Exhibit 10.2
EMPLOYMENT
AGREEMENT
This Employment Agreement (this
“Agreement”) is entered into as of June 27, 2005,
between FATS, Inc., a Delaware corporation (the
“Company”) and David W. McGrane (the
“Executive”).
WHEREAS , the Company is the
operating subsidiary of Firearms Training Systems, Inc. (the
“Parent”), a leading worldwide provider of small and
supporting arms training simulators; and
WHEREAS , the Company desires
to employ the Executive to serve as Chief Operating Officer of the
Company, and the Executive desires to be employed by the Company,
upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE , in
consideration of the premises and the mutual agreements contained
herein, the Company and the Executive hereby agree as
follows:
1. Employment .
The Company hereby agrees to employ
the Executive and the Executive hereby agrees to be employed by the
Company upon the terms and subject to the conditions contained in
this Agreement. The term of employment of the Executive by the
Company pursuant to this Agreement (the “Employment
Period”) shall commence on June 27, 2005 (the
“Effective Date”) and shall end on the third
anniversary of the Effective Date, unless earlier
terminated pursuant to Section 4 hereof.
2. Position and Duties;
Responsibilities . (a) Position and Duties . The Company
shall employ the Executive during the Employment Period as its
Chief Operating Officer. The Executive shall report directly to the
Board of Directors of the Parent. During the Employment Period, the
Executive shall perform faithfully and loyally and to the best of
the Executive’s abilities the duties assigned to the
Executive hereunder and shall devote the Executive’s full
business time, attention and effort to the affairs of the Company
and its subsidiaries, and shall use the Executive’s best
efforts to promote the interests of the Company, its subsidiaries
and the Parent. The Executive may engage in charitable, civic or
community activities and, with the prior approval of the Board of
Directors, may serve as a director of any other business
corporation, provided that such activities or service do not
interfere with the Executive’s duties hereunder or violate
the terms of any of the covenants contained in Sections 6, 7, 8, 9
or 10 hereof.
(b) Responsibilities .
Subject to the powers, authority and responsibilities vested in the
Board and in duly constituted committees of the Board, the
Executive shall have the authority and responsibility for the
Company’s management. The Executive shall also perform such
other duties (not inconsistent with the position of Chief Operating
Officer) on behalf of the Company and its subsidiaries as may from
time to time be authorized or directed by the Chief Executive
Officer.
3. Compensation
. (a) Base Salary
. During the Employment Period, the Company shall pay to the
Executive a base salary at the rate of $275,000.00 per annum
(“Base Salary”), payable in accordance with the
Company’s executive payroll policy. Such Base Salary shall be
reviewed annually and shall be subject to such changes as
determined by the Compensation Committee of the Board (the
“Compensation Committee”).
(b) Annual Bonus . During the
Employment Period, the Company shall provide the Executive the
opportunity to earn an annual merit-based bonus of up to fifty
percent (50%) of this Base Salary, based upon the Company’s
performance, the Executive’s individual performance and the
Company prospects and liquidity position (the “Annual
Bonus”). The actual amount of such Annual Bonus shall be
determined by the Board after the end of the Company’s fiscal
year, in its sole discretion; provided , however ,
that in no event may the Executive receive an Annual Bonus in
excess of fifty percent (50%) of the Executive’s Base Salary.
In addition, in the event of a Sale of the Parent (defined as the
acquisition of fifty-one percent (51%) or more of the
Parent’s common stock outstanding by a single party),
Executive will be entitled to receive the maximum Annual Bonus of
fifty percent (50%) of his Base Salary for the fiscal year in which
the Sale of the Parent takes place as long as he remains employed
by the Company through the end of that fiscal year or is terminated
by the Company other than for Cause. Payment of the Annual Bonus in
such circumstances will not reduce any payments to which the
Executive is entitled pursuant to Section 4 of this
Agreement.
(c) Stock Options . In his
prior Employment Agreement dated August 9, 2002, the Executive
received a grant of non-qualified stock options under the Firearms
Training System, Inc. Stock Option Plan as follows:
(i) The Executive was granted an
option to purchase from the Parent 2,100,000 of the company’s
common shares currently outstanding. The options bear a strike
price of $0.40 per share.
(ii) After January 1, 2004, the
options vest in equal twenty percent (20%) portions on an annual
basis over a five (5) year waiting period commencing on January 1,
2004 (i.e., the first vesting date was January 1, 2005 and the
final vesting date is January 1, 2009). Other vesting terms and
conditions will be substantially similar to those contained in the
Company’s existing option grants, including becoming 100%
vested and exercisable upon the Sale of the Parent.
(d) Other Benefits . During
the Employment Period, the Executive shall be entitled to
participate in the Company’s employee benefit plans that are
generally available from time to time to executives of the Company,
including group medical, dental, life, accidental death and
dismemberment, short-term disability, long-term disability,
business travel accident plans, sick leave, vacation, and the
profit sharing retirement plan (all such benefits being hereinafter
referred to as the “Employee Benefits”).
(e) Expense Reimbursement .
During the Employment Period, the Company shall reimburse the
Executive, in accordance with the Company’s policies and
procedures, for all proper documented expenses incurred by the
Executive in the performance of the Executive’s duties
hereunder.
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4. Termination
. (a) Death . Upon
the death of the Executive, this Agreement shall automatically
terminate and all rights of the Executive and the Executive’s
heirs, executors and administrators to compensation and other
benefits under this Agreement shall cease immediately, except that
the Executive’s heirs, executors or administrators, as the
case may be, shall be entitled to:
(i) accrued Base Salary through and
including the Executive’s date of death;
(ii) the Annual Bonus, if any, that
the Executive would have received for the fiscal year in which his
death occurs had he remained employed through the end of such year,
reduced pro rata for that portion of such fiscal year not completed
by the Executive and payable at such time as the Executive would
have received such Annual Bonus had he remained employed through
the end of such fiscal year; and
(iii) other Employee Benefits to
which the Executive was entitled on the date of death in accordance
with the terms of the plans and programs of the Company.
(b) Disability . The Company
may, at its option, terminate this Agreement upon written notice to
the Executive if the Executive, because of physical or mental
incapacity or disability, fails to perform the essential functions
of the Executive’s position, with or without reasonable
accommodation, required of the Executive hereunder for a continuous
period of one hundred twenty (120) days or any one hundred eighty
(180) days within any twelve (12) month period. In the event of any
dispute regarding the existence of the Executive’s incapacity
or disability hereunder, the matter shall be resolved by the
determination of a physician, qualified to practice medicine in the
state of the Executive’s Residence, to be selected by the
Board. The Executive shall have the right to require a second
opinion from a physician qualified to practice medicine in the
state of the Executive’s residence, as selected by the
Executive. If the initial and second opinions are inconsistent, the
matter shall be resolved by a third opinion from a physician
licensed to practice medicine as selected by the agreement between
the Company and the Executive. Upon such termination, all
obligations of the Company hereunder shall cease immediately,
except that the Executive shall be entitled to:
(i) accrued Base Salary through and
including the effective date of the Executive’s termination
of employment;
(ii) the Annual Bonus, if any, that
the Executive would have received for the fiscal year in which the
Executive’s termination of employment occurs had he remained
employed through the end of such year, reduced pro rata for that
portion of such fiscal year not completed by the Executive and
payable at such time as the Executive would have received such
Annual Bonus had he remained employed through the end of such
fiscal year; and
(iii) other Employee Benefits to
which the Executive is entitled upon termination of employment in
accordance with the terms of the plans and programs of the
Company.
(c) Cause . (i) The Company
may, at its option, terminate the Executive’s employment
under this Agreement for Cause (as hereinafter defined) upon
written notice
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to the Executive (the “Cause
Notice”). Any such termination for Cause shall be authorized
by the Board. The Cause Notice shall state the particular action(s)
or inaction(s) giving rise to termination for Cause.
(ii) As used in this Agreement, the
term “Cause” shall mean any one or more of the
following:
(A) The Executive’s commission
of a felony or any other crime involving moral turpitude, fraud,
misrepresentation, embezzlement, or theft,
(B) The Executive’s engaging
in any other activity that is harmful (including alcoholic or other
self-induced affliction), in a material respect, to the Company,
any of its subsidiaries or the Parent, monetarily or otherwise, as
determined by a majority of the Board;
(C) The Executive’s material
malfeasance (including, without limitation, any intentional act of
fraud or theft), misconduct, or gross negligence in connection with
the performance of his duties hereunder;
(D) The Executive’s
significant violation of any statutory or common law duty of
loyalty to the Company, any of its subsidiaries or the
Parent;
(E) The Executive’s material
breach of this Agreement or of a material policy of the Company or
the Parent (including, without limitation, disclosure or misuse of
any confidential or competitively sensitive information or trade
secrets of the Company, any of its subsidiaries or the
Parent);
(F) The Executive’s refusal or
failure to carry out directives or instructions of the majority of
the Board that are consistent with the scope and nature of the
Executive’s duties and responsibilities set forth herein;
or
(G) Any breach by the Executive of
any one or more of the covenants contained in Section 6, 7, 8, 9 or
10 hereof.
(iii) With respect to E and F above,
the Executive shall have ten days after the Cause Notice is given
to cure the particular action(s) or inaction(s), to the extent a
cure is possible. If the Executive so effects a cure to the
satisfaction of the Board, the Cause Notice shall be deemed
rescinded and of no force or effect.
(iv) The exercise of the right of
the Company to terminate this Agreement pursuant to this Section
4(c) shall not abrogate the rights or remedies of the Company in
respect of the breach giving rise to such termination.
(v) If the Company terminates the
Executive’s employment for Cause, all obligations of the
Company hereunder shall cease, except that the Executive shall be
entitled to the payments and benefits specified in Sections 4(b)(i)
and 4(b)(iii) hereof.
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(d) Termination Without Cause
. The Company may, at its option, terminate the Executive’s
employment under this Agreement upon written notice to the
Executive for a reason other than a reason set forth in Section
4(a), 4(b) or 4(c). Any such termination shall be authorized by the
Board. If the Company terminates the Executive’s employment
for any such reason, all obligations of the Company hereunder shall
cease immediately, except that the Executive shall be entitled
to:
(i) accrued Base Salary through and
including the date of the Executive’s termination of
employment;
(ii) other Employee Benefits to
which the Executive is entitled upon termina
