EXHIBIT 2.04
Firearms Training Systems, Inc.
0000 XxXxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
November 1, 1996
THIN International N.V.
c/o Holland Intertrust (Antilles) N.V.
Landhuis Joonchi
Kaya Xxxxxxx X. Xxxxxxx z/n
X.X. Xxx 000
Xxxxxxx, Xxxxxxxxxxx Antilles
Attn: Xxxxxxx Xxxxx, Director
Gentlemen and Ladies:
We are writing in connection with the Recapitalization and Stock Purchase
Agreement and Sale Agreement (the "Recapitalization Agreement") among THIN
International N.V. (formerly Firearms Training Systems International N.V.)
("THIN"), Firearms Training Systems, Inc. (the "Company") and various entities
managed by Centre Partners Management LLC dated as of June 5, 1996 as amended.
The Company has filed Registration Statement No. 333-13105 on Form S-1 (the
"Registration Statement") seeking to register for sale in an initial public
offering (the "IPO") pursuant to an underwriting agreement 6,900,000 shares of
its Class A Common Stock (the "Common Stock"), consisting of (1) 4,000,000
shares to be sold by the Company; (2) 2,000,000 shares to be sold by certain
selling shareholders and (3) up to 900,000 additional shares for sale by a
selling shareholder if the underwriters' over-allotment option is exercised.
The Company intends to file as promptly as feasible an amendment to the
Registration Statement increasing the number of shares to be offered for sale by
the Company to 6,000,000 shares, and reducing the shares to be offered by
selling shareholders to the 900,000 shares which are subject to exercise of the
underwriters' over-allotment option. (Numbers of such shares of Common Stock
and per share prices hereinafter described have been adjusted to reflect a 1.66
for one stock split to be effected prior to the IPO). The Company intends to
apply the net proceeds of the offering in order of priority to (i) prepay in
full $40 million principal amount of senior subordinated notes (the "Bridge
Notes"), together with accrued interest thereon, plus the fee due NationsBridge,
L.L.C. ("NationsBridge") in connection therewith of $1.3 million; (ii) make a
cash payment of $19.3 million to THIN as described below in full satisfaction of
its Contingent Payment obligation; (iii) eliminate the obligation to issue
NationsBridge 288,434 shares of Common Stock to be issued upon exercise in full
by NationsBridge of certain warrants (the "Warrants") deposited in escrow in
connection with the Bridge Notes; and (iv) retire senior bank
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debt provided by NationsBank, N.A. (South) and certain other lenders (the
"Senior Lenders") pursuant to the NationsBank Credit Agreement described in the
Registration Statement. The Company will have discretion to reduce the size of
(or determine not to complete) the offering. If the size of the offering is
reduced, the Company will apply the net proceeds in the order described above.
In the event the Registration Statement becomes effective and the Common
Stock is sold by the underwriters at an initial price to the public of at least
approximately $13.443 (the "Trigger Price"), THIN would be entitled to receive
pursuant to Section 1(c)(D) of the Recapitalization Agreement the Contingent
Payment of $20 million. Under the Recapitalization Agreement, since a
Prohibition as defined therein is currently in effect, such Contingent Payment
would be required to be paid in shares of Common Stock within 45 days of the
consummation of the IPO at an initial price to the public of not less than the
Trigger Price (a "Trigger Event"), with such number of shares to be issued
calculated at a value to be determined as provided in the Recapitalization
Agreement. In addition, THIN has indicated a desire to participate in the
underwritten offering as a selling shareholder pursuant to Section 3 of the
Registration Rights Agreement dated as of July 31, 1996 (the "Registration
Rights Agreement") among THIN, the Company and certain Institutional Holders
described therein.
This letter sets forth our understanding with respect to a revised
mechanism for payment of the Contingent Payment if earned in connection with the
IPO at the Trigger Price and the exercise of THIN's registration rights pursuant
to Section 3 of the Registration Rights Agreement.
We hereby agree with you as follows:
(1) In the event the IPO is consummated at an initial price to the public
of not less than the Trigger Price, in lieu of payment of the Contingent
Payment in the manner contemplated by the Recapitalization Agreement, THIN will
be entitled to receive upon the closing of the IPO and receipt by the Company of
the sale proceeds, a payment in cash of $19.3 million in full satisfaction of
the Contingent Payment. The Company and the Senior Lenders have executed an
amendment to the Senior Credit Agreement which permits the Company to satisfy
the Contingent Payment for $19.3 million in cash and requires the Company to
apply the net proceeds of the offering as described in the first paragraph of
this letter.
(2) As noted above, after application of proceeds to retire the Bridge
Notes in full and satisfaction of the Contingent Payment, the Company intends to
use additional proceeds from the offering to repurchase the Warrants at a per
share price equal to the price paid by the public in the IPO net of the per
share underwriting discount.
(3) THIN will have the exclusive right to participate in the sale pursuant
to the Registration Statement and Underwriting Agreement of up to 900,000 shares
of Common Stock if purchased by the underwriters pursuant to the over-allotment
option. In addition, if the
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underwriters are prepared to purchase an additional amount of shares in the IPO
without an adverse impact on the price at which such shares are sold (after sale
by the Company of 6 million primary shares), the Company will discuss with THIN
(but is under no contractual obligation to permit) the participation by THIN in
the sale of such additional shares; provided, however, if the amount of shares
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in the over-allotment option increases beyond 900,000 shares due to the
Underwriters' purchase of additional amounts of shares in the IPO, THIN will
have the exclusive right to participate in the sale of any such increases in the
over-allotment option. All sales by THIN shall be pursuant to an Underwriting
Agreement among the Company, the underwriters and THIN in substantially the form
attached hereto as Exhibit A (the "Underwriting Agreement"). In addition, the
Power of Attorney to be executed by THIN in connection with the Underwriting
Agreement will contain a "minimum price" clause, which will allow THIN to
withdraw from the offering if the per share price is below the minimum
threshold, which will be at or below the price at which the Contingent Payment
is not reached.
(4) As contemplated by Section 6.2 of the Registration Rights Agreement,
the Company will bear all Registration Expenses as defined therein that are
incurred in connection with this Piggyback Registration. Furthermore, whether
or not THIN participates in the sale under the Registration Statement, THIN will
observe as required by the Registration Rights Agreement a 180 day holdback from
direct or indirect sale or other disposition of any equity securities of the
Company as reflected in the Underwriting Agreement unless THIN shall have
received an appropriate consent of the underwriters as permitted therein.
If the foregoing reflects our mutual agreement, please execute and return a
copy to the Company, to the attention of Xx. Xxxxx X. Xxxxxx, President and
Chief Executive Officer, 0000 XxXxxxxx Xxxxx Xxxx, Xxxxxxx XX 00000 (fax number
000-000-0000), with a copy to Xxxxx X. Xxxxxx, Xxxxxx & Xxxxxx, 000 Xxxxx Xxx.,
Xxx Xxxx, X.X., fax number 000-000-0000.
Very truly yours,
Firearms Training Systems, Inc.
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
President and Chief Executive Officer
cc: Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxxxx
Accepted:
Date: 2 November 1996 THIN International N.V.
------------------- By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Director
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