EXHIBIT 10.4

FORM OF SERIES K STOCK OPTION AGREEMENT DATED AS OF MAY 1, 2003 BETWEEN THE
COMPANY AND CERTAIN OF ITS EMPLOYEES

FIREARMS TRAINING SYSTEMS, INC.
STOCK OPTION AGREEMENT
SERIES K

Firearms Training Systems, Inc., a Delaware corporation (the “Company”), hereby
grants to ______________ (the “Optionee”) as of May 1, 2003 (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”) ______ shares of its Class A Common Stock, $0.000006 par value
(“Stock”), at the price of $0.40 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 percent (33-1/3%) of the
shares of Stock subject to the Option 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.

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(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 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 therefore 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 therefore 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) mark 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.

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

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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 worldwide); 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 shall, within five business days of receipt by the Optionee of a
written demand therefore, 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

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demand therefore, 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
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

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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 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

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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:

(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.

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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 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

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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.

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
therefore. 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 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,

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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.

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., 7340 McGinnis Ferry Road, Suwanee, Georgia 30024, Attention: Corporate
Secretary, and if to the Optionee, to ____________, _________________________,
_______, _______ _____. 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

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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.

 

 

 

 

 

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Ronavan R Mohling
Chairman of the Board & Chief Executive Officer

 

Accepted this 6th day of
May, 2003.

 

 

 

 

 

 

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Optionee