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EXHIBIT 10.27
SECURITIES EXCHANGE AND RELEASE AGREEMENT
among
THE INVESTORS NAMED HEREIN
and
FIREARMS TRAINING SYSTEMS, INC., as Issuer
Dated as of April 1, 2000
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SECURITIES EXCHANGE AND RELEASE AGREEMENT
SECURITIES EXCHANGE AND RELEASE AGREEMENT dated as of April 1,
2000 among FIREARMS TRAINING SYSTEMS, INC., a Delaware corporation (the
"Company"), and each of the parties listed on Schedule 1 annexed hereto (each,
an "Investor," and collectively, the "Investors").
W I T N E S S E T H
WHEREAS, FATS, Inc., a Delaware Corporation ("FATS") and a
wholly owned Subsidiary of the Company, proposes to issue and exchange with the
Investors (i) an aggregate of $966,248 principal amount of Junior Secured Debt
(the "Junior Secured Debt") pursuant to the Loan Agreement and Exchange
Agreement dated as of April 1, 2000 among the Company, FATS and the Lenders
named therein (the "Loan Agreement"), having the terms and subject to the
security as set forth in the Loan Agreement; and (ii) an aggregate of $504,129
principal amount of Senior Secured Debt issued pursuant to the Loan Agreement
having terms and subject to the security as set forth in the Loan Agreement (the
"Senior Secured Debt", and together with the Junior Secured Debt, the "Debt")
WHEREAS the Company proposes to issue (i) an aggregate of
897.397 shares (the "Preferred Shares") of its Series B Preferred Stock having
the rights, powers, privileges and preferences set forth in the Certificate of
Designations thereof (the "Certificate of Designations") attached hereto as
Exhibit A (the "Preferred Stock"); (ii) an aggregate of 8,459,664 shares (the
"Common Shares") of its Class A Common Stock (the "Class A Common Stock"); (iii)
warrants in the form attached hereto as Exhibit B to purchase an aggregate of
2,000,000 shares of the Company's Class A Common Stock (the "New Warrants"); and
(iv) amended warrants in the form attached hereto as Exhibit C (the "Amended
Warrants") to purchase an aggregate of 3,246,164 shares of the Company's Class A
Common Stock (which Preferred Shares, Common Shares, New Warrants, Amended
Warrants together are referred to as the "Securities"); and
WHEREAS, the Investors presently hold (i) an aggregate
of 20,289 shares (the "Old Preferred Shares") of Series A Preferred Stock (the
"Series A Preferred Stock"); (ii) warrants (the "Original Warrants") to purchase
an aggregate of 3,246,164 shares of the Company's Class B Non-voting Common
Stock (the "Class B Common Stock"), exercisable only by exchange of Series A
Preferred Stock (which aggregates include all shares of Series A Preferred Stock
and Original Warrants payable as Unit dividends in kind on the Old Preferred
Shares through and including March 31, 2000);
WHEREAS, certain Investors (the "Guarantor Investors")
presently hold a Revolving Promissory Note (the "Promissory Note") in the
principal amount of $3,000,000 plus accrued and unpaid interest originally
issued to Deutsche Financial Services Corporation ("DFSC") and acquired by
certain of the Investors in payment of a Guaranty issued by the Guarantor
Investors to DFSC (the "Guaranty"); and
WHEREAS, the Investors have severally agreed to exchange the
Old Preferred Shares for a portion of the Common Shares and the Original
Warrants for the Amended Warrants and the Guarantor Investors have severally
agreed to release and cancel all obligations of the Company to them pursuant to
the Guaranty and the Promissory Note in exchange for the Junior Secured Debt,
the Senior Secured Debt, the Series B Preferred Shares, the balance of the
Common Shares, and the New Warrants;
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NOW, THEREFORE, in consideration of the promises and the
covenants hereinafter contained, the parties hereby agree as follows:
ARTICLE I
EXCHANGE OF SECURITIES AND RELEASE
SECTION 1.1 THE GUARANTY EXCHANGE. The Company or FATS, as
applicable, by all requisite corporate action, has authorized the issuance and
exchange to the Guarantee Investors of (i) the Junior Secured Debt; (ii) the
Senior Secured Debt; (iii) the Preferred Shares and all additional shares of
Preferred Stock issuable in respect of dividends thereon (the "Additional
Preferred Shares"); (iv) an aggregate of 1,764,452 Common Shares and (v) the New
Warrants and the shares issuable upon exercise of such warrants. In reliance on
the representations and warranties of the Company contained herein and subject
to the terms and conditions hereof, the Guarantee Investors hereby agree to
release the Company and any of its affiliates from all obligations pursuant to
the Promissory Note, the Guarantee and the letter agreement dated as of June 1,
1999 between the Guarantor Investors and the Company (the "Letter Agreement"),
and in reliance on the representations of the Guarantee Investors contained
herein and subject to the terms and conditions hereof, the Company agrees to
issue the Preferred Shares, such number of Common Shares, and the New Warrants
to the Guarantee Investors in the amounts set forth on Schedule 1. Pursuant to
the Loan Agreement, FATS has agreed to issue the Junior Secured Debt and the
Senior Secured Debt. The consideration for such release shall be allocated among
the Junior Secured Debt, the Senior Secured Debt, the Preferred Shares, the
Common Shares, and the New Warrants as set forth on Schedule 2.
SECTION 1.2 THE SERIES A PREFERRED STOCK AND AMENDED WARRANT
EXCHANGE. The Company, by all requisite corporate action, has authorized the
issuance and exchange with the Investors of an aggregate of 6,695,212 Common
Shares and the Amended Warrants and the issuance of all shares of Class A Common
Stock of the Company issuable upon exercise of the Amended Warrants. In reliance
on the representations and warranties of the Company contained herein and
subject to the terms and conditions hereof, the Investors agree to exchange the
Old Preferred Shares and the Original Warrants for such number of Common Shares
and the Amended Warrants and in reliance on the representations and warranties
of the Investors contained herein and subject to the terms and conditions
hereof, the Company agrees to issue such Common Shares and Amended Warrants to
the Investors in the amounts set forth on Schedule 1 and such exchange shall be
allocated as set forth on Schedule 2.
SECTION 1.3 TERMINATION AND RELEASE OF RESTRICTION ON THE
EXCHANGE OF SECURITIES. The parties hereto hereby agree to terminate, and the
Company hereby agrees to release the Investors, Centre Partners Management LLC
and Centre Partners II, L.P. (collectively, the "Centre Entities"), from, the
restrictions upon conversion of shares of Class B Common Stock into shares of
Class A Common Stock, as set forth in Article IX of the Securities Purchase
Agreement dated as of November 13, 1998 among the Company and the investors
identified therein, and as set forth in any other agreement between the Centre
Entities and the Company. The parties hereto agree that such Securities Purchase
Agreement and such other agreements are hereby amended to give effect to the
foregoing.
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ARTICLE II
CLOSING
SECTION 2.1 CLOSING DATE. The closing (the "Closing") of the
exchange of the Securities, Debt and releases contemplated hereby shall take
place as soon as practicable following such time as all of the conditions set
forth in Article V are satisfied or waived (the date of the Closing is
hereinafter referred to as the "Closing Date"). The Closing shall be held at the
offices of Sidley & Austin, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at
such other place as agreed to by the Company and the Investors.
Delivery of the Securities to be issued to the Investors
pursuant to this Agreement shall be made at the Closing by the Company
delivering to each Investor, against exchange of the consideration therefor,
certificates representing the appropriate number of Preferred Shares, Common
Shares, New Warrants and Amended Warrants (registered in the name of such
Investor or such other person which shall be an affiliate of such Investor or a
nominee of such Investor or such affiliate as such Investor may have designated
in writing to the Company prior to the Closing Date). The consideration
exchanged for the Securities shall be the amounts thereof set forth opposite
each Investor's name on Schedule 1 and shall be paid by delivery to the Company
of certificates representing the Old Preferred Stock and the Original Warrants.
The Closing and delivery of the Debt shall be made in accordance with the Loan
Agreement.
SECTION 2.2 FURTHER ASSURANCES. From time to time following
the Closing, upon the request of any Investor, the Company shall execute and
deliver, or cause to be executed and delivered, to such Investor such other
instruments and take such other action as may be reasonably necessary to more
effectively vest in such Investor and put the Investor in possession of the
Preferred Shares, the New Warrants, the Additional Preferred Shares, the Amended
Warrants and all shares of common stock issuable upon exercise of the New
Warrants and the Amended Warrants.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Investors to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company represents
and warrants to each of the Investors as follows:
SECTION 3.1 ORGANIZATION, STANDING AND POWER OF THE COMPANY
AND ITS SUBSIDIARIES; HOLDINGS OF THE COMPANY. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware; and each of the subsidiaries of the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and each subsidiary of the
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company and its subsidiaries are duly qualified to transact business and are in
good standing as foreign corporations in each jurisdiction where the character
of their activities requires such qualification, except where the failure of the
Company or its subsidiaries to be so qualified would not cause a material
adverse effect on the business, results of operations, condition (financial or
otherwise),
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properties, assets or prospects of the Company and its subsidiaries, taken as a
whole ("Material Adverse Change").
The Company owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of each of its subsidiaries free and
clear of any liens, encumbrances, equities and claims (other than liens and
encumbrances pursuant to the Loan Agreement, the Second Amended and Restated
Credit Agreement and Partial Exchange Agreement, dated as of April 1, 2000,
among the Company, FATS, Inc., the lenders named therein, and Bank of America,
N.A., as agent (the "Credit Agreement") and liens and encumbrances securing the
Junior Secured Debt and the Senior Secured Debt). All such shares were duly
authorized, validly issued and are non-assessable and were not issued or
transferred in violation of any preemptive or similar rights.
SECTION 3.2 AUTHORITY. The Company has all necessary corporate
power and corporate authority to enter into this Agreement and all documents and
instruments (including, without limitation, the Securities) to be executed by
the Company in furtherance of the transactions contemplated hereby
(collectively, the "Transaction Documents"), and to consummate the transactions
contemplated hereby and thereby.
SECTION 3.3 NON-CONTRAVENTION. The execution, delivery, and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby by the Company do not and will not (a)
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to any agreement, instrument, franchise, license or
permit to which the Company or any of its subsidiaries is a party or by which
any of such corporations or their respective properties or assets may be bound
or (b) violate any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to the
Company or any of its subsidiaries or any of their respective properties or
assets, other than such breaches, defaults or violations that are not reasonably
expected to impair the ability of the Company to consummate the transactions
contemplated by the Transaction Documents. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby do not and will not violate or conflict
with any provision of the certificate of incorporation or by-laws of the Company
or any of its subsidiaries, as currently in effect. Except for such UCC-1
filings and/or mortgage recordation as required by the Credit Agreement or
compliance by the Company with SEC disclosure requirements or filings with the
Secretary of State of the State of Delaware, no consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any government agency or body or self regulatory
organization (including, without limitation, the NASD or the NASDAQ Stock
Market) applicable to the Company or any of its subsidiaries or any of their
respective properties or assets is required for the execution, delivery and
performance of the Transaction Documents or the consummation of the transactions
contemplated thereby, including the issuance, sale and delivery of the
Securities to be issued, sold and delivered by the Company hereunder and the
issuance of the Additional Preferred Shares, and the issuance of shares of the
Company's common stock upon exercise of the New Warrants and the Amended
Warrants.
SECTION 3.4 ENFORCEABILITY OF AGREEMENT. This Agreement has
been, and the other Transaction Documents to be executed and delivered by the
Company pursuant hereto have been duly and validly authorized by all requisite
corporate action on the part of, and executed and delivered by, the
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Company, and this Agreement is, and such other Transaction Documents when so
executed and delivered will be, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
SECTION 3.5 CAPITALIZATION. The authorized capital stock of
the Company as of (i) immediately prior to the Closing, and (ii) immediately
following the Closing, will be as set forth on Schedule 3 hereto. All of the
outstanding shares of the Company's capital stock are duly and validly
authorized and issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and were not issued and
are not now in violation of or subject to any preemptive rights. The Securities,
the Additional Preferred Shares, and all shares of common stock issuable upon
exercise of the New Warrants and Amended Warrants have been duly and validly
authorized by the Company. When issued, sold and delivered in accordance with
this Agreement, the New Warrants and the Amended Warrants, the Preferred Shares,
the Additional Preferred Shares, the Common Shares and all shares of the
Company's common stock issuable upon exercise of the New Warrants and Amended
Warrants, will be duly and validly issued, fully paid and nonassessable. A
sufficient number of shares of Class A Common Stock has been reserved for
issuance upon exercise of the New Warrants and Amended Warrants; a sufficient
number of shares of Class A Common Stock of the Company has been reserved for
issuance upon the conversion of Class B Common Stock; and no further approval or
authority of the stockholders or the Board of Directors of the Company under the
Delaware General Corporation Law or the Securities Exchange Act of 1934 (the
"Exchange Act") will be required for any such issuance. No preemptive rights or
other rights to subscribe for or purchase securities exist with respect to the
issuance and sale of the Securities by the Company pursuant to this Agreement or
the issuance of common stock upon exercise of all New Warrants and Amended
Warrants.
SECTION 3.6 REGISTRATION AND QUALIFICATION. Assuming the
accuracy of the representations and warranties made by each of the Investors set
forth in Article IV hereof, it is not necessary in connection with the offer,
sale and delivery of the Securities to the Investors in the manner contemplated
by this Agreement to register under the Securities Act the Securities or the
shares of Class A Common Stock issuable upon exercise of the New Warrants and
the Amended Warrants pursuant to an exemption therefrom.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
As an inducement to the Company to enter into this agreement
and to consummate the transactions contemplated hereby, each of the Investors,
severally and not jointly, hereby represents and warrants to the Company as
follows:
SECTION 4.1 INVESTMENT. Investor is acquiring the Securities
for investment for its own account, and not with a view to any distribution
thereof in contravention of applicable securities laws. Investor understands
that the Securities and the shares of common stock issuable upon exercise of the
New Warrants and Amended Warrants (collectively, the "Warrants") have not been
registered under the Securities Act of 1933 as amended (the "Securities Act") by
reason of specific exemptions therefrom
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which depend upon, among other things, the bona fide nature of the investment
intent and the accuracy of Investor's representations as expressed herein.
Investor's financial condition and investments are such that
it is in a position to hold the Securities and the shares of common stock
issuable upon exercise of the Warrants for an indefinite period, bear the
economic risks of the investment and to withstand the complete loss of the
investment. Investor has extensive knowledge and experience in financial and
business matters and has the capability to evaluate the merits and risks of any
Securities and the shares of common stock issuable upon exercise of the
Warrants. Investor qualifies as an "accredited investor" as such term is defined
in Regulation D promulgated under the Securities Act.
SECTION 4.2 RULE 144. Investor acknowledges that the
Securities and the shares of common stock issuable upon exercise of the Warrants
must be held indefinitely unless subsequently registered under the Securities
Act or any applicable state securities laws or unless exemptions from such
registrations are available. Investor is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of securities
purchased in a private placement subject to the satisfaction of certain
conditions.
SECTION 4.3 ORGANIZATION OF INVESTOR. Investor is duly
organized and validly existing under the laws of the jurisdiction of its
organization.
SECTION 4.4 AUTHORITY OF INVESTOR. Investor has the power and
authority (corporate or similar) to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to comply with the terms,
conditions and provisions hereof.
The execution, delivery and performance of this Agreement by
Investor has been duly authorized and approved by Investor and does not require
any further authorization or consent of Investor or its beneficial owners. This
Agreement is the legal, valid and binding agreement of Investor, enforceable
against Investor in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
SECTION 4.5 NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement by Investor and the consummation of any of the
transactions contemplated hereby by Investor will not (a) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Investor pursuant to
any agreement, instrument, franchise, license or permit to which Investor is a
party or by which any of its properties or assets may be bound or (b) violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to
Investor or any of its properties or assets, other than such breaches, defaults
or violations that are not reasonably expected to impair the ability of Investor
to consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by Investor and the consummation of
the transactions contemplated hereby by Investor do not and will not violate or
conflict with any provision of the organizational documents of Investor, as
currently in effect.
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SECTION 4.6 CO-INVESTORS' POWER-OF-ATTORNEY. Investor, if
it is a Co-Investor, as defined below, has duly appointed Centre Partners II,
LLC its true and lawful attorney-in-fact with full power and authority in its
name, place and stead to execute and deliver this Agreement and to execute and
deliver such stock powers, agreements, documents and instruments as may be
necessary or appropriate to give effect to the transactions contemplated by this
Agreement.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
OBLIGATIONS OF THE INVESTORS
SECTION 5.1 GENERAL CONDITIONS TO OBLIGATIONS OF THE
INVESTORS. The obligation of each of the Investors to consummate the
transactions contemplated herein is subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date, and to the performance in all material
respects by the Company of its obligations hereunder (including the covenants
contained in Article VI of this Agreement).
SECTION 5.2 REGISTRATION RIGHTS AGREEMENT. The obligation of
each of the Investors to consummate the transactions contemplated herein is
subject to the (i) Registration Rights Agreement dated as of July 31, 1996 among
the Company, certain of the Investors and affiliates thereof as amended as of
the Closing Date (the "Registration Rights Agreement") continuing to be in full
force and effect and (ii) the Investors' receipt of the Company's agreement, in
form and substance satisfactory to the Investors, that all shares of Class A
Common Stock and Class B Common Stock of the Company currently or hereafter
owned by the Investors or their affiliates, all Common Shares, all shares of
common stock issuable upon exercise of the New Warrants and the Amended
Warrants, and all shares of the Company's Class A Common Stock issued upon
conversion of such shares (and all securities issuable in respect thereof upon a
split, combination or reclassification of such securities or pursuant to a
merger of the Company with another entity), constitute "Registrable Securities"
under and for purposes of the Registration Rights Agreement, except to the
extent such securities constitute Registrable Securities under and for the
purposes of the registration rights agreement dated as of April 1, 2000 among
the Company and the Institutional Holders set forth therein.
SECTION 5.3 OFFICERS' CERTIFICATES. The obligation of each of
the Investors to consummate the transactions contemplated herein is subject to
each of the Investors at the Closing Date receiving a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company, dated the Closing
Date, to the effect that (i) as of the date hereof and as of the Closing Date,
the representations and warranties of the Company set forth in Article III
hereof are accurate and (ii) as of the Closing Date, the obligations of the
Company to be performed hereunder on or prior to the Closing Date have been duly
performed in all material respects.
SECTION 5.4 OPINION. The obligation of each of the Investors
to consummate the transactions contemplated herein is subject to the Investors'
receiving at the Closing Date the opinion of Sidley & Austin, counsel to the
Company, to the effect of the matters set forth in Exhibit D attached hereto.
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SECTION 5.5 CERTIFICATE OF DESIGNATION. The obligation of each
of the Investors to consummate the transactions contemplated herein is subject
to the Certificate of Designation attached hereto as Exhibit A having been duly
adopted by the Company and filed with the Secretary of State of the State of
Delaware in accordance with the General Corporation Law of that State.
SECTION 5.6 LENDER DOCUMENTS. The obligation of each of the
Investors to consummate the transactions contemplated herein is subject to the
execution and delivery by the Company and the required lenders of the Credit
Agreement and associated documents reflecting the terms set forth in the drafts
thereof previously delivered to the Investors and such lender's execution of an
intercreditor agreement in form and substance satisfactory to the Investors
(collectively, the "Lender Documents").
OBLIGATIONS OF THE COMPANY
SECTION 5.7 GENERAL CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY. The obligation of the Company to issue the Securities to each of the
Investors shall be subject to the accuracy of the representations and warranties
of each of the Investors herein contained except to the extent any inaccuracies
do not materially impair the ability of the Investors to consummate the
transaction contemplated by the Agreement, as of the date hereof and as of the
Closing Date, and to the performance in all material respects by each of the
Investors of its obligations hereunder.
SECTION 5.8 LENDER DOCUMENTS. The obligation of the Company to
consummate the transactions contemplated herein is subject to the execution and
delivery by (i) the lenders of the Lender Documents; and (ii) the execution and
delivery by the Guaranty Investors of an intercreditor agreement among the
required lenders and the Guaranty Investors in form satisfactory to all parties
thereto.
SECTION 5.9 CERTIFICATE OF CENTRE PARTNERS II, LLC. The
obligation of the Company to consummate the transactions contemplated herein are
subject to the Company receiving a certificate of Centre Partners II, LLC
("Centre Partners") dated the Closing Date, to the effect that as of the date
hereof and as of the Closing Date Centre Partners is the true and lawful
attorney-in-fact of each of NationsBanc Investment Corporation, X.X. Xxxxx
Family Limited Partnership, Xxxxx X. X. Xxxxx, The Xxxxxx Freres & Co. LLC
Employees' Savings Plan & Trust f/b/o Xxxx X. Xxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxxxxxx, Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxxxx, Xxxx X. Xxx, Xxxx
Xxxxxxx, 11/24/1987 Trust f/b/o Kerwelyn X. Xxxxx, 12/17/1986 f/b/o Xxxxxxx X.
Xxxxx (each a "Co-Investor") with full power and authority to execute and
deliver this Agreement, and any stock powers as may be necessary or appropriate
to give effect to the transactions contemplated by this Agreement, in the name,
place and stead of each Co-Investor.
OBLIGATIONS OF EACH OF THE COMPANY AND THE INVESTORS
SECTION 5.10 NO INJUNCTION. The obligations of each of the
Company and the Investors to consummate the transactions contemplated herein are
subject to the condition that no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction prohibiting or preventing consummation of the transactions
contemplated herein shall be in effect.
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ARTICLE VI
COVENANTS OF THE COMPANY
As an inducement to the Investors to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company hereby
covenants with each of the Investors as follows:
SECTION 6.1 REPORTING. The Company shall, so long as the
Preferred Shares, Additional Preferred Shares, Common Shares or the shares of
common stock issuable upon exercise of the Warrants are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, timely file all required reports and other information with the
Commission under Section 13 or 15 (d) of the Exchange Act.
SECTION 6.2 PAYMENT OF EXPENSES. Whether or not the
transactions contemplated in this Agreement are consummated or this Agreement is
terminated, the Company hereby agrees to pay (i) all costs and expenses incident
to the performance of the obligations of the Company hereunder, including those
in connection with (a) the issuance, transfer and delivery of the Debt, Common
Shares, Preferred Shares, Additional Preferred Shares, Warrants, and all shares
of common stock issuable upon exercise of the Warrants, including any transfer
or similar taxes payable therein, (b) the qualification of the Common Shares,
Preferred Shares, Additional Preferred Shares and the shares of common stock
issuable upon exercise of the Warrants under state or foreign securities or Blue
Sky laws, (c) the cost of printing certificates for the Common Shares, Preferred
Shares, Additional Preferred Shares and the shares of common stock issuable upon
exercise of the Warrants and (d) the cost and charges of any transfer agent,
registrar, trustee or fiscal paying agent; and (ii) all documented out-of-pocket
costs and expenses, including the fees of one firm of attorneys, incurred by the
Investors in connection with the negotiation and delivery of this Agreement and
consummation of the transactions contemplated hereby.
SECTION 6.3 INSPECTION. Prior to and following the Closing,
the Company will permit each of the Investors and their representatives to visit
and inspect any of the Company's properties, to examine its books and records
and to make copies and to take extracts therefrom, and to discuss its business
affairs and finances with its officers and key employees, all at such reasonable
times as the Investors may request.
SECTION 6.4 AVAILABILITY OF COMMON STOCK. The Company hereby
covenants and agrees to use its best efforts to take all action necessary,
desirable or appropriate to have, reserve and keep available at all times out of
the Company's authorized but unissued shares of capital stock the full number of
shares of Class A Common Stock issuable upon (i) the exercise of the Amended
Warrants and the New Warrants, and (ii) upon conversion of Class B Common Stock,
for issuance for the purpose of effecting such exercise and conversion.
SECTION 6.5 NO GENERAL SOLICITATION. None of the Company, its
affiliates (as defined in Rule 501(b) of the Securities Act) or any person
acting on their behalf will solicit any offer to buy or offer or sell the
Securities, Additional Preferred Shares or any shares of common stock issuable
upon exercise of the Warrants by means of any form or general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act that would require the registration of
such securities under the Securities Act.
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SECTION 6.6 EXCHANGE OF STOCK CERTIFICATES. Upon surrender of
any certificate representing the Securities, the Additional Preferred Shares, or
the common stock issuable upon exercise of such Warrants for exchange at the
office of the Company, the Company at its expense will cause to be issued in
exchange therefor new certificates in such denomination or denominations as may
be requested for the same aggregate number of securities represented by the
certificate so surrendered and registered as such holder may request.
SECTION 6.7 LOST CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate evidencing any of the Securities, the Additional
Preferred Shares, the Warrants, or the common stock issuable upon exercise of
the Warrants, and (in case of loss, theft or destruction) of indemnity
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
such certificate, if mutilated, the Company will make and deliver in lieu of
such certificate a new certificate of like tenor and for the number of shares
evidenced by such certificate which remain outstanding. An Investor's agreement
of indemnity shall constitute indemnity satisfactory to the Company for the
purposes of this Section 6.7.
ARTICLE VII
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES
SECTION 7.1 RESTRICTIVE LEGEND. Each certificate representing
(a) the Preferred Shares, (b) the Common Shares (c) the New Warrants, (d) the
Additional Preferred Shares, (e) the Amended Warrants, (f) the shares of the
common stock issuable upon exercise of the Warrants, and (g) any other
securities issued in respect of such shares upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR EXEMPTIONS
THEREFROM UNDER SAID ACT AND LAWS.
The Company will promptly, upon request, remove any such legend when no longer
required by the terms of this Agreement or by applicable law.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION. The Company hereby agrees to
indemnify, defend and hold harmless each Investor and its partners,
stockholders, directors, officers and affiliates from and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses (collectively, "Claims"), including without limitation,
interest, penalties and attorneys' fees
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and expenses, asserted against, resulting to, or imposed upon or incurred by
such Investor directly or indirectly, in connection with the transactions
contemplated hereby.
SECTION 8.2 TERMS OF INDEMNIFICATION. The obligations and
liabilities of the Company with respect to Claims by third parties will be
subject to the following terms and conditions:
(a) an Investor will give the Company prompt
notice of any Claims asserted against, resulting to, imposed upon or
incurred by such Investor, directly or indirectly, and the Company will
undertake the defense thereof by representatives of its own choosing
which are reasonably satisfactory to such Investor; provided that the
failure of any Investor to give notice as provided in this Section 8.2
shall not relieve the Company of its obligations under this Article
VIII, except to the extent that such failure has materially and
adversely affected the rights of the Company;
(b) if within a reasonable time after notice of
any Claim, the Company fails to defend, such Investor will have the
right to undertake the defense, compromise or settlement of such Claims
on behalf of and for the account and at the risk of the Company,
subject to the right of the Company to assume the defense of such Claim
at any time prior to settlement, compromise or final determination
thereof;
(c) the Company on one hand and the Investors on
the other will not, without the prior written consent of the other,
settle or compromise any Claim or consent to entry of any judgment
relating to any such Claim;
(d) with respect to any Claims asserted against
one or more Investors, such Investors will have the right to employ one
counsel of their choice in each applicable jurisdiction (if more than
one jurisdiction is involved) to represent such Investors if, in such
Investors' reasonable judgment, a conflict of interest between such
Investors and the indemnifying party exists in respect of such Claims,
and in that event the reasonable fees and expenses of such separate
counsel shall be paid by such indemnifying party; and
(e) the Company will provide each Investor
reasonable access to all records and documents of the Company relating
to any Claim.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES THEREOF.
SECTION 9.2 SURVIVAL. All representations and warranties,
covenants and agreements of the Company and any Investor contained in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Investor or any representative or
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof; and such
representations and warranties shall survive for a period of one year from the
Closing Date and such covenants and agreements shall survive indefinitely.
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SECTION 9.3 SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. No
assignment of this Agreement may be made by the Company at any time, whether or
not by operation of law, without the Investors' prior written consent. Each
Investor may assign any of its rights hereunder to an affiliate of such Investor
without the Company's consent provided that such affiliate expressly assumes in
writing all of the Investor's obligations hereunder, and provided that such
assignment shall not relieve the assigning Investor of its obligations
hereunder. From and after the Closing Date, all rights of the Investors
hereunder shall inure to subsequent holders of the Securities, the Additional
Preferred Shares, and the shares of common stock issuable upon the exercise of
the Warrants.
SECTION 9.4 ENTIRE AGREEMENT: AMENDMENT. This Agreement, the
Transaction Documents and the Registration Rights Agreement constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof. Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
SECTION 9.5 NOTICES, ETC. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier or courier guaranteeing overnight delivery, addressed (a) if to the
Investors to Centre Partners Management LLC, 00 Xxxxxxxxxxx Xxxxx, Xxxxx 0000,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xx. Xxxxx Xxxxxxxxx, Facsimile No.: (212)
332-5801 or at such other addresses as shall have been furnished to the Company,
with a copy (which shall not constitute notice) to: Weil, Gotshal & Xxxxxx LLP;
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxxxx Xxxxxxxx, Esq.,
Facsimile No.: (000) 000-0000 and (b) if to the Company, at 0000 XxXxxxxx Xxxxx
Xxxx, Xxxxxxx, Xxxxxxx 00000, Attention: Chief Financial Officer, or at such
other address as the Company shall have furnished to the Investors in writing,
with a copy to: Sidley & Austin, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: Xxxxx X. Xxxxxx, Esq., Facsimile No.: (000) 000-0000. All such notices and
communications shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
is acknowledged, if telecopied; and on the next business day, if timely
delivered to a courier guaranteeing overnight delivery.
SECTION 9.6 DELAYS OR OMISSIONS. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
the Company or any of the Investors upon any breach or default of any party
under this Agreement, shall impair any such right, power or remedy of the
Company or any of the Investors nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or any of the Investors of any breach or
default under this Agreement, or any waiver on the part of any such party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to the
Company or any of the Investors, shall be cumulative and not alternative.
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SECTION 9.7 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which may be executed by only one of the
parties hereto, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
SECTION 9.8 SEVERABILITY. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
SECTION 9.9 TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
SECTION 9.10 NO PUBLIC ANNOUNCEMENT. Neither the Company nor
any of the Investors shall make any press release or other public announcement
concerning the transactions contemplated by this Agreement except as and to the
extent that any such party shall be obligated to make any such disclosure by law
or by the rules of NASDAQ and then only after consultation with the other
regarding the basis of such obligation and the content of such press release or
other public announcement or as the parties shall mutually agree.
SECTION 9.11 SPECIFIC ENFORCEMENT. Investors, on the one hand,
and the Company, on the other, acknowledge and agree that irreparable damage
would occur in the event that any of the covenants contained in this Agreement
were not performed in accordance with their specific terms or were otherwise
breached, and that money damages are an inadequate remedy for breach thereof
because of the difficulty of ascertaining and quantifying the amount of damage
that will be suffered by the parties hereto in the event that such covenants are
not performed in accordance with their terms or are otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the covenants referred to in the immediately
preceding sentence and to enforce specifically the terms and provisions hereof
in any court of the United States or any state thereof having jurisdiction, this
being in addition to any other rights and remedies to which they may be entitled
at law or equity.
SECTION 9.12 TIME OF THE ESSENCE. Time is of the essence for
purposes of the Company's covenants and agreements contained herein.
[signature page follows]
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IN WITNESS WHEREOF, each of the undersigned has caused the
foregoing Agreement to be executed by one of its duly authorized officers as of
the date first above written.
FIREARMS TRAINING SYSTEMS, INC.
By /s/ Xxxxxx Xxxxxxx
---------------------------------
Name:
Title.
CENTRE CAPITAL INVESTORS II, L.P. CENTRE
CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.,
as General Partner
By: Centre Partners Management LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC,
as General Partner
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
NATIONSBANC INVESTMENT CORPORATION
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
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X.X. XXXXX FAMILY LIMITED PARTNERSHIP
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
XXXXX X. X. XXXXX
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
XXXXXXX X. XXXXXX, AS TRUSTEE OF THE
LAZARD FRERES & CO. LLC EMPLOYEES'
SAVINGS PLAN & TRUST F/B/O XXXX X. XXXX,
XXXXX XXXXXXX, XXXXX XXXXXXXXX, XXXXX
XXXXX, XXXXXX X. XXXXXX, AND XXXXXXX
XXXXXXX
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
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XXXX XXX
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
XXXX XXXXXXX
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
11/24/1987 TRUST F/B/O KERWELYN X. XXXXX
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
12/17/1986 TRUST F/B/O XXXXXXX X. XXXXX
By: Centre Partners II, LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
---------------------------------
Managing Director
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SCHEDULE 1
INVESTORS
Preferred Common New Amended
Investor Shares Shares Warrants Warrants
-------- -------- ------ -------- --------
Centre Capital Investors II, L.P.
Centre Capital Tax-Exempt Investors II, L.P.
Centre Capital Offshore Investors II, L.P.
Centre Partners Coinvestment, L.P.
NationsBanc Investment Corporation
X.X. Xxxxx Family Limited Partnership
Xxxxx X. X. Xxxxx
The Xxxxxx Freres & Co. LLC Employees' Savings Plan
& Trust f/b/o Xxxx X. Xxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxxxxxx, Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxxxx
Xxxx.X. Xxx
Xxxx Xxxxxxx
11/24/1987 Trust f/b/o Kerwelyn X. Xxxxx
12/17/1986 Trust f/b/o Xxxxxxx X. Xxxxx
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SCHEDULE 2
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SCHEDULE 3
CAPITALIZATION
As of immediately prior to the Closing, the authorized capital
stock of the Company consists of 68,060,000 shares of Class A Common Stock of
which 19,496,897 are issued and outstanding, 6,200,000 shares of Class B Common
Stock of which 1,139,017 are issued and outstanding, 38,000 shares of Series A
Preferred Stock of which 20,289 are issued and outstanding, and 50,000 shares of
Series B Preferred Stock of which none are issued and outstanding. In addition,
6,600,035 shares of Class A Common Stock have been reserved for issuance upon
the exercise of options and warrants or the conversion of the shares of Class B
Common Stock which are issued and outstanding.
As of immediately following the Closing, the authorized
capital stock of the Company consists of 1,000,000 shares of Class A Common
Stock of which 68,750,050 are issued and outstanding, 6,200,000 shares of Class
B Common Stock of which 1,139,017 are issued and outstanding, 38,000 shares of
Series A Preferred Stock of which none are issued and outstanding, and 50,000
shares of Series B Preferred Stock of which 21,361.114 are issued and
outstanding. In addition, 8,600,035 shares of Class A Common Stock have been
reserved for issuance upon the exercise of options and warrants or the
conversion of the shares of Class B Common Stock which are issued and
outstanding.
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS
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EXHIBIT B
FORM OF NEW WARRANTS
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EXHIBIT C
FORM OF AMENDED WARRANTS
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EXHIBIT D
FORM OF OPINION
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