<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 1999 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to _________
Commission file number 1-12410
SIMULA, INC.
(Exact Name of Registrant as Specified in Its Charter)
ARIZONA 86-0320129
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2700 NORTH CENTRAL AVENUE, SUITE 1000, PHOENIX, ARIZONA 85004
(Address of Principal Executive Offices) (Zip Code)
(602) 631-4005
(Registrant's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports)
Yes X No
--------- ---------
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at June 30, 1999
Common Stock, $.01 par value 10,167,371
<PAGE> 2
SIMULA, INC.
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1 - Financial Statements
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998....................... 2
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1999 and 1998........ 3
Consolidated Statement of Shareholders' Equity
Six Months Ended June 30, 1999........................... 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998.................. 5
Notes to Interim Consolidated Financial Statements ........... 6 - 10
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition............ 11 - 15
PART II - OTHER INFORMATION
Item 2 - Legal Proceedings............................................. 16
Item 4 - Submission of Matters to Vote of Security Holders............. 17
Item 6 - Exhibits and Reports.......................................... 18
SIGNATURES............................................................. 19
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SIMULA, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,455,121 $ 933,462
Contract and trade receivables - Net 33,848,110 27,113,757
Inventories 31,127,494 26,021,433
Deferred income taxes 3,173,000 3,173,000
Prepaid expenses and other 1,048,233 601,614
Net current assets of discontinued operations 7,807,170 4,580,773
------------- -------------
Total current assets 79,459,128 62,424,039
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Net 18,244,594 21,494,535
DEFERRED INCOME TAXES 19,750,000 20,550,000
DEFERRED FINANCING COSTS 2,549,848 2,627,765
INTANGIBLES - Net 3,437,285 3,452,402
OTHER ASSETS 424,783 430,340
------------- -------------
TOTAL $ 123,865,638 $ 110,979,081
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 20,600,000 $ 16,900,000
Trade accounts payable 11,572,382 11,028,062
Other accrued liabilities 9,022,011 7,496,841
Advances on contracts 2,769,644 2,220,737
Current portion of long-term debt 7,125,759 7,530,222
------------- -------------
Total current liabilities 51,089,796 45,175,862
LONG-TERM DEBT - Less current portion 46,069,304 47,233,558
------------- -------------
Total liabilities 97,159,100 92,409,420
------------- -------------
REDEEMABLE CONVERTIBLE 6% SERIES A PREFERRED STOCK,
$.05 par value - issued 6,750 shares 6,750,000
-------------
SHAREHOLDERS' EQUITY
Preferred stock, $.05 par value - authorized
50,000,000 shares; issued 6,750 shares redeemable
convertible 6% series A preferred stock
Common stock, $.01 par value - authorized 50,000,000
shares; issued 10,167,371 and 9,915,391 101,674 99,154
Additional paid-in capital 52,681,769 51,742,593
Accumulated deficit (32,252,573) (33,452,571)
Accumulated other comprehensive income (574,332) 180,485
------------- -------------
Total shareholders' equity 19,956,538 18,569,661
------------- -------------
TOTAL $ 123,865,638 $ 110,979,081
============= =============
</TABLE>
See notes to consolidated financial statements
2
<PAGE> 4
SIMULA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 34,026,137 $ 25,739,419 $ 65,954,399 $ 48,281,597
Cost of revenue 25,161,644 19,067,593 48,575,753 35,683,586
------------ ------------ ------------ ------------
Gross margin 8,864,493 6,671,826 17,378,646 12,598,011
Administrative expenses 5,944,406 4,690,539 11,994,250 9,087,781
------------ ------------ ------------ ------------
Operating income 2,920,087 1,981,287 5,384,396 3,510,230
Interest expense (1,741,531) (1,194,824) (3,408,603) (2,403,650)
Interest income 13,173 52,513 24,205 115,075
------------ ------------ ------------ ------------
Earnings before taxes and discontinued operations 1,191,729 838,976 1,999,998 1,221,655
Income tax expense (476,000) (336,000) (800,000) (490,000)
------------ ------------ ------------ ------------
Earnings before discontinued operations 715,729 502,976 1,199,998 731,655
Discontinued operations:
Loss from discontinued operations, net of tax -- (1,932,410) -- (2,156,388)
Estimated loss on disposal, net of tax -- (4,680,000) -- (4,680,000)
------------ ------------ ------------ ------------
Net earnings (loss) 715,729 (6,109,434) 1,199,998 (6,104,733)
Dividends on preferred stock 111,205 -- 111,205 --
------------ ------------ ------------ ------------
Net earnings available for common shareholders $ 604,524 $ (6,109,434) $ 1,088,793 $ (6,104,733)
============ ============ ============ ============
Earnings (loss) per common share - basic:
Earnings before discontinued operations per common shareholder $ 0.06 $ 0.05 $ 0.11 $ 0.07
Discontinued operations:
Loss from discontinued operations, net of tax -- (0.20) -- (0.22)
Estimated loss on disposal, net of tax -- (0.47) -- (0.47)
------------ ------------ ------------ ------------
Net earnings (loss) per common share $ 0.06 $ (0.62) $ 0.11 $ (0.62)
============ ============ ============ ============
Earnings (loss) per common share - assuming dilution:
Earnings before discontinued operations $ 0.06 $ 0.05 $ 0.10 $ 0.07
Discontinued operations:
Loss from discontinued operations, net of tax -- (0.19) -- (0.21)
Estimated loss on disposal, net of tax -- (0.46) -- (0.46)
------------ ------------ ------------ ------------
Net earnings (loss) per common share $ 0.06 $ (0.60) $ 0.10 $ (0.60)
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 5
SIMULA, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Total
--------------------- Paid-in Accumulated Comprehensive Shareholders' Comprehensive
Shares Amount Capital Deficit Income Equity Income
---------- --------- ----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 9,915,391 $ 99,154 $51,742,593 $(33,452,571) $ 180,485 $18,569,661
Net earnings (loss) 1,199,998 1,199,998 $1,199,998
Issuance of common shares 94,619 946 295,051 295,997
Conversion of redeemable convertible
Series A Preferred Stock 157,361 1,574 755,330 756,904
Preferred stock dividends (111,205) (111,205)
Currency translation adjustment (754,817) (754,817) (754,817)
---------- --------- ----------- ------------ --------- ----------- ----------
BALANCE, June 30, 1999 10,167,371 $ 101,674 $52,681,769 $(32,252,573) $(574,332) $19,956,538 $ 445,181
---------- --------- ----------- ------------ --------- ----------- ----------
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 6
SIMULA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows used for operating activities:
Net income (loss) $ 1,199,998 $(6,104,733)
Adjustment to reconcile net income (loss) to net cash used by
operating activities:
Estimated loss on disposal of discontinued operations 7,800,000
Depreciation and amortization 2,855,397 2,210,009
Deferred income taxes 800,000 (4,069,000)
Gain on sale of assets (365,714)
Currency translation adjustment (754,817) 141,017
Changes in net assets and liabilities:
Contract and trade receivables - net of advances (6,185,447) (2,908,278)
Inventories (5,106,061) (3,890,626)
Prepaid expenses and other (446,619) (443,472)
Deferred costs (377,765)
Other assets 5,557 90,189
Net assets of discontinued operations (3,226,397) 1,565,013
Trade accounts payable 544,320 (1,954,460)
Other accrued liabilities 1,532,074 1,043,806
----------- -----------
Net cash used by operating activities (9,525,474) (6,520,535)
----------- -----------
Cash flows used by investing activities:
Purchase of property and equipment (1,352,661) (2,888,934)
Proceeds from the sale of assets 2,860,362
Costs incurred to obtain intangibles (276,643) (77,279)
----------- -----------
Net cash provided by (used in) investing activities 1,231,058 (2,966,213)
----------- -----------
Cash flows from financing activities:
Net borrowings under line of credit 3,700,000 7,050,000
Principal payments under other debt arrangements (1,568,717) (980,731)
Issuance of common shares 295,997 339,575
Issuance of preferred shares 7,500,000
Preferred stock dividends (111,205)
----------- -----------
Net cash provided by financing activities 9,816,075 6,408,844
----------- -----------
Net (decrease) increase in cash and cash equivalents 1,521,659 (3,077,904)
Cash and cash equivalents at beginning of period 933,462 9,367,031
----------- -----------
Cash and cash equivalents at end of period $ 2,455,121 $ 6,289,127
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
In May 1999, $750,000 of Series A Preferred Stock plus accrued
dividends of $6,904 were exchanged for 157,361 shares of the
Company's common stock
Interest paid $ 3,118,196 $ 2,534,708
=========== ===========
Taxes paid $ 15,000
===========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 7
SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The accompanying interim consolidated financial statements of Simula,
Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and
with the instructions to Form 10-Q. Accordingly, they do not include
all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of Management, all adjustments and reclassifications considered
necessary for a fair and comparable presentation have been included and
are of a normal recurring nature. Operating results for the three and
six months ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
NOTE 2 - INVENTORIES:
At June 30, 1999 and December 31, 1998, inventories consisted of the
following.
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw materials $14,047,790 $15,581,952
Work in process 11,479,644 9,077,849
Finished goods 5,600,060 1,361,632
----------- -----------
Total inventories $31,127,494 $26,021,433
=========== ===========
</TABLE>
Inventories included in net current assets of discontinued operations
at June 30, 1999 and December 31, 1998 were $6,069,946 and $6,198,387,
respectively, and consisted mainly of raw materials.
NOTE 3 - DEBT:
The Company's Senior Credit Agreement, as amended by the Modification
Agreements executed in February, April, June and July of 1999, provided
for a revolving line of credit up to the lesser of $25,000,000 or the
Revolving Line of Credit Borrowing Base (as defined) until August 31,
1999 or the date in which the outstanding principal balance is reduced
below $20,000,000 from proceeds received from the issuance of junior
capital, at which time the revolving line of credit is adjusted to the
lesser of $20,000,000 or the Revolving Line of Credit Borrowing Base
(as defined).
NOTE 4 - REDEEMABLE CONVERTIBLE PREFERRED STOCK:
On March 29, 1999, the Company completed a private placement to an
accredited investor of $7.5 million of the Company's Series A
Convertible Preferred Stock (the "Series A"). Under the terms of this
offering the Series A bears a dividend rate of 6% per annum payable
quarterly in cash, or in stock that will be valued at 90% of fair
market value at the time of payment. The Series A may be converted into
shares of the Company's Common Stock at any time at 101% of the average
closing price of any 15 out of the 30 consecutive trading days
preceding conversion, up to a specified maximum conversion price (the
"Conversion Cap"). The Conversion Cap for the first twelve months is
$8.60 per share and is subject to an annual adjustment to the lesser of
the then existing Conversion Cap or 130% of the average of the closing
bid prices for 20 consecutive trading days immediately proceeding the
annual adjustment anniversary date. Conversion of the Series A is
limited to 10% of the initial amount per month, accumulating monthly up
to a maximum of 30% of the accumulated convertible amount in any month.
The Company may require the conversion of the Series A if the market
price of the Company's Common Stock exceeds the Conversion Cap by at
least 50% for at least 20 consecutive trading days, subject to the same
conversion limitations imposed upon the Series A holders.
Series A Preferred Stock is subject to a mandatory redemption of the
remaining outstanding shares on May 1, 2004 at which time the Company
is required to redeem all such shares at the greater of 130% of the
preferred
6
<PAGE> 8
SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
stock stated value plus accrued and unpaid dividends, or the average of
the closing bid prices on the ten consecutive trading days immediately
preceding the redemption date. The holders of the Company's Series A
Preferred Stock have the option to require the Company to redeem all or
a portion of the Series A Preferred Stock at a redemption price equal
to 105% of the preferred stock stated value plus accrued and unpaid
dividends if the Company consolidates or merges with or into another
company.
In May 1999, $750,000 of Series A Preferred Stock plus accrued
dividends of $6,904 were exchanged for 157,361 shares of the Company's
common stock.
NOTE 5 - DISCONTINUED OPERATIONS:
In 1998, the Company's board of directors adopted a plan to dispose of
its rail and mass transit seating operations. Accordingly, the
operating results of these rail and mass transit operations, including
a provision for estimated loss upon disposition, have been segregated
from continuing operations and are reported as discontinued operations.
Due to the subjective nature of estimated future operations and
incremental costs of disposal, it is reasonably possible that these
estimates may change in the future. Future changes in estimates will be
included in the consolidated statement of operations in the reporting
period determined.
Revenues for the rail and mass transit operations were $3,659,473 and
$3,271,808 for the three months ended June 31, 1999 and 1998,
respectively and were $7,054,816 and $8,733,332 for the six months
ended June 30, 1999 and 1998, respectively. Interest expense has been
allocated to discontinued operations based on the ratio of the
discontinued operations' net assets to consolidated net assets. General
corporate administrative expenses are not allocated to discontinued
operations.
NOTE 6 - SEGMENT REPORTING
The Company is a holding company for wholly owned subsidiaries which
operate in two business segments. The Commercial Transportation
Products segment includes operations which primarily manufacture
seating systems for domestic and foreign passenger airlines and
includes operations encompassing inflatable restraints and related
technology for automobiles. The Government and Defense segment includes
operations that design and manufacture crash resistant components,
energy absorbing devices, ballistic armor and composites principally in
connection with branches of the United States armed forces procurement.
The remaining segment, entitled Other, represents general corporate
operations.
7
<PAGE> 9
SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three month period ended June 30, 1999 and 1998, inter-segment
sales were insignificant and total intercompany sales of $1,158,729 and
$1,254,562, respectively, have been eliminated.
<TABLE>
<CAPTION>
1999
------------------------------------------------------------
Commercial
Transportation Governments
Products and Defense Other Total
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 10,276,044 $ 10,276,044
Product sales:
Airline seat systems $ 16,068,159 16,068,159
Automotive safety systems 7,251,988 7,251,988
Other $ 199,549 199,549
Technology sales and royalties 230,397 230,397
------------ ------------ ---------- ------------
Total revenue $ 23,550,544 $ 10,276,044 $ 199,549 $ 34,026,137
============ ============ =========== ============
Operating (loss) income $ 2,167,490 $ 1,084,180 $ (331,583) $ 2,920,087
</TABLE>
<TABLE>
<CAPTION>
1998
------------------------------------------------------------
Commercial
Transportation Governments
Products and Defense Other Total
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 8,080,428 $ 8,080,428
Product sales:
Airline seat systems $ 10,817,935 10,817,935
Automotive safety systems 6,593,482 6,593,482
Other $ (6,817) (6,817)
Technology sales and royalties 254,391 254,391
------------ ----------- ---------- ------------
Total revenue $ 17,665,808 $ 8,080,428 $ (6,817) $ 25,739,419
============ =========== ========== ============
Operating (loss) income $ 2,232,046 $ 233,027 $ (483,786) $ 1,981,287
</TABLE>
8
<PAGE> 10
SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the six month period ended June 30, 1999 and 1998, inter-segment
sales were insignificant and total intercompany sales of $2,728,790 and
$2,296,870 respectively, have been eliminated.
<TABLE>
<CAPTION>
1999
------------------------------------------------------------
Commercial
Transportation Governments
Products and Defense Other Total
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 21,488,676 $ 21,488,676
Product sales:
Airline seat systems $ 28,822,838 28,822,838
Automotive safety systems 14,621,027 14,621,027
Other 591,913 $ 199,548 791,461
Technology sales and royalties 230,397 230,397
------------ ------------ ---------- ------------
Total revenue $ 43,674,262 $ 22,080,589 $ 199,548 $ 65,954,399
============ ============ ========== ============
Operating (loss) income $ 4,552,938 $ 1,682,490 $ (851,032) $ 5,384,396
</TABLE>
<TABLE>
<CAPTION>
1998
------------------------------------------------------------
Commercial
Transportation Governments
Products and Defense Other Total
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 16,220,430 $16,220,430
Product sales:
Airline seat systems $20,298,095 20,298,095
Automotive safety systems 11,319,279 11,319,279
Other $ 8,235 8,235
Technology sales and royalties 435,558 435,558
------------ ------------ ---------- ------------
Total revenue $32,052,932 $ 16,220,430 $ 8,235 $48,281,597
============ ============ ========== ===========
Operating (loss) income $ 3,917,473 $ 380,357 $ (787,600) $ 3,510,230
</TABLE>
9
<PAGE> 11
SIMULA, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - EARNINGS PER SHARE:
The following is a reconciliation of the numerators and denominators of
basic and diluted earnings per share computations. Earnings per share
amounts are calculated using only weighted average shares outstanding.
For the three month period ended June 30, 1999 and 1998 and the six
month period ended June 30, 1999 and 1998 diluted earnings per share
does not include the effects of options to purchase common stock and
shares to be issued upon conversion of the Company's 8% Senior
Subordinated Convertible Notes (the "8% Notes") and the Series C 10%
Senior Subordinated Convertible Notes (the "10% Notes") of 5,179,784,
4,311,861, 5,186,861 and 4,313,148, respectively, because the result
would be anit-dilutive.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Income before discontinued operations $ 715,729 $ 502,976 $ 1,199,998 $ 731,655
Discontinued operations:
Loss from discontinued operations, net of tax (1,932,410) (2,156,388)
Estimated loss on disposal, net of tax (4,680,000) (4,680,000)
-------------- -------------- -------------- --------------
Net earnings (loss) 715,729 (6,109,434) 1,199,998 (6,104,733)
Dividends on preferred stock 111,205 111,205
-------------- -------------- -------------- --------------
Net earnings (loss) available to common
stockholders $ 604,524 $ (6,109,434) $ 1,088,793 $ (6,104,733)
============== ============== ============== ==============
Basic weighted average shares outstanding 10,049,111 9,873,668 9,983,154 9,851,392
Effect of dilutive securities 1,425,245 402,970 1,458,076 367,561
-------------- -------------- -------------- --------------
Diluted weighted average shares outstanding 11,474,356 10,276,638 11,441,230 10,218,953
============== ============== ============== ==============
Basic per share amounts:
Earnings before discontinued operations
per common shareholder $ 0.06 $ 0.05 $ 0.11 $ 0.07
Discontinued operations:
Loss from discontinued operations, net of tax -- (0.20) -- (0.22)
Estimated loss on disposal, net of tax -- (0.47) -- (0.47)
-------------- -------------- -------------- --------------
Earnings (loss) per common shareholder $ 0.06 (0.14) $ 0.11 (0.14)
============== ============== ============== ==============
Diluted per share amounts:
Income before discontinued operations $ 0.06 $ 0.05 $ 0.10 $ 0.07
Discontinued operations:
Loss from discontinued operations, net of tax -- (0.19) -- (0.21)
Estimated loss on disposal, net of tax -- (0.46) -- (0.46)
-------------- -------------- -------------- --------------
Net earnings (loss) per common shareholder $ 0.06 $ (0.60) $ 0.10 $ (0.60)
============== ============== ============== ==============
</TABLE>
10
<PAGE> 12
SIMULA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
GENERAL - The following discussion and analysis provides information that
management of Simula, Inc. (the "Company") believes is relevant to an assessment
and understanding of the Company's results of operations and financial condition
for the three and six month periods ended June 30, 1999 compared to the same
periods in 1998. This discussion should be read in conjunction with the Interim
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Form 10-Q. This Form 10-Q contains certain forward-looking statements and
information. The cautionary statements contained below should be read as being
applicable to all related forward-looking statements wherever they appear. See
"Forward Looking Information and Risks of the Business."
OVERVIEW
The Company designs and manufactures occupant safety systems and
devices engineered to safeguard human life in a wide range of air and ground
transportation vehicles. Utilizing its substantial proprietary technology in
energy-absorbing seating, inflatable restraints, and composite materials, the
Company focuses on reducing injury and increasing survivability in vehicle and
aircraft crashes.
The Company is a holding company for wholly owned subsidiaries which
operate in two business segments. The Commercial Transportation Products segment
includes operations which primarily manufacture seating systems for domestic and
foreign passenger airlines and operations producing inflatable restraints and
related safety technologies for automobiles. The Government and Defense segment
includes operations that design and manufacture crash resistant seats and
components, energy absorbing devices, and ballistic armor, principally in
connection with United States armed forces procurement. The remaining segment,
entitled Other, represents general corporate operations.
Since its founding in 1975, the Company's historic business has been as
a government and defense contractor. Additionally, commencing with acquisitions
and commercial products development since 1993, the Company has become the
largest North American-based supplier of seating systems for rail and other mass
transit vehicles and a successful new entrant in the manufacture of new
commercial airliner seating and inflatable restraints for automobiles. Utilizing
its proprietary safety technology, the Company has introduced crashworthy
systems for a variety of vehicles and aircraft including its 16g commercial
airliner passenger seat ("16g Seat") and various inflatable restraint systems
for automobiles including the Inflatable Tubular Structure ("ITS(R)").
Management made a strategic decision to enter the commercial aircraft
seating market to bring its proprietary energy-absorbing technologies to a new
industry and take advantage of positive industry trends in 1993. To implement
its decision, the Company completed three acquisitions that allowed it to
develop the necessary infrastructure to support future growth. In August 1993,
the Company acquired Airline Interiors, Inc. (the "Airline Acquisition"), which
was primarily involved with the refurbishment, reupholstery, reconditioning, and
reconfiguring of existing passenger seats. The Airline Acquisition provided
certain FAA certifications, enhanced the Company's management team and customer
base, and provided substantial assembly capacity. During 1994, the Company
acquired Coach & Car Equipment Corporation ("Coach and Car") and Artcraft
Industries Corp. ("Artcraft"). The acquisitions of Coach and Car and Artcraft
are collectively referred to as the 1994 Acquisitions. The 1994 Acquisitions'
existing operations included providing a majority of all manufacturing and
refurbishment of rail and mass transit seating systems in North America. The
1994 Acquisitions provided the Company with substantial large-scale
manufacturing capacity and synergies utilized in the production of its 16g Seat
for airliners.
In 1994, the Company made a strategic decision to enter the inflatable
restraint market for automobiles utilizing its proprietary technology, the ITS.
Through 1996, the Company completed its development of this technology and
start-up of its manufacturing facilities. In 1997, the Company began
manufacturing the ITS(R) for sale to BMW, a major European automobile
manufacturer, which began including it in certain models of its automobiles in
1997.
To continue it's strategic plan, in 1998 the Company adopted a plan to
sell its rail and mass transit seating operations at Coach and Car and Artcraft.
Because the Company's commercial airliner seating operation moved into a new
significantly larger facility in July 1998 and has established substantial
production, the rail operations are no longer required to demonstrate the
Company's production capabilities to current and potential airliner seating
customers. In addition, the larger airliner seating manufacturing facility
reduced the synergies achieved previously with the rail and mass transit seating
operation. The sale of these rail seating businesses will provide cash that will
be used to repay outstanding indebtedness. The company anticipates it will sell
these operations as ongoing businesses. These companies will continue their
marketing, sales and manufacturing activities pending the sale. The company's
rail and mass transit seating operations are reported as discontinued
operations.
11
<PAGE> 13
SIMULA, INC.
Simula's revenue has historically been derived from three sources:
sales of Company manufactured products; contract research and development for
third parties; and technology sales and royalties. A substantial portion of its
current revenue from the government and defense segment is accounted for under
the percentage of completion method of accounting. Under this method, revenue is
recorded as production progresses so that revenue less costs incurred to date
yields the percentage of gross margin estimated for each contract. Overall gross
margin percentages can increase or decrease based upon changes in estimated
gross margin percentages over the lives of individual contracts.
RESULTS FROM CONTINUING OPERATIONS
Three and Six Months Ended June 30, 1999 Compared to 1998
Revenue for the three months ended June 30, 1999 increased 32% to $34.0
million from $25.7 million for the comparable period in 1998. Revenue for the
six months ended June 30, 1999 increased 37% to $66.0 million from $48.3 million
for the comparable period in 1998. The increases in revenue are attributable to
both of the Company's business segments. Commercial Transportation Products
revenue for the three months ended June 30, 1999 increased 33% to $23.6 million
from $17.7 million and for the six month period ended June 30, 1999 increased
36% to $43.7 million from $32.1 million for the comparable periods in 1998. The
Commercial Transportation Products revenue increases are due to increased
deliveries of ITS(R) and 16g Seats. Government and Defense revenue for the three
months ended June 30, 1999 increased 27% to $10.3 million from $8.1 million and
for the six month period ended June 30, 1999 increased 36% to $22.1 million from
$16.2 million for the comparable periods in 1998. The increase in Government and
Defense revenue is attributable to increased overall contracts and the timing of
material costs incurred on contracts.
Gross margin for the three months ended June 30, 1999 increased 33% to
$8.9 million from $6.7 million and for the six months ended June 30, 1999
increased 38% to $17.4 million from $12.6 million for the comparable period in
1998. Gross margin as a percent of sales for the three and six months ended June
30, 1999 remained consistent with the comparable 1998 periods in each of the
Company's segments. Commercial Transportation Products gross margin for the
three months ended June 30, 1999 increased 30% to $5.3 million from $4.1 million
and for the six months ended June 30, 1999 increased 34% to $10.5 million from
$7.8 million for the comparable periods in 1998. Government and Defense gross
margin increased 30% to $3.4 million from $2.6 million and for the six months
ended June 30, 1999 increased 40% to $6.7 million from $4.8 million for the
comparable periods in 1998. The increase in gross margin is attributable to the
increase in revenue noted above.
Administrative expenses for the three months ended June 30, 1999
increased 27% to $5.9 million from $4.7 million and for the six months ended
June 30, 1999 and increased 32% to $12.0 million from $9.1 million for the
comparable periods in 1998. Commercial Transportation Products administrative
expenses for the three months ended June 30, 1999 increased 68% to $3.1 million
from $1.9 million and for the six months ended June 30, 1999 increased 52% to
$5.9 million from $3.9 million for the comparable periods in 1998. The increases
in Commercial Transportation Products administrative expenses is attributable to
an increased support structure required to support revenue growth. Commercial
Transportation Products administrative expenses as a percentage of sales for the
three and six month periods ended June 30, 1999 was 13.3% and 13.5%,
respectively, as compared to 10.5% and 12.1% for the three and six month periods
ended June 30, 1998, respectively. Government and Defense administrative
expenses for the three month period ended June 30, 1999 decreased 3% to $2.3
million from $2.4 million for the comparable 1998 period and is principally
related to a decrease in efforts related to internally funded research and
development due to increased demand of technical resources applied to third
party contracts. Government and Defense administrative expenses for the six
month period ended June 30, 1999 increased 14% to $5.0 million from $4.4 million
for the comparable period in 1998 and is principally related to increases during
the first quarter of internally funded research and development and
pre-production parachute costs. Administrative expenses as a percentage of sales
was 22.1% and 22.7% for the three and six month period ended June 30, 1999 as
compared to 29.0% and 27.1% in the comparable 1998 period.
Interest expense increased 46% to $1.7 million from $1.2 million for
the three months ended June 30, 1999 and 1998, respectively, and increased 42%
to $3.4 million from $2.4 million for the six month period ended June 30, 1999
and 1998, respectively. The increase in interest expense is primarily
attributable to increased outstanding borrowing.
The effective income tax rate for the three and six month periods ended
June 30, 1999 and 1998 approximated the Company's combined statutory rate of
40%.
12
<PAGE> 14
SIMULA, INC.
DISCONTINUED OPERATIONS
In 1998, the Company's board of directors adopted a plan to dispose of
its rail and mass transit seating operations. Accordingly, the operating results
of these rail and mass transit operations, including a provision for estimated
loss upon disposition, have been segregated from continuing operations and are
reported as discontinued operations. Due to the subjective nature of estimated
future operations and incremental costs of disposal, it is reasonably possible
that these estimates may change in the future. Future changes in estimates will
be included in the consolidated statement of operations in the reporting period
determined.
On June 30, 1999, the Company executed a definitive purchase agreement
with a third party for the sale of the rail and mass transit operations. Under
the terms of the agreement, the total purchase price is $10.0 million. The
agreement requires the buyer to assume all liabilities, to deposit nonrefundable
earnest money and calls for a closing date no later than July 30, 1999. The
buyer paid the earnest money but was unable to meet the July 30, 1999 closing
date because it is relying upon funds from a lender, which is currently
completing final due diligence and loan approval. The company is cooperating
with the third party and it's lender to complete the transaction in an
expeditious manner. Depending upon the level of funding the buyer will receive
from it's lender, the Company may modify the June 30, 1999 definitive agreement
to extend the closing date and to adjust the amount of cash to be received by
the Company at closing, with the balance represented by a note from the buyer.
Although the Company has continued to cooperate with the third party buyer, it
has also entered into discussions with two other buyer groups. Under the terms
of the June 30 definitive purchase agreement, Management of the Company does not
believe an additional provision for loss on disposal of its discontinued
operation will be required.
Revenues for the rail and mass transit operations were $3,659,473 and
$3,271,808 for the three months ended June 30, 1999 and 1998, respectively and
$7,054,816 and $8,733,332 for the six months ended June 30, 1999 and 1998,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to fund working capital requirements and meet
debt service requirements during the next year will be dependent upon improved
cash flow from operating units, the proceeds received from the sale of its
discontinued operations to repay indebtedness and increase availability of funds
under its Senior Credit Agreement, and obtaining replacement financing of $4.8
million in its 10% Senior Subordinated Notes (the "10% Notes") due September 15,
1999. Anticipated cash proceeds related to the sale of the company's
discontinued operation should be sufficient to satisfy the Company's obligation
to reduce its revolving line of credit borrowing base under its Senior Credit
Agreement. In addition, the Company believes it will secure replacement
financing of the $4.8 million due on its 10% Notes in order to meet its
repayment obligation under these notes. The Company's ability to fund working
capital requirements after the Revolving Line of Credit borrowing base is
adjusted to $20 million on August 31, 1999 is primarily dependent upon its
ability to generate the necessary funds from its operating units. The Company is
investigating a number of financing alternatives including additional potential
strategic asset and technology sales licensing and financing, and negotiated
increases to its revolving line of credit borrowing base in order to improve its
liquidity position. The Company may also, however, seek to obtain additional
capital should demand for its products exceed current capacity. The raising of
additional capital in public or private markets will be primarily dependent upon
prevailing market conditions and demand for the Company's technologies and
products.
The Company's liquidity is impacted by the nature of the billing
provisions under its contracts. Generally, in the early period of contracts,
cash expenditures and accrued profits are greater than allowed billings while
contract completion results in billing previously unbilled costs and profits.
Contract and trade receivables, net of advances on contracts, increased
approximately $6.2 million for the six months ended June 30, 1999 due
principally to increased receivables from 16g Seat and ITS sales and the timing
of billing provisions on certain Government and Defense contracts.
Operating activities required the use of $9.5 million of cash during
the six months ended June 30, 1999, compared to the use of $6.5 million of cash
during the same period in 1998. Cash used by operating activities in the 1999
period was primarily used to increase accounts receivable (discussed above) and
inventories and funding of discontinued operations current operating losses and
increase in net assets. The increase in inventories was primarily due to an
increase in 16g Seat inventory necessary to support anticipated future
deliveries and inventories in the Government and Defense segment primarily
related to timing of material deliveries.
Investing activities provided $1.2 million of cash during the six
months ended June 30, 1999, compared to use of $2.9 million of cash during the
same period in 1998. The increase in cash provided by investing activities is
primarily due to net proceeds of $2.9 million received under a sale and
leaseback of a subsidiary office and development facility and of the sale of
certain technology intangibles, inventory and related production equipment. The
1999 cash proceeds received was partially offset by $1.4 million in purchases of
various production equipment as compared to equipment purchases of $2.9 million
during
13
<PAGE> 15
SIMULA, INC.
the comparable period in 1998. The decrease in equipment purchases is due to a
higher level of investing in additional production capacity in the company's
Commercial Transportation Products segment to meet increased demand for the 16g
Seat and the ITS during the 1998 period.
Financing activities provided $9.8 million of cash during the six
months ended June 30, 1999 as compared to $6.4 million during the comparable
period in 1998. Cash provided from financing activities during the 1999 period
includes $7.5 million received for the issuance of redeemable preferred stock
and $3.7 million in net borrowings under the Company's line of credit partially
offset by principal payments under other debt arrangements for scheduled
principal reductions. Cash provided from financing activities during the 1998
period includes $7.1 million in net borrowing under the Company's line of credit
partially offset by principal payments under other debt arrangements for
scheduled principal reductions.
In April 1999, the Senior Credit Agreement was amended to reduce the
Company's revolving line of credit from the lesser of $26 million or the
Revolving Line of Credit Borrowing Base (as defined) to the lesser of $23
million or the Revolving Line of Credit Borrowing Base (as defined). In June and
July 1999, the Senior Credit Agreement was amended to increase the revolving
line of credit from $23 million to $25 million and extend the date at which time
the revolving line of credit is reduced to $20 million from July 31, 1999 to
August 31, 1999. At August 16, 1999, under the line of credit the Company had
available borrowing of $25 million and outstanding borrowing of $22.9 million.
INFLATION
The Company does not believe that it is significantly impacted by
inflation.
RESEARCH AND DEVELOPMENT
The Company's research and development occurs under fixed-price,
government-funded contracts and Company-sponsored efforts. Historically,
research and development efforts have fluctuated based upon available
government-funded contracts and available Company funding. The Company
anticipates that future fluctuations may also occur as a result of efforts to
expand its inflatable restraint, commercial airliner and helicopter seating, and
other technologies.
SEASONALITY
The Company does not believe that it is currently significantly
impacted by seasonal factors.
YEAR 2000 MATTERS
Background
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define an applicable year. Any computer
programs or equipment that have time-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions in
commerce, including among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company employs a number of information technology ("IT") systems
in its operations, including computer networking systems, hardware and software,
financial systems, and other similar systems. The Company also employs a number
of non-IT devices such as building security and safety devices, and other
devices containing embedded electronic circuits. Both IT systems and non-IT
devices are subject to potential failure due to the Year 2000 issue.
The Company's Year 2000 Plan
In 1996, the Company initiated a plan for the conversion from existing
accounting software to new state-of-the-art, Year 2000-compliant, manufacturing
and accounting systems at each of its operating companies. That conversion is
part of an overall plan (the "Year 2000 Plan") the Company has developed to
achieve Year 2000 readiness. The Year 2000 Plan is intended to remediate the
Year 2000 issue in all categories of systems and electronic devices in use by
the Company, including IT and non-IT devices, so that the Company may continue
its operations without interruption or with minimal disruption. The Year 2000
Plan also includes communication with critical third parties such as customers,
vendors and other business partners to determine the expected degree of Year
2000 compliance of those parties and to
14
<PAGE> 16
SIMULA, INC.
monitor their progress toward Year 2000 readiness. The Year 2000 Plan includes
the following phases: 1) assessment, 2) remediation, 3) testing, and 4)
implementation.
The Company is in the remediation phase with regard to its state of
readiness relative to non-IT devices containing embedded circuitry. The Company
is in the process of communicating with the manufacturers of non-IT devices
containing embedded circuitry and to date has fully assessed (confirmed that
such devices are Year 2000 compliant or upgraded the devices as needed)
approximately 90% of such devices. The assessed devices are in various stages of
remediation, testring and implementation. Completion thru implementation is
expected during the third quarter of 1999.
The Company is also in the assessment phase with regard to third
parties with which the Company has a material relationship. In connection with
this assessment, the Company has appointed a Year 2000 Program Manager at each
of its subsidiaries, and has made or is making written inquiries of its
customers and suppliers. This process is not yet complete. While the Company has
not been made aware of any problems that would materially impact the Company's
operations, there can be no assurance that one or more material third parties
will not have Year 2000 problems that materially impact the Company's business
in some fashion. Various agencies of the U.S. government and military branches
of the U.S. armed forces are significant customers of the Company. As of the
date of this report, the Company has received conflicting data as to the state
of any of such customers' Year 2000 readiness. Therefore, the Company is unsure
at this time the extent, if any, that any entity of the U.S. government with
whom the Company has a material relationship will have internal Year 2000 issues
which may materially impact the Company's business.
The Company continues to be in the implementation phase with regard to
its IT systems. As of the date of this report, the Company has one subsidiary
using accounting and manufacturing systems significantly affected by the Year
2000 issue. This subsidiary is currently in the remediation phase and completion
thru implementation is expected by November 1999.
Selection of a remediation tool set for desktop personal computers and
servers was completed in February 1999. The tool was implemented in June 1999
and results are beign used to remediate Year 2000 deficiencies highlighted by
its application.
In addition to the internal assessment and remediation efforts being
conducted by the Company pursuant to the Year 2000 Plan as described above, the
Company has engaged the services of a third party consultant to review Year 2000
matters on a subsidiary-by-subsidiary basis. The consultant commenced work in
January 1999.
Costs
The Company has incurred significant costs in connection with its
conversion, beginning in 1996, to the state-of-the-art manufacturing and
accounting systems discussed above. An incidental benefit of this conversion is
that such systems are Year 2000-compliant.
In addition to the foregoing, the costs associated with the Company's
Year 2000 Plan, including the on-going systems conversions described above, are
expensed as incurred and to date have not been, and are not anticipated to be,
material to the Company's financial position or results of operations.
Risks of Year 2000 Failure
The failure on any party's part to correct a material Year 2000 problem
could result in an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and adversely affect
the Company's results of operations, liquidity and financial condition. The
Company has not developed a formal written contingency plan for dealing with
potential Year 2000 issues in general. The risks associated with each particular
system not being Year 2000 compliant are analyzed in connection with the
Company's assessment of Year 2000 issues as described above, and contingency
plans will be effected by the Company on a case-by-case basis as the need
arises.
Due to the general uncertainty inherent in the Year 2000 issue,
resulting in large part from the uncertainty of the Year 2000 readiness of
material third party suppliers and customers, the Company is unsure at this time
the extent, if any, that it might be materially adversely impacted by Year 2000
issues.
15
<PAGE> 17
SIMULA, INC.
Readers are cautioned that forward-looking statements contained in this
Year 2000 discussion should be read in conjunction with the Company's
disclosures under the heading "Forward Looking Information and Risks of the
Business" below.
FORWARD LOOKING INFORMATION AND RISKS OF THE BUSINESS
Commencing in fiscal 1997, the Company entered large scale production
of the ITS(R) and 16g Seat. Significant investments to transition to high volume
manufacturing for these products were also made in 1997, which affected
earnings. The Company began to realize significant revenues from the
introduction of these products in 1997, which has continued in 1998 and is
anticipated to continue in 1999. Growth in the automotive safety business should
result from increased production volumes. However, auto industry customary price
reductions will reduce operating margins. Improved financial performance in the
airline seating business is expected but will be dependent on improvements in
manufacturing efficiencies, materials cost reductions, better delivery records
and customer satisfaction, and continued sales. It is estimated that the airline
seating business should achieve break even results in 1999. During 1999, the
government and defense business of the Company is expected to show growth in
revenues and operating income.
Projected operating results and capital needs will be affected by a
wide variety of factors which could adversely impact revenues, profitability and
cash flows. The Company's liquidity and available working capital will be
dependent upon improved cash flow from operating units, the availability of cash
sales proceeds from discontinued operations to repay indebtedness and increase
availability of funds under its bank credit agreement and obtaining replacement
financing for the 10% Notes due September 15, 1999. Factors and risks that may
affect results include those described in the Company's registration statements
and periodic reports filed with the U.S. Securities and Exchange Commission. In
addition, other factors include, but are not limited to, manufacturing capacity
and yield; costs of labor, raw materials, supplies, and equipment; reliability
of vendor base; contract mix and shifting production and delivery schedules;
amount of resources committed to independent research and development from time
to time; success in building strategic alliances with large prime contractors
and first tier suppliers to OEMs; the level of orders which are received and can
be shipped and invoiced in a quarter; customer order patterns and seasonality;
the cyclical nature of the industries and markets addressed by the Company's
products; the level and makeup of military expenditures; technological changes;
increased costs attributable to changes in government regulations and
certifications for transport vehicles; competition and competitive pressures on
pricing; and economic conditions in the United States and worldwide markets
served by the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In February 1998, the Company filed a complaint in United States
District Court for the District of Arizona against Autoliv, Inc. seeking
injunctive relief from alleged anti-competitive acts and practices by Autoliv.
The complaint alleged numerous unlawful actions taken by Autoliv in connection
with a license from the Company to market and distribute the Company's ITS(R).
In 1998, the District Court stayed the proceedings and ruled that the dispute
between the parties was a contractual one and was subject to arbitration
pursuant to a contract provision. The Company disagreed and appealed the order
to the United States Court of Appeals for the Ninth Circuit. In April 1999, this
Court ruled that the proper jurisdiction for this dispute is arbitration. No
court has ruled on the merits of the Company's claims. In May 1999, the Company
commenced a proceeding for international arbitration. This arbitration is
proceeding in the ordinary course.
On November 3, 1998, the Company filed a separate complaint against
Autoliv in the United States District Court for the District of Delaware seeking
injunctive relief and damages for patent infringement. The Company's complaint
alleges that Autoliv developed, offered, and sold a side impact head protection
device in the United States that infringes the patent that Simula owns for the
ITS(R). This litigation is pending.
In addition, the Company is involved in other litigation in the
ordinary course of business from time to time. The Company presently is not a
party to any threatened or pending litigation, the negative outcome of which
would be material to the Company.
16
<PAGE> 18
SIMULA, INC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders was held on June 17, 1999.
Proxies were solicited for votes on matters proposed at such meeting pursuant to
Section 14 of the Securities Exchange Act of 1934. The Company's Proxy Statement
for the 1999 Annual Meeting was filed with the Securities and Exchange
Commission on May 1, 1999. April 23, 1999 was fixed as the record date for
voting on matters presented at the Annual Meeting. As of such date, 9,976,752
shares of Common Stock were outstanding and eligible to be voted on all matters.
At the meeting 9,815,135 shares were present in person or by proxy. A quorum was
constituted of 4,907,569 shares.
The first matter submitted for vote was the ratification of the
selection of Deloitte & Touche, LLP as the independent public accountants for
the Company's fiscal year 1998. Shares voted on the matter were 9,815,135 and
votes tabulated were 9,590,158 for, 183,152 against, and 41,825 abstaining.
The second matter submitted for Shareholder vote was the election of
four directors. Votes for individual directors were tabulated as follows:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
- ---------------------------- ------------------ ------------------
<S> <C> <C>
James A. Saunders 9,398,212 416,923
Bradley P. Forst 9,406,612 408,523
James C. Withers 9,420,812 394,323
S. Thomas Emerson 9,405,812 409,323
</TABLE>
The third matter submitted for Shareholder vote was the approval of the
1999 Incentive Compensation Option Plan. Shares voted on the matter were
9,815,135, and votes tabulated were 4,676,544 for, 950,551 against, and 110,076
abstaining. There were 4,077,964 broker non-votes on the matter. Under
applicable rules the matter was approved.
No other matters were voted upon at the meeting.
17
<PAGE> 19
SIMULA, INC.
ITEM 6. EXHIBITS AND REPORTS.
(a) The following Exhibits are included pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
No. Description Reference
<S> <C>
3.1 Articles of Incorporation of Simula, Inc., as amended and restated .............................................. (4)
3.2 Bylaws of Simula, Inc., as amended and restated ................................................................. (1)
4.2 Indenture dated December 17, 1993, as amended ................................................................... (2)
4.5 Supplemental Indenture No. 2 dated September 12, 1996, entered into in connection with the
Company's issuance of Series C 10% Senior Subordinated Convertible Notes ........................................ (6)
4.6 Supplemental Indenture No. 3, effective March 14, 1997, amending the Indenture of Simula,
Inc. dated December 17, 1993 .................................................................................... (7)
4.7 Indenture dated April 1, 1997, in connection with the Company's issuance of the 8% Senior
Subordinated Convertible Notes due May 1, 2004 .................................................................. (7)
4.8 Certificate of Designation, Preferences, Rights and Privileges of the Company's $7,500,000
Series A Preferred Stock ........................................................................................ (12)
10.11 1992 Stock Option Plan, as amended effective September 15, 1998 ................................................. (10)
10.12 1992 Restricted Stock Plan ...................................................................................... (1)
10.21 1994 Stock Option Plan, as amended effective September 15, 1998 ................................................. (10)
10.24 Senior Credit Agreement with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
November 6, 1998 ................................................................................................ (10)
10.25 Modification Agreement with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
February 12, 1999 ............................................................................................... (11)
10.26 Simula, Inc. Employee Stock Purchase Plan ....................................................................... (4)
10.29 Form of Change of Control Agreements, as amended and restated, between the Company and
Donald W. Townsend, Bradley P. Forst, and James A. Saunders ..................................................... (9)
10.30 Form of Employment Agreements between the Company and Donald W. Townsend, Bradley P.
Forst, and James A. Saunders ................................................................................... (8)
10.31 Modification Agreement No. 2 with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
April 28, 1999 .................................................................................................. (12)
10.32 Form of Employment Agreement between the Company and James C. Dodd .............................................. (12)
10.33 Form of Change of Control Agreement between the Company and James C. Dodd ....................................... (12)
*10.34 Modification Agreement No. 3 with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
June 28, 1999 ...................................................................................................
*10.35 Modification Agreement No. 4 with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
July 28, 1999 ...................................................................................................
18. Preference Letter re: change in accounting principles ........................................................... (5)
21. Subsidiaries of the Company ..................................................................................... (8)
24. Powers of Attorney - Directors .................................................................................. (8)(11)
*27. Financial Data Schedule
</TABLE>
- ----------
* Filed herewith.
(1) Filed with Registration Statement on Form S-18, No. 33-46152-LA, under the
Securities Act of 1933, effective April 13, 1992.
(2) Filed with Registration Statement on Form SB-2, No. 33-61028 under the
Securities Act of 1933, effective December 10, 1993.
(3) Filed with Registration Statement on Form SB-2, No. 33-87582, under the
Securities Act of 1933, effective December 28, 1994.
(4) Filed with Definitive Proxy on May 14, 1996, for the Company's Annual
Meeting of Shareholders held on June 20, 1996.
(5) Filed with report on Form 10-Q/A for the quarter ended June 30, 1996. (6)
Filed with report on Form 10-K for the year ended December 31, 1996.
(7) Filed with registration Statement on Form S-3, No. 333-13499, under the
Securities Act of 1993, effective April 24, 1997.
(8) Filed with report on Form 10-K for the year ended December 31, 1997.
(9) Filed with report on Form 10-Q for the quarter ended March 31, 1998.
(10) Filed with report on Form 10-Q for the quarter ended September 30, 1998.
(11) Filed with report on Form 10-K for the year ended December 31, 1998.
(12) Filed with report on Form 10-Q for the quarter ended March 31, 1999.
18
<PAGE> 20
SIMULA, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q for the quarter ended June
30, 1999 to be signed on its behalf by the undersigned thereunto duly
authorized.
SIMULA, INC.
DATE: August 13, 1999 /s/ Donald W. Townsend
----------------------------------
DONALD W. TOWNSEND
President
Chief Executive Officer
/s/ James C. Dodd
----------------------------------
JAMES C. DODD
Executive Vice President
Chief Financial Officer
20
<PAGE> 21
Exhibit Index
<TABLE>
<CAPTION>
No. Description Reference
<S> <C>
3.1 Articles of Incorporation of Simula, Inc., as amended and restated .............................................. (4)
3.2 Bylaws of Simula, Inc., as amended and restated ................................................................. (1)
4.2 Indenture dated December 17, 1993, as amended ................................................................... (2)
4.5 Supplemental Indenture No. 2 dated September 12, 1996, entered into in connection with the
Company's issuance of Series C 10% Senior Subordinated Convertible Notes ........................................ (6)
4.6 Supplemental Indenture No.3, effective March 14, 1997, amending the Indenture of Simula,
Inc. dated December 17, 1993 .................................................................................... (7)
4.7 Indenture dated April 1, 1997, in connection with the Company's issuance of the 8% Senior
Subordinated Convertible Notes due May 1, 2004 .................................................................. (7)
4.8 Certificate of Designation, Preferences, Rights and Privileges of the Company's $7,500,000
Series A Preferred Stock ........................................................................................ (12)
10.11 1992 Stock Option Plan, as amended effective September 15, 1998 ................................................. (10)
10.12 1992 Restricted Stock Plan ...................................................................................... (1)
10.21 1994 Stock Option Plan, as amended effective September 15, 1998 ................................................. (10)
10.24 Senior Credit Agreement with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
November 6, 1998 ................................................................................................ (10)
10.25 Modification Agreement with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
February 12, 1999 ............................................................................................... (11)
10.26 Simula, Inc. Employee Stock Purchase Plan ....................................................................... (4)
10.29 Form of Change of Control Agreements, as amended and restated, between the Company and
Donald W. Townsend, Bradley P. Forst, and James A. Saunders ..................................................... (9)
10.30 Form of Employment Agreements between the Company and Donald W. Townsend, Bradley P.
Forst, and James A. Saunders ................................................................................... (8)
10.31 Modification Agreement No. 2 with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
April 28, 1999 .................................................................................................. (12)
10.32 Form of Employment Agreement between the Company and James C. Dodd .............................................. (12)
10.33 Form of Change of Control Agreement between the Company and James C. Dodd ....................................... (12)
*10.34 Modification Agreement No. 3 with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
June 28, 1999 ...................................................................................................
*10.35 Modification Agreement No. 4 with Bank One, Arizona, N.A. and Imperial Bank, Arizona dated
July 28, 1999 ...................................................................................................
18. Preference Letter re: change in accounting principles ........................................................... (5)
21. Subsidiaries of the Company ..................................................................................... (8)
24. Powers of Attorney - Directors .................................................................................. (8)(11)
*27. Financial Data Schedule
</TABLE>
- ----------
* Filed herewith.
(1) Filed with Registration Statement on Form S-18, No. 33-46152-LA, under the
Securities Act of 1933, effective April 13, 1992.
(2) Filed with Registration Statement on Form SB-2, No. 33-61028 under the
Securities Act of 1933, effective December 10, 1993.
(3) Filed with Registration Statement on Form SB-2, No. 33-87582, under the
Securities Act of 1933, effective December 28, 1994.
(4) Filed with Definitive Proxy on May 14, 1996, for the Company's Annual
Meeting of Shareholders held on June 20, 1996.
(5) Filed with report on Form 10-Q/A for the quarter ended June 30, 1996. (6)
Filed with report on Form 10-K for the year ended December 31, 1996.
(7) Filed with registration Statement on Form S-3, No. 333-13499, under the
Securities Act of 1993, effective April 24, 1997.
(8) Filed with report on Form 10-K for the year ended December 31, 1997.
(9) Filed with report on Form 10-Q for the quarter ended March 31, 1998.
(10) Filed with report on Form 10-Q for the quarter ended September 30, 1998.
(11) Filed with report on Form 10-K for the year ended December 31, 1998.
(12) Filed with report on Form 10-Q for the quarter ended March 31, 1999.
<PAGE> 1
Exhibit 10.34
THIRD MODIFICATION AGREEMENT
BY THIS THIRD MODIFICATION AGREEMENT (the "Agreement"), made and
entered into as of the 23rd day of June, 1999, BANK ONE, ARIZONA, NA, a national
banking association, as administrative agent for the Banks (as hereinafter
defined) (the "Administrative Agent"), and SIMULA, INC., an Arizona corporation
(the "Company"), all present and future Subsidiaries of the Company (with the
Company, the "Borrower"), in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, hereby confirm and agree as follows:
RECITALS:
A. Borrower, the Administrative Agent, the Issuing Bank and the "Banks"
named therein entered into that Senior Credit Agreement dated November 6, 1998
to provide financial accommodations to the Borrower as provided therein (as
modified from time to time, including without limitation by that Modification
Agreement dated as of February 12, 1999 and that Second Modification Agreement
dated as of April 28, 1999, the "Senior Credit Agreement").
B. Borrower and the Administrative Agent, with the consent of the Banks
and the Issuing Bank, desire to modify the Senior Credit Agreement as set forth
herein.
C. All undefined capitalized terms used herein shall have the meaning
given them in the Senior Credit Agreement.
AGREEMENT:
SECTION 1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
SECTION 2. MODIFICATIONS OF LOAN DOCUMENTS; OTHER AGREEMENTS.
2.1 The following definitions in Section 1.1 of the Senior Credit
Agreement are hereby amended to read as follows:
"RLC Commitment" means Twenty-Five Million And No/100 Dollars
($25,000,000.00) until the RLC Adjustment Date, after which it means
Twenty Million And No/100 Dollars ($20,000,000.00).
2.2 Section 2.2(d) of the Senior Credit Agreement is hereby amended to
read as follows:
(d) Notwithstanding anything herein to the contrary,
an amount of the RLC Commitment equal to $300,000.00 (the
"Payment
<PAGE> 2
Reserve") shall not be disbursed after June 23, 1999 for any
purpose other than to pay the Rail Credit Fee and the fees,
costs and expenses of the Administrative Agent, the Banks and
their agents (including, without limitation, attorneys' fees
and costs) with respect to the documentation of the Loans, and
the drafting of the Credit Documents and any modification
thereof until the Administrative Agent shall have determined
in its sole discretion that all such amounts have been fully
paid; provided that the Payment Reserve shall no longer be
required once the Discontinued Operations have been sold and
the RLC Loans prepaid in accordance with Section 7.19(b)
hereof.
2.3 Section 7.19 of the Senior Credit Agreement is hereby amended to
read as follows:
7.19 Discontinued Operations.
(a) Upon its sale of the Discontinued Operations, the
Company shall apply the net proceeds from such sale to the
repayment of the Loans, first to the extent applicable the
RLC, second to the extent applicable the Term B Loan and third
to the extent applicable the Term A Loan.
(b) The Discontinued Operations shall be sold by the
Company no later than July 31, 1999. The net sales price
therefrom shall not be less than $10,000,000.00 unless the
Banks otherwise agree in writing. Of the net sales price,
$8,000,000.00 in cash shall be applied to the prepayment of
the RLC Loans. The purchaser's note in the amount of
$2,000,000.00 for the balance of the purchase price shall be
in a form that is assignable to the Banks and, within two
weeks after its execution by the purchaser, shall be delivered
to the Administrative Agent with an assignment thereof
acceptable to the Bank, pledging it to the Banks to secure the
Borrower's Obligation hereunder.
(c) Unless the Banks otherwise agree in writing, the
Company shall not invest, directly or indirectly, more than an
$1,500,000.00 in cash in the Discontinued Operations during
the 1999 fiscal year.
2.4 Section 7.20 of the Senior Credit Agreement is hereby amended to
read as follows:
7.20 Building Sale. The building located at 10016 South 51st
Street, Phoenix, Arizona shall be sold no later than July 31, 1999. As
a result of such sale, at least $2,000,000 of such sale proceeds shall
be available for, and shall be applied
-2-
<PAGE> 3
to, the repayment of the Loans, first to the extent applicable the RLC
and thereafter to the other Loans.
2.5 Section 8.9(f) of the Senior Credit Agreement is hereby amended to
read as follows:
(f) Its EBITDA to be less than $3,000,000.00 for the fiscal
quarter ending March 31, 1999, $3,500,000 for the fiscal quarter ending
June 30, 1999 and $4,000,000.00 for any fiscal quarter thereafter,
calculated for each fiscal quarter without any annualization
adjustment.
2.6 Exhibit "A" to the Senior Credit Agreement is hereby amended to
read as attached hereto.
2.7 Schedule 1.1 of the Senior Credit Agreement is hereby amended to
read as attached hereto.
2.8 The reference to "$23,000,000.00" in Section 2(a) of each Security
Agreement is hereby amended to read "$25,000,000.00."
2.9 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantors is materially incomplete, incorrect, or misleading as of
the date hereof.
2.10 Each reference in the Credit Documents to any of the Credit
Documents is hereby amended to be a reference to such document as modified
herein.
SECTION 3. RATIFICATION OF CREDIT DOCUMENTS AND COLLATERAL.
The Credit Documents are ratified and affirmed by Borrower and shall
remain in full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Credit Documents shall remain
as security for the Loans and the obligations of Borrower in the Credit
Documents.
SECTION 4. BORROWER REPRESENTATIONS AND WARRANTIES.
Company and each Co-Borrower to the extent applicable represents and
warrants to the Banks:
4.1 No default or event of default under any of the Credit Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Credit
Documents as modified herein has occurred and is continuing.
-3-
<PAGE> 4
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to the Banks in connection with the Loans from the most recent
financial statement received by the Banks.
4.3 Each and all representations and warranties of Borrower in the
Credit Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loans or the Credit Documents as modified herein.
4.5 The Credit Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Credit Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Credit Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Agreement has been duly executed and
delivered on behalf of Borrower.
SECTION 5. BORROWER COVENANTS.
Borrower covenants with the Banks:
5.1 Borrower shall execute, deliver, and provide to the Administrative
Agent such additional agreements, documents, and instruments as reasonably
required by the Banks to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and absolutely and forever releases and
discharges the Administrative Agent and the Banks and their present and former
directors, shareholders, officers, employees, agents, representatives,
successors and assigns, and their separate and respective heirs, personal
representatives, successors and assigns, from any and all actions, causes of
action, claims, debts, damages, demands, liabilities, obligations, and suits, of
whatever kind or nature, in law or equity of Borrower, whether now known or
unknown to Borrower, and whether contingent or matured, (i) in respect of the
Loans, the Credit Documents, or the actions or omissions of the Administrative
Agent or the Banks in respect of the Loans or the Credit Documents and (ii)
arising from events occurring prior to the date of this Agreement.
-4-
<PAGE> 5
SECTION 6. CONDITIONS PRECEDENT.
The agreements of the Banks and the Administrative Agent and the
modifications contained herein shall not be binding upon the Banks until the
Banks have executed and delivered this Agreement and the Administrative Agent
has received, at Borrower's expense, all of the following, all of which shall be
in form and content satisfactory to the Administrative Agent and shall be
subject to approval by the Administrative Agent:
6.1 An original of this Agreement fully executed by the Borrower and
all Guarantors;
6.2 With respect to the increase in the RLC Commitment, Borrower shall
pay to Bank One a $20,000.00 arrangement fee;
6.3 Such resolutions or authorizations and such other documents as the
Administrative Agent may require relating to the existence and good standing of
each Borrower and Guarantor the authority of any person executing this Agreement
or other documents on behalf of each Borrower and Guarantor; and
6.4 Payment of all the internal and external costs and expenses
incurred by the Administrative Agent and the Banks in connection with this
Agreement (including, without limitation, inside and outside attorneys,
appraisal, appraisal review, processing, title, filing, and recording costs,
expenses, and fees).
SECTION 7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Credit Documents as modified herein contain the complete
understanding and agreement of Borrower and the Banks in respect of the Loans
and supersede all prior representations, warranties, agreements, arrangements,
understandings, and negotiations. No provision of the Credit Documents as
modified herein may be changed, discharged, supplemented, terminated, or waived
except in a writing signed by the parties thereto.
SECTION 8. BINDING EFFECT.
The Credit Documents as modified herein shall be binding upon and shall
inure to the benefit of Borrower and the Banks and their successors and assigns
and the executors, legal administrators, personal representatives, heirs,
devisees, and beneficiaries of Borrower, provided, however, Borrower may not
assign any of its right or delegate any of its obligation under the Credit
Documents and any purported assignment or delegation shall be void.
SECTION 9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Arizona, without giving effect to conflicts of law
principles.
-5-
<PAGE> 6
SECTION 10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
SIMULA, INC., an Arizona corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Treasurer
------------------------------------------
COMPANY
SIMULA SAFETY SYSTEMS, INC., formerly
known as Simula Government Products, Inc., an
Arizona corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES,
INC., an Arizona corporation, a/k/a ASD-Simula
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Treasurer
------------------------------------------
-6-
<PAGE> 7
SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
ARTCRAFT INDUSTRIES CORP., an Arizona
corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
COACH AND CAR EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
-7-
<PAGE> 8
VIATECH, INC., a Delaware corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Treasurer
------------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES
LIMITED, a company organized under the laws of
the United Kingdom
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
INTERNATIONAL CENTER FOR SAFETY
EDUCATION, INC., an Arizona corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Treasurer
------------------------------------------
-8-
<PAGE> 9
INTAERO, LTD., an Arizona corporation
By: /s/ Donald Townsend
------------------------------------------
Name: Donald Townsend
------------------------------------------
Its: Assistant Treasurer
------------------------------------------
CO-BORROWERS
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhart
------------------------------------------
Name: Steve Reinhart
------------------------------------------
Title: Vice President
------------------------------------------
ADMINISTRATIVE AGENT
-9-
<PAGE> 10
CONSENT AND AGREEMENT OF GUARANTORS
With respect to the Third Modification Agreement, dated June 23, 1999
("Agreement"), between SIMULA, INC., an Arizona corporation (the "Company"), all
present and future Subsidiaries of the Company (with the Company, the
"Borrower") and BANK ONE, ARIZONA, NA, a national banking association as
administrative agent for the Banks (as defined in the Agreement)
("Administrative Agent"), the undersigned (individually and, if more than one,
collectively "Guarantor") agrees for the benefit of the Banks as follows:
1 Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Continuing Guarantees as modified herein, and (B) any
other agreements, documents, or instruments securing or otherwise relating to
the Continuing Guarantees, (including, without limitation, any arbitration
resolution and any environmental certification and indemnity agreement
previously executed and delivered by the undersigned), as modified herein. The
Continuing Guarantees and such other agreements, documents, and instruments, as
modified herein, are referred to individually and collectively as the "Guarantor
Documents."
2 Guarantor consents to the modification of the Credit Documents and
all other matters in the Agreement.
3 Guarantor fully, finally, and forever releases and discharges the
Banks and the Administrative Agent and their successors, assigns, directors,
officers, employees, agents, and representatives from any and all actions,
causes of action, claims, debts, demands, liabilities, obligations, and suits of
whatever kind or nature, in law or equity, that Guarantor has or in the future
may have, whether known or unknown, (i) in respect of the Loans, the Credit
Documents, the Guarantor Documents, or the actions or omissions of the Banks and
the Administrative Agent in respect of the Loans, the Credit Documents, or the
Guarantor Documents and (ii) arising from events occurring prior to the date
hereof.
4 Guarantor agrees that all references, if any, to the Notes, the
Senior Credit Agreement, the Security Documents, and the Credit Documents in the
Guarantor Documents shall be deemed to refer to such agreements, documents, and
instruments as modified by the Agreement.
5 Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantors. Any
property or rights to or interests in property granted as security in the
Guarantor Documents shall remain as security for the Continuing Guarantees and
the obligations of Guarantor in the Continuing Guarantees.
6 Guarantor agrees that the Credit Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantors, are the legal,
<PAGE> 11
valid, and binding obligations of Borrower and the undersigned, respectively,
enforceable in accordance with their terms against Borrower and the undersigned,
respectively.
7 Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of the
Guarantor Documents.
8 Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most recent
financial statement received by Lender.
9 Guarantor agrees that this Consent and Agreement of Guarantors may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same document. Signature
and acknowledgement pages may be detached from the counterparts and attached to
a single copy of this Consent and Agreement of Guarantors to physically form one
document.
DATED as of the date of the Agreement.
SIMULA SAFETY SYSTEMS, INC., formerly known
as Simula Government Products, Inc., an
Arizona corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES, INC.,
an Arizona corporation, a/k/a ASD-Simula
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Treasurer
-----------------------------------------
-2-
<PAGE> 12
SIMULA TRANSPORTATION EQUIPMENT CORPORATION,
an Arizona corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
ARTCRAFT INDUSTRIES CORP., an Arizona
corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
COACH AND CAR EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
-3-
<PAGE> 13
VIATECH, INC., a Delaware corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Treasurer
-----------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES LIMITED, a
company organized under the laws of the
United Kingdom
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
INTERNATIONAL CENTER FOR SAFETY
EDUCATION, INC., an Arizona corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Treasurer
-----------------------------------------
-4-
<PAGE> 14
INTAERO, LTD., an Arizona corporation
By: /s/ Donald Townsend
-----------------------------------------
Name: Donald Townsend
-----------------------------------------
Its: Assistant Treasurer
-----------------------------------------
GUARANTOR
-5-
<PAGE> 15
EXHIBIT "A"
COMPLIANCE CERTIFICATE FOR
REPORTING PERIOD ENDING
_____________, 19___
("REPORTING PERIOD")
Bank One, Arizona, NA
Post Office Box 71
Phoenix, Arizona 85001
Attn: Commercial Banking AZ1-1178 Date: (1)
------------------------
Dear Ladies and Gentlemen:
This Compliance Certificate refers to the Senior Credit Agreement dated
as of November 6, 1998 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Senior Credit Agreement"), among Simula, Inc.,
an Arizona corporation ("Company"), all present and future Subsidiaries of the
Company, the Banks named therein from time to time and Bank One, Arizona, NA, a
national banking association as Administrative Agent for the Banks. Capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
such terms in the Senior Credit Agreement.
Pursuant to Section 7.1 of the Senior Credit Agreement, the
undersigned, an Authorized Officer of Company, hereby certifies that:
(1) Enclosed are the required financial statements for the [month]
[quarter] [fiscal year] ending for the Company as required under Section 7.1 of
the Senior Credit Agreement, which, to the undersigned's knowledge, after due
inquiry, fairly present in all material respects the financial position of the
Company and the results of its operations at the dates and for the periods
indicated, and have been prepared in accordance with GAAP.
(2) To the best of the undersigned's knowledge, no "Event of Default"
has occurred [or if so, specifying the nature and extent thereof and any
corrective actions taken or to be taken].
(3) Attached is a schedule indicating the profit status of the
Company's principal contracts.
(4) As of the last day of the Reporting Period, the computations below
were true and correct:
- --------------------
(1) To be submitted within seventy-five (75) days after the end of the final
fiscal quarter of each fiscal year of the Company and within forty-five (45)
days after the end of all other fiscal quarters of the Company.
<PAGE> 16
I. Section 8.9(a) - EBITDA RATIO (in thousands)
Numerator: Funded Debt $
less Subordinated Debt $
less advances on contracts $
less accruals $
less Restricted Bond Proceeds $
less accounts payable $
equals $ A
divided by
Denominator: Net Income(2)
plus interest expense
plus depreciation
plus amortization
less debt service on Subordinated Debt
equals EBITDA(3) B
equals A/B
Maximum: Until the earlier of 7/31/99 or
the Discontinued Operations Sale Date 3.5x
- --------------------
(2) Disregarding any losses due to the Discontinued Operations.
(3) Annualized: As of March 31, 1999, multiplied by 4. As of June 30, 1999,
multiplied by 2. As of September 30, 1999, multiplied by 1.33. Thereafter,
rolling 4 quarters.
-2-
<PAGE> 17
Thereafter 3.0x
II. Section 8.9(b) - CURRENT RATIO
Numerator: Current Assets A
divided by
Denominator: Current Liabilities B
equals A/B
Minimum 1.5x
III. Section 8.9(c) - DEBT COVERAGE RATIO
Numerator: Net Income(2)
plus depreciation
plus amortization
less income taxes paid in cash
equals NIDA(3) A
divided by
Denominator: Current maturities of
long-term debt
less, unless previously refinanced,
$4,750,000
Subordinated Debt due 9/99
equals B
equals A/B
Minimum 1.75x
IV. Section 8.9(d) - TANGIBLE NET WORTH PERCENTAGE
Numerator: Equity
-3-
<PAGE> 18
plus Subordinated Debt
less intangible assets
equals A
divided by
Denominator: Assets
less intangible assets
less an amount equal to Restricted
Bond Proceeds
equals B
equals A/B
Minimum 50%
V. Section 8.9(e) - NET INCOME(2)
Two consecutive fiscal quarters
beginning with the two fiscal
quarters ending June 30, 1999
Fiscal Year beginning with the
1999 fiscal year
Minimum $ 0
VI. Section 8.9(f) - QUARTERLY EBITDA(2)
Fiscal quarter ending March 31, 1999 Minimum $3,000,000
Fiscal quarter ending June 30, 1999 Minimum $3,500,000
-4-
<PAGE> 19
Each fiscal quarter thereafter Minimum $4,000,000
SIMULA, INC.
By:
---------------------------------------
Name:
---------------------------------------
Its:
---------------------------------------
-5-
<PAGE> 20
SCHEDULE 1.1
PRO RATA SHARE AND NOTICE ADDRESS OF EACH BANK
<TABLE>
<CAPTION>
Pro Rata Share: Bank One Imperial
--------------- -------- --------
<S> <C> <C>
RLC:
If RLC Commitment is $20,000,000: $12,000,000 $ 8,000,000
If RLC Commitment is $25,000,000: $17,000,000 $ 8,000,000
Term A Loan $ 5,000,000 0
Term B Loan $ 2,500,000 0
</TABLE>
Notice Address:
Bank One: See Section 10.4
Imperial: Imperial Bank
400 East Van Buren
Suite 900
Phoenix, Arizona 85004
Attention: Kevin Halloran
Telecopier: (602) 261-7881
With a copy to: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: General Counsel
Telecopier: (310) 417-5695
<PAGE> 21
CONSENT OF THE BANKS
Re: Simula, Inc. and its Subsidiaries
The undersigned:
(a) is a Bank named in that Senior Credit Agreement dated
November 6, 1998 between Simula, Inc. and its Subsidiaries (the
"Borrower"), Bank One, Arizona, NA, a national banking association, as
administrative agent for the Banks (the "Administrative Agent"), the
Issuing Bank, and the Banks; and
(b) consents to that Third Modification Agreement dated June
23, 1999 entered into between the Borrower and the Administrative
Agent.
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhart
--------------------------------------
Name: Steve Reinhart
--------------------------------------
Its: Vice President
--------------------------------------
"Issuing Bank" and "Bank"
<PAGE> 22
CONSENT OF THE BANKS
Re: Simula, Inc. and its Subsidiaries
The undersigned:
(a) is a Bank named in that Senior Credit Agreement dated
November 6, 1998 between Simula, Inc. and its Subsidiaries (the
"Borrower"), Bank One, Arizona, NA, a national banking association, as
administrative agent for the Banks (the "Administrative Agent"), the
Issuing Bank, and the Banks; and
(b) consents to that Third Modification Agreement dated June
23, 1999 entered into between the Borrower and the Administrative
Agent.
IMPERIAL BANK, California banking
corporation, successor by merger to IMPERIAL
BANK ARIZONA, an Arizona banking corporation
By: /s/ Stephen Wallis
---------------------------------------
Name: Steven Wallis
---------------------------------------
Its: Senior Vice President
---------------------------------------
"Bank"
<PAGE> 1
Exhibit 10.35
FOURTH MODIFICATION AGREEMENT
BY THIS FOURTH MODIFICATION AGREEMENT (the "Agreement"), made and
entered into as of the 28th day of July, 1999, BANK ONE, ARIZONA, NA, a national
banking association, as administrative agent for the Banks (as hereinafter
defined) (the "Administrative Agent"), and SIMULA, INC., an Arizona corporation
(the "Company"), all present and future Subsidiaries of the Company (with the
Company, the "Borrower"), in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, hereby confirm and agree as follows:
RECITALS:
A. Borrower, the Administrative Agent, the Issuing Bank and the "Banks"
named therein entered into that Senior Credit Agreement dated November 6, 1998
to provide financial accommodations to the Borrower as provided therein (as
modified from time to time, including without limitation by that Modification
Agreement dated as of February 12, 1999, that Second Modification Agreement
dated as of April 28, 1999 and that Third Modification Agreement dated as of
June 23, 1999, the "Senior Credit Agreement").
B. Borrower and the Administrative Agent, with the consent of the Banks
and the Issuing Bank, desire to modify the Senior Credit Agreement as set forth
herein.
C. All undefined capitalized terms used herein shall have the meaning
given them in the Senior Credit Agreement.
AGREEMENT:
SECTION 1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
SECTION 2. MODIFICATIONS OF LOAN DOCUMENTS; OTHER AGREEMENTS.
2.1 The following definition in Section 1.1 of the Senior Credit
Agreement is hereby amended to read as follows:
"RLC Adjustment Date" means the earliest of (i) August 31,
1999, (ii) the Discontinued Operations Sale Date, or (iii) the date on
which the aggregate outstanding principal balance of the RLC is reduced
to a balance below $20,000,000.00 by Borrower from funds obtained by it
from a junior capital source after the date of the Second Modification
Agreement between the Borrower and the Administrative Agent.
<PAGE> 2
2.2 Section 3.2(e) of the Senior Credit Agreement is hereby amended to
read as follows:
(e) Rail Credit Fee. Company agrees to pay the
Administrative Agent for distribution to the Banks a monthly
fee (the "Rail Credit Fee") in advance on the first day of
each month, commencing May 1, 1999 if the Discontinued
Operations Sale Date has not yet occurred and continuing until
the Discontinued Operations Sale Date has occurred. The Rail
Credit Fee shall be (i) commencing May 1, 1999, $100,000.00
and (ii) commencing August 1, 1999, $150,000.00. The Rail
Credit Fee shall be distributed by the Administrative Agent as
follows: 80.0% to Bank One and 20.0% to Imperial.
2.3 Section 7.19 of the Senior Credit Agreement is hereby amended to
read as follows:
7.19 Discontinued Operations.
(a) Upon its sale of the Discontinued Operations, the
Company shall apply the net proceeds from such sale to the
repayment of the Loans, first to the extent applicable the
RLC, second to the extent applicable the Term B Loan and third
to the extent applicable the Term A Loan.
(b) The Discontinued Operations shall be sold by the
Company no later than August 31, 1999. The terms of the sale
shall be approved by the Banks in writing. Any note and/or
other instrument delivered to the Company by the purchaser
evidencing any purchase carryback obligations to the Company
in connection with such sale shall be in a form that is
assignable to the Banks and, within two weeks after its
execution by the purchaser, shall be delivered to the
Administrative Agent with an assignment thereof acceptable to
the Bank, pledging it to the Banks to secure the Borrower's
Obligation hereunder.
(c) Unless the Banks otherwise agree in writing, the
Company shall not invest, directly or indirectly, more than an
$1,500,000.00 in cash in the Discontinued Operations during
the 1999 fiscal year.
2.4 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantors is materially incomplete, incorrect, or misleading as of
the date hereof.
-2-
<PAGE> 3
2.5 Each reference in the Credit Documents to any of the Credit
Documents is hereby amended to be a reference to such document as modified
herein.
SECTION 3. RATIFICATION OF CREDIT DOCUMENTS AND COLLATERAL.
The Credit Documents are ratified and affirmed by Borrower and shall
remain in full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Credit Documents shall remain
as security for the Loans and the obligations of Borrower in the Credit
Documents.
SECTION 4. BORROWER REPRESENTATIONS AND WARRANTIES.
Company and each Co-Borrower to the extent applicable represents and
warrants to the Banks:
4.1 No default or event of default under any of the Credit Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Credit
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to the Banks in connection with the Loans from the most recent
financial statement received by the Banks.
4.3 Each and all representations and warranties of Borrower in the
Credit Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loans or the Credit Documents as modified herein.
4.5 The Credit Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Credit Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Credit Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Agreement has been duly executed and
delivered on behalf of Borrower.
-3-
<PAGE> 4
SECTION 5. BORROWER COVENANTS.
Borrower covenants with the Banks:
5.1 Borrower shall execute, deliver, and provide to the Administrative
Agent such additional agreements, documents, and instruments as reasonably
required by the Banks to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and absolutely and forever releases and
discharges the Administrative Agent and the Banks and their present and former
directors, shareholders, officers, employees, agents, representatives,
successors and assigns, and their separate and respective heirs, personal
representatives, successors and assigns, from any and all actions, causes of
action, claims, debts, damages, demands, liabilities, obligations, and suits, of
whatever kind or nature, in law or equity of Borrower, whether now known or
unknown to Borrower, and whether contingent or matured, (i) in respect of the
Loans, the Credit Documents, or the actions or omissions of the Administrative
Agent or the Banks in respect of the Loans or the Credit Documents and (ii)
arising from events occurring prior to the date of this Agreement.
SECTION 6. CONDITIONS PRECEDENT.
The agreements of the Banks and the Administrative Agent and the
modifications contained herein shall not be binding upon the Banks until the
Banks have executed and delivered this Agreement and the Administrative Agent
has received, at Borrower's expense, all of the following, all of which shall be
in form and content satisfactory to the Administrative Agent and shall be
subject to approval by the Administrative Agent:
6.1 An original of this Agreement fully executed by the Borrower and
all Guarantors;
6.2 Such resolutions or authorizations and such other documents as the
Administrative Agent may require relating to the existence and good standing of
each Borrower and Guarantor the authority of any person executing this Agreement
or other documents on behalf of each Borrower and Guarantor; and
6.3 Payment of all the internal and external costs and expenses
incurred by the Administrative Agent and the Banks in connection with this
Agreement (including, without limitation, inside and outside attorneys,
appraisal, appraisal review, processing, title, filing, and recording costs,
expenses, and fees).
SECTION 7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
-4-
<PAGE> 5
The Credit Documents as modified herein contain the complete
understanding and agreement of Borrower and the Banks in respect of the Loans
and supersede all prior representations, warranties, agreements, arrangements,
understandings, and negotiations. No provision of the Credit Documents as
modified herein may be changed, discharged, supplemented, terminated, or waived
except in a writing signed by the parties thereto.
SECTION 8. BINDING EFFECT.
The Credit Documents as modified herein shall be binding upon and shall
inure to the benefit of Borrower and the Banks and their successors and assigns
and the executors, legal administrators, personal representatives, heirs,
devisees, and beneficiaries of Borrower, provided, however, Borrower may not
assign any of its right or delegate any of its obligation under the Credit
Documents and any purported assignment or delegation shall be void.
SECTION 9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Arizona, without giving effect to conflicts of law
principles.
SECTION 10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
SIMULA, INC., an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
COMPANY
-5-
<PAGE> 6
SIMULA SAFETY SYSTEMS, INC., formerly
known as Simula Government Products, Inc., an
Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES,
INC., an Arizona corporation,
a/k/a ASD-Simula
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
-6-
<PAGE> 7
ARTCRAFT INDUSTRIES CORP., an Arizona
corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
COACH AND CAR EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
VIATECH, INC., a Delaware corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
-7-
<PAGE> 8
SIMULA AUTOMOTIVE SAFETY DEVICES
LIMITED, a company organized under the laws
of the United Kingdom
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
INTERNATIONAL CENTER FOR SAFETY
EDUCATION, INC., an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
INTAERO, LTD., an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
CO-BORROWERS
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhardt
--------------------------------------
Name: Steve Reinhardt
--------------------------------------
Its: Vice President
--------------------------------------
ADMINISTRATIVE AGENT
-8-
<PAGE> 9
CONSENT AND AGREEMENT OF GUARANTORS
With respect to the Fourth Modification Agreement, dated July 28, 1999
("Agreement"), between SIMULA, INC., an Arizona corporation (the "Company"), all
present and future Subsidiaries of the Company (with the Company, the
"Borrower") and BANK ONE, ARIZONA, NA, a national banking association as
administrative agent for the Banks (as defined in the Agreement)
("Administrative Agent"), the undersigned (individually and, if more than one,
collectively "Guarantor") agrees for the benefit of the Banks as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Continuing Guarantees as modified herein, and (B) any
other agreements, documents, or instruments securing or otherwise relating to
the Continuing Guarantees, (including, without limitation, any arbitration
resolution and any environmental certification and indemnity agreement
previously executed and delivered by the undersigned), as modified herein. The
Continuing Guarantees and such other agreements, documents, and instruments, as
modified herein, are referred to individually and collectively as the "Guarantor
Documents."
2. Guarantor consents to the modification of the Credit Documents and
all other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges the
Banks and the Administrative Agent and their successors, assigns, directors,
officers, employees, agents, and representatives from any and all actions,
causes of action, claims, debts, demands, liabilities, obligations, and suits of
whatever kind or nature, in law or equity, that Guarantor has or in the future
may have, whether known or unknown, (i) in respect of the Loans, the Credit
Documents, the Guarantor Documents, or the actions or omissions of the Banks and
the Administrative Agent in respect of the Loans, the Credit Documents, or the
Guarantor Documents and (ii) arising from events occurring prior to the date
hereof.
4. Guarantor agrees that all references, if any, to the Notes, the
Senior Credit Agreement, the Security Documents, and the Credit Documents in the
Guarantor Documents shall be deemed to refer to such agreements, documents, and
instruments as modified by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantors. Any
property or rights to or interests in property granted as security in the
Guarantor Documents shall remain as security for the Continuing Guarantees and
the obligations of Guarantor in the Continuing Guarantees.
6. Guarantor agrees that the Credit Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantors, are the legal,
<PAGE> 10
valid, and binding obligations of Borrower and the undersigned, respectively,
enforceable in accordance with their terms against Borrower and the undersigned,
respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of the
Guarantor Documents.
8 Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most recent
financial statement received by Lender.
9 Guarantor agrees that this Consent and Agreement of Guarantors may be
executed in one or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same document. Signature
and acknowledgement pages may be detached from the counterparts and attached to
a single copy of this Consent and Agreement of Guarantors to physically form one
document.
DATED as of the date of the Agreement.
SIMULA SAFETY SYSTEMS, INC., formerly
known as Simula Government Products, Inc.,
an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES,
INC., an Arizona corporation,
a/k/a ASD-Simula
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
-2-
<PAGE> 11
SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
ARTCRAFT INDUSTRIES CORP., an Arizona
corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
COACH AND CAR EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
-3-
<PAGE> 12
VIATECH, INC., a Delaware corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
SIMULA AUTOMOTIVE SAFETY DEVICES LIMITED,
a company organized under the laws of
the United Kingdom
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
INTERNATIONAL CENTER FOR SAFETY
EDUCATION, INC., an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Treasurer
--------------------------------------
-4-
<PAGE> 13
INTAERO, LTD., an Arizona corporation
By: /s/ Donald Townsend
--------------------------------------
Name: Donald Townsend
--------------------------------------
Its: Assistant Treasurer
--------------------------------------
GUARANTOR
-5-
<PAGE> 14
CONSENT OF THE BANKS
Re: Simula, Inc. and its Subsidiaries
The undersigned:
(a) is a Bank named in that Senior Credit Agreement dated November 6,
1998 between Simula, Inc. and its Subsidiaries (the "Borrower"), Bank One,
Arizona, NA, a national banking association, as administrative agent for the
Banks (the "Administrative Agent"), the Issuing Bank, and the Banks; and
(b) consents to that Fourth Modification Agreement dated July 28, 1999
entered into between the Borrower and the Administrative Agent.
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhart
--------------------------------------
Name: Steve Reinhart
--------------------------------------
Its: Vice President
--------------------------------------
"Issuing Bank" and "Bank"
<PAGE> 15
CONSENT OF THE BANKS
Re: Simula, Inc. and its Subsidiaries
The undersigned:
(a) is a Bank named in that Senior Credit Agreement dated November 6,
1998 between Simula, Inc. and its Subsidiaries (the "Borrower"), Bank One,
Arizona, NA, a national banking association, as administrative agent for the
Banks (the "Administrative Agent"), the Issuing Bank, and the Banks; and
(b) consents to that Fourth Modification Agreement dated July 28, 1999
entered into between the Borrower and the Administrative Agent.
IMPERIAL BANK, California banking
corporation, successor by merger to
IMPERIAL BANK banking corporation
By: /s/ Stephen Wallis
--------------------------------------
Name: Stephen Wallis
--------------------------------------
Its: Senior Vice President
--------------------------------------
"Bank"
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,455,121
<SECURITIES> 0
<RECEIVABLES> 26,024,695
<ALLOWANCES> 353,819
<INVENTORY> 31,127,494
<CURRENT-ASSETS> 79,459,128
<PP&E> 30,431,834
<DEPRECIATION> 12,187,239
<TOTAL-ASSETS> 123,865,638
<CURRENT-LIABILITIES> 51,089,796
<BONDS> 0
6,750,000
0
<COMMON> 101,674
<OTHER-SE> 19,854,864
<TOTAL-LIABILITY-AND-EQUITY> 19,956,538
<SALES> 65,954,399
<TOTAL-REVENUES> 65,954,399
<CGS> 48,575,753
<TOTAL-COSTS> 48,575,753
<OTHER-EXPENSES> 13,793,043
<LOSS-PROVISION> 177,000
<INTEREST-EXPENSE> 3,408,603
<INCOME-PRETAX> 1,999,998
<INCOME-TAX> 800,000
<INCOME-CONTINUING> 1,199,998
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,199,998
<EPS-BASIC> .11
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