Document:

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                                                                   EXHIBIT 10.08

                                 LOAN AGREEMENT
                             AND EXCHANGE AGREEMENT

                            DATED AS OF APRIL 1, 2000

                                      AMONG

                   FIREARMS TRAINING SYSTEMS, INC., AS PARENT,

                            FATS, INC., AS BORROWER,

                            THE LENDERS NAMED HEREIN

                                       AND

                   CENTRE CAPITAL INVESTORS II, L.P., AS AGENT

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         Exhibit A-1       Senior Secured Notes

         Exhibit A-2       Junior Secured Notes

         Exhibit B-1       Parent's Consent

         Exhibit B-2       Borrower's Consent

         Exhibit B-3       Subsidiaries Consent

         Exhibit C         Parent Guarantee Agreement

         Exhibit D         Subsidiaries Guarantee Agreement

         Exhibit E         Assignment and Acceptance

         Exhibit F         Intercreditor Agreement

         Exhibit G         Mortgage

         Exhibit H         Supplemental Agreement

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         This LOAN AGREEMENT AND EXCHANGE AGREEMENT dated as of April 1, 2000,
is made among FIREARMS TRAINING SYSTEMS, INC., a Delaware corporation, FATS,
INC., a Delaware corporation, CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.,
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P. and CENTRE PARTNERS COINVESTMENT,
L.P., as Lenders, and CENTRE CAPITAL INVESTORS II, L.P., as Agent and
individually as a Lender.

                                    RECITALS:

         A. The Borrower is indebted to the Lenders by way of a reimbursement
obligation (the "Guarantee Reimbursement Obligation") due under a guarantee
dated June 1, 1999 given by the Lenders in respect of the Deutsche Financial
Loan (as defined below).

         B. The Borrower and the Parent have requested, and the Lenders have
agreed, that the Guarantee Reimbursement Obligation shall be converted (in
satisfaction thereof) into the Senior Secured Loans, the Junior Secured Loans,
the Centre New Preferred and the Centre New Class A Common.

         C. The Borrower and certain Loan Parties have entered into a
restructuring of certain bank facilities pursuant to the Bank Credit Agreement
(as defined below).

         D. The Lenders are willing to enter into this Agreement upon the terms
and subject to the conditions set forth herein. Accordingly, the parties hereto
agree that, as of the Effective Date, this Agreement will, subject to the
conditions herein provided, become effective, as follows:

                                   ARTICLE I

                                   DEFINITIONS

         SECTION 1.01 Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:

         "additional amounts" shall have the meaning assigned to such term in
Section 2.20(a).

         "Administrative Questionnaire" shall mean, with respect to each Lender,
the administrative questionnaire in the form submitted to such Lender by the
Agent and returned to the Agent duly completed by such Lender.

         "Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.

         "Agency Account Agreement" shall mean an agency account agreement among
the Borrower or any Domestic Subsidiary, the Banks' Agent and a financial
institution in which the Borrower or such Domestic Subsidiary maintains a
deposit account, in substantially the form attached to the Bank Credit Agreement
as Exhibit J, as amended from time to time.

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         "Agency Agreement" shall mean the Agency Agreement dated as of January
1, 1997 between the Parent and the Borrower.

         "Agent" shall mean Centre Capital Investors II, L.P. in its capacity as
agent for the Lenders hereunder, and its successors in such capacity.

         "Agreement" shall mean this Loan Agreement and Exchange Agreement, as
amended, modified or supplemented from time to time.

         "Applicable Laws" shall have the meaning assigned to such term in
Section 3.09(b).

         "Applicable Percentage" of any Lender shall mean a fraction (expressed
as a percentage), the numerator of which is the aggregate amount of such
Lender's Loans and the denominator of which is the aggregate of all Lenders'
Loans.

         "Asset Sale" shall mean any sale, lease, transfer, assignment,
Condemnation, Casualty (in the case of Casualty, to the extent covered by
insurance) or other disposition of assets (including Intellectual Property and
other intangibles), business units, individual business assets or property of
the Parent, the Borrower or any of the Subsidiaries made after the Effective
Date, including the sale, transfer or disposition of any Capital Stock or real
property, except as expressly permitted or contemplated by this Agreement;
provided, however, that none of the following shall be deemed to be an Asset
Sale: (a) the sale of inventory (other than to Subsidiaries) in the ordinary
course of business; and (b) the sale, lease, transfer, assignment or other
disposition of assets (other than in connection with any Casualty or
Condemnation) of the Borrower or any Subsidiary (i) to the Borrower or any
Wholly Owned Subsidiary which is a Domestic Subsidiary, (ii) to any Wholly Owned
Subsidiary which is a Foreign Subsidiary, so long as such transaction is
permitted by paragraph (G) of Section 6.05(a), (iii) in connection with the
liquidation for the account of the Borrower or any Subsidiary of Cash
Equivalents or (iv) to the extent that such assets consist of damaged, worn out
or obsolete tangible assets, so long as the fair market value of all property
disposed of pursuant to this clause (iv) does not exceed $50,000 in the
aggregate in any fiscal year; provided that the foregoing definition shall not
be deemed to imply that any such Asset Sale is permitted under this Agreement.

         "Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and its assignee, and accepted by the Agent, in the
form attached hereto as Exhibit E or such other form as shall be approved by the
Agent.

         "Balance Sheet" shall have the meaning assigned to such term in Section
3.05.

         "Bank Credit Agreement" shall mean the Credit Agreement originally
dated as of October 15, 1997 among the Borrower, the Parent, the banks and
financial institutions party thereto as lenders and Bank of America, N.A., as
agent for such lenders, as further amended, modified, supplemented and/or
restated from time to time, including as of April 1, 2000.

         "Bank Common Stock" shall mean the "Lender Common Stock" as such term
is defined in the Bank Credit Agreement.

         "Bank Facilities" shall mean the "Facilities" as such term is defined
in the Bank Credit Agreement and the other Bank Loan Documents.

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         "Bank Letters of Credit" shall mean the "Letters of Credit" as such
term is defined in the Bank Credit Agreement after the Effective Date pursuant
to Section 2.22 thereof.

         "Bank Common Stock" shall mean the "Lender Common Stock" as such term
is defined in the Bank Credit Agreement.

         "Bank Junior Secured Loan" shall mean the "Junior Secured Loan" as such
term is defined in the Bank Credit Agreement.

         "Bank Junior Secured Notes" shall mean the Junior Secured Notes as such
term is defined in the Bank Credit Agreement.

         "Bank Loan Documents" shall mean the "Loan Documents" as such term is
defined in the Bank Credit Agreement.

         "Bank Loans" shall mean the Bank Junior Secured Loan and the Bank
Senior Secured Loan.

         "Bank Preferred Stock" shall mean the 20,463.717 shares of Series B
Preferred Stock of the Parent issued to the Banks pursuant to the terms of the
Bank Credit Agreement and pursuant to the Certificate of Designations of Series
B Preferred Stock dated August 24, 2000 and filed with the Secretary of State of
Delaware, and the shares of Series B Preferred Stock issued as dividends
thereon.

         "Banks" shall mean, at any time, the banks and financial institutions
at such time party to, and in their respective capacities, as lenders under the
Bank Credit Agreement.

         "Banks' Agent" shall mean (i) Bank of America, N.A. or any successor
agent under the Bank Credit Agreement and (ii) with respect to the Collateral,
Bank of America, N.A. in its capacity as agent for the Secured Parties pursuant
to and under the Intercreditor Agreement.

         "Bank Senior Secured Loan" shall mean the "Senior Secured Loan" as such
term is defined in the Bank Credit Agreement.

         "Bank Senior Secured Notes" shall mean the "Senior Secured Notes" as
such term is defined in the Bank Credit Agreement.

         "Board" shall mean the Board of Governors of the Federal Reserve System
of the United States.

         "Borrower" shall mean FATS, Inc.

         "Borrower's Consent" shall mean the Borrower's Consent and Agreement
dated as of the Effective Date among the Borrower, the Lenders, the Banks, the
Agent and the Banks' Agent in the form attached hereto as Exhibit B-2.

         "Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of North Carolina or New York) on
which banks are open for business in Charlotte, North Carolina and New York
City.

         "Capital Expenditures" shall mean, for any period, the sum of (a) all
expenditures (whether paid in cash or other consideration or accrued as a
liability) which would, in accordance with GAAP, be included on a consolidated
statement of cash flows of the Parent and its Consolidated Subsidiaries for

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such period as additions to property, plant and equipment, Capital Lease
Obligations or similar items and (b) to the extent not covered by clause (a)
hereof, all expenditures (whether paid in cash or other consideration or accrued
as a liability) of the Parent and its Consolidated Subsidiaries for such period
to acquire by purchase or otherwise the business, property or fixed assets of,
or stock or other evidences of beneficial ownership of, any other person (other
than the portion of such expenditures allocable in accordance with GAAP to net
current assets); provided that the foregoing shall exclude (i) all such
expenditures to the extent made with Insurance Proceeds or Condemnation Awards,
and (ii) de minimis expenditures which individually are less than $2,500 (so
long as the exclusion of such de minimis items is in accordance with GAAP).

         "Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.

         "Capital Stock" of any person shall mean any and all shares,
partnership and other interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated) the
equity of such person.

         "Cash Capital Expenditures" shall mean, for any period, all Capital
Expenditures paid in cash during such period.

         "Cash Dividends" shall mean, for any period, the aggregate amount of
dividends paid in cash during such period.

         "Cash Equivalents" shall mean:

                  (a) direct obligations of, or obligations the principal of and
         interest on which are unconditionally guaranteed by, the United States
         of America (or by any agency thereof to the extent such obligations are
         backed by the full faith and credit of the United States of America),
         in each case maturing within 180 days from the date of acquisition
         thereof;

                  (b) investments in commercial paper maturing within 180 days
         from the date of acquisition thereof and having, at such date of
         acquisition, the highest credit rating obtainable from Standard &
         Poor's Corporation or from Moody's Investors Service, Inc.,
         respectively;

                  (c) investments in certificates of deposit, banker's
         acceptances and time deposits maturing within 180 days from the date of
         acquisition thereof issued or guaranteed by or placed with, and money
         market deposit accounts issued or offered by, any domestic office of
         any Bank or any commercial bank organized under the laws of the United
         States of America or any State thereof which has a combined capital and
         surplus and undivided profits of not less than $500,000,000;

                  (d) money market funds substantially all of whose assets are
         comprised of securities of the types described in (a) through (c)
         above;

                  (e) cash deposits in any Deposit Account covered by an Agency
         Account Agreement or in any cash collateral account with the Banks'
         Agent required by, and maintained in

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         accordance with, this Agreement or any Collateral Document or pursuant
         to any Bank Loan Document; and

                  (f) other investment instruments approved in writing by the
         Banks' Agent and offered by financial institutions which have a
         combined capital and surplus and undivided profits of not less than
         $500,000,000.

         "Cash Interest Expense" shall mean, for any period, the gross amount of
interest expense of the Parent and its Consolidated Subsidiaries, determined on
a consolidated basis in accordance with GAAP, during such period, including (a)
the portion of any payments or accruals with respect to Capital Lease
Obligations that are allocable to interest expense in accordance with GAAP, and
(b) all fees, charges, discounts and other costs paid in respect of Indebtedness
during such period, but, in each case, excluding any non-cash interest expense.

         "Cash Tax Expense" shall mean, for any period, the amount of expense
for Federal, state, local and other income taxes of the Parent and its
Consolidated Subsidiaries, determined on a consolidated basis in accordance with
GAAP (assuming the Parent was deemed to be the common parent of an affiliated
group (within the meaning of Section 1504 of the Code) of which only the Parent,
the Borrower and the Subsidiaries were members), for such period, but excluding
deferred income tax expense.

         "Casualty" shall mean any casualty or other loss, damage or
destruction.

         "Centre Class B Stock" shall mean the 1,694,569 shares of Class B
non-voting common stock of the Parent owned by the Centre Entities as of the
Effective Date.

         "Centre Converted Class A Common" shall mean the 6,695,213 shares of
Class A Common of the Parent issued to the Lenders valued at the Class A Common
Value in exchange for the Centre Existing Preferred valued at its liquidation
preference amount effective as of the Effective Date.

         "Centre Entities" shall mean the Lenders as at the date hereof.

         "Centre Existing Preferred" shall mean the Series A Preferred Stock of
the Parent issued to certain of the Lenders pursuant to that certain Securities
Purchase Agreement dated November 13, 1998.

         "Centre New Preferred" shall mean the 897.397 shares of Series B
Preferred Stock of the Parent having terms identical to the Bank Preferred Stock
which is to be issued to the Centre Entities, pursuant to the Certificate of
Designations of Series B Preferred Stock dated August 24, 2000 and filed with
the Secretary of State of Delaware, in partial satisfaction of the Guarantee
Reimbursement Obligation and all Series B Preferred Stock of the Parent issued
as dividends thereon.

         "Centre New Class A Common" shall mean the 1,764,452 shares of Class A
Common Stock of the Parent issued to the Lenders in partial satisfaction of the
Guarantee Reimbursement Obligation.

         "Change in Control" shall mean the occurrence of any of the following
events: (a) the Parent shall fail to own 100% of the Capital Stock of the
Borrower (on a fully diluted basis), (b) any person or "group" (within the
meaning of Rule 13d-5 under the Exchange Act), together with its Affiliates,
other than the Permitted Investors, shall beneficially own, directly or
indirectly, an amount of the outstanding Capital Stock of the Parent entitled to
25% or more of the Total Voting Power of the Parent, (c) the Permitted Investors
shall beneficially own, directly or indirectly, an amount of the outstanding
capital stock of the Parent entitled to less than 60% of the Total Voting Power
of the Parent, or (d) the failure at

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any time of a majority of the seats (excluding vacant seats) on the board of
directors of the Parent to be occupied by persons who were nominated by the
affirmative vote of members of such board of directors who are officers or
Affiliates of the Permitted Investors.

         "Charges" shall have the meaning assigned to such term in Section 9.09.

         "Class A Common Value" shall mean the average of the trading closing
prices for the Parent's Class A Common Stock for the 20 days preceding April,
27, 2000.

         "Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.

         "Collateral" shall mean all the collateral pledged or purported to be
pledged pursuant to any of the Collateral Documents.

         "Collateral Documents" shall mean the Security Agreement, the Pledge
Agreement, the Perfection Certificate, the Agency Account Agreements, the
Mortgages, the Parent's Consent, the Borrower's Consent, the Subsidiaries'
Consent, the Guarantee Agreements and all other security agreements, financing
statements and other documents and instruments executed and delivered pursuant
to the terms hereof or thereof in order to secure any Obligations, perfect any
Lien granted to the Banks' Agent for the benefit of the Secured Parties and the
secured parties under the Bank Credit Agreement pursuant thereto or otherwise
protect the interests of the Secured Parties and the secured parties under the
Bank Credit Agreement, including each agreement executed in connection with (i)
the pledge of Capital Stock of F.A.T.S. Singapore PTE LTD. and Firearms Training
Systems Netherlands B.V. and (ii) the granting of a security interest in or
assignment of (or any equivalent thereof) (A) any foreign collection account,
operating account or investment account and (B) any rights to receive payments
with respect to any Government Contract.

         "Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.

         "Condemnation" shall mean any taking of property, or any part thereof
or interest therein, for public or quasi-public use under the power of eminent
domain, by reason of any public improvement or condemnation proceeding, or in
any other manner.

         "Condemnation Award" shall mean all proceeds of any Condemnation or
transfer in lieu thereof.

         "Consolidated Subsidiaries" shall mean, for any person, all
subsidiaries of such person that should be consolidated with such person for
financial reporting purposes in accordance with GAAP.

         "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.

         "Current Assets" shall mean, as of any date, all assets which would, in
accordance with GAAP, be included on a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of such date as current assets.

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         "Current Liabilities" shall mean, as of any date, all liabilities which
would, in accordance with GAAP, be included on a consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of such date as current
liabilities.

         "Debt Issuance" shall mean the issuance after the Effective Date of any
Indebtedness by the Parent, the Borrower or any of the Subsidiaries (other than
any Indebtedness permitted by Section 6.01); provided that the foregoing
definition shall not be deemed to imply that any such issuance of Indebtedness
is permitted under this Agreement.

         "Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.

         "Deposit Account" shall mean any demand, time, savings, passbook,
collection, operating, investment or other like type of account relating in any
way to the assets or business of the Borrower or any Subsidiary.

         "Deutsche Financial Loan" shall mean the revolving promissory note
dated June 1, 1999 executed and delivered by Firearms Training Systems Limited,
a U.K. limited company, and Firearms Training Systems Netherlands, B.V., a
corporation organized under the laws of the Netherlands, to Deutsche Financial
Services Corporation in the original principal amount of $3,000,000.

         "Disqualified Stock" of any person shall mean (a) any Capital Stock of
such person which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the happening
of any event or otherwise (i) matures or is mandatorily redeemable or subject to
any mandatory repurchase requirement, pursuant to a sinking fund obligation or
otherwise, (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock or (iii) is redeemable or subject to any
mandatory repurchase requirement at the option of the holder thereof, in whole
or in part, in each case on or prior to the first anniversary date of the Junior
Secured Loans Maturity Date and (b) if such person is a Subsidiary, any
Preferred Stock of such person.

         "dollars" or "$" shall mean lawful money of the United States of
America.

         "Domestic Subsidiaries" shall mean all Subsidiaries incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.

         "EBITDA" shall mean, for any period, (a) Net Income for such period,
plus, (b) the following to the extent deducted in computing such Net Income: (i)
interest expense, (ii) tax expense, (iii) depreciation and amortization of
tangible and intangible assets and (iv) other non-cash charges or non-cash
losses, in each case for the Parent and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, minus (c) the
following to the extent added in computing such Net Income: (i) interest income
and (ii) any non-cash income or non-cash gains, in each case for the Parent and
its Consolidated Subsidiaries, determined on a consolidated basis in accordance
with GAAP.

         "Effective Date" shall mean April 1, 2000.

         "Environmental Laws" shall mean any and all applicable present and
future (when implemented) treaties, laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, Release or threatened Release of any Hazardous Material or to health
and safety matters, including the

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Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
ss.ss. 9601 et seq. (collectively "CERCLA"), the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. ss.ss. 6901 et seq., the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C.
ss.ss. 1251 et seq., the Clean Air Act of 1970, as amended 42 U.S.C. ss.ss. 7401
et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss. 2601 et
seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.ss. 651 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. ss.ss. 11001 et seq., the Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. ss.ss. 300(f) et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. ss.ss. 5101 et seq., and any similar or implementing state or
local law, and all amendments or regulations promulgated under any of the
foregoing.

         "Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.

         "Equity Issuance" shall mean the issuance after the Effective Date of
any Capital Stock or receipt of any capital contribution by the Parent, the
Borrower or any of the Subsidiaries not expressly permitted or contemplated by
this Agreement; provided that the foregoing definition shall not be deemed to
imply that any such Equity Issuance is permitted under this Agreement.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.

         "Event of Default" shall have the meaning assigned to such term in
Article VII.

         "Excess Cash Flow" shall mean, for any period, the excess of (a) the
sum, without duplication, of (i) EBITDA for such period, (ii) extraordinary cash
income, if any, business interruption insurance proceeds, if any, and cash gains
attributable to sales of assets out of the ordinary course of business, if any,
during such period to the extent that any such extraordinary cash income, such
insurance proceeds or such cash gain (A) is not included in EBITDA for such
period and (B) is not required to be utilized in connection with a payment made
(or to be made) by the Borrower pursuant to Section 2.12(e) and (iii) the
amount, if any, by which Working Capital decreased during such period over (b)
the sum, without duplication, of (i) Cash Tax Expense for such period, (ii) Cash
Interest Expense for such period, (iii) Cash Capital Expenditures for such
period, (iv) prepayments of the principal of Loans made during such period
(except pursuant to Section 2.12(f)), but only to the extent that such
prepayments by their terms cannot be reborrowed or redrawn and, in the case of
any mandatory prepayment made during such period, only to the extent that the
Net Cash Proceeds of the Prepayment Event giving rise to such prepayment are
included in EBITDA for such period, and (v) the amount, if any, by which Working
Capital increased during such period.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "Excluded Taxes" shall have the meaning assigned in such term in
Section 2.20(a).

         "FATS UK" shall mean Firearms Training Systems Limited, a United
Kingdom corporation.

         "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal

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funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it. Each change in the Federal Funds Effective
Rate shall be effective on the date thereof, without notice to the Borrower.

         "Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer or similar officer of such corporation.

         "Financial Statements" shall have the meaning assigned to such term in
Section 3.05(a).

         "Foreign Subsidiary" shall mean any Subsidiary which is not a Domestic
Subsidiary.

         "GAAP" shall mean United States generally accepted accounting
principles, applied on a consistent basis.

         "Governmental Authority" shall mean any Federal, state, local or
foreign governmental department, commission, board, bureau, authority, agency,
court, instrumentality or judicial or regulatory body or entity.

         "Government Contract" shall have the meaning assigned to such term in
Section 3.17(a).

         "Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; provided, however, that the term Guarantee
shall not include endorsements for collection or deposit, in either case in the
ordinary course of business.

         "Guarantee Agreements" shall mean the Parent Guarantee Agreement and
the Subsidiaries Guarantee Agreement.

         "Guarantee Reimbursement Obligation" shall have the meaning given to
such term in Recital A to this Agreement.

         "Guarantor" shall mean any party to either Guarantee Agreement.

         "Hazardous Materials" shall mean all explosive or radioactive
substances or wastes, hazardous or toxic substances or wastes, pollutants,
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

         "Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind made with or to such person, (b)

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all obligations of such person evidenced by bonds, debentures, notes or similar
instruments, including certificates issued in connection with an asset
securitization, (c) all obligations of such person upon which interest charges
are customarily paid, (d) all obligations of such person under conditional sale
or other title retention agreements relating to property or assets purchased by
such person, (e) all obligations of such person issued or assumed as the
deferred purchase price of property or services, (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (g) all Guarantees by such person of Indebtedness of others, (h)
all Capital Lease Obligations of such person, (i) all obligations of such person
in respect of interest rate protection agreements, (j) all obligations of such
person, contingent or otherwise, as an account party in respect of letters of
credit and bankers' acceptances and (k) all obligations of such person to
contribute money or other property to any other person. The Indebtedness of any
person shall include, without duplication, the Indebtedness of any partnership
in which such person is a general partner and of any trust or other entity
formed or utilized in connection with a securitization of assets of such person.
Notwithstanding the foregoing, (i) the Indebtedness of any person shall exclude
all trade accounts payable arising in the ordinary course of business and (ii)
the Indebtedness of the Borrower shall exclude accrued expenses in accordance
with GAAP.

         "Indemnified Party" shall have the meaning assigned to such term in
Section 9.05(b).

         "Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement dated as of October 1, 1997,
among the Borrower, each Subsidiary and the Banks' Agent.

         "Insurance Proceeds" shall mean all insurance proceeds (other than
business interruption insurance proceeds), damages, awards, claims and rights of
action with respect to any Casualty.

         "Intellectual Property" shall mean all patents, patent rights, patent
applications, licenses, inventions, trade secrets, know how, proprietary
techniques (including processes and substances), trademarks, servicemarks,
tradenames and copyrights.

         "Intercompany Notes" shall mean the promissory notes issued as
contemplated by Section 6.04(a)(ii).

         "Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated as of the Effective Date among certain of the Lenders, the
Agent, the Banks and the Banks' Agent in the form attached hereto as Exhibit F.

         "Interest Period" shall mean (unless otherwise provided in this
Agreement) (i) with respect to the New Revolving Loan, the period commencing on
the date of a borrowing or on the last day of the immediately preceding Interest
Period, as the case may be, and ending on the earlier of the next succeeding
March 31, June 30, September 30 or December 31 or the New Revolving Credit
Maturity Date, and (ii) with respect to any Senior Secured Loan or Junior
Secured Loan, the period commencing on the Effective Date or on the last day of
the immediately preceding Interest Period, as the case may be, and ending on the
earlier of the next succeeding March 31, June 30, September 30 or December 31 or
the Junior Secured Loans Maturity Date or the Senior Secured Loans Maturity
Date, as the case may be. Interest shall accrue from and including the first day
of an Interest Period to, but excluding, the last day of such Interest Period.

                                       10

<PAGE>   13

         "Junior Secured Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01(b) in an aggregate amount equal to the
Junior Secured Loans Amount.

         "Junior Secured Loans Amount" shall mean $966,248.

         "Junior Secured Loans Extension Fee" shall mean an amount equal to one
percent (1%) of the outstanding principal balance of the Junior Secured Loans at
the time of extension.

         "Junior Secured Loans Extension Option" shall have the meaning set
forth in Section 2.12(l).

         "Junior Secured Loans Maturity Date" shall mean March 31, 2003, or if
the Borrower has exercised the Junior Secured Loans Extension Option, March 31,
2004.

         "Junior Secured Notes" shall mean the promissory notes of the Borrower,
substantially in the form of Exhibit A-2, evidencing Junior Secured Loans and
any interest paid to the Lenders on the Junior Secured Loans as provided in
Section 2.07(b).

         "Landlord Waiver" shall mean each of the Landlord Waiver and Consents,
in form and substance satisfactory to the Agent and the Banks' Agent made by the
Landlords of the Borrower's Georgia offices for the benefit of the Banks' Agent
and the Secured Parties.

         "Lender" shall mean each person listed on the signature pages of this
Agreement, each assignee which hereafter becomes a Lender pursuant to Section
9.04(b), and their respective successors.

         "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, easement, restriction, restrictive covenant, lease,
sublease, option, charge, security interest, financing statement or encumbrance
of any kind in respect of such asset and (b) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities. For purposes hereof, the Borrower or any Subsidiary shall be deemed
to own subject to a lien any asset which it has acquired or holds subject to the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or title retention agreement relating to such asset.

         "Liquidation Value" shall mean the liquidation preference amount of the
Bank Preferred Stock.

         "Loan Documents" shall mean (a) this Agreement, (b) the Senior Secured
Notes and the Junior Secured Notes, (c) the Guarantee Agreements, (d) any
Supplemental Agreements and (e) the Collateral Documents.

         "Loan Parties" shall mean the Borrower, the Subsidiaries, the Parent
and any other person which becomes a pledgor or grantor under any pledge
agreement or security agreement.

         "Loans" shall mean any or all of the Senior Secured Loans and the
Junior Secured Loans, and each individually, a "Loan".

         "Margin Stock" shall have the meaning assigned to such term under
Regulation U.

         "Material Adverse Change" shall mean either (i) any material adverse
change in the material existing agreements and relationships, business,
financial condition or results of operations of the Borrower and the
Subsidiaries, taken as a whole, other than changes relating to the economy in
general or the defense, law enforcement or simulations industries in general and
not specifically relating to the

                                       11

<PAGE>   14

Borrower or a Subsidiary, or (ii) any damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking that has a
Material Adverse Effect on the Borrower or the Subsidiaries.

         "Material Adverse Effect" shall mean (a) a materially adverse effect on
the material existing agreements and relationships, business, financial
condition or results of operations of the Borrower and the Subsidiaries, taken
as a whole, (b) a material impairment of the ability of the Borrower and the
Subsidiaries to perform their material obligations under the Loan Documents,
taken as a whole, or (c) a material impairment of the rights of or benefits
available to the Lenders under the Loan Documents, taken as a whole. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events would result in a
Material Adverse Effect.

         "Material Contracts" shall have the meaning assigned to such term in
Section 3.10(a).

         "Material Intellectual Property" shall have the meaning assigned to
such term in Section 3.07(c).

         "Maximum Rate" shall have the meaning assigned to such term in Section
9.09.

         "Mortgage" shall mean each mortgage, assignment of rents, security
agreement and fixture filing, or deed of trust, assignment of rents and fixture
filing, or similar instrument creating and evidencing a lien on real property
and other property and rights incidental thereto, which shall be substantially
in the form of Exhibit G hereto (with such conforming changes appropriate for a
fee mortgage or a leasehold mortgage as shall be satisfactory to the Agent and
the Banks' Agent), containing such schedules and including such exhibits as
shall not be inconsistent with the requirements of the Bank Credit Agreement or
shall be necessary to conform such instrument to applicable local law and which
shall be dated the date of delivery thereof and made by the owner of the real
property described therein for the benefit of the Banks's Agent, as mortgagee
(or beneficiary), assignee and secured party for the benefit of the Secured
Parties, as the same may at any time be amended, modified or supplemented in
accordance with the terms thereof and hereof and, in each case, for such changes
therein (whether before or after the execution and delivery thereof) as are
otherwise permitted by Section 9.08.

         "Mortgaged Properties" shall mean the owned real properties and
leasehold interests identified as "Mortgaged Properties" on Schedule 3.07(b) and
each other owned real property or leasehold interest required to be subjected to
a Mortgage under Section 5.12.

         "Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

         "Net Cash Proceeds" shall mean: (a) with respect to any Asset Sale, (i)
the gross amount of cash proceeds (including Insurance Proceeds and Condemnation
Awards in the case of any Casualty or Condemnation unless such Insurance
Proceeds or Condemnation Awards (A) are Reinvestment Funds or (B) are to be used
for repair, restoration or replacement pursuant to plans approved by the
Required Lenders) actually paid to or actually received by the Parent, the
Borrower or any Subsidiary in respect of such Asset Sale (including cash
proceeds subsequently received at any time in respect of such Asset Sale in
respect of non-cash consideration initially received or otherwise), less (ii)
the sum of (A) the amount, if any, of all taxes (other than income taxes) and
the Borrower's good-faith best estimate of all income taxes (to the extent that
such amount shall have been set aside for the purpose of paying such taxes when
due),

                                       12

<PAGE>   15

and customary fees, brokerage fees, commissions, costs and other expenses (other
than those payable to the Borrower, any Subsidiary or any Affiliate of the
Borrower) that are incurred in connection with such Asset Sale and are payable
by the seller or the transferor of the assets or property to which such Asset
Sale relates, but only to the extent not already deducted in arriving at the
amount referred to in clause (a)(i) above, (B) appropriate amounts that must be
set aside as a reserve in accordance with GAAP against any liabilities
associated with such Asset Sale and (C) if applicable, the amount of
Indebtedness secured by a Lien permitted under Section 6.02 that has been repaid
or refinanced as required in accordance with its terms with the proceeds of such
Asset Sale; and (b) with respect to any Equity Issuance or Debt Issuance, the
gross amount of cash proceeds paid to or received by the Parent, the Borrower or
any Subsidiary in respect of such Equity Issuance or Debt Issuance, as the case
may be, net of underwriting discounts and commissions or placement fees,
investment banking fees, legal fees, consulting fees, accounting fees and other
customary fees and expenses directly incurred by the Parent, the Borrower or any
Subsidiary in connection therewith.

         "Net Income" shall mean, for any period, net income (or loss) of the
Parent and its Consolidated Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from such calculation of net income (or loss) (a) the income of any
person in which any other person (other than the Parent, the Borrower or any of
the Subsidiaries) has any interest, except to the extent of the amount of
dividends or other distributions actually paid to the Parent, the Borrower or
any Wholly Owned Subsidiary by such person during such period, (b) the income
(or loss) of any person accrued prior to the date it becomes a Subsidiary or is
merged into or consolidated with the Parent, the Borrower or any of the
Subsidiaries or the date such person's assets are acquired by the Parent, the
Borrower or any of the Subsidiaries, (c) the income of any Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Subsidiary, (d) any
after-tax gains or losses attributable to sales of assets out of the ordinary
course of business and (e) (to the extent not included in clauses (a) through
(d) above) any non-cash extraordinary gains or non-cash extraordinary losses.

         "Net Worth" shall mean, as of any date, the total of all amounts which
would in accordance with GAAP be included on a consolidated balance sheet of the
Parent and its Consolidated Subsidiaries as of such date as (a) the par or
stated value of all outstanding Capital Stock of the Parent, (b) paid in capital
or capital surplus relating to such Capital Stock and (c) any retained earnings
or earned surplus less (i) any accumulated deficit and (ii) any amounts
attributable to Disqualified Stock.

         "New Lending Office" shall have the meaning assigned to such term in
Section 2.20(e).

         "New Revolving Credit Maturity Date" shall mean March 31, 2003.

         "New Revolving Loan" shall mean the revolving loans made by the Banks
to the Borrower pursuant to Section 2.02(a) of the Bank Credit Agreement.

         "Non-U.S. Lender" shall have the meaning assigned to such term in
Section 2.20(e).

         "Notes" shall mean the Senior Secured Notes and the Junior Secured
Notes.

         "Obligations" shall mean (a) the Borrower's obligations in respect of
the due and punctual payment of principal of and interest (including interest
accruing after the filing of a petition initiating any

                                       13

<PAGE>   16

proceeding referred to in paragraph (g) or (h) of Article VII of this Agreement)
on the Loans when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (b) all fees, expenses, indemnities
and expense reimbursement obligations of the Borrower under any other Loan
Document and (c) all other obligations, monetary or otherwise, of the Borrower
or any of the other Loan Parties under any Loan Document to which it is a party,
in each case, whether now owing or hereafter existing.

         "Other Taxes" shall have the meaning assigned to such term in Section
2.20(b).

         "Parent" shall mean Firearms Training Systems, Inc.

         "Parent Guarantee Agreement" shall mean the Guarantee Agreement dated
as of the Effective Date between the Parent and the Agent in the form attached
hereto as Exhibit C.

         "Parent's Consent" shall mean the Parent's Consent and Amendment
Agreement dated as of the Effective Date among the Lenders, the Banks, the
Parent, the Agent and the Banks' Agent in the form attached hereto as Exhibit
B-1.

         "PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor thereto.

         "Perfection Certificate" shall mean a certificate from the Borrower and
the Subsidiaries dated as of the Effective Date.

         "Permitted Investors" shall mean (a) the Sponsor, (b) any Affiliate of
the Sponsor, so long as such Affiliate is reasonably acceptable to the Agent;
provided that each of the Centre Entities shall be deemed reasonably acceptable
to the Agent, (c) the Lenders or Affiliates of the Lenders, (d) the Banks and
any Affiliates of the Banks and (e) stockholders of the Parent that become
stockholders of the Parent in connection with acquisitions by the Borrower, so
long as the aggregate Total Voting Power of the Parent held by such person/or
persons, at any time, does not exceed 5% of the Total Voting Power of the
Parent.

         A "person" shall mean any natural person, corporation, business trust,
joint venture, association, company, limited liability company, partnership,
government (or any agency or political subdivision thereof) or other entity.

         "Personnel" shall have the meaning assigned to such term in Section
3.07(c).

         "Plan" shall mean at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.

         "Pledge Agreement" shall mean the Pledge Agreement between the Parent
and the Banks' Agent dated as of January 1, 1997, as amended by the Parent's
Consent and Agreement dated as of October 15, 1997 and as further amended by the
Parent's Consent and as such Pledge Agreement may be further amended from time
to time.

         "Preferred Stock", as applied to the Capital Stock of any corporation,
shall mean Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the

                                       14

<PAGE>   17

distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.

         "Prepayment Event" shall mean any Asset Sale, Equity Issuance or Debt
Issuance.

         "Prime Rate" shall mean the rate of interest per annum adopted from
time to time by Bank of America N.A. (or any successor agent under the Bank
Credit Agreement) as its prime rate, as announced and in effect at its principal
office in Charlotte, North Carolina. Each change in the Prime Rate shall be
effective on the date such change is adopted, without notice to the Borrower.
The Prime Rate is a reference rate used by the Banks' Agent or the Agent in
determining interest rates on certain loans and is not intended to be the lowest
rate of interest charged on any extension of credit to any debtor.

         "Properties" shall have the meaning assigned to such term in Section
5.11(a).

         "Reference Period" with respect to any date shall mean the period of
four consecutive fiscal quarters of the Borrower immediately preceding such date
or, if such date is the last day of a fiscal quarter, ending on such date.

         "Register" shall have the meaning assigned to such term in Section
9.04(d).

         "Registration Rights Agreement" shall mean the registration rights
agreement, as amended, dated as of July 31, 1996, among the Parent and the
Lenders, and as further amended from time to time.

         "Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

         "Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

         "Reinvestment Funds" shall mean, with respect to any Insurance Proceeds
from a Casualty or Condemnation Award from a Condemnation, that portion of such
proceeds as shall, according to a certificate of a Financial Officer of the
Borrower delivered to the Agent within 90 days after the occurrence of such
Casualty or Condemnation, be reinvested in the repair, restoration or
replacement of the properties and assets that were the subject of such Casualty
or Condemnation; provided that (a) the aggregate amount of such proceeds with
respect to any such event or series of related events shall not exceed
$1,000,000, (b) pending such reinvestment, the entire amount of such proceeds
shall be deposited in an account with the Banks' Agent for the benefit of the
Lenders and the Banks, over which the Banks' Agent shall have sole control and
exclusive right of withdrawal (subject to the right of the Borrower to withdraw
funds for the purpose of the reinvestment described in such certificate so long
as no Default or Event of Default has occurred and is continuing and subject to
the provisions of the Intercreditor Agreement), (c) from and after the date of
delivery of such certificate, the Borrower shall diligently proceed, in a
commercially reasonable manner, to complete the repair, restoration or
replacement of the properties and assets that were the subject of such Casualty
or Condemnation as described in such certificate and (d) no Event of Default
shall have occurred and be continuing.

         "Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.

                                       15

<PAGE>   18

         "Remedial Action" shall mean (a) "remedial action" as such term is
defined in CERCLA, 42 U.S.C. ss.9601(24), and (b) all other actions required by
any Governmental Authority or voluntarily undertaken to (i) cleanup, remove,
treat, abate or in any other way address any Hazardous Material in the
environment; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not migrate or endanger or
threaten to endanger public health, welfare or the environment; or (iii) perform
studies and investigations in connection with, or as a precondition to, the
actions described in clause (i) or (ii) above.

         "Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the PBGC has waived either
the 30-day notice period or the penalty for failure to give notice.

         "Required Financial Statements" shall mean, with respect to any period,
the financial statements of the Borrower for such period required under Section
5.04(a) or (b) hereunder, as applicable.

         "Required Lenders" shall mean, at any time, Lenders having Applicable
Percentages exceeding 50%.

         "Responsible Officer" of any person shall mean and include the
president, chief executive officer, chief operating officer, any financial
officer, any vice president, the general counsel or any other senior officer of
such person (or, in the case of a partnership, of a general partner thereof).

         "SEC" shall mean the Securities and Exchange Commission or any
successor agency.

         "Secured Parties" shall mean (a) the Lenders, (b) the Agent, in its
capacity as such under each Loan Document, (c) the beneficiaries of each
indemnification obligation undertaken by any of the Loan Parties under any Loan
Document and (d) the successors and assigns of the foregoing.

         "Securities Exchange Agreement" shall mean that certain Securities
Exchange and Release Agreement dated as of April 1, 2000, among the Parent and
the investors named therein.

         "Security Agreement" shall mean the Pledge and Security Agreement dated
as of July 31, 1996 among the Parent, the Domestic Subsidiaries and the Bank'
Agent, and assigned to and assumed by the Borrower pursuant to the Assignment
and Assumption Agreement, as amended by the Borrower's Consent and Agreement
dated as of October 15, 1997 and the Subsidiaries' Consent and Agreement dated
as of October 15, 1997, and as amended by the Borrower's Consent and the
Subsidiaries' Consent and as such Security Agreement may be further amended from
time to time.

         "Senior Secured Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01(b) in an aggregate amount equal to the
Senior Secured Loans Amount.

         "Senior Secured Loans Amount" shall mean $504,129.

         "Senior Secured Loans Extension Fee" shall mean an amount equal to one
percent (1%) of the outstanding principal balance of the Senior Secured Loans at
the time of extension.

         "Senior Secured Loans Extension Option" shall have the meaning set
forth in Section 2.12(l).

         "Senior Secured Loans Maturity Date" shall mean March 31, 2003, or if
the Borrower has exercised the Senior Secured Loans Extension Option, March 31,
2004.

                                       16

<PAGE>   19

         "Senior Secured Notes" shall mean the promissory notes of the Borrower,
substantially in the form of Exhibit A-1, evidencing Senior Secured Loans.

         "Single Employer Plan" shall mean any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.

         "Solvent" shall have the meaning assigned to such term in Section
3.19(a).

         "Sponsor" shall mean Centre Partners II, LLC, a Delaware limited
liability company.

         "subsidiary" shall mean, with respect to any person (referred to in
this definition as the "parent"), any corporation, partnership, association or
other business entity (a) of which Capital Stock representing more than 50% of
the aggregate ordinary voting power or more than 50% of the ownership interests
or more than 50% of the general partnership interests is, at the time any
determination is being made, owned, Controlled or held or (b) which is, at the
time any determination is made, otherwise Controlled, by (i) the parent, (ii)
one or more subsidiaries of the parent or (iii) the parent and one or more
subsidiaries of the parent.

         "Subsidiary" shall mean any subsidiary of the Borrower, including FATS
UK.

         "Subsidiaries' Consent" shall mean the Subsidiaries' Consent and
Agreement dated as of the Effective Date among the Domestic Subsidiaries, the
Lenders, the Banks, the Agent and the Banks' Agent in the form attached hereto
as Exhibit B-3.

         "Subsidiaries' Guarantee Agreement" shall mean the Guarantee Agreement,
dated as of the date hereof, between the Subsidiaries named therein and the
Agent in the form attached hereto as Exhibit D.

         "Supplemental Agreement" shall mean an agreement between a Subsidiary
and the Agent in the form attached hereto as Exhibit H, as amended from time to
time.

         "Taxes" shall have the meaning assigned to such term in Section
2.20(a).

         "Total Debt" shall mean, as of any date, the aggregate principal amount
of (a) all Senior Secured Loans and Junior Secured Loans as of such date, (b)
the outstanding principal amount of the Bank Junior Secured Loans, the Bank
Senior Secured Loans and the New Revolving Loans and (c) all other Indebtedness
of the Borrower and its Consolidated Subsidiaries as of such date, determined on
a consolidated basis in accordance with GAAP.

         "Total Voting Power" with respect to any person on any date shall mean
the total number of votes which may be cast in the election of directors of such
person at any meeting of stockholders of such person if all securities entitled
to vote in the election of directors of such person (on a fully diluted basis,
assuming the exercise, conversion or exchange of all rights, warrants, options
and securities exercisable for, exchangeable for or convertible into, such
voting securities on such date or within 60 days thereafter) were present and
voted at such meeting (other than votes that may be cast only upon the happening
of a contingency).

         "Transferee" shall have the meaning assigned to such term in Section
2.20(a).

         "Wholly Owned Subsidiary" shall mean, at any time, any Subsidiary all
the Capital Stock of which is at such time directly or indirectly owned by the
Borrower.

                                       17

<PAGE>   20

         "Working Capital" shall mean, as of any date of determination, an
amount equal to (a) Current Assets as of such date, but excluding cash and Cash
Equivalents described under clauses (a) through (f) of the definition thereof,
minus (b) Current Liabilities as of such date, but excluding (i) the current
portion of long-term Indebtedness and (ii) New Revolving Loans. Working Capital
as of any date may be a positive or negative number. Working Capital increases
when it becomes more positive or less negative and decreases when it becomes
less positive or more negative, and all such increases and decreases for any
period shall be determined in a manner consistent with that used in preparing
the Borrower's consolidated statements of cash flows for the same period in
accordance with GAAP.

         SECTION 1.02 Terms Generally. The definitions in Section 1.01 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, all terms of an accounting or financial nature used
herein shall be interpreted in accordance with GAAP, as in effect from time to
time; provided, however, that for purposes of (a) making any calculation
contemplated by the provisions of Article II and (b) determining compliance with
any covenant set forth in Article VI, such terms shall be construed in
accordance with GAAP as in effect on the date of this Agreement applied on a
basis consistent with the application used in preparing the Required Financial
Statements. Terms defined in the Bank Credit Agreement, unless otherwise defined
herein, (if the context permits) shall have the shall have the same meanings in
this Agreement.

                                   ARTICLE II

                                  THE EXCHANGE

         SECTION 2.01 Exchange of Guarantee Reimbursement Obligation for Equity
and Loans. (a) The Parent agrees, pursuant to the Securities Exchange Agreement,
(i) to issue to the Lenders on the Effective Date the Centre New Class A Common
(to be issued to each of the Lenders in accordance with the allocation set forth
on Schedule 2.01(a) hereto) in exchange for a credit equal to $882,226 and (ii)
to issue to the Lenders the Centre New Preferred (to be issued to each of the
Lenders in accordance with the allocation set forth on Schedule 2.01(a) hereto)
for a credit equal to $897,397, in each case to be applied against the Guarantee
Reimbursement Obligation.

         (b) The Borrower and the Lenders agree that, as of the Effective Date,
$1,470,377 of the Guarantee Reimbursement Obligation will be converted into (i)
Senior Secured Loans in the amount of the Senior Secured Loans Amount and (ii)
Junior Secured Loans in the amount of the Junior Secured Loans Amount,
respectively owing to each Lender in the amounts set forth in Schedule 2.01(b).
The Borrower shall issue to each of the Lenders a Senior Secured Note and a
Junior Secured Note, each payable to each such Lender in the amount set forth
for each such Lender in Schedule 2.01(b) hereto.

         (c) Upon the issue of the Centre New Class A and the Centre New
Preferred pursuant to Section 2.01(a) and the conversion of the Guarantee
Reimbursement Obligation to Senior Secured Loans and Junior Secured Loans
pursuant to Section 2.01(a), the Guarantee Reimbursement Obligation shall be
deemed satisfied in full.

         (d) Amounts paid or prepaid in respect of the Senior Secured Loans or
the Junior Secured Loans may not be reborrowed.

                                       18

<PAGE>   21

         (e) [Intentionally deleted].

         SECTION 2.02 [Intentionally deleted].

         SECTION 2.03 [Intentionally deleted].

         SECTION 2.04 [Intentionally deleted].

         SECTION 2.05 Notes; Repayment of Loans. The Senior Secured Loans and
the Junior Secured Loans of each Lender are evidenced by the Senior Secured
Notes in substantially the form of Exhibit A-1 hereto and the Junior Secured
Notes substantially in the form of Exhibit A-2 hereto, respectively, duly
executed and delivered on behalf of the Borrower, and dated as of the Effective
Date. The outstanding principal balance of each Loan, as evidenced by the
applicable Note, shall be payable on the Senior Secured Loans Maturity Date and
the Junior Secured Loans Maturity Date, as the case may be. Each Lender shall,
and is hereby authorized by the Borrower to, endorse on the schedule attached to
each Note delivered to such Lender (or on a continuation of such schedule
attached to such Note and made a part thereof), or otherwise to record in such
Lender's internal records, an appropriate notation evidencing the date and
amount of each applicable Loan from such Lender, each payment and prepayment of
principal of any such Loan, each payment of interest on any such Loan and the
other information provided for on such schedule; provided, however, that the
failure of any Lender to make such a notation or any error therein shall not
affect the obligation of the Borrower to repay the Loans made by such Lender in
accordance with the terms of this Agreement and the applicable Notes.

         SECTION 2.06 Fees. The Borrower agrees to reimburse the Agent for the
Agent's reasonable out-of-pocket expenses and any other fees arising under or in
connection with this Agreement, the Intercreditor Agreement and the other Loan
Documents.

         SECTION 2.07 Interest on Loans. (a) Subject to the provisions of
Section 2.08, (i) each Senior Secured Note shall bear interest for each day from
the Effective Date (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be) at a rate per annum equal to
the Prime Rate, plus one percent (1%). Except for the first payment of interest,
which shall be due and payable in cash on October 1, 2000, interest on the
Senior Secured Loans for each Interest Period shall be due and payable on the
fifth Business Day after the end of such Interest Period.

         (b) Subject to the provisions of Section 2.08, (i) each Junior Secured
Note delivered pursuant to Section 2.01(b) shall bear interest for each day from
the Effective Date (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be) at a fixed rate per annum
equal to ten percent (10%). Interest on the Junior Secured Notes for each
Interest Period payable in kind as hereinafter provided shall be due and payable
on the fifth Business Day after the end of such Interest Period and the Junior
Secured Notes evidencing such interest shall be delivered to the Agent for the
benefit of the Lenders. Interest on the Junior Secured Notes for each Interest
Period payable in cash as hereinafter provided shall be due and payable on the
first day of the next succeeding Interest Period and shall be paid to the Agent
for the benefit of the Lenders. For any Interest Period in which the EBITDA of
the Parent, on a consolidated basis, is less than 120% of the interest payments
on the Senior Secured Notes, the Bank Senior Secured Notes and the New Revolving
Credit Notes for such Interest Period, interest on the Junior Secured Notes
shall be payable in kind by the delivery to each of the Lenders of an additional
Junior Secured Note, substantially in the form of Exhibit A-2 hereto, dated the
last day of such Interest Period and in the amount of the interest owed to each
such Lender for such Interest Period. For any Interest Period in which the
EBITDA of the Parent, on a consolidated basis, is

                                       19

<PAGE>   22

more than 120% of the interest payments on the Senior Secured Notes and the Bank
Senior Secured Notes and the New Revolving Credit Notes for such Interest
Period, such interest shall be payable in cash, to the extent of the Lenders'
Applicable Percentage of such excess, and the remainder, if any, shall be
payable in kind by the delivery to each of the Lenders of an additional Junior
Secured Note, substantially in the form of Exhibit A-2 hereto dated the last day
of such Interest Period and in the amount of the balance of the interest owed to
each such Lender for such Interest Period. Any interest payable on the Junior
Secured Loans in cash shall, when paid to the Agent as hereinafter provided, be
held as cash collateral by the Agent in an interest bearing account for an
additional 120 day period before being distributed to the Lenders and applied to
the Junior Secured Notes. During such 120 day period, if the EBITDA of the
Parent, on a consolidated basis, during the next succeeding Interest Period is
less than 120% of the interest due on the Senior Secured Notes, the Bank Senior
Secured Notes and the New Revolving Credit Notes for the next succeeding
Interest Period, the funds so held shall not, upon the written request of the
Borrower, be applied as interest on the Junior Secured Notes as provided above
but shall be used to pay interest on the Senior Secured Notes, the Bank Senior
Secured Notes and for Capital Expenditures permitted hereunder, for the next
succeeding Interest Period to the extent of the difference between 120% of the
EBITDA for such period and the interest due on the Senior Secured Notes, the
Bank Senior Secured Notes and the New Revolving Credit Notes for such period. In
the event any funds so held are not applied to interest on the Junior Secured
Notes, the Borrower shall promptly execute additional Junior Secured Notes to
the Lenders and deliver the same to the Agent for the benefit of the Lenders in
the amount of any remaining unpaid interest on the Junior Secured Notes dated
and effective as of the original due date of such interest.

         SECTION 2.08 Default Interest. If and for so long as any Event of
Default shall have occurred and be continuing, interest shall, at the option of
the Required Lenders, accrue, to the extent permitted by applicable law, on the
outstanding amount of all Obligations during the period from (and including) the
date of such Event of Default or the date such option is elected, to (but not
including) the date of actual payment (after as well as before judgment) at, (a)
in the case of principal of or interest on any Loan, the rate per annum
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be) applicable to such Loan during such period
pursuant to Section 2.07, plus two percent (2.00%) and (b) in the case of any
other amount, a rate per annum (computed on the basis of the actual number of
days elapsed over a year of 365 or 366 days, as the case may be) equal to the
Prime Rate plus three percent (3.00%). The Borrower shall pay all such accrued
but unpaid interest from time to time upon demand.

         SECTION 2.09 [Intentionally deleted].

         SECTION 2.10 [Intentionally deleted].

         SECTION 2.11 [Intentionally deleted].

         SECTION 2.12 Prepayments.

         (a) [Intentionally deleted].

         (b) [Intentionally deleted].

         (c) (i) In the event that the Borrower (or any other Loan Party)
prepays the Bank Senior Secured Loan or New Revolving Loan or provides cash
collateral in respect of any Bank Letter of Credit, the Borrower shall (on the
date of such prepayment or provision of cash collateral),

                                       20

<PAGE>   23

prepay the Senior Secured Loans in an amount which shall be a percentage of such
Senior Secured Loans which is the same as the percentage of the aggregate Bank
Senior Secured Loans, New Revolving Loans and Bank Letters of Credit which are
so prepaid and cash collateralized.

             (ii) In the event that the Borrower (or any other Loan Party)
         prepays the Bank Junior Secured Loan, the Borrower shall (on the date
         of such prepayment) prepay the Junior Secured Loans in an amount which
         shall be a percentage of such Junior Secured Loans which is the same as
         the percentage of the aggregate Bank Junior Secured Loans which are so
         prepaid.

         (d) To the extent not previously paid, (i) all Senior Secured Loans
shall be due and payable on the Senior Secured Loans Maturity Date and (ii) all
Junior Secured Loans shall be due and payable on the Junior Secured Loans
Maturity Date.

         (e) The Borrower shall give to the Agent and the Lenders at least three
Business Days' prior written or telecopy notice of each and every Prepayment
Event, the amount of Net Cash Proceeds expected to be received therefrom and the
expected schedule for receiving such proceeds. On the date of receipt by the
Borrower, any Subsidiary or the Parent of Net Cash Proceeds from any Prepayment
Event, the Borrower shall prepay outstanding Loans and the Bank Senior Secured
Loans and the Bank Junior Secured Loans, pro rata, if loans are paid, prepay the
New Revolving Loans in accordance with paragraph (g) below in an aggregate
principal amount equal to 100% of such Net Cash Proceeds received by the
Borrower, any Subsidiary or the Parent (subject to the final sentence of
paragraph (g) below). Upon receipt of any such Net Cash Proceeds by the Parent,
the Parent shall immediately contribute all such funds to the capital of the
Borrower in order to enable the Borrower to comply with the foregoing
requirements (subject to the final sentence of paragraph (g) below).

         (f) As promptly as practicable, but in any event within 90 days after
the end of each fiscal year of the Borrower, commencing with the fiscal year
ending March 31, 2001, the Borrower shall deliver to the Agent a certificate, in
form and substance satisfactory to the Agent, executed by a Financial Officer of
the Borrower setting forth a reasonably detailed calculation of the amount of
the Excess Cash Flow of the Parent, on a consolidated basis, for such fiscal
year. Upon review and acceptance of such certificate by the Agent, the Agent
shall notify the Lenders and the Borrower of such acceptance and the Borrower
shall, within three Business Days thereafter, prepay outstanding Loans in the
amount of such Excess Class Flow in accordance with paragraph (g) below.

         (g) Mandatory prepayments under paragraphs (c), (e) and (f) above shall
be applied, unless the Required Lenders otherwise elect, first to reduce the
then outstanding Senior Secured Notes and the Bank Senior Secured Notes, pro
rata, and second, when the Senior Secured Notes and the Bank Senior Secured
Notes are paid in full, to reduce the Junior Secured Notes and the Bank Junior
Secured Notes, pro rata, in such order as the Agent may select (provided,
however, that such payments shall be applied pro rata among the Lenders and the
holders of the Bank Junior Secured Notes and the Bank Senior Secured Notes, as
applicable).

         (h) [Intentionally deleted].

         (i) [Intentionally deleted].

         (j) [Intentionally deleted].

                                       21

<PAGE>   24

         (k) Each prepayment pursuant to this Section 2.12 shall be accompanied
by accrued interest on the principal amount paid to but excluding the date of
payment. All payments and prepayments on the Loans pursuant to this Section 2.12
shall be without premium or penalty.

         (l) The Borrower may extend the maturity of the Senior Secured Loans
(the "Senior Secured Loans Extension Option") and the Junior Secured Loans (the
"Junior Secured Loans Extension Option") pursuant to the terms of this
paragraph. The Borrower may elect such extension so long as no Default then
exists and is continuing by (i) notifying the Agent in writing of its election
to extend between 60 and 90 days prior to the original maturity date and (ii)
paying the Agent the Senior Secured Loans Extension Fee and the Junior Secured
Loans Extension Fee, to be shared with the Lenders pro rata based on their
Applicable Percentages. To the extent unpaid, the Borrower must elect to extend
both the Senior Secured Loans and the Junior Secured Loans at the same time.

         SECTION 2.13 Optional Prepayment. The Borrower shall have the right at
any time and from time to time to prepay any Loan, in whole or in part, upon
giving prior written or telecopy notice (or telephone notice promptly confirmed
by written or telecopy notice) to the Agent, by 11:00 a.m., New York City time,
on the date of prepayment; provided, however, that no Senior Secured Loans or
Bank Senior Secured Loans shall be prepaid until the Junior Secured Loans and
the Bank Junior Secured Loans have been paid in full, except as otherwise
provided in Section 2.12(g). Each notice of prepayment shall specify the
prepayment date, the Loan to be prepaid and the principal amount thereof to be
prepaid, shall be irrevocable and shall commit the Borrower to prepay such Loan
by the amount stated therein on the date stated therein. All prepayments under
this Section 2.13 shall be without premium or penalty. All prepayments under
this Section 2.13 shall be accompanied by accrued interest on the principal
amount being prepaid to but excluding the date of payment.

         SECTION 2.14 [Intentionally Deleted].

         SECTION 2.15 [Intentionally deleted].

         SECTION 2.16 Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of any default by the Borrower in the making of any payment or
prepayment required to be made hereunder. A certificate of any Lender setting
forth any amount or amounts which such Lender is entitled to receive pursuant to
this Section 2.16 shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay each Lender the amount shown as
due on any such certificate delivered by it within 10 days after its receipt of
the same.

         SECTION 2.17 Pro Rata Treatment. Each Loan, each payment or prepayment
of principal of any Loan, and each payment of interest on the Loans, shall be
allocated pro rata among the Lenders in accordance with their Applicable
Percentages. Each Lender agrees that in computing such Lender's portion of any
Loan to be made hereunder, the Agent may, in its discretion, round each Lender's
percentage allocation of such Loan to the next higher or lower whole dollar
amount.

         SECTION 2.18 Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans as a result
of which the unpaid principal portion of its Loans shall be

                                       22

<PAGE>   25

proportionately less than the unpaid principal portion of the Loans of any other
Lender, it shall be deemed simultaneously to have purchased from such other
Lender at face value, and shall promptly pay to such other Lender the purchase
price for, participation in such Loans of such other Lender, so that the
aggregate unpaid principal amount of the Loans and participation in Loans held
by each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Loans then outstanding as the principal amount of its Loans prior
to such exercise of banker's lien, setoff or counterclaim or other event was to
the principal amount of all Loans outstanding prior to such exercise of banker's
lien, setoff or counterclaim or other event; provided, however, that, if any
such purchase or purchases or adjustments shall be made pursuant to this Section
2.18 and the payment giving rise thereto shall thereafter be recovered, such
purchase or purchases or adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustment restored without
interest. To the extent permitted by law, the Borrower expressly consents to the
foregoing arrangements and agrees that any Lender holding a participation in a
Loan deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower to such Lender by reason thereof as fully as if such Lender had
made a Loan directly to the Borrower in the amount of such interest.

         SECTION 2.19 Payments. (a) Unless expressly provided otherwise herein,
the Borrower shall make each payment (including principal of or interest on any
Loan or any fees or other amounts, except with respect to interest on the Junior
Secured Loans as provided in this Agreement) hereunder or under any other Loan
Document without setoff, defense or counterclaim and not later than 12:00
(noon), New York time, on the date when due in dollars to the Agent at its
offices at 30 Rockefeller Plaza, Suite 5050, 50th Floor, New York, NY 10020 in
immediately available funds. Any such payment received after such time on any
date shall be deemed made on the next Business Day.

         (b) Whenever any payment (including principal of or interest on any
Loan or any fees or other amounts) hereunder or under any other Loan Document
shall become due, or otherwise would occur, on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of interest or fees,
if applicable.

         SECTION 2.20 Taxes. (a) Any and all payments by or on behalf of the
Borrower or any other Loan Party hereunder and under any other Loan Document
shall be made, in accordance with Section 2.19, free and clear of and without
deduction for any and all current or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding (i)
income taxes or branch profit taxes imposed on the net income of the Agent or
any Lender (or any transferee or assignee thereof, including a participation
holder (any such entity a "Transferee")) and (ii) franchise taxes imposed on the
net income of the Agent or any Lender (or Transferee), in each case by the
jurisdiction under the laws of which the Agent or such Lender (or Transferee) is
organized or any political subdivision thereof or the jurisdiction in which such
Lender or Transferee has its applicable lending office (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities,
collectively or individually, being called "Taxes", and all such excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being called
"Excluded Taxes"). Subject to the provisions of Section 2.20(f), if the Borrower
or any other Loan Party shall be required to deduct any Taxes from or in respect
of any sum payable hereunder or under any other Loan Document to the Agent or
any Lender (or any Transferee), (A) the sum payable shall be increased by the
amount (an "additional amount") necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.20 but excluding Excluded Taxes) the Agent or such Lender (or
Transferee), as the case may be, shall receive an amount equal to the sum it
would have received had

                                       23

<PAGE>   26

no such deductions been made, (B) the Borrower or such Loan Party shall make
such deductions and (C) the Borrower or such Loan Party shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.

         (b) In addition, the Borrower agrees to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies (including mortgage recording taxes and similar fees) that arise
from any payment made hereunder or under any other Loan Document or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document ("Other Taxes").

         (c) The Borrower will indemnify the Agent and each Lender (or
Transferee) for the full amount of Taxes and Other Taxes paid by the Agent or
such Lender (or Transferee), as the case may be, and any liability (excluding
Excluded Taxes, but including penalties, interest and expenses (including
reasonable attorney's fees and expenses)) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability and the method of computation thereof prepared by
the Agent or a Lender (or Transferee), or the Agent on its behalf, absent
manifest error, shall be final, conclusive and binding for all purposes. Such
indemnification shall be made within 30 days after the date the Agent or any
Lender (or Transferee), as the case may be, makes written demand therefor and
provides the Borrower with the certificate described above.

         (d) As soon as practicable after the date of any payment of Taxes or
Other Taxes by the Borrower or any other Loan Party to the relevant Governmental
Authority, the Borrower or such other Loan Party will deliver to the Agent, at
its address referred to in Section 9.01, the original or a certified copy of a
receipt issued by such Governmental Authority evidencing payment thereof.

         (e) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the Agent two
copies of (i) either United States Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions thereof
or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for purposes of
Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled
foreign corporation related to the Borrower (within the meaning of Section
864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S.
Lender claiming complete exemption from, or reduced rate of, U.S. Federal
withholding tax on payments by the Borrower under this Agreement and the other
Loan Documents and (ii) an Internal Revenue Service Form W-8 or W-9 entitling
such Non-U.S. Lender to receive a complete exemption from United States backup
withholding tax. Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender. If a
Non-U.S. Lender who has delivered the forms referred to above on the date it
becomes a party to this Agreement (or, in the case of a Transferee, on the date
that it becomes a Transferee hereunder) determines that it is unable
subsequently to submit to the Borrower any such form, or that it is required to
withdraw or cancel

                                       24

<PAGE>   27

any such form, such Non-U.S. Lender shall promptly notify the Borrower of such
fact. Notwithstanding any other provision of this Section 2.20(e), a Non-U.S.
Lender shall not be required to deliver any form pursuant to this Section
2.20(e) that such Non-U.S. Lender is not legally able to deliver.

         (f) The Borrower shall not be required to indemnify any Non-U.S. Lender
or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (f) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrower and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (e) above.

         (g) Nothing contained in this Section 2.20 shall require any Lender (or
any Transferee) or the Agent to make available any of its tax returns (or any
other information that it deems to be confidential or proprietary).

         (h) The provisions of this Section 2.20 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Agent or any Lender.

         SECTION 2.21 Assignment of Loans Under Certain Circumstances; Duty to
Mitigate. (a) In the event (i) any Lender delivers a certificate requesting
compensation pursuant to Section 2.14, or (ii) the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority on account of
any Lender pursuant to Section 2.20, the Borrower may, at its sole expense and
effort (including with respect to the processing and recordation fee referred to
in Section 9.04(b)), upon notice to such Lender and the Agent, require such
Lender to transfer and assign, without recourse (in accordance with and subject
to the restrictions contained in Section 9.04), all of its interests, rights and
obligations under this Agreement to an assignee that shall assume such assigned
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (A) such assignment shall not conflict with any law,
rule or regulation or order of any court or other Governmental Authority having
jurisdiction, (B) the Borrower shall have received the prior written consent of
the Agent, which consent shall not unreasonably be withheld, (C) no Event of
Default shall have occurred and be continuing and (D) the Borrower or such
assignee shall have paid to the affected Lender in immediately available funds
an amount equal to the sum of 100% of the principal of and interest accrued to
the date of such payment on the outstanding Loans of such Lender respectively,
plus all fees and other amounts accrued for the account of such Lender hereunder
(including any amounts under Section 2.14 and Section 2.16); provided further
that if prior to any such assignment the circumstances or event that resulted in
such

                                       25

<PAGE>   28

Lender's notice or certificate under Section 2.14 or demand for additional
amounts under Section 2.20, as the case may be, shall cease to exist or become
inapplicable for any reason or if such Lender shall waive its rights in respect
of such circumstances or event under Section 2.14, or 2.20, as the case may be,
then such Lender shall not thereafter be required to make any such assignment
hereunder.

         (b) If (i) any Lender shall request compensation under Section 2.14, or
(ii) the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority on account of any Lender, pursuant to Section 2.20, then
such Lender shall use reasonable efforts (which shall not require such Lender to
incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any
action inconsistent with its internal policies or legal or regulatory
restrictions or suffer any disadvantage or burden deemed by it to be
significant) (A) to file any certificate or document reasonably requested in
writing by the Borrower or (B) to assign its rights and delegate and transfer
its obligations hereunder to another of its offices, branches or affiliates, if
such filing or assignment would reduce its claims for compensation under Section
2.14 or would reduce amounts payable pursuant to Section 2.20, as the case may
be, in the future. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such filing or
assignment, delegation and transfer.

         SECTION 2.22 [Intentionally deleted].

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         The Borrower and the Parent, jointly and severally, represent and
warrant to each of the Lenders that:

         SECTION 3.01 Organization; Powers. Each of the Borrower and the other
Loan Parties (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has all requisite power
and authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (c) is qualified to do business in
every jurisdiction where such qualification is required, except where the
failure so to qualify would not result in a Material Adverse Effect, and (d) has
the requisite power and authority to execute, deliver and perform its
obligations under each of the Loan Documents and each other agreement or
instrument contemplated thereby to which it is or will be a party, and, in the
case of the Borrower, to obtain extensions of credit hereunder. The Borrower is
a corporation organized under the laws of the State of Delaware.

         SECTION 3.02 Authorization. The execution, delivery and performance by
each of the Borrower and the other Loan Parties of each of the Loan Documents to
which it is or will be a party (including the exercise of remedies thereunder)
and, in the case of the Borrower, the extensions of credit hereunder (a) have
been duly authorized by all requisite corporate or partnership and, if required,
stockholder action and (b) will not (i) violate, (A) any provision of law,
statute, rule or regulation, (B) any provision of the certificate of
incorporation, partnership agreement, operating agreement or other constitutive
documents or by-laws of the Borrower and the other Loan Parties, (C) any order
of any Governmental Authority or (D) except as set forth in Schedule 3.17(a),
any provision of any indenture, agreement or other instrument to which the
Borrower or any of the Loan Parties is a party or by which any of them or any of
their property is or may be bound, (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default or
give rise to increased, additional, accelerated or guaranteed rights of any
person under any such indenture, agreement or other instrument or (iii) except
for the Lien of the Collateral Documents, result in the creation or imposition
of any Lien

                                       26

<PAGE>   29

upon or with respect to any property or assets now owned or hereafter acquired
by the Borrower or any of the other Loan Parties.

         SECTION 3.03 Enforceability. This Agreement has been duly executed and
delivered by the Borrower and the Parent and constitutes, and each other Loan
Document when executed and delivered by the Borrower or any of the other Loan
Parties will constitute, a legal, valid and binding obligation of such party
enforceable against such party in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance, voidable preference or similar laws and the application
of equitable principles generally.

         SECTION 3.04 Consents and Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by (a) any
Governmental Authority, (b) any creditor or shareholder of the Borrower or any
creditor, shareholder, partner or member of the other Loan Parties or (c) except
where failure to take or obtain such action, consent or approval of,
registration or filing with or such other action could not reasonably be
expected to have a Material Adverse Effect, any other person is or will be
required in connection with the Loans or the performance by the Borrower or any
of the other Loan Parties of the Loan Documents to which it is or will be a
party, in each case except such as have been made or obtained and are in full
force and effect.

         SECTION 3.05 Financial Statements; Undisclosed Liabilities. (a) The
Borrower has heretofore furnished to the Lenders the audited consolidated
balance sheets of the Parent and the Borrower (the "Balance Sheet", whether one
or more), as of March 31, 2000 and the related consolidated statements of income
and cash flows of the Parent and the Borrower (together with the Balance Sheet,
the "Financial Statements"), for the year ended March 31, 2000. The Financial
Statements have been prepared in conformity with generally accepted accounting
principles consistently applied and on that basis fairly present the
consolidated financial condition, results of operations and cash flows of the
Parent, the Borrower and the Subsidiaries, as of the respective dates thereof
and for the respective periods indicated.

         (b) As of the Effective Date, none of the Parent, the Borrower or the
Subsidiaries have (i) any liability, contingent or otherwise, in excess of
$100,000 or (ii) any material liabilities, contingent or otherwise, or material
obligations required by GAAP to be set forth on a consolidated balance sheet of
the Borrower, except for items set forth in Schedule 3.05(b).

         SECTION 3.06 No Material Adverse Change. Since the date of the Balance
Sheet, there has not been any Material Adverse Change. Except as set forth in
Schedule 3.06, since the date of the Balance Sheet and prior to the Effective
Date, the business of the Borrower and the Subsidiaries has been conducted in
the ordinary course and in substantially the same manner as previously
conducted.

         SECTION 3.07 Title to Properties; Possession Under Leases; Intellectual
Property. (a) Each of the Borrower, the Subsidiaries and the Parent has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets (including all Intellectual Property of the Borrower and
the Subsidiaries), except for defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties and assets for their intended purposes and do not materially detract
from the value of such properties and assets. All such material properties and
assets are free and clear of Liens, other than Liens permitted by Section 6.02.

                                       27

<PAGE>   30

         (b) Schedule 3.07(b) sets forth, as of the Effective Date, a true,
complete and correct list of (i) all real property owned by the Borrower and the
Subsidiaries; (ii) all real property leased by the Borrower or any Subsidiary;
and (iii) the location of each such parcel of real property.

         (c) Except as set forth in Schedule 3.07(c) and except for agreements
relating to shrink-wrapped computer software licensed to the Borrower in the
ordinary course of business, the Borrower or one of the Subsidiaries owns, and
the Borrower and the Subsidiaries have the perpetual, royalty-free right, free
and clear of any consensual Liens, to use, execute, reproduce, display, perform,
modify, enhance, distribute, prepare derivative works of and sublicense, without
payment to any other person, all the material Intellectual Property necessary or
desirable to the conduct of the business of the Borrower and the Subsidiaries
(the "Material Intellectual Property"). Except for non-exclusive rights as
customarily provided to its customers in the ordinary course of business and
except for the U.S. Government Department of Defense's "limited rights" in
technical data and "restricted rights" in computer software, neither the
Borrower nor any of the Subsidiaries has granted any options, licenses or
agreements of any kind relating to Material Intellectual Property, except as set
forth on Schedule 3.07(c). No claims are pending, and to the knowledge of the
Borrower, none have been asserted, as of the date of this Agreement against the
Borrower or any Subsidiary by any person with respect to the ownership,
validity, enforceability, effectiveness or use of any Material Intellectual
Property. Except as described in Schedule 3.07(c), to the Borrower's knowledge,
no claims of infringement of any copyright, trademark, service mark, trade name,
patent, patent right, trade secret or other property right of any other person
are pending, and none have been asserted, as of the date of this Agreement as
against any Material Intellectual Property. Except as disclosed on Schedule
3.07(c), (i) neither the Borrower nor any of the Subsidiaries is in breach of
any material provision of any license, sublicense, or other agreement which
relates to any of the Material Intellectual Property, and (ii) neither the
Borrower nor any of the Subsidiaries has taken any action which would impair or
otherwise adversely affect its rights in any of the Material Intellectual
Property. All such Intellectual Property is valid and enforceable, except that,
with respect to the applications to register any unregistered Intellectual
Property (but not with respect to the underlying Intellectual Property rights
that are the subject of such applications), the Borrower only represents and
warrants that such applications are pending and in good standing all without
challenge of any kind. The Material Intellectual Property has been maintained in
confidence in accordance with protection procedures customarily used to protect
rights of like importance. To the knowledge of the Borrower, all former and
current members of management and key personnel of the Parent, the Borrower or
any of the Subsidiaries, including all former and current employees, agents,
consultants and independent contractors who have contributed to or participated
in the conception and development of software or other Material Intellectual
Property for the FATS II, FX, III, L.E. and IV (collectively, "Personnel"), have
executed and delivered to the Borrower or such Subsidiary a proprietary
information agreement restricting such person's right to disclose proprietary
information of the Borrower, the Subsidiaries and their respective clients. No
such representation is made with respect to FATS I. All former and current
Personnel, as referenced above, either (A) have been party to a "work-for-hire"
arrangement or agreement with the Borrower, in accordance with applicable
Federal and state law, that has accorded the Borrower or a Subsidiary full,
effective, exclusive and original ownership of all tangible and intangible
property thereby arising or (B) have executed appropriate instruments of
assignment in favor of the Borrower or a Subsidiary as assignee that have
conveyed to the Borrower or a Subsidiary full, effective and exclusive ownership
of all tangible and intangible property thereby arising. No former or current
Personnel have any claim against the Borrower or any of the Subsidiaries in
connection with such person's involvement in the conception and development of
any Material Intellectual Property and no such claim has been asserted or is
threatened. None of the current officers and employees of the Borrower or any of
the Subsidiaries have any patents issued or applications pending for any device,
process, design or invention of any kind now used or needed by the Borrower or
any of the Subsidiaries

                                       28

<PAGE>   31

in the furtherance of its business operations, which patents or applications
have not been assigned to the Borrower or a Subsidiary, with such assignment
duly recorded in the United States Patent Office.

         SECTION 3.08 Subsidiaries. Schedule 3.08 sets forth as of the Effective
Date a list of all the Subsidiaries, the respective jurisdictions of
organization thereof and the percentage ownership interest, direct or indirect,
of the Borrower therein.

         SECTION 3.09 Litigation; Compliance with Laws. (a) Schedule 3.09(a)
sets forth a list as of the Effective Date of all pending or, to the knowledge
of the Borrower or the Parent, threatened litigation, arbitrations or other
proceedings against the Borrower, the Parent or any Subsidiary that involves a
claim for more than $50,000. Except as set forth in Schedule 3.09(a), none of
such lawsuits, claims, arbitrations or other proceedings as to which there is a
reasonable possibility of adverse determination would have, if so determined, a
Material Adverse Effect. To the knowledge of the Borrower or the Parent, except
as set forth in Schedule 3.09(a), as of the Effective Date, neither the
Borrower, the Parent nor any Subsidiary is a party or subject to or in default
under any material judgment, order, injunction or decree of any Governmental
Authority or arbitration tribunal. Except as set forth in Schedule 3.09(a),
there are no actions, suits, investigations or proceedings at law or in equity
or by or before any arbitrator or Governmental Authority now pending or, to the
knowledge of the Borrower or the Parent, threatened against or affecting the
Parent, the Borrower, any of the Subsidiaries or any business, property or
rights of the Parent, the Borrower or any of the Subsidiaries (i) which involve
any Loan Document or (ii) as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined, could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

         (b) Except as set forth in Schedule 3.09(b), the Parent, the Borrower
and the Subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Authority
("Applicable Laws") including those relating to occupational health and safety,
except for instances of noncompliance that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Schedule 3.09(a), as of the Effective Date neither the Borrower, the Parent nor
a Subsidiary has received any written communication during the past three years
from a Governmental Authority that alleges that the Borrower, the Parent or such
Subsidiary is not in compliance in any material respect with any Applicable
Laws. Except as set forth in Schedule 3.09(a), to the knowledge of the Borrower
or the Parent, as of the Effective Date, there is no pending or threatened
investigation of the Borrower, the Parent or a Subsidiary by any Governmental
Authority. This Section 3.09(b) does not relate to matters with respect to
taxes, which are the subject of Section 3.14, or to environmental matters, which
are the subject of Section 3.09(c).

         (c) Except as set forth in Schedule 3.09(c): (i) as of the Effective
Date, neither the Borrower, the Parent nor any of the Subsidiaries has received
any written communication during the past five years from a Governmental
Authority that alleges that the Borrower, the Parent or such Subsidiary is not
in compliance with any Environmental Laws which has not been resolved to the
satisfaction of the Governmental Authority; (ii) each of the Borrower, the
Parent and the Subsidiaries holds and is in compliance with, all material
permits, licenses and governmental authorizations required for each of the
Borrower, the Parent and the Subsidiaries to conduct its business in compliance
with the Environmental Laws, and is in compliance with all Environmental Laws,
except for any instances of noncompliance which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect;
(iii) as of the Effective Date, neither the Borrower, the Parent nor any of the
Subsidiaries has received any written communication alleging that the Borrower,
the Parent or any of the Subsidiaries is liable to any party (including, but not
limited to, a Governmental Authority) as a result of the Release of a

                                       29
<PAGE>   32

Hazardous Substance; (iv) to the knowledge of the Borrower or the Parent, none
of the properties owned or leased by the Borrower or any of the Subsidiaries
contains underground storage tanks, asbestos-containing materials, or
PCB-containing materials; and (v) to the knowledge of the Borrower or the
Parent, there have been no Releases of Hazardous Substances on any of the
properties owned or leased by the Borrower or any of the Subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. For purposes of this Section 3.09(c) only: the term
"Environmental Laws" means any and all applicable foreign, Federal, state or
local laws, regulations, binding determinations, orders, decrees or permits
issued, promulgated or entered into by any Governmental Authority, relating to
the Release of Hazardous Substances; the term "Hazardous Substances" means all
materials defined as hazardous substances pursuant to Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
ss.ss. 9601 et seq. ("CERCLA") and petroleum; and the term "Release" shall have
the meaning set forth in Section 101(22) of CERCLA.

         SECTION 3.10 Agreements. (a) Each indenture or other agreement or
instrument evidencing Indebtedness and each other material agreement, contract,
lease, license, commitment or other instrument to which the Borrower, the Parent
or any of the Subsidiaries is a party or by which it or any of its properties or
assets are or may be bound as of the Effective Date, after giving effect to the
application of proceeds thereof as of the Effective Date, is listed on Schedule
3.10(a) hereto (collectively with any agreements listed on Schedule 3.20, the
"Material Contracts").

         (b) Except as set forth in Schedule 3.10(b), as of the Effective Date,
all the Material Contracts are valid, binding and in full force and effect in
all material respects. Except as set forth in Schedule 3.10(b), as of the
Effective Date, the Borrower, the Parent and the Subsidiaries have performed all
material obligations required to be performed by them to date under the Material
Contracts and they are not in breach or default in any material respect
thereunder and, to the knowledge of the Borrower or the Parent, no other party
to any of the Material Contracts is in breach or default in any material respect
thereunder. All contracts between the Borrower, any Subsidiary or the Parent and
the U.S. Department of Defense (and any modifications to such contracts) with a
face value in excess of $100,000 have been negotiated, fixed priced agreements,
as defined in the Federal Acquisition Regulation, as amended.

         SECTION 3.11 Federal Reserve Regulations. (a) None of the Borrower, the
Subsidiaries and the Parent is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.

         (b) No part of the proceeds of any Loan will be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, for any
purpose which entails a violation of, or which is inconsistent with, the
provisions of the regulations of the Board, including Regulations G, U and X.

         SECTION 3.12 Investment Company Act; Public Utility Holding Company
Act. None of the Parent, the Borrower and the Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935 or (c) subject to
regulation as a "public utility" or a "public service corporation" or the
equivalent under any federal or state law.

         SECTION 3.13 Use of Proceeds. The Senior Secured Loans and the Junior
Secured Loans were refinancings in part satisfaction of the Guarantee
Reimbursement Obligation.

                                       30

<PAGE>   33

         SECTION 3.14 Tax Returns. Each of the Parent, the Borrower and the
Subsidiaries has filed or caused to be filed all Federal, state, local and
foreign tax returns required to be filed by it and has paid or caused to be paid
all taxes shown to be due and payable on such returns or on any assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings diligently pursued and for which adequate reserves in
accordance with GAAP have been set aside on its financial statements.

         SECTION 3.15 No Material Misstatements. To the knowledge of the
Borrower and the Parent as of the Effective Date, the reports, financial
statements, exhibits, schedules and other information (except for forecasts and
projections) furnished by or on behalf of the Borrower or the Parent to the
Lenders in connection with the negotiation of any Loan Document or included
therein or delivered pursuant thereto, when taken as a whole and evaluated in
the context presented, do not contain any material misstatement of fact or omit
to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which such information was
provided. Any such report, financial statement, exhibit, schedule or other
information which constitutes a forecast or a projection was prepared in good
faith, was based on assumptions that the Borrower believes to be reasonable and
based on the best information available to the Borrower. As of the Effective
Date, except for the uncertainty inherent in any similar financial forecast or
projection, the Borrower has no reason to believe that any such forecasts or
projections are misleading in any material respect in light of the circumstances
existing at the time of preparation thereof.

         SECTION 3.16 Employee Benefit Plans. (a) Each of the Borrower and the
Commonly Controlled Entities is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published interpretations
thereunder. Neither a Reportable Event nor an "accumulated funding deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA) has
occurred within the five years prior to the Effective Date with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan has
occurred and no Lien in favor of the PBGC or a Plan has arisen during the five
years prior to the Effective Date.

         (b) The present value of all accrued benefits under each Single
Employer Plan in which the Borrower or any Commonly Controlled Entity is a
participant (based on those assumptions used to fund the Plans) did not, as of
the last annual valuation date prior to the Effective Date, exceed the value of
the assets of such Plan allocable to such accrued benefits.

         (c) Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the last
valuation date prior to the Effective Date.

         (d) No such Multiemployer Plan is in "reorganization" or "insolvent,"
within the meaning of such terms as used in ERISA.

         (e) Neither the Borrower nor any Commonly Controlled Entity has any
liability for post retirement benefits to be provided to its current and former
employees.

         (f) No prohibited transaction under ERISA or the Code has occurred with
respect to any Multiemployer Plan or Single Employer Plan which could have a
Material Adverse Effect.

                                       31

<PAGE>   34

         SECTION 3.17 Government Contracting Matters. (a) Except as set forth in
Schedule 3.17(a), each of the Parent, the Borrower and the Subsidiaries has
complied with all material terms and conditions of each Government Contract that
provides for aggregate payments to the Parent, the Borrower and the Subsidiaries
of $50,000 or more, including all clauses, provisions and requirements
incorporated by reference or by operation of law therein, and there are no
claims that could reasonably be expected to have a Material Adverse Effect nor
any potential liability for defective pricing, false statements or false claims
on Government Contracts. For the purposes hereof, "Government Contract" means
any bid, quotation, proposal, contract, agreement, work authorization, lease,
commitment or sale or purchase order of the Parent, the Borrower or any of the
Subsidiaries with any foreign or domestic, Federal, state, local or other
governmental authority, agency or instrumentality, including all contracts and
work authorizations to supply goods and services to such governmental authority,
agency or instrumentality and including contracts that are first-tier
subcontracts on prime contracts.

         (b) Except as set forth in Schedule 3.17(b), there is no action, suit,
proceeding or, to the Borrower's or the Parent's knowledge, investigation
relating to any proposed suspension or debarment of the Parent, the Borrower or
any of the Subsidiaries or any of their respective directors, officers,
employees or agents from doing business with any foreign or domestic, Federal,
state, or local government (or any agency or instrumentality thereof). None of
the Parent, the Borrower and the Subsidiaries, nor any of their respective
directors, officers, or employees is (or, to the Borrower's or the Parent's
knowledge, during the last five years has been) suspended, proposed for
debarment, or debarred from doing business with any foreign or domestic,
Federal, state, or local government (or any agency or instrumentality thereof)
or is (or during such period was) the subject of a finding of nonresponsibility
or ineligibility for contracting with any foreign or domestic, Federal, state,
or local government (or any agency or instrumentality thereof).

         (c) Except as set forth in Schedule 3.17(c), to the Borrower's or the
Parent's knowledge, none of the Parent's, the Borrower's and the Subsidiaries'
respective directors, officers, employees or agents is (or during the last five
years has been) under administrative, civil, or criminal investigation,
indictment or information by any Governmental Authority with respect to any
material alleged irregularity, misstatement or omission arising under or
relating to any Government Contract. None of the Parent, the Borrower and the
Subsidiaries has any knowledge of any material irregularity, misstatement or
omission arising under or relating to any Government Contract that has led or
could reasonably lead, either before or after the Effective Date, to any of the
consequences set forth in Section 3.17(b) or to any other material damage,
penalty, assessment, recoupment of payment or disallowance of cost.

         (d) Except as set forth in Schedule 3.17(d), there exist (i) no
outstanding material claims against the Parent, the Borrower or any of the
Subsidiaries, by any foreign or domestic, Federal, state, or local government
(or any agency or instrumentality thereof) or by any prime contractor,
subcontractor, vendor or other third party, arising under or relating to any
Government Contract; and (ii) no material disputes between the Parent, the
Borrower or the Subsidiaries and any foreign or domestic, Federal, state, or
local government (or any agency or instrumentality thereof), or any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract.

         (e) None of the Parent, the Borrower and the Subsidiaries has, nor are
any of them in the conduct of their respective businesses required to have, any
facility security clearance or personnel security clearance or other security
clearance from any foreign or domestic, Federal, state, or local government (or
any agency or instrumentality thereof), and none of them have any access to
classified information in connection with any Government Contract or otherwise.

                                       32

<PAGE>   35

         SECTION 3.18 Security Documents. (a) The Pledge Agreement is effective
to create in favor of the Banks' Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement) and, the Pledge Agreement, together with the
Collateral delivered to the Banks' Agent pursuant thereto, constitutes a fully
perfected priority Lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral, in each case prior and
superior in right to any other person, except as provided in the Intercreditor
Agreement.

         (b) The Security Agreement is effective to create in favor of the
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable priority security interest in the Collateral, except as provided in
the Intercreditor Agreement and the Security Agreement, together with financing
statements filed in connection therewith and the Pledged Securities (as defined
in the Security Agreement) delivered pursuant to the Security Agreement,
constitute a fully perfected Lien on, and security interest in, all right, title
and interest of the grantors thereunder in such Collateral in which a security
interest can be perfected by (i) filing a financing statement under Article 9 of
the Uniform Commercial Code or (ii) delivering possession of a security under
Article 8 of the Uniform Commercial Code, in each case prior and superior in
right to any other person, other than with respect to Liens expressly permitted
by Section 6.02 and as provided in the Intercreditor Agreement.

         (c) The Security Agreement, together with the filings made in the
United States Patent and Trademark Office and the United States Copyright Office
in connection with the Security Agreement constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the grantors
thereunder in the Intellectual Property of the Parent, the Borrower and the
Subsidiaries to the extent that security interests in such Intellectual Property
can be perfected by filing in such offices, in each case prior and superior in
right to any other person, except as provided in the Intercreditor Agreement (it
being understood that subsequent filings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on Intellectual Property acquired by the grantors after the date
hereof).

         (d) Each Mortgage is effective to create in favor of the Banks' Agent,
for the ratable benefit of the Secured Parties, a legal, valid and enforceable
Lien on all of the Loan Parties' right, title and interest in and to the
Mortgaged Property thereunder and the proceeds thereof, and when such Mortgage
is filed in the offices specified on Schedule 3.18(d), such Mortgage shall
constitute a fully perfected Lien on, and security interest in, all right, title
and interest of the Loan Parties in such Mortgaged Property and the proceeds
thereof, in each case prior and superior in right to any other person, other
than with respect to the rights of persons pursuant to Liens expressly permitted
by Section 6.02 and as provided in the Intercreditor Agreement.

         (e) The Banks' Agent for the benefit of the Secured Parties will at all
times have the Liens provided for in the Collateral Documents and, subject to
the filing by the Banks' Agent of continuation statements to the extent required
by the Uniform Commercial Code, the Collateral Documents will at all times
constitute a valid and continuing lien of record and priority perfected security
interest in all the Collateral referred to therein, except as provided in the
Intercreditor Agreement and except as priority may be affected by Liens
expressly permitted by Section 6.02 and any intervening creditors and except for
Collateral released in accordance with all applicable provisions of this
Agreement and the Collateral Documents. No filings or recordings are required in
order to perfect the security interests created under the Collateral Documents,
except for filings or recordings listed on Schedule 3.18(e).

                                       33

<PAGE>   36

         (f) By complying with Sections 4.01(e) and 4.02(x) of the Security
Agreement and upon receipt by the Banks' Agent of acknowledgement copies of each
Notice of Assignment, substantially in the form of Exhibit D-2 to the Security
Agreement, as required under the Assignment of Claims Act of 1940, as amended
(31 U.S.C. ss.3727, 41 U.S.C. ss.15(1988)), each Grantor (as defined in the
Security Agreement) shall have assigned to the Agent all moneys due or to become
due under each Government Contract (other than (i) those Government Contracts
identified as completed on Schedule 13 to the Security Agreement and (ii)
Government Contract 65-02F-0414D with the General Services Administration) with
a total current or potential value exceeding $100,000 and entered into by such
Grantor with any U.S. Federal Governmental Authority.

         SECTION 3.19 Solvency. (a) On and as of the Effective Date each of the
Parent, the Borrower and the Subsidiaries are Solvent. "Solvent" means, with
respect to any person, that (i) the fair value of the assets of such person, at
a fair valuation, will exceed the debts and liabilities, subordinated,
contingent or otherwise, of such person; (ii) the present fair saleable value of
the property of such person will be greater than the amount that will be
required to pay the liabilities of such person on its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (iii) such person will be able to pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured; and (iv) such person will not have
an unreasonably small amount of capital with which to conduct the businesses in
which it is engaged as such businesses are now conducted and are proposed to be
conducted . With respect to any contingent liabilities, such liabilities shall
be computed at the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can reasonably be expected to
become an actual or matured liability.

         (b) The Borrower does not intend to, or to permit any of the
Subsidiaries to, and does not believe that the Borrower or any of the
Subsidiaries will, incur debts beyond its ability to pay such debts as they
mature taking into account the timing of and amounts of cash to be received by
the Borrower or any such Subsidiary and the timing of and amounts of cash to be
payable on or in respect of indebtedness of the Borrower or any such Subsidiary.

         SECTION 3.20 Transactions with Affiliates. Except as set forth in
Schedule 3.20, as of the Effective Date, neither the Borrower nor any of the
Subsidiaries is a party to or engaged in any transaction with, and none of the
properties and assets of the Borrower or any of the Subsidiaries is subject to
or bound by any agreement or arrangement with an Affiliate of the Borrower or
any of the Subsidiaries.

         SECTION 3.21 Ownership. (a) As of the date on which the transactions
contemplated by this Agreement are consummated, the authorized Capital Stock of
the Borrower consists of 1,000 shares of common stock, par value $1.00 per
share, all of which are issued and outstanding. All of the shares of Capital
Stock of the Borrower that are issued and outstanding on the date on which the
transactions contemplated by this Agreement are consummated have been duly and
validly authorized and issued, are fully paid and nonassessable, and were not
issued in violation of the preemptive rights of any shareholder. As of the date
on which the transactions contemplated by this Agreement are consummated, the
Parent has good, valid and marketable title to all of the outstanding Capital
Stock of the Borrower, free and clear of Liens of every kind, whether absolute,
matured, contingent or otherwise, other than the Liens of the Pledge Agreement.
As of the date on which the transactions contemplated by this Agreement are
consummated there are no existing options (including employee stock options),
warrants, calls or commitments relating to, or any securities or rights
convertible into, exercisable for or exchangeable for, any Capital Stock of the
Borrower.

                                       34

<PAGE>   37

         (b) As of the date on which the transactions contemplated by this
Agreement are consummated, the authorized Capital Stock of the Parent consists
of (i) 100,000,000 shares of Class A common stock, par value $0.000006 per share
(the "Class A Common Stock"), of which 68,750,050 are issued and outstanding,
including the Bank Common Stock, the Centre Converted Class A Common Stock and
the Centre New Class A Common Stock, (ii) 6,200,000 shares of Class B non-voting
common stock, par value $0.000006 per share, of which 1,139,017 are issued and
outstanding, and (iii) 100,000 shares of preferred stock, par value $0.10 per
share, 21,361.114 shares of which are issued and outstanding which are the Bank
Preferred Stock and the Centre New Preferred. As of the date on which the
transactions contemplated by this Agreement are consummated, all of the shares
of the Class A Common Stock , Class B Common Stock and Preferred Stock of the
Parent that are issued and outstanding have been duly and validly authorized and
issued, are fully paid and nonassessable, and were not issued in violation of
the preemptive rights of any shareholder. As of the date on which the
transactions contemplated by this Agreement are consummated there are no
existing options (including employee stock options), warrants, calls or
commitments relating to, or any securities or rights convertible into,
exercisable for or exchangeable for, any Capital Stock of the Parent, except as
set forth on Schedule 3.21(b). As of the date on which the transactions
contemplated by this Agreement are consummated, the stock ownership of the
outstanding Capital Stock of the Parent was as shown on Schedule 3.21(b).

         (c) All of the shares of common stock of each Subsidiary have been duly
and validly authorized and issued, are fully paid and nonassessable, and were
not issued in violation of the preemptive rights of any shareholder. The
Borrower owns, directly or indirectly, good, valid and marketable title to all
the common stock of each Subsidiary, free and clear of all Liens, other than the
Liens of the Collateral Documents, of every kind, whether absolute, matured,
contingent or otherwise. There are no existing options, warrants, calls or
commitments relating to, or any securities or rights convertible into,
exercisable for or exchangeable for, any Capital Stock of the Subsidiaries.

         SECTION 3.22 Insurance. The Borrower and the Subsidiaries maintain, as
of the Effective Date, policies of fire and casualty, liability, business
interruption and other forms of insurance in such amounts, with such deductibles
and against such risks and losses as are necessary to insure fully the business
and assets of the Borrower and the Subsidiaries. All such policies are in full
force and effect as of the Effective Date, all premiums due and payable thereon
as of the Effective Date have been paid in accordance with their terms (other
than retroactive or retrospective premium adjustments that are not yet, but may
be, required to be paid with respect to any period ending prior to the Effective
Date under comprehensive general liability and workmen's compensation insurance
policies), and no notice of cancellation or termination has been received as of
the Effective Date with respect to any such policy which has not been replaced
on substantially similar terms prior to the date of such cancellation. The
activities and operations of the Borrower and the Subsidiaries have been
conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.

         SECTION 3.23 Labor Matters. (a) Except as set forth in Schedule
3.23(a), as of the Effective Date, (i) there is no labor strike, dispute, work
stoppage or lockout pending, or, to the knowledge of the Borrower or the Parent,
threatened, against the Borrower or a Subsidiary; (ii) to the knowledge of the
Borrower or the Parent, no union organizational campaign is in progress with
respect to the employees of the Borrower or a Subsidiary; (iii) there is no
unfair labor practice charge or complaint against the Borrower or a Subsidiary
pending, or, to the knowledge of the Borrower or the Parent, threatened, before
the National Labor Relations Board; (iv) there are no pending, or, to the
knowledge of the Borrower or the Parent, threatened, union grievances against
the Borrower or a Subsidiary as to which there is a reasonable possibility of
adverse determination and that, if so determined, would have a

                                       35

<PAGE>   38

Material Adverse Effect; (v) there are no pending, or, to the knowledge of the
Borrower or the Parent, threatened, charges against the Borrower, a Subsidiary
or any current or former employee of any of them before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices; and (vi) neither the Borrower nor
any of the Subsidiaries has received written notice during the past three years
of the intent of any Governmental Authority responsible for the enforcement of
labor or employment laws to conduct an investigation of the Borrower or a
Subsidiary and, to the knowledge of the Borrower or the Parent, no such
investigation is in progress.

         (b) No employee or agent of the Parent, the Borrower or any Subsidiary
that has not signed a confidentiality and non-compete agreement is privy to any
information that, if disseminated to an unrelated third party, could have a
Material Adverse Effect.

         SECTION 3.24 Licenses; Permits. Schedule 3.24 sets forth a true and
complete list as of the Effective Date of all material licenses, permits and
authorizations issued or granted to the Borrower and the Subsidiaries by
Governmental Authorities which are necessary or desirable for the conduct of the
business of the Borrower and the Subsidiaries as currently conducted. Except as
set forth in Schedule 3.24, as of the Effective Date, all such licenses, permits
and authorizations are validly held by the Borrower or the relevant Subsidiary,
and the Borrower and the Subsidiaries have complied in all material respects
with all terms and conditions thereof.

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

         SECTION 4.01 Conditions Precedent to the Effective Date. This Agreement
shall become effective as of the Effective Date, provided that all of the
following conditions precedent set forth in this Section 4.01, and the
additional conditions precedent set forth in Section 4.02, have been satisfied:

         (a) The Agent shall have received (i) counterparts hereof signed by
each of the parties hereto (or, in the case of any Lender as to which an
executed counterpart shall not have been received, telegraphic, telex, telecopy
or other written confirmation from such party in form satisfactory to the Agent
of the execution of a counterpart hereof by such Lender), (ii) counterparts to
the Parent Guarantee Agreement signed by each of the parties thereto, (iii)
counterparts to the Parent's Consent signed by each of the parties thereto, (iv)
counterparts to the Subsidiaries' Guarantee Agreement signed by each of the
parties thereto, (v) counterparts of the Subsidiaries' Consent signed by each of
the parties thereto, and (vi) a counterpart of the Borrower's Consent signed by
each of the parties thereto.

         (b) The Agent shall have received, for the account of each Lender, duly
executed Notes, dated as of the Effective Date, complying with the provisions of
Section 2.05.

         (b-1) The Centre New Preferred Stock shall been duly issued to the
Lenders by the Parent in accordance with the terms hereof and subject to an
agreement acceptable to the Agent in its sole discretion.

         (b-2) The Centre New Class A Common Stock shall have been duly issued
to the Lenders by the Parent.

                                       36

<PAGE>   39

         (b-3) The Banks' Agent shall have received for the benefit of each of
the Banks certificates representing the duly issued shares of the Bank Preferred
Stock and the Bank Common Stock.

         (c) The Banks' Agent on behalf of the Secured Parties shall have a
security interest in the Collateral of the type and priority described in each
Collateral Document, perfected to the extent contemplated by Section 3.18 (but
subject to the interest of the Banks pursuant to the Intercreditor Agreement)
and the Agent shall have received:

         (i) confirmation by the Borrower that the Banks' Agent has previously
         received certificates representing all Pledged Securities (as defined
         in the Security Agreement and Pledge Agreement), accompanied by stock
         powers endorsed in blank; and

         (ii) confirmation that no additional filing, registration or
         recordation of any document (including any Uniform Commercial Code
         financing statement) is required to be filed, registered or recorded in
         order to create in favor of the Banks' Agent (in accordance with the
         Intercreditor Agreement) for the benefit of the Secured Parties a
         valid, legal and perfected security interest in or Lien on the
         Collateral;

         (d) The Agent shall have received an opinion or opinions of counsel to
the Parent and the Borrower with respect to such matters as the Agent and the
Lenders may reasonably request and being in form and substance satisfactory to
the Agent and the Lenders, dated the date of execution of the Agreement and
addressed to the Agent and the Lenders.

         (e) The Agent shall have received:

         (i) a certificate, dated the date of execution of the Agreement and
         signed by a Financial Officer of each of the Borrower and the Domestic
         Subsidiaries confirming compliance with the conditions precedent set
         forth in paragraphs (h) and (j) of this Section 4.01;

         (ii) a copy of the long form certificate of incorporation or other
         constitutive documents, including all amendments thereto, of the
         Parent, the Borrower and the Domestic Subsidiaries, certified as of a
         recent date by the Secretary of State (or comparable authority) of the
         jurisdiction of its organization, and a certificate as to the good
         standing of each such party as of a recent date, from such Secretary of
         State (or other authority);

         (iii) a certificate of the Secretary or Assistant Secretary of the
         Parent, the Borrower and the Domestic Subsidiaries dated the date of
         execution of the Agreement and certifying (A) that attached thereto is
         a true and complete copy of the by-laws or comparable governing
         instruments of such party as in effect on that date and at all times
         since a date prior to the date of the resolutions described in clause
         (B) below, (B) that attached thereto is a true and complete copy of
         resolutions duly adopted by the Board of Directors or comparable
         governing body of such party (or, in the case of any partnership, of
         the general partner of such party) authorizing the execution, delivery
         and performance of this Agreement, the Loan Documents to which such
         party is or will be a party, including without limitation, the Parent
         Guarantee Agreement, the Subsidiaries' Guarantee Agreement, the Pledge
         Agreement, the Security Agreement, the Mortgage,

                                       37

<PAGE>   40

         and in the case of the Parent, the issuance of the Centre Converted
         Class A Common the Centre New Preferred and the Centre New Class A
         Common, and in the case of the Borrower, the extensions of credit
         hereunder, and that such resolutions have not been modified, rescinded
         or amended and are in full force and effect, (C) that the certificate
         of incorporation or other constitutive documents of such party have not
         been amended since the date of the last amendment thereto shown on the
         certificate of good standing furnished pursuant to clause (ii) above,
         and (D) as to the incumbency and specimen signature of each officer
         executing any Loan Document or any other document delivered in
         connection herewith on behalf of such party; and

         (iv)  such other documents, opinions, certificates and agreements in
         connection with the Loans, in form and substance satisfactory to the
         Agent, as it shall reasonably request.

         (f)   The Borrower shall have paid all fees, if any, and other amounts
due and payable to the Agent or any Lender on or prior to the date of execution
of this Agreement.

         (g)   [Intentionally deleted].

         (g-1) [Intentionally deleted].

         (g-2) The Intercreditor Agreement containing terms and conditions
satisfactory to the Agent in its sole discretion shall have been duly executed
by the Lenders, the Banks' Agent, the Agent and the Banks and shall be effective
as of the Effective Date.

         (g-3) [Intentionally deleted].

         (g-4) The Centre Existing Preferred Stock shall have been exchanged for
the Centre Converted Class A Common Stock.

         (h)   No Material Adverse Change shall have occurred since the date of
execution of this Agreement.

         (i)   The Agent shall have received satisfactory evidence that the
Borrower has obtained all governmental, shareholder and third party consents and
approvals and expiration of all applicable waiting or appeal periods necessary
or, in the opinion of the Agent, appropriate in connection with this Agreement.

         (j)   There shall not exist any action, suit, investigation or
proceeding pending or threatened in any court or before any arbitrator or other
Governmental Authority that purports to adversely affect the Loans or that could
have a material adverse effect on the ability of the Borrower or the
Subsidiaries to perform their obligations under the documents to be executed in
connection with the Loans, except as disclosed to and approved by the Agent
prior to the date hereof.

         (k)   [Intentionally deleted.]

         (l)   The Lenders shall have purchased, pursuant to an assignment and
acceptance, the loans and all related rights owed to Bank Austria Creditanstalt
Corporate Finance, Inc. under the Bank Credit Agreement and the Bank Loan
Documents.

                                       38

<PAGE>   41

         (m) The Restructure Effective Date (as defined in the Bank Credit
Agreement) shall have occurred pursuant to the Bank Credit Agreement or shall
occur contemporaneously with the Effective Date.

         (n) The transactions contemplated by this Agreement shall have been
consummated no later than August 25, 2000

         SECTION 4.02 Conditions Subsequent to the Effective Date.

         (a) The Borrower shall reasonably promptly deliver to the Agent
searches of Uniform Commercial Code filings in the jurisdiction of the chief
executive office of the Parent, the Borrower and each Subsidiary and each
jurisdiction where any Collateral is located and where a filing was made in
connection with the Collateral Documents and the Bank Loan Documents, confirming
the perfected security interest in favor of the Banks' Agent for the benefit of
the Secured Parties.

                                   ARTICLE V

                              AFFIRMATIVE COVENANTS

         The Borrower and the Parent covenant and agree with each Lender that so
long as this Agreement shall remain in effect or any Obligations shall be
unpaid, and until the Loans, together with interest, fees and all other
Obligations have been paid in full, unless the Required Lenders shall otherwise
consent in writing:

         SECTION 5.01 Existence; Businesses and Properties. (a) The Borrower
will, and will cause each of the Subsidiaries to, and the Parent will, do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.05(a).

         (b) The Borrower will, and will cause each of the Subsidiaries to, and
the Parent will, do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, leases,
privileges, licenses, permits, franchises, authorizations, patents, copyrights,
trademarks, trade names and all other Intellectual Property material to the
conduct of its business; maintain and operate such business in substantially the
manner in which it is presently conducted and operated; comply in all material
respects with all applicable laws, rules, regulations (including any zoning,
building, ordinance, code or approval or any building permits or any
restrictions of record or agreements affecting the Mortgaged Properties and
excluding Environmental Laws, which are subject to the provisions of Section
5.11) and judgments, writs, injunctions, decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all times maintain
and preserve all property material to the conduct of such business and keep such
property in good repair, working order and condition (subject to ordinary wear
and tear) and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.

         SECTION 5.02 Insurance. (a) The Borrower will, and will cause each of
the Subsidiaries to, keep its insurable properties fully insured at all times by
financially sound and reputable insurers; such insurance to include fire and
other risks insured against by extended coverage, public liability insurance
against claims for personal injury or death or property damage occurring upon,
in, about or in connection

                                       39

<PAGE>   42

with the use of any properties owned, occupied or controlled by it and business
interruption insurance, and maintain such other insurance as may be required by
law.

         (b) The Borrower will, and will cause each of the Subsidiaries to,
cause all such policies (other than workers' compensation and employee health
policies) to be endorsed or otherwise amended to include a "standard" or "New
York" lender's loss payable endorsement, in form and substance reasonably
satisfactory to the Banks' Agent and the Agent, which endorsement shall provide
that, from and after the Effective Date, if the insurance carrier shall have
received written notice from the Banks' Agent or the Agent of the occurrence of
an Event of Default, the insurance carrier shall pay all proceeds otherwise
payable to the Borrower or the Loan Parties under such policies directly to the
Agent and the Banks' Agent; cause all such policies to provide that neither the
Borrower, the Agent, the Banks' Agent, nor any other party shall be a coinsurer
thereunder and to contain a "Replacement Cost Endorsement", without any
deduction for depreciation, and such other provisions as the Banks' Agent and
the Agent may reasonably require from time to time to protect the interests of
the Banks' Agent, the Agent, the Banks and the Lenders; deliver original or
certified copies of all such policies to the Banks' Agent and the Agent; cause
each such policy to provide that it shall not be cancelled, modified or not
renewed (i) by reason of nonpayment of premium upon not less than 30 days' prior
written notice thereof by the insurer to the Banks' Agent and the Agent (giving
the Banks' Agent and the Agent the right to cure defaults in the payment of
premiums) or (ii) for any other reason upon not less than 30 days' prior written
notice thereof by the insurer to the Banks' Agent and the Agent; deliver to the
Banks' Agent and the Agent, prior to the cancellation, modification or
nonrenewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Banks' Agent and the Agent) together with evidence satisfactory to the Banks'
Agent and the Agent of payment of the premium therefor.

         (c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated (i) a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), the Borrower will, and will cause each of the Subsidiaries
to, obtain flood insurance in such total amount as the Agent or the Required
Lenders may from time to time require, and otherwise comply with the National
Flood Insurance Program as set forth in the Flood Disaster Protection Act of
1973, as it may be amended from time to time, or (ii) a "Zone 1" area, to the
extent available at commercially reasonable rates, obtain earthquake insurance
in such total amount as the Agent or the Required Lenders may from time to time
require.

         (d) With respect to any Mortgaged Property, the Borrower will, and will
cause each of the Subsidiaries to, carry and maintain comprehensive general
liability insurance including coverage on an occurrence basis against claims
made for personal injury (including bodily injury, death and property damage)
and umbrella liability insurance against any and all claims, in no event for a
combined single limit with respect to such Mortgaged Property of less than
$10,000,000, naming the Agent as an additional insured, on forms satisfactory to
the Agent.

         (e) The Borrower will, and will cause each of the Subsidiaries to,
notify the Banks' Agent and the Agent immediately whenever any separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section 5.02 is taken out by the Borrower;
and promptly deliver to the Banks' Agent and the Agent a duplicate original copy
of such policy or policies.

         (f) In connection with the covenants set forth in this Section 5.02, it
is understood and agreed that:

                                       40

<PAGE>   43

                  (i)   none of the Agent, the Lenders or their respective
         agents or employees shall be liable for any loss or damage insured by
         the insurance policies required to be maintained under this Section
         5.02, it being understood that (A) the Borrower and the other Loan
         Parties shall look solely to their insurance companies or any other
         parties other than the aforesaid parties for the recovery of such loss
         or damage and (B) such insurance companies shall have no rights of
         subrogation against the Agent or the Lenders or their agents or
         employees. If, however, the insurance policies do not provide waiver of
         subrogation rights against such parties, as required above, then the
         Borrower hereby agrees, to the extent permitted by law, to waive its
         right of recovery, if any, against the Agent, the Lenders and their
         agents and employees;

                  (ii)  the Borrower will permit an insurance consultant
         retained by the Banks' Agent and acceptable to the Agent, at the
         expense of the Borrower, to review the insurance policies maintained by
         the Borrower and the Subsidiaries, but no more frequently than
         annually; and

                  (iii) the designation of any form, type or amount of insurance
         coverage by the Agent or the Required Lenders under this Section 5.02
         shall in no event be deemed a representation, warranty or advice by the
         Agent or the Lenders that such insurance is adequate for the purposes
         of the business of the Borrower and the Subsidiaries or the protection
         of their properties and the Agent and the Required Lenders shall have
         the right from time to time to require the Borrower, the Subsidiaries
         and the Parent to keep other insurance in such form and amount as the
         Agent or the Required Lenders may reasonably request, provided that
         such insurance shall be obtainable on commercially reasonable terms.

         SECTION 5.03 Obligations and Taxes. The Borrower will, and will cause
each of the Subsidiaries to, and the Parent will, pay all of its obligations
(other than Indebtedness) promptly and in accordance with their terms and pay
and discharge promptly when due all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or in respect of its
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise which, if unpaid,
might give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings
diligently pursued and the Borrower shall have set aside on its books adequate
reserves in accordance with GAAP with respect thereto and such contest operates
to suspend collection of the contested obligation, tax, assessment or charge and
enforcement of a Lien and, in the case of a Mortgaged Property, there is no risk
of forfeiture of such property.

         SECTION 5.04 Financial Statements, Reports, etc. The Parent will
furnish to the Agent and each Lender:

         (a) as soon as available, and in any event within 90 days after the end
of each fiscal year, its consolidated balance sheet and related consolidated
statements of operations and cash flows, showing the consolidated financial
position of the Parent and the Borrower and its Consolidated Subsidiaries as of
the close of such fiscal year and the consolidated results of their operations
and cash flows during such year, in each case setting forth in comparative form
the figures for the preceding fiscal year, all audited by Arthur Andersen LLP or
another nationally recognized "Big Six" independent public accounting firm and
accompanied by an opinion of such accountants (which shall not be qualified in
any material respect) to the effect that such financial statements fairly
present the consolidated financial position and consolidated results of

                                       41
<PAGE>   44

operations and cash flows of the Parent and the Borrower and its Consolidated
Subsidiaries in accordance with GAAP consistently applied;

         (b) as soon as available, and in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year, its consolidated
balance sheet and related consolidated statements of operations and cash flows,
showing the consolidated financial position of the Parent and the Borrower and
its Consolidated Subsidiaries as of the close of such fiscal quarter, the
consolidated results of their operations during such fiscal quarter and the then
elapsed portion of the fiscal year and the consolidated cash flows for the then
elapsed portion of the fiscal year, all certified by one of its Financial
Officers as fairly presenting the consolidated financial position and
consolidated results of operations and cash flows of the Parent and the Borrower
and its Consolidated Subsidiaries in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments;

         (c) concurrently with any delivery of financial statements under
paragraph (a) or (b) above, a certificate of a Financial Officer of the Parent
certifying that no Default or Event of Default has occurred or, if such a
Default or Event of Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be taken with respect
thereto;

         (d) concurrently with any delivery of financial statements under
paragraph (a) or (b) above, a certificate of a Financial Officer of the Parent,
in form and substance satisfactory to the Agent, (i) setting forth computations
in reasonable detail satisfactory to the Agent demonstrating compliance with the
covenants contained in Sections 6.14 and 6.15, (ii) stating whether, since the
date of the most recent Required Financial Statements previously delivered,
there has been any material change in the generally accepted accounting
principles applied in the preparation of the Parent's financial statements and,
if so, describing such change, (iii) containing summaries of accounts payable
agings, accounts receivable agings, and inventory on a stand-alone basis, (iv)
in the case of a certificate delivered concurrently with a certificate under
paragraph (a) above, setting forth the Excess Cash Flow for the preceding fiscal
year and a reasonably detailed calculation thereof, (v) a comparison of the
actual results during the period covered by such financial statements to those
originally budgeted by the Parent prior to the beginning of the applicable
fiscal year, along with management's discussion and analysis of variances
between such actual and budgeted results, as well as variances between actual
results for such period and actual results for the same period in the previous
fiscal year and (vi) a list of any significant sales contracts awarded or
terminated since the date of the most recent Required Financial Statements
previously delivered, including a description thereof in reasonable detail
(provided that the Parent may disclose orally, rather than in writing, any such
sales information that the Parent deems highly sensitive from a competitive
standpoint);

         (e) [Intentionally deleted].

         (f) promptly upon completion, but in any event not later than 30 days
after the commencement of each fiscal year, a copy of projections by the Parent
of its consolidated balance sheet and related consolidated statements of
operations and cash flows for such fiscal year (including all material
assumptions to such projections) and a budget for such fiscal year, all in form
customarily prepared by the Parent's management, such projected financial
statements to be accompanied by a certificate of a Financial Officer to the
effect that such projected financial statements have been prepared in good
faith, based on assumptions that the Parent believes to be reasonable and based
on the best information available to the Parent and that such Financial

                                       42

<PAGE>   45

Officer has no reason to believe they are misleading in any material respect in
light of the circumstances existing at the time of preparation thereof;

         (g) on Wednesday of each week, a copy of projections by the Parent of
its consolidated cash flows for the 12-week period beginning on such Wednesday
(including all material assumptions to such projections), in form and substance
and in such detail as may be satisfactory to the Lenders, such cash flow
projections to be accompanied by a certificate of a Financial Officer to the
effect that such cash flow projections have been prepared in good faith, based
on assumptions that the Parent believes to be reasonable and based on the best
information available to the Parent and that such Financial Officer has no
reason to believe they are misleading in any material respect in light of the
circumstances existing at the time of preparation thereof;

         (h) as soon as available, (i) a copy of each financial statement,
report, notice or proxy statement sent by the Parent, the Borrower or any of the
Subsidiaries to their respective stockholders in their capacity as stockholders,
(ii) a copy of each regular, periodic or special report, registration statement,
or prospectus filed by the Parent, the Borrower or any of the Subsidiaries with
any securities exchange or the SEC, (iii) any material order issued by any
court, governmental authority, or arbitrator in any material proceeding to which
the Parent, the Borrower or any of the Subsidiaries is a party and (iv) copies
of all press releases and other statements made available generally by the
Parent, the Borrower or any of the Subsidiaries to the public generally
concerning material developments in the Parent's, the Borrower's or such
Subsidiary's business;

         (i) as soon as available, and in any event within 15 days of receipt,
any final management letter issued or provided by the auditors of the Parent,
the Borrower or any Subsidiary; and

         (j) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Parent, the Borrower
or any Subsidiary, or compliance with the terms of any Loan Document, as the
Agent or any Lender may reasonably request.

         SECTION 5.05 Other Information. (a) The Borrower will furnish to the
Agent prompt written notice of the following:

                  (i)    any Default or Event of Default, specifying the nature
         and extent thereof and the corrective action (if any) proposed to be
         taken with respect thereto;

                  (ii)   the filing or commencement of, or any threat or notice
         of intention of any person to file or commence, any action, suit or
         proceeding, whether at law or in equity or by or before any
         Governmental Authority, against or affecting the Parent, the Borrower
         or any of the Subsidiaries (A) which, if adversely determined, could,
         individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect or (B) which involves a claim or series of
         related claims against the Parent, the Borrower or any Subsidiary in
         excess of $50,000;

                  (iii)  all matters materially affecting the value,
         enforceability or collectibility of any material portion of its assets,
         including changes to significant contracts, schedules of equipment,
         changes of significant equipment or real property, the reclamation or
         repossession of, or the

                                       43

<PAGE>   46

         return to the Borrower or any of the Subsidiaries of, a material amount
         of goods and material claims or disputes asserted by any customer or
         other obligor, which matters could have a Material Adverse Effect;

             (iv) any material adverse change in the relationship between any of
         the Borrower and the Subsidiaries, on the one hand, and any of its
         respective suppliers, licensors or customers, on the other hand, which
         could reasonably be expected to have a Material Adverse Effect.

             (v)  all proposed amendments to any material agreement relating to
         Indebtedness to which the Borrower or any Subsidiary is a party; and

             (vi) any development that, individually or in the aggregate, has
         resulted in, or could reasonably be expected to have, a Material
         Adverse Effect.

         (b) Immediately upon receipt by the Borrower, the Borrower shall
provide the Agent and the Lenders with copies of all notices (including notices
of default), statements and financial information received from any other
creditor or lessor with respect to any item of Indebtedness which, if not paid,
could give rise to an Event of Default or the repossession of material property
from the Borrower or any of the Subsidiaries.

         (c) Any notification required by this Section 5.05 shall be accompanied
by a certificate of a Financial Officer of the Borrower setting forth the
details of the specified events and the action which the Borrower proposes to
take with respect thereto.

         (d) The Borrower will deliver to the Agent no later than the first
Business Day of each month, a report on the status of proposed and existing
contracts of the Borrower and the Subsidiaries, in form and substance and in
such detail as may be satisfactory to the Lenders, but in any event including
but not limited to the following: (i) all government contracts for which a bid
has been or is being prepared, whether the bid has been submitted or when it
will be, whether the bid has been awarded and to whom, or when it will be,
whether the bid has been rejected, and, if awarded, the status of the contract
and (ii) with respect to other contracts, describing all contracts in
negotiation or bid preparation and all contracts that have been awarded or
rejected, and, if awarded, the status of each contract.

         (e) Each Lender and the Agent agrees to use reasonable efforts to keep
confidential, in accordance with its customary practices, all information
obtained by it pursuant to this Section 5.05 or any other provision of the Loan
Documents, except for any disclosure (i) to its employees, officers, advisers
and agents which are acting in connection with the Loan Documents, (ii) to its
actual or prospective assignees or participants who agree to be bound by the
provisions of this paragraph (e), (iii) in respect of information to the extent
that it becomes available to the public other than pursuant to a breach of this
paragraph (e), or (iv) required by law, regulation or judicial order or
requested or required by bank regulators or auditors.

         SECTION 5.06 ERISA. (a) The Borrower will, and will cause each of the
Subsidiaries to, and the Parent will, comply in all material respects with the
applicable provisions of ERISA and the Code.

         (b) The Borrower will promptly give notice to the Agent and each Lender
of the following events, as soon as possible and in any event within 30 days
after the Borrower knows or has reason to know thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any

                                       44

<PAGE>   47

Plan, a failure to make any required contribution to a Plan, any filing by the
Borrower with the PBGC of a notice of intent to terminate a Plan, any receipt by
the Borrower of notice from the PBGC of the intention of the PBGC to terminate a
Plan or appoint a trustee to administer a Plan, any Lien in favor of the PBGC or
a Plan, or any withdrawal from, or the termination, reorganization or insolvency
(within the meaning of such terms as used in ERISA) of, any Multiemployer Plan;
or (ii) the institution of proceedings or the taking of any other action by the
PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the termination, reorganization or
insolvency (within the meaning of such terms as used in ERISA) of, any Single
Employer Plan or Multiemployer Plan.

         SECTION 5.07 Maintaining Records; Access to Properties and Inspections.
The Borrower will, and will cause each of the Subsidiaries to, keep proper books
of record and account in which full, true and correct entries in conformity with
GAAP and all requirements of law are made of all dealings and transactions in
relation to its business and activities. The Borrower will, and will cause each
of the Subsidiaries to, permit any representatives designated by the Agent or
the Required Lenders to visit and inspect the financial records and the
properties of the Borrower or any Subsidiary at reasonable times and as often as
reasonably requested, and to make extracts from and copies of such financial
records, and permit any representatives designated by the Agent or the Required
Lenders to discuss the affairs, finances and condition of the Borrower or any
Subsidiary with the officers thereof and independent accountants therefor (with
representatives of the Borrower present unless an Event of Default or Default
has occurred and is continuing).

         SECTION 5.08 [Intentionally deleted].

         SECTION 5.09 [Intentionally deleted].

         SECTION 5.10 Fiscal Year. The Borrower will, and will cause each
Subsidiary to, cause its fiscal year to end on March 31 in each year.

         SECTION 5.11 Compliance with Environmental Laws; Preparation of
Environmental Reports. (a) The Borrower will, and will cause each Subsidiary to,
and the Parent will, comply, and use its best efforts to cause all lessees and
other persons occupying the properties owned or leased by the Borrower and the
Subsidiaries (the "Properties") to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties except to the extent that the failure to comply therewith could not
reasonably be expected to result in liability in excess of $250,000; obtain and
renew all material Environmental Permits necessary for its operations and
Properties; and conduct any Remedial Action required under, and in accordance
with, Environmental Laws, except to the extent that: (i) the cost of such
Remedial Action could not reasonably be expected to exceed $250,000; or (ii) the
necessity of any such Remedial Action is being contested in good faith by
appropriate proceedings timely instituted and diligently pursued and in the
manner provided by applicable law.

         (b) If a Default or Event of Default caused by reason of a breach of
Section 3.09(c) or 5.11(a) shall have occurred and be continuing, or if the laws
of the United States or any state in which the Borrower or any of the
Subsidiaries leases or owns property provide that a Lien upon the property of
the Borrower or any of the Subsidiaries may be obtained for the removal of
Hazardous Materials which have been released, at the request of the Required
Lenders through the Agent, the Borrower will provide to the Lenders within 45
days after such request, at the expense of the Borrower, an environmental site
assessment report for the Properties which are the subject of such Default or
Event of Default prepared

                                       45

<PAGE>   48

by an environmental consulting firm acceptable to the Banks' Agent and the Agent
and indicating the presence or absence of Hazardous Materials and the estimated
cost of any compliance or Remedial Action in connection with such Properties. To
the extent any such Hazardous Materials are located therein or thereunder that
either (i) subject the property to Lien or (ii) require removal to safeguard the
health of any person, the Borrower shall, and shall cause each of the
Subsidiaries to, remove, or cause to be removed, such Lien and such Hazardous
Materials at the Borrower's expense. The Borrower acknowledges and agrees that
if the Borrower fails to perform its obligations under this Section 5.11(b), the
Agent shall have the right to do so for the Borrower and the Subsidiaries. The
Borrower further acknowledges and agrees that if the Borrower or any Subsidiary
fails to cooperate (e.g., by allowing access to any premises or permitting the
drilling of core samples, etc.), the Agent and the Lenders will not have an
adequate remedy at law.

         SECTION 5.12 Further Assurances. The Borrower will, and will cause each
Subsidiary to, and the Parent will, execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Uniform Commercial Code and other financing statements,
mortgages and deeds of trust) that may be required under applicable law, or that
the Required Lenders or the Agent may reasonably request, in order to effectuate
the transactions contemplated by the Loan Documents and in order to grant,
maintain, preserve, protect and perfect the validity and priority (except as
such priority may be affected by the Liens permitted under Section 6.02 and the
Intercreditor Agreement) of the security interests created or intended to be
created by the Collateral Documents. The Borrower will cause any subsequently
acquired or organized Domestic Subsidiary to become a party to the Subsidiaries
Guarantee Agreement, Indemnity Subrogation and Contribution Agreement,
Intercompany Note and each applicable Collateral Document in favor of the Banks'
Agent; provided that the foregoing shall not be deemed to imply that any such
acquisition or organization of a Subsidiary is permitted under this Agreement.
In addition, from time to time, the Borrower will, and will cause each Domestic
Subsidiary to, at its cost and expense, promptly secure the Obligations by
pledging or creating, or causing to be pledged or created, perfected security
interests with respect to such of its assets and properties as the Agent or the
Required Lenders shall designate (it being understood that it is the intent of
the parties that the Obligations shall be secured by, among other things,
substantially all the assets of the Borrower and the Domestic Subsidiaries
(including real and other properties owned or leased as of the Effective Date or
acquired subsequent to the Effective Date and including 100% of the capital
stock of each Subsidiary, except that in the case of the pledge of the capital
stock of any Foreign Subsidiary, such pledge shall be limited to 65% of the
capital stock of such Foreign Subsidiary to the extent, and for so long as, the
pledge of any greater percentage would have adverse tax consequences for the
Borrower). Such security interests and Liens will be created under the
Collateral Documents and other security agreements, mortgages, deeds of trust
and other instruments and documents in form and substance satisfactory to the
Banks' Agent and the Agent, and the Borrower shall deliver or cause to be
delivered to the Lenders all such instruments and documents (including legal
opinions, title insurance policies, surveys and lien searches) as the Agent
shall reasonably request to evidence compliance with this Section 5.12. The
Borrower agrees to provide such evidence as the Agent shall reasonably request
as to the perfection and priority status of each such security interest and
Lien.

         SECTION 5.13 Management Consultant. The Parent and the Borrower shall
engage a management consultant acceptable to the Required Lenders on terms and
conditions acceptable to the Required Lenders on or before September 30, 2000.

                                       46

<PAGE>   49

                                   ARTICLE VI

                               NEGATIVE COVENANTS

         The Borrower and the Parent covenant and agree with each Lender that so
long as this Agreement shall remain in effect or any Obligations shall be
unpaid, and until the Loans, together with interest, fees and all other
Obligations have been paid in full, unless the Required Lenders shall otherwise
consent in writing:

         SECTION 6.01 Indebtedness. The Parent and the Borrower will not, and
will not cause or permit any of the Subsidiaries to, incur, create, issue,
assume or permit to exist any Indebtedness or Preferred Stock, except:

         (a) Indebtedness existing as of the Effective Date, to the extent set
forth on Schedule 6.01(a) (but not any extension, renewal or refinancing
thereof);

         (b) Indebtedness represented by the Loan Documents and the Bank Loan
Documents (other than the Intercompany Notes);

         (c) [Intentionally deleted].

         (d) [Intentionally deleted].

         (e) Indebtedness represented by the Intercompany Notes, to the extent
permitted by Section 6.04(a)(ii);

         (f) other unsecured Indebtedness in an aggregate principal amount of up
to $1,000,000 outstanding at any time;

         (g) Indebtedness consisting of the obligation to reimburse the issuer
of any bid bond, performance bond or other instrument of a like nature and
purpose incurred in the ordinary course of business up to $500,000 in the
aggregate outstanding at any time;

         (h) the Bank Preferred Stock; and

         (i) the Centre New Preferred.

         SECTION 6.02 Negative Pledge. The Parent and the Borrower will not, and
will not cause or permit any of the Subsidiaries to, create, incur, assume or
permit to exist any Lien on any property or assets (including stock or other
securities of any Subsidiary or other person) now owned or hereafter acquired by
it or on any income or revenues or rights in respect of any thereof, except:

         (a) Liens existing as of the Effective Date, to the extent set forth on
Schedule 6.02(a), provided that such Liens secure only those obligations which
they secure as of the Effective Date;

         (b) Liens in favor of the Banks' Agent on behalf of the Secured Parties
created by the Collateral Documents;

                                       47

<PAGE>   50

         (c) Liens for taxes not yet due or which are being contested in
compliance with Section 5.03;

         (d) carriers', warehousemen's, mechanic's, materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and securing
obligations that are not due or which are being contested in compliance with
Section 5.03;

         (e) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other social
security laws or regulations;

         (f) trade contracts (other than for Indebtedness), leases (other than
Capital Lease Obligations), and other obligations of a like nature incurred in
the ordinary course of business;

         (g) zoning restrictions, easements, rights-of-way, restrictions on use
of real property and other similar encumbrances incurred in the ordinary course
of business which, in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Borrower or any of the
Subsidiaries;

         (h) deposits of up to $500,000 in the aggregate outstanding at any time
to secure any obligations permitted by Section 6.01(g);

         (i) [Intentionally deleted];

         (j) Liens arising by operation of law held by any Wholly Owned
Subsidiary which is a Foreign Subsidiary securing accounts payable by the
Borrower to such Foreign Subsidiary for finished products acquired by the
Borrower from such Foreign Subsidiary in transactions contemplated by, and
subject to the limitations set forth in, clause (iv) of Section 6.04(a);
provided that (i) such Liens securing accounts payable for finished products do
not extend to any property other than such finished products, (ii) all such
Foreign Subsidiaries shall have executed and delivered to the Banks' Agent an
Acknowledgement of Subordination substantially in the form of Exhibit L to the
Bank Credit Agreement, (iii) the payment of all accounts payable by the Borrower
to any such Foreign Subsidiary shall be subordinate to the payment in full of
all the Obligations and (iv) any such Liens shall have a subordinate lien status
to the liens and other claims created under the Collateral Documents for the
benefit of the Banks' Agent and the Secured Parties; and

         (k) Liens securing the Bank Senior Secured Notes at a level equal to,
and on par with, the Senior Secured Notes and the New Revolving Notes and Liens
securing the Bank Junior Secured Notes at a level equal to, and on par with, the
Junior Secured Notes and the other obligations of the Loan Parties arising under
the Bank Loan Documents.

         SECTION 6.03 Sale and Lease-Back Transactions. The Borrower will not,
and will not cause or permit any of the Subsidiaries to, enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred.

                                       48
<PAGE>   51
         SECTION 6.04      Investments, Loans and Advances. (a) The Borrower and
the Parent will not, and will not cause or permit any of the Subsidiaries to,
purchase, hold or acquire any Capital Stock, evidences of indebtedness or other
securities of, make or permit to exist any loans, extensions of credit or
advances to, maintain any Deposit Account or make or permit to exist any other
investment, capital contribution or other interest in, any other person,
except:

                  (i)      investments existing as of the Effective Date, to the
         extent set forth on Schedule 6.04(a)(i), by the Borrower in Wholly
         Owned Subsidiaries;

                  (ii)     loans and advances made after the Effective Date by
         the Borrower to Wholly Owned Subsidiaries; provided that (A) any such
         loan or advance is evidenced by an Intercompany Note pledged and
         delivered to the Agent on behalf of the Secured Parties pursuant to
         the Security Agreement, (B) any such loan or advance to any Wholly
         Owned Subsidiary shall be permitted only so long as such person
         remains a Wholly Owned Subsidiary and (C) the aggregate principal
         amount outstanding at any time of loans and advances (excluding
         investments under clauses (iii) and (iv) of this Section 6.04(a)) made
         by the Borrower after the Effective Date to Foreign Subsidiaries shall
         not exceed $1,000,000;

                  (iii)    investments by the Borrower in Wholly Owned
         Subsidiaries which are Foreign Subsidiaries; provided that (A) such
         investments consist of receivables for inventory transferred to such
         Foreign Subsidiaries in the ordinary course of business for resale to
         customers of such Foreign Subsidiaries, (B) the aggregate principal
         amount of such receivables outstanding at any time shall not exceed
         $5,000,000, (C) any such receivable shall be discharged, released or
         cancelled only to the extent that the Borrower has received payment of
         the amount due from the applicable Foreign Subsidiary, (D) the
         Borrower shall receive payment of a corresponding portion of any such
         receivable for any goods transferred to any Foreign Subsidiary within
         10 Business Days after receipt by such Foreign Subsidiary of payment
         from its customer for such goods and (E) the original amount of any
         such receivable is based on the Borrower's reasonable, good faith
         estimate of the amount that would be paid in an arms-length
         transaction with an independent, unrelated third party;

                  (iv)     investments by the Borrower in Wholly Owned
         Subsidiaries which are Foreign Subsidiaries; provided that (A) such
         investments consist of receivables for parts transferred to such
         Foreign Subsidiaries in the ordinary course of business for use in
         manufacturing and assembly by such Foreign Subsidiaries, (B) the
         aggregate principal amount of such receivables to any Foreign
         Subsidiary outstanding at any time is less than the aggregate
         principal amount of accounts payable by the Borrower to such Foreign
         Subsidiary for finished products acquired by the Borrower in the
         ordinary course of business, (C) the amount of any such receivable or
         payable is based on the Borrower's reasonable, good faith estimate of
         the amount that would be paid in an arms'-length transaction with an
         independent, unrelated third party and (D) all such Foreign
         Subsidiaries shall have executed and delivered to the Agent an
         Acknowledgement of Subordination substantially in the form of Exhibit
         L to the Bank Credit Agreement;

                  (v)      Cash Equivalents, so long as no Event of Default has
         occurred and is continuing;

                  (vi)     (A) trade accounts receivable (and related notes and
         instruments) arising in the ordinary course of business consistent
         with past practices and (B) notes receivable in the aggregate
         principal amount of up to $250,000 outstanding at any time
         constituting seller financing for sales made by the Borrower and the
         Subsidiaries in the ordinary course of business

                                      49
<PAGE>   52

         consistent with past practices, provided that any such notes shall be
         pledged to the Agent on behalf of the Secured Parties pursuant to the
         Security Agreement; and

                  (vii)    advances to employees for moving and travel expenses
         in the ordinary course of business consistent with past practices; and

         (b)      Except as herein expressly permitted or contemplated, the
Borrower and the Parent shall not issue, sell, transfer, lease or otherwise
dispose of any of its Capital Stock to, or accept any capital contribution
from, any person, other than, in the case of the Borrower, the Parent or permit
to exist any rights, warrants or options exercisable for, or any securities
exchangeable for or convertible into, any shares of common stock of the
Borrower or the Parent, except in the case of the Parent, those described on
Schedule 6.04(b); provided, the Parent may issue the Bank Preferred Stock and
the Centre New Preferred and may issue Preferred Stock to pay its dividend in
kind on the Bank Preferred Stock and the Centre New Preferred.

         SECTION 6.05      Mergers, Acquisitions and Other Transactions. (a) The
Borrower and the Parent will not, and will not cause or permit any of the
Subsidiaries to, (i) merge into or consolidate with any other person, (ii)
permit any other person to merge into or consolidate with it, (iii) sell,
transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or any part of its assets (whether now owned or hereafter
acquired) or (iv) issue, sell, transfer, lease or otherwise dispose of any
Capital Stock of any Subsidiary to, or permit any Subsidiary to accept any
capital contribution from, any person, except that:

                  (A)      the Borrower and any of the Subsidiaries may sell
         inventory in the ordinary course of business for fair value and on an
         arms-length basis;

                  (B)      the Borrower and any of the Subsidiaries may sell
         damaged, worn out or obsolete tangible assets in the ordinary course
         of business and in a commercially reasonable manner, so long as the
         Net Cash Proceeds of any such disposition are applied as required by
         Section 2.12(e);

                  (C)      the foregoing shall not be deemed violated by any
         Casualty or Condemnation affecting assets of the Borrower or any
         Subsidiary, so long as the Net Cash Proceeds thereof are applied as
         required by Section 2.12(e);

                  (D)      the Borrower or any Subsidiary may liquidate Cash
         Equivalents for its account;

                  (E)      [Intentionally deleted];

                  (F)      the Borrower or any of the Subsidiaries may transfer
         assets consisting of plant, property and equipment (in accordance with
         GAAP) to the Borrower or any Wholly Owned Subsidiary which is a
         Domestic Subsidiary, provided that (I) the Borrower and such Domestic
         Subsidiary have complied with all applicable provisions of Section
         5.12 and (II) the fair market value of all property disposed of by the
         Borrower pursuant to this clause (F) does not exceed $500,000 in the
         aggregate in any fiscal year;

                  (G)      the Borrower or any of the Subsidiaries may (I)
         transfer inventory to Foreign Subsidiaries in the ordinary course of
         business for resale to customers of such Foreign Subsidiaries as
         contemplated by, and subject to the limitations set forth in, clause
         (iii) of Section 6.04(a) and (II) transfer parts to Foreign
         Subsidiaries in the ordinary course of business

                                      50
<PAGE>   53

         for use in manufacturing and assembly by such Foreign Subsidiaries as
         contemplated by, and subject to the limitations set forth in, clause
         (iv) of Section 6.04(a); and

         (b)      The Borrower and the Parent will not, and will not cause or
permit any of the Subsidiaries to, purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any substantial part of the
assets of any other person, except that the Borrower and any of the
Subsidiaries may purchase inventory in the ordinary course of business.

         SECTION 6.06      Dividends, Distributions and Other Restricted
Payments. The Borrower and the Parent will not, and will not cause or permit
any of the Subsidiaries to, (a) declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise
and including any tax sharing or indemnification payments), whether in cash,
property, securities or a combination thereof, with respect to any Capital
Stock of the Borrower, the Parent or any of the Subsidiaries, except on the
Bank Preferred Stock and the Centre New Preferred Stock (b) directly or
indirectly redeem, purchase, retire or otherwise acquire for value, any Capital
Stock of the Borrower, the Parent or any of the Subsidiaries whether such
acquisition is made at the option of the Borrower, the Parent or such
Subsidiary or at the option of the holder of such Capital Stock and whether or
not such acquisition is required under the terms and conditions applicable to
such Capital Stock or set aside any amount for any such purpose, (c) release,
cancel, compromise or forgive in whole or in part the Indebtedness evidenced by
the Intercompany Notes or (d) directly or indirectly redeem, purchase, prepay,
retire, defease or otherwise acquire for value any Indebtedness, whether such
acquisition is made at the option of the Borrower, the Parent or such
Subsidiary or at the option of the holder of such Indebtedness and whether or
not such acquisition is required under the terms and conditions applicable to
such Indebtedness, or set aside any amount for any such purpose, in each case
other than Obligations and the obligations under the Bank Credit Agreement, on
a pro rata basis,; provided, however, that:

                  (i)      any Subsidiary may declare and pay dividends or make
         other distributions directly or indirectly to the Borrower; and

                  (ii)     the Borrower and the Subsidiaries may repay the
         principal of any Indebtedness in accordance with the scheduled
         amortization thereof.

         SECTION 6.07      Impairment of Security Interests. The Borrower will
not, and will not permit any of the Subsidiaries to, take or omit to take any
action, which action or omission might or would have the result of materially
impairing the security interests in favor of the Banks' Agent on behalf of the
Secured Parties with respect to the Collateral, and the Borrower will not, and
will not permit any of the Subsidiaries to, grant to any person (other than the
Banks' Agent on behalf of the Secured Parties pursuant to the Loan Documents)
any interest whatsoever in the Collateral, except for Liens permitted under
Section 6.02.

         SECTION 6.08      Limitation on Restrictions on Subsidiary Dividends,
etc. The Borrower will not, and will not cause or permit any of the
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction or any
restriction in its articles of incorporation, bylaws or comparable governing
instruments on the ability of any Subsidiary to (a) pay dividends or make any
other distributions on or in respect of its Capital Stock, or pay any
indebtedness owed to the Borrower or any Subsidiary, (b) make loans or advances
to the Borrower or any Subsidiary or (c) transfer any of its properties or
assets to the Borrower or any Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (i) customary

                                      51
<PAGE>   54

non-assignment provisions in any lease governing a leasehold interest, and (ii)
this Agreement and the Collateral Documents.

         SECTION 6.09      No Other Negative Pledges. The Borrower will not,
and will not cause or permit any of the Subsidiaries to, directly or
indirectly, enter into any agreement prohibiting the creation or assumption of
any Lien upon the properties or assets of the Borrower or any Subsidiary,
whether now owned or hereafter acquired, or requiring an obligation to be
secured if some other obligation is secured, except for this Agreement.

         SECTION 6.10      Transactions with Affiliates. (a) The Borrower will
not, and will not cause or permit any of the Subsidiaries to, sell or transfer
any property or assets to, or purchase or acquire any property or assets from,
or otherwise enter into or maintain any other transactions with, (i) the
Sponsor, the Parent or (ii) any Affiliate of the Borrower, the Parent or the
Sponsor, except that so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower or any Subsidiary may enter into any
of the foregoing transactions in the ordinary course of business at prices and
on terms and conditions that are (x) set forth in writing and (y) as favorable
to the Borrower or such Subsidiary as would be obtainable at the time in a
comparable transaction on an arm's-length basis from an independent, unrelated
third party. The provisions of this Section 6.10(a) shall not prohibit (A) any
payment expressly permitted under Section 6.04 or 6.06, (B) any transaction
entered into and maintained among the Borrower and any Wholly Owned
Subsidiaries or among Wholly Owned Subsidiaries, (C) payment of compensation to
employees in the ordinary course of business and grants of stock options to
employees and directors in the ordinary course of business, (D) the payment of
fees to the members of the board of directors of the Parent of up to $20,000
per director per year, (E) reimbursement of reasonable out-of-pocket expenses
of Centre Partners Management LLC, (F) the Agency Agreement and transactions
pursuant to the Agency Agreement and (G) transactions with the Centre Entities
specifically contemplated by this Agreement.

         (b)      [Intentionally deleted].

         SECTION 6.11      Nature of Business. (a) The Borrower will not, and
will not cause or permit any of the Subsidiaries to, engage at any time in any
business or business activity other than the business conducted by it as of the
Effective Date and business activities reasonably incidental thereto.

         (b)      The Parent will not engage in any activity (including any
merger, consolidation or sale of assets), issue any securities, incur any
Indebtedness, incur any other material liability or create or permit to exist
any Lien on its assets, other than the ownership of the common stock of the
Borrower and related de minimis activities incidental thereto. Notwithstanding
the foregoing sentence, the Parent may, so long as any such action is not
prohibited by any other applicable provision of this Agreement, (i) engage in
any activity incidental to the maintenance of the corporate existence of the
Parent and compliance with applicable law, (ii) enter into and perform the
obligations of the Parent under the Parent Guarantee Agreement, and the Pledge
Agreement (iii) enter into (or issue, as applicable), perform the obligations
of the Parent under and exercise the rights of the Parent under stock options
exercisable for Capital Stock of the Parent granted to employees of the
Borrower and directors of the Borrower or the Parent and other customary
participants or an employee stock option plan, an employee stock compensation
plan or an employee stock purchase plan established for the benefit of
employees of the Borrower and directors of the Borrower or the Parent and other
customary participants, (iv) issue additional shares of Capital Stock of the
Parent or receive any capital contribution, so long as 100% of the net cash
proceeds, if any, of any such issuance or contribution are contributed by the
Parent to the capital of the Borrower, (v) issue the Bank Preferred Stock, the
Bank Common Stock ,the Centre Converted Class A Common, the Centre New

                                      52
<PAGE>   55

Class A Common, the Centre New Preferred, the Centre Senior Secured Notes and
the Centre Junior Secured Notes, and issue stock pursuant to the exercise of
the warrants described on Schedule 3.21(b) and other issuances of equity
securities contemplated by this Agreement, and (vi) administer on behalf of the
Borrower, pursuant to the Agency Agreement (which shall be assigned to the
Banks' Agent on behalf of the Secured Parties), any nontransferable assets
which remain owned by the Parent.

         SECTION 6.12      Sales of Receivables. The Borrower will not, and will
not cause or permit any of the Subsidiaries to, sell with recourse, discount or
otherwise sell or dispose of its notes or accounts receivable.

         SECTION 6.13      Certain Amendments. The Parent and the Borrower will
not, and will not cause or permit any of its subsidiaries to, enter into any
amendment, modification or waiver that is adverse in any respect to the Lenders
to the Certificate of Incorporation, By-laws or comparable governing
instruments of any of them. The Borrower will promptly provide the Lenders with
copies of all proposed amendments to the foregoing documents and instruments.

         SECTION 6.14      Capital Expenditures. After October 1, 2000, the
Borrower and the Parent will not permit (a) Capital Expenditures of the Parent,
on a consolidated basis for any fiscal year of the Parent to be more than 20 %
of the EBITDA of the Parent, on a consolidated basis, for such fiscal year, and
(b) Capital Expenditures of the Parent, on a consolidated basis, during any
such fiscal year, to exceed $100,000, in the aggregate, by the end of the first
fiscal quarter of such year, to exceed $200,000, in the aggregate, by the end
of the second fiscal quarter of such year, and to exceed $300,000, in the
aggregate, by the end of the third fiscal quarter of such year, except that for
each of the quarters ending December 31, 2000 and March 31, 2001, consolidated
Capital Expenditures may be up to $100,000 per quarter.

         SECTION 6.15      Interest Coverage. After January 1, 2001, the
Borrower and the Parent will not permit the ratio, of (a) EBITDA of the Parent,
on a consolidated basis, during any quarter (or the average if more than one
quarter is included) plus Capital Expenditures (or the average if more than one
quarter is included) of the Parent, on a consolidated basis, during such
quarter or quarters, to (b) the sum of the interest on the Senior Secured Loans
accruing during such quarter plus the Capital Expenditures of the Parent, on a
consolidated basis, during such quarter (or, in each case, the average if more
than one quarter is included), to be less than (i) 1.00 to 1.00 for the quarter
ending on March 31, 2001; (ii) 1.00 to 1.00 for the quarter ending on June 30,
2001 and the immediately preceding quarter; (iii) 1.00 to 1.00 for the quarter
ending on September 30, 2001 and the immediately preceding two quarters; (iv)
1.05 to 1.00 for the quarter ending December 31, 2001, and the immediately
preceding three quarters; (v) 1.15 to 1.00 for the quarter ending March 31,
2002 and the immediately preceding three quarters; (vi) 1.20 to 1.00 for the
quarter ending June 30, 2002 and the immediately preceding three quarters;
(vii) 1.25 to 1.00 for the quarter ending September 30, 2002 and the
immediately preceding three quarters; and (viii) 1.30 to 1.00 for each quarter
thereafter together with the three quarters immediately preceding such quarter.

                                  ARTICLE VII

                               EVENTS OF DEFAULT

         In case of the happening of any of the following events ("Events of
Default"):

                  (a)      default shall be made in the payment of any principal
         of any Loan when and as the same shall become due and payable, whether
         at the due date thereof or at a date fixed for prepayment thereof or
         by acceleration thereof or otherwise;

                                      53
<PAGE>   56

                  (b)      default shall be made in the payment of any interest
         on any Loan or any fee or any other amount (other than an amount
         referred to in paragraph (a) above) due under any Loan Document, when
         and as the same shall become due and payable, and such default shall
         continue unremedied for a period of five (5) Business Days;

                  (c)      default shall be made in the due observance or
         performance by the Borrower or any other Loan Party of any covenant,
         condition or agreement contained in Section 5.01, 5.02, 5.04, 5.05,
         5.08, 5.09 5.10, 5.11 or 5.13 or in Article VI and such default shall
         continue unremedied for a period of seven (7) Business Days after such
         default becomes known to a Responsible Officer of the Borrower or such
         other Loan Party;

                  (d)      default shall be made in the due observance or
         performance by the Borrower , the Parent or any other Loan Party of
         any covenant, condition or agreement contained herein and in any other
         Loan Document (other than those specified in paragraphs (a), (b) and
         (c) above and such default shall continue unremedied for a period of
         thirty (30) days after such default becomes known to a Responsible
         Officer of the Borrower or such other Loan Party;

                  (e)      any representation or warranty made or deemed made in
         or in connection with any Loan Document or the extensions of credit
         hereunder, or any representation, warranty, statement or information
         contained in any report, certificate, financial statement or other
         instrument furnished in connection with or pursuant to any Loan
         Document, shall prove to have been false or misleading in any material
         respect when so made, deemed made or furnished;

                  (f)      the Borrower, any Subsidiary or the Parent shall (i)
         fail to pay any principal or interest, regardless of amount, due in
         respect of any Indebtedness in a principal amount in excess of
         $250,000, when and as the same shall become due and payable or (ii)
         fail to observe or perform any other term, covenant, condition or
         agreement contained in any agreement or instrument evidencing or
         governing any such Indebtedness if the effect of such failure is to
         cause, or to permit the holder or holders of such Indebtedness or a
         trustee on its or their behalf to cause, with or without the giving of
         notice or the lapse of time or both, such Indebtedness to become due
         prior to its stated maturity;

                  (g)      an involuntary proceeding shall be commenced or an
         involuntary petition shall be filed in a court of competent
         jurisdiction seeking (i) relief in respect of the Borrower, any
         Subsidiary or the Parent, or of a substantial part of its property or
         assets, under Title 11 of the United States Code, as now constituted
         or hereafter amended, or any other Federal, state or foreign
         bankruptcy, insolvency, receivership or similar law, (ii) the
         appointment of a receiver, trustee, custodian, sequestrator,
         conservator or similar official for the Borrower, any Subsidiary or
         the Parent, or for a substantial part of its property or assets, or
         (iii) the winding-up or liquidation of the Borrower, any Subsidiary or
         the Parent; and such proceeding or petition shall continue undismissed
         for 60 days or an order or decree approving or ordering any of the
         foregoing shall be entered;

                  (h)      the Borrower, any Subsidiary or the Parent shall (i)
         voluntarily commence any proceeding or file any petition seeking
         relief under Title 11 of the United States Code, as now constituted or
         hereafter amended, or any other Federal, state or foreign bankruptcy,
         insolvency, receivership or similar law, (ii) consent to the
         institution of, or fail to contest in a timely and appropriate manner,
         any proceeding or the filing of any petition described in paragraph
         (g) above, (iii) apply for or consent to the appointment of a
         receiver, trustee, custodian, sequestrator,

                                      54
<PAGE>   57

         conservator or similar official for such party or for a substantial
         part of its property or assets, (iv) file an answer admitting the
         material allegations of a petition filed against it in any such
         proceeding, (v) make a general assignment for the benefit of
         creditors, (vi) become unable, admit in writing its inability or fail
         generally to pay its debts as they become due or (vii) take any action
         for the purpose of effecting any of the foregoing;

                  (i)      one or more judgments or orders for the payment of
         money in an aggregate amount in excess of $50,000 shall be rendered
         against the Borrower, any Subsidiary or the Parent or any combination
         thereof and the same shall remain undischarged for a period of 45 days
         during which execution shall not be effectively stayed, or any action
         shall be legally taken by a judgment creditor to levy upon assets or
         properties of the Borrower, any Subsidiary or the Parent to enforce
         any such judgment;

                  (j)      (i) any person shall engage in any "prohibited
         transaction" (as defined in Section 406 of ERISA or Section 4975 of
         the Code) involving any Plan, (ii) any "accumulated funding
         deficiency" (as defined in Section 302 of ERISA), whether or not
         waived, shall exist with respect to any Plan, or any Lien shall arise
         on the assets of the Borrower or any Commonly Controlled Entity in
         favor of the PBGC or a Plan, (iii) a Reportable Event shall occur with
         respect to, or proceedings shall commence to have a trustee appointed,
         or a trustee shall be appointed, to administer or to terminate, any
         Single Employer Plan, which Reportable Event or commencement of
         proceedings or appointment of a trustee is, in the reasonable opinion
         of the Required Lenders, likely to result in the termination of such
         Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan
         shall terminate for purposes of Title IV of ERISA (other than in a
         standard termination within the meaning of Section 4041(b) of ERISA),
         (v) the Borrower or any Commonly Controlled Entity shall, or in the
         reasonable opinion of the Required Lenders is likely to, incur any
         liability in connection with a withdrawal from, or the termination,
         reorganization or insolvency of (within the meaning of such terms as
         used in ERISA), a Multiemployer Plan or (vi) any other event or
         condition shall occur or exist with respect to a Plan; and, in each
         case in clauses (i) through (vi) above, such event or condition,
         together with all other such events or conditions, if any, could
         reasonably be expected to result in liability of the Borrower, the
         Subsidiaries and the Parent in an aggregate amount exceeding
         $2,000,000 or require payments by the Borrower, the Subsidiaries and
         the Parent exceeding $1.000,000 in any year;

                  (k)      any Lien purported to be created by any Collateral
         Document shall cease to be, or shall for any reason be asserted by the
         Borrower or any other Loan Party not to be, a valid, perfected,
         priority Lien on the securities, properties or assets covered thereby,
         except as provided in the Intercreditor Agreement and as priority may
         be affected by Liens permitted under Section 6.02 and except for
         releases of Collateral in accordance with all applicable provisions of
         this Agreement and the Collateral Documents;

                  (l)      any Loan Document or any material provision of any
         Loan Document shall be declared by any Governmental Authority to be
         invalid or unenforceable in whole or in part or shall for any reason
         not be, or shall be asserted by the Borrower or any other Loan Party
         not to be, in full force and effect and enforceable in accordance with
         its terms;

                  (m)      any adverse change in the material agreements or
         relationships of the Parent, the Borrower and the Subsidiaries shall
         occur and such event or condition, together with all other such events
         or conditions, if any, could, in light of all the then existing
         circumstances, reasonably be expected to have a Material Adverse
         Effect;

                                      55
<PAGE>   58

                  (n)      any Material Intellectual Property or any material
         license relating thereto shall be invalid or unenforceable in whole or
         in part or shall for any reason not be in full force and effect and
         enforceable by the Borrower, the Subsidiaries and the Parent or shall
         infringe the rights of any other person or any other adverse change in
         the Material Intellectual Property rights of the Borrower, the
         Subsidiaries and the Parent shall occur and such event or condition,
         together with all other such events or conditions, if any, could
         reasonably be expected to have a Material Adverse Effect;

                  (o)      either (i) the Borrower, any Subsidiary or the Parent
         shall be liable, whether directly, indirectly through required
         indemnification of any person or otherwise, for the costs of
         investigation and/or remediation of any Hazardous Material originating
         from or affecting property or properties, whether or not owned, leased
         or operated by the Borrower, any Subsidiary or the Parent, which
         liability, together with all other such liabilities, could reasonably
         be expected to exceed $2,000,000 or require payments exceeding
         $1,000,000 in any year or (ii) any Federal, state, regional, local or
         other environmental regulatory agency or authority shall commence an
         investigation or take any other action that, individually or in the
         aggregate, could reasonably be expected to have a Material Adverse
         Effect;

                  (p)      the shares of common stock of the Borrower pledged to
         the Banks' Agent on behalf of the Lenders pursuant to the Collateral
         Documents shall cease to constitute 100% of the shares of the Capital
         Stock of the Borrower (on a fully diluted basis) or shall cease to
         constitute 100% of the Total Voting Power of the Borrower;

                  (q)      there shall occur any Change in Control; or

                  (r)      there shall occur an "Event of Default" pursuant to
         and as such term is defined in the Bank Credit Agreement;

then, and in every such event, and at any time thereafter during the
continuance of such event, the Agent may, and at the request of the Required
Lenders shall, take one or more of the following actions, at the same or
different times: (i) by notice to the Borrower declare the Loans then
outstanding to be forthwith due and payable (in whole or, in the sole
discretion of the Required Lenders, from time to time in part, provided that
any such partial acceleration shall be made pro rata based on the outstanding
principal amount of the Loans ), whereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and any
unpaid accrued fees and all other liabilities of the Borrower accrued hereunder
or under any other Loan Document, shall thereupon become immediately due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in any other Loan Document to the contrary notwithstanding; (ii)
exercise any remedies available under the Guarantee Agreements or the
Collateral Documents or otherwise or cause the Banks' Agent to exercise any
remedies available under the Collateral Documents or otherwise, each in
accordance with the terms of the Intercreditor Agreement; or (iii) any
combination of the foregoing; provided that in the case of any of the Events of
Default with respect to the Borrower described in paragraph (g) or (h) above
the principal of the Loans then outstanding, together with accrued interest
thereon and any unpaid accrued fees and all other liabilities of the Borrower
accrued hereunder or under any other Loan Document, shall automatically become
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in any other Loan Document to the contrary notwithstanding.

                                      56
<PAGE>   59

                                 ARTICLE VIII

                                   THE AGENT

         SECTION 8.01      Appointment and Authorization. (a) In order to
expedite the transactions contemplated by this Agreement, Centre Capital
Investors II, L.P. is hereby appointed to act as Agent on behalf of the
Lenders. Each of the Lenders, and each subsequent holder of any Note by its
acceptance thereof, hereby irrevocably appoints and authorizes the Agent to
take such actions as agent on behalf of such Lender or holder and to exercise
such powers as are specifically delegated to the Agent, as the case may be, by
the terms and provisions hereof and of the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto.

         (b)      Without hereby limiting any implied authority, the Agent is
hereby expressly authorized by the Lenders to, and hereby agrees that at the
direction of the Required Lenders it shall: (i) receive on behalf of the
Lenders all payments of principal of and interest on the Loans and all other
amounts due to the Lenders hereunder, and promptly distribute to each Lender
its proper share of each payment so received; (ii) give notice on behalf of
each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Agent has actual knowledge acquired in connection with
its agency hereunder; (iii) give notice to the Lenders of any Event of Default
specified in this Agreement of which the Agent has actual knowledge acquired in
connection with its agency hereunder; and (iv) distribute to each Lender copies
of all notices, financial statements and other materials delivered by the
Borrower pursuant to this Agreement promptly as received by the Agent. Without
limiting the generality of the foregoing, the Agent is hereby expressly
authorized (i) to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto and (ii) to delegate any of its rights and obligations as Agent in
relation to the Collateral to the Banks' Agent for the purposes of perfecting,
enforcing, amending or modifying the security interests granted under the
Collateral Documents in favor of the Secured Parties in its capacity as
collateral agent for the Secured Parties, as contemplated by and in accordance
with the provisions of this Agreement, the Intercreditor Agreement and the
other Collateral Documents.

         SECTION 8.02      Liability of Agent. Neither the Agent, nor any of
its respective directors, officers, employees or agents, shall be liable as
such for any action taken or omitted to be taken by any of them, except for
such party's own gross negligence or willful misconduct, or be responsible for
any statement, warranty or representation herein or the contents of any
document delivered in connection herewith, or be required to ascertain or to
make any inquiry concerning the performance or observance by the Borrower or
any other Loan Party of any of the terms, conditions, covenants or agreements
contained in any Loan Document. The Agent shall not be responsible to the
Lenders or the holders of the Notes for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement, the Notes or any
other Loan Documents or other instruments or agreements. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof until
it shall have received from the payee of such Note notice, given as provided
herein, of the transfer thereof in compliance with Section 9.04. The Agent
shall in all cases be fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required Lenders and, except
as otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders and each
subsequent holder of any Note. The Agent and the Required Lenders shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. Neither the Agent nor any
of its directors, officers, employees or agents, shall have any responsibility
to the Borrower or any other Loan Party on account of the failure of or delay
in performance or breach by any Lender of any

                                      57
<PAGE>   60

of its obligations hereunder or to any Lender on account of the failure of or
delay in performance or breach by any other Lender or the Borrower or any other
Loan Party of any of their respective obligations hereunder or under any other
Loan Document or in connection herewith or therewith. The Agent may execute any
and all duties hereunder by or through agents or employees, shall be entitled
to consult with legal counsel, independent public accountants and other experts
selected by it with respect to all matters arising hereunder and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.

         SECTION 8.03      Action by Agent. The Lenders hereby acknowledge that
the Agent shall be under any duty to take any discretionary action permitted to
be taken by it pursuant to the provisions of this Agreement unless it shall be
requested in writing to do so by the Required Lenders. The obligations of the
Agent under the Loan Documents are only those expressly set forth herein and
therein. Without limiting the generality of the foregoing, the Agent shall not
be required to take any action with respect to any Default or Event of Default,
except as expressly provided in Article VII.

         SECTION 8.04      Successor Agents. Subject to the appointment and
acceptance of a successor, the Agent may resign at any time by notifying the
Lenders and the Borrower. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor, subject to approval by the Borrower
(which shall not be unreasonably withheld). If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent on behalf of the Lenders, shall appoint a successor Agent as
applicable, which shall be a financial institution organized or licensed under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $5,000,000 or an Affiliate of the
Agent or of any such financial institution. Upon the acceptance of any
appointment as an Agent, as the case may be, hereunder by a successor bank,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from its duties and obligations hereunder. After the resignation of
the Agent hereunder, the provisions of this Article and Section 9.05 shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as the Agent.

         SECTION 8.05      Agent and Affiliate. With respect to the Loans made
by it hereunder and the Notes issued to it, the Agent, in its individual
capacity and not as the Agent, shall have the same rights and powers as any
other Lender and may exercise the same as though it were not the Agent. The
Agent may accept deposits from, lend money to and generally engage in any kind
of business and transactions with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Agent (or such Affiliate thereof).

         SECTION 8.06      Indemnification. (a) Each Lender agrees to reimburse
the Agent on demand, in the amount of its pro rata share (as determined under
Section 2.17) of any expenses incurred for the benefit of the applicable
Lenders by the Agent, including counsel fees and compensation of agents and
employees paid for services rendered on behalf of such Lenders, which shall not
have been reimbursed by the Borrower and (b) each Lender agrees to indemnify
and hold harmless the Agent and any of its respective directors, officers,
employees or agents on demand, in the amount of such pro rata share, from and
against any and all liabilities, taxes, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as the Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any action taken or omitted by
it or any of them under this Agreement or any other such Loan Document, to the
extent the same shall not have been reimbursed by the Borrower; provided that
no Lender shall be liable to the Agent for any portion of such liabilities,

                                      58
<PAGE>   61

obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent, or any of its directors, officers, employees or
agents.

         SECTION 8.07      Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement or any other Loan
Document, any related agreement or any document furnished hereunder or
thereunder.

                                  ARTICLE IX

                                 MISCELLANEOUS

         SECTION 9.01      Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy as
follows:

                  (a)      if to the Parent or the Borrower, to it at 7340
         McGinnis Ferry Road, Suwanee, Georgia 30174-1247, Attention of John A.
         Morelli (Telecopy No. (770) 622-3515), with copies to (i) Centre
         Partners Management LLC, 30 Rockefeller Plaza, New York, NY 10020,
         Attention of Scott Perekslis (Telecopy No. (212) 332-5801) and (ii)
         Sidley & Austin, One First National Plaza, Chicago, IL 60603,
         Attention of James Clark (Telecopy No. (312) 853-7036); and

                  (b)      if to the Agent or any Lender, to it at Centre
         Partners Management LLC, 30 Rockefeller Plaza, New York, NY 10020,
         Attention of Scott Perekslis (Telecopy No. (212) 332-5801), with a
         copy to Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY
         10153, Attention of Jeffrey J. Weinberg (Telecopy No. (212) 310-8007.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.

         SECTION 9.02      Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower or the Parent herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders, the Agent and shall survive the making by
the Lenders of the Loans, the execution and delivery to the Lenders of the
Notes evidencing such Loans regardless of any investigation made by the
Lenders, the Agent or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan, any fee
or any other amount payable under this Agreement or any other Loan Document is
outstanding and unpaid. The provisions of Section 2.14, 2.16, 2.20 and 9.05
shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the invalidity or
unenforceability of any term or

                                      59
<PAGE>   62

provision of this Agreement or any other Loan Document or any investigation
made by or on behalf of the Agent, or any Lender.

         SECTION 9.03      Binding Effect. This Agreement shall become effective
as of the Effective Date.

         SECTION 9.04      Successors and Assigns. (a) All covenants, promises
and agreements by or on behalf of the Borrower, the Parent, the Agent or the
Lenders that are contained in this Agreement shall be binding upon and inure to
the benefit of their respective permitted successors and assigns.

         (b)      Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its the Loans at the time owing to it, the Notes
held by it; provided, however, that (i) except in the case of an assignment to
a Lender or an Affiliate of a Lender and the Agent must give its prior written
consent to such assignment (which consent shall not be unreasonably withheld),
(ii) except in the case of an assignment to a Lender or an Affiliate of a
Lender, the sum of the principal amount of the outstanding Loans subject to
each such assignment and (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent) shall not
be less than the lesser of (I) $1,000,000 and (II) the entire remaining amount
of the outstanding Loans of such Lender, (iii) the parties to each such
assignment (including, but not limited to, an assignment by a Lender to another
Lender) shall execute and deliver to the Agent an Assignment and Acceptance,
together with the Note or Notes subject to such assignment and a processing and
recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender or
an Affiliate thereof, shall deliver to the Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to Section 9.04(e), from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution thereof
(unless the Agent shall otherwise agree), (A) the assignee thereunder shall be
a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement and (B) the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.14, 2.16, 2.20 and 9.05, as well as to any fees accrued for its account to
the effective date of the Assignment and not yet paid).

         (c)      By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim arising
in respect of any action by the assigning Lender; (ii) except as set forth in
clause (i) above, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of the Borrower
or any other Loan Party or the performance or observance by the Borrower or any
other Loan Party of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement and the other Loan Documents, together with
copies of the most recent Required Financial Statements

                                      60
<PAGE>   63

and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (v) such assignee will independently, and without reliance upon the
Agent, such assigning Lender or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (vi)
such assignee appoints and authorizes the Agent to exercise such powers under
this Agreement as are delegated to such party by the terms hereof, together
with such powers as are reasonably incidental hereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender.

         (d)      The Agent shall maintain at its offices in New York, New York
a copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and principal amount of
the Loans owing to, each Lender pursuant to the terms hereof from time to time
(the "Register"). The entries in the Register shall be conclusive in the
absence of manifest error and the Borrower, the Agent and the Lenders may treat
each person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower, and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.

         (e)      Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with the Note or Notes
subject to such assignment, an Administrative Questionnaire completed in
respect of the assignee (unless the assignee shall already be a Lender
hereunder or shall be an Affiliate of a Lender), the processing and recordation
fee referred to in Section 9.04(b) and, if required, the written consent of the
Borrower, the Agent to such assignment, the Agent shall (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Lenders and the Borrower.
Within five Business Days after receipt of notice, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange for the
surrendered Note or Notes, a new Note or Notes payable to the order of such
assignee in a principal amount equal to the applicable portion thereof assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained any portion of such Note or Notes, a new Note or Notes payable to
the order of such assigning Lender in a principal amount equal to the
applicable portion of such Note or Notes retained by it. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note; such new Note or Notes shall be dated the date
of the surrendered Notes which they replace and shall otherwise be in
substantially the form of Exhibits A-1 through A-3 hereto, as applicable.
Cancelled Notes shall be returned to the Borrower.

         (f)      Each Lender may, without the consent of the Borrower or the
Agent sell participations in all or a portion of its rights and obligations
under this Agreement (including all or a portion of the Loans owing to it) to
one or more participants; provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) the principal amount of the
outstanding Loans subject to such participation of the Lender subject to such
participation shall be not less than the lesser of (I) $1,000,000 and (II) the
entire remaining amount of the outstanding Loans of such Lender, (iii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) the participating banks or other entities
shall be entitled to the benefit of the cost protection and indemnity
provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if
they were Lenders (except that no participant shall be entitled to claim any
amount greater than its pro rata share of the amount that could have been
claimed by the Lender from which it acquired its participation) and (v) the
Borrower, the Agent, and the other Lenders shall continue to deal solely and
directly with the Lender from which the participant acquired its interest in
connection with such Lender's rights and obligations under this

                                      61
<PAGE>   64

Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans and to approve any amendment,
modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
the amount of principal of or the rate at which interest is payable on the
Loans, extending any scheduled principal payment date or date fixed for the
payment of interest on the Loans).

         (g)      Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrower or any of the other
Loan Parties furnished to such Lender by or on behalf of the Borrower or any of
the other Loan Parties.

         (h)      Assignments and participations pursuant to this Section 9.04
need not be pro rata among the Loans.

         (i)      Any Lender may at any time assign all or any portion of its
rights under this Agreement and the Notes issued to it to a Federal Reserve
Bank to secure extensions of credit by such Federal Reserve Bank to such
Lender; provided that no such assignment shall release a Lender from any of its
obligations hereunder or substitute any such Bank for such Lender as a party
hereto.

         (j)      Neither the Borrower nor the Parent shall assign or delegate
any of its rights or duties hereunder or any interest herein (whether
voluntarily, by operation of law or otherwise). Any purported assignment or
delegation in violation of the foregoing shall be void.

         SECTION 9.05      Expenses; Indemnity. (a) The Borrower agrees to pay
all reasonable out-of-pocket expenses incurred by the Agent in connection with
the preparation, execution and administration of this Agreement and the other
Loan Documents, the administration of the Loans or in connection with any
amendment, modification or waiver of the provisions hereof or thereof and the
Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the
Agent or any Lender in connection with the enforcement or protection of the
rights of the Agent and the Lenders under this Agreement and the other Loan
Documents or in connection with the Loans deemed made or the Notes issued
hereunder, including the reasonable fees, charges and disbursements of (i)
Weil, Gotshal & Manges, counsel for the Agent, and (ii) in connection with any
such enforcement or protection (including any workout or restructuring or any
negotiations relating thereto), the other counsel for the Agent, or any Lender
(including the reasonable allocated internal fees and expenses of any in-house
staff counsel).

         (b)      The Borrower agrees to indemnify the Agent, the Affiliates of
the Agent, the Lenders, and their respective directors, officers, employees,
agents and Controlling persons (each, an "Indemnified Party") from and against
any and all losses, claims (whether valid or not), damages and liabilities,
joint or several, to which such Indemnified Party may become subject, related
to or arising out of (i) the transactions contemplated by the Agreement and the
Loans, (ii) the execution or delivery of this Agreement or any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto or thereto of their respective obligations
hereunder or thereunder and the other transactions contemplated hereby and
thereby, (iii) the use of the proceeds of the Loans or (iv) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnified Party is a party thereto. The Borrower further
agrees to reimburse each Indemnified Party for all expenses (including
reasonable attorneys' fees and expenses) as they are incurred in connection
with the investigation of, preparation for or defense of any pending or
threatened claim or any action or proceeding arising therefrom. Notwithstanding
the foregoing, the obligation to indemnify any Indemnified Party under this
Section 9.05(b) shall not apply in respect of any loss, claim, damage or

                                      62
<PAGE>   65

liability to the extent that a court of competent jurisdiction shall have
determined by final and nonappealable judgment that such loss, claim, damage or
liability resulted from such Indemnified Party's gross negligence or willful
misconduct.

         (c)      The Borrower agrees to indemnify each of the Agent, the
Lenders and the other Indemnified Parties from and against any and all losses,
claims (whether valid or not), damages and liabilities, joint or several, to
which such Indemnified Party may become subject, related to or arising out of
(i) any Federal, state, local or other statute, ordinance, order, judgment,
ruling or regulation relating to environmental pollution, regulation or control
affecting the Borrower, any Subsidiary, the Parent or its properties or assets,
(ii) any Hazardous Materials managed by the Borrower, any Subsidiary or the
Parent, (iii) any event, condition or circumstance involving environmental
protection, pollution, regulation or control affecting the Borrower, any
Subsidiary, the Parent or their properties or assets or (iv) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnified Party is a party thereto. The Borrower further
agrees to reimburse each Indemnified Party for all expenses (including
reasonable consultants' and attorneys' fees and expenses) as they are incurred
in connection with the investigation of, preparation for or defense of any
pending or threatened claim or any action or proceeding arising therefrom.
Notwithstanding the foregoing, the obligation to indemnify any Indemnified
Party under this Section 9.05(c) shall not apply in respect of any loss, claim,
damage or liability to the extent that a court of competent jurisdiction shall
have determined by final and nonappealable judgment that such loss, claim,
damage or liability resulted from such Indemnified Party's gross negligence or
willful misconduct.

         (d)      In the event that the foregoing indemnity is unavailable or
insufficient to hold an Indemnified Party harmless, then the Borrower will
contribute to amounts paid or payable by such Indemnified Party in respect of
such Indemnified Party's losses, claims, damages or liabilities in such
proportions as appropriately reflect the relative benefits received by and
fault of the Borrower and such Indemnified Party in connection with the matters
as to which such losses, claims, damages or liabilities relate and other
equitable considerations.

         (e)      If any action, proceeding or investigation is commenced, as to
which any Indemnified Party proposes to demand such indemnification, it shall
notify the Borrower with reasonable promptness; provided, however, that any
failure by such Indemnified Party to notify the Borrower shall not relieve the
Borrower from its obligations hereunder except to the extent the Borrower is
prejudiced thereby. The Borrower shall be entitled to assume the defense of any
such action, proceeding or investigation, including the employment of counsel
and the payment of all fees and expenses. Each Indemnified Party shall have the
right to employ separate counsel in connection with any such action, proceeding
or investigation and to participate in the defense thereof, but the fees and
expenses of such counsel shall be paid by such Indemnified Party, unless (i)
the Borrower has failed to assume the defense and employ counsel as provided
herein, (ii) the Borrower has agreed in writing to pay such fees and expenses
of separate counsel or (iii) an action, proceeding or investigation has been
commenced against such Indemnified Party and the Borrower and representation of
both the Borrower and such Indemnified Party by the same counsel would be
inappropriate because of actual or potential conflicts of interest between the
parties (in the case of any Agent or Lender, the existence of any such actual
or potential conflict of interest to be determined by such party, taking into
account, among other things, any relevant regulatory concerns). In the case of
any circumstance described in clause (i), (ii), or (iii) of the immediately
preceding sentence, the Borrower shall be responsible for the reasonable fees
and expenses of such separate counsel; provided, however, that the Borrower
shall not in any event be required to pay the fees and expenses of more than
one separate counsel (plus appropriate local counsel under the direction of
such separate counsel) for all Indemnified Parties, unless representation of
all Indemnified Parties by the

                                      63
<PAGE>   66

same counsel would be inappropriate due to actual or potential conflicting
interests between such Indemnified Parties, in which case, the Borrower shall
be required to pay the fees and expenses of such additional counsel as are
necessary to prevent such conflicting interests. The Borrower shall be liable
only for settlement of any claim against an Indemnified Party made with the
Borrower's written consent.

         (f)      The provisions of this Section 9.05 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term
or provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of any Agent or Lender. All amounts due under this Section
9.05 shall be payable on written demand therefor.

         SECTION 9.06      Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
except deposits for the payment of payroll taxes) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower against any and all of the Obligations of the Borrower
now or hereafter existing under this Agreement and the other Loan Documents
held by such Lender, irrespective of whether or not such Lender shall have made
any demand under this Agreement or such other Loan Document and although such
obligations may be unmatured. The rights of each Lender under this Section 9.06
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.

         SECTION 9.07      Applicable Law. THIS AMENDED AGREEMENT AND THE OTHER
LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS)
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.

         SECTION 9.08      Waivers; Amendment. (a) No failure or delay of the
Agent or any Lender in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Agent and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies which they would otherwise have. No waiver
of any provision of this Agreement or any other Loan Document or consent to any
departure by the Parent, the Borrower or any other Loan Party therefrom shall
in any event be effective unless the same shall be permitted by Section
9.08(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on
the Parent, the Borrower or any other Loan Party in any case shall entitle the
Parent, the Borrower or any other Loan Party to any other or further notice or
demand in similar or other circumstances.

         (b)      None of this Agreement, the other Loan Documents or any
provision hereof or thereof may be waived, amended or modified (and no consent
to the departure by the Parent, the Borrower or any other Loan Party therefrom
may be effective), except pursuant to an agreement or agreements in writing
entered into by the Required Lenders, the Parent and the Borrower; provided,
however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or date for the payment of any interest on any Loan, or
waive or excuse any such payment or any part thereof, or decrease the rate of
interest on any Loan, without the prior written consent of each Lender affected
thereby, (ii) decrease the fees of any Lender without the prior written consent
of such Lender or (iii) amend or modify the

                                      64
<PAGE>   67

provisions of Section 2.17 or 9.04(j), the provisions of this Section, or the
definition of the term "Required Lenders", subordinate any of the Liens of the
Lenders on the Collateral, release any Guarantor or release any Collateral of
material value without the prior written consent of each Lender; provided
further, that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Agent hereunder or under any other Loan Document
without the prior written consent of the Agent (it being understood that the
requirements of this paragraph are cumulative). Any approval of a transaction
of the Parent, the Borrower or a Subsidiary given by the Required Lenders in
accordance with the terms of this Agreement shall include approval of any
release of Collateral which is a part of such transaction, notwithstanding the
foregoing restrictions, so long as substantially all of the consideration paid
to the Parent, the Borrower or the Subsidiary in connection with such
transaction is applied to the Senior Secured Loans and/or the Junior Secured
Loans in accordance with the terms of this Agreement. Each Lender and each
holder of a Note shall be bound by a waiver, amendment or modification
authorized by this Section 9.08 regardless of whether its Note shall have been
marked to make reference thereto, and any consent by any Lender or holder of a
Note pursuant to this Section 9.08 shall bind any person subsequently acquiring
a Note from it, whether or not such Note shall have been so marked.

         SECTION 9.09      Interest Rate Limitation. Notwithstanding anything
herein or in the Notes to the contrary, if at any time the applicable interest
rate, together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Lender, shall exceed the maximum
rate permitted by applicable law (the "Maximum Rate") which may be contracted
for, charged, taken, received or reserved by such Lender in accordance with
applicable law, the rate of interest payable under the affected Note held by
such Lender, together with all Charges payable to such Lender, shall be limited
to the Maximum Rate.

         SECTION 9.10      Entire Agreement. (a) This Agreement and the other
Loan Documents constitute the entire contract among the parties relative to the
subject matter hereof and thereof. Any previous agreement among the parties
with respect to the subject matter hereof and thereof is superseded by this
Agreement and the other Loan Documents. Nothing in this Agreement or the other
Loan Documents, expressed or implied, is intended to confer upon any party
(other than the parties hereto and thereto and the other Secured Parties) any
rights, remedies, obligations or liabilities under or by reason of this
Agreement or the other Loan Documents.

         (b)      THIS WRITTEN AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS
AND THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         SECTION 9.11      Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

         SECTION 9.12      Counterparts. This Agreement may be executed by the
parties hereto in several counterparts and each such counterpart shall be
deemed to be an original, admissible into evidence, but all such counterparts
shall together constitute but one and the same Agreement, and shall

                                      65
<PAGE>   68

become effective as provided in Section 9.03. Delivery of an executed
counterpart of this Agreement by telecopy shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telecopy shall also
deliver a manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.

         SECTION 9.13      Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

         SECTION 9.14      Remedies. In case any one or more of the covenants
and/or agreements set forth in this Agreement shall have been breached by the
Borrower or the Parent, then the Agent may, on behalf of the Lenders, proceed
to protect and enforce the Lenders' rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Agreement. Without limitation of the
foregoing, each of the Borrower and the Parent agrees that failure to comply
with any of the covenants contained herein will cause irreparable harm and that
specific performance shall be available in the event of any breach thereof. The
Agent acting pursuant to this Section 9.14, shall be indemnified against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including reasonable legal and accounting fees and expenses)
in accordance with Section 9.05.

         SECTION 9.15      Jurisdiction; Consent to Service of Process; Waiver
of Jury Trial. (a) The Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in New
York, New York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State court
or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall affect
any right that any Agent or any Lender may otherwise have to bring any action
or proceeding relating to this Agreement or the other Loan Documents against
the Borrower or its properties in the courts of any jurisdiction.

         (b)      The Borrower hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State court or Federal court of the United States of
America sitting in New York, New York. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

         (c)      Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

         (d)      TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDED
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                                      66
<PAGE>   69

         SECTION 9.16      Waiver of Certain Provisions of Certain Agreements.
The Lenders hereby agree to waive any provisions of the Bank Credit Agreement
and of this Agreement prohibiting the conversion of the Centre Class B Stock to
Class A common voting stock of the Parent, if any, on a share for share basis.

                          [Signature Pages to Follow.]

                                      67
<PAGE>   70

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.

                           FIREARMS TRAINING SYSTEMS, INC.,
                           as Parent

                           By:
                              --------------------------------------------------
                              Name:
                              Title:

                           FATS, INC.,
                           as Borrower

                           By:
                              --------------------------------------------------
                              Name:
                              Title:

                           CENTRE CAPITAL INVESTORS II, L.P., as Agent,
                                and individually as a Lender

                           By:  Centre Partners II, L.P., as general partner

                                By: Centre Partners Management LLC,
                                    attorney-in-fact

                           By:
                              --------------------------------------------------
                              Name:
                              Title:

                           CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.

                           By:  Centre Partners II, L.P., as general partner

                                By: Centre Partners Management LLC,
                                    attorney-in-fact

                           By:
                              --------------------------------------------------
                              Name:
                              Title:

                                      68
<PAGE>   71

                           CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.

                           By:  Centre Partners II, L.P., as general partner

                                By: Centre Partners Management LLC,
                                    attorney-in-fact

                           By:
                              --------------------------------------------------
                              Name:
                              Title:

                           CENTRE PARTNERS COINVESTMENT, L.P.

                           By:  Centre Partners II, LLC, as general partner

                           By:
                              --------------------------------------------------
                              Name:
                              Title:  Managing Director

                                      69
<PAGE>   72

                                Schedule 2.01(a)
        Allocation of Centre New Class A Common and Centre New Preferred

<TABLE>
<CAPTION>
                                     CENTRE NEW CLASS A
CAPITAL BREAKDOWN:                        COMMON                  CENTRE NEW PREFERRED
------------------                   -------------------          --------------------
<S>                                  <C>                          <C>
Centre Capital Investors II,             $ 605,481                      $ 615,893
L.P.
Centre Capital Tax-Exempt                $  67,687                      $  68,851
Investors II, L.P.
Centre Capital Offshore                  $ 119,978                      $ 122,041
Investors II, L.P.
Centre Partners                          $  89,081                      $  90,612
Coinvestment, L.P.
                                         ---------                      ---------
TOTAL:                                   $ 882,227                      $ 897,397
                                         ---------                      ---------
</TABLE>

                                      70
<PAGE>   73

                                Schedule 2.01(b)
          Allocation of Senior Secured Loans and Junior Secured Loans

<TABLE>
<CAPTION>
CAPITAL BREAKDOWN:                     SENIOR SECURED DEBT           JUNIOR SECURED DEBT
------------------                     -------------------           -------------------
<S>                                    <C>                           <C>
Centre Capital Investors II,                $ 345,989                      $ 663,146
L.P.
Centre Capital Tax-Exempt                   $  38,678                      $  74,133
Investors II, L.P.
Centre Capital Offshore                     $  68,559                      $ 131,404
Investors II, L.P.
Centre Partners                             $  50,903                      $  97,565
Coinvestment, L.P.
                                            ---------                      ---------
TOTAL:                                      $ 504,129                      $ 966,248
                                            ---------                      ---------
</TABLE>

                                      71
<PAGE>   74

                                Schedule 3.05(b)
                            Undisclosed Liabilities

                                      72
<PAGE>   75

                                 Schedule 3.06
                            Material Adverse Change

                                      73
<PAGE>   76

                                Schedule 3.07(b)
                                 Real Property

                                      74
<PAGE>   77

                                Schedule 3.07(c)
                             Intellectual Property

                                      75
<PAGE>   78

                                 Schedule 3.08
                                  Subsidiaries

                                      76
<PAGE>   79

                                Schedule 3.09(a)
                                   Litigation

                                      77
<PAGE>   80

                                Schedule 3.09(b)
                        Compliance with Applicable Laws

                                      78
<PAGE>   81

                                Schedule 3.09(c)
                            Environmental Compliance

                                      79
<PAGE>   82

                                Schedule 3.10(a)
                               Material Contracts

                                      80
<PAGE>   83

                                Schedule 3.10(b)
                        Validity and Breach of Contracts

                                      81
<PAGE>   84

                                Schedule 3.17(a)
                      Compliance with Government Contracts

                                      82
<PAGE>   85

                                Schedule 3.17(b)
                Government Contract Investigation and Debarment

                                      83
<PAGE>   86

                                Schedule 3.17(c)
                Government Contract Investigation of Individuals

                                      84
<PAGE>   87

                                Schedule 3.17(d)
                           Government Contract Claims

                                      85
<PAGE>   88

                                Schedule 3.18(d)
                          Offices for Filing Mortgages

                                      86
<PAGE>   89

                                Schedule 3.18(e)
                           Security Interest Filings

                                      87
<PAGE>   90

                                 Schedule 3.20
                          Transactions with Affiliates

                                      88
<PAGE>   91

                                Schedule 3.21(b)
                                Stock Ownership

                                      89
<PAGE>   92

                                Schedule 3.23(a)
                                 Labor Matters

                                      90
<PAGE>   93

                                 Schedule 3.24
                               Licenses; Permits

                                      91
<PAGE>   94

                                Schedule 6.01(a)
                     Existing Indebtedness; Preferred Stock

                                      92
<PAGE>   95

                                Schedule 6.02(a)
                                 Existing Liens

                                      93
<PAGE>   96

                              Schedule 6.04(a)(i)
                          Investments in Subsidiaries

                                      94
<PAGE>   97

                                Schedule 6.04(b)
                                Stock Issuances

                                      95
<PAGE>   98

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
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Article I       DEFINITIONS ........................................................................................     1

         SECTION 1.01    Defined Terms .............................................................................     1

         SECTION 1.02    Terms Generally ...........................................................................    18

Article II      THE EXCHANGE .......................................................................................    18

         SECTION 2.01    Exchange of Guarantee Reimbursement Obligation for Equity and Loans .......................    18

         SECTION 2.05    Notes; Repayment of Loans .................................................................    19

         SECTION 2.06    Fees ......................................................................................    19

         SECTION 2.07    Interest on Loans .........................................................................    19

         SECTION 2.08    Default Interest ..........................................................................    20

         SECTION 2.09    [Intentionally deleted] ...................................................................    20

         SECTION 2.10    [Intentionally deleted] ...................................................................    20

         SECTION 2.11    [Intentionally deleted] ...................................................................    20

         SECTION 2.12    Prepayments ...............................................................................    20

         SECTION 2.13    Optional Prepayment .......................................................................    22

         SECTION 2.14    [Intentionally Deleted] ...................................................................    22

         SECTION 2.15    [Intentionally deleted] ...................................................................    22

         SECTION 2.16    Indemnity .................................................................................    22

         SECTION 2.17    Pro Rata Treatment ........................................................................    22

         SECTION 2.18    Sharing of Setoffs ........................................................................    22

         SECTION 2.19    Payments ..................................................................................    23

         SECTION 2.20    Taxes .....................................................................................    23

         SECTION 2.21    Assignment of Loans Under Certain Circumstances; Duty to Mitigate .........................    25

Article III     REPRESENTATIONS AND WARRANTIES .....................................................................    26

         SECTION 3.01    Organization; Powers ......................................................................    26

         SECTION 3.02    Authorization .............................................................................    26

         SECTION 3.03    Enforceability ............................................................................    27
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         SECTION 3.04    Consents and Governmental Approvals .......................................................    27

         SECTION 3.05    Financial Statements; Undisclosed Liabilities .............................................    27

         SECTION 3.06    No Material Adverse Change ................................................................    27

         SECTION 3.07    Title to Properties; Possession Under Leases; Intellectual Property .......................    27

         SECTION 3.08    Subsidiaries ..............................................................................    29

         SECTION 3.09    Litigation; Compliance with Laws ..........................................................    29

         SECTION 3.10    Agreements ................................................................................    30

         SECTION 3.11    Federal Reserve Regulations ...............................................................    30

         SECTION 3.12    Investment Company Act; Public Utility Holding Company Act ................................    30

         SECTION 3.13    Use of Proceeds ...........................................................................    30

         SECTION 3.14    Tax Returns ...............................................................................    31

         SECTION 3.15    No Material Misstatements .................................................................    31

         SECTION 3.16    Employee Benefit Plans ....................................................................    31

         SECTION 3.17    Government Contracting Matters ............................................................    32

         SECTION 3.18    Security Documents ........................................................................    33

         SECTION 3.19    Solvency ..................................................................................    34

         SECTION 3.20    Transactions with Affiliates ..............................................................    34

         SECTION 3.21    Ownership .................................................................................    34

         SECTION 3.22    Insurance .................................................................................    35

         SECTION 3.23    Labor Matters .............................................................................    35

         SECTION 3.24    Licenses; Permits .........................................................................    36

Article IV      CONDITIONS PRECEDENT ...............................................................................    36

         SECTION 4.01    Conditions Precedent to the Effective Date ................................................    36

         SECTION 4.02    Conditions Subsequent to the Effective Date ...............................................    39

Article V       AFFIRMATIVE COVENANTS ..............................................................................    39

         SECTION 5.01    Existence; Businesses and Properties ......................................................    39
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                                  (CONTINUED)

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         SECTION 5.02    Insurance .................................................................................    40

         SECTION 5.03    Obligations and Taxes .....................................................................    41

         SECTION 5.04    Financial Statements, Reports, etc ........................................................    41

         SECTION 5.05    Other Information .........................................................................    43

         SECTION 5.06    ERISA .....................................................................................    45

         SECTION 5.07    Maintaining Records; Access to Properties and Inspections .................................    45

         SECTION 5.08    [Intentionally deleted] ...................................................................    45

         SECTION 5.09    [Intentionally deleted] ...................................................................    45

         SECTION 5.10    Fiscal Year ...............................................................................    45

         SECTION 5.11    Compliance with Environmental Laws; Preparation of Environmental Reports ..................    45

         SECTION 5.12    Further Assurances ........................................................................    46

         SECTION 5.13    Management Consultant .....................................................................    47

Article VI      NEGATIVE COVENANTS .................................................................................    47

         SECTION 6.01    Indebtedness ..............................................................................    47

         SECTION 6.02    Negative Pledge ...........................................................................    47

         SECTION 6.03    Sale and Lease-Back Transactions ..........................................................    48

         SECTION 6.04    Investments, Loans and Advances ...........................................................    49

         SECTION 6.05    Mergers, Acquisitions and Other Transactions ..............................................    50

         SECTION 6.06    Dividends, Distributions and Other Restricted Payments ....................................    51

         SECTION 6.07    Impairment of Security Interests ..........................................................    51

         SECTION 6.08    Limitation on Restrictions on Subsidiary Dividends, etc ...................................    51

         SECTION 6.09    No Other Negative Pledges .................................................................    52

         SECTION 6.10    Transactions with Affiliates ..............................................................    52

         SECTION 6.11    Nature of Business ........................................................................    52

         SECTION 6.12    Sales of Receivables ......................................................................    53

         SECTION 6.13    Certain Amendments ........................................................................    53
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                               TABLE OF CONTENTS

                                  (CONTINUED)

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         SECTION 6.14    Capital Expenditures ......................................................................    53

         SECTION 6.15    Interest Coverage .........................................................................    53

Article VII     EVENTS OF DEFAULT ..................................................................................    53

Article VIII    THE AGENT ..........................................................................................    57

         SECTION 8.01    Appointment and Authorization .............................................................    57

         SECTION 8.02    Liability of Agent ........................................................................    57

         SECTION 8.03    Action by Agent ...........................................................................    58

         SECTION 8.04    Successor Agents ..........................................................................    58

         SECTION 8.05    Agent and Affiliate .......................................................................    58

         SECTION 8.06    Indemnification ...........................................................................    58

         SECTION 8.07    Credit Decision ...........................................................................    59

Article IX      MISCELLANEOUS ......................................................................................    59

         SECTION 9.01    Notices ...................................................................................    59

         SECTION 9.02    Survival of Agreement .....................................................................    59

         SECTION 9.03    Binding Effect ............................................................................    60

         SECTION 9.04    Successors and Assigns ....................................................................    60

         SECTION 9.05    Expenses; Indemnity .......................................................................    62

         SECTION 9.06    Right of Setoff ...........................................................................    64

         SECTION 9.07    Applicable Law ............................................................................    64

         SECTION 9.08    Waivers; Amendment ........................................................................    64

         SECTION 9.09    Interest Rate Limitation ..................................................................    65

         SECTION 9.10    Entire Agreement ..........................................................................    65

         SECTION 9.11    Severability ..............................................................................    65

         SECTION 9.12    Counterparts ..............................................................................    66

         SECTION 9.13    Headings ..................................................................................    66

         SECTION 9.14    Remedies ..................................................................................    66

         SECTION 9.15    Jurisdiction; Consent to Service of Process; Waiver of Jury Trial .........................    66

         SECTION 9.16    Waiver of Certain Provisions of Certain Agreements ........................................    67
</TABLE>

                                      iv<PAGE>   1
                                                                EXHIBIT 10.14-02

March 23, 2000

Caryl Glenn Marsh

Dear Glenn:

We are pleased to award to you a grant of Firearms Training Systems, Inc.
Restricted Stock effective as of March 22, 2000. The details of your award are
outlined below.

This award is in recognition of your role and contributions toward the future
success of Firearms Training Systems, Inc. (the "Company"). Ownership in the
Company is a means for you to share in the success of the Company.

Again, our congratulations on this recognition of your importance to our
organization and its future.

                     Details of your Restricted Stock Award:

Number of Shares:          20,000

Vesting Schedule:          50% on 9/30/2000
                           50% on 3/31/2001
                                    Provided that you remain continuously
                           employed by the Company through to applicable vesting
                           date

                                 Acknowledgment

By signing below, I acknowledge receipt of the Firearms Training Systems, Inc.
Restricted Stock Award Agreement and the Firearms Training Systems, Inc. Stock
Compensation Plan, accept the award of restricted stock granted to me on the
grant date for the number of shares set forth in this Award Notification in
accordance with the Plan and agree to be bound by the terms and conditions of
the Plan, this Award Notification and the Agreement.

                  Signed:                                Date:
                          ------------------------------       ----------

       Please return original execution copy of this Award Notification to
        Firearms Training Systems, Inc., Attention: Corporate Secretary,
                  7340 McGinnis Ferry Road, Suwanee, GA 30024.

                                      A-2
<PAGE>   2

March 23, 2000

John A. Morelli

Dear John:

We are pleased to award to you a grant of Firearms Training Systems, Inc.
Restricted Stock effective as of March 22, 2000. The details of your award are
outlined below.

This award is in recognition of your role and contributions toward the future
success of Firearms Training Systems, Inc. (the "Company"). Ownership in the
Company is a means for you to share in the success of the Company.

Again, our congratulations on this recognition of your importance to our
organization and its future.

                     Details of your Restricted Stock Award:

Number of Shares:          30,000

Vesting Schedule:          50% on 9/30/2000
                           50% on 3/31/2001
                                    Provided that you remain continuously
                           employed by the Company through to applicable vesting
                           date

                                 Acknowledgment

By signing below, I acknowledge receipt of the Firearms Training Systems, Inc.
Restricted Stock Award Agreement and the Firearms Training Systems, Inc. Stock
Compensation Plan, accept the award of restricted stock granted to me on the
grant date for the number of shares set forth in this Award Notification in
accordance with the Plan and agree to be bound by the terms and conditions of
the Plan, this Award Notification and the Agreement.

                  Signed:                                Date:
                          ------------------------------       ----------

       Please return original execution copy of this Award Notification to
        Firearms Training Systems, Inc., Attention: Corporate Secretary,
                  7340 McGinnis Ferry Road, Suwanee, GA 30024.

                                      A-3
<PAGE>   3

                         FIREARMS TRAINING SYSTEMS, INC.
                        RESTRICTED STOCK AWARD AGREEMENT

                  Firearms Training Systems, Inc., a Delaware corporation (the
"Company") has granted to the individual (the "Holder") named in the award
notification attached hereto (the "Award Notification") as of the grant date set
forth in the Award Notification (the "Grant Date"), pursuant to the provisions
of the Firearms Training Systems, Inc. Stock Compensation Plan (the "Plan"), a
restricted stock award (the "Award") of that number of shares of the Company's
Class A Common Stock, $0.000006 par value ("Stock"), set forth in the Award
Notification, upon and subject to the restrictions, terms and conditions set
forth below. Capitalized terms not defined herein shall have the meanings
specified in the Plan.

                  1.       Award Subject to Acceptance of Agreement. The Award
shall be null and void unless the Holder shall (a) accept this Agreement by
executing the Award Notification in the space provided therefore and returning
it to the Company and (b) execute and return one or more irrevocable stock
powers to facilitate the transfer to the Company (or its assignee or nominee) of
all or a portion of the shares subject to the Award, if shares are forfeited
pursuant to the Award Notification or if required under applicable laws or
regulations. As soon as practicable after the Holder has executed this Agreement
and such stock power or powers and returned the same to the Company, the Company
shall cause to be issued in the Holder's name a stock certificate or
certificates representing the total number of shares of Stock subject to the
Award.

                  2.       Rights as a Stockholder. The Holder shall have the
right to vote the shares of Stock subject to the Award and to receive dividends
and other distributions thereon unless and until, and only to the extent, such
shares are forfeited pursuant to the Award Notification; provided, however, that
a dividend or other distribution with respect shares of Stock (including,
without limitation, a stock dividend or stock split), other than a regular cash
dividend, shall be delivered to the Company (and the Holder shall, if requested
by the Company, execute and return one or more irrevocable stock powers related
thereto) and shall be subject to the same restrictions as the shares of Stock
with respect to which such dividend or other distribution was made.

                                      A-4
<PAGE>   4

                  3.       Custody and Delivery of Certificates Representing
Shares. The Company shall hold the certificate or certificates representing the
shares of Stock subject to the Award until such Award shall have vested, in
whole or in part, to the Award Notification, and the Company shall as soon
thereafter as practicable, subject to Section 6.3, deliver the certificate or
certificates for the vested shares to the Holder and destroy the stock power or
powers relating to the vested shares. If such stock power or powers also relates
to unvested shares, the Company may require, as a condition precedent to
delivery of any certificate pursuant to this Section 3, the execution and
delivery to the Company of one or more stock powers relating to such unvested
shares.

                  4.       Restriction Period and Vesting. The Award shall vest
in accordance with the terms contained in the Award Notification.

                  5.       Termination of Award. In the event that the Holder
shall forfeit all or a portion of the shares of Stock subject to the Award, the
Holder 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 Holder returns this Agreement.

                  6.       Additional Terms and Conditions of Award.

                  6.1.     Nontransferability of Award. The unvested shares of
Stock subject to the Award may not be transferred by the Holder other than by
will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company. Except to the extent permitted
by the foregoing, during the Restriction Period, the unvested shares of Stock
subject to the Award 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 or encumber, or
otherwise dispose of such shares, the Award shall immediately become null and
void.

                  6.2.     Investment Representation. The Holder hereby
represents and covenants that (a) any share of Stock acquired upon the vesting
of the Award will be acquired for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the

                                      A-5
<PAGE>   5

"Securities Act"), unless such acquisition has been registered under the
Securities Act and any applicable state securities law; (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 Holder
shall not offer, sell, contract to sell or otherwise dispose of any shares of
Stock acquired pursuant to the Award for the period specified in such agreement;
and (d) if requested by the Company, the Holder 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 acquisition 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 the delivery to
the Holder of any shares subject to the Award, the Holder shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board of Directors or any committee authorized
by the Board of Directors shall in its sole discretion deem necessary or
advisable.

                  6.3.     Withholding Taxes. (a) As a condition precedent to
the delivery to the Holder of any shares of Stock subject to the Award, the
Holder shall, upon request by the Company, pay to the Company 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 the Award. If
the Holder 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 Holder.

                  (b)      The Holder 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 6.3(a), (2) delivery (either actual
delivery or by attestation procedures established by the Company) to the Company
of previously owned whole shares of Stock (which the Holder has held for at
least six months prior to the delivery of such shares or which the Holder
purchased on the open market and

                                      A-6
<PAGE>   6

for which the Holder 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 Award
(the "Tax Date"), equal to the Required Tax Payments, (3) authorizing the
Company to withhold from the shares of Stock otherwise to be delivered to the
Holder pursuant to the Award, a number of whole shares of Stock 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 through whom the
Holder has sold the shares with respect to which the Required Tax Payments have
arisen 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).
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 such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the Holder. No
certificate representing a share of Stock shall be delivered until the Required
Tax Payments have been satisfied in full.

                  6.4.     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 Award
shall be appropriately adjusted by the Committee. If any adjustment would result
in a fractional security being subject to the Award, the Company shall pay the
Holder in connection with the vesting, if any, of such fractional security, an
amount in cash determined by multiplying (i) such fraction (rounded to the
nearest hundredth) by (ii) the Fair Market Value on the vesting date. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive.

                  6.5.     Compliance with Applicable Law. The Award is subject
to the condition that if the listing, registration or qualification of the
shares subject to the Award 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
vesting or delivery of shares hereunder, the shares of Stock subject to the
Award shall not vest or be delivered, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained, free

                                      A-7
<PAGE>   7

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.

                  6.6.     Delivery of Certificates. Subject to Section 6.3,
upon the vesting of a share of Stock subject to the Award, in whole or in part,
the Company shall deliver or cause to be delivered one or more certificates
representing the number of vested shares. 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 6.3.

                  6.7.     Award Confers No Rights to Continued Employment. In
no event shall the granting of the Award or its acceptance by the Holder give or
be deemed to give the Holder any right to continued employment by the Company or
any affiliate of the Company.

                  6.8.     Decisions of Board of Directors or Committee. The
Board of Directors or the Committee shall have the right to resolve all
questions which may arise in connection with the Award. Any interpretation,
determination or other action made or taken by the Board of Directors or the
Committee regarding the Plan or this Agreement shall be final, binding and
conclusive.

                  6.9.     Agreement Subject to the Plan. This Agreement is
subject to the provisions of the Plan and shall be interpreted in accordance
therewith. The Holder hereby acknowledges receipt of a copy of the Plan.

                  6.10.    Change in Control. (a) Notwithstanding any other
provision in this Agreement, in the event of the occurrence of a Change in
Control as defined below in connection with which the holders of Stock receive
shares of common stock that are registered under Section 12 of the Exchange Act,
all unvested shares of Stock subject to this Award shall immediately be vested
in full and there shall be substituted for each such share of Stock the number
and class of shares into which each outstanding share of Stock shall be
converted pursuant to such Change in Control.

         (b)      "Change in Control" shall mean:

                  (1)      the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, of beneficial

                                      A-8
<PAGE>   8

ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act,
of 50% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Common Stock") or (ii) the combined voting power of
the then outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Voting Securities"); excluding, however,
the following: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege unless the security being so exercised, converted or exchanged was
acquired directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (D)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of clause (3) below; provided further, that for
purposes of clause (B), if any Person (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial owner of 50%
or more of the Outstanding Common Stock or 50% or more of the Outstanding Voting
Securities by reason of an acquisition by the Company, and such Person shall,
after such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Common Stock or any additional Outstanding
Voting Securities and such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in Control;

                  (2)      individuals who, as of February 18, 2000, constitute
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that any individual who
becomes a director of the Company subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising the Incumbent Board
shall be deemed a member of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the Company as a result of
an actual or threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board of Directors shall not be deemed a member of the Incumbent
Board;

                                      A-9
<PAGE>   9

                  (3)      approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which (i) all or
substantially all of the individuals or entities who are the beneficial owners,
respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities immediately prior to such Corporate Transaction will beneficially
own, directly or indirectly, more than 50% of, respectively, the outstanding
shares of common stock, and the combined voting power of the outstanding
securities of such corporation entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or indirectly), (ii) no Person (other than: the Company;
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company; the corporation resulting
from such Corporate Transaction; and any Person which beneficially owned,
immediately prior to such Corporate Transaction, directly or indirectly, 50% or
more of the Outstanding Common Stock or the Outstanding Voting Securities, as
the case may be) will beneficially own, directly or indirectly, 50% or more of,
respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally in the
election of directors or (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or

                  (4)      approval by the stockholders of the Company of a plan
of complete liquidation or dissolution of the Company.

                  7.       Miscellaneous Provisions.

                  7.1.     Meaning of Certain Terms. As used herein, the term
"vest" shall mean no longer subject to forfeiture and "unvested" shall mean
subject to forfeitures. As used herein, employment by the Company shall include
employment by an affiliate of the Company.

                  7.2.     Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the

                                      A-10
<PAGE>   10

Company and any person or persons who shall, upon the death of the Holder,
acquire any rights hereunder in accordance with this Agreement or the Plan.

                  7.3.     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 Holder, to the Holder, c/o
Firearms Training Systems, Inc., 7340 McGinnis Ferry Road, Suwanee, GA 30024.
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 is not received during regular business
hours, it shall be deemed to be received on the next succeeding business day of
the Company.

                  7.4.     Governing Law. This Agreement, the Award and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not otherwise 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 conflicts of laws principles.

                                             FIREARMS TRAINING SYSTEMS, INC.

                                             By:
                                                --------------------------------
                                                Name: Robert F. Mecredy
                                                Title: President & CEO

                                      A-11
<PAGE>   11

                                                                EXHIBIT 10.14-02

                                                                       2/24/2000

[Date, 2000]

[Full Name]

Dear [first name],

We are pleased to award to you a grant of Firearms Training Systems, Inc.
Restricted Stock effective as of February 18, 2000. The details of your award
are outlined below.

[THIS AWARD IS IN RECOGNITION OF YOUR ROLE AND CONTRIBUTIONS TOWARD THE FUTURE
SUCCESS OF FIREARMS TRAINING SYSTEMS, INC. (THE "COMPANY"). OWNERSHIP IN THE
COMPANY IS A MEANS FOR YOU TO SHARE IN THE SUCCESS OF THE COMPANY.]

Again, our congratulations on this recognition of your importance to our
organization and its future.

                     Details of your Restricted Stock Award:

Number of Shares:
                  ----------

Vesting Schedule:          50% on 9/30/2000
                           50% on 3/31/2001
                           Provided that you remain continuously employed by the
                           Company through to applicable vesting date

                                 Acknowledgment

By signing below, I acknowledge receipt of the Firearms Training Systems, Inc.
Restricted Stock Award Agreement and the Firearms Training Systems, Inc. Stock
Compensation Plan, accept the award of restricted stock granted to me on the
grant date for the number of shares set forth in this Award Notification in
accordance with the Plan and agree to be bound by the terms and conditions of
the Plan, this Award Notification and the Agreement.

             Signed:                                Date:
                     ------------------------------       ----------

                                      A-1
<PAGE>   12

        Please return original execution copy of this Award Notification
                               to [NAME/ADDRESS].

                                      A-2
<PAGE>   13

                         FIREARMS TRAINING SYSTEMS, INC.
                        RESTRICTED STOCK AWARD AGREEMENT

                  Firearms Training Systems, Inc., a Delaware corporation (the
"Company") has granted to the individual (the "Holder") named in the award
notification attached hereto (the "Award Notification") as of the grant date set
forth in the Award Notification (the "Grant Date"), pursuant to the provisions
of the Firearms Training Systems, Inc. Stock Compensation Plan (the "Plan"), a
restricted stock award (the "Award") of that number of shares of the Company's
Class A Common Stock, $0.000006 par value ("Stock"), set forth in the Award
Notification, upon and subject to the restrictions, terms and conditions set
forth below. Capitalized terms not defined herein shall have the meanings
specified in the Plan.

                  1.       Award Subject to Acceptance of Agreement. The Award
shall be null and void unless the Holder shall (a) accept this Agreement by
executing the Award Notification in the space provided therefore and returning
it to the Company and (b) execute and return one or more irrevocable stock
powers to facilitate the transfer to the Company (or its assignee or nominee) of
all or a portion of the shares subject to the Award, if shares are forfeited
pursuant to the Award Notification or if required under applicable laws or
regulations. As soon as practicable after the Holder has executed this Agreement
and such stock power or powers and returned the same to the Company, the Company
shall cause to be issued in the Holder's name a stock certificate or
certificates representing the total number of shares of Stock subject to the
Award.

                  2.       Rights as a Stockholder. The Holder shall have the
right to vote the shares of Stock subject to the Award and to receive dividends
and other distributions thereon unless and until, and only to the extent, such
shares are forfeited pursuant to the Award Notification; provided, however, that
a dividend or other distribution with respect shares of Stock (including,
without limitation, a stock dividend or stock split), other than a regular cash
dividend, shall be delivered to the Company (and the Holder shall, if requested
by the Company, execute and return one or more irrevocable stock powers related
thereto) and shall be subject to the same restrictions as the shares of Stock
with respect to which such dividend or other distribution was made.

                                      A-3
<PAGE>   14

                  3.       Custody and Delivery of Certificates Representing
Shares. The Company shall hold the certificate or certificates representing the
shares of Stock subject to the Award until such Award shall have vested, in
whole or in part, to the Award Notification, and the Company shall as soon
thereafter as practicable, subject to Section 6.3, deliver the certificate or
certificates for the vested shares to the Holder and destroy the stock power or
powers relating to the vested shares. If such stock power or powers also relates
to unvested shares, the Company may require, as a condition precedent to
delivery of any certificate pursuant to this Section 3, the execution and
delivery to the Company of one or more stock powers relating to such unvested
shares.

                  4.       Restriction Period and Vesting. The Award shall vest
in accordance with the terms contained in the Award Notification.

                  5.       Termination of Award. In the event that the Holder
shall forfeit all or a portion of the shares of Stock subject to the Award, the
Holder 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 Holder returns this Agreement.

                  6.       Additional Terms and Conditions of Award.

                  6.1.     Nontransferability of Award. The unvested shares of
Stock subject to the Award may not be transferred by the Holder other than by
will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company. Except to the extent permitted
by the foregoing, during the Restriction Period, the unvested shares of Stock
subject to the Award 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 or encumber, or
otherwise dispose of such shares, the Award shall immediately become null and
void.

                  6.2.     Investment Representation. The Holder hereby
represents and covenants that (a) any share of Stock acquired upon the vesting
of the Award will be acquired 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"),

                                      A-4
<PAGE>   15

unless such acquisition has been registered under the Securities Act and any
applicable state securities law; (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 Holder shall
not offer, sell, contract to sell or otherwise dispose of any shares of Stock
acquired pursuant to the Award for the period specified in such agreement; and
(d) if requested by the Company, the Holder 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 acquisition 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 the delivery to the Holder of any shares
subject to the Award, the Holder shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance of the shares and, in connection therewith, shall execute any
documents which the Board of Directors or any committee authorized by the Board
of Directors shall in its sole discretion deem necessary or advisable.

                  6.3.     Withholding Taxes. (a) As a condition precedent to
the delivery to the Holder of any shares of Stock subject to the Award, the
Holder shall, upon request by the Company, pay to the Company 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 the Award. If
the Holder 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 Holder.

                  (b)      The Holder 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 6.3(a), (2) delivery (either actual
delivery or by attestation procedures established by the Company) to the Company
of previously owned whole shares of Stock (which the Holder has held for at
least six months prior to the delivery of such shares or which the Holder
purchased on the open market and for which the Holder has good title, free and
clear of all liens and

                                      A-5
<PAGE>   16

encumbrances) having a Fair Market Value, determined as of the date the
obligation to withhold or pay taxes first arises in connection with the Award
(the "Tax Date"), equal to the Required Tax Payments, (3) authorizing the
Company to withhold from the shares of Stock otherwise to be delivered to the
Holder pursuant to the Award, a number of whole shares of Stock 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 through whom the
Holder has sold the shares with respect to which the Required Tax Payments have
arisen 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).
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 such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the Holder. No
certificate representing a share of Stock shall be delivered until the Required
Tax Payments have been satisfied in full.

                  6.4.     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 Award
shall be appropriately adjusted by the Committee. If any adjustment would result
in a fractional security being subject to the Award, the Company shall pay the
Holder in connection with the vesting, if any, of such fractional security, an
amount in cash determined by multiplying (i) such fraction (rounded to the
nearest hundredth) by (ii) the Fair Market Value on the vesting date. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive.

                  6.5.     Compliance with Applicable Law. The Award is subject
to the condition that if the listing, registration or qualification of the
shares subject to the Award 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
vesting or delivery of shares hereunder, the shares of Stock subject to the
Award shall not vest or be delivered, 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

                                      A-6
<PAGE>   17

to use reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval.

                  6.6.     Delivery of Certificates. Subject to Section 6.3,
upon the vesting of a share of Stock subject to the Award, in whole or in part,
the Company shall deliver or cause to be delivered one or more certificates
representing the number of vested shares. 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 6.3.

                  6.7.     Award Confers No Rights to Continued Employment. In
no event shall the granting of the Award or its acceptance by the Holder give or
be deemed to give the Holder any right to continued employment by the Company or
any affiliate of the Company.

                  6.8.     Decisions of Board of Directors or Committee. The
Board of Directors or the Committee shall have the right to resolve all
questions which may arise in connection with the Award. Any interpretation,
determination or other action made or taken by the Board of Directors or the
Committee regarding the Plan or this Agreement shall be final, binding and
conclusive.

                  6.9.     Agreement Subject to the Plan. This Agreement is
subject to the provisions of the Plan and shall be interpreted in accordance
therewith. The Holder hereby acknowledges receipt of a copy of the Plan.

                  6.10.    Change in Control. (a) Notwithstanding any other
provision in this Agreement, in the event of the occurrence of a Change in
Control as defined below in connection with which the holders of Stock receive
shares of common stock that are registered under Section 12 of the Exchange Act,
all unvested shares of Stock subject to this Award shall immediately be vested
in full and there shall be substituted for each such share of Stock the number
and class of shares into which each outstanding share of Stock shall be
converted pursuant to such Change in Control.

         (b)      "Change in Control" shall mean:

                  (1)      the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, of beneficial ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act, of 50% or more of either (i) the then
outstanding

                                      A-7
<PAGE>   18

shares of common stock of the Company (the "Outstanding Common Stock") or (ii)
the combined voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Voting
Securities"); excluding, however, the following: (A) any acquisition directly
from the Company (excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was acquired directly from the Company), (B)
any acquisition by the Company, (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of clause (3)
below; provided further, that for purposes of clause (B), if any Person (other
than the Company or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company) shall
become the beneficial owner of 50% or more of the Outstanding Common Stock or
50% or more of the Outstanding Voting Securities by reason of an acquisition by
the Company, and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding Common
Stock or any additional Outstanding Voting Securities and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control;

                  (2)      individuals who, as of February 18, 2000, constitute
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that any individual who
becomes a director of the Company subsequent to the date hereof whose election,
or nomination for election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising the Incumbent Board
shall be deemed a member of the Incumbent Board; and provided further, that any
individual who was initially elected as a director of the Company as a result of
an actual or threatened election contest, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board of Directors shall not be deemed a member of the Incumbent
Board;

                  (3)      approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a

                                      A-8
<PAGE>   19

Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately prior
to such Corporate Transaction will beneficially own, directly or indirectly,
more than 50% of, respectively, the outstanding shares of common stock, and the
combined voting power of the outstanding securities of such corporation entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or
indirectly), (ii) no Person (other than: the Company; any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 50% or more of the Outstanding
Common Stock or the Outstanding Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 50% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding securities
of such corporation entitled to vote generally in the election of directors or
(iii) individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction; or

                  (4)      approval by the stockholders of the Company of a plan
of complete liquidation or dissolution of the Company.

                  7.       Miscellaneous Provisions.

                  7.1.     Meaning of Certain Terms. As used herein, the term
"vest" shall mean no longer subject to forfeiture and "unvested" shall mean
subject to forfeitures. As used herein, employment by the Company shall include
employment by an affiliate of the Company.

                  7.2.     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 Holder, acquire any rights
hereunder in accordance with this Agreement or the Plan.

                                      A-9
<PAGE>   20

                  7.3.     Notices. All notices, requests or other
communications provided for in this Agreement shall be made, if to the Company,
to Firearms Training Systems, Inc., 7346 McGinnis Ferry Road, Suwanee, Georgia
30174, Attention: Corporate Secretary, and if to the Holder, 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 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 is not received during regular business
hours, it shall be deemed to be received on the next succeeding business day of
the Company.

                  7.4.     Governing Law. This Agreement, the Award and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not otherwise 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 conflicts of laws principles.

                                             FIREARMS TRAINING SYSTEMS, INC.

                                             By:
                                                --------------------------------
                                                Name:
                                                Title:

                                      A-10

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