EXHIBIT 10.16
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES C
Firearms Training Systems, Inc., a Delaware corporation (the "Company"),
hereby grants to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Optionee") as of September 18, 1996 (the
"Option Date"), pursuant to the provisions of the Firearms Training Systems,
Inc. Stock Option Plan (the "Plan"), a non-qualified option to purchase from the
Company (the "Option") 10,000 shares of its Class A Common Stock, $0.00001 par
value ("Stock"), at the price of $5.40 per share upon and subject to the terms
and conditions set forth below. Capitalized terms not defined herein shall have
the meanings specified in the Plan.
1. Option Subject to Acceptance of Agreement. The Option shall be null
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and void unless the Optionee shall accept this Agreement by executing it in the
space provided below and returning such original execution copy to the Company.
2. Time and Manner of Exercise of Option.
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2.1. Maximum Term of Option. In no event may the Option be exercised, in
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whole or in part, after the seventh anniversary of the Option Date (the
"Expiration Date").
2.2. Exercise of Option. (a) Except as otherwise provided in Section 3.4
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below (relating to a change in control of the Company) and Section 3.5 below
(relating to certain restrictions contained in the Credit Agreement, as defined
below) the Option shall become exercisable with respect to thirty-three and one-
third percent (33-1/3%) of the shares of Stock subject to the Option of the
Option Date on the first anniversary of the Option Date, an additional thirty-
three and one-third percent (33-1/3%) of the shares of Stock subject to the
Option Date on the second anniversary of the Option Date and an additional one-
third percent (33-1/3%) of the shares of Stock subject to the Option Date on the
third anniversary of the Option Date.
(b) If the Optionee ceases to be a director of the Company by reason of
Disability, the Option shall be exercisable
only to the extent it is exercisable on the effective date of the Optionee's
ceasing to be a director and may thereafter be exercised by the Optionee or the
Optionee's Legal Representative until the Expiration Date.
(c) If the Optionee ceases to be a director of the Company by reason of
the Optionee's death, the Option shall be exercisable only to the extent it is
exercisable on the date of death and may thereafter be exercised by the
Optionee's Legal Representative or Permitted Transferees, as the case may be,
until the Expiration Date.
(d) If the Optionee ceases to be a director of the Company for any reason
other than as described in subsection (b) or (c) above, the Option shall be
exercisable only to the extent it is exercisable on the effective date of the
Optionee's ceasing to be a director and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative until and including the earliest
to occur of (i) the date which is 180 days after the effective date of the
Optionee's ceasing to be a director and (ii) the Expiration Date.
Notwithstanding the foregoing, with respect to an Optionee who has never
provided services to the Company as an employee thereof, the Option shall be
exercisable with respect to all of the Stock subject to the Option on the Option
Date if the Optionee ceases to be a director pursuant to this subsection (d) for
any reason other than (i) the Optionee's failure properly to perform his duties
as a director of the Company, or (ii) under circumstances which, if the Optionee
were an employee of the Company, would constitute termination for Cause (as
defined in the Plan).
2.3. Method of Exercise. Subject to the limitations set forth in this
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Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company, the form of which is set forth on Exhibit A to this
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Agreement, specifying the number of whole shares of Stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) either (i) in cash, (ii) by delivery of previously
owned whole shares of Stock (which the Optionee has held for at least six months
prior to the delivery of such shares or which the Optionee purchased on the open
market and in each case for which the Optionee has good title, free and clear of
all liens and encumbrances) having a Fair Market Value, determined as of the
date of exercise, equal to the aggregate
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purchase price payable pursuant to the Option by reason of such exercise, (iii)
in cash by a broker-dealer acceptable to the Company to whom the Optionee has
submitted an irrevocable notice of exercise or (iv) a combination of (i), (ii)
and (iii), and (2) by executing such documents as the Company may reasonably
request. The Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (ii) - (iv). Any fraction of a share of Stock which
would be required to pay such purchase price shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the full purchase price
therefor has been paid.
2.4. Termination of Option. (a) In no event may the Option be exercised
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after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of the shares of
Stock subject to the Option expire or are exercised, cancelled or forfeited, the
Optionee shall, upon the Company's request, promptly return this Agreement to
the Company for full or partial cancellation, as the case may be. Such
cancellation shall be effective regardless of whether the Optionee returns this
Agreement. If the Optionee continues to have rights to purchase shares of Stock
hereunder, the Company shall, within 10 business days of the Optionee's delivery
of this Agreement to the Company, either (i) ▇▇▇▇ this Agreement to indicate the
extent to which the Option has expired or been exercised, cancelled or forfeited
or (ii) issue to the Optionee a substitute option agreement applicable to such
rights, which agreement shall otherwise be substantially similar to this
Agreement in form and substance.
3. Additional Terms and Conditions of Option.
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3.1. Nontransferability of Option. The Option may not be transferred by
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the Optionee other than (i) by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company or (ii)
as otherwise permitted under Rule 16b-3 under the Exchange Act. Except to the
extent permitted by the foregoing sentence, during the Optionee's lifetime the
Option is exercisable only by the
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Optionee or the Optionee's Legal Representative. Except to the extent permitted
by the foregoing, the Option may not be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of the Option, the Option and all rights hereunder shall
immediately become null and void.
3.2. Investment Representation and Restrictions. The Optionee hereby
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represents and covenants that (a) any share of Stock purchased upon exercise of
the Option will be purchased for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; (c) to the extent required by an
agreement between one or more underwriters and the Company in connection with an
offering of shares of Stock pursuant to a registration statement under the
Securities Act, the Optionee shall not offer, sell, contract to sell or
otherwise dispose of any shares of Stock purchased upon exercise of the Option
for the period specified in such agreement; (d) to the extent required by the
terms of the Credit Agreement (as defined below), (I) this Option and all shares
of Stock purchased upon exercise of the Option shall be subject to the terms of
the Credit Agreement (as defined below) which may require, among other things,
that this Option and such shares be pledged in support of the Obligations (as
defined in the Credit Agreement), that the Optionee subordinate amounts owed to
him by the Company, if any, to the Obligations, and/or that Centre Partners II,
LLC or an affiliate thereof ("Centre") be granted sole voting and investment
power with regard to the shares when acquired by the Optionee, and (II) the
Optionee shall execute from time to time such pledge agreements, subordination
agreements, irrevocable powers of appointment to Centre or other instruments and
to cause to be delivered such certificates, opinions or supporting documentation
as the Agent (as defined in the Credit Agreement) may require to satisfy the
Agent that this Option and the shares are being acquired subject to the
provisions of the Credit Agreement; (e)
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if requested by the Company, the Optionee shall submit a written statement, in
form satisfactory to the Company, to the effect that such representation (x) is
true and correct as of the date of purchase of any shares hereunder or (y) is
true and correct as of the date of any sale of any such shares, as applicable.
As a further condition precedent to any exercise of the Option, the Optionee
shall comply with all regulations and requirements of any regulatory authority
having control of or supervision over the issuance or delivery of the shares
and, in connection therewith, shall execute any documents which the Board or the
Committee shall in its sole discretion deem necessary or advisable.
3.3. Adjustment. In the event of any stock split, stock dividend,
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recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the excess,
if any, of (A) the Fair Market Value on the exercise date over (B) the exercise
price of the Option. The decision of the Committee regarding any such
adjustment shall be final, binding and conclusive.
3.4. Change in Control. Notwithstanding any provision in this Agreement,
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in the event of the occurrence of a Change in Control as defined in paragraph
(b)(3) or (4) of Section 3.8 of the Plan in connection with which the holders of
Stock receive shares of common stock that are registered under Section 12 of the
Exchange Act, all outstanding options shall immediately be exercisable in full
and there shall be substituted for each share of Stock available under this
Plan, whether or not then subject to an outstanding option, the number and class
of shares into which each outstanding share of Stock shall be converted pursuant
to such Change in Control. In the event of any such substitution, the purchase
price per share of each option shall be appropriately adjusted by the Committee,
such adjustments to
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be made without an increase in the aggregate purchase price or base price.
(2) Notwithstanding any provision in this Agreement, in the event of the
occurrence of a Change in Control pursuant to paragraph (b)(1) or (2) of Section
3.8 of the Plan, or in the event of the occurrence of a Change in Control
pursuant to paragraph (b)(3) or (4) of Section 3.8 of the Plan in connection
with which the holders of Stock receive consideration other than shares of
common stock that are registered under Section 12 of the Exchange Act, each
outstanding option shall be surrendered to the Company by the holder thereof,
and each such option shall immediately be cancelled by the Company, and the
holder shall receive, within 10 business days of the occurrence of a Change in
Control pursuant to paragraph (b)(1) or (2) of Section 3.8 of the Plan or within
10 business days of the approval of the stockholders of the Company contemplated
by paragraph (b)(3) or (4) of Section 3.8 of the Plan, a cash payment from the
Company in an amount equal to the number of shares of Stock then subject to such
option, multiplied by the excess, if any, of the Fair Market Value of a share of
Stock on the date of occurrence of the Change in Control over (ii) the purchase
price per share of Stock subject to the option. The Company may, but is not
required to, cooperate with any person who is subject to Section 16 of the
Exchange Act to assure that any cash payment in accordance with the foregoing to
such person is made in compliance with Section 16 and the rules and regulations
thereunder.
3.5. Limitation on Exercisability in the Case of Default Under Credit
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Agreement. Notwithstanding any provision of this Agreement to the contrary, to
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the extent required by the terms of the credit agreement dated as of July 31,
1996 among the Company, the Lenders (as defined therein) and NationsBank, N.A.
(South) as Swingline Lender, Issuing Bank and Agent (as defined therein) for the
Lenders (as amended, supplemented or replaced from time to time, the "Credit
Agreement"), this Option shall not be exercisable while an "Event of Default" or
a "Default" (within the meaning of such terms as used in the Credit Agreement)
shall have occurred and is continuing.
3.6. Compliance with Applicable Law. The Option is subject to the
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condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval
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of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the purchase or delivery of
shares hereunder, the Option may not be exercised, in whole or in part, unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company agrees to use reasonable efforts to effect or obtain any such listing,
registration, qualification, consent or approval.
3.7. Delivery of Certificates. Upon the exercise of the Option, in whole
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or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery.
3.8. Option Confers No Rights as Stockholder. The Optionee shall not
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be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of the Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.9. Option Confers No Rights to Continue to Serve as a Director. In no
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event shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the Optionee any right to continue to serve, to be elected or
reelected to serve or to be nominated to serve as a director of the Company.
3.10. Decisions of Board or Committee. The Board or the Committee shall
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have the right to resolve all questions which may arise in connection with the
Option or its exercise. Any interpretation, determination or other action made
or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.11. Company to Reserve Shares. The Company shall at all times prior to
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the expiration or termination of the Option reserve and keep available, either
in its treasury or out of its authorized but unissued shares of Stock, the full
number of shares subject to the Option from time to time.
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3.12. Agreement Subject to the Plan. This Agreement is subject to the
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provisions of the Plan and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
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4.1. Designation as Nonqualified Stock Option. The Option is hereby
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designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. (a) As used herein, employment by the
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Company shall include employment by an affiliate of the Company. References in
this Agreement to sections of the Code shall be deemed to refer to any successor
section of the Code or any successor internal revenue law.
(b) As used herein, the term "Legal Representative" shall include an
executor, administrator, legal representative, guardian or similar person and
the term "Permitted Transferee" shall include any transferee (i) pursuant to a
transfer permitted under Section 3.4 of the Plan and Section 3.1 hereof or (ii)
designated pursuant to beneficiary designation procedures approved by the
Company.
4.3. Successors. This Agreement shall be binding upon and inure to the
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benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights hereunder in
accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided for
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in this Agreement shall be made, if to the Company, to Firearms Training
Systems, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Corporate Secretary, and if to the Optionee, to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, c/o First
Security Consulting, 1285 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile with confirmation of receipt, (c) by
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mailing in the United States mails to the last known address of the party
entitled thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
however, that if a notice, request or other communication sent to the Company is
not received during regular business hours, it shall be deemed to be received on
the next succeeding business day of the Company.
4.5. Governing Law. This Agreement, the Option and all determinations
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made and actions taken pursuant hereto and thereto, to the extent not governed
by the laws of the United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.
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4.6. Counterparts. This Agreement may be executed in two counterparts
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each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
Accepted this ____ day of
September, 1996.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Optionee
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