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Sectors: Services
Governing Law: New York, View New York State Laws
Effective Date: January 01, 1997
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EXHIBIT 10.05


PARENT PLEDGE AGREEMENT


DATED AS OF JANUARY 1, 1997


BETWEEN


FIREARMS TRAINING SYSTEMS, INC.


AND


NATIONSBANK, N.A. (SOUTH),


AS AGENT 2


TABLE OF CONTENTS


ARTICLE SECTION PAGE - ------- ------- ---- ARTICLE I DEFINITIONS............................................................... 1
SECTION 1.01. Terms Defined in Credit Agreement........................... 1
SECTION 1.02. Definition of Certain Terms Used Herein..................... 1
SECTION 1.03. UCC Definitions............................................. 2
SECTION 1.04. Terms Generally............................................. 2 ARTICLE II SECURITY INTERESTS....................................................... 2
SECTION 2.01. The Security Interests...................................... 2
SECTION 2.02. Continuing Liability of the Pledgor......................... 2
SECTION 2.03. Delivery of Pledged Securities.............................. 2
SECTION 2.04. Security Interests Absolute................................. 3
SECTION 2.05. Release of Collateral....................................... 3 ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................... 4
SECTION 3.01. Credit Agreement............................................ 4
SECTION 3.02. Pledged Securities.......................................... 4
SECTION 3.03. Validity, Perfection and Priority of Security Interests..... 4
SECTION 3.04. Place of Business; Location of Collateral................... 4
SECTION 3.05. Effectiveness............................................... 4 ARTICLE IV COVENANTS................................................................ 5
SECTION 4.01. Perfection of Security Interests............................ 5
SECTION 4.02. Further Actions............................................. 5
SECTION 4.03. Change of Name, Identity or Structure....................... 5
SECTION 4.04. Place of Business and Collateral............................ 6
SECTION 4.05. Maintenance of Records...................................... 6
SECTION 4.06. Compliance with Laws, etc. ................................. 6
SECTION 4.07. Payment of Taxes, etc. ..................................... 6
SECTION 4.08. Limitation on Liens on Collateral........................... 6
SECTION 4.09. Limitations on Dispositions of Collateral................... 6
SECTION 4.10. Notices..................................................... 6
SECTION 4.11. Change of Law............................................... 6
SECTION 4.12. Reimbursement Obligation.................................... 6 ARTICLE V DISTRIBUTIONS ON PLEDGED SECURITIES; VOTING............................... 7
SECTION 5.01. Right to Receive Distributions on Pledged Collateral; 7
Voting...................................................... ARTICLE VI REMEDIES; RIGHTS UPON DEFAULT............................................ 8
SECTION 6.01. UCC Rights.................................................. 8
SECTION 6.02. Sale of Collateral.......................................... 8
SECTION 6.03. Rights of Purchasers........................................ 9
SECTION 6.04. Additional Rights of the Agent.............................. 9
SECTION 6.05. Securities Act, etc. ....................................... 9
SECTION 6.06. Remedies Not Exclusive...................................... 10
SECTION 6.07. Waiver and Estoppel......................................... 11
SECTION 6.08. Power of Attorney........................................... 11
SECTION 6.09. Application of Proceeds..................................... 12 ARTICLE VII MISCELLANEOUS........................................................... 13
SECTION 7.01. Notices..................................................... 13
SECTION 7.02. Survival of Agreement....................................... 13
SECTION 7.03. Counterparts; Effectiveness................................. 13
SECTION 7.04. Amendments, Etc. ........................................... 13
SECTION 7.05. Assignments................................................. 13


i 3


ARTICLE SECTION PAGE - ------- ------- ----
SECTION 7.06. Savings Clause.............................................. 13
SECTION 7.07. Governing Law............................................... 14
SECTION 7.08. Entire Agreement............................................ 14
SECTION 7.09. No Waiver; Remedies......................................... 14
SECTION 7.10. Headings.................................................... 14
SECTION 7.11. Submission to Jurisdiction.................................. 14
SECTION 7.12. No Oral Agreements.......................................... 14


SCHEDULES - --------- Schedule 1 Chief Executive Office and Principal Place of Business;
Locations of Records of Receivables and General Intangibles Schedule 2 Pledged Securities Schedule 3 Trade Names, Division Names, etc. Schedule 4 Required Filings and Recordings


ii 4


PLEDGE AGREEMENT dated as of January 1, 1997 between FIREARMS TRAINING SYSTEMS, INC., a Delaware corporation (the "Pledgor"), and NATIONSBANK, N.A. (SOUTH), as Agent (in such capacity, the "Agent") for the Lenders (as defined herein).


Reference is made to (a) the Credit Agreement dated as of July 31, 1996 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among FATS, Inc. (the "Borrower", which simultaneously with the execution and delivery of this Agreement has assumed all of the Obligations (as such term is defined in the Credit Agreement) of Firearms Training Systems, Inc. pursuant to Section 6.05(a)(iv) E) of the Credit Agreement), the financial institutions party thereto as lenders (the "Lenders") and NationsBank, N.A. (South), as Agent, as Swingline Lender and as Issuing Bank.


The Lenders and the Swingline Lenders have respectively agreed to extend credit to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions set forth in, the Credit Agreement. The obligations of the Lenders and the Swingline Lenders to extend credit and of the Issuing Bank to issue Letters of Credit under the Credit Agreement are conditioned on, among other things, the execution and delivery by the Pledgor of a Pledge Agreement in the form hereof in connection with the consummation of the Permitted Drop Down Transaction. As consideration therefor and in order to induce the Lenders to make Loans, the Pledgor is willing to execute and deliver this Agreement.


Accordingly, the Pledgor, intending to be legally bound, hereby agrees with the Agent, for the ratable benefit of the Secured Parties, as follows:


ARTICLE I


DEFINITIONS


SECTION 1.01. Terms Defined in Credit Agreement. Terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement; provided that as used herein, the term "Loan Party" when used in connection with the obligations of the Pledgor, shall mean the Borrower, the Subsidiaries, the Buyers and the Seller.


SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the following terms shall have the following meanings:


"Collateral" shall have the meaning assigned to such term in Section
2.01.


"General Intangibles" of the Pledgor shall mean (a) all contract
rights to receive dividends, liquidating dividends, distributions, options,
rights to subscribe, cash, instruments and other property and proceeds from
time to time in respect of or in exchange for any or all of the Capital
Stock of the Borrower and (b) all rights of the Pledgor (including all
choses in action and causes of action) under all agreements that in any way
relate to such Capital Stock.


"Pledged Securities" shall mean (a) the Capital Stock listed and
described on Schedule 2 hereto, and the certificates, if any, representing
such Capital Stock, (b) all additional Capital Stock from time to time
acquired by the Pledgor in any manner (which shares shall be considered to
be Pledged Securities under this Agreement), together in each case with the
certificates representing such additional Capital Stock and (c) all
dividends, liquidating dividends, stock dividends, distributions, stock or
partnership rights, options, rights to subscribe, cash, instruments and
other property and proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
listed Capital Stock referenced in clause (a) above or such additional
Capital Stock referenced in clause (b) above.


"Proceeds" shall mean all proceeds, including (a) whatever is received
upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash and (b) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral. 5


"Secured Obligations" of the Pledgor shall mean (a) all amounts now or
hereafter payable by the Pledgor under the Parent Guarantee Agreement and
(b) all expenses (including reasonable counsel fees and expenses) incurred
in enforcing any rights of the Agent and the Secured Parties against the
Pledgor under this Agreement.


"UCC" shall mean at any time the Uniform Commercial Code as the same
may from time to time be in effect in the State of New York; provided that
if, by reason of mandatory provisions of law, the validity or perfection of
any security interest granted herein is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, then, as to the
validity or perfection of such security interest, "UCC" shall mean the
Uniform Commercial Code in effect in such other jurisdiction.


SECTION 1.03. UCC Definitions. The uncapitalized terms "contract right", "instrument", "general intangible", "money" and "proceeds", as used in Section 1.02 or elsewhere in this Agreement shall have the meanings ascribed thereto in the UCC.


SECTION 1.04. Terms Generally. The definitions in the Credit Agreement and in Section 1.02 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Unless otherwise expressly provided herein, the word "day" means a calendar day.


ARTICLE II


SECURITY INTERESTS


SECTION 2.01. The Security Interests. To secure the due and punctual payment of all Secured Obligations of the Pledgor, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, in accordance with the terms thereof, (a) the Pledgor hereby grants to the Agent, its successors and its assigns, for the ratable benefit of the Secured Parties, a security interest in and (b) the Pledgor hereby pledges to the Agent, its successors and assigns, for the ratable benefit of the Secured Parties, all of the Pledgor's right, title and interest in, to and under the following, whether now existing or hereafter acquired (all of which are herein collectively called the "Collateral"):


(i) all General Intangibles;


(ii) all Pledged Securities; and


(iii) to the extent not otherwise included, all Proceeds and products
of any or all of the foregoing, whether existing on the date hereof or
arising hereafter.


SECTION 2.02. Continuing Liability of the Pledgor. Anything herein to the contrary notwithstanding, the Pledgor shall remain liable to observe and perform all the terms and conditions to be observed and performed by it under any contract, agreement, warranty or other obligation with respect to the Collateral, and shall do nothing to impair the security interests herein granted. Neither the Agent nor any Secured Party shall have any obligation or liability under any such contract, agreement, warranty or obligation by reason of or arising out of this Agreement or the receipt by the Agent or any Secured Party of any payment relating to any Collateral, nor shall the Agent or any Secured Party be required to perform or fulfill any of the obligations of the Pledgor with respect to any of the Collateral, to make any inquiry as to the nature or sufficiency of any payment received by it or the sufficiency of the performance of any party's obligations with respect to any Collateral. Furthermore, neither the Agent nor any Secured Party shall be required to file any claim or demand to collect any amount due or to enforce the performance of any party's obligations with respect to the Collateral.


SECTION 2.03. Delivery of Pledged Securities. All certificates or instruments representing or evidencing the Pledged Securities shall be delivered to and held by or on behalf of the Agent, for the ratable benefit of


2 6


the Secured Parties, pursuant hereto and shall be in suitable form for transfer by delivery, duly endorsed and shall be accompanied by duly executed instruments of transfer or assignments in blank, with signatures appropriately guaranteed, and accompanied in each case by any required transfer tax stamps, all in form and substance satisfactory to the Agent. The Agent shall have the right, at any time in its discretion and without notice to the Pledgor after the occurrence and continuance of an Event of Default, to cause any or all of the Pledged Securities to be transferred of record into the name of the Agent or its nominee.


SECTION 2.04. Security Interests Absolute. All rights of the Agent and the Secured Parties hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:


(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any Secured Obligation or any document securing any Secured
Obligation, by operation of law or otherwise;


(b) any modification or amendment or supplement to the Credit
Agreement, any Collateral Document, or any other document evidencing or
securing any Secured Obligation;


(c) any release, non-perfection or invalidity of any direct or
indirect security for any Secured Obligation;


(d) any change in the existence, structure or ownership of the
Borrower, the Pledgor or other Loan Party, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, the
Pledgor or other Loan Party or its assets or any resulting disallowance,
release or discharge of all or any portion of the Secured Obligations;


(e) the existence of any claim, set-off or other right which the
Pledgor may have at any time against the Borrower, any other Loan Party,
the Agent, any Secured Party or any other corporation or person, whether in
connection herewith or any unrelated transactions; provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;


(f) any invalidity or unenforceability for any reason of any Secured
Obligation relating to or against the Borrower, the Pledgor or any other
Loan Party, or any provision of applicable law or regulation purporting to
prohibit the payment by the Borrower, the Pledgor or any other Loan Party
of the Secured Obligations;


(g) any failure by the Agent or any Secured Party (i) to file or
enforce a claim against the Borrower, the Pledgor or any other Loan Party
or its estate (in a bankruptcy or other proceeding), (ii) to give notice of
the existence, creation or incurrence by the Borrower, the Pledgor or any
other Loan Party of any new or additional indebtedness or obligation under
or with respect to the Secured Obligations, (iii) to commence any action
against the Borrower, the Pledgor or any other Loan Party, (iv) to disclose
to the Borrower, the Pledgor or any other Loan Party any facts which the
Agent or any Secured Party may now or hereafter know with regard to the
Borrower, the Pledgor or any other Loan Party or (v) to proceed with due
diligence in the collection, protection or realization upon any collateral
securing the Secured Obligations; or


(h) any other act or omission to act or delay of any kind by the
Borrower, the Pledgor, any other Loan Party, the Agent, any Secured Party
or any other person or any other circumstance whatsoever which might, but
for the provisions of this clause, constitute a legal or equitable
discharge of the Pledgor's obligations hereunder.


SECTION 2.05. Release of Collateral. Upon (a) the indefeasible payment in full in cash of all of the Secured Obligations, (b) the termination of the Commitments, (c) the cancellation or expiration of all Letters of Credit and the reimbursement in full of all Letter of Credit Disbursements and (d) the satisfaction by the Borrower of all terms and conditions hereof, the Credit Agreement, the Notes, the Collateral Documents and all other documents or agreements governing the Secured Obligations, the Agent will (as soon as reasonably practicable after receipt of notice from the Pledgor requesting the same, but at the expense of the Pledgor) execute and send to the Pledgor, (i) for each filing made under Section 4.01 or 4.02 to perfect the security interests granted to the Agent and the Secured Parties hereunder, a termination statement
3 7


prepared by the Pledgor to the effect that the Agent and the other Secured Parties no longer claim a security interest under such filing and (ii) all documents and instruments previously pledged to the Agent hereunder.


ARTICLE III


REPRESENTATIONS AND WARRANTIES


The Pledgor represents and warrants to the Agent and each of the Secured Parties that:


SECTION 3.01. Credit Agreement. All representations and warranties contained in the Credit Agreement that relate to the Pledgor are true and correct. The Pledgor agrees to comply with each of the covenants contained in the Credit Agreement that imposes or purports to impose, through agreements with the Borrower, restrictions or obligations on the Pledgor. The Pledgor acknowledges that any default in the due observance or performance by the Pledgor of any covenant, condition or agreement contained herein may constitute an Event of Default under Article VII of the Credit Agreement. There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.


SECTION 3.02. Pledged Securities. All Pledged Securities have been duly authorized and validly issued by the Borrower and are fully paid and nonassessable. The Pledgor owns good, valid and marketable title to all the outstanding Capital Stock of the Borrower, free and clear of all Liens, other than the Liens of the Collateral Documents, of every kind, whether absolute, matured, contingent or otherwise. None of the Pledged Securities is subject to options to purchase or similar rights of any person. The Pledgor is not and will not become a party to or otherwise bound by any agreement, other than this Agreement, which restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto. The Pledged Securities constitute and will at all times constitute 100% of the Capital Stock of the Borrower.


SECTION 3.03. Validity, Perfection and Priority of Security Interests. (a) By complying with Section 4.01 and by delivering all certificates or instruments, if any, representing or evidencing the Collateral to the Agent, the Pledgor will have created a valid and duly perfected security interest in favor of the Agent for the benefit of the Secured Parties as security for the due and punctual payment of all Secured Obligations of the Pledgor in all Collateral and identifiable Proceeds of such Collateral, as to which a security interest may be perfected by (i) filing UCC financing statements and (ii) possession. Continuing compliance by the Pledgor with the provisions of Section 4.02 will also (i) create and duly perfect valid security interests in all Collateral acquired or otherwise coming into existence after the date hereof and in all identifiable Proceeds of such Collateral as security for the due and punctual payment of all Secured Obligations of the Pledgor and (ii) cause such security interests in all Collateral and in all Proceeds which are (A) identifiable cash Proceeds of Collateral covered by financing statements required to be filed hereunder and (B) identifiable Proceeds in which a security interest may be perfected by such filing under the UCC to be duly perfected under the UCC.


(b) The security interests of the Agent in the Collateral rank first in priority. Other than financing statements or other similar documents perfecting the security interests of the Agent, no financing statements or similar documents covering all or any part of the Collateral are on file or of record in any government office in any jurisdiction in which such filing or recording would be effective to perfect a security interest in such Collateral, nor is any of the Collateral in the possession of any person (other than the Pledgor) asserting any claim thereto or security interest therein.


SECTION 3.04. Place of Business; Location of Collateral. Schedule 1 correctly sets forth (a) the Pledgor's chief executive office and principal place of business and (b) the offices of the Pledgor where records concerning the General Intangibles are kept.


SECTION 3.05. Effectiveness. The pledge and grant effected hereby is effective to vest in the Agent, on behalf of the Secured Parties, the rights of the Agent in the Collateral as set forth herein.


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ARTICLE IV


COVENANTS


The Pledgor covenants and agrees with the Agent that until (a) all the Secured Obligations have been indefeasibly paid in full in cash, (b) the Commitments have been terminated, (c) all Letters of Credit have been cancelled or have expired and all Letter of Credit Disbursements have been reimbursed in full and (d) all terms and conditions hereof, the Credit Agreement, the Collateral Documents and all other documents or agreements governing the Secured Obligations have been satisfied, the Pledgor will comply with the following:


SECTION 4.01. Perfection of Security Interests. The Pledgor will, at its own expense, cause al
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