Secretary Title:
[Corporate Seal]
ATTEST: NATIONSBANK, N.A. (SOUTH),
as Agent
_____________________________ By:________________________
___________Secretary Title:
[Bank Seal]
STATE OF _________
________OF________
The foregoing instrument was acknowledged before me this ___ day
__________________, 19___ by _______________________ as [title] of
__________________, a ____________________ corporation, on behalf of the
corporation.
My commission expires:
Notarial Seal
__________________________________
Notary Public
SCHEDULE A
----------
COPYRIGHTS AND COPYRIGHT APPLICATIONS
-------------------------------------
Serial No. or Copyright
Registration No. Country Publication Date Title
---------------- ------- ---------------- ------------
EXHIBIT B
to
Pledge and Security Agreement
-----------------------------
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are
hereby acknowledged, [NAME OF GRANTOR], a [Jurisdiction] [entity] (the
"Assignor"), having its chief executive office at [address], hereby assigns and
--------
grants to NATIONSBANK, N.A. (SOUTH), as Agent (in such capacity, the "Agent"),
-----
with offices at NationsBank Corporate Center, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, a security interest in (all of which are herein
collectively referred to as the "Copyright Collateral") (i) all of the
--------- ----------
Assignor's right, title and interest in and to the United States copyrights and
associated United States copyright registrations and applications for
registration set forth in Schedule A attached hereto (the "Copyrights"), (ii)
---------- ----------
all Proceeds (as such term is defined in the Security Agreement referred to
below) and products of the Copyrights, (iii) the goodwill of the businesses
symbolized by the Copyrights and (iv) all causes of action arising prior to or
after the date hereof for infringement of any of the Copyrights.
THIS ASSIGNMENT is made to secure the full and prompt performance and payment
of all of the Secured Obligations of the Assignor, as such term is defined in
the Pledge and Security Agreement, dated as of July __, 1996 among the Assignor,
the Agent and the other parties thereto (as amended, supplemented or modified
from time to time, the "Security Agreement"). Upon the satisfaction of the
-------- ---------
conditions set forth in Section 2.08(b) of the Security Agreement, the Agent
shall execute, acknowledge, and deliver to the Assignor an instrument in writing
releasing the security interests of the Copyright Collateral acquired under this
Assignment.
THIS ASSIGNMENT has been granted in conjunction with the security interest
granted to the Agent for the benefit of the Secured Parties under the Security
Agreement. The rights and remedies of the Agent with respect to the security
interest granted herein are without prejudice to, and are in addition to those
set forth in the Security Agreement, all terms and provisions of which are
incorporated herein by reference. In the event that any provisions of this
Assignment are deemed to conflict with the Security Agreement, the provisions of
the Security Agreement shall govern.
EXHIBIT C
to
Pledge and Security Agreement
-----------------------------
[FORM OF]
LANDLORD'S WAIVER AND CONSENT
LANDLORD'S WAIVER AND CONSENT dated as of _____________, 199____,
made by [ ] (the "Landlord"), for the benefit of NationsBank, N.A.
--------
(South), having an office at NationsBank Corporate Center, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of NationsBank, N.A. (South), as
Agent, and the Secured Parties (defined in the Credit Agreement dated as of July
________, 1996, (as amended or modified from time to time, the "Credit
------
Agreement"), among the Borrower, the financial institutions party thereto as
lenders (the "Lenders") and the Agent.
-------
The Secured Parties have extended or agreed to extend certain loans, purchase
mortgage notes and to extend other financial accommodations to the Borrower, to
be guaranteed by the subsidiaries of the Borrower and secured in whole or in
part pursuant to one or more agreements, instruments and other documents
(collectively, the "Security Agreements") granting security interests in and
-------- ----------
liens on, among other things, all presently owned and hereafter acquired
personal property (collectively, the "Collateral") of the Borrower and its
----------
subsidiaries (the Borrower and the subsidiaries are referred to herein
collectively as the "Debtors" and each is referred to herein as a "Debtor").
------- ------
Any or all of the Collateral is or may be installed or kept at the premises
owned by
the Landlord and leased to a Debtor known as [ ] and located in [
], as
more particularly described in Exhibit A attached hereto and made a part hereof
---------
(the "Premises").
--------
In order to induce the Secured Parties to make the loans and to extend other
financial accommodations to the Borrower described in the Credit Agreement, the
Landlord has agreed to execute and deliver this Agreement in favor of the Agent
on behalf of the Secured Parties.
NOW THEREFORE, the Landlord, for and in consideration of the sum of $10.00 and
other good and valuable consideration, the receipt and sufficiency.of which is
hereby acknowledged, hereby agrees as follows:
1. The Landlord (i) consents to the installation or location of the
Collateral in or on the Premises, (ii) agrees that any right, claim, title,
interest or lien in respect of any of the Collateral (including without
limitation any right of distraint, levy, execution or sale) that the Landlord
may have or acquire for any reason or in any manner (including by reason of the
Collateral being installed in or on, attached to or located in or on the
Premises, or otherwise), whether arising under any agreement, instrument or law
now or hereafter in effect, is hereby made fully subordinate, subject and
inferior to every right, claim, title, interest and lien in respect of the
Collateral in favor of the Agent and the Secured Parties or any of them to the
full extent that the same secures or may hereafter secure any and all
obligations and indebtedness of every kind, now existing or hereafter arising,
of the
Debtors, or any of them, to the Secured Parties, and (iii) further agrees that
the Collateral is and will remain personal property and will not become part of
the Premises.
2. The Landlord hereby agrees that so long as this Agreement is in
effect, the Landlord shall not exercise or attempt to exercise any right, assert
any claim, title or interest in or lien upon, or take any action or institute
any proceedings with respect to, the Collateral. The Landlord agrees to use all
reasonable efforts to give the Agent written notice of any event which, with or
without the giving of notice or passage of time or both, could result in the
creation of the right of the Landlord to terminate any lease ("Lease") covering
-----
all or any part of the Premises or to accelerate any rent due thereunder. The
Landlord, simultaneously with the giving by the Landlord of any notice of
default to the then tenant under a Lease, shall send by registered or certified
mail, return receipt requested, or by a reputable overnight courier, to the
Agent a photostat or xerox copy of such notice of default.
3. The Agent and/or the Secured Parties and their agents, representatives
and designees may, at any time and from time to time upon reasonable prior
notice to the Landlord (which may be oral), enter the Premises without the
consent of the Landlord and remove and take possession of the Collateral free of
any right, claim, title, interest or lien of the Landlord, provided the Secured
Parties restore any parts of the Premises physically damaged by them in the
course of removal to the condition such parts were in prior to such entry and
removal of the Collateral (but the foregoing shall not impose any liability upon
any Secured Party for any damage by fire or other insurable casualty).
4. The provisions hereof shall be irrevocable and remain in full force and
effect until each Debtor has fully paid and performed all of its obligations to
the Secured Parties under and in accordance with the terms of all present and
future agreements, instruments and documents evidencing such obligations and all
present and future Security Agreements (in each case including any extensions,
modifications and renewals thereof or substitutions therefor at any time made),
and until all obligations, if any, of the Secured Parties to extend loans,
advances, or provide other financial accommodations to the Debtors (including
any commitment to lend or issue or confirm or participate in letters of credit)
shall be terminated.
5. This Agreement shall be binding upon the Landlord and its successors and
assigns and shall inure to the benefit of the Secured Parties and their
respective successors, assigns and designees. The Landlord agrees to make this
Agreement known to any transferee of the Premises and any person who may have an
interest or right in the Premises. The Landlord acknowledges and agrees that
the provisions set forth in this Agreement are, and are intended to be, an
inducement and consideration to each Secured Party to make, or to permit to
remain outstanding, loans, advances and financial accommodations to the Debtors,
and each Secured Party shall be deemed conclusively to have relied upon such
provisions in making, or permitting to remain outstanding, such loans, advances
and financial accommodations, and each Secured Party is made an obligee
hereunder and may directly enforce the provisions hereof.
IN WITNESS WHEREOF, the Landlord has duly executed this Agreement under seal
as of the date and year first above written.
ATTEST: [Name of Landlord]
_________________________ By: _________________________________________
____________ Secretary Name: _________________________________________
Title: _________________________________________
[Corporate Seal]
Attachments:
-----------
Schedule A - Description of Premises
----------
STATE OF_____________
COUNTY OF ___________
I, _____________________________, a Notary Public of the aforesaid County and
State, do hereby certify that _________________________________ personally
appeared before me this day and acknowledged that (s)he is the
___________________ of _________________, a [Jurisdiction] corporation, and that
by authority duly given and as an act of the corporation, the foregoing
instrument was signed in its name by its _________, and attested by
herself/himself as ______________, and sealed with its common corporate seal.
Witness my hand and notarial seal this ___ day of ____________, 1996.
[STAMP/SEAL] __________________________________
Notary Public
My Commission Expires:
_____________________
SCHEDULE A
----------
Description of Premises
EXHIBIT D-1
to
Pledge and Security Agreement
-----------------------------
INSTRUMENT OF ASSIGNMENT
[DATE]
Contract Number __________________
KNOW ALL MEN BY THESE PRESENTS: For value received and in accordance with the
Assignment of Claims Act of 1940, as amended (31 ▇.▇.▇. ▇▇▇, ▇▇ ▇.▇.▇. 15), the
undersigned Assignor does hereby assign, set over and transfer to NATIONSBANK,
N.A. (SOUTH) having offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, all rights, title and interest to all moneys due or to
become due Assignor from the United States of America, or from any agency or
department thereof, under Contact Number ________________________, with a dollar
value of $_________________________.
The Assignee shall not be held responsible for the performance of any work for
the manufacture or delivery of any of the items mentioned in said contract or
contracts.
___________________________________
Name:
Title:
Signed, sealed and delivered:
Attested by: [SEAL]
___________________________________
[NAME], Corporate Secretary
Assignment accepted at ________________________________________________
(City) (County) (State)
this_____ day of_____,_____
NationsBank, N.A (SOUTH), as Assignee
__________________________________
Name:
Title:
EXHIBIT D-2
to
Pledge and Security Agreement
-----------------------------
NOTICE OF ASSIGNMENT
TO: [NAME OF CONTRACTING OFFICER]
[ADDRESS]
This has reference to Contract No.__________________ dated__________,________,
entered into between [NAME OF GRANTOR], [ADDRESS], and the [NAME OF GOVERNMENTAL
AUTHORITY] [NAME OF OFFICE] [ADDRESS], for delivery of goods and services as
described in the aforementioned contract.
Moneys due or to become due under the contract described above have been
assigned to the undersigned under the provisions of the Assignment of Claims Act
of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15.
A true copy of the instrument of assignment executed by the Contractor on [DATE]
is attached to the original notice.
Payments due or to become due under this contract should be made to the
undersigned assignee by wire transfer pursuant to the wire transfer instructions
attached hereto.
Please return to the undersigned the three (3) enclosed copies of this notice
with appropriate notations showing the date and hour or receipt, and signed by
the person acknowledging receipt on behalf of the addressee.
Very truly yours,
By:______________________________________
Name:
Title:
NATIONSBANK, N.A. (SOUTH)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA No.__________
Re: Firearms Training Systems, Inc.
ACKNOWLEDGMENT
Receipt is acknowledged of the above notice and of a copy of the instrument of
assignment. They were received at ______ (a.m.) (p.m.) on
_____________________, _____.
________________________________
[Signature]
________________________________
[Title]
On behalf of: [NAME OF ADDRESSEE OF THIS NOTICE]
-- ------ --