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EXHIBIT 10.11.01
FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES D
Firearms Training Systems, Inc., a Delaware corporation (the
"Company"), hereby grants to Xxxxxxx X. Xxxxxx (the "Optionee") as of April 17,
1997 (the "Option Date"), pursuant to the provisions of the Firearms Training
Systems, Inc. Stock Option Plan (the "Plan"), a non-qualified option to purchase
from the Company (the "Option") 10,000 shares of its Class A Common Stock,
$0.000006 par value ("Stock"), at the price of $11.75 per share upon and subject
to the terms and conditions set forth below. References to employment shall also
mean an agency or independent contractor relationship and references to
employment by the Company shall also mean employment by a Subsidiary.
Capitalized terms not defined herein shall have the meanings specified in the
Plan.
1. Option Subject to Acceptance of Agreement. The Option shall
be null and void unless the Optionee shall accept this Agreement by executing it
in the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the Option be
exercised, in whole or in part, after the seventh anniversary of the Option Date
(the "Expiration Date").
2.2. Exercise of Option. (a) Except as otherwise provided in
Section 3.5 below (relating to a change in control of the Company), the Option
shall become exercisable with respect to thirty three and one-third percent
(33-1/3%) of the shares of Stock subject to the Option on the first anniversary
of the Option Date, and an additional thirty three and one-third (33-1/3%) of
the shares of Stock subject to the Option Date on each of the second and third
anniversaries of the Option Date on a cumulative basis, so that the Option is
exercisable with respect to one hundred percent (100%) of the shares of Stock
subject to the Option on the third anniversary of the Option Date.
(b) If the Optionee terminates employment with the Company by
reason of Disability, the Option shall be exercisable only to the extent it is
exercisable on the effective date of the Optionee's termination of employment
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and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until the Expiration Date.
(c) If the Optionee terminates employment with the Company by
reason of retirement on or after age 62 or with the consent of the Company, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until the
Expiration Date.
(d) If the Optionee's employment with the Company terminates
by reason of the Optionee's death, the Option shall be exercisable only to the
extent it is exercisable on the date of death and may thereafter be exercised by
the Optionee's Legal Representative or Permitted Transferees, as the case may
be, until the Expiration Date.
(e) If the Optionee terminates employment with the Company for
any reason other than as described in subsection (b), (c) or (d) above, the
Option shall be exercisable only to the extent it is exercisable on the
effective date of the Optionee's termination of employment and may thereafter be
exercised by the Optionee or the Optionee's Legal Representative until and
including the earliest to occur of (i) the date which is 90 days after the
effective date of the Optionee's termination of employment and (ii) the
Expiration Date; provided that if the Optionee's employment is terminated by the
Company for Cause, the Option shall terminate automatically on the effective
date of the Optionee's termination of employment, and the Optionee shall be
subject to the provisions of Section 2.5.
(f) For purposes of this Agreement, "Cause" shall mean the
Optionee's willful and continued failure to substantially perform the Optionee's
duties with the Company (other than a failure resulting from the Optionee's
Disability), or the direct or indirect engaging in any activity which is
contrary, inimical or harmful to the interests of the Company or any Subsidiary,
monetarily or otherwise, as determined by a majority of the members of the
Board, including (I) conduct that, in the reasonable judgment of the Company,
fails to conform with any material standard of conduct applicable to the
Company's executives, including gross violations of material Company policies,
(II) any act of dishonesty, (III) commission of a felony, (IV) a significant
violation of any statutory or common law duty of loyalty to the Company, or (V)
the disclosure or misuse of any confidential or competitively sensitive
information or trade secrets of the Company or a Subsidiary or affiliate.
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2.3. Method of Exercise. Subject to the limitations set forth
in this Agreement, the Option may be exercised by the Optionee (1) by giving
written notice to the Company, the form of which is set forth on Exhibit A to
this Agreement, specifying the number of whole shares of Stock to be purchased
and accompanied by payment therefor in full (or arrangement made for such
payment to the Company's satisfaction) either (i) in cash, (ii) by delivery of
previously owned whole shares of Stock (which the Optionee has held for at least
six months prior to the delivery of such shares or which the Optionee purchased
on the open market and in each case for which the Optionee has good title, free
and clear of all liens and encumbrances) having a Fair Market Value, determined
as of the date of exercise, equal to the aggregate purchase price payable
pursuant to the Option by reason of such exercise, (iii) in cash by a
broker-dealer acceptable to the Company to whom the Optionee has submitted an
irrevocable notice of exercise or (iv) a combination of (i), (ii) and (iii), and
(2) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (iv). Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Stock shall be delivered until the full purchase price therefor has
been paid.
2.4. Termination of Option. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be.
Such cancellation shall be effective regardless of whether the Optionee returns
this Agreement. If the Optionee continues to have rights to purchase shares of
Stock hereunder, the Company shall, within 10 business days of the Optionee's
delivery of this Agreement to the Company, either (i) xxxx 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.
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2.5 Termination of Option and Forfeiture of Option Gain. (a) If at any
time prior to the earliest to occur of (i) the Expiration Date, (ii) the date
which is two years after the effective date of the Optionee's termination of
employment for any reason other than death and (iii) the date which is two years
after the Optionee exercises any portion of the Option, the Optionee:
(1) directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) owns, manages, operates,
controls, participates in, performs services for, or otherwise carries
on, a business substantially similar to or competitive with the
business conducted by the Company or any Subsidiary (it being
understood by the parties hereto that the prohibited activities are not
limited to any particular region because such business may be engaged
in effectively from any location in the United States); provided, that
nothing set forth in this Section 2.5(a)(1) shall prohibit the Optionee
from owning not in excess of 5% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and
listed on any national or regional stock exchange or on the Nasdaq
Stock Market; or
(2) directly or indirectly induces or tempts to persuade any
employee, agent or customer of the Company or any Subsidiary to
terminate such employment, agency or business relationship in order to
enter into any such relationship on behalf of any other business
organization in competition with the business conducted by the Company
or any Subsidiary;
(3) is terminated for Cause, or, in the event the Optionee is
no longer employed with the Company, directly or indirectly engages in
any activity which is contrary, inimical or harmful to the interests of
the Company or any Subsidiary, including the disclosure or misuse of
any confidential or competitively sensitive information or trade
secrets of the Company or a Subsidiary or affiliate; or
(4) participates in any activity not approved by the Board
which contributes to or results in the initiation of an action or
transaction which, if consummated, would result in a Change in Control
of the Company,
then the Option shall terminate automatically on the date the Optionee engages
in such activity and (x) with respect to any shares of Stock owned by the
Optionee as of such date as the result of any exercise of the Option, the
Optionee
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shall, within five business days of receipt by the Optionee of a written demand
therefor, sell such shares to the Company at a price equal to the lesser of (i)
the Fair Market Value of a share of Stock on the date the Optionee engages in
such activity and (ii) the purchase price per share of Stock set forth in the
first paragraph of this Agreement, and (y) with respect to any shares of Stock
acquired by the Optionee as a result of any exercise of the Option which were
subsequently sold or otherwise disposed of by the Optionee prior to the date on
which the Optionee engaged in such activity, the Optionee shall pay the Company,
within five business days of receipt by the Optionee of a written demand
therefor, an amount in cash determined by multiplying the number of shares of
Stock purchased pursuant to each exercise of the Option (without reduction for
any shares of Stock delivered by the Optionee or withheld by the Company
pursuant to Section 2.3 or Section 3.3) by the difference between (i) the Fair
Market Value of a share of Stock on the date of such exercise (or on the date of
any subsequent sale or other disposition, if greater) and (ii) the purchase
price per share of Stock set forth in the first paragraph of this Agreement.
(b) The Optionee may be released from the Optionee's
obligations under Sections 2.2(e) and 2.5(a) only if and to the extent the
Committee determines in its sole discretion that such a release is in the best
interests of the Company.
(c) The Optionee agrees that by executing this Agreement the
Optionee authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the Optionee pursuant to Section 2.2(e) or 2.5(a) from any
amounts payable by the Company or any Subsidiary to the Optionee, including,
without limitation, any amount payable to the Optionee as salary, wages,
vacation pay or bonus. This right of setoff shall not be an exclusive remedy and
the Company's or a Subsidiary's election not to exercise this right of setoff
with respect to any amount payable to the Optionee shall not constitute a waiver
of this right of setoff with respect to any other amount payable to the Optionee
or any other remedy.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act.
Except to the extent permitted by the foregoing sentence, during the Optionee's
lifetime the
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Option is exercisable only by the Optionee or the Optionee's
Legal Representative. Except to the extent permitted by the foregoing, the
Option may not be sold, transferred, assigned, pledged, hypothecated, encumbered
or otherwise disposed of (whether by operation of law or otherwise) or be
subject to execution, attachment or similar process. Upon any attempt to so
sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
the Option, the Option and all rights hereunder shall immediately become null
and void.
3.2. Investment Representation and Restrictions. The Optionee
hereby represents and covenants that (a) any share of Stock purchased upon
exercise of the Option will be purchased for investment and not with a view to
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), unless such purchase has been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; (c) to the extent required by an
agreement between one or more underwriters and the Company in connection with an
offering of shares of Stock pursuant to a registration statement under the
Securities Act, the Optionee shall not offer, sell, contract to sell or
otherwise dispose of any shares of Stock purchased upon exercise of the Option
for the period specified in such agreement; and (d) if requested by the Company,
the Optionee shall submit a written statement, in form satisfactory to the
Company, to the effect that such representation (x) is true and correct as of
the date of purchase of any shares hereunder or (y) is true and correct as of
the date of any sale of any such shares, as applicable. As a further condition
precedent to any exercise of the Option, the Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance or delivery of the shares and, in connection
therewith, shall execute any documents which the Board or the Committee shall in
its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect
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to such exercise of the Option. If the Optionee shall fail to advance the
Required Tax Payments after request by the Company, the Company may, in its
discretion, deduct any Required Tax Payments from any amount then or thereafter
payable by the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and in each case for which the Optionee has good
title, free and clear of all liens and encumbrances) having a Fair Market Value,
determined as of the date the obligation to withhold or pay taxes first arises
in connection with the Option (the "Tax Date"), equal to the Required Tax
Payments, (3) authorizing the Company to withhold whole shares of Stock which
would otherwise be delivered to the Optionee upon exercise of the Option having
a Fair Market Value, determined as of the Tax Date, equal to the Required Tax
Payments, (4) a cash payment by a broker-dealer acceptable to the Company to
whom the Optionee has submitted an irrevocable notice of exercise or (5) any
combination of (1), (2) and (3). The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5); provided, however,
that if the Optionee exercises the option on the Expiration Date, is employed as
of such date, and the shares of Stock are not traded on a national securities
exchange or are not quoted on the Nasdaq National Market as of such date, the
Company shall take reasonable efforts to permit an Optionee to use, in whole or
in part, the method described in clause (3) above. Shares of Stock to be
delivered or withheld may not have a Fair Market Value in excess of the minimum
amount of the Required Tax Payments. Any fraction of a share of Stock which
would be required to satisfy any such obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Optionee. No certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.
(c) Unless the Committee otherwise determines, if the Optionee
is subject to Section 16 of the Exchange Act, the following provisions shall
apply to the Optionee's election to deliver to the Company whole shares of Stock
or to authorize the Company to withhold whole shares of Stock purchasable upon
exercise of the Option in payment of all or a portion of the Optionee's tax
liability in connection with such exercise:
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(1) The Optionee may deliver to the Company
previously owned whole shares of Stock in accordance with Section
3.3(b), if such delivery is in connection with the delivery of shares
of Stock in payment of the exercise price of the Option.
(2) The Optionee may authorize the Company to
withhold whole shares of Stock purchasable upon exercise of the Option
in accordance with Section 3.3(b); provided, that the following
provisions shall apply to such election:
(i) Such election may apply only
to the Option or any or all options held by the Optionee,
shall be filed with the Committee at least six months prior to
the exercise date of the Option and may not take effect during
the six-month period beginning on the date of grant of the
Option (other than in the event of the Optionee's death) or
(ii) such election (A) shall be subject to approval by the
Committee, (B) may not take effect during the six-month period
beginning on the date of grant of the Option (other than in
the event of the Optionee's death), (C) must be filed with the
Committee during (or must be filed with the Committee in
advance of, but take effect during) the 10 business day period
beginning on the third business day following the date of
release of the Company's quarterly or annual summary
statements of sales and earnings and (D) the exercise of the
Option must occur during such 10 business day period. Unless
the Committee otherwise determines, any election pursuant to
clause (i) may be revoked or changed only if such revocation
or change is made at least six months prior to the exercise of
the Option. Any election made pursuant to clause (ii) may be
revoked or changed prior to the exercise of the Option during
the 10 business day period.
3.4. Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Stock other than a
regular cash dividend, the number and class of securities subject to the Option
and the purchase price per security shall be appropriately adjusted by the
Committee without an increase in the aggregate purchase price. If any adjustment
would result in a fractional security being subject to the Option, the Company
shall pay the Optionee, in connection with the first exercise of the
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Option occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Change in Control. (a) Notwithstanding any provision in
this Agreement, in the event of the occurrence of a Change in Control as defined
in paragraph (b)(3) or (4) of Section 3.8 of the Plan in connection with which
the holders of Stock receive shares of common stock that are registered under
Section 12 of the Exchange Act, all outstanding options shall immediately be
exercisable in full and there shall be substituted for each share of Stock
available under this Plan, whether or not then subject to an outstanding option,
the number and class of shares into which each outstanding share of Stock shall
be converted pursuant to such Change in Control. In the event of any such
substitution, the purchase price per share of each option shall be appropriately
adjusted by the Committee, such adjustments to be made without an increase in
the aggregate purchase price or base price.
(b) Notwithstanding any provision in this Agreement, in the
event of the occurrence of a Change in Control pursuant to paragraph (b)(1) or
(2) of Section 3.8 of the Plan, or in the event of the occurrence of a Change in
Control pursuant to paragraph (b)(3) or (4) of Section 3.8 of the Plan in
connection with which the holders of Stock receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange Act,
each outstanding option shall be surrendered to the Company by the holder
thereof, and each such option shall immediately be cancelled by the Company, and
the holder shall receive, within 10 business days of the occurrence of a Change
in Control pursuant to paragraph (b)(1) or (2) of Section 3.8 of the Plan or
within 10 business days of the approval of the stockholders of the Company
contemplated by paragraph (b)(3) or (4) of Section 3.8 of the Plan, a cash
payment from the Company in an amount equal to the number of shares of Stock
then subject to such option, multiplied by the excess, if any, of the Fair
Market Value of a share of Stock on the date of occurrence of the Change in
Control over (ii) the purchase price per share of Stock subject to the option.
The Company may, but is not required to, cooperate with any person who is
subject to Section 16 of the Exchange Act to assure that any cash payment in
accordance with the foregoing to such person is made in compliance with Section
16 and the rules and regulations thereunder.
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3.6. Compliance with Applicable Law. The Option is subject to
the condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.7. Delivery of Information to Optionee. The Company shall
forward to the Optionee annual reports to shareholders and annual or quarterly
financial statements of the Company, including the consolidated balance sheet
and related consolidated statements of operations and cash flows for a fiscal
year, fiscal quarter or period of a fiscal year, as applicable, as soon as
administratively practicable after such materials are prepared and distributed
or filed, as the case may be, by the Company. The Optionees shall have the same
rights as holders of shares of Stock to notice with respect to annual or special
meetings of shareholders of the Company, and shall have the right to attend any
such meetings.
3.8. Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver or cause to be delivered
one or more certificates representing the number of shares purchased against
full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.3.
3.9. Option Confers No Rights as Stockholder. The Optionee
shall not be entitled to any privileges of ownership with respect to shares of
Stock subject to the Option unless and until purchased and delivered upon the
exercise of the Option, in whole or in part, and the Optionee becomes a
stockholder of record with respect to such delivered shares; and the Optionee
shall not be considered a stockholder of the Company with respect to any such
shares not so purchased and delivered.
3.10. Option Confers No Rights to Continued Employment. In no
event shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the
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Optionee any right to continued employment by the Company or any affiliate of
the Company.
3.11. Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.
3.12. Company to Reserve Shares. The Company shall at all
times prior to the expiration or termination of the Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Stock, the full number of shares subject to the Option from time to time.
3.13. Agreement Subject to the Plan. This Agreement is subject
to the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
4.1. Designation as Nonqualified Stock Option. The Option is
hereby designated as not constituting an "incentive stock option" within meaning
of section 422 of the Internal Revenue Code of 1986, as amended (the "Code");
this Agreement shall be interpreted and treated consistently with such
designation.
4.2. Meaning of Certain Terms. (a) As used herein, employment
by the Company shall include employment by an affiliate of the Company.
References in this Agreement to sections of the Code shall be deemed to refer to
any successor section of the Code or any successor internal revenue law.
(b) As used herein, the term "Legal Representative" shall
include an executor, administrator, legal representative, guardian or similar
person and the term "Permitted Transferee" shall include any transferee (i)
pursuant to a transfer permitted under Section 3.4 of the Plan and Section 3.1
hereof or (ii) designated pursuant to beneficiary designation procedures
approved by the Company.
4.3. Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
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4.4. Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to Firearms
Training Systems, Inc., 0000 XxXxxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000,
Attention: Corporate Secretary, and if to the Optionee, to Xxxxxxx X. Xxxxx, 000
Xxxxxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000. All notices, requests or other
communications provided for in this Agreement shall be made in writing either
(a) by personal delivery to the party entitled thereto, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed to be received upon
personal delivery, upon confirmation of receipt of facsimile transmission or
upon receipt by the party entitled thereto if by United States mail or express
courier service; provided, however, that if a notice, request or other
communication sent to the Company is not received during regular business hours,
it shall be deemed to be received on the next succeeding business day of the
Company.
4.5. Governing Law. This Agreement, the Option and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Delaware and construed in accordance therewith without giving
effect to principles of conflicts of laws.
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4.6. Counterparts. This Agreement may be executed in two counterparts each of
which shall be deemed an original and both of which together shall constitute
one and the same instrument.
FIREARMS TRAINING SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
President & Chief Executive Officer
Accepted this 17th day of
April, 1997.
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
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