<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)*
SIMULA, INC.
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(Name of Issuer)
Common Stock, $.01 par value per share
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(Title of Class of Securities)
829206101
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(CUSIP Number)
Arthur E. Levine with a copy to:
President Mitchell S. Cohen, Esq.
Levine Leichtman Capital Partners, Inc. Riordan & McKinzie
335 North Maple Drive, Suite 240 300 South Grand Avenue, Suite 2900
Beverly Hills, California 90025 Los Angeles, California 90071
(310) 275-5335 (213) 629-4824
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
December 31, 1999
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box / /.
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Section
240.13d-7(b) for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
Page 1 of 14
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SCHEDULE 13D
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CUSIP No. 829206101 Page 2 of 14 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Levine Leichtman Capital Partners II, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE (a) / /
INSTRUCTIONS) (b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (See Item 3)
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 850,000 (See Item 5)
----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
----------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 850,000 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
850,000 (See Item 5)
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
(SEE INSTRUCTIONS)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.1% (See Item 5)
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
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<PAGE>
SCHEDULE 13D
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CUSIP No. 829206101 Page 3 of 14 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
LLCP California Equity Partners II, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE (a) / /
INSTRUCTIONS) (b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (See Item 3)
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 850,000 (See Item 5)
----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
----------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 850,000 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
850,000 (See Item 5)
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
(SEE INSTRUCTIONS)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.1% (See Item 5)
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
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<PAGE>
SCHEDULE 13D
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CUSIP No. 829206101 Page 4 of 14 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Levine Leichtman Capital Partners, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE (a) / /
INSTRUCTIONS) (b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (See Item 3)
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 850,000 (See Item 5)
----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
----------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 850,000 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
850,000 (See Item 5)
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
(SEE INSTRUCTIONS)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.1% (See Item 5)
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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SCHEDULE 13D
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CUSIP No. 829206101 Page 5 of 14 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Arthur E. Levine
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE (a) / /
INSTRUCTIONS) (b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (See Item 3)
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 850,000 (See Item 5)
----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
----------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 850,000 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
850,000 (See Item 5)
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
(SEE INSTRUCTIONS)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.1% (See Item 5)
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
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SCHEDULE 13D
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CUSIP No. 829206101 Page 6 of 14 Pages
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Lauren B. Leichtman
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE (a) / /
INSTRUCTIONS) (b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
00 (See Item 3)
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 850,000 (See Item 5)
----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
----------------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 850,000 (See Item 5)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
850,000 (See Item 5)
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12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
(SEE INSTRUCTIONS)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.1% (See Item 5)
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14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) NAME OF ISSUER:
Simula, Inc., an Arizona corporation (the "Issuer").
(b) ADDRESS OF PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER:
2700 N. Central Avenue, Suite 1000, Phoenix, AZ 85004.
(c) TITLE OF CLASS OF EQUITY SECURITIES:
Common Stock, $.01 par value per share ("Common Stock").
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is being filed pursuant to a Joint Reporting
Agreement dated January 7, 2000, a copy of which is attached as EXHIBIT 1
hereto, among and on behalf of Levine Leichtman Capital Partners II,
L.P., a California limited partnership (the "Partnership"), LLCP
California Equity Partners II, L.P., a California limited partnership
(the "General Partner"), Levine Leichtman Capital Partners, Inc., a
California corporation ("Capital Corp."), Arthur E. Levine ("Mr. Levine")
and Lauren B. Leichtman ("Ms. Leichtman" and, together with the
Partnership, the General Partner, Capital Corp. and Mr. Levine, the
"Reporting Persons").
(a) PARTNERSHIP.
The Partnership is a limited partnership formed under the laws of
the State of California. The address of the principal business or
principal office of the Partnership is 335 North Maple Drive, Suite 240,
Beverly Hills, California 90210. The principal business of the
Partnership is to seek out opportunities to invest in the securities of
middle market companies and to acquire, hold, manage and dispose of such
securities in connection with growth financings, restructurings,
recapitalizations, mergers, acquisitions and buyouts.
(b) GENERAL PARTNER.
The General Partner is the sole general partner of the
Partnership. The address of the principal business or principal office
of the General Partner is 335 North Maple Drive, Suite 240, Beverly
Hills, California 90210. The principal business of the General Partner
is to act as the general partner of the Partnership and to organize and
manage the investments made by the Partnership.
Page 7 of 14
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(c) CAPITAL CORP.
Capital Corp. is the sole general partner of the General Partner.
The address of the principal business or principal office of Capital
Corp. is 335 North Maple Drive, Suite 240, Beverly Hills, California
90210. The principal business of Capital Corp. is to act as the general
partner of the General Partner and of LLCP California Equity Partners,
L.P., a California limited partnership, the sole general partner of
Levine Leichtman Capital Partners, L.P., a California limited
partnership.
(d) MR. LEVINE.
Mr. Levine is a director, the President and a shareholder of
Capital Corp. The business address of Mr. Levine is 335 North Maple
Drive, Suite 240, Beverly Hills, California 90210. The present
principal occupation or employment of Mr. Levine is to serve as a
director and the President of Capital Corp. Mr. Levine is a citizen of
the United States of America. Mr. Levine, together with Ms. Leichtman,
are the sole directors and shareholders of Capital Corp. Mr. Levine is
also an executive officer of Capital Corp.
(e) MS. LEICHTMAN.
Ms. Leichtman is a director, the Chief Executive Officer,
Treasurer and Secretary and a shareholder of Capital Corp. The business
address of Ms. Leichtman is 335 North Maple Drive, Suite 240, Beverly
Hills, California 90210. The present principal occupation or employment
of Ms. Leichtman is to serve as a director and the Chief Executive
Officer, Treasurer and Secretary of Capital Corp. Ms. Leichtman is a
citizen of the United States of America. Ms. Leichtman, together with
Mr. Levine, are the sole directors and shareholders of Capital Corp. Ms.
Leichtman is also an executive officer of Capital Corp.
During the last five years, no Reporting Person has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation
with respect to such laws.
The Reporting Persons may also be members of a "group" within the
meaning of Rule 13d-5(b)(1) for the limited purposes described in Items 4
and 6 below. The other members of the group may include Stanley P.
Desjardins ("Desjardins"), Donald W. Townsend ("Townsend"), James A.
Saunders ("Saunders") and Bradley P. Forst ("Forst" and, together with
Desjardins, Townsend and Saunders, the "Principal Shareholders").
Page 8 of 14
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To the extent that such a group exists, this Schedule 13D is also being
individually filed by the Reporting Persons, as members of such group,
pursuant to Rule 13d-1(k)(2) to satisfy such group's filing obligations.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a Securities Purchase Agreement dated as of
December 31, 1999 (the "Securities Purchase Agreement"), among the
Issuer, certain subsidiaries of the Issuer and the Partnership, a copy of
which is attached as EXHIBIT 2 hereto, the Issuer and certain of its
subsidiaries jointly and severally issued and sold to the Partnership a
Secured Senior Note Due 2000 dated December 31, 1999, in the principal
amount of $5,000,000 (the "Term A Note"), and a Secured Senior Note Due
2003 dated December 31, 1999, in the principal amount of $15,000,000 (the
"Term B Note"). In addition, as part of the same transaction, the Issuer
issued and sold to the Partnership a warrant to purchase 850,000 shares
of Common Stock (the "Warrant" and, together with the Term A Note and the
Term B Note, the "Securities"). The Securities were acquired by the
Partnership for an aggregate purchase price of $20,000,000. Copies of
the Term A Note, the Term B Note and the Warrant are attached as
EXHIBIT 3, EXHIBIT 4 and EXHIBIT 5 hereto, respectively.
The source of funds for the purchase of the Securities was capital
contributions made by the partners of the Partnership in the aggregate
amount of $20,000,000, in response to a Call to Purchase Portfolio
Securities dated December 1, 1999.
ITEM 4. PURPOSE OF TRANSACTION.
The Partnership acquired the Securities pursuant to the Securities
Purchase Agreement for investment purposes only.
In connection with the acquisition by the Partnership of the
Securities, and pursuant to the terms of an Investor Rights Agreement
dated as of December 31, 1999 (the "Investor Rights Agreement"), among
the Issuer, the Principal Shareholders and the Partnership, a copy of
which is attached as EXHIBIT 6 hereto, the Issuer has granted certain
management, investment monitoring and other rights to the Partnership.
Among other rights, the Partnership may require the Issuer, upon the
occurrence of an "Event of Default" as defined in the Securities Purchase
Agreement, to cause a representative designated by the Partnership (an
"LLCP Representative") to be elected or appointed as a member of the
Board of Directors of the Issuer until the later to occur of (a) the
180th day after the effective date of such election or appointment and
(b) the date that the next annual meeting of the shareholders of the
Issuer at which directors are to be elected occurs. In addition, the
Principal Shareholders have granted to the Partnership limited voting
rights with respect to the shares of Common Stock owned by the Principal
Shareholders, respectively. If, upon the occurrence of such an Event of
Default, the Partnership exercises its right to require the Issuer to
cause an LLCP Representative to be elected or appointed as a member of
the Board of Directors of the Issuer, the Principal
Page 9 of 14
<PAGE>
Shareholders have agreed to vote (or cause to be voted) the shares of
Common Stock owned by them in favor of such election or appointment
for the requisite period. The Principal Shareholders have also granted
to the Partnership certain co-sale rights with respect to the shares
of Common Stock owned by them, respectively, as more fully described
in the Investor Rights Agreement.
While the Partnership did not acquire the Securities with the
purpose of changing or influencing control of the Issuer, such
acquisition, after giving effect to the management, investment monitoring
and other rights granted to the Partnership under the Investor Rights
Agreement, may have the effect of changing or influencing control of the
Issuer within the meaning of Rule 13d-3(d)(1)(i).
Other than as described above, none of the Reporting Persons
presently has any plans or proposals which relate to or would result in
any of the actions described in subparagraphs (a) through (j) of Item 4
of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON AND PERCENT OF
CLASS:
Each Reporting Person is deemed to be the beneficial owner (within
the meaning of Rule 13d-3(a) of the Securities Exchange Act of 1934, as
amended) of 850,000 shares of Common Stock issuable upon the exercise of
the Warrant. In addition, each Reporting Person may be deemed to be the
beneficial owner, for the limited purposes described in Items 4 above and
6 below, of an additional 3,356,955 shares of Common Stock owned by the
Principal Shareholders as of December 31, 1999, including (i) 3,273,414
shares owned by Desjardins, (ii) 45,649 shares owned by Townsend, (iii)
4,880 shares owned by Saunders and (iv) 33,012 shares owned by Forst.
The numbers of outstanding shares of Common Stock owned by the Principal
Shareholders were represented by the Issuer to the Partnership under the
Securities Purchase Agreement. (The Reporting Persons have no pecuniary
interest in the shares of Common Stock owned by the Principal
Shareholders.)
The aggregate number of shares of Common Stock beneficially owned
by the Reporting Persons constitutes approximately 7.1% of the
outstanding shares of such class as of December 31, 1999. To the extent
that a group exists as discussed in Item 2 above, the aggregate
number of shares of Common Stock beneficially owned by the Reporting
Persons, including the shares of Common Stock owned by the Principal
Shareholders, would constitute approximately 35.0% of the outstanding
shares of such class as of December 31, 1999. Such percentages are based
upon a total of 11,173,903 shares of Common Stock issued and outstanding
as of December 31, 1999, as represented by the Issuer to the Partnership
under the Securities Purchase Agreement, and was calculated in accordance
with Rule 13d-3(d)(1)(i).
Page 10 of 14
<PAGE>
The Warrant may be exercised at any time prior to December 31,
2006, with respect to all or any portion of the total number of shares of
Common Stock purchasable thereunder. The exercise price of the shares of
Common Stock purchasable under the Warrant is $5.00 per share.
(b) VOTING AND DISPOSITIVE POWER:
The Partnership may be deemed to have (i) sole and dispositive
voting power with respect to no shares of Common Stock and (ii) shared
voting and dispositive power with all other Reporting Persons with
respect to 850,000 shares of Common Stock. In addition, to the extent
that a group exists as discussed in Item 2 above, in the limited
circumstances described in Items above 4 and 6 below, the Partnership may
be deemed to have shared voting power with all other Reporting Persons
and the Principal Shareholders with respect to an additional 3,356,955
shares of Common Stock.
By virtue of being the sole general partner of the Partnership,
the General Partner may be deemed to have (i) sole and dispositive
voting power with respect to no shares of Common Stock and (ii) shared
voting and dispositive power with all other Reporting Persons with
respect to 850,000 shares of Common Stock. In addition, to the extent
that a group exists as discussed in Item 2 above, in the limited
circumstances described in Items 4 above and 6 below, the General Partner
may be deemed to have shared voting power with all other Reporting
Persons and the Principal Shareholders with respect to an additional
3,356,955 shares of Common Stock.
By virtue of being the sole general partner of the General
Partner, Capital Corp. may be deemed to have (i) sole and dispositive
voting power with respect to no shares of Common Stock and (ii) shared
voting and dispositive power with all other Reporting Persons with
respect to 850,000 shares of Common Stock. In addition, to the extent
that a group exists as discussed in Item 2 above, in the limited
circumstances described in Items 4 above and 6 below, Capital Corp. may
be deemed to have shared voting power with all other Reporting Persons
and the Principal Shareholders with respect to an additional 3,356,955
shares of Common Stock.
By virtue of being the sole directors, executive officers and
shareholders of Capital Corp., each of Mr. Levine and Ms. Leichtman may
be deemed to have (i) sole and dispositive voting power with respect to
no shares of Common Stock and (ii) shared voting and dispositive power
with all other Reporting Persons with respect to 850,000 shares of Common
Stock. In addition, to the extent that a group exists as discussed in
Item 2 above, in the limited circumstances described in Items 4 above and
6 below, each of Mr. Levine and Mr. Leichtman may be deemed to have
shared voting power with all other Reporting Persons and the
Principal Shareholders with respect to an additional 3,356,955 shares of
Common Stock.
Each of the Reporting Persons disclaims beneficial ownership over
the 3,356,955 shares of Common Stock owned by the Principal Shareholders.
See Items 4 above and 6 below.
(c) OTHER TRANSACTIONS.
Not Applicable.
Page 11 of 14
<PAGE>
(d) INTERESTS OF OTHER PERSONS:
Not Applicable.
(e) DATE UPON WHICH THE REPORTING PERSON CEASED TO BE THE BENEFICIAL
OWNER OF MORE THAN FIVE PERCENT OF CLASS:
Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The Partnership funded its purchase of the Securities with capital
contributions made by the partners of the Partnership in the aggregate
amount of $20,000,000, in response to a Call to Purchase Portfolio
Securities dated December 1, 1999.
On December 31, 1999, the Issuer issued and sold the Securities to
the Partnership. A copy of each of the Term A Note, the Term B Note and
the Warrant is attached as EXHIBIT 3, EXHIBIT 4 and EXHIBIT 5 hereto,
respectively, which describes more fully the payment and other terms
thereof.
Pursuant to the Investor Rights Agreement, a copy of which is
attached as EXHIBIT 6 hereto, the Issuer has granted certain management,
investment monitoring and other rights to the Partnership. Among other
rights, the Partnership may require the Issuer, upon the occurrence of an
"Event of Default" as defined in the Securities Purchase Agreement, to
cause a representative designated by the Partnership (an "LLCP
Representative") to be elected or appointed as a member of the Board of
Directors of the Issuer until the later to occur of (a) the 180th day
after the effective date of such election or appointment and (b) the date
that the next annual meeting of the shareholders of the Issuer at which
directors are to be elected occurs. In addition, the Principal
Shareholders have granted to the Partnership limited voting rights with
respect to the shares of Common Stock owned by the Principal
Shareholders, respectively. If, upon the occurrence of such an Event of
Default, the Partnership exercises its right to require the Issuer to
cause an LLCP Representative to be elected or appointed as a member of
the Board of Directors of the Issuer, the Principal Shareholders have
agreed to vote (or cause to be voted) the shares of Common Stock owned by
them in favor of such election or appointment for the requisite period.
The Principal Shareholders have also granted to the Partnership certain
co-sale rights with respect to the shares of Common Stock owned by them,
respectively, as more fully described in the Investor Rights Agreement.
Pursuant to a Registration Rights Agreement dated as of
December 31, 1999 (the "Registration Rights Agreement"), between the
Issuer and the Partnership, the Partnership has been granted certain
"demand" and "piggyback" registration rights with respect to the
Page 12 of 14
<PAGE>
shares of Common Stock issuable upon exercise of the Warrant
(including, but not limited to, the right to require the Issuer to
register resales of such shares on a registration statement on Form
S-3). Such registration rights are described more fully in the
Registration Rights Agreement, a copy of which is attached as EXHIBIT
7 hereto.
The Issuer, the Principal Shareholders and the Partnership have entered
into, or are expected to enter into, a First Amendment to Investor Rights
Agreement, in substantially the form of EXHIBIT 8 hereto, pursuant to
which the parties are clarifying that the Principal Shareholders have
entered into the voting agreements set forth in Section 1.1 thereof in
their individual capacities, and not as representatives of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Joint Reporting Agreement dated January 7, 2000, among the
Partnership, the General Partner, Capital Corp., Mr. Levine
and Ms. Leichtman.
Exhibit 2. Securities Purchase Agreement dated as of December 31,
1999, among the Issuer, certain subsidiaries of the Issuer
and the Partnership.
Exhibit 3. Secured Senior Note Due 2000, dated December 31, 1999,
issued by the Issuer and certain of its subsidiaries
jointly and severally in the principal amount of
$5,000,000.
Exhibit 4. Secured Senior Note Due 2003, dated December 31, 1999,
issued by the Issuer and certain of its subsidiaries
jointly and severally in the principal amount of
$15,0000,000.
Exhibit 5. Warrant to Purchase 850,000 shares of Common Stock of the
Issuer, dated December 31, 1999.
Exhibit 6. Investor Rights Agreement dated as of December 31, 1999,
among the Issuer, Stanley P. Desjardins, Donald W.
Townsend, James A. Saunders, Bradley P. Forst and the
Partnership.
Exhibit 7. Registration Rights Agreement dated as of December 31,
1999, between the Issuer and the Partnership.
Exhibit 8. Form of First Amendment to Investor Rights Agreement
among the Issuer, Stanley P. Desjardins, Donald W.
Townsend, James A. Saunders, Bradley P. Forst
and the Partnership.
Page 13 of 14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Dated: January 7, 2000 LEVINE LEICHTMAN CAPITAL PARTNERS II,
L.P., a California limited partnership
By: LLCP California Equity Partners II, L.P., a
California limited partnership, its General
Partner
By: Levine Leichtman Capital Partners, Inc.,
a California corporation, its General
Partner
By: /s/ Arthur E. Levine
-------------------------------------
Arthur E. Levine
President
LLCP CALIFORNIA EQUITY PARTNERS II, L.P.,
a California limited partnership
By: Levine Leichtman Capital Partners, Inc., a
California corporation, its General Partner
By: /s/ Arthur E. Levine
-------------------------------------
Arthur E. Levine
President
LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation
By: /s/ Arthur E. Levine
-------------------------------------
Arthur E. Levine
President
/s/ Arthur E. Levine
-------------------------------------
ARTHUR E. LEVINE
/s/ Lauren B. Leichtman
-------------------------------------
LAUREN B. LEICHTMAN
Page 14 of 14
<PAGE>
EXHIBIT 1
JOINT REPORTING AGREEMENT
In consideration of the mutual covenants herein contained,
pursuant to Rule 13d-1(k)(1), each of the parties hereto represents to and
agrees with the other parties as follows:
1. Such party is eligible to a statement or statements on
Schedule 13D pertaining to the Common Stock, $.01 par value per share, of
Simula, Inc., an Arizona corporation, to which this Joint Reporting Agreement is
an exhibit, for filing of the information contained herein.
2. Such party is responsible for the timely filing of such
statement and any amendments thereto, and for the completeness and accuracy of
the information concerning such party contained therein, PROVIDED that no such
party is responsible for the completeness or accuracy of the information
concerning any other party making the filing, unless such party knows or has
reason to believe that such information is inaccurate.
3. Such party agrees that such statement is being filed by and
on behalf of each of the parties identified herein, and that any amendment
thereto will be filed on behalf of each such party.
This Joint Reporting Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original instrument, but
all of such counterparts together shall constitute but one agreement.
Dated: January 7, 2000 LEVINE LEICHTMAN CAPITAL PARTNERS II,
L.P., a California limited partnership
By: LLCP California Equity Partners II, L.P.,
a California limited partnership, its General
Partner
By: Levine Leichtman Capital Partners, Inc., a
California corporation, its General Partner
By: /s/ Arthur E. Levine
-----------------------
Arthur E. Levine
President
<PAGE>
LLCP CALIFORNIA EQUITY PARTNERS II, L.P.,
a California limited partnership
By: Levine Leichtman Capital Partners, Inc., a
California corporation, its General Partner
By: /s/ Arthur E. Levine
-----------------------
Arthur E. Levine
President
LEVINE LEICHTMAN CAPITAL PARTNERS, INC.,
a California corporation
By: /s/ Arthur E. Levine
-------------------------
Arthur E. Levine
President
/s/ Arthur E. Levine
---------------------------
ARTHUR E. LEVINE
/s/ Lauren B. Leichtman
---------------------------
LAUREN B. LEICHTMAN
-2-
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
SIMULA, INC.
AND
CERTAIN SUBSIDIARIES OF SIMULA, INC.,
AS COMPANY PARTIES,
AND
LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
A CALIFORNIA LIMITED PARTNERSHIP,
AS PURCHASER
------------------------------------------------
$5,000,000 Principal Amount Secured Senior Note Due 2000
(Term A Note)
$15,000,000 Principal Amount Secured Senior Note Due 2003
(Term B Note)
Warrant to Purchase 850,000 Shares of Common Stock
------------------------------------------------
Dated as of December 31, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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TABLE OF CONTENTS
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1. DEFINITIONS; ACCOUNTING TERMS.........................................................................2
1.1 Definitions.....................................................................................2
1.2 Accounting Terms and Computations..............................................................24
1.3 Independence of Covenants......................................................................24
1.4 Captions; Construction and Interpretation......................................................24
1.5 Determinations.................................................................................25
1.6 Knowledge of the Company.......................................................................25
2. PURCHASE AND SALE OF THE SECURITIES..................................................................25
2.1 Authorization..................................................................................25
2.2 Purchase of the Securities; Issue Price........................................................25
2.3 Closing........................................................................................25
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................26
3.1 Organization and Qualification.................................................................26
3.2 Corporate or Other Power.......................................................................26
3.3 Authorization; Binding Obligations.............................................................26
3.4 Subsidiaries...................................................................................27
3.5 Conflict with Other Instruments; Existing Defaults; Ranking....................................28
3.6 Governmental and Other Third Party Consents....................................................28
3.7 Capitalization.................................................................................29
3.8 Validity and Issuance of Warrant Shares........................................................30
3.9 Company SEC Documents..........................................................................30
3.10 Financial Statements...........................................................................31
3.11 Existing Indebtedness; Existing Liens; Investments; Etc........................................32
3.12 Absence of Certain Changes.....................................................................33
3.13 Material Contracts.............................................................................35
3.14 Accounts Receivable............................................................................37
3.15 Labor Relations................................................................................37
3.16 Employee Benefit Plans; ERISA..................................................................38
3.17 Taxes..........................................................................................42
3.18 Litigation.....................................................................................42
3.19 Transactions with Affiliates...................................................................43
3.20 Investment Company Act.........................................................................44
3.21 Public Utility Holding Company Act.............................................................44
3.22 Compliance with Laws; Operating Licenses.......................................................44
3.23 Title to Property..............................................................................45
3.24 Real Property..................................................................................45
3.25 Environmental Matters..........................................................................46
3.26 Intellectual Property..........................................................................47
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3.27 Nature of Business.............................................................................48
3.28 Powers of Attorney.............................................................................48
3.29 Listing of Common Stock........................................................................48
3.30 Insurance......................................................................................48
3.31 Customers......................................................................................49
3.32 Suppliers......................................................................................49
3.33 Business Relationships.........................................................................49
3.34 Personal Property Leases.......................................................................49
3.35 Employment Agreements..........................................................................50
3.36 Solvency.......................................................................................50
3.37 Use of Proceeds; Margin Stock..................................................................50
3.38 Depository and Other Accounts..................................................................50
3.39 Year 2000 Compliance...........................................................................51
3.40 Books and Records..............................................................................51
3.41 Burdensome Obligations; Future Expenditures....................................................51
3.42 Brokers; Certain Expenses......................................................................51
3.43 Disclosure.....................................................................................52
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................................................52
4.1 Organization...................................................................................52
4.2 Authorization..................................................................................52
4.3 Due Execution and Delivery; Binding Obligations................................................52
4.4 No Violation...................................................................................52
4.5 Investment Intent..............................................................................53
4.6 Accredited Investor Status.....................................................................53
4.7 Purchaser Consents.............................................................................53
4.8 Brokers........................................................................................53
5. CONDUCT PRIOR TO CLOSING.............................................................................53
5.1 Conduct of Business Prior to Closing...........................................................53
5.2 Access to Information and Documents............................................................55
5.3 Non-Solicitation...............................................................................55
5.4 Covenant to Close..............................................................................56
6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER.......................................................56
6.1 Closing Date...................................................................................56
6.2 Representations and Warranties; No Default.....................................................56
6.3 Payment of Purchaser Expenses..................................................................56
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6.4 Purchase Permitted By Applicable Laws..........................................................56
6.5 No Material Adverse Change.....................................................................57
6.6 No Injunction or Order.........................................................................57
6.7 Delivery of Certain Closing Documents..........................................................57
6.8 Collateral Documents...........................................................................58
6.9 Bank Credit Facility...........................................................................58
6.10 Sale of Airline Interiors......................................................................58
6.11 Opinion of Counsel.............................................................................59
6.12 Delivery of Corporate Documents................................................................59
6.13 Repayment of Existing Indebtedness; UCC Termination Statements.................................60
6.14 Insurance......................................................................................60
6.15 Completion of Due Diligence Investigation......................................................60
6.16 Phase I Environmental Assessments..............................................................60
6.17 Delivery of Financial Projections..............................................................61
6.18 [Intentionally Omitted]........................................................................61
6.19 Third Party Consents...........................................................................61
6.20 Capital Structure..............................................................................61
6.21 Proceedings Satisfactory.......................................................................61
7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.........................................................61
7.1 Representations and Warranties.................................................................62
7.2 Purchase Permitted By Applicable Laws..........................................................62
7.3 No Injunction or Order.........................................................................62
7.4 Payment for Securities.........................................................................62
8. INDEMNIFICATION; FEES AND EXPENSES...................................................................62
8.1 Transfer Taxes.................................................................................62
8.2 Losses.........................................................................................62
8.3 Indemnification Procedures.....................................................................64
8.4 Contribution...................................................................................64
8.5 Reimbursement of Deal-Related Costs and Expenses...............................................65
8.6 Costs of Collection............................................................................65
9. AFFIRMATIVE COVENANTS................................................................................66
9.1 Payment of Notes and Other Obligations.........................................................66
9.2 Performance of Investment Documents............................................................66
9.3 Information Reporting Requirements.............................................................66
9.4 SEC Documents..................................................................................69
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9.5 Compliance with Laws...........................................................................70
9.6 Legal Existence................................................................................70
9.7 Books and Records; Inspections.................................................................70
9.8 Maintenance of Properties......................................................................71
9.9 Insurance......................................................................................71
9.10 Taxes..........................................................................................72
9.11 ERISA Matters..................................................................................72
9.12 Communication with Accountants.................................................................73
9.13 Compliance with Material Contracts.............................................................73
9.14 Fiscal Year End................................................................................73
9.15 Environmental Matters..........................................................................73
9.16 Additional Company Parties.....................................................................75
9.17 NYSE Listing...................................................................................75
9.18 C&C Notes......................................................................................75
9.19 Bridge Fee.....................................................................................75
9.20 Dissolution of Simula Protective UK and Intaero Ltd............................................76
9.21 Future Information.............................................................................76
9.22 Further Assurances.............................................................................76
9.23 Survival of Certain Affirmative Covenants......................................................76
10.NEGATIVE AND FINANCIAL COVENANTS.....................................................................77
10.1 Limitations on Indebtedness....................................................................77
10.2 Limitations on Liens...........................................................................77
10.3 Limitations on Investments.....................................................................78
10.4 Limitations on Restricted Payments by the Company..............................................78
10.5 Limitations on Payment Restrictions Affecting Subsidiaries.....................................78
10.6 Limitations on Transactions With Affiliates....................................................78
10.7 Change in Business.............................................................................79
10.8 Sales of Receivables...........................................................................79
10.9 Fundamental Changes............................................................................79
10.10 Agreements Affecting Capital Stock and Indebtedness; Amendments to
Material Contracts.............................................................................80
10.11 Conditional Sales..............................................................................80
10.12 Margin Stock...................................................................................80
10.13 No Payments Upon a Simula Change of Control....................................................80
10.14 Sublease of Airline Interiors Lease............................................................81
10.15 Financial Covenants............................................................................81
10.16 Survival of Certain Negative Covenants.........................................................84
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11.DEFAULTS AND REMEDIES................................................................................84
11.1 Events of Default..............................................................................84
11.2 Acceleration...................................................................................88
11.3 Other Remedies.................................................................................88
11.4 Appointment of Receiver........................................................................88
11.5 Waiver of Past Defaults........................................................................89
12.TERMINATION..........................................................................................89
12.1 Termination....................................................................................89
12.2 Effect of Termination..........................................................................90
12.3 Waiver.........................................................................................90
12.4 Alternative Transaction Fee....................................................................90
13.MISCELLANEOUS........................................................................................91
13.1 Survival of Representations and Warranties; Purchaser Investigation............................91
13.2 Consent to Amendments..........................................................................91
13.3 Entire Agreement...............................................................................91
13.4 Severability...................................................................................92
13.5 Successors and Assigns; Assignments............................................................92
13.6 Notices........................................................................................92
13.7 Counterparts...................................................................................93
13.8 Governing Law..................................................................................94
13.9 Consent to Jurisdiction and Venue..............................................................94
13.10 Confidentiality................................................................................95
13.11 Limitation of Liability........................................................................95
13.12 Publicity......................................................................................95
13.13 WAIVER OF TRIAL BY JURY........................................................................96
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v
<PAGE>
EXHIBITS
Exhibit A-1 -- Form of Term A Note
Exhibit A-2 -- Form of Term B Note
Exhibit B -- Form of Warrant
Exhibit C -- Form of Compliance Certificate
DISCLOSURE SCHEDULES
Schedule 3.4 -- Subsidiaries
Schedule 3.5(a) -- No Conflicts
Schedule 3.5(b) -- No Default or Breach
Schedule 3.5(c) -- Financing Restrictions
Schedule 3.5(d) -- Pari Passu Indebtedness
Schedule 3.6 -- Consents
Schedule 3.7(a) -- Capitalization (Company)
Schedule 3.7(b) -- Capitalization (Subsidiary)
Schedule 3.9 -- Company SEC Documents
Schedule 3.10(c) -- Pro Forma Closing Balance Sheet
Schedule 3.11(a) -- Existing Indebtedness, Liens, Investments, Etc.
Schedule 3.11(c) -- Post-Closing Indebtedness
Schedule 3.12(a) -- Absence of Certain Changes
Schedule 3.13(b) -- Material Contracts
Schedule 3.13(c) -- No Restrictive Agreements
Schedule 3.14 -- Accounts Receivable
Schedule 3.16 -- Employee Benefit Plans; ERISA
Schedule 3.18 -- Litigation
Schedule 3.19 -- Transactions with Affiliates
Schedule 3.22 -- Operating Licenses
Schedule 3.24 -- Real Property
Schedule 3.25 -- Environmental Matters
Schedule 3.26 -- Intellectual Property
Schedule 3.29 -- Listed Securities
Schedule 3.30 -- Insurance
Schedule 3.31 -- Significant Customers
Schedule 3.32 -- Suppliers
Schedule 3.34 -- Personal Property Leases
Schedule 3.35 -- Employment Agreements
Schedule 3.37 -- Use of Proceeds
Schedule 3.38 -- Depository and Other Accounts
vi
<PAGE>
SIMULA, INC. AND SUBSIDIARIES
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into as of the 31st day
of December 1999 (this "AGREEMENT"), by and between SIMULA, INC., an Arizona
corporation (the "COMPANY"), SIMULA SAFETY SYSTEMS, INC., an Arizona corporation
("SSSI"), SIMULA TRANSPORTATION EQUIPMENT CORPORATION (formerly known as
Intaero, Inc.), an Arizona corporation ("SIMTECH"), AIRLINE INTERIORS, INC., an
Arizona corporation ("AIRLINE INTERIORS"), ARTCRAFT INDUSTRIES CORP., an Arizona
corporation ("ARTCRAFT INDUSTRIES"), SIMULA COMPOSITES CORPORATION (formerly
known as Viatech, Inc.), a Delaware corporation ("COMPOSITES"), SIMULA
AUTOMOTIVE SAFETY DEVICES, INC., an Arizona corporation ("SASD"), SIMULA
TECHNOLOGIES, INC., an Arizona corporation ("STI"), INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC., an Arizona corporation ("ICSE"), SIMULA POLYMER SYSTEMS,
INC., an Arizona corporation ("POLYMER") SIMULA AUTOMOTIVE SAFETY DEVICES
LIMITED, a company organized and existing under the laws of the United Kingdom
("SIMULA AUTOMOTIVE UK"), and CCEC CAPITAL CORP., an Arizona corporation
("CCEC"), on the one hand, and LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P., a
California limited partnership (the "PURCHASER"), on the other hand. The
Company, SSSI, SimTech, Airline Interiors, Artcraft Industries, Composites,
SASD, STI, ICSE, Polymer, Simula Automotive UK and CCEC may be individually
referred to as a "COMPANY PARTY" and collectively referred to as the "COMPANY
PARTIES."
R E C I T A L S
A. The Company Parties are engaged as an integrated group in the
business of designing, manufacturing, marketing and selling advanced occupant
seating and restraint systems for installation in air, ground and sea transport
vehicles, developing armor, polymers and technologies related thereto, and
testing of safety devices and technologies related thereto, for the military,
commercial airline and automotive industries.
B. In connection with the financing of the business operations of the
Company Parties, the Company Parties have authorized the joint and several
issuance and sale to the Purchaser of Secured Senior Notes as provided herein in
the aggregate principal amount of $20,000,000, and the Purchaser is willing to
purchase such Secured Senior Notes on the terms and subject to the conditions
set forth herein.
C. To induce the Purchaser to purchase the Secured Senior Notes, the
Company is willing to issue and sell to the Purchaser a warrant to purchase
850,000 shares of Common Stock (as such term is defined herein), which shares
will represent, immediately after the closing of the transactions contemplated
hereby, approximately 4.8988% of the Common Stock on a Fully Diluted Basis (as
such term is defined herein).
<PAGE>
D. To further induce the Purchaser to purchase the Secured Senior
Notes, the Company Parties and certain of their Affiliates (as such term is
defined herein) are willing to enter into other Investment Documents (as such
term is defined herein), including, without limitation, an Investor Rights
Agreement under which the Company will grant to the Purchaser or one of its
Affiliates certain investment monitoring and other rights with respect to the
Company and its Affiliates in connection with the transactions contemplated by
this Agreement.
E. To further induce the Purchaser to purchase the Secured Senior
Notes, and in consideration therefor, the Company Parties have agreed, at the
request of one another, to guaranty absolutely and unconditionally the
Guarantied Obligations (as such term is defined herein). Each Company Party has
derived and expects to derive, directly or indirectly, a substantial benefit
from the purchase by the Purchaser of the Secured Senior Notes, both in its
separate capacity and as a member of the integrated group.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS; ACCOUNTING TERMS.
1.1 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to the
singular and the plural forms thereof):
"AFFILIATE" shall mean, with respect to any specified Person,
(i) any other Person that, directly or indirectly, owns or controls, or
has the right to acquire, whether beneficially or of record, or as a
trustee, guardian or other fiduciary (other than a commercial bank or
trust company), five percent (5%) or more of the Capital Stock of such
specified Person, (ii) any other Person that, directly or indirectly,
controls, is controlled by, is under direct or indirect common control
with, or is included in the Immediate Family of, such specified Person
or any Affiliate of such specified Person, or (iii) any officer,
director, joint venturer, partner or member of such specified Person,
or any Person included in the Immediate Family of any of the foregoing.
For the purposes of this definition, the term "CONTROL," when used with
respect to any specified Person, shall mean the power to direct or
cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED"
have meanings correlative of the foregoing. Notwithstanding anything to
the contrary, for the purposes of this Agreement and the other
Investment Documents, neither the Purchaser nor any of its Affiliates,
officers, directors, partners or employees shall be deemed to be an
Affiliate of the Company or any other Company Party.
2
<PAGE>
"AGREEMENT" shall mean this Agreement, together with the
Exhibits and the Disclosure Schedules, in each case as amended,
restated, supplemented or otherwise modified from time to time.
"AIRLINE INTERIORS" shall have the meaning set forth in the
preamble.
"AIRLINE INTERIORS BUYER" shall mean Weber Aircraft, Inc., a
Delaware corporation, as "purchaser" under the Airline Interiors Sale
Agreement.
"AIRLINE INTERIORS SALE" shall mean the sale by Airline
Interiors to the Airline Interiors Buyer of all or substantially all of
its assets pursuant to the terms of the Airline Interiors Sale
Agreement.
"AIRLINE INTERIORS SALE AGREEMENT" shall mean the Asset
Purchase Agreement dated as of December 24, 1999, by and among Airline
Interiors, SimTech, the Company and the Airline Interiors Buyer, with
respect to the Airline Interiors Sale.
"ALTERNATIVE TRANSACTION" shall have the meaning set forth in
SECTION 5.3.
"ALTERNATIVE TRANSACTION FEE" shall have the meaning set forth
in SECTION 12.4.
"APPLICABLE LAWS" shall mean all applicable provisions of all
(i) constitutions, treaties, statutes, laws, rules, regulations and
ordinances of any Governmental Authority, (ii) any Consents of any
Governmental Authority and (iii) any orders, decisions, rulings,
judgments or decrees of any Governmental Authority.
"ARTCRAFT INDUSTRIES" shall have the meaning set forth in the
preamble.
"ASSET SALE" shall mean any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or other
dispositions) by the Company or any other Company Party, including any
disposition by means of a merger, consolidation or similar transaction,
of (i) any shares of Capital Stock of any Company Party (other than the
Company) or (ii) any other assets of the Company or any other Company
Party other than inventory in the ordinary course of business.
"ASSIGNEE" shall have the meaning set forth in SECTION 13.5.
"ASSIGNMENT" shall mean an assignment or other transfer of any
Note pursuant to the terms of such Note.
"AUDIT REPORTS" shall mean any reports issued by any
Governmental Authority with respect to the compliance or non-compliance
of the Company or any of its
3
<PAGE>
Subsidiaries with Applicable Laws with respect to its customer
contracts to which any Governmental Authority is a party.
"BANK" shall mean The CIT Group/Business Credit, Inc., a New
York corporation.
"BANK CREDIT AGREEMENT" shall mean the Financing Agreement
dated of even date herewith, among the Bank, the Company and the other
Company Parties.
"BANK CREDIT DOCUMENTS" shall mean the Bank Credit Agreement
and all notes and other instruments, guaranties, security agreements,
pledge agreements and other documents contemplated by the Bank Credit
Agreement and executed and delivered in connection therewith.
"BANKRUPTCY LAWS" shall mean Title 11 of the United States
Code (11 U.S.C. Section 101 ET SEQ.) and any similar federal or state
law for the relief of debtors, as amended from time to time.
"BARCLAYS MORTGAGE" shall mean the Mortgage (Fixed) dated
December 31, 1997, between Barclays Mercantile Business Finance Limited
and Simula Automotive UK.
"BENEFIT PLAN" shall have the meaning set forth in SECTION
3.16.
"BOARD OF DIRECTORS" shall mean, with respect to any Person,
the board of directors (or similar governing body) of such Person.
"BRIDGE FEE" shall have the meaning set forth in SECTION 9.19.
"BUSINESS DAY" shall mean any day that is not a Saturday, a
Sunday or, in the City of New York, New York or in Los Angeles,
California, a day on which banking institutions are authorized or
required by law to close.
"C&C NOTES" shall mean, collectively, (i) the Promissory Note
dated October 21, 1999, issued by Coach & Car Equipment Corp. in favor
of CCEC in the original principal amount of $8,118,008, and (ii) the
Promissory Note dated October 21, 1999, issued by Coach & Car Equipment
Corp. in favor of CCEC in the original principal amount of $1,996,000,
in each case as amended, supplemented or otherwise modified from time
to time in accordance with SECTION 10.10.
"CAPITAL EXPENDITURES" shall mean, for any period, all
expenditures of the Company and its Subsidiaries (whether paid in cash
or accrued or financed by the incurrence of Indebtedness) during such
period, including all Capital Lease Obligations,
4
<PAGE>
for any property, plant, equipment or other fixed assets, or for
improvements thereto, or for replacements, substitutions or additions
thereto, that have a useful life of more than one (1) year or are
required to be capitalized on the consolidated balance sheet of the
Company and its Subsidiaries in accordance with GAAP.
"CAPITAL LEASE" shall mean any lease or agreement of the
Company or its Subsidiaries for property (whether real, personal or
mixed) which has been or is required to be capitalized on the
consolidated balance sheet of the Company and its Subsidiaries in
accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" shall mean all liabilities or
other obligations for the payment of rent for any property (whether
real, personal or mixed) which has been or is required to be
capitalized on the consolidated balance sheet of the Company and its
Subsidiaries in accordance with GAAP with respect to a Capital Lease.
"CAPITAL STOCK" shall mean, with respect to any Person, (i) if
such Person is a corporation, any and all shares of capital stock,
participations in profits or other equivalents (however designated) or
other equity interests of such Person, (ii) if such Person is a limited
liability company, any and all membership units or other interests, or
(iii) if such Person is a partnership or other entity, any and all
partnership or entity units or other interests.
"CASH INTEREST EXPENSE" shall mean, for any period, without
duplication and only to the extent deducted in determining Net Income
(Loss), calculated without regard to any limitation on the payment
thereof and determined in accordance with GAAP, (i) total consolidated
interest expense of the Company and its Subsidiaries (including,
without limitation, interest paid to Affiliates and the portion of any
Capitalized Lease Obligations allocable to interest expense), whether
paid or accrued, MINUS (ii) to the extent included in total
consolidated interest expense, any non-cash interest expense,
including, without limitation, any payment-in-kind interest,
amortization of original issue discount, non-cash losses on hedging
agreements and amortization of capitalized up-front costs..
"CCEC" shall have the meaning set forth in the preamble.
"CHANGE IN CONTROL" shall mean the occurrence of one or more
of the following events:
(i) any "person" (other than the Purchaser) or
"group" (as such terms are used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act or any successor provisions to
either of the foregoing), including any group acting for the
purpose of acquiring, holding, voting or disposing of
securities within the meaning of Rule 13d-5(b)(1) of the
Exchange Act, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 of the Exchange Act (PROVIDED that a
Person will
5
<PAGE>
be deemed to have "beneficial ownership" of all shares that
any such Person has the right to acquire, whether such right
is exercisable immediately or only after the passage of
time)), directly or indirectly, of (a) fifty percent (50.0%)
or more of the voting power of the Voting Stock of the Company
or (b) if a "Change of Control" under any Simula Change of
Control Agreement shall concurrently occur and any
"Compensation" (as such term is defined therein) or other
consideration is thereafter required to be paid to the Simula
Change of Control Party who is a party thereto, twenty percent
(20.0%) or more of the voting power of the Voting Stock of the
Company;
(ii) the sale, transfer, assignment, lease,
conveyance or other disposition, directly or indirectly, of
all or substantially all of the assets of the Company or any
other Company Party shall have occurred;
(iii) the Company merges, consolidates or amalgamates
with or into any other Company Party or any other Person, or
any other Company Party or any other Person merges,
consolidates or amalgamates with or into the Company, and in
any such event any Person who is not an Affiliate of the
Company as of the date hereof acquires "control" (as such term
is defined in the definition of "Affiliate") of the Company;
(iv) Donald W. Townsend shall cease to be the
President and Chief Executive Officer of the Company with
significant daily senior management responsibilities, PROVIDED
that the Company does not replace Mr. Townsend with an
individual who is reasonably acceptable to the Purchaser
within ninety (90) days after Mr. Townsend's effective
resignation or termination date;
(v) James A. Saunders shall cease to be the Chief
Operating Officer of the Company with significant daily senior
management responsibilities, PROVIDED that the Company does
not replace Mr. Saunders with an individual who is reasonably
acceptable to the Purchaser within ninety (90) days after Mr.
Saunders's effective resignation or termination date;
(vi) (A) During the Fiscal Year ending December 31,
2000 or December 31, 2001, Stanley P. Desjardins shall sell,
transfer or otherwise dispose of more than ten percent (10.0%)
of the number of shares of Common Stock beneficially owned or
held by him on January 1st of such Fiscal Year, or (B) during
the Fiscal Year ending December 31, 2002 or December 31, 2003,
Mr. Desjardins shall sell, transfer or otherwise dispose of
more than fifteen percent (15.0%) of the number of shares of
Common Stock beneficially owned or held by him on January 1st
of such Fiscal Year (it being understood, by way of example,
that if Mr. Desjardins beneficially owns 1,000,000 shares of
Common Stock on January 1, 2000, he may sell up to 100,000
shares during the Fiscal
6
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Year ending December 31, 2000; if Desjardins sells only 90,000
in such Fiscal Year, he may sell only 91,000 shares in the
Fiscal Year ending December 31, 2001); notwithstanding the
above, Mr. Desjardins may sell one million (1,000,000) shares
of such Common Stock in addition to the shares permitted to be
sold in clauses (A) and (B) above without causing a Change in
Control under this clause (vi); or
(vii) the Board of Directors or the shareholders of
the Company or any other Company Party shall have approved any
plan of liquidation or dissolution of the Company or any other
Company Party, as applicable.
"CLOSING" shall have the meaning specified in SECTION 2.3.
"CLOSING DATE" shall have the meaning specified in SECTION
2.3.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as set forth in Section 4980B
of the Code and Part 6 of Title I of ERISA.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute, and the treasury regulations
promulgated thereunder.
"COLLATERAL" shall mean the collateral under the Collateral
Documents, however defined.
"COLLATERAL DOCUMENTS" shall mean, collectively, the Security
Agreement, the Pledge Agreement, the Intellectual Property Security
Agreement, the landlord waivers and consents, the notices of security
interest in deposit accounts, the UCC financing statements and all
other agreements, instruments and documents delivered from time to time
in connection therewith or otherwise to secure the Obligations or any
other obligations of the Company Parties or any other Person under this
Agreement, the Notes or any other Investment Document, in each case as
amended, restated, supplemental or otherwise modified from time to
time.
"COMMISSION" shall mean the Securities and Exchange
Commission, or any successor agency.
"COMMON STOCK" shall mean the common stock, $.01 par value per
share, of the Company.
"COMPANY" shall have the meaning set forth in the preamble.
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"COMPANY PARTY" and "COMPANY PARTIES" shall have the meaning
set forth in the preamble.
"COMPOSITES" shall have the meaning set forth in the preamble.
"COMPANY INTELLECTUAL PROPERTY" shall have the meaning
specified in SECTION 3.26.
"COMPANY SEC DOCUMENTS" shall mean all registration
statements, prospectuses, reports, schedules, forms, statements and
other documents (including all exhibits, schedules and other
information included or incorporated by reference therein) which are
filed or are required to be filed by the Company (or any of its
Subsidiaries) with the Commission under the Securities Act, the
Exchange Act or the rules and regulations promulgated thereunder, and
all applications, filings, reports and other documents which are filed
or are required to be filed by the Company with the NYSE.
"COMPANY STOCK PLANS" shall mean the 1992 Restricted Stock
Plan, the 1992 Stock Option Plan, the 1994 Stock Option Plan, Employee
Stock Purchase Plan and the 1999 Incentive Compensation Option Plan, in
each case as in effect and amended to date.
"CONSENT" shall mean any consent, approval, authorization,
waiver, permit, grant, franchise, license, exemption or order of, any
registration, certificate, qualification, declaration or filing with,
or any notice to, any Person, including, without limitation, any
Governmental Authority.
"CONTINGENT OBLIGATIONS" shall mean, with respect to any
Person, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) with respect to any Indebtedness or other obligation of
another Person, including, without limitation, any direct or indirect
guarantee of such Indebtedness (other than any endorsement for
collection or deposit in the ordinary course of business) or any other
direct or indirect obligation, by agreement or otherwise, to purchase
or repurchase any such Indebtedness or obligation or any security
therefor, or to provide funds for the payment or discharge of any such
Indebtedness or obligation (whether in the form of loans, advances,
stock purchases, capital contributions, dividends or otherwise),
letters of credit and reimbursement obligations for letters of credit,
(ii) to provide funds to maintain the financial condition of any other
Person, or (iii) otherwise to indemnify or hold harmless the holders of
Indebtedness or other obligations of another Person against loss in
respect thereof. The amount of any Contingent Obligation under clauses
(i) and (ii) above shall be the maximum amount guaranteed or otherwise
supported by the Contingent Obligation.
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"CONVERTIBLE SECURITIES" shall mean, with respect to any
Person, any securities or other obligations issued or issuable by such
Person or any other Person that are exercisable or exchangeable for, or
convertible into, any Capital Stock of such Person, including, without
limitation, with respect to the Company, the Series A Preferred.
"DEFAULT" shall mean any Event of Default or any event or
condition which, with the giving of notice or the lapse of time or
both, becomes an Event of Default.
"DESJARDINS NOTES" shall mean (i) the Promissory Note dated
October 15, 1999, issued by the Company in favor of Stanley P.
Desjardins in the original principal amount of $1,000,000, and (ii) the
Promissory Note dated December 31, 1999 and effective December 14, 1999
(the "REMAINING DESJARDINS NOTE"), issued by the Company in favor of
Stanley P. Desjardins in the original principal amount of $1,000,000.
"DISCLOSURE SCHEDULES" shall have the meaning specified in the
introductory paragraph of SECTION 3.
"EBITDA" shall mean, for any period, without duplication and
determined on a consolidated basis and in accordance with GAAP:
(i) the sum of (A) Net Income (Loss), (B) interest
expense deducted in determining Net Income (Loss) (including, without
limitation, cash interest, payment-in-kind interest and amortization of
original issue discount), (C) the amount of Taxes, based on or measured
by income, deducted in determining Net Income (Loss), (D) the amount of
depreciation and amortization expense deducted in determining Net
Income (Loss), and (E) any extraordinary or unusual non-cash losses
(PROVIDED that such extraordinary or unusual non-cash losses do not at
any time result in any cash outlay), in each case for such period;
MINUS
(ii) any extraordinary or unusual income or gains for
such period.
"ENVIRONMENTAL CONDITIONS" shall mean any Release of any
Hazardous Materials (whether or not such Release constituted at the
time thereof a violation of any Environmental Laws) or any violation of
any Environmental Law as a result of which any Environmental Person has
or may become liable to any Person or by reason of which the business,
condition or operations of such Environmental Person or any of its
assets or properties may suffer or be subjected to any Lien or
liability.
"ENVIRONMENTAL LAWS" shall mean all Applicable Laws relating
to Hazardous Materials or the protection of human health or the
environment, including all requirements pertaining to reporting,
permitting, investigating or remediating Releases or threatened
Releases of Hazardous Materials into the environment, or relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or
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handling of Hazardous Materials. Without limiting the generality of the
foregoing, the term "ENVIRONMENTAL LAWS" shall include the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 9601 ET seq.) ("CERCLA"), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.)
("RCRA"), the Federal Clean Water Act (33 U.S.C. Section 1251 ET SEQ.),
the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 ET SEQ.) and the
Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.), as
such laws may be amended from time to time, and any other present or
future federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or
establishing standards of conduct for the protection of human health or
the environment.
"ENVIRONMENTAL PERSONS" shall mean, collectively, (i) the
Company, any of its Subsidiaries and any of their respective
Subsidiaries or other Affiliates, (ii) any other Person in which any of
the Persons listed in clause (i) above was at any time, or is, a
partner, joint venturer, member or other participant, and (iii) any
predecessor or former partnership, joint venture, trust, association,
corporation, limited liability company or other Person, whether in
existence as of the date hereof or at any time prior to the date
hereof, the assets, properties, liabilities or obligations of which
have been acquired or assumed by any of the Persons listed in clause
(i) above or to which any of the Persons listed in clause (i) above has
succeeded.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
warrants, options or other rights to subscribe for or purchase, or
obligations to issue, any Capital Stock of such Person, or any
Convertible Securities of such Person, including, without limitation,
any options or similar rights issued or issuable under any employee
stock option plan, pension plan or other employee benefit plan of such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute, including the rules and
regulations promulgated thereunder, in each case as amended from time
to time.
"ERISA AFFILIATE" shall mean any Person that is or was a
member of the controlled group of corporations or trades or businesses
(as defined in Sections (b), (c), (m) or (o) of Section 414 of the
Code) of which any Company Party is or was a member at any time within
the last six (6) years.
"EVENT OF DEFAULT" shall have the meaning specified in SECTION
11.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations promulgated
thereunder.
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"EXISTING INDEBTEDNESS" shall have the meaning set forth in
SECTION 3.12.
"EXISTING LIENS" shall have the meaning set forth in SECTION
3.12.
"FEE LETTER" shall have the meaning set forth in SECTION
6.7(l).
"FINANCIAL STATEMENTS" shall have the meaning specified in
SECTION 3.10(a).
"FISCAL QUARTER" shall mean any quarter of a Fiscal Year.
"FISCAL YEAR" shall mean the fiscal year of the Company, which
shall be the twelve (12) month period ending on December 31 in each
calendar year, or such other period as the Company may designate in
writing and the Purchaser may approve in writing.
"FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any
period, the ratio of (i) EBITDA for such period to (ii) Fixed Charges
for such period.
"FIXED CHARGES" shall mean, for any period and without
duplication, the sum of (i) Cash Interest Expense; (ii) scheduled
payments of principal on any Indebtedness of the Company and its
Subsidiaries, not including Indebtedness under the Term A Note or the
Term Loan Promissory Note made payable to the Bank in the principal
amount of $5,000,000 repaid due to the consummation of the Airline
Interiors Sale or any Asset Sale; (iii) Capitalized Lease Obligations
of the Company or any of its Subsidiaries for such period representing
principal and having a scheduled due date; (iv) Cash Taxes of the
Company and its Subsidiaries, based on or measured by income; (v) cash
dividends or distributions, if any, paid by the Company or any of its
Subsidiaries; and (vi) Capital Expenditures, in each case for such
period.
"FULLY DILUTED BASIS" shall mean, at any time, a basis that
includes all shares of Capital Stock of the Company issued and
outstanding at such time and all additional shares of Capital Stock of
the Company which would be issued upon the conversion or exercise of
all Equity Rights of the Company outstanding at such time.
"GAAP" shall mean generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession, all as in effect on the date hereof, applied on a basis
consistent with prior periods.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
and any state or political subdivision thereof, any entity exercising
executive, legislative, judicial,
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regulatory or administrative functions of or pertaining to government
(including, without limitation, the Commission and the United States
Environmental Protection Agency ("EPA")), and any court, tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory
organization.
"GUARANTIED OBLIGATIONS" shall have the meaning set forth in
the Guaranty.
"GUARANTORS" shall have the meaning set forth in the Guaranty.
"GUARANTY" shall mean a Joint and Several Continuing Guaranty
made by the Company Parties in favor of the Purchaser, in form and
substance satisfactory to the Purchaser, as amended, supplemented or
otherwise modified from time to time.
"HAZARDOUS MATERIALS" shall mean any substance (i) the
presence of which requires investigation or remediation under any
Applicable Laws; (ii) that is defined or becomes defined as a
"hazardous waste" or "hazardous substance" under any Applicable Laws
(including, without limitation, CERCLA or RCRA); (iii) that is toxic,
explosive, corrosive, inflammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any Governmental Authority; (iv) the presence of which on
any real property causes or threatens to cause a nuisance upon the real
property or to adjacent properties or poses or threatens to pose a
hazard to any real property or to the health or safety of Persons on or
about any real property; or (v) that contains gasoline or other
petroleum hydrocarbons, polychlorinated biphenyls or asbestos.
"HAZARDOUS MATERIALS CLAIM" shall have the meaning set forth
in SECTION 9.15.
"HOLDER" shall mean a Term A Note Holder or Term B Note
Holder, as the case may be, and the term "HOLDERS" shall mean,
collectively, the Term A Note Holder and the Term B Note Holder.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"ICSE" shall have the meaning set forth in the preamble.
"IMMEDIATE FAMILY" of a Person includes such Person's spouse,
and the parents, children and siblings of such Person or his or her
spouse and their spouses and other Persons related to the foregoing by
blood, adoption or marriage within the second degree of kinship, and,
with respect to any officer or director of the Company, shall also
include any Person who is or was a personal friend of such officer or
director prior to becoming a business associate of such officer or
director.
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"INDEBTEDNESS" shall mean, with respect to any Person and
without duplication, (i) any indebtedness, liabilities or other
obligations, contingent or otherwise, for borrowed money; (ii) all
obligations evidenced by bonds, notes, debentures or similar
instruments; (iii) all obligations to pay the deferred purchase or
acquisition price of property or services (other than trade accounts
payable arising in the ordinary course of business so long as such
trade accounts payable are less than sixty (60) days past their due
dates) and any installment payment non-compete agreements; (iv) all
Capital Lease Obligations; (v) all obligations of others secured by a
Lien to which any property or assets owned by such Person is subject,
whether or not the obligations secured thereby have been assumed by
such Person; (vi) all obligations of such Person, contingent or
otherwise, in respect of any letters of credit or bankers' acceptances;
(vii) all obligations under facilities for the discount or sale of
receivables; (viii) the maximum fixed repurchase price of any
redeemable Capital Stock of such Person; (ix) all Contingent
Obligations; and (x) all obligations which are required to be
classified as long-term liabilities on the balance sheet of such Person
under GAAP as liabilities.
"INDEMNIFIED ENVIRONMENTAL COSTS" shall mean all actual or
threatened liabilities, claims, actions, causes of action, judgments,
orders, damages (including foreseeable and unforeseeable consequential
damages), costs, expenses, fines, penalties and losses (including sums
paid in settlement of claims and all reasonable consultant, expert and
legal fees and reasonable expenses of counsel) incurred in connection
with any Hazardous Materials Claim, any investigation of Site
conditions or any clean-up, Remedial Work or other remedial, removal or
restoration work (whether of any Real Property or any other real
property), or any resulting damages, harm or injuries to the Person or
property of any third parties or to any natural resources.
"INDEMNIFIED PARTIES" shall have the meaning specified in
SECTION 8.2.
"INITIAL FINANCIAL PROJECTIONS" shall have the meaning set
forth in SECTION 6.17.
"INTAERO LTD" shall mean Intaero, Ltd., an Arizona corporation
and a wholly owned Subsidiary of the Company.
"INTANGIBLE ASSETS" shall mean the book value of all
intangible assets (as defined under GAAP) shown on the consolidated
balance sheet of the Company and its Subsidiaries, including, without
limitation, organization costs, securities issuance costs, goodwill
(including any amounts, however designated on such balance sheet,
representing the excess of the purchase price paid for assets or stock
acquired over the value assigned thereto on the books of the Company
and its Subsidiaries), covenants not to compete, patents, trademarks,
copyrights, trade secrets, customer lists, know-how, licenses,
contracts, franchises, software costs, research and development costs,
investments in and monies from Affiliates and any other intangible
assets.
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"INTELLECTUAL PROPERTY" shall mean all (i) inventions, whether
or not patentable, whether or not reduced to practice, and whether or
not yet made the subject of a pending patent application or
applications, (ii) ideas and conceptions of potentially patentable
subject matter, including, without limitation, any patent disclosures,
whether or not reduced to practice and whether or not yet made the
subject of a pending patent application or applications, (iii) national
(including the United States) and multinational statutory invention
registrations, patents, patent registrations and patent applications
(including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights
therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration,
patent or application, (iv) trademarks, service marks, trade dress,
logos, trade names and corporate names, whether or not registered,
including all common law rights, and registrations and applications for
registration thereof, including, without limitation, all marks
registered in the United States Patent and Trademark Office, the
Trademark Offices of the States and Territories of the United States of
America, and the Trademark Offices of other nations throughout the
world, and all rights therein provided by international treaties or
conventions, (v) copyrights (registered or otherwise) and registrations
and applications for registration thereof, (vi) computer software,
(vii) trade secrets and confidential, technical and business
information (including ideas, formulas, compositions, inventions, and
conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (viii) whether or not
confidential, technology (including know-how and show-how),
manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing
plans and customer and supplier lists and information, (ix) copies and
tangible embodiments of all the foregoing, in whatever form or medium,
(x) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights, and (xi) all rights to sue or
recover and retain damages and costs and attorneys' fees for present
and past infringement of any of the foregoing.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean a Grant
of Security Interest in Patents, Trademarks and Licenses made by the
Company Parties.
"INTERCREDITOR AGREEMENT" shall mean an Intercreditor
Agreement between the Bank and the Purchaser, and acknowledged by the
Company.
"INVESTMENT DOCUMENTS" shall mean, collectively, this
Agreement, the Notes, the Warrant, the Registration Rights Agreement,
the Guaranty, the Collateral Documents, the Investor Rights Agreement,
the Fee Letter, the Intercreditor Agreement, the supplements to the
Simula Change of Control Agreements (referred to in SECTION 6.7(j)) and
all other agreements, instruments, certificates, closing and other
letters and other
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<PAGE>
documents executed and/or delivered in connection herewith or
therewith, in each case as amended, restated, supplemented or otherwise
modified from time to time.
"INVESTMENTS" shall mean, as applied to any Person, (i) any
direct or indirect acquisition by such Person of Capital Stock, other
securities or other interests of, or investments in, any other Person,
or all or any substantial part of the business or assets of any other
Person, and (ii) any direct or indirect loan, advance or capital
contribution by such Person to any other Person.
"INVESTOR RIGHTS AGREEMENT" shall mean an Investor Rights
Agreement, in form and substance satisfactory to the Purchaser, among
the Company, the Principal Shareholders and the Purchaser.
"LEVERAGE RATIO" shall mean, with respect to any period, the
ratio of (i) the sum of (A) total Indebtedness of the Company and its
Subsidiaries at the end of such period PLUS (B) all Capital Leases
existing at the end of such period, LESS $200,000, to (ii) EBITDA for
such period or such other period, as applicable.
"LIEN" shall mean any lien, pledge, mortgage, security
interest, charge or encumbrance of any kind (including, without
limitation, the interest of a lessor under a Capital Lease having
substantially the same economic effect), any agreement to give or
refrain from giving any lien, pledge, mortgage, security interest,
charge or other encumbrance of any kind, any conditional sale or other
title retention agreement, any lease in the nature thereof and the
filing of any financing statement or other similar form of notice under
the laws of any jurisdiction.
"LOSSES" shall have the meaning specified in SECTION 8.2.
"MARGIN REGULATIONS" shall mean Regulations T, U and X of the
Board of Governors of the Federal Reserve System, or any successor
thereto (the "FEDERAL RESERVE BOARD"), as amended from time to time.
"MARGIN STOCK" shall mean "margin stock" as defined in the
Margin Regulations.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall
mean a material adverse effect on or material adverse change in, as the
case may be, (i) the business, assets, condition (financial or
otherwise), properties (whether real, personal or otherwise),
operations, profitability or prospects of the Company and its
Subsidiaries, individually or taken as a whole, (ii) the ability of the
Company or any of its Subsidiaries to perform its or their obligations
under this Agreement or any other Investment Document to which it is a
party or (iii) the validity or enforceability of this Agreement or any
other Investment Document.
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"MATERIAL CONTRACTS" shall have the meaning set forth in
SECTION 3.13.
"MONTHLY REPORTING PACKAGE" shall have the meaning set forth
in SECTION 9.3.
"NASDAQ" shall mean The Nasdaq National Market System or The
Nasdaq SmallCap Market, as the case may be, or any successor reporting
system thereof.
"NET AVAILABLE CASH" from any Asset Sale shall mean the sum
of: (i) net cash payments received therefrom (including any cash
payments received by way of deferred payment of principal but only as
and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to the property that is the subject of such Asset
Sale or received in any other non-cash form); and (ii) net cash
payments received upon the sale, conversion, collection or other
liquidation of any non-cash proceeds therefrom (including notes, debt
securities, other rights to payment, Capital Stock or other
consideration received from any Asset Sale). For purposes of this
definition, the term "NET" means net of (a) the principal amount of any
Indebtedness secured by a Permitted Lien on the assets subject to and
required to be prepaid, and actually prepaid, upon such Asset Sale, (b)
all legal, title, transfer and recording Taxes payable as a result of
such Asset Sale, and any reasonable professional fees and expenses,
reasonable broker's commissions, fees to investment bankers, severance
costs and other reasonable out-of-pocket expenses of sale paid to any
Person attributable to such Asset Sale, and (c) any income Taxes
reasonably estimated by the Company to be payable in respect of such
Asset Sale.
"NET INCOME (LOSS)" shall mean, for any period, net income
(loss) after Taxes of the Company and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period,
all computed in accordance with GAAP.
"90-DAY RECEIVABLES" shall mean, at any time, the total
consolidated trade receivables of the Company and its Subsidiaries,
determined in accordance with GAAP, that are then outstanding ninety
(90) days past the invoice date.
"1997 INDENTURE" shall mean the Indenture dated as of April 1,
1997, as supplemented by Supplement No. 1 dated as of October 15, 1998,
among the Company, the Subsidiaries of the Company party thereto, as
"Subsidiary Guarantors" (as such term is defined therein) and Bank One,
Columbus, NA, as trustee thereunder, as the same may be further
amended, supplemented or otherwise modified from time to time in
accordance with SECTION 10.10.
"NYSE" shall mean The New York Stock Exchange, Inc.
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"NOTE" or "NOTES" shall have the meaning set forth in SECTION
2.1, and shall also include, where applicable, any additional note or
notes issued by the Company in connection with any Assignments.
"OBLIGATIONS" shall mean any and all present and future loans,
advances, Indebtedness, claims, guarantees, liabilities or obligations
of the Company Parties, or of any other Person for or on behalf of the
Company Parties, owing to the Purchaser, any Affiliate of the Purchaser
or any Indemnified Party, of whatever nature, character or description,
arising under or in connection with this Agreement, the Notes, the
Warrant, the Registration Rights Agreement, the Guaranty, the
Collateral Documents, the Investor Rights Agreement and any other
Investment Document or otherwise, any and all agreements, instruments
or other documents heretofore or hereafter executed or delivered in
connection with any of the foregoing, in each case whether due or not
due, direct or indirect, joint and/or several, absolute or contingent,
voluntary or involuntary, liquidated or unliquidated, determined or
undetermined, now or hereafter existing, amended, renewed, extended,
exchanged, restated, refinanced, refunded or restructured, whether or
not from time to time decreased or extinguished and later increased,
created or incurred, whether for principal, interest, premiums, fees,
costs, expenses (including, without limitation, attorneys' fees) or
other amounts incurred for administration, collection, enforcement or
otherwise, whether or not arising after the commencement of any
proceeding under the Bankruptcy Laws (including, without limitation,
post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding, and whether or not recovery of any such
obligation or liability may be barred by any statute of limitations or
such Indebtedness, claim, liability or obligation may otherwise be
unenforceable.
"OBLIGOR" shall have the meaning set forth in the Guaranty.
"OPERATING LICENSES" shall mean, collectively, all licenses,
franchises, permits, consents, approvals, registrations, certificates
and authorizations of all Governmental Authorities necessary or
advisable to the conduct of the businesses of the Company or any of its
Subsidiaries.
"OTHER DEBT DOCUMENT" shall mean any agreement, instrument or
other document evidencing or governing any Indebtedness of the Company
or any other Company Party other than the Notes and any other
Investment Document, but including, without limitation, the Bank Credit
Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, as
defined in Title IV of ERISA.
"PERMITTED ALTERNATIVE TRANSACTION" shall have the meaning set
forth in SECTION 5.3.
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"PERMITTED INVESTMENTS" shall mean any one or more of the
following:
(i) any direct obligations of the United States of
America (including obligations issued or held in book-entry form on the
books of the Department of the Treasury of the United States of
America) or obligations the timely payment of the principal of and
interest on which are fully guaranteed by the United States of America,
all of which mature within three (3) months from the date of
acquisition thereof; or
(ii) any interest-bearing demand or time deposits or
certificates of deposit that mature no more than sixty (60) days from
the date of creation thereof and that are either (a) insured by the
Federal Deposit Insurance Corporation or (b) held in any United States
commercial bank having general obligations rated at least "AA" or
equivalent by Standard & Poor's Rating Group Corporation or Moody's
Investors Service, Inc. and having capital and surplus of at least
$500,000,000 or the equivalent.
"PERMITTED LIENS" shall mean:
(i) judgment and attachment Liens in connection with
(a) judgments that do not constitute an Event of Default so
long as the judgment creditor has not succeeded in the
foreclosure thereof and reserves have been established to the
extent required by GAAP as in effect at such time and (b)
litigation and legal proceedings that are being contested in
good faith by appropriate proceedings (or as to which the
Company or any of its Subsidiaries, as the case may be, is
preparing to promptly initiate appropriate proceedings) so
long as reserves have been established to the extent required
by GAAP as in effect at such time and so long as such Liens do
not encumber assets by an aggregate amount (together with the
amount of any unstayed judgments against the Company or any of
its Subsidiaries) in excess of $100,000;
(ii) Liens for Taxes, assessments or other
governmental charges or levies on property of the Company or
any of its Subsidiaries if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith by appropriate proceedings;
(iii) pledges or deposits by the Company or any of
its Subsidiaries under worker's compensation laws,
unemployment insurance laws or similar legislation;
(iv) Liens on the property of the Company or any of
its Subsidiaries incurred in the ordinary course of business
to secure performance of obligations with respect to statutory
or regulatory requirements, performance or return-of- money
bonds, surety or indemnity bonds or other obligations of like
nature and incurred in a manner consistent with industry
practice, in each case which are not
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incurred in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred
purchase price of property;
(v) Liens imposed by operation of law, such as
carriers', warehousemen's and mechanics' Liens, on property of
the Company or any of its Subsidiaries arising in the ordinary
course of business and securing payment of obligations which
are not more than sixty (60) days past due or are being
contested in good faith by appropriate proceedings and, if
required by GAAP, are appropriately reserved for on the books
of the Company or such Subsidiary, as the case may be; and
(vi) utility easements, building restrictions and
such other encumbrances or charges against real property as
are of a nature generally existing with respect to properties
of a similar character;
PROVIDED, HOWEVER, that each of the Liens described in the foregoing
clauses (i) through (vi) inclusive shall only constitute a Permitted
Lien so long as such Liens do not materially interfere with the conduct
of the Company Parties' business, individually or taken as a whole, or
create a Material Adverse Change.
"PERSON" shall mean any individual, trustee, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company,
limited liability partnership and other entity or any Governmental
Authority.
"PLEDGE AGREEMENT" shall mean a Pledge Agreement by and among
the Company, SimTech, SASD and STI, as "Pledgors," on the one hand, and
the Purchaser, on the other hand.
"POLYMER" shall have the meaning set forth in the preamble.
"PRINCIPAL SHAREHOLDERS" shall mean, collectively, Stanley P.
Desjardins, Donald W. Townsend, James A. Saunders and Bradley P. Forst.
"PRO FORMA CLOSING BALANCE SHEET" shall have the meaning
specified in SECTION 3.10(c).
"PURCHASE PRICE" shall have the meaning specified in SECTION
2.2.
"PURCHASER" shall have the meaning set forth in the preamble.
"REAL PROPERTY" shall mean any and all real property now or
hereafter owned, leased or operated by the Company and/or its
Subsidiaries.
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"REGISTRATION RIGHTS AGREEMENT" shall mean a Registration
Rights Agreement, in form and substance satisfactory to the Purchaser,
between the Company and the Purchaser.
"RELEASE" shall mean any release (whether threatened or
actual), migration, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, seeping, leaching, dumping
or disposing into the environment or the workplace of any Hazardous
Materials, and otherwise as defined in any Environmental Laws.
"REMEDIAL WORK" shall have the meaning set forth in SECTION
9.15.
"RESTRICTED PAYMENT" shall mean any one or more of the
following:
(i) any dividend or other distribution (whether made
in cash, securities or other property), whether direct or indirect,
declared or paid on account of or with respect to any Capital Stock or
other securities of the Company or any of its Subsidiaries now or
hereafter outstanding, except for any dividend payable by the Company
to the holders of the Series A Preferred pursuant to the terms of its
charter;
(ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or
indirect, of any shares of any Capital Stock of the Company or any of
its Subsidiaries now or hereafter outstanding;
(iii) any payment or prepayment of principal of
premium, if any, or interest, fees or other charges on or with respect
to, or any redemption, purchase or other acquisition for value,
retirement, defeasance, sinking fund or similar payment with respect
to, any Subordinated Indebtedness;
(iv) any management, consulting or similar fees or
other payments payable by the Company or any of its Subsidiaries to any
of its or their Affiliates, other than payments made by the Company's
Subsidiaries of the Company to the Company in respect of the typical
charge imposed by the Company on its Subsidiaries with reference to the
so-called "Corporate Allocation" and consistent with past practices and
supplemented by appropriate documentation; and
(v) any Investment (other than Permitted Investments)
in any Person.
"SASD" shall have the meaning set forth in the preamble.
"SECURITIES" shall have the meaning specified in SECTION 2.1.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, all as
the same shall be in effect at the time.
"SECURITY AGREEMENT" shall mean a Security Agreement made by
the Company Parties in favor of the Purchaser.
"SENIOR INDEBTEDNESS" shall mean the principal amount of
premium, if any, and interest on any Indebtedness of the Company,
whether now outstanding or hereafter created, incurred, assumed or
guaranteed, unless such Indebtedness is contractually subordinate or
junior in right of payment to the Indebtedness evidenced by the Notes.
"SENIOR SUBORDINATED INDEBTEDNESS" shall mean, collectively,
(i) Indebtedness of the Company outstanding under the 8% Senior
Subordinated Convertible Notes due May 1, 1994 (the "8% NOTES"),
issued under the 1997 Indenture; (ii) Indebtedness of the Company
outstanding under the 9 1/2% Senior Subordinated Notes due 2003 (the
"9 1/2% NOTES"), issued under the 1997 Indenture; and (iii) any
other subordinated Indebtedness of the Company which specifically
provides that such subordinated Indebtedness is to rank PARI PASSU
with the Indebtedness evidenced by the 8% Notes and the 9 1/2% Notes
and is not subordinated by its terms to any other Indebtedness or
other obligations of the Company which is not Senior Indebtedness,
PROVIDED that such other subordinated Indebtedness is evidenced or
governed by provisions that are satisfactory to the Purchaser, in
each case as amended, supplemented, modified, refinanced, renewed,
replaced, restructured or exchanged from time to time in accordance
with SECTION 10.10.
"SERIES A PREFERRED" shall mean the Series A Convertible
Preferred Stock, par value $.05 per share, of the Company.
"SIMTECH" shall have the meaning set forth in the preamble.
"SIMULA AUTOMOTIVE UK" shall have the meaning set forth in the
preamble.
"SIMULA CHANGE OF CONTROL AGREEMENTS" shall mean (i) the
Amended and Restated Change of Control Employment Agreement dated as of
January 1, 1998, between the Company and Donald W. Townsend (the
"TOWNSEND CHANGE OF CONTROL AGREEMENT"); (ii) the Change of Control
Employment Agreement dated as of January 1, 1998, between the Company
and James A. Saunders (the "SAUNDERS CHANGE OF CONTROL AGREEMENT");
(iii) the Amended and Restated Change of Control Employment Agreement
dated as of March 2, 1999, between the Company and James C. Dodd (the
"DODD CHANGE OF CONTROL AGREEMENT"); and (iv) the Amended and Restated
Change of Control Employment Agreement dated as of January 1, 1998,
between the Company and Bradley P. Forst (the "FORST CHANGE OF CONTROL
AGREEMENT").
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"SIMULA CHANGE OF CONTROL PARTIES" shall mean (i) Donald W.
Townsend, with respect to the Townsend Change of Control Agreement;
(ii) James A. Saunders, with respect to the Saunders Change of Control
Agreement; (iii) James A. Dodd, with respect to the Dodd Change of
Control Agreement; and (iv) Bradley P. Forst, with respect to the Forst
Change of Control Agreement.
"SIMULA PROTECTIVE UK" shall Simula Protective Systems
Limited, a company organized and existing under the laws of the United
Kingdom.
"SITE" shall mean any real property previously, currently or
hereafter owned, leased or operated by any Environmental Person.
"SOLVENT" shall mean, with respect to any Person, that on the
date of determination: (i) the present fair saleable value of the
assets of such Person will exceed the amount that will be required to
pay the probable liability on the existing debts (whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent)
of such Person as they become absolute and matured; (ii) the sum of the
debts (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of such Person will not exceed all of
the property of such Person at a fair valuation; and (iii) the capital
of such Person will not be unreasonably small for such Person to carry
on its businesses.
"SSSI" shall have the meaning set forth in the preamble.
"STI" shall have the meaning set forth in the preamble.
"SUBORDINATED INDEBTEDNESS" shall mean any and all
Indebtedness of any Company Party, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, that is subordinate or junior
in right of payment to the Indebtedness evidenced by the Notes or the
Guaranty, as the case may be, pursuant to a written agreement to that
effect, as such Indebtedness of any Company Party may be refinanced,
renewed, replaced, restructured or exchanged from time to time in
accordance with SECTION 10.10.
"SUBSIDIARY" and "SUBSIDIARIES" shall mean, with respect to
any specified Person, any other Person of which more than ten percent
(10.0%) of the total voting power of Capital Stock entitled to vote
(without regard to the occurrence of any contingency) in the election
of directors (or other Persons performing similar functions) are at the
time directly or indirectly owned by such specified Person. Unless
otherwise indicated, the term "SUBSIDIARY" refers to a Subsidiary of
the Company, whether directly or indirectly owned.
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"TANGIBLE NET WORTH" shall mean, with respect to the Company
and its Subsidiaries on any date and without duplication, (i) the sum
of (a) the excess of the book value of assets over liabilities at such
time, determined on a consolidated basis in accordance with GAAP, and
(b) the amount shown for redeemable warrants on the consolidated
balance sheet of the Company and its Subsidiaries at such time, MINUS
(ii) Intangible Assets at such time.
"TAX" or "TAXES" shall mean any present and future income,
excise, sales, use, stamp or franchise taxes and any other taxes, fees,
duties, levies, withholdings or other charges of any nature whatsoever
imposed by any taxing authority, whether federal, state, local or
foreign, together with any interest and penalties and additions to tax.
"TERM A NOTE" shall have the meaning set forth in SECTION 2.1.
"TERM B NOTE" shall have the meaning set forth in SECTION 2.1.
"TERM A NOTE HOLDER" shall mean any Person (including, without
limitation, the Purchaser) in whose name any Term A Note is registered
in the register required to be maintained by the Company Parties
pursuant to SECTION 10 of the Term A Note.
"TERM B NOTE HOLDER" shall mean any Person (including, without
limitation, the Purchaser) in whose name any Term B Note is registered
in the register required to be maintained by the Company Parties
pursuant to SECTION 10 of the Term B Note.
"TERMINATION EVENT" shall mean (i) the Company, any Benefit
Plan or any fiduciary (within the meaning of Section 3(21) of ERISA) of
a Benefit Plan being named as a defendant in a lawsuit filed under
ERISA; (ii) the Internal Revenue Service giving notice that it intends
to revoke the tax-qualified status of any Benefit Plan; (iii) the
occurrence of a "Reportable Event" described in Section 4043 of ERISA
with respect to a Benefit Plan, regardless of whether the PBGC has
waived the notice requirements with respect to such event in its
regulations; (iv) the imposition of liability (whether absolute or
contingent) as a result of a complete or partial withdrawal from a
multiemployer plan; (v) the filing of a notice to terminate a Benefit
Plan in a distress termination under Section 4041(c) of ERISA; (vi) the
institution of proceedings by the PBGC to terminate a Benefit Plan or
to appoint a trustee pursuant to Section 4042 of ERISA, or the
occurrence of any event or set of circumstances that might reasonably
constitute grounds for the PBGC to do either; (vii) the restoration of
a plan by the PBGC pursuant to Section 4047 of ERISA; or (viii) the
Company's withdrawal from a single-employer plan during the plan year
in which it is a substantial employer pursuant to Section 4063 of
ERISA.
"THIRD PARTY INTELLECTUAL PROPERTY RIGHTS" shall have the
meaning specified in SECTION 3.26.
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"TOTAL RECEIVABLES" shall mean, at any time, the total
consolidated trade receivables of the Company and its Subsidiaries at
such time, determined in accordance with GAAP.
"UCC" shall mean the Uniform Commercial Code, as adopted and
in force in the State of California as from time to time in effect, and
the Uniform Commercial Code of any other jurisdiction as required under
Division 9103 of the California Commercial Code.
"VOTING STOCK" of a Person shall mean all classes of Capital
Stock of such Person then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.
"WARRANT" shall have the meaning set forth in SECTION 2.1.
"WARRANT SHARES" shall have the meaning set forth in the
Warrant.
"YEAR 2000 COMPLIANT" shall have the meaning set forth in
SECTION 3.39.
1.2 ACCOUNTING TERMS AND COMPUTATIONS. For purposes of this Agreement,
(a) all accounting terms used in this Agreement that are not expressly defined
herein have the meanings given to them under GAAP, (b) all computations made
pursuant to this Agreement or any other Investment Document shall be made in
accordance with GAAP and (c) all financial statements and other financial
information to be delivered by the Company or any of its Subsidiaries hereunder
or under any other Investment Document shall be prepared in accordance with
GAAP, except that any interim financial statements or other financial
information which are unaudited may be subject to year-end audit adjustments and
may omit footnotes.
1.3 INDEPENDENCE OF COVENANTS. All covenants and agreements under this
Agreement shall each be given independent effect so that if a particular action
or condition is not permitted by any such covenant, the fact that it would be
permitted by another covenant, by an exception thereto, or be otherwise within
the limitations thereof, shall not avoid the occurrence of a Default or an Event
of Default if such action is taken or condition exists.
1.4 CAPTIONS; CONSTRUCTION AND INTERPRETATION. The captions in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement and are not to be considered in construing or interpreting this
Agreement. All section, preamble, recital, exhibit, schedule, disclosure
schedule, annex, clause and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of this
Agreement for purposes of construing the provisions of this Agreement, and all
provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.
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1.5 DETERMINATIONS. Any determination or calculation contemplated by
this Agreement or any other Investment Document that is made by the Purchaser
shall be final and conclusive and binding upon the Company in the absence of
manifest error.
1.6 KNOWLEDGE OF THE COMPANY. Whenever the term "knowledge of the
Company Parties," "knowledge of any Company Party" or "best knowledge of the
Company and its Subsidiaries" or words of similar import are used in this
Agreement or any other Investment Document with respect to the existence or
absence of any fact, it shall mean that any one or more of the Principal
Shareholders knows or should have known, based upon reasonable inquiry, of the
existence or absence of such fact.
2. PURCHASE AND SALE OF THE SECURITIES.
2.1 AUTHORIZATION. The Company Parties have authorized the joint and
several issuance and sale to the Purchaser of (a) a Secured Senior Note Due 2000
in the principal amount of $5,000,000, in substantially the form of EXHIBIT A-1
(as the same may be amended, restated, supplemented, modified, renewed,
refinanced or restructured from time to time, the "TERM A NOTE"), and (b) a
Secured Senior Note Due 2003 in the principal amount of $15,000,000, in
substantially the form of EXHIBIT A-2 (as the same may be amended, restated,
supplemented, modified, renewed, refinanced or restructured from time to time,
the "TERM B NOTE" and, together with the Term A Note, the "NOTES", and the term
"NOTE" shall refer to either the Term A Note or the Term B Note, as applicable).
In addition, the Company has authorized the issuance and sale to the Purchaser
of a Warrant to Purchase 850,000 Shares of Common Stock, in substantially the
form of EXHIBIT B (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "WARRANT"). The Notes and the Warrant
are collectively referred to herein as the "SECURITIES."
2.2 PURCHASE OF THE SECURITIES; ISSUE PRICE. Subject to the terms and
conditions contained herein and in the other Investment Documents, and in
reliance upon the representations, warranties, covenants and agreements
contained herein, at the Closing, the Company Parties shall jointly and
severally issue and sell to the Purchaser the Notes, the Company shall issue and
sell to the Purchaser the Warrant, and the Purchaser shall purchase the
Securities from the Company. The aggregate purchase price to be paid by the
Purchaser for the Securities (the "PURCHASE PRICE") shall be $20,000,000,
payable as provided in SECTION 2.3. The Company Parties, on the one hand, and
the Purchaser, on the other hand, agree that, for purposes of Section 1271 ET
SEQ. of the Code, the original issue price of the Term A Note will be 93.825% of
its principal amount, the original issue price of the Term B Note will be
93.825% of its principal amount and the original issue price of the Warrant will
be $1,235,000, and that this agreement is intended to constitute an agreement as
to the issue prices of the Securities for all federal, state and local income
tax purposes.
2.3 CLOSING. The closing of the issuance and sale of the Securities
under this Agreement (the "CLOSING") shall take place at the offices of Riordan
& McKinzie, 300 South
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Grand Avenue, Suite 2900, Los Angeles, California 90071, on the date hereof or
as soon as practicable thereafter immediately following the satisfaction or
waiver of the conditions precedent set forth in SECTION 6 and SECTION 7 (such
date being referred to as the "CLOSING DATE"), subject to SECTION 12.1. At the
Closing, the Company Parties shall deliver to the Purchaser, among other things,
the Securities, duly executed by the Company Parties or the Company, as
applicable, against delivery by the Purchaser of the Purchase Price (net of
amounts permitted to be withheld pursuant to SECTIONS 6.3 and 8.5) by wire
transfer in immediately available funds to such bank as the Company may request
in writing for credit to an account designated by the Company in such request,
PROVIDED, HOWEVER, that such request shall be consistent with the purposes set
forth in SCHEDULE 3.37.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the
Purchaser to purchase the Securities under this Agreement, the Company Parties
hereby jointly and severally represent and warrant to the Purchaser that, except
as expressly set forth in the respective Disclosure Schedules (the "DISCLOSURE
SCHEDULES"):
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona. The Company has all requisite power and authority, and all Operating
Licenses, necessary to own or lease and operate its properties and assets and to
carry on its business as now conducted and as proposed to be conducted, and is
duly qualified or licensed to do business in each jurisdiction in which the
character of the properties or assets owned, leased or operated by the Company
or the nature of the activities conducted makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed could not
reasonably be expected to result in a Material Adverse Effect.
3.2 CORPORATE OR OTHER POWER. Each Company Party has the requisite
power and authority to execute, deliver, carry out and perform its obligations
under this Agreement and all other Investment Documents to which it is a party,
including, without limitation, the power and authority to issue, sell and
deliver the Securities to be issued and sold by it to the Purchaser hereunder.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. The execution, delivery and
performance of this Agreement and each of the other Investment Documents to
which any Company Party is a party, the issuance, sale and delivery by the
Company Parties of the Securities as contemplated hereunder and the consummation
of the other transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Company Parties, as
applicable. This Agreement has been duly executed and delivered by the Company
Parties and, at the Closing, each of the other Investment Documents will be duly
executed and delivered by each Company Party that is a party thereto. This
Agreement is, and each other Investment Document will at the Closing be, a
legal, valid and binding obligation of each Company Party that is a party
thereto, enforceable against each such Company Party in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization,
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moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability, and except as rights of indemnity or contribution may be limited
by federal or state securities laws or the public policy underlying such laws.
3.4 SUBSIDIARIES.
(a) SCHEDULE 3.4 sets forth a true, complete and correct list
of all of the direct and indirect Subsidiaries of the Company, setting forth, as
to each such Subsidiary, its name, the address of its principal executive
offices, its state or other jurisdiction of organization and its federal and
state Tax identification numbers. The Company owns, directly or indirectly, all
of the issued and outstanding shares of Capital Stock of each Subsidiary set
forth on SCHEDULE 3.4. Except as set forth on SCHEDULE 3.4, no Subsidiary of the
Company owns or holds any Capital Stock of any other Person.
(b) Each Subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of its state or
other jurisdiction of organization and has all requisite power and authority,
and all Operating Licenses, necessary to own or lease and operate its properties
and assets and to carry on its business as now conducted and as proposed to be
conducted.
(c) Each Subsidiary of the Company is duly qualified or
licensed to do business in good standing in each jurisdiction in which the
character of the properties or assets owned, leased or operated by such
Subsidiary or the nature of the activities conducted makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect. SCHEDULE 3.4 also sets forth a true, complete and
correct list of all states and other jurisdictions in which each of the
Company's Subsidiaries is duly qualified or licensed to do business as a foreign
corporation.
(d) Neither Simula Automotive UK nor Intaero Ltd. conducts any
business, or have any commercial relationships (contractual or otherwise), with
any Person other than the Company and the other Company Parties. Neither Simula
Automotive UK nor Intaero Ltd. owns or holds any assets or properties or conduct
any business, or maintain any commercial relationships (contractual or
otherwise), with any Person, and is inactive.
(e) Except for Simula Protective UK and Intaero Ltd., all
direct and indirect Subsidiaries of the Company are Company Parties.
(f) The representations set forth in SECTION 3.4(a), (b) and
(c) shall not be made with respect to Intaero Ltd..
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3.5 CONFLICT WITH OTHER INSTRUMENTS; EXISTING DEFAULTS; RANKING.
(a) Except as set forth in SCHEDULE 3.5(a), the execution,
delivery and performance of this Agreement by the Company Parties and of each
other Investment Document to which any Company Party is a party, the issuance,
sale and delivery by the Company Parties of the Securities and the consummation
of the other transactions contemplated hereby and thereby do not and will not
violate (i) the charter or bylaws of any Company Party, in each case as in
effect on the date hereof, (ii) any term of any lease, credit agreement,
indenture, note, mortgage, instrument or other agreement to which any Company
Party is a party or by which any of its or their properties or assets are bound
(including, without limitation, any Material Contracts) or (iii) any Applicable
Laws.
(b) Except as set forth in SCHEDULE 3.5(b), neither the
Company nor any of its Subsidiaries is in default, breach or violation of (i)
its charter or bylaws, as in effect as of the date hereof, (ii) any lease,
credit agreement, indenture, note, mortgage, instrument or other agreement to
which it is a party or by which any of its properties or assets are bound
(including, without limitation, any Material Contracts) or (iii) any Applicable
Laws. Without limiting the generality of the foregoing, there does not exist any
"default" or "event of default" (in each case as defined in any Other Debt
Document) or any default under any other credit or financing agreement to which
the Company or any of its Subsidiaries is a party or by which any of its
properties or assets are bound.
(c) Except as set forth in SCHEDULE 3.5(c), there are no
contractual or other restrictions or limitations which prohibit the issuance and
sale by any Company Party of the Securities as contemplated hereunder, prohibit
or restrict any merger, sale of assets or other event which could cause a Change
in Control, or otherwise prohibit any other financings by any Company Party,
including, without limitation, any public or private debt or equity financings.
(d) The Indebtedness evidenced by the Notes constitutes Senior
Indebtedness of the Company and is not subordinate or junior in right of payment
to any other Indebtedness of the Company. Except as set forth in SCHEDULE
3.5(d), no Indebtedness of the Company ranks PARI PASSU with the Indebtedness
evidenced by the Notes or with any other Obligations.
3.6 GOVERNMENTAL AND OTHER THIRD PARTY CONSENTS. Except for the
Consents listed in SCHEDULE 3.6 and those that have already been obtained or
made, no Company Party is required to obtain any Consent from, or is required to
make any declaration or filing with, any Governmental Authority or any other
Person in connection with the execution, delivery and performance of this
Agreement or any other Investment Document, including, without limitation, the
issuance, sale and delivery of the Securities, or for the purpose of maintaining
in full force and effect any Operating Licenses. Each of the Consents which have
been obtained or made in connection with the execution, delivery and performance
of this Agreement or any other Investment Document is in full force and effect.
The time within which any administrative or judicial appeal, reconsideration,
rehearing or other review of any such
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Consent may be taken or instituted has lapsed, and no such appeal,
reconsideration or rehearing or other review has been taken or instituted.
3.7 CAPITALIZATION.
(a) SCHEDULE 3.7(a) sets forth a true, correct and complete
description of the authorized capital stock of the Company and the number of
shares of each class of Capital Stock that is issued and outstanding as of the
date hereof. All of the issued and outstanding shares of Capital Stock of the
Company have been duly authorized and are validly issued, fully paid and
non-assessable, and are free and clear of any Liens and other restrictions
(including any restrictions on the right to vote, sell or otherwise dispose of
such Capital Stock) and of any preemptive or other similar rights to subscribe
for or to purchase any such Capital Stock. Except as set forth on SCHEDULE
3.7(a) (which Schedule sets forth a true, correct and complete description of,
with respect to each security, title, name of the holder or Person, as
applicable, the number of shares of Capital Stock underlying such security,
exercise price, expiration date and percentage of shares of such Capital Stock
on a Fully Diluted Basis), as of the date hereof, there are: (i) no outstanding
Equity Rights of the Company; (ii) to the best knowledge of the Company Parties,
no voting trusts or other agreements or undertakings with respect to the voting
of the Capital Stock of the Company; (iii) no obligations or rights (whether
fixed or contingent) on the part of the Company, any of its directors or
officers or any Principal Shareholders or, to the best knowledge of the Company
Parties, any other Person to purchase, repurchase, redeem or "put" any
outstanding shares of the Capital Stock of the Company or Equity Rights of the
Company; and (iv) no agreements to which the Company, any of its directors or
officers or any Principal Shareholder or, to the best knowledge of the Company
Parties, any other Person is a party granting any other Person any rights of
first offer or first refusal, registration rights or "drag-along," "tag-along"
or similar rights with respect to any transfer of any Capital Stock or Equity
Rights of the Company. All shares of Capital Stock and Equity Rights of the
Company that have been issued by the Company have been issued and offered in
compliance with all applicable federal and state securities laws. Except as set
forth on SCHEDULE 3.7(a), no additional shares of Capital Stock of the Company
will become issuable to any Person pursuant to any "anti-dilution" provisions of
any such issued and outstanding securities of the Company on account of the
issuance of the Securities, the exercise of the Warrant or the application of
the "anti-dilution" provisions contained in the Warrant.
(b) SCHEDULE 3.7(b) sets forth a true, correct and complete
description of the authorized capital stock of each Subsidiary of the Company,
the number of shares of each class of Capital Stock of each such Subsidiary that
is issued and outstanding as of the date hereof, the certificate number(s)
representing such number of shares and the owner of record of such issued and
outstanding shares. All of the issued and outstanding shares of Capital Stock of
each Subsidiary of the Company have been duly authorized and are validly issued,
fully paid and non-assessable, and are free and clear of any Liens and other
restrictions (including any restrictions on the right to vote, sell or otherwise
dispose of any such Capital Stock) and of any preemptive or other similar rights
to subscribe for or to purchase any such Capital Stock.
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Except as set forth on SCHEDULE 3.7(b) (which Schedule sets forth a true,
correct and complete description of, with respect to each security, title, name
of the holder, number of shares of Capital Stock underlying such security,
exercise price, expiration date and percentage of shares of such Capital Stock
on a Fully Diluted Basis), there are: (i) no outstanding Equity Rights of any
Subsidiary of the Company; (ii) no voting trusts or other agreements or
undertakings with respect to the voting of the Capital Stock of any such
Subsidiary; (iii) no obligations or rights (whether fixed or contingent) on the
part of any such Subsidiary or any other Person to purchase, repurchase, redeem
or "put" any outstanding shares of the Capital Stock or Equity Rights of any
such Subsidiary; and (iv) no agreements granting any Person any rights of first
offer or first refusal, registration rights or "drag-along," "tag-along" or
similar rights with respect to any transfer of any Capital Stock or Equity
Rights of any such Subsidiary. All shares of Capital Stock and Equity Rights any
such Subsidiary that have been issued by such Subsidiary have been issued and
offered in compliance with all applicable federal and state securities laws. No
additional shares of Capital Stock of any Subsidiary of the Company will become
issuable to any Person pursuant to any "anti-dilution" provisions of any such
issued and outstanding securities of any such Subsidiary on account of the
issuance of the Securities, the exercise of the Warrant or the application of
the "anti-dilution" provisions contained in the Warrant.
3.8 VALIDITY AND ISSUANCE OF WARRANT SHARES. The Warrant Shares have
been duly authorized and reserved and, when issued, delivered and paid for
pursuant to the terms of the Warrant, will be duly and validly issued, fully
paid and non-assessable.
3.9 COMPANY SEC DOCUMENTS.
(a) The Company has timely filed with the Commission all
Company SEC Documents which were required to be filed by it with the Commission
and the NYSE since December 31, 1996. SCHEDULE 3.9 sets forth a true, complete
and correct list of all Company SEC Documents filed by the Company since
December 31, 1996, the respective dates on which they were filed and a notation
to the effect, if true, that such filing was late.
(b) Each Company SEC Document previously filed by the Company
complies with all applicable requirements of the Securities Act, the Exchange
Act or the NYSE rules, as the case may be, and, when filed with the SEC, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company and its Subsidiaries
included in each Company SEC Document filed by the Company complied as to form,
as of the dates of its filing with the Commission, with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by the Commission) and fairly present the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended
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(subject, in the case of unaudited statements, to normal year-end audit
adjustments consistent with past practices and consistently applied).
(c) All information regarding the "Y2K" issue is fully and
adequately disclosed in the Company SEC Documents with respect to the Company
and its Subsidiaries.
3.10 FINANCIAL STATEMENTS.
(a) The Company has delivered to the Purchaser copies of (i)
audited consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 1996, 1997 and 1998, and audited consolidated statements of
operations, shareholders' equity and changes in financial position or cash flows
for each of the three (3) years then ended, together with a report and an
unqualified opinion of Deloitte & Touche LLP, the independent public accountants
of the Company, and (ii) unaudited financial statements of the Company and its
Subsidiaries consisting of a balance sheet as of November 30, 1999, and a
statement of operations and cash flows for the eleven (11) month period ended
November 30, 1999 (the financial statements referred to in clauses (i) and (ii)
being collectively referred to as the "FINANCIAL STATEMENTS"). The Financial
Statements (including, in each case, the related schedules and notes) fairly
present the consolidated financial position of the Company and its Subsidiaries
as of the respective dates of such balance sheets and the results of operations
of the Company and its Subsidiaries for the respective periods covered by such
statements of operations, shareholders' equity and changes in financial position
or cash flows, as the case may be, and have been prepared in accordance with
GAAP. Except as set forth on SCHEDULE 3.12(a), since December 31, 1998, there
has not been any Material Adverse Change.
(b) Except as provided in this Agreement, no Company Party or
any of its or their officers, directors or other Affiliates (i) is contemplating
the filing of a petition under the Bankruptcy Laws with respect to any Company
Party, or the liquidation of all or any major portion of its or their assets or
properties, or (ii) is aware of any Person contemplating the filing of any
petition against any Company Party under the Bankruptcy Laws. No Company Party
is contemplating changing its business, as such business is being conducted on
the date hereof. Notwithstanding the foregoing, the Purchaser acknowledges that
(A) the Company, SimTech and Airline Interiors have entered into the Airline
Interiors Sale Agreement pursuant to which Airline Interiors is expected to sell
all or substantially all of its assets to the Airline Interiors Buyer on the
terms set forth therein and (B) the Company is currently contemplating the sale
of all the Capital Stock, or all or substantially all of the assets, of Artcraft
Industries.
(c) The Company has furnished to the Purchaser a consolidated
balance sheet of the Company and its Subsidiaries as of November 30, 1999, as
adjusted to give PRO FORMA effect to the consummation of the transactions
contemplated by this Agreement and the Bank Credit Agreement as if such
transactions had occurred on such date (the "PRO FORMA CLOSING BALANCE SHEET").
SCHEDULE 3.10(c) sets forth a true, correct and complete copy of the Pro Forma
Closing Balance Sheet, together with footnotes describing the PRO FORMA
adjustments and
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the assumptions underlying the Pro Forma Closing Balance Sheet. The Pro Forma
Closing Balance Sheet presents fully and fairly in all material respects the PRO
FORMA consolidated financial position of the Company and its Subsidiaries as of
November 30, 1999, and properly gives effect to the application of the PRO FORMA
adjustments described therein and contemplated herein. All assumptions
underlying the Pro Forma Closing Balance Sheet were made in good faith and are
reasonable under the circumstances.
3.11 EXISTING INDEBTEDNESS; EXISTING LIENS; INVESTMENTS; ETC.
(a) SCHEDULE 3.11 sets forth a true, correct and complete
list, and describes, as of the date or dates indicated therein, as applicable:
(i) all Indebtedness of the Company and its
Subsidiaries on a consolidated and consolidating basis
(collectively,"EXISTING INDEBTEDNESS") outstanding immediately prior to
the Closing Date, showing, as to each Indebtedness, the payee thereof
and the total amount outstanding (by principal, interest and other
amounts, if applicable);
(ii) all Liens in respect of any property or assets
of the Company and/ or any of its Subsidiaries (collectively, "EXISTING
LIENS") existing as of December 28, 1999, showing, as to each Lien, the
name of the grantor and secured party, the Indebtedness secured
thereby, the name of the debtor (if different from the grantor) and the
assets or other property covered by such Lien;
(iii) all Investments of the Company and its
Subsidiaries immediately prior to the Closing Date;
(iv) all UCC financing statements existing as of
December 28, 1999, naming the Company or any of its Subsidiaries as a
debtor, showing, as to each financing statement, the basis for the
filing; and
(v) a trade payables aging schedule for the Company
and its Subsidiaries, on a consolidated basis as of November 30, 1999.
(b) Neither the Company nor any of its Subsidiaries has on the
date hereof any material Contingent Obligations, liabilities for Taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected in the Pro Forma
Closing Balance Sheet.
(c) Immediately following the Closing, the Company and its
Subsidiaries will not have any Indebtedness, whether accrued, absolute,
contingent or otherwise (whether individually or in the aggregate), except for
the Indebtedness set forth on SCHEDULE 3.11(c).
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(d) As of the Closing Date, the "Availability" under the Bank
Credit Agreement is, or will be, at least $2.0 million.
(e) The total liability of the Company Parties outstanding
under the retention agreements entered into in connection with the sale of all
or substantially all of the assets of Coach & Car Equipment Corporation does not
exceed $181,300 in the aggregate.
3.12 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
3.12(a), since December 31, 1998, there has not been:
(a) Any transaction involving any Company Party not in the
ordinary course of business, including, without limitation, any sale of any
assets or properties (other than inventory in the ordinary course of business);
(b) Any declaration, setting aside or payment of any dividend
or other distribution or payment (whether in cash, stock or property) with
respect to the Capital Stock of any Company Party, or any redemption, purchase
or other acquisition of securities of any Company Party, or any payment to any
stockholder of the Company not in his, her or its capacity as a stockholder;
(c) Any damage, destruction or loss, whether or not covered by
insurance, to any material assets or properties of any Company Party;
(d) Any Material Adverse Change;
(e) Any loan or advance made by any Company Party to any
Person, except normal travel advances or other reasonable business expense
advances made in the ordinary course of business to its own employees;
(f) Any Indebtedness for borrowed money incurred by any
Company Party or any commitment to incur Indebtedness for borrowed money entered
into by any Company Party (other than as contemplated by this Agreement);
(g) Any capital expenditures or commitments to make capital
expenditures materially in excess of the amount reflected in the Initial
Financial Projections;
(h) Any indemnity or other claims made by or against any
Company Party with respect to or in connection with any acquisition or sale or
other disposition, whether direct or indirect, of the Capital Stock or assets of
any other Person;
(i) Any amendment or other modification to the charter or
bylaws of any Company Party;
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(j) The formation or creation of any direct or indirect
Subsidiary of any Company Party, or the disposition of the Capital Stock or
assets of any Company Party;
(k) Any waiver by any Company Party of a valuable right or of
Indebtedness owed to it;
(l) Any payment, satisfaction, discharge or cancellation of
any debts or claims of any Company Party other than in the ordinary course of
business consistent with past practices;
(m) Any amendment, modification or termination of any Material
Contract or any material agreement to which any Company Party is a party or by
which any Company Party or any of their assets or properties may be bound or
subject or of any employment or consulting agreement;
(n) Any change in the Contingent Obligations of any
Company Party, by way of guarantee or otherwise;
(o) Any mortgage, pledge or Lien encumbering any of the assets
or properties of any Company Party, or any assumption of, or taking any assets
or properties subject to, any liability;
(p) Any resignation by, or termination of the employment of,
any director or officer of any Company Party;
(q) Any Investment by any Company Party in the Capital Stock
of any Person;
(r) Any payment of management, consulting or similar fees by
any Company Party to any of its Affiliates;
(s) Any offer, issuance or sale of any shares of Capital Stock
or Equity Rights of any Company Party;
(t) Any alteration or change in any Company Party's credit
guidelines and policies, charge-off policies or accounting methods, quality
control procedures or policies or manner of preparing its financial statements
or maintaining its books of account;
(u) Any increase in, or commitment to increase, the salaries,
wages, bonuses or other compensation payable or to become payable to any officer
or other employee of any Company Party, other than increases in salaries and
wages in the ordinary course of business consistent with past practices and,
with respect to any Principal Shareholder, not in excess of fifteen percent
(15.0%);
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(v) Any adoption by any Company Party of any new Benefit Plan
or amendment to any Benefit Plan to provide any new or additional plans,
programs, contracts, benefits or arrangements involving direct or indirect
compensation to any officer, director, employee, former employee, or their
dependents or beneficiaries, of the Company Parties;
(w) Any settlement of any litigation, entry of a consent
decree or entry of any judgment against any Company Party with a value of
$10,000 or more;
(x) Any revaluation by any Company Party of any of its assets,
including without limitation, any write-offs, increases in any reserves except
in the ordinary course of business consistent with past practice or any write-up
or write-down of the value of inventory, property, plant, equipment or any other
asset;
(y) Any revaluation or repricing of any Equity Rights of any
Company Party; or
(z) The occurrence of any other event or the development of
any other condition which has had or could have a Material Adverse Effect.
3.13 MATERIAL CONTRACTS.
(a) SCHEDULE 3.13 sets forth a true, correct and complete list
of all contracts, commitments, licenses, agreements, obligations or
arrangements, whether oral or written, formal or informal, to which any Company
Party is a party (or intends to become a party) or to which any of its assets or
properties is bound:
(i) under which any Company Party is indemnified for
or against any liability in excess of $100,000 or under which any
Company Party is or could be obligated to indemnify any Person in
excess of $100,000;
(ii) under which any Company Party leases personal
property from or to third parties under Capital Leases which involve
rental payments of at least $25,000 per annum or under operating
leases which involve rental payments of at least $100,000;
(iii) for the purchase or sale of products or other
personal property or for the furnishing or receipt of services (A)
which calls for performance over a period of more than one (1) year,
(B) which involves payments of more than the $100,000 in the aggregate
or (C) in which any Company Party has agreed to purchase a minimum
quantity of goods or services or has agreed to purchase goods or
services exclusively from any Person;
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(iv) (A) granting representation, marketing or
distribution rights or (B) relating to Intellectual Property
(including, without limitation, license, franchise or similar
agreements);
(v) under which any Company Party has created,
incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) Indebtedness in excess of $100,000;
(vi) establishing or maintaining any partnership,
joint venture or strategic alliance;
(vii) under which there is or may be imposed a
security interest or other Lien on any of its assets, whether tangible
or intangible, whose net book value or fair market value is in excess
of $50,000 (other than the security interests or Liens granted in
favor of the Purchaser and the Bank);
(viii) concerning any confidentiality or
non-solicitation obligations entered into outside the ordinary course
of business;
(ix) under which any Company Party is restricted from
carrying on its business or any part thereof, or from competing in any
line of business or with any Person;
(x) with officers, directors, employees, consultants
or independent contractors of any Company Party;
(xi) resulting in the creation of any Lien (including
any lease notifications) other than a Permitted Lien;
(xii) involving any Affiliates of any Company Party;
(xiii) under which the consequences of a default or
termination could have a Material Adverse Effect;
(xiv) under which any Company Party will (A) receive
aggregate payments from customers, (B) make aggregate payments to
vendors or other suppliers or (C) make or receive aggregate payments
to or from any other Persons, in each case in excess of $100,000 per
annum;
(xv) under which any Governmental Authority is a
party (or a beneficiary thereof) that involves payments to any Company
Party in excess of $500,000 and that is less than fifty percent (50%)
completed by the Company Parties; and
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(xvi) not entered into in the ordinary course of
business and not otherwise disclosed on SCHEDULE 3.13 in response to
any of the foregoing clauses.
All of the contracts, commitments, licenses, agreements,
obligations or arrangements described in clauses (i) through (xvi) above,
together with the real property leases, subleases, licenses and other interests
described in SECTION 3.24, whether entered into prior to, on or after the
Closing Date, are collectively referred to herein as the "MATERIAL CONTRACTS".
(b) Except as disclosed on SCHEDULE 3.13(b), each Material
Contract existing as of the date hereof is a legal, valid and binding obligation
of the Company Party or Parties that are party thereto, on the one hand, and the
other parties thereto, on the other hand, enforceable against each of them in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or conveyance or
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability, and is in full force and effect. The
parties to each Material Contract existing as of the date hereof are in
substantial compliance with the terms thereof, and no default or event of
default by any Company Party or, to the best knowledge of the Company Parties,
any other party thereto exists thereunder.
(c) Except as set forth on SCHEDULE 3.13(c), neither the
Company nor any of its Subsidiaries is a party to any contract, commitment,
license, agreement, obligation or arrangement that restricts it from carrying on
its business or any part thereof, or from competing in any line of business or
with any other Person.
3.14 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
Parties (a) are legal, valid and binding obligations of the Persons shown in the
accounting records of the Company Parties as the obligor with respect thereto
(and if any such accounts receivable is not legal, valid and binding obligations
of such Persons, the Company has established reserves therefor, which reserves
are adequate in accordance with GAAP), (b) arose out of bona fide sales actually
made or services actually performed on or prior to such date in the ordinary
course of business, (c) are not subject to discount, rebate, offset, return
privilege or claim (other than as reflected in the reserves taken in recording
the accounts receivable on the books of the Company Parties, which reserves are
adequate in accordance with GAAP) (d) are, to the best knowledge of the Company
Parties, valid and collectible in the ordinary course of business. Except as set
forth on SCHEDULE 3.14, no customer has indicated an unwillingness or an
inability to pay any amount included in the accounts receivables of the Company
Parties.
3.15 LABOR RELATIONS.
(a) Each Company Party is in full compliance with the Fair
Labor Standards Act (29 U.S.C. Section 201 ET SEQ.), all state wage and hour
laws and all worker's compensation laws
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and is not engaged in any unfair labor practice which has had or could have a
Material Adverse Effect;
(b) There is no labor strike, slowdown, work stoppage or
charge of unfair labor practice, and there are no labor disputes, grievances,
complaints or arbitration proceedings, pending or affecting any Company Party
nor, to the best knowledge of the Company Parties, is there any basis therefor
or threat thereof;
(c) No Company Party is bound by or subject to any written or
oral, express or implied, contract, commitment or arrangement with any labor
union or other employee organization, and, to the best knowledge of the Company
Parties, no labor union or other employee organization has requested or sought
to represent any of the employees, representatives or agents of the Company
Parties;
(d) No Company Party is aware of (i) any labor union or other
employee organization activity involving employees of the Company or any other
Company Party, or (ii) any officer, any group officers or any Principal
Shareholder who intends or intend to terminate his or her employment with any
Company Party;
(e) To the best knowledge of the Company Parties, there are no
petitions pending before the National Labor Relations Board in connection with
any pending claim for union representation; and
(f) To the best knowledge of the Company Parties, there is no
fact or circumstance which could, with the passage of time or otherwise, cause
this representation and warranty to be no longer true and correct.
3.16 EMPLOYEE BENEFIT PLANS; ERISA. For purposes of this SECTION 3.16,
the term "Company" shall include any Person that is or would be aggregated with
the Company under Section 414(b), (c), (m), or (o) of the Code. However, this
SECTION 3.16 will not apply to a "Multiemployer Plan" (as defined in Section
4001(a)(3) of ERISA), except as expressly referred to herein.
(a) SCHEDULE 3.16 sets forth a true, correct and complete list
of:
(i) Each termination or severance agreement involving
the Company or its Subsidiaries, on the one hand, and any of its
respective employees whose annual compensation is at a base rate equal
to or exceeding $60,000, on the other hand;
(ii) All employee benefit plans, as defined in ERISA
Section 3(3); and
(iii) All other profit-sharing, bonus, stock option,
stock purchase, stock bonus, restricted stock, stock appreciation
right, phantom stock, vacation pay, holiday
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pay, tuition reimbursement, scholarship, severance, dependent care
assistance, excess benefit, incentive compensation, salary
continuation, supplemental retirement, employee loan or loan guarantee
program, split dollar, cafeteria plan, and other compensation
arrangements;
in each case maintained or contributed to by the Company for the benefit of its
employees (or former employees) and/or their beneficiaries. All of these types
of arrangements shall be collectively referred to as "BENEFIT PLANS". An
arrangement will not fail to be a Benefit Plan simply because it only covers one
individual, or because the Company's obligations under the plan arise by reason
of its being a "successor employer" under Applicable Laws. Furthermore, a
Voluntary Employees' Beneficiary Association under Section 501(c)(9) of the Code
will be considered a Benefit Plan for this purpose.
(b) The Company has delivered to Buyer a true and complete
copy of the following documents, to the extent that they are applicable:
(i) Each Benefit Plan and any related funding
agreements (E.G., trust agreements or insurance contracts), including
all amendments (and SCHEDULE 3.16 includes a description of any such
amendment that is not in writing);
(ii) The current draft of the summary plan
description and all subsequent summaries of material modifications of
each Benefit Plan;
(iii) The most recent Internal Revenue Service
determination letter for each Benefit Plan that is intended to qualify
for favorable income tax treatment under Section 401(a) or 501(c)(9) of
the Code, which determination letter reflects all amendments that have
been made to the plan (except as set forth in SCHEDULE 3.16); and
(iv) The two (2) most recent Form 5500s (including
all applicable Schedules and the opinions of the independent
accountants) that were filed on behalf of the Benefit Plan.
(c) All costs of administering and contributions required to
be made to each Benefit Plan under the terms of that Benefit Plan, ERISA, the
Code, or any other applicable law have been timely made, and are fully
deductible in the year for which they were paid. All other amounts that should
be accrued to date as liabilities of the Company under or with respect to each
Benefit Plan (including administrative expenses and incurred but not reported
claims) for the current plan year of the plan have been recorded on the books of
the Company. There will be no liability of the Company (i) with respect to any
Benefit Plan that has previously been terminated or (ii) under any insurance
policy or similar arrangement procured in connection with any Benefit Plan in
the nature of a retroactive rate adjustment, loss sharing arrangement, or other
liability arising wholly or partially out of events occurring before the
Closing.
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(d) Each Benefit Plan has been operated at all times in
accordance with its terms, and complies currently, and has complied in the past,
both in form and in operation, with all Applicable Laws, including ERISA and the
Code. The Internal Revenue Service has issued a favorable determination letter
with respect to each Benefit Plan that is intended to qualify under Section
401(a) or 501(c)(9) of the Code, and no event has occurred (either before or
after the date of the letter) that would disqualify the plan.
(e) The Company does not maintain any plan that provides (or
will provide) medical or death benefits to one or more former employees or
independent contractors (including retirees) following termination of
employment, other than benefits that are required to be provided under COBRA or
any state law continuation coverage or conversion rights. The Company has
complied in all material respects with the continuation coverage requirements of
COBRA.
(f) There are no investigations, proceedings, lawsuits or
claims pending or, to the best knowledge of the Company, threatened relating to
any Benefit Plan.
(g) The Company does not have any intention or commitment,
whether legally binding or not, to create any additional Benefit Plan, or to
modify any existing Benefit Plan so as to increase benefits to participants or
the cost of maintaining the plan. The benefits under all Benefit Plans are as
represented, and have not been, and will not be increased subsequent to the date
documents are provided to the Purchaser except in the ordinary course of
business and consistent with competitive business standards. No statement,
either oral or written, has been made by the Company (or any agent of the
Company) to any Person regarding any Benefit Plan that is not in accordance with
the Plan that could have adverse economic consequences to the Purchaser.
(h) None of the persons performing services for the Company
have been improperly classified as being independent contractors, leased
employees, or as being exempt from the payment of wages for overtime.
(i) None of the Benefit Plans provide any benefits that (i)
become payable or become vested solely as a result of the consummation of this
transaction or (ii) would result in excess parachute payments (within the
meaning of Section 280G of the Code), either (A) solely as a result of the
consummation of this transaction or (B) as a result of the consummation of this
transaction and any actions taken by the Purchaser after the Closing Date.
Furthermore, the consummation of this transaction will not require the funding
(whether formal or informal) of the benefits under any Benefit Plan (E.G.,
contributions to a "rabbi trust").
(j) None of the assets of any Benefit Plan that is a "pension
plan" within the meaning of Section 3(2) of ERISA are invested in a group
annuity contract or other insurance contract that is subject to any surrender
charge, interest rate adjustment, or other similar expense upon its premature
termination.
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(k) No Benefit Plan has any interest in any annuity contract
or other investment or insurance contract issued by an insurance company that is
the subject of bankruptcy, conservatorship, rehabilitation, or similar
proceeding.
(l) With respect to each Benefit Plan that is subject to Title
IV of ERISA:
(i) No amount is due or owing from the Company to the
PBGC, other than a liability for premiums under ERISA Section 4007;
(ii) All premiums have been paid to the PBGC on a
timely basis;
(iii) The value, determined on a termination basis
using the actuarial assumptions stated in the plan, of all accrued and
ancillary benefits (whether or not vested) under each such plan did not
exceed, as of the most recent valuation date, and will not exceed as of
the Closing Date, the then current fair market value of the assets of
the plan; and
(iv) No reportable events (within the meaning of
ERISA Section 4043) have occurred.
(m) In the case of each Benefit Plan that is subject to Code
Section 412, there is no accumulated funding deficiency (within the meaning of
Code Section 4971), whether or not such deficiency has been waived.
(n) The Company has not incurred any withdrawal liability
(including any contingent or secondary withdrawal liability) to any
Multiemployer Plan, and no event has occurred, and there exists no condition or
set of circumstances, that presents a material risk of the occurrence of any
withdrawal (partial or otherwise) from, or the partition, termination,
reorganization, or insolvency of any Multiemployer Plan that could result in any
liability on behalf of the Company to a Multiemployer Plan.
(o) The aggregate liability of the Company to all
Multiemployer Plans in the event of a complete withdrawal therefrom, as of the
close of the most recent plan year of the Multiemployer Plan ended prior to the
date hereof would not exceed $10,000. To the best knowledge of the Company,
there has been no material change in the (i) financial condition of any
Multiemployer Plan, (ii) the actuarial assumptions, (iii) required level of
Company contributions, or (iv) level of benefits provided under any
Multiemployer Plan since the close of the most recent plan year of the
Multiemployer Plan that, individually or in the aggregate, would materially
increase the amount of this liability.
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3.17 TAXES.
(a) The Company and each of its Subsidiaries has filed within
the required time periods (after giving effect to any permitted extensions) all
federal, state and other Tax returns required to have been filed by it or them,
and has paid all Taxes which were due and payable by it or them, prior to the
date hereof, other than Taxes that are being contested in good faith and for
which reserves have been properly established on the Pro Forma Closing Balance
Sheet.
(b) The Company and each of its Subsidiaries has withheld and
paid all Taxes required to be withheld and paid by it or them in connection with
amounts paid or owing to any employee, creditor, shareholder or other third
party.
(c) (i) Neither the Company nor any of its Subsidiaries has
been advised that any Tax returns have been or are being audited by any
Governmental Authority; (ii) there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the assessment
of any Taxes or deficiency against the Company or any of its Subsidiaries; (iii)
there are no actions, suits, proceedings or claims now pending by or against the
Company or any of its Subsidiaries in respect of any Taxes or assessments; and
(iv) there is no pending or, to the best knowledge of the Company Parties,
threatened audit or investigation of the Company or any of its Subsidiaries by
any Governmental Authority relating to any Taxes or assessments, or any claims
for additional taxes or assessments asserted by any Governmental Authority.
(d) No Company Party is a party to or bound by any tax
sharing, tax indemnity or tax allocation agreement or other similar arrangement.
3.18 LITIGATION. SCHEDULE 3.18 sets forth a true, complete and correct
list of all actions, suits, arbitration proceedings, investigations, inquiries
or other proceedings, whether governmental or non-governmental, before any
Governmental Authority pending or threatened on the date hereof, or at any time
during the past five (5) years, against, relating to or affecting the Company or
any of its Subsidiaries, or any officer, director or employee thereof in his or
her capacity as such, or any of its or their respective assets, properties or
businesses, and which involve a monetary claim or claims in excess of $25,000 or
injunctive or other equitable relief. Such Schedule sets forth, as to each
matter identified therein, the names of the parties thereto, the forum for such
matter, a summary of the details of the matter, the settlement or other
disposition of the matter (including the monetary value of such settlement or
other disposition) or, if such matter is still pending, a statement to that
effect. Except as set forth on SCHEDULE 3.18:
(a) There is not in effect any order, judgment, decree,
injunction or ruling of any Governmental Authority against, relating to or
affecting the Company or any of its Subsidiaries, or any officer, director or
employee thereof in his or her capacity as such,
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enjoining, barring, suspending, prohibiting or otherwise limiting the same from
conducting or engaging in any aspect of the Company's or any of its
Subsidiaries' business, or requiring the Company or any of its Subsidiaries or
any such officer, director or employee to take certain action with respect to
any aspect of its or their business;
(b) Neither the Company nor any of its Subsidiaries is in
default under any order, judgment, decree, injunction or ruling of any
Governmental Authority, or is subject to or a party to any order, judgment,
decree or ruling arising out of any action, suit or proceeding under any
Applicable Laws, respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters; and
(c) There is no action, suit, arbitration or other proceeding,
investigation or inquiry pending or threatened before any Governmental Authority
which questions the validity of this Agreement, the Notes, the Warrant, the
Guaranty or any other Investment Document or any actions taken or to be taken
pursuant hereto or thereto, or which could, individually or in the aggregate,
have a Material Adverse Effect.
3.19 TRANSACTIONS WITH AFFILIATES
(a) Except as set forth in SCHEDULE 3.19, there is no
Indebtedness owing by the Company to any of its Subsidiaries or other
Affiliates, or by such Subsidiaries or other Affiliates to the Company.
(b) Except as set forth on SCHEDULE 3.19, immediately
following the Closing Date:
(i) no Company Party will be indebted, directly or
indirectly, to any of its own officers or directors, the officers or
directors of its Affiliates or the Principal Shareholders, or to any
members of the Immediate Families of such officers or directors or the
Principal Shareholders, except for, in the case of officers,
compensation payable in the ordinary course of business and reasonable
travel advances accrued in the ordinary course of business consistent
with past practices;
(ii) no officer or director of any Company Party, and
no Principal Shareholder, and no member members of their Immediate
Families, will (A) be indebted to any Company Party in any amount
whatsoever or (B) have any direct or indirect ownership interests in
any Person which competes, directly or indirectly, with the Company
Party; and
(iii) there are no voting or similar agreements
between or among the shareholders of the Company.
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(c) Except for the matters set forth on SCHEDULE 3.16 and
SCHEDULE 3.35, no officer, director or employee of any Company Party, and no
shareholder of the Company, and no member of the Immediate Families of any of
the foregoing, has any direct or indirect interest in any contract, commitment,
license, agreement, obligation or arrangement to which any Company Party is a
party.
(d) No Company Party is a party to any agreement relating to
the voting or disposition of the Capital Stock of any Company Party.
(e) Since January 1, 1997, no shareholder, employee, officer,
director or Affiliate of any Company Party, and no member of the Immediate
Family of any such Person, has engaged in any transaction or relationship with
any Company Party (other than with respect to compensation payable to its
officers and employees and reasonable travel advances accrued in the ordinary
course of business).
(f) No Company Party has loaned or advanced funds to any of
its or their Affiliates' officers, directors, employees or shareholders, or to
any member of the Immediate Families of any of the foregoing.
3.20 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
3.21 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any of
its Subsidiaries is a "holding company" or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
3.22 COMPLIANCE WITH LAWS; OPERATING LICENSES. The Company and each of
its Subsidiaries is in compliance with all Applicable Laws, except to the extent
that non-compliance could not reasonably be expected to have a Material Adverse
Effect. Without limiting the generality of the foregoing, each of the Company
Parties' and their employees, agents and other representatives is in compliance
with the Foreign Corrupt Practices Act of 1977, as amended (15 U.S.C.
Section78dD-2 ET SEQ.)). SCHEDULE 3.22 sets forth a true, correct and complete
list of all material Operating Licenses held by the Company Parties in
connection with the ownership of its or their assets or the conduct of its or
their businesses (which Schedules shall set forth, with respect to each
Operating License, its name, the issuing Person, the date it was issued and the
date of expiration), and such Operating Licenses constitute all of the Operating
Licenses required under Applicable Laws to own their respective assets or
conduct their respective businesses as now conducted and as proposed to be
conducted. All of the Operating Licenses are validly issued and in full force
and effect, and the Company and its Subsidiaries have fulfilled and performed in
all material respects their obligations with respect thereto and have full power
and authority to operate thereunder.
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3.23 TITLE TO PROPERTY; LIENS. Each of the Company and its Subsidiaries
has good and marketable title to its real properties (or holds valid leasehold
interests in real property) and good and merchantable title to its other
properties, and none of such properties is subject to any Liens except for Liens
in favor of the Bank and the Purchaser and for the Permitted Liens. Each of the
Company and its Subsidiaries enjoys quiet possession under all real property
leases to which they are parties as lessees, and all of such leases are valid,
subsisting and in full force and effect. None of such leases contain any
provision restricting the incurrence of indebtedness by the lessee or any
unusual or burdensome provision adversely affecting the current and proposed
operations of the Company and its Subsidiaries taken as a whole.
3.24 REAL PROPERTY.
(a) SCHEDULE 3.24 sets forth a true, correct and complete list
of all Real Property in which the Company or any of its Subsidiaries owns or
holds a fee interest, which list includes, as to each parcel of such Real
Property, the legal owner, its common name, a legal description and the name of
any mortgagee or trustee thereof.
(b) SCHEDULE 3.24 sets forth a true, correct and complete list
of all Real Property leases, subleases or licenses pursuant to which the Company
or any of its Subsidiaries is a lessor, lessee, sublessor, sublessee, licensor
or licensee, in each case as amended through the date hereof, which list
includes the street address, the identity of the lessors, lessees, sublessors,
sublessees, licensors or licensees, the term thereof (referencing applicable
extension or renewal periods, the rent payment terms and the current use). The
Company has delivered to the Purchaser true, correct and complete copies of each
such lease, sublease or license. The Real Property interests described or listed
on SCHEDULE 3.24 constitute all of the interests in Real Property owned, leased
or otherwise held for use by the Company or any of its Subsidiaries, as the case
may be. With respect to each such lease, sublease and license, except as set
forth on SCHEDULE 3.24:
(i) there are no disputes, oral agreements or
forbearance programs in effect as to any such lease, sublease or
license; and
(ii) neither the Company nor any of its Subsidiaries
has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest therein.
(c) Except as set forth on SCHEDULE 3.6, no Consent of any
party to any lease, sublease, license or mortgage is required in connection with
the consummation of the transactions contemplated by this Agreement, the Notes,
the Warrant or the other Investment Documents, including, without limitation,
the issuance and sale of the Securities, and no such event shall be prohibited
by, or shall constitute a default under, any such lease, sublease, license or
mortgage.
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(d) To the best knowledge of the Company Parties, all parking
lots located on any Real Property subject thereto are in compliance with
Applicable Laws, including, without limitation, zoning requirements, and are
adequate for the employees and business operations of the Company or its
Subsidiaries.
3.25 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.25:
(a) Each Environmental Person and each Site is in compliance
with all, and no Environmental Person has any liability under, any Environmental
Laws, and no Hazardous Materials are being used by the Company or any of its
Subsidiaries on any Real Property.
(b) No Release has occurred at any Site, and there are no
present or past Environmental Conditions in any way relating to any
Environmental Person, any Site or the business or operations of any
Environmental Person.
(c) SCHEDULE 3.25 sets forth a true, correct and complete list
of all environmental site assessments, audits, studies or reports relating to
any Environmental Condition or relating to the business, condition or operations
of all Environmental Persons. The Company has delivered to the Purchaser true,
correct and complete copies of all such environmental site assessments, audits,
studies or reports.
(d) No Environmental Person is a "potentially responsible
party" within the meaning of CERCLA with respect to any federal, state, local or
foreign environmental clean-up site or with respect to investigations or
corrective actions under any Environmental Laws.
(e) No Environmental Person has received notice of any
alleged, actual or potential responsibility, inquiry, investigation or
administrative or judicial proceeding regarding (i) any Release by any
Environmental Person at any Site or other location or (ii) any violation of or
non-compliance by any Environmental Person with the conditions of any License or
Permit required under any Environmental Laws or the provisions of any
Environmental Laws. No Environmental Person has received notice of any other
claim, demand or action by any Person alleging any actual or threatened injury
or damage to any Person, property, natural resources or the environment arising
from or relating to any Release, transportation or disposal of any Hazardous
Materials.
(f) Each Environmental Person has furnished all notices and
warnings, made all reports and has kept and maintained all records required by,
and in compliance with, all Environmental Laws, including, without limitation,
any notices and Consents required under any Environmental Laws in connection
with the consummation of the transactions contemplated by the Investment
Documents.
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The parties hereby acknowledge and agree that the
representations and warranties of the Company Parties in this SECTION 3.25 with
respect to Real Property located outside of the United States shall be made to
the best knowledge of the Company Parties.
3.26 INTELLECTUAL PROPERTY.
(a) Each Company Party owns, licenses or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), tangible or intangible proprietary information or material
and other Intellectual Property that are currently used in, or material to, its
or their business (the "COMPANY INTELLECTUAL PROPERTY"). SCHEDULE 3.26 contains
a true, correct and complete list of (i) all registered patents, trademarks,
trade names, service marks, and copyrights owned, used or licensed by the
Company, (ii) the registration number, date of registration and jurisdiction of
registration thereof, (iii) the name of the registered owner and, if different,
the user or users thereof and (iv) any applications for any of the foregoing.
(b) The Company has provided to the Purchaser (i) all material
documents, if any, relative to patents and patent applications and all
registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks owned by the Company
Parties and included in the Company Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements as to which any
Company Party is a party and pursuant to which any person is authorized to use
any Company Intellectual Property, and (iii) all licenses, sublicenses and other
agreements as to which any Company Party is a party and pursuant to which any
Company Party is authorized to use any third party patents, trademarks or
copyrights, including software, or any other third party Intellectual Property
("THIRD PARTY INTELLECTUAL PROPERTY RIGHTS") which are or are presently expected
to be incorporated in, or are or expected to form a part of any existing or
proposed Company Party product, or which are or are presently expected to be
utilized in the development, modification or support of any existing or proposed
Company Party product.
(c) To the best knowledge of the Company Parties, there is no
unauthorized use, disclosure, infringement or misappropriation of any Company
Intellectual Property, any trade secret material to the Company, or any Third
Party Intellectual Property Right to the extent licensed by or through any
Company Party, by any third party. No Company Party or, to the best knowledge of
the Company, any of its employees has entered into any agreement to indemnify
any other person against any charge of infringement of any Company Intellectual
Property, other than indemnification provisions arising in the ordinary course
of business, such as those in purchase orders, invoices or similar sales-related
documents.
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(d) No Company is, or will be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in material breach of any license, sublicense or other agreement
currently used in, or material to, to the Company Intellectual Property or Third
Party Intellectual Property Rights.
(e) All patents, registered trademarks, service marks and
copyrights held by any Company Party are validly issued and presently
subsisting. Except as set forth on SCHEDULE 3.26, no Company Party (i) has been
sued in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary or Intellectual Property right of any third party
and (ii) has brought any action, suit or proceeding for infringement of Company
Intellectual Property or breach of any license or agreement involving Company
Intellectual Property against any third party. The manufacture, marketing,
licensing or sale of the Company Parties' products and services as currently
conducted and proposed to be conducted does not, to the best knowledge of the
Company Parties, infringe any patent, trademark, service mark, copyright, trade
secret or other proprietary right of any third party.
(f) The Company Parties have taken steps which it believes to
be sufficient to protect and preserve the confidentiality of all Company
Intellectual Property not otherwise protected by patents, or patent applications
or copyright. All use, disclosure or appropriation by the Company Parties of
such Intellectual Property owned by any Company Party by or to a third party has
been pursuant to written agreements between the Company and its Subsidiaries and
such third party except where the failure to do so could not reasonably be
expected to result in a Material Adverse Effect. All use, disclosure or
appropriation of such Intellectual Property not owned by any Company Party has
been pursuant to written agreements between the Company Parties and the owner of
such Intellectual Property, or is otherwise lawful.
3.27 NATURE OF BUSINESS. The Company Parties are engaged as an
integrated group in the business described in recital A.
3.28 POWERS OF ATTORNEY. There are no outstanding powers of attorney
with respect to the Company Parties (or any one of them).
3.29 LISTING OF COMMON STOCK. The Common Stock is listed for trading
solely on the NYSE. Except as set forth on SCHEDULE 3.29, no Capital Stock or
other securities of the Company or any of its Subsidiaries is listed for trading
on any other securities exchange or on Nasdaq.
3.30 INSURANCE. SCHEDULE 3.30 sets forth a true and complete list of
all liability and other insurance coverage (including, without limitation,
product liability and product recall insurance) insuring the Company and its
Subsidiaries against losses arising out of or related to the business of the
Company and its Subsidiaries (which list accurately describes the coverage
carried and the expiration dates of such policies). The Company and its
Subsidiaries are
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covered by insurance in scope and amount customary and reasonable for the
business in which it is engaged and will be so covered after consummation of the
transactions contemplated hereby. The insurance policies listed on SCHEDULE 3.30
constitute insurance protection against all liability, claims and risks
occurring in the ordinary course of business customarily included within
comprehensive liability coverage and at amounts and levels customarily
maintained for a business of this type. SCHEDULE 3.30 also sets forth all claims
made by the Company and its Subsidiaries under such policies during the past
three (3) years. All such policies are in full force and effect.
3.31 CUSTOMERS. SCHEDULE 3.31 lists the names and addresses of the ten
(10) most significant customers (by revenue) of the Company Parties during each
of the Fiscal Years ended December 31, 1997 and 1998, and the amount of revenues
accounted for by each such customer during each such period. No customer of the
Company Parties accounts for more than twenty percent (20.0%) of the total
consolidated revenues of the Company Parties. No Company Party has received any
notice, nor has any Company Party any reason to believe, that any significant
customer of the Company Parties has ceased, or will cease, to use the products
or services of the Company Parties (or any one of them), or has reduced, or will
reduce, the use of such products or services at any time.
3.32 SUPPLIERS. SCHEDULE 3.32 lists the ten (10) largest suppliers of
any products or services to the Company Parties during each of the Fiscal Years
ended December 31, 1997 and 1998, and the amount of purchases made by the
Company Parties from each during each such period. No material purchase order or
commitment of the Company Parties is in excess of normal requirements, nor are
prices provided therein in excess of current market prices for the products or
services to be provided thereunder.
3.33 BUSINESS RELATIONSHIPS. There exists no actual or threatened
termination, cancellation or limitation of, or any adverse modification or
change in, the business relationship between the Company Parties, on the one
hand, and any customer or group of customers whose purchases, individually or in
the aggregate, are material to the business of the Company Parties, as the case
may be, or with any material suppliers, on the other hand, and there exists no
present condition or state of facts or circumstances known to the Company
Parties which could materially and adversely affect the Company Parties or
prevent the Company Parties from conducting such business after the consummation
of the transactions contemplated by this Agreement in substantially the same
manner in which it has been heretofore conducted.
3.34 PERSONAL PROPERTY LEASES. SCHEDULE 3.34 sets forth a true and
complete list and description of all agreements (or group of related agreements)
to which any Company Party is a party for the lease of personal property,
including, with respect to each such lease, the name of the lessor and the
lessee, the type of lease (whether operating, capital or otherwise), a
description of the leased property, the monthly rental payments due and the
expiration date. No Company Party has breached any agreement pertaining to, is
in default with respect to, or is overdue in payment of, any amounts owing under
any lease agreement disclosed on
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SCHEDULE 3.34. No such lease agreement contains any provisions which restrict or
prohibit (a) the issuance or sale of the Securities as contemplated herein, (b)
any other financings by any Company Party, including, without limitation, any
public or private debt or equity financings or (c) other than ordinary
restrictions on assignment, any merger, sale of assets or other event which
could cause a Change in Control.
3.35 EMPLOYMENT AGREEMENTS. SCHEDULE 3.35 sets forth a true, correct
and complete list of all (a) employment contracts or agreements, agency,
independent contractor and sales representative agreements involving annual
compensation at a base rate equal to or exceeding $60,000, golden parachute
agreements, change of control agreements and employee-related non-competition
and non-solicitation agreements, in each case to which any Company Party is a
party. The Company has previously delivered true, correct and complete copies of
all such agreements, including all amendments thereto. Each such agreement is in
writing, is a valid and binding agreement enforceable against the respective
parties thereto in accordance with its terms, and neither the Company nor, to
the best knowledge of the Company Parties, any other Person that is a party to
any such agreement is in breach of, or in default with respect to, any of its
obligations thereunder, nor is any Company Party aware of any facts or
circumstances which might give rise to any breach or default thereunder which
could reasonably be expected to have a Material Adverse Effect.
3.36 SOLVENCY. Each Company Party is, and immediately following the
consummation of the transactions contemplated by this Agreement each Company
Party will be, Solvent. No Company Party will, by virtue of the consummation of
the transactions contemplated hereby and by the other Investment Documents,
incur debts that will be beyond its ability to pay as they mature. No transfer
of property is being made and no obligation is being incurred in connection with
the transactions contemplated by this Agreement and the other Investment
Documents with the intent to hinder, delay or defraud either present or future
creditors of the Company Parties.
3.37 USE OF PROCEEDS; MARGIN STOCK. The proceeds to be received by the
Company Parties from the issuance and sale of the Securities as contemplated
hereunder shall be used solely for the purposes set forth in SCHEDULE 3.37 and
applied in accordance with the uses described therein. No Company Party is
engaged in extending credit for the purposes of purchasing or carrying Margin
Stock. Neither the Company nor any of its Subsidiaries has any Margin Stock, as
determined in accordance with the Margin Regulations. None of the proceeds from
the issuance and sale of the Notes will be used to buy or carry any Margin
Stock.
3.38 DEPOSITORY AND OTHER ACCOUNTS. SCHEDULE 3.38 sets forth a true and
complete list of all banks and other financial institutions and depositories at
which any Company Party maintains (or has caused to be maintained) deposit
accounts, spread accounts, yield supplement reserve accounts, operating
accounts, trust accounts, trust receivable accounts or other accounts of any
kind or nature into which funds of any Company Party (including funds in which
the Company Parties maintain a contingent or residual interest) is deposited
from time to time. Such SCHEDULE 3.38 correctly identifies the name and address
of each depository, the name in
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which each account is held, the purpose of the account, the account number, the
contact person at such depository and his or her telephone number. The Company
will notify the Purchaser and supplement SCHEDULE 3.38 as new accounts are
established within two (2) Business Days thereof.
3.39 YEAR 2000 COMPLIANCE. All devices, systems, machinery, information
technology, computer software and hardware and other data sensitive technology
necessary for the Company and its Subsidiaries to carry on its or their business
as presently conducted and as contemplated to be conducted in the future
(individually and collectively, the "SYSTEMS") are Year 2000 Compliant. For
purposes of this Agreement, the term "YEAR 2000 COMPLIANT" shall mean that such
Systems are designed to be used prior to, during and after the Gregorian
calendar year 2000 A.D. and will operate during each such time period without
error relating to date data, specifically including any error relating to, or
the product of, date data which represents or references different centuries or
more than one century.
3.40 BOOKS AND RECORDS. The minute books and other similar records of
each Company Party contain true and complete records of all actions taken at any
meeting of the Company Party's shareholders, Board of Directors or any
committees thereof, as the case may be, and of all written consents executed in
lieu of the holding of any such meeting. The books and records of the Company
Parties accurately reflect in all material respects the assets, liabilities,
business, financial condition and results of operations of the Company Parties,
as the case may be, and have been maintained in accordance with good business,
accounting and bookkeeping practices.
3.41 BURDENSOME OBLIGATIONS; FUTURE EXPENDITURES. No Company Party is a
party to or bound by any agreement, instrument, deed, lease or other document,
or is subject to any charter, bylaw or other restriction, commitment or
requirement, which, in the opinion of its management, is so unusual or
burdensome that in the foreseeable future it could have a Material Adverse
Effect. No Company Party anticipates that future expenditures, if any, by the
Company Parties, as the case may be, needed to meet the provisions of any
Applicable Laws will be so burdensome as to have or cause, or create a material
risk of having or causing, a Material Adverse Effect.
3.42 BROKERS; CERTAIN EXPENSES. Neither the Company or any of its
Subsidiaries or other Affiliates has paid or is obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary, other
than Jeffries & Company, Inc., in connection with this Agreement, any other
Investment Document or any of the transactions contemplated hereby or thereby.
Neither the Company or any of its Subsidiaries or other Affiliates is bound by
any agreement or commitment for the provision of investment banking or financial
advisory services with respect to any recapitalization, issuance of debt or
equity securities or other capital or financing transactions involving the
Company Parties that would operate to restrict or prevent the Closing.
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3.43 DISCLOSURE. After due inquiry of the directors, officers and
employees of the Company Parties having knowledge of the matters represented,
warranted or stated herein, neither this Agreement, the Disclosure Schedules nor
any other Investment Document, nor any certificate, report, questionnaire,
statement or document furnished by or on behalf of any Company Party, whether
included in any materials provided to the Purchaser prior to the date hereof or
included in this Agreement or any other Investment Document or in any Exhibit or
Disclosure Schedule or in any other document or instrument delivered at any time
prior to the Closing, is, or will be, untrue with respect to any material fact
or omits, or will omit, to state a material fact necessary in order to make the
statement made herein or therein, in light of the circumstances in which such
statement was made, not misleading. There are not facts or circumstances
existing which could have a Material Adverse Effect, either individually or in
the aggregate. The information contained in each of the management
questionnaires completed by certain officers, directors and employees of the
Company and the corporate questionnaire dated November 1, 1999, prepared by the
Company and delivered to the Purchaser prior to the date of this Agreement is
true and correct.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows:
4.1 ORGANIZATION. The Purchaser is a limited partnership formed and
validly existing under the laws of the State of California, and has all
requisite power and authority to enter into this Agreement and each other
Investment Document to which it is a party and to consummate the transactions
contemplated hereby and thereby.
4.2 AUTHORIZATION. The execution, delivery and performance by the
Purchaser of this Agreement and of each of the other Investment Documents to
which the Purchaser is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
partnership action taken on the part of the Purchaser.
4.3 DUE EXECUTION AND DELIVERY; BINDING OBLIGATIONS. This Agreement has
been duly executed and delivered by the Purchaser. This Agreement is, and at the
time of the Closing each of the other Investment Documents to which the
Purchaser is a party will be, a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability, and except as rights of indemnity or contribution may be limited
by federal or state securities laws or the public policy underlying such laws.
4.4 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement and each of the other Investment Documents to which
the Purchaser is a party, and the consummation of the transactions contemplated
hereby, do not violate (a) the limited partnership agreement of the Purchaser as
in effect on the date hereof, (b) any law, statute, rule
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or regulation applicable to the Purchaser, (c) any order, ruling, judgment or
decree of any Governmental Authority binding on the Purchaser or (d) any
material indenture, mortgage, lease, agreement or instrument to which the
Purchaser is a party.
4.5 INVESTMENT INTENT. The Purchaser is acquiring the Securities for
its own account, for investment purposes, and not with a view to or for sale in
connection with any distribution thereof. The Purchaser understands that the
Securities have not been registered under the Securities Act or registered or
qualified under any state securities laws in reliance upon specific exemptions
therefrom, which exemptions may depend upon, among other things, the BONA FIDE
nature of the Purchaser's investment intent as expressed herein. Therefore, the
Securities are "restricted securities" which cannot be sold without registration
under the Securities Act or pursuant to an exemption therefrom, and may have to
be held indefinitely, subject, however, to the Purchaser's registration rights
under the Registration Rights Agreement, and the Purchaser accepts the risk of
such restrictions on resale.
4.6 ACCREDITED INVESTOR STATUS. The Purchaser is an "accredited
investor" (as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act). By reason of its business and financial experience, the
Purchaser has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
investment in the Securities, has the capacity to protect its own interests and
is able to bear the economic risk of such investment.
4.7 PURCHASER CONSENTS. The execution and delivery by the Purchaser of
this Agreement and each of the other Investment Documents to which it is a
party, and the consummation by the Purchaser of the transactions contemplated
hereby, do not and will not require the Consent of any Governmental Authority or
any other Person, other than Consents that have already been obtained or made.
4.8 BROKERS. The Purchaser has not paid and is not obligated to pay any
fee or commission to any broker, finder, investment banker or other intermediary
in connection with this Agreement, any other Investment Document or any of the
transactions contemplated hereby or thereby.
5. CONDUCT PRIOR TO CLOSING.
5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. From and after the date of
this Agreement and until the Closing, each Company Party shall operate its
business in the ordinary course consistent with past practices. Notwithstanding
the foregoing, no Company Party shall, without the prior written consent of the
Purchaser:
(a) amend or otherwise modify any Material Contract on terms
less favorable than those that exist on the date hereof;
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(b) make any change to its authorized capital stock, or amend
its charter or bylaws;
(c) take or fail to take any act which could have a Material
Adverse Effect;
(d) enter into any new employment or consulting agreement;
(e) create any Contingent Obligation, by way of guarantees or
otherwise;
(f) declare, pay or set aside any dividend or other
distribution or payment in cash, stock or property in respect of shares of its
Capital Stock (other than dividends with respect to the Series A Preferred), or
adopt or consider any plan or arrangement with respect thereto, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of its
Capital Stock or split, combine or reclassify outstanding shares of its Capital
Stock;
(g) issue or sell any shares of its Capital Stock or any
Equity Rights;
(h) (i) increase the level of compensation of any officer or
employee, except as otherwise permitted under SECTION 3.12(u); (ii) amend any
existing Benefit Plan or adopt any new Benefit Plan; or (iii) enter into any new
employment or consulting agreement;
(i) (i) incur any Indebtedness for borrowed money (other than
in connection with the transactions contemplated by SECTIONS 5.3(i) or (ii));
(ii) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber
any asset of the Company with a value exceeding $10,000 individually and $50,000
in the aggregate; (iii) purchase or acquire any business or any securities or
assets of any business; (iv) enter into any partnership, joint venture or
strategic alliance; (v) settle any litigation in an amount in excess of $10,000;
or (vi) accelerate payment on any Indebtedness;
(j) make any Capital Expenditures in excess of $750,000 in the
aggregate or sell any assets (other than inventory in the ordinary course of
business consistent with past practices);
(k) fail to preserve intact its business organization, fail to
keep available the services of its operating personnel, or fail to preserve the
goodwill of those having business relationships with the Company Parties,
including, without limitation, customers;
(l) engage in any transactions with its or their Affiliates;
(m) fail to maintain its books and records in accordance with
past practices and in conformity with GAAP;
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(n) take any action enumerated in SECTION 3.12 or which would
be prohibited by any other Investment Document determined as if the transactions
contemplated by this Agreement had been consummated; or
(o) take, or fail to take, any action so that any of the
representations or warranties of the Company Parties contained in this Agreement
cease to be true and correct in all respects.
The Company shall notify the Purchaser in writing of the occurrence of
any Material Adverse Effect or breach of the representations and warranties of
the Company Parties under this Agreement within one (1) day following the
occurrence thereof. This SECTION 5.1 shall not apply to the Airline Interiors
Sale.
5.2 ACCESS TO INFORMATION AND DOCUMENTS. From and after the date of
this Agreement and until the Closing, each Company and its Subsidiaries shall
give the Purchaser and its authorized representatives and agents full and
complete access during normal business hours to the properties, documents, books
and records of the Company Parties, and shall furnish the Purchaser with such
information concerning the Company and each of its Subsidiaries as the Purchaser
may request. Until the Closing, the provisions of this SECTION 5.2 are subject
to the terms and conditions of the Confidentiality Agreement dated as of
December 21, 1998, between the Company and the Purchaser.
5.3 NON-SOLICITATION. In consideration of the capital and other
resources (human and otherwise) committed and to be committed to the Purchaser's
due diligence investigation of the Company and its Subsidiaries and other
Affiliates, the preparation and negotiation of this Agreement and the other
Investment Documents and the consummation of the transactions contemplated
hereby and thereby, the Company shall not, and shall not permit any of its
Affiliates, Subsidiaries, shareholders, directors, officers, employees,
attorneys, accountants, investment bankers (including, without limitation,
Jeffries & Company, Inc.), representatives or agents to, directly or indirectly,
initiate contact with, make, solicit or encourage any inquiries or proposals
from, furnish any information regarding the Company, its Subsidiaries, its other
Affiliates or their respective businesses or assets to, or engage or participate
in any discussions or negotiations with any Person with respect to any proposal
pursuant to which the Company or any of its Subsidiaries would (a) obtain any
debt or equity financing or (b) enter into any agreement to be acquired by, sold
to, merged into or combined with any such Person. Any transaction referred to in
clauses (a) or (b) above is referred to herein as an "ALTERNATIVE TRANSACTION."
The Company will immediately communicate to the Purchaser in writing the fact
that it has received any proposal or inquiry regarding an Alternative
Transaction. Notwithstanding the foregoing, the Company may enter into or
continue its discussions with (i) the Bank regarding an additional new senior
revolving and/or term credit facility and (ii) potential buyers of the Company's
commercial aircraft seating business (each transaction described in (i) or (ii)
shall be referred to herein as a "PERMITTED ALTERNATIVE TRANSACTION").
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5.4 COVENANT TO CLOSE. Each Company Party and the Purchaser shall use
its best efforts to consummate the transactions contemplated by this Agreement
in accordance with the terms, and subject to the conditions, of this Agreement.
Without limiting the generality of the foregoing, the Company Parties shall use
their best efforts to obtain all Consents from third parties which are required
to be obtained in connection with the consummation of each of the transactions
contemplated by this Agreement, including, without limitation, any Consents of
the holders of any Indebtedness of the Company Parties to the incurrence by the
Company Parties of the Indebtedness evidenced by the Notes.
6. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligations of the
Purchaser to consummate the transactions contemplated hereby, including, without
limitation, to purchase the Securities as provided herein, is subject to the
satisfaction, prior to or at the Closing, of the conditions set forth in this
SECTION 6; PROVIDED, HOWEVER, that any or all of such conditions may be waived,
in whole or in part, by the Purchaser in its sole and absolute discretion:
6.1 CLOSING DATE. The Closing Date shall occur on or before December
31, 1999.
6.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Each of the
representations and warranties made by the Company Parties in this Agreement
shall be true and correct in all respects as of the date made, and shall be true
and correct in all respects as of the Closing Date, with the same effect as if
made on and as of the Closing Date; each of the covenants, agreements and
obligations of the Company Parties under this Agreement to be performed or
satisfied by it or them on or prior to the Closing Date shall have been
performed or satisfied by it or them on or before the date hereof; and no
Default or Event of Default shall exist or result from the issuance and sale of
the Securities or the other transactions contemplated by this Agreement or the
Bank Credit Agreement. The Company Parties shall have delivered to the Purchaser
an officers' certificate, signed by the President and Chief Executive Officer
and the Chief Financial Officer of each Company Party, dated as of the Closing
Date, to such effect and to the effect that each of the other conditions set
forth in this SECTION 6 has been satisfied and fulfilled.
6.3 PAYMENT OF PURCHASER EXPENSES. The Company Parties shall have paid
to the Purchaser at the Closing, in immediately available funds to a bank
account designated by the Purchaser, or the Purchaser shall have withheld the
same from such proceeds to be delivered by the Purchaser against delivery of the
Securities, all out-of-pocket fees, costs and expenses incurred by or on behalf
of the Purchaser as provided in SECTION 8.5.
6.4 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order, decree or ruling. Without limiting the generality of the
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foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal securities and
state securities or "blue sky" laws.
6.5 NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred in the sole judgment of the Purchaser since December 31, 1998, except
as set forth on SCHEDULE 3.12(a).
6.6 NO INJUNCTION OR ORDER. There shall not have been issued any
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the other Investment Documents,
and there shall not be any action, suit, proceeding or investigation pending or,
to the best knowledge of the Company Parties, threatened against any Company
Party that (a) draws into question the validity, legality or enforceability of
this Agreement or the other Investment Documents or the consummation of the
transactions contemplated hereby or thereby or (b) might result, in the judgment
of the Purchaser, in the imposition of a penalty if the Securities were
delivered as contemplated hereunder or in any Material Adverse Change.
6.7 DELIVERY OF CERTAIN CLOSING DOCUMENTS. The Company shall have
delivered to the Purchaser the following closing documents, each dated as of the
Closing Date:
(a) This Agreement, duly executed by the Company Parties,
together with the Exhibits and Disclosure Schedules;
(b) The Term A Note, duly executed by the Company Parties;
(c) The Term B Note, duly executed by the Company Parties;
(d) The Warrant, duly executed by the Company;
(e) The Guaranty, duly executed by the Company Parties;
(f) The Registration Rights Agreement, duly executed by the
Company;
(g) The Investor Rights Agreement, duly executed by the
Company, the Principal Shareholders and the spouses of the Principal
Shareholders;
(h) The Intercreditor Agreement, duly executed by the Bank and
the Company;
(i) A copy of the Remaining Desjardins Note, duly executed by
the Company in favor of Stanley P. Desjardins, in form and substance
satisfactory to the Purchaser;
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(j) Supplements to the Simula Change of Control Agreements, in
form and substance satisfactory to the Purchaser, duly executed by each of the
Simula Change of Control Parties and the Company;
(k) (i) A non-competition, non-solicitation and
confidentiality agreement, in form and substance satisfactory to the Purchaser,
duly executed by Stanley P. Desjardins and the Company, and (ii)
non-solicitation agreements, in form and substance satisfactory to the
Purchaser, duly executed by all other Principal Shareholders;
(l) A fee letter, in form and substance satisfactory to the
Purchaser (the "FEE LETTER"), duly executed by the Company, with respect to the
payment by the Company Parties of aggregate closing fees to the Purchaser as
provided therein; and
(m) Such other documents as the Purchaser may reasonably
request.
6.8 COLLATERAL DOCUMENTS. The Company Parties shall have delivered to
the Purchaser the following collateral documents, each dated as of the Closing
Date:
(a) The Security Agreement, duly executed by the Company
Parties, together with the exhibits and schedules thereto;
(b) The Pledge Agreement, duly executed by the Company and the
other "Pledgors" (as such term is defined therein), together with the exhibits
and schedules thereto;
(c) Pledged Shares, together with stock powers duly executed
by the appropriate Company Party in blank;
(d) The Intellectual Property Security Agreement, duly
executed by the Bank and the Company, together with the exhibits and schedules
thereto;
(e) UCC-1 Financing Statements, naming each Company Party as
debtor, as applicable, duly executed by the Company Parties as requested by the
Purchaser; and
(f) Such other documents relating to the Collateral as the
Purchaser may request.
6.9 BANK CREDIT FACILITY. The transactions contemplated by the Bank
Credit Agreement shall have been consummated, and the Company shall have
delivered copies of all of the Bank Credit Documents, certified by the Assistant
Secretary of the Company, in form and substance acceptable to the Purchaser.
6.10 SALE OF AIRLINE INTERIORS. (a) The Company shall have delivered to
the Purchaser copies of the Airline Interiors Sale Agreement, together with all
exhibits, schedules,
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agreements, instruments and other documents relating thereto, all certified by
the Secretary of the Company as being true, complete and correct and in form and
substance satisfactory to the Purchaser, (b) the Company shall have delivered
evidence satisfactory to the Company that the Airlines Interior Buyer has
deposited in cash at least $2.0 million, representing the "purchase price" under
the Airline Interiors Sale Agreement, into an escrow account established by the
Company and the Airline Interiors Buyer with an unrelated third party escrow
agent under an escrow agreement in form and substance satisfactory to the
Purchaser, the release of which escrowed funds is subject only to the expiration
or earlier termination of the waiting period under the HSR Act applicable to the
Airline Interiors Sale, and (c) the Airlines Interior Buyer and the Company (as
the "ultimate parent entity") shall have each filed with the U.S. Federal Trade
Commission and the U.S. Department of Justice the notification and report form
and other documents required to be filed therewith with respect to the Airline
Interiors Sale, true and correct copies of which shall have been delivered to
the Purchaser for its review and comment.
6.11 OPINION OF COUNSEL. The Purchaser shall have received the
following: (a) an opinion letter of Fennemore Craig, a Professional Corporation,
counsel to the Company Parties, dated as of the Closing Date and addressed to
the Purchaser, in form and substance satisfactory to the Purchaser and its legal
counsel, and (b) an opinion letter of Bradley P. Forst, Esq., General Counsel to
the Company Parties, dated as of the Closing Date and addressed to the
Purchaser, in form and substance satisfactory to the Purchaser and its legal
counsel.
6.12 DELIVERY OF CORPORATE DOCUMENTS. The Company Parties shall have
delivered to the Purchaser the following for each Company Party:
(a) Certified copies of its charter or similar organizational
documents as amended through the Closing Date, certified by its Secretary as
being in full force and effect as of the Closing Date;
(b) A good standing certificate and, if available, a good
standing tax certificate, issued by the Secretary of State or Corporate
Commission, as the case may be, of its state of incorporation or organization
and the taxing authority of such state, in each case dated as of a recent
practicable date prior to the Closing Date;
(c) Foreign good standing certificates from each jurisdiction
in which it is required to be qualified to transact business as a foreign
corporation or other entity, in each case dated as of a recent practicable date
prior to the Closing Date;
(d) Copies of its bylaws or similar governing document as
amended through the Closing Date, certified by its Secretary as being in full
force and effect as of the Closing Date;
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(e) Resolutions of its Board of Directors (or similar
governing body) approving and authorizing the execution, delivery and
performance of this Agreement, the Notes, the Warrant and the other Investment
Documents to which it is a party, and, in the case of the Company, approving and
authorizing the execution, issuance, sale and delivery of the Securities,
certified by its Secretary as being in full force and effect as of the Closing
Date;
(f) Incumbency certificates of its officers who are authorized
to execute, deliver and perform this Agreement, the other Investment Documents
and any other agreements, instruments, certificate or other documents required
to be executed by it in connection herewith; and
(g) Such other documents as the Purchaser may request.
6.13 REPAYMENT OF EXISTING INDEBTEDNESS; UCC TERMINATION STATEMENTS.
Prior to or simultaneously with the Closing, (a) the Company shall have paid in
full (i) all Indebtedness, liabilities and other obligations owing under the
Senior Credit Agreement dated as of November 6, 1998, by and among the Company,
the banks named therein and Bank One, Arizona, NA, as administrative agent and
as issuing bank, and related documents, and (ii) all other Indebtedness,
liabilities and other obligations scheduled to be paid on SCHEDULE 3.37, and (b)
the Company shall have delivered to the Purchaser UCC termination statements,
duly executed by or on behalf of Bank One, Arizona, NA, releasing any and all
Liens securing the Indebtedness, liabilities or other obligations owing thereto
as contemplated by clause (a) above.
6.14 INSURANCE. The Company shall deliver to the Purchaser certificates
of liability insurance with respect to the insurance policies required to be
maintained by the Company and its Subsidiaries as of the Closing Date pursuant
to SECTION 9.9, together with additional insured and lender's loss payable
endorsements in favor of the Purchaser, all in form and substance satisfactory
to the Purchaser.
6.15 COMPLETION OF DUE DILIGENCE INVESTIGATION. The Purchaser shall
have completed its due diligence investigation of the Company and its
Subsidiaries and other Affiliates, to the sole satisfaction of the Purchaser and
its legal counsel, as contemplated by the investment proposal letter agreements
referenced in SECTION 13.3.
6.16 PHASE I ENVIRONMENTAL ASSESSMENTS. The Company shall have
delivered to the Purchaser Phase I Environmental Assessments, in form and
substance satisfactory to the Purchaser, with respect to certain real property
owned or leased by the Company Parties and selected by the Purchaser in its sole
discretion.
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6.17 DELIVERY OF FINANCIAL PROJECTIONS. The Company shall have
finalized and delivered to the Purchaser prior to the Closing Date, and the
Purchaser shall have approved, the financial projections of the Company and its
Subsidiaries for the four (4) Fiscal Years ending December 31, 2002 (the
"INITIAL FINANCIAL PROJECTIONS"). The Initial Financial Projections shall
specify the assumptions on which they are based and shall be made in good faith.
The Initial Financial Projections shall be accompanied by an officer's
certificate, in form and substance satisfactory to the Purchaser, duly executed
by the Chief Financial Officer of the Company, specifying, among other things,
the assumptions on which the Initial Financial Projections are based.
6.18 [INTENTIONALLY OMITTED.]
6.19 THIRD PARTY CONSENTS. The Company shall have obtained all other
Consents required to be obtained from all Governmental Authorities and other
Persons in connection with the transactions contemplated by this Agreement
(including, without limitation, the Consents listed on SCHEDULE 3.6), and the
Purchaser shall have approved the terms and conditions thereof.
6.20 CAPITAL STRUCTURE. The Purchaser shall have approved the form,
substance and scope of the legal and capital structure of the Company and its
Subsidiaries.
6.21 PROCEEDINGS SATISFACTORY. All proceedings taken prior to or at the
Closing in connection with the issuance and sale of the Securities and the
consummation of the other transactions contemplated hereby, and all papers and
other documents relating thereto, shall be in form and substance satisfactory to
the Purchaser and its counsel, and the Purchaser shall have received copies of
such documents and papers, all in form and substance satisfactory to the
Purchaser and its counsel, all such documents, where appropriate, to be
counterpart originals and/or certified by proper authorities, corporate
officials and other Persons. Without limiting the generality of the foregoing,
the Company shall have made such arrangements as may be requested by the
Purchaser to ensure that the proceeds from the issuance and sale of the
Securities are applied in the manner set forth in SCHEDULE 3.37, including,
without limitation, provision for the direct payment of the obligations of the
Company to be paid from such proceeds as provided in SECTION 8.5, the
withholding of fees payable to the Purchaser as provided in SECTION 8.5 and the
segregation of funds to be paid to third parties concurrent with or following
the Closing.
7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the Company
to consummate the transactions contemplated hereby are subject to the
satisfaction, prior to the Closing, of the conditions set forth in this SECTION
7; PROVIDED, HOWEVER, that any
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or all of such conditions may be waived, in whole or in part, by the Company in
its sole and absolute discretion:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser contained in this Agreement shall be true and correct in all
respects at and as of the Closing Date after giving effect to the transactions
contemplated by this Agreement, as if made on and as of such date, and the
Purchaser shall have performed or satisfied all of its covenants and agreements
hereunder to be performed or satisfied on or prior to the Closing Date.
7.2 PURCHASE PERMITTED BY APPLICABLE LAWS. The consummation of the
transactions contemplated by this Agreement shall not be prohibited by or
violate any Applicable Laws and shall not subject any party to any Tax, penalty
or liability, under or pursuant to any Applicable Laws, and shall not be
enjoined (temporarily or permanently) under, or prohibited by or contrary to,
any injunction, order, decree or ruling. Without limiting the generality of the
foregoing, the consummation of the transactions contemplated hereby shall
otherwise comply with all applicable requirements of federal and state
securities laws.
7.3 NO INJUNCTION OR ORDER. There shall not have been issued any
injunction, order, decree or ruling that prohibits or limits any of the
transactions contemplated by this Agreement or the other Investment Documents.
7.4 PAYMENT FOR SECURITIES. The Purchaser shall have delivered to the
Company the Purchase Price required to be paid by SECTION 2.3, LESS the amounts
provided for in SECTIONS 6.3 and 8.5.
8. INDEMNIFICATION; FEES AND EXPENSES.
8.1 TRANSFER TAXES. The Company Parties shall pay all stamp, transfer
and other similar Taxes (together in each case with interest and penalties, if
any) payable or determined to be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Securities and shall
hold harmless the Purchaser from and against any and all liabilities with
respect to or resulting from any delay in paying, or omission to pay, such
Taxes.
8.2 LOSSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated, the Company Parties shall jointly and severally
indemnify and hold harmless the Purchaser, its successors and assigns, and its
Affiliates, employees, partners, officers, directors, representatives, agents,
attorneys, successors and assigns (the "INDEMNIFIED PARTIES"), from and against
any and all losses, claims, damages, liabilities, judgments, Indemnified
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Environmental Costs, expenses and costs, including, without limitation,
attorneys' fees and other fees and expenses incurred in, and the costs of
preparing for, investigating or defending any matter (collectively, "LOSSES"),
incurred by such Indemnified Party in connection with or arising from:
(i) Any breach of any warranty or the inaccuracy of
any representation made by the Company Parties (or any Company Party)
in this Agreement or any other Investment Document;
(ii) The failure of the Company Parties (or any
Company Party) to fulfill any of their (or its) covenants, agreements
or undertakings under this Agreement or any other Investment Document
(or any other document or instrument executed herewith or pursuant
hereto); or
(iii) Any third party actions, suits, proceedings or
claims brought against any Indemnified Party in connection with,
arising out of or with respect to (i) any other matters arising out of
or in connection with the transactions contemplated by this Agreement,
the Notes, the Warrant or any other Investment Document or (ii) the
business, operations or affairs of the Company Parties (including,
without limitation, any litigation in which any Company Party is
involved).
(b) The Company Parties shall either pay directly all Losses
which it is required to pay hereunder or reimburse any Indemnified Party within
ten (10) days after any request for such payment. The obligations of the Company
Parties to the Indemnified Parties under this SECTION 8 shall be separate
obligations to each Indemnified Party, and the liability of the Company Parties
to such Indemnified Parties hereunder shall not be extinguished solely because
any Indemnified Party is not entitled to indemnity hereunder.
(c) In addition, notwithstanding anything in this Agreement or
any other Investment Document to the contrary, in the event of a breach of the
representation and warranty set forth in SECTION 3.7(a) (including, without
limitation, SCHEDULE 3.7(a)) with respect to the number of shares of Common
Stock outstanding on a Fully Diluted Basis, to the extent that the number of
Warrant Shares evidenced by the Warrant immediately after the Closing represent,
as calculated therein, a percentage of the outstanding shares of Common Stock on
a Fully Diluted Basis that is less than 4.8988%, then the Company shall
immediately issue to the Purchaser, at no cost to the Purchaser, an additional
warrant, in form and substance satisfactory to the Purchaser, representing an
additional number of Warrant Shares such that, if such additional Warrant Shares
had been included in the Warrant immediately after the Closing, such
representation and warranty would have been true and accurate in all respects
when made.
(d) The obligations of the Company Parties to the Indemnified
Parties under this SECTION 8 shall survive (i) the repayment of the Notes
(whether at maturity, by prepayment or acceleration or otherwise), (ii) any
transfer of the Notes or any interest therein, (iii) the
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termination of this Agreement or any other Investment Document and (iv) the
issuance, exercise, assignment and/or sale of the Warrant (or any interest
therein) or the sale of the Warrant Shares.
8.3 INDEMNIFICATION PROCEDURES. Any Person entitled to indemnification
under this SECTION 8 shall (a) give prompt written notice to the Company of any
claim with respect to which it is entitled to seek indemnification and (b)
permit the Company to assume the defense of such claim with counsel selected by
the Company and reasonably acceptable to such Person; PROVIDED, HOWEVER, that
any Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim and the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the Company has agreed to pay such fees or expenses; (ii) the Company has failed
to notify such Person in writing within ten (10) days of its receipt of such
written notice to the Company that it will assume the defense of such claim and
employ counsel reasonably acceptable to such Person; or (iii) in the judgment of
any such Person, a conflict of interest exists between such Person, on the one
hand, and the Company or any of its Subsidiaries, on the other hand, with
respect to such claims (in which case, if the Person notifies the Company in
writing that such Person elects to employ separate counsel at the expense of the
Company, the Company shall not have the right to assume the defense of such
claim on behalf of such Person). The Company will not be subject to any
liability for any settlement made without its consent (but such consent may not
be unreasonably withheld). No Indemnified Party may, without the consent of the
Company (which consent will not be unreasonably withheld), consent to the entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
Company of a release from all liability in respect of such claim or litigation.
8.4 CONTRIBUTION. If the indemnification provided for in this SECTION 8
is unavailable to the Purchaser or any other Indemnified Party in respect of any
Losses, then the Company Parties, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by the Indemnified Party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Company Parties, on the one hand, and such Indemnified
Party, on the other hand, in connection with the actions, statements or
omissions which resulted in such Losses, as well as any other relevant equitable
considerations. The relative fault of the Company Parties, on the one hand, and
such Indemnified Party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
either any Company Party or such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
any such action, statement or omission. The parties agree that it would not be
just and equitable if contribution pursuant to this SECTION 8.4 were determined
by PRO RATA allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. No Person guilty of
fraudulent
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misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
8.5 REIMBURSEMENT OF DEAL-RELATED COSTS AND EXPENSES. Notwithstanding
anything to the contrary contained herein or otherwise, whether or not the
transactions contemplated by this Agreement are consummated or this Agreement is
terminated for any reason, and in addition to all other amounts due or owing to
the Purchaser hereunder, under any other Investment Document or otherwise, the
Company Parties shall be jointly and severally responsible, and jointly and
severally agree to promptly reimburse the Purchaser, for all out-of-pocket costs
and expenses of every type and nature (including, without limitation, all fees
and expenses of counsel, accounting fees and expenses and other deal-related
costs and expenses) incurred by or on behalf of the Purchaser, in an aggregate
amount not to exceed $300,000, in connection with the Purchaser's due diligence
investigation of the Company and its Subsidiaries and other Affiliates, the
preparation, negotiation, execution and delivery of this Agreement, the Notes,
the Warrant and the other Investment Documents and the consummation of the
transactions contemplated hereby and thereby (which costs and expenses may be
withheld by the Purchaser from the proceeds to be delivered by the Purchaser at
the Closing pursuant to SECTION 7.4). At the Purchaser's request and direction,
the Company shall reimburse third party providers of the Purchaser directly for
all of such costs and expenses. In addition, the Company Parties jointly and
severally agree to pay to the Purchaser such fees, costs and expenses at the
Closing, if the Closing occurs, or within one (1) Business Day of any written
demand therefor by the Purchaser, if the Closing shall not occur for any reason.
8.6 COSTS OF COLLECTION. The Company Parties jointly and severally
agree to pay to the Purchaser all costs and expenses, including the fees and
expenses of all attorneys, accountants and other experts retained by the
Purchaser, which are expended or incurred by or on behalf of the Purchaser in
connection with (a) the collection and enforcement of the Obligations, whether
or not any action, suit or other proceeding is commenced; (b) any actions for
declaratory relief in any way related to the Obligations; (c) the protection or
preservation of any rights or remedies of the Purchaser under this Agreement or
any other Investment Document; (d) any actions taken by the Purchaser in
negotiating any amendment, waiver, consent or release of or under this
Agreement, the Notes or any other Investment Document; (e) any actions taken in
reviewing the Company's or any of its Subsidiaries' financial affairs if any
Event of Default has occurred or the Purchaser has determined in good faith that
an Event of Default may likely occur, which actions shall include, but not be
limited to the following: (i) inspect the facilities of the Company and any of
its Subsidiaries or conduct audits or appraisals of the financial condition of
the Company and any of its Subsidiaries; (ii) have an accounting or other firm
selected by the Purchaser review the books and records of the Company and any of
its Subsidiaries and perform a thorough and complete examination thereof; (iii)
interview the Company and any of its Subsidiaries' employees, attorneys,
accountants, customers and any other Persons related to the Company or such
Subsidiaries which the Purchaser believes may have relevant information
concerning the business, condition (financial or otherwise), results of
operations or prospects of the Company or any of its Subsidiaries; and
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(iv) undertake any other action which the Purchaser believes is necessary to
assess accurately the financial condition and prospects of the Company and any
of its Subsidiaries; (f) any refinancing, restructuring (whether in the nature
of a "work out" or otherwise), bankruptcy or insolvency proceeding involving the
Company or any of its respective Subsidiaries or other Affiliates, including,
without limitation, any refinancing or restructuring of this Agreement, the
Notes or any other Investment Documents; (g) any actions taken to verify,
maintain, perfect and protect any Lien granted to the Purchaser by the Company
or any other Person under the Investment Documents; or (h) any effort by the
Purchaser to protect, assemble, complete, collect, sell, liquidate or otherwise
dispose of any collateral, including in connection with any case under
Bankruptcy Laws. The Company Parties hereby consent to the taking of the
foregoing actions by the Purchaser.
9. AFFIRMATIVE COVENANTS. The Company Parties jointly and severally covenant and
agree that, except as provided in SECTION 9.23, so long as any Obligations under
the Notes remain outstanding or the Purchaser owns or holds, or has the right to
acquire, directly or indirectly, at least 500,000 Warrant Shares, the Company
Parties shall perform, comply with and observe each of the covenants set forth
in this SECTION 9, as applicable.
9.1 PAYMENT OF NOTES AND OTHER OBLIGATIONS. The Company Parties shall
fully and timely pay all Obligations owing pursuant to the terms of this
Agreement, the Notes (including, without limitation, all principal thereof,
premium, if any, and interest thereon), the Warrant and the other Investment
Documents to which they are parties, in each case on the dates and in the manner
provided for herein and therein.
9.2 PERFORMANCE OF INVESTMENT DOCUMENTS. The Company Parties shall
perform, comply with and observe all of its obligations under this Agreement,
the Notes, the Warrant and each other Investment Document.
9.3 INFORMATION REPORTING REQUIREMENTS. The Company shall furnish to
the Purchaser:
(a) As soon as available, and in no event later than ninety
(90) days after the end of each Fiscal Year, a consolidated balance sheet of the
Company and its Subsidiaries as of the end of such Fiscal Year, and related
consolidated statements of operations, shareholders' equity and cash flows of
the Company and its Subsidiaries for such Fiscal Year, setting forth in
comparative form the corresponding figures for the immediately preceding Fiscal
Year, all in reasonable detail and prepared in accordance with GAAP, and
accompanied by a report and an opinion, prepared in accordance with generally
accepted auditing standards, of independent certified public accountants of
recognized national standing as a "Big 5" accounting firm selected by the
Company (which opinion shall provide that such consolidated financial statements
present fairly, in all material respects, the financial position for the periods
indicated in conformity with GAAP, and which opinion shall not be qualified or
limited because of a
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restricted or limited examination by such accountant of any material portion of
the records of the Company or any of its Subsidiaries or otherwise qualified in
any respect);
(b) Within two (2) Business Days after it is prepared, and in
no event later than twenty (20) days after the last day of each calendar month,
a monthly financial package for such month (the "MONTHLY REPORTING PACKAGE"),
all in reasonable detail and prepared in accordance with GAAP, consisting of at
least the following:
(i) an income statement for such month on a
consolidated and consolidating basis and by division, with comparative
information for the Initial Financial Projections for the Fiscal Year
ended December 31, 2000 and the Annual Financial Projections
thereafter, and the same month during the immediately preceding Fiscal
Year;
(ii) a year-to-date income statement for such month
on a consolidated and consolidating basis and by division, with
comparative information for the Initial Financial Projections for the
Fiscal Year ended December 31, 2000 and the Annual Financial
Projections thereafter, and the same year-to-date month during the
immediately preceding Fiscal Year;
(iii) a cash flow statement for such month, with
comparative information for the Initial Financial Projections for the
Fiscal Year ended December 31, 2000 and the Annual Financial
Projections thereafter, and the same month during the immediately
preceding Fiscal Year;
(iv) a year-to-date cash flow statement for such
month, with comparative information for the Initial Financial
Projections for the Fiscal Year ended December 31, 2000 and the Annual
Financial Projections thereafter, and the same year-to-date period
during the immediately preceding Fiscal Year;
(v) a balance sheet as at the end of such month on a
consolidated and consolidating basis, with comparative information for
the Initial Financial Projections for the Fiscal Year ended December
31, 2000 and the Annual Financial Projections thereafter, and as at the
end of the same month during the immediately preceding Fiscal Year; and
(vi) other information, as may be requested by the
Purchaser, to monitor mutually agreeable critical success factors of
the Company that need to be achieved in order for the Company to meet
its financial projections, including, without limitation, aged backlog,
receivables aging, and payables aging;
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(c) No later than Tuesday of the following week, financial
information regarding the Company and its Subsidiaries with respect to the
immediately preceding week, all in reasonable detail and prepared in accordance
with GAAP, consisting of the following: (i) a backlog report for SASD as of the
close of business at the end of such week; (ii) a copy of the weekly borrowing
base certificate delivered to the Bank; (iii) a statement showing the cash
position as of the close of business at the end of such week; (iv) a trade
payables aging schedule as of the closing of business at the end of such week;
and (v) such other information as the Purchaser may request;
(d) Promptly (and in any event not later than three (3)
Business Days) after the issuance of any Audit Report, or series of Audit
Reports, a copy (or copies) of such Audit Report(s) (or written summaries of any
substantially similar oral reports(s));
(e) At least thirty (30) days prior to the beginning of each
Fiscal Year, a copy of the Company's internal financial projections for such
Fiscal Year (the "ANNUAL FINANCIAL PROJECTIONS"), prepared on a monthly basis
and in reasonable detail, which shall include the following: (i) a balance
sheet, income statement and cash flow statement for each month of such Fiscal
Year; (ii) a capital expenditures budget, including, without limitation,
internal rate of return analysis and "payback" analysis; (iii) an explanation in
reasonable detail of all material changes proposed for the business and its
personnel and facilities; (iv) an explanation in reasonable detail of all
material assumptions underlying such financial projections, which assumptions
shall be believed by the Company to be reasonable; (v) a description of the
opportunities to be pursued during such Fiscal Year; and (vi) a description of
any incentive compensation expected to be paid to senior management;
(f) Simultaneously with the delivery of (i) the financial
statements required to be delivered to the Purchaser under clause (a) of this
SECTION 9.3 and (ii) the financial statements required to be delivered to the
Purchaser under clause (b) of this SECTION 9.3 with respect to each calendar
month which ends on the last day of any Fiscal Quarter, a Compliance
Certificate, in substantially the form of EXHIBIT C, signed by the President and
Chief Executive Officer and the Chief Financial Officer of the Company,
certifying that each of them has reviewed this Agreement and the other
Investment Documents and such financial statements (including the financial
condition and results of operations) of the Company and its Subsidiaries for
purposes of delivering such Compliance Certificate and further certifying as to
the matters set forth in such Compliance Certificate;
(g) Promptly after submission to any Governmental Authority
(and in any event not later than two (2) Business Days thereafter), all
documents and information furnished to such Governmental Authority in connection
with any investigation of the Company or any of its Subsidiaries other than
routine inquiries by such Governmental Authority;
(h) Promptly (and in any event not later than two (2) Business
Days) after an officer of the Company obtains knowledge thereof, notice of (i)
the occurrence of any event, act
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or condition which constitutes a Default or Event of Default or any "default" or
"event of default" under the terms of any Other Debt Documents; (ii) the
commencement of any litigation against the Company or any of its Subsidiaries
involving an amount in excess of $50,000 or any investigation or other
proceeding of any Governmental Authority against the Company or any of its
Subsidiaries; or (iii) any other event which could have a Material Adverse
Effect. Each such notice shall specify in reasonable detail the nature of the
event, act, condition, Default, Event of Default, default, event of default,
litigation or investigation or other proceeding and what action the Company or
any other Person is taking or proposes to take to cure the same;
(i) Concurrently with the delivery of any "Notice of Major
Transaction" or Notice of Triggering Event" (as such terms as defined in the
Company's charter), copies of such notices furnished to the holders of the
Series A Preferred;
(j) (i) Within five (5) Business Days after the calendar month
ending January 31, 2000, a backlog report for SSSI as of the end of such
calendar month, signed by the Chief Executive Officer, Chief Operating Officer
of Chief Financial Officer of the Company and in reasonable detail,(ii) within
five (5) Business Days after the two week period ending February 11, 2000, a
backlog report for SSSI as of the end of such two week period, signed by the
Chief Executive Officer, Chief Operating Officer of Chief Financial Officer of
the Company and in reasonable detail; and (iii) within five (5) Business Days
after the end of each one week period ending February 18, 2000 and thereafter, a
backlog report for SSSI as of the end of each such week, signed by the Chief
Executive Officer, Chief Operating Officer of Chief Financial Officer of the
Company and in reasonable detail; and
(k) Promptly upon request (and in any event not later than
three (3) Business Days thereafter), such other notices and other information
(whether or not in the possession of third parties) concerning the business,
operations, condition (financial or otherwise) or affairs of the Company or its
Subsidiaries or other Affiliates as the Purchaser may from time to time request,
including, without limitation, written notices of any sales of Common Stock by
the Principal Shareholders.
9.4 SEC DOCUMENTS. The Company shall timely file with the Commission,
and provide to the Purchaser concurrently therewith, all Company SEC Documents
as are specified in the Exchange Act as being required to be filed by U.S.
corporations that are subject to reporting requirements of the Exchange Act. In
addition, the Company shall timely file with the NYSE and provide to the
Purchaser concurrently therewith, all Company SEC Documents required to be filed
therewith. Each Company SEC Document to be filed by the Company, when filed with
the Commission or the NYSE, as the case may be, will comply with all applicable
requirements of the Securities Act, the Exchange Act or the NYSE rules, as the
case may be, and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company and its
Subsidiaries to be included in each Company SEC Document to be filed by the
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Company will comply as to form, as of the date of its filing with the
Commission, with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, will be prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by the Commission) and will fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments consistent with past practices and
consistently applied). Notwithstanding anything to the contrary contained in
this SECTION 9.4, the Company shall not be deemed to be in default of this
SECTION 9.4 if the Company is late in filing any Company SEC Document, PROVIDED
that (a) such Company SEC Document is filed with the Commission within ten (10)
Business Days after the filing was due, shall notify the Purchaser in writing of
the late filing and (b) such late filing shall not in any manner adversely
affect the Purchaser's right to avail itself of the benefits under Rule 144
promulgated under the Securities Act with respect to the Warrant Shares, and
PROVIDED FURTHER that the Company shall not rely on the grace period in this
sentence on more than two (2) occasions during the term of this Agreement.
9.5 COMPLIANCE WITH LAWS. The Company Parties shall, and shall cause
each of its Subsidiaries to, comply at all times with all Applicable Laws
(including, without limitation, Environmental Laws) in respect of the conduct of
its or their businesses and the ownership of its or their properties in the
states or other jurisdictions in which it or they conduct their respective
businesses, except to the extent that non-compliance could not reasonably be
expected to have a Material Adverse Effect.
9.6 LEGAL EXISTENCE. The Company Parties shall, and shall cause each of
its Subsidiaries to, at all times do or cause to be done all things necessary to
(a) maintain and preserve its existence and its material rights and privileges,
(b) become or remain duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect and (c) preserve, renew and keep in full force and effect all of
its Operating Licenses, except where the failure to maintain such Operating
Licenses could not reasonably be expected to have a Material Adverse Effect.
Notwithstanding the foregoing, the Company Parties may dissolve Airline
Interiors after the Airline Interiors Sale is consummated.
9.7 BOOKS AND RECORDS; INSPECTIONS. The Company Parties shall, and
shall cause each of its Subsidiaries to, maintain proper books of record and
account in which full, true and complete entries in conformity with GAAP and all
requirements of Applicable Laws shall be made of all material dealings and
transactions in relation to its business and activities. The Company Parties
shall, and shall cause each of its Subsidiaries to, permit the designated
representatives and/or agents of the Purchaser to visit and inspect any of the
properties of the Company Parties and their Subsidiaries, and to examine the
books of record and account of the Company Parties and their Subsidiaries and to
discuss the affairs, finances and accounts of the
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Company Parties and their Subsidiaries with, and be advised as to the same by,
its officers, attorneys and independent accountants, all during normal business
hours and at such reasonable times and to such extent as the Purchaser may
request (and in any event as soon as practicable (and not later than three (3)
Business Days) thereafter), PROVIDED that so long as no Default or Event of
Default has occurred or is continuing, any costs or expenses paid or payable to
third party service providers which are incurred by the Purchaser in connection
with the activities contemplated in this SECTION 9.7 shall be paid by the
Purchaser. In addition, all such requests of the Purchaser shall be made by
telephone or pursuant to SECTION 13.6 to any Principal Shareholder.
9.8 MAINTENANCE OF PROPERTIES. The Company Parties shall, and shall
cause each of its Subsidiaries to, maintain and preserve all of its or their
properties which are necessary or materially useful in the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and comply at all times with the provisions of all material personal property
leases to which each of them is a party as lessee or under which each of them
occupies property, so as to prevent any loss or forfeiture thereof or
thereunder. The Company Parties shall, and shall cause each of its Subsidiaries
to, make all payments and otherwise perform all of its obligations under all
leases of Real Property, and all leases of material personal property, to which
any Company Party or any such Subsidiary is a party, keep such leases in full
force and effect and not permit such leases to expire, lapse or be terminated
(or any rights to renew such leases to be forfeited or canceled), notify the
Purchaser of any default by any party thereto and cooperate with the Purchaser
in all respects to cure any such default. Notwithstanding anything to the
contrary contained in this SECTION 9.8, the Company Parties may determine in
good faith that any of its assets or properties, whether owned or leased, is
obsolete or has been damaged and the cost of repair makes its inadvisable to
repair such asset or property. In either event, or in the event that the Company
elects, subject to SECTION 10.9, to discontinue the line of business in which
such property is necessary or useful, the Company shall be under no obligation
under this SECTION 9.8 in respect of such asset or property. Nothing in this
SECTION 9.8 shall be deemed to constitute consent to the sale, transfer or other
disposition of any such assets or properties.
9.9 INSURANCE. The Company Parties shall maintain with financially
sound and reputable insurers policies of insurance, coverage amounts and related
terms and conditions for the Company and its Subsidiaries normally maintained by
companies engaged in the same or similar business as the Company Parties against
loss or damage and such other policies of insurance and coverage amount as may
be reasonably requested by the Purchaser. Such insurance shall include, without
limitation, comprehensive general liability, fire and extended coverage, product
liability and recall, property damage, workers' compensation, flood insurance
(if customarily maintained in locations in which any Company Party is located),
earthquake loss insurance, environmental liability insurance, business
interruption insurance (either for loss of revenues or for additional expenses)
and directors and officers liability insurance as provided in the Investor
Rights Agreement. All insurance covering liability shall name the Purchaser as
an additional insured, and all insurance covering property subject to a Lien in
favor of the
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Purchaser shall name the Purchaser as a loss payee and, with respect to any
casualty or loss, provide that the full amount of insurance proceeds shall be
payable to the Purchaser. In addition, the Company Parties shall procure from
financially sound and reputable insurers acceptable to the Purchaser within
thirty (30) days after the Closing, and maintain until the Obligations have been
indefeasibly paid in full, key man life insurance policies on the lives of each
of the Principal Shareholders in coverage amounts costing $20,000 per year in
aggregate premiums for such key man life insurance policies. Each of the
insurance policies required to be maintained under this SECTION 9.9 shall
provide for at least thirty (30) days' prior written notice to the Purchaser of
the cancellation or substantial modification thereof.
9.10 TAXES. The Company Parties shall, and shall cause each of its
Subsidiaries to, pay and discharge promptly when due all Taxes imposed upon it
or any of its or their properties or in respect of any of its franchises,
business, income or property before any penalty shall be incurred with respect
to such Taxes; PROVIDED, HOWEVER, that the Company Parties need not pay or
discharge any such Tax so long as (a) the validity or amount thereof is being
contested in good faith and by appropriate proceedings, (b) the Company's
outside Tax counsel shall have advised the Company in writing that it has a
reasonable legal basis for contesting the validity or amount of such Tax and (c)
reserves as may be required by GAAP shall have been made therefor.
9.11 ERISA MATTERS.
(a) The Company Parties shall, and shall cause each of its
Subsidiaries to, cause each Benefit Plan to be operated in compliance with the
terms of such Benefit Plan and Applicable Law and shall pay and discharge
promptly any liability imposed upon it or them pursuant to the provisions of
such Benefit Plan and Applicable Law; PROVIDED, HOWEVER, that no Company Party
shall be required to pay any such liability if (i) the amount, applicability, or
validity thereof shall be diligently contested in good faith by appropriate
proceedings and (ii) such Person shall have set aside on its books reserves
which, in the good faith judgment of the Board of Directors of such Person, are
adequate with respect thereto.
(b) The Company Parties shall, and shall cause each of its
Subsidiaries to, deliver to the Purchaser promptly, but in no event more than
five (5) Business Days after any officer of any Company Party obtains knowledge
of (i) the Internal Revenue Service's (A) revocation of the tax-qualified status
of any Benefit Plan that is a tax-qualified retirement plan, (B) imposition of
an excise tax upon the occurrence of a "prohibited transaction" as such term is
defined in Section 4975 of the Code, or (C) disallowance of a deduction (in
whole or in part) for a contribution to a Benefit Plan, (ii) the institution of
a lawsuit against a Benefit Plan (or a Fiduciary of such plan), or (iii) the
United Stated Department of Labor's imposition of a penalty under Section 502 of
ERISA relating to a Benefit Plan, a written notice specifying the nature of such
action, what action has been taken, is being taken, or is proposed to be taken
with respect thereto, and a copy of any correspondence or other documentation
relating to the matter.
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9.12 COMMUNICATION WITH ACCOUNTANTS. So long as an Event of Default
shall have occurred and be continuing, the Company Parties hereby authorize the
Purchaser to communicate directly with the Company Parties' independent
certified public accountants, and authorize such accountants to disclose to the
Purchaser any and all financial statements and other supporting financial
documents, workpapers and schedules as the Purchaser may request.
9.13 COMPLIANCE WITH MATERIAL CONTRACTS. The Company Parties shall, and
shall cause each of its Subsidiaries to, (a) perform, comply with and observe
all terms and provisions of each Material Contract to be performed, complied
with or observed by it, (b) subject to SECTION 10.10(c), maintain each Material
Contract in full force and effect and (c) enforce each Material Contract in
accordance with its terms. The Company Parties shall make such demands or
requests for information from each other party to any Material Contract, and
take action against each other party to any Material Contract, as the Purchaser
may request and the General Counsel of the Company shall approve in the exercise
of his reasonable business judgment; PROVIDED, HOWEVER, that if, in connection
with the enforcement of any rights or remedies of any Company Party under any
employment agreement, non-competition, non-solicitation and/or confidentiality
agreement or similar agreement to which it is a party, the Purchaser requests
that such Company Party file any action, suit or other proceeding seeking
injunctive or other equitable relief against such other party, such Company
Party shall do so within three (3) Business Days of its receipt of such request.
This SECTION 9.13 shall (i) not apply to any Material Contracts to which Airline
Interiors is a party from and after the closing of the Airline Interiors Sale
and (ii) be solely for the benefit of the initial Purchaser.
9.14 FISCAL YEAR END. The Company Parties will cause the Fiscal Year of
the Company and its Subsidiaries to end on December 31 of each calendar year or
on such other date as the Company may designate and the Purchaser shall approve
in writing.
9.15 ENVIRONMENTAL MATTERS.
(a) The Company Parties shall, and shall cause each of its
Subsidiaries to, comply, and shall use their reasonable best efforts to cause
all tenants and other Persons who may come upon any Real Property to comply (and
the Company Parties shall not be obligated to incur any costs in excess of
$5,000 to cause such tenants and other Persons to so comply), with all
Environmental Laws, including those requiring disclosures to prospective and
actual buyers or tenants of all or any portion of the Real Property. The Company
Parties will not, and will not permit their Subsidiaries to, install or allow to
be installed any underground storage tanks on any Real Property. The Company
Parties shall, and shall cause each of its Subsidiaries to, comply with the
recommendations of any qualified environmental engineer or other expert engaged
by the Company Parties with respect to any Real Property.
(b) The Company shall promptly notify the Purchaser in writing
(i) if it knows, suspects or believes there may be any Hazardous Materials in or
around any part of the Real Property, any improvements constructed on the Real
Property, or the soil, groundwater or
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soil vapor on or under the Real Property, or that any Company Party or the Real
Property may be subject to any threatened or pending investigation by any
Governmental Authority under any Applicable Laws pertaining to any Hazardous
Materials, and (ii) of any claim made or threatened by any Person arising out of
or resulting from any Hazardous Materials being present or released in, on or
around any part of the Real Property, any improvements constructed on the Real
Property or the soil, groundwater or soil vapor on or under the Real Property
(any of the matters described in clauses (i) and (ii) above being referred to as
a "HAZARDOUS MATERIALS CLAIM").
(c) The Purchaser shall have the right, during normal business
hours, to enter and visit any Real Property for the purposes of observing the
Real Property, taking and removing soil or groundwater samples and conducting
tests on any part of the Real Property, if the Purchaser has reason to believe
that Hazardous Materials may be present on the Real Property, all at the cost
and expense of the Company if such costs equal or are less than $5,000;
PROVIDED, HOWEVER, that the Purchaser shall not have any duty to visit or
observe the Real Property or to conduct tests, and no site visit, observation or
testing by the Purchaser shall impose any liability on the Purchaser. The
Company Parties shall use its reasonable efforts to obtain all Consents
necessary, if any, for the Purchaser to do any of the same; PROVIDED, HOWEVER,
that the Company shall have no obligation to expend in excess of $5,000 to
obtain such Consents. In no event will any site visit, observation or testing by
the Purchaser be a representation that Hazardous Materials are or are not
present in, on or under the Real Property, or that there has been or will be
compliance with any Environmental Law. Neither the Company Parties nor any other
Person shall be entitled to rely on any site visit, observation or testing by
the Purchaser. The Purchaser shall, if requested by the Company, share with the
Company the written results, if any, from any such site visit, observation or
testing. The Purchaser owes no duty of care to protect the Company Parties or
any other Person against or to inform the Company Parties or any other Person of
the presence of any Hazardous Materials or any other adverse condition affecting
the Real Property, except that the Purchaser shall repair any damage to Real
Property caused by or on behalf of the Purchaser in connection with any
inspection by the Purchaser of such Real Property. The Purchaser shall use its
reasonable efforts to avoid interfering with the existing use of the Real
Property by the Company Parties in exercising any rights provided in this
SECTION 9.15.
(d) The Company Parties shall, and shall cause each of its
Subsidiaries to, promptly undertake any and all remedial work in response to
Hazardous Materials Claims ("REMEDIAL WORK") to the extent required by any
Governmental Authority involved or as recommended by prudent business practices,
if such standard requires a higher degree of remediation, and in all events to
minimize any impairment to the Real Property. All Remedial Work must be
conducted (i) in a diligent and timely fashion by licensed contractors acting
under the supervision of a consulting environmental engineer; (ii) pursuant to a
detailed written plan for the Remedial Work approved by all public or private
agencies or persons with a legal or contractual right to such approval; (iii)
with insurance coverage pertaining to liabilities arising out of the Remedial
Work as is then customarily maintained with respect to such activities; and
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(iv) only following receipt of any required permits, licenses or approvals. The
selection of the Remedial Work contractors and consulting environmental
engineer, the contracts entered into with such parties, any disclosures to or
agreements with any public or private agencies or parties relating to Remedial
Work and the written plan for the Remedial Work (and any changes thereto) at the
Purchaser's option, are subject to the Purchaser's prior written approval.
9.16 ADDITIONAL COMPANY PARTIES. The Company shall cause any direct or
indirect Subsidiary of the Company formed, created or acquired at any time after
the Closing to execute and deliver to the Purchaser promptly (and in any event
within three (3) days after such formation, creation or acquisition): (a) a
joinder to this Agreement, in form and substance satisfactory to the Purchaser,
pursuant to which such Subsidiary would become a Company Party hereunder, (b) a
joinder to the Guaranty, in form and substance satisfactory to the Purchaser,
pursuant to which such Subsidiary would become a Guarantor, (c) a joinder to the
Security Agreement, pursuant to which such Subsidiary would grant a security
interest in all of its assets, (d) if such Subsidiary has any Subsidiaries,
pledge agreements, together with (i) certificates representing all of the
Capital Stock of such Subsidiaries; (ii) undated stock powers executed in blank
and (iii) such opinions of counsel and such approving certificates of such
Subsidiaries as the Purchaser may request in respect of complying with any
legend on any such certificate or any other matter relating to such shares; (e)
such other agreements, instruments, approvals or other documents as may be
requested by the Purchaser in order to create, perfect, establish, and maintain
the first priority (subject only to the Liens, if any, of the Bank) of any Lien
in favor of the Purchaser to effect the intent that such Subsidiary shall become
bound by all of the terms, covenants and agreements contained in the Collateral
Documents and that all property and assets of such Subsidiary shall become
Collateral for the Obligations, and (e) such additional agreements, instruments,
approvals and documents, and legal opinions, as the Purchaser may request to
effect the intent that such Subsidiary shall become bound by all of the terms,
covenants and agreements contained in this Agreement and the other Investment
Documents.
9.17 NYSE LISTING. The Company shall use its best efforts to do or
cause to be done all things necessary at all times to maintain the listing of
the Common Stock on the NYSE.
9.18 C&C NOTES. The Company Parties shall use their best efforts to
collect, and enforce the payment and collection of, all amounts owing to it
under the C&C Notes and its rights under the security and other agreements,
instruments or documents relating thereto, and shall not amend, supplement or
otherwise modify the terms of any C&C Note or such other documents without the
prior written consent of the Purchaser.
9.19 BRIDGE FEE. Until all of the Obligations under the Term A Note are
indefeasibly paid in full, the Company Parties shall jointly and severally pay
to the Purchaser, as additional consideration for the purchase of the Term A
Note by the Purchaser, a non-accountable, non-refundable monthly bridge fee (the
"BRIDGE FEE") in the amount of $25,000. The Bridge Fee shall be payable in
arrears on the last Business Day of each calendar month, commencing on
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January 31, 2000, and on the date upon which all of the Obligations under the
Term A Note are indefeasibly paid in full. The Bridge Fee payable in each month
shall be deemed fully earned by the Purchaser as of the first day of such month.
9.20 DISSOLUTION OF SIMULA PROTECTIVE UK AND INTAERO LTD. As soon as
practicable but not later than sixty (60) days following the Closing Date, the
Company shall cause the dissolution and winding up of Simula Protective UK.
Prior to the date that Simula Protective UK has been dissolved and wound up, no
Company Party shall transfer any assets or properties to Simula Protective UK,
or cause Simula Protective UK to conduct any business whatsoever, and Simula
Protective UK shall remain an inactive indirect Subsidiary of the Company. In
addition, as soon as practicable but not later than January 7, 2000, the Company
shall cause the dissolution and winding up of Intaero Ltd. Prior to the date
that Intaero Ltd. has been dissolved and wound up, no Company Party shall
transfer any assets or properties to Intaero Ltd., or cause Intaero Ltd. to
conduct any business whatsoever, and Intaero Ltd. shall remain an inactive
Subsidiary of the Company.
9.21 FUTURE INFORMATION. All data, certificates, reports, statements,
documents and other information furnished to the Purchaser by or on behalf of
the Company Parties, any of their Subsidiaries or any of their respective
representatives or agents in connection with this Agreement, the other
Investment Documents or the transactions contemplated hereby and thereby, at the
time the information is so furnished, shall not contain any untrue statement of
a material fact, shall be complete and correct in all material respects to the
extent necessary to give the Purchaser sufficient and accurate knowledge of the
subject matter thereof, and shall not omit to state a material fact necessary in
order to make the statements contained therein not misleading in light of the
circumstances under which such information is furnished.
9.22 FURTHER ASSURANCES. From time to time after the date hereof, the
Company Parties shall, and shall cause its Subsidiaries and any other Persons
who are required to give their Consent to execute and deliver, such instruments,
certificates and documents, and will take all such actions, as the Purchaser may
reasonably request, for the purposes of implementing or effectuating the
provisions of this Agreement, the Notes, the Warrant and the other Investment
Documents. Upon exercise by the Purchaser of any power, right, privilege or
remedy pursuant to this Agreement, the Securities Purchase Agreement, or any
other Investment Document which requires any Consent, the Company Parties will
execute and deliver, and will cause its Subsidiaries and any other Persons to
execute and deliver, all applications, certifications, instruments and other
documents and papers that may be required to be obtained for such Consent.
9.23 SURVIVAL OF CERTAIN AFFIRMATIVE COVENANTS. From and after the date
that the Obligations under the Notes have been indefeasibly paid in full, the
Company Parties shall no longer be obligated to perform, comply with and observe
the covenants set forth in SECTIONS 9.3(c) through (k) only (Information
Reporting Requirements), SECTION 9.8 (Maintenance of Properties), SECTION 9.9
(Insurance), SECTION 9.12 (Communication with Accountants), SECTION
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9.13 (Compliance with Material Contracts), SECTION 9.14 (Fiscal Year End),
SECTION 9.16 (Additional Company Parties), SECTION 9.18 (C&C Notes), SECTION
9.21 (Future Information) and SECTION 9.22 (Further Assurances).
10. NEGATIVE AND FINANCIAL COVENANTS. The Company Parties jointly and severally
covenant and agree that, except as provided in SECTION 10.15, so long as any
Obligations under the Notes remain outstanding or the Purchaser owns or holds,
or has the right to acquire, directly or indirectly, at least 500,000 Warrant
Shares, the Company shall perform, comply with and observe each of the covenants
set forth in this SECTION 10, as applicable.
10.1 LIMITATIONS ON INDEBTEDNESS. The Company Parties shall not, and
shall not permit any of their Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee, suffer to exist or become or remain liable with
respect to any Indebtedness, except for:
(a) The Obligations;
(b) Indebtedness existing under the Bank Credit Agreement;
(c) The Indebtedness existing on the date hereof and listed on
SCHEDULE 3.11 (excluding any refinancings, restructurings (whether in the nature
of a "work out" or otherwise), restatements or refundings thereof);
(d) Trade accounts payables that are more than sixty (60) days
past their due dates incurred in the ordinary course of business in the
aggregate amount of $100,000 at any time outstanding; and
(e) Indebtedness consisting of the maximum fixed repurchase
price of any mandatory redemption of the Series A Preferred, PROVIDED that the
Company shall not make any mandatory redemption of the Series A Preferred prior
to the repayment in full of all Obligations under the Notes.
10.2 LIMITATIONS ON LIENS. The Company Parties shall not, and shall not
permit any of their Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist, any Lien with respect to any of its properties
(whether tangible or intangible, now existing or hereafter acquired), except:
(a) Liens in favor of the Purchaser;
(b) Liens in favor of the Bank; and
(c) Permitted Liens.
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10.3 LIMITATIONS ON INVESTMENTS. The Company Parties shall not, and
shall not permit any of their Subsidiaries to, directly or indirectly, purchase,
make or own any Investment, EXCEPT:
(a) Permitted Investments; and
(b) Investments set forth on SCHEDULE 3.11.
10.4 LIMITATIONS ON RESTRICTED PAYMENTS BY THE COMPANY. The Company
shall not, directly or indirectly, make any Restricted Payments. Notwithstanding
the foregoing sentence, so long as the Company is Solvent and no Default or
Event of Default has occurred and is continuing or would occur as a result
thereof, the Company may make the following Restricted Payments:
(a) Any dividend or other distribution on account of any other
Capital Stock of the Company now or hereafter outstanding which is payable
solely in shares of the same class of Capital Stock;
(b) The issuance of Common Stock upon the exercise of Equity
Rights of the Company outstanding as of the date hereof;
(c) The cancellation or acquisition of any Capital Stock of
the Company as payment to the Company of the exercise price of any Equity Rights
of the Company; or
(d) Fees and other payments to professional service providers
who are Affiliates of the Company made on an arm's length basis and approved in
writing in advance by a majority of the disinterested directors of the Board of
Directors of the Company (which approval shall be confirmed in writing). Fees
and other payments made to such professional service providers in accordance
with this CLAUSE (d) shall be deemed to have complied with the provisions of
SECTION 10.6.
10.5 LIMITATIONS ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Company Parties shall not, and shall not permit any of their Subsidiaries to,
enter into or permit to exist any agreement, instrument or other document which,
directly or indirectly, prohibits or restricts in any manner, or would have the
effect of prohibiting or restricting in any manner, the ability of any Company
Party or Subsidiary to (a) pay dividends or make other distributions in respect
of its Capital Stock owned by the Company or any other Subsidiary, (b) pay or
repay any Indebtedness owed to the Company or any other Subsidiary, (c) make
loans or advances to the Company or (d) transfer any of its properties or assets
to the Company or any other Subsidiary.
10.6 LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Company Parties
shall not, and shall not permit any of their Subsidiaries to, enter into at any
time any contract, transaction or other arrangement involving any Company Party
or such Subsidiary, on the one hand, and any
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other Company Party or any of its or their respective Affiliates, officers,
directors or employees, on the other hand, unless such contract, transaction or
arrangement (a) has been approved in writing in advance by a majority of the
disinterested directors of the Board of Directors of the Company, (b) will be on
terms and conditions that are no less favorable to the Company Party or
Subsidiary, as the case may be, than those that would be obtained from any
Person who is not an Affiliate of (or otherwise related to) the Company Party or
any of its Subsidiaries in a similar transaction and (c) has been approved in
writing in advance by the Purchaser.
10.7 CHANGE IN BUSINESS. The Company Parties shall not engage in any
business other than the business described in recital A.
10.8 SALES OF RECEIVABLES. The Company Parties shall not, and shall not
permit any of their Subsidiaries to, sell, assign, discount, transfer, or
otherwise dispose of any material accounts receivable, chattel paper, promissory
notes, drafts or trade acceptances or other rights to receive payment held by
it, with or without recourse, except for the purpose of collection or settlement
in the ordinary course of business.
10.9 FUNDAMENTAL CHANGES. No Company Party shall, and the Company
Parties shall not permit any of their Subsidiaries to:
(a) make any change in its business objectives, purposes,
structure or operations as the same exists on the date hereof;
(b) amend, modify or alter its charter, bylaws or other
organizational documents in any manner which is either (i) adverse to the
Purchaser or (ii) adversely affects the ability of any Company Party to repay
the Obligations or the Guarantied Obligations, as the case may be, or otherwise
perform its obligations hereunder or under any other Investment Document;
(c) merge, consolidate, amalgamate, reorganize or
recapitalize;
(d) form, create or acquire any additional Subsidiaries;
(e) sell, lease, transfer or otherwise dispose of, in any
transaction or series of transactions, all or a significant portion of its
assets (whether now owned or hereafter acquired), other than (i) Airline
Interiors pursuant to the Airlines Interior Sale and (ii) dispositions of assets
in the ordinary course of business not to exceed $100,000 in the aggregate in
any Fiscal Year;
(f) wind up, liquidate or dissolve itself (or permit or suffer
any thereof); or
(g) issue any of its Capital Stock (other than the issuance by
the Company of shares of Series A Preferred as a dividend payable to holders of
Series A Preferred pursuant to
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the terms of its charter or shares of Common Stock upon the exercise of Equity
Rights of the Company existing as of the date hereof).
10.10 AGREEMENTS AFFECTING CAPITAL STOCK AND INDEBTEDNESS; AMENDMENTS
TO MATERIAL CONTRACTS. No Company Party shall, and the Company Parties shall not
permit any of their Subsidiaries to, without the prior written consent of the
Purchaser:
(a) Enter into any voting agreement, voting trust, irrevocable
proxy or other agreement affecting the voting rights of the Capital Stock of any
Company Party, except for, in the case of the Company, the Investor Rights
Agreement;
(b) Amend, supplement, modify, refinance, renew, replace or
restructure any Other Debt Document, or waive any term or provision contained
therein; or
(c) Cancel or terminate any Material Contract (or consent to
or accept any cancellation or termination thereof), amend or otherwise modify
any Material Contract or give any consent, waiver or approval thereunder, waive
any breach of or default under any Material Contract, or take any action in
connection with any Material Contract that would impair the value of the
interests or rights of any Company Party thereunder or that would impair the
interest or rights of the Purchaser hereunder or under this Agreement or any
other Investment Document.
10.11 CONDITIONAL SALES. No Company Party shall, and the Company
Parties shall not permit any of their Subsidiaries to, make any sale to any
customer on a bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment or any other repurchase or return basis, other than in the ordinary
course of business consistent with prior periods.
10.12 MARGIN STOCK. No Company Party shall, and the Company Parties
shall not permit any of their Subsidiaries to, directly or indirectly, use any
of the proceeds from the issuance and sale of the Securities for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any Margin
Stock or maintaining or extending credit to others for such purpose or for any
other purpose that violates the Margin Regulations. If requested by the
Purchaser, the Company Parties will promptly furnish to the Purchaser a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in the Margin Regulations.
10.13 NO PAYMENTS UPON A SIMULA CHANGE OF CONTROL. No Company Party
shall, without the prior written consent of the Purchaser, make any payments to
any Simula Change of Control Party pursuant to its obligations under any Simula
Change of Control Agreement upon the occurrence of a "Change of Control" (as
such term is defined therein), except to the extent that any such Change of
Control Party is entitled to such payments under the applicable supplement to
Simula Change of Control Agreement delivered at the Closing pursuant to SECTION
6.7(j).
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10.14 SUBLEASE OF AIRLINE INTERIORS LEASE. The Company shall use its
best efforts to locate a Person to whom to sublease, or otherwise transfer the
lease relating to, the industrial building and related manufacturing facilities
located in Poway, California, and currently used by Airline Interiors in its
business operations.
10.15 FINANCIAL COVENANTS. The Company covenants and agrees that, so
long as any Obligations remain outstanding, the Company shall perform, comply
with and observe each of the financial covenants set forth in this SECTION
10.15, PROVIDED that in the event that the Capital Stock, or all or
substantially all of the assets, of Artcraft Industries shall have been sold,
the financial covenant amounts shall be reset to take into account the effects
of such sale.
(a) MINIMUM MONTHLY EBITDA. For each calendar month, EBITDA
shall be not less than $500,000 in such calendar month.
(b) MINIMUM QUARTERLY EBITDA. For each of the periods listed
in the table below, EBITDA shall not be less than the total amount set forth
opposite such period:
<TABLE>
<CAPTION>
MINIMUM
EBITDA
-----------------
<S> <C>
Fiscal Quarter ending March 31, 2000.............. $ 3,348,000
Trailing two Fiscal Quarters ending June 30,
2000........................................... 6,669,000
Trailing three Fiscal Quarters ending
September 30, 2000............................. 9,855,000
TRAILING FOUR FISCAL QUARTERS ENDING:
December 31, 2000................................. $ 13,392,000
March 31, 2001.................................... 13,622,000
June 30, 2001..................................... 13,878,000
September 30, 2001................................ 14,270,000
December 31, 2001................................. 14,310,000
March 31, 2002.................................... 15,053,000
June 30, 2002..................................... 15,795,000
September 30, 2002................................ 16,537,000
December 31, 2002................................. 17,280,000
Thereafter on a Fiscal Quarter basis.............. 18,000,000
</TABLE>
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(c) MINIMUM FIXED CHARGE COVERAGE RATIO. For each of the
periods listed in the table below, the Fixed Charge Coverage Ratio shall not be
less than the ratio set forth opposite such period:
<TABLE>
<CAPTION>
FIXED CHARGE
COVERAGE
RATIO
------------
<S> <C>
Fiscal Quarter ending March 31, 2000....................... .92
Trailing two Fiscal Quarters ending June 30,
2000.............................................. 1.18
Trailing three Fiscal Quarters ending September
30, 2000.......................................... 1.11
TRAILING FOUR FISCAL QUARTERS ENDING:
December 31, 2000.......................................... 1.25
March 31, 2001............................................. 1.31
June 30, 2001.............................................. 1.36
September 30, 2001......................................... 1.41
December 31, 2001.......................................... 1.42
March 31, 2002............................................. 1.48
June 30, 2002.............................................. 1.53
September 30, 2002......................................... 1.59
December 31, 2002.......................................... 1.69
Thereafter on a Fiscal Quarter basis....................... 1.80
</TABLE>
(d) MAXIMUM LEVERAGE RATIO. As of the last day of each Fiscal
Quarter set forth in the table below, the Leverage Ratio shall not exceed the
ratio set forth opposite such Fiscal Quarter in the table; PROVIDED, HOWEVER,
that (i) with respect to the Fiscal Quarter ending March 31, 2000, EBITDA shall
be calculated during such Fiscal Quarter; (ii) with respect to the Fiscal
Quarter ending June 30, 2000, EBITDA shall be calculated during the trailing two
Fiscal Quarters; (iii) with respect to the Fiscal Quarter ending September 30,
2000, EBITDA shall be calculated during the trailing three Fiscal Quarters; and
(iv) with respect to the Fiscal Quarter
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ending December 31, 2000 and each Fiscal Quarter thereafter, EBITDA shall be
calculated during the trailing four Fiscal Quarters:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING: LEVERAGE RATIO
---------------------- --------------
<S> <C>
March 31, 2000................................................... 21.70
June 30, 2000.................................................... 10.76
September 30, 2000............................................... 7.22
December 31, 2000................................................ 5.22
March 31, 2001................................................... 5.17
June 30, 2001.................................................... 5.00
September 30, 2001............................................... 4.90
December 31, 2001................................................ 4.80
March 31, 2002................................................... 4.56
June 30, 2002.................................................... 4.24
September 30, 2002............................................... 4.04
December 31, 2002................................................ 3.77
Thereafter....................................................... 3.50
</TABLE>
(e) MAXIMUM ANNUAL CAPITAL EXPENDITURES. Capital Expenditures
in the Fiscal Year (FYE) ending December 31, 2000 set forth in the table below
shall not exceed the corresponding divisional amount, and aggregate Capital
Expenditures in the Fiscal Year ending December 31, 2001 and 2002, shall not
exceed $2,866,960 and $3,338,348, respectively:
<TABLE>
<CAPTION>
FYE 2000
------------
<S> <C>
SASD.................................... $ 333,512
SSSI, ICSE, STI, SimTech
and Polymer............................ 1,475,976
Airline Interiors....................... 0
Artcraft Industries..................... 563,800
Composites.............................. 80,000
Other................................... 92,224
------------
Total................................... $ 2,549,512
------------
------------
</TABLE>
(f) MINIMUM NET INCOME. Net Income for any Fiscal Quarter
shall not be less than $0.
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(g) MAXIMUM OVER 90-DAY RECEIVABLES. The 90-Day Receivables at
any time shall not be greater than seven percent (7.0%) of Total Receivables at
such time.
10.16 SURVIVAL OF CERTAIN NEGATIVE COVENANTS. From and after the date
that the Obligations under the Notes have been indefeasibly paid in full, the
Company Parties shall no longer be obligated to perform, comply with and observe
the covenants set forth in SECTION 10.1 (Limitations on Indebtedness), SECTION
10.2 (Limitations on Liens), SECTION 10.3 (Limitations on Investments), SECTION
10.4 (Limitations on Restricted Payments by the Company), SECTION 10.9
(Fundamental Changes), SECTION 10.10 (Agreements Affecting Capital Stock and
Indebtedness; Amendments to Material Contracts), SECTION 10.13 (No Payments Upon
a Simula Change of Control) and SECTION 10.15 (Financial Covenants).
11. DEFAULTS AND REMEDIES.
11.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events, acts or occurrences shall constitute an event of default (each
an "EVENT OF DEFAULT"):
(a) Any Company Party shall fail to pay as and when due
(whether at stated maturity, upon acceleration or required prepayment or
otherwise) any principal, premium, if any, interest or other amount payable
under any Note or any other amounts (including, without limitation, fees, costs
or expenses) payable under this Agreement or any other Investment Document; or
(b) Any Company Party shall breach or fail to perform, comply
with or observe any agreement, covenant or obligation required to be performed
by it under SECTION 9.6 (Legal Existence), SECTION 9.7 (Books and Records;
Inspections), SECTION 9.8 (Maintenance of Properties), SECTION 9.16 (Additional
Subsidiary Guarantors), SECTION 9.20 (Future Information), SECTION 9.21 (Further
Assurances), SECTION 10.2 (Limitations on Liens), SECTION 10.8 (Sales of
Receivables), SECTION 10.11 (Conditional Sales) and SECTION 10.13 (Margin Stock)
and, if such breach or failure may be cured, such breach or failure shall not
have been remedied within five (5) Business Days after the Chief Executive
Officer, President, Chief Operating Officer, Chief Financial Officer, General
Counsel, Treasurer or Secretary of the Company becomes aware or should have
become aware of such failure or breach; or
(c) (i) Any Company Party shall breach or fail to perform,
comply with or observe any agreement, covenant or obligation required to be
performed by it under this Agreement, Notes, the Warrant, the Investor Rights
Agreement or any other Investment Document (other than the agreements, covenants
or obligations expressly covered by SECTIONS 11.1(a) and (b)), or (ii) any
Principal Shareholder shall breach or fail to perform, comply with or observe
any agreement, covenant or obligation required to be performed by him under the
Investor Rights Agreement; or
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(d) Any representation or warranty made by the Company Parties
under, relating to or in connection with this Agreement or any other Investment
Document shall be false or misleading when made (or deemed made); or
(e) (i) Any "Default" or "Event of Default" under the Bank
Credit Agreement or other Bank Credit Document shall have occurred and be
continuing, or (ii) any "default" or "event of default" under any other Other
Debt Document shall have occurred and be continuing and shall not have been
waived by the lender thereunder; or
(f) (i) Any Company Party shall default in the payment
(whether at stated maturity, upon acceleration or required prepayment or
otherwise), beyond any period of grace provided therefor, of any principal of or
interest on any other Indebtedness with a principal amount in excess of
$250,000, or (ii) any other breach or default (or other event or condition)
shall occur under any agreement, indenture or instrument evidencing or governing
any such other Indebtedness, if the effect of such breach or default (or such
other event or condition) is to cause, or to permit the holder or holders of
such other Indebtedness to cause (upon the giving of notice or the passage of
time or both), such other Indebtedness to become or be declared due and payable,
or required to be prepaid, redeemed, purchased or defeased (or an offer of
prepayment, redemption, purchase or defeasance is made) prior to its stated
maturity, unless such breach or default has been waived within ten (10) days
following such breach or default by the Person or Persons entitled to give such
waiver; or
(g) Any Investment Document, or any material provision
thereof, shall cease to be of full force and effect for any reason other than in
accordance with its terms, or any Company Party shall contest or purport to
repudiate or disavow any of its obligations under or the validity or
enforceability of any Investment Document or any material provision thereof,
including by operation of law; or
(h) There shall be commenced against any Company Party or any
of its Subsidiaries an involuntary case seeking the liquidation or
reorganization of such Person under the Bankruptcy Laws or any similar
proceeding under any other Applicable Laws or an involuntary case or proceeding
seeking the appointment of a custodian or to take possession of all or a
substantial portion of its property or to operate all or a substantial portion
of its business, and any of the following events occur: (i) any such Person
consents to such involuntary case or proceeding; (ii) the petition commencing
the involuntary case or proceeding is not timely controverted; (iii) the
petition commencing the involuntary case or proceeding remains undismissed and
unstayed for a period of sixty (60) days; or (iv) an order for relief shall have
been issued or entered therein; or
(i) Any Company Party or any of their Subsidiaries shall
institute a voluntary case seeking liquidation or reorganization under the
Bankruptcy Laws or any similar proceeding under any other Applicable Laws, or
shall consent thereto; or shall consent to the conversion of an involuntary case
to a voluntary case; or shall file a petition, answer a complaint or otherwise
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institute any proceeding seeking, or shall consent or acquiesce to the
appointment of, a custodian or to take possession of all or a substantial
portion of its property or to operate all or a substantial portion of its
business; or shall make a general assignment for the benefit of creditors; or
shall generally not pay its debts as they become due; or the Board of Directors
of any such Person (or any committee thereof) adopts any resolution or otherwise
authorizes action to approve any of the foregoing; or
(j) Any Company Party or any of their Subsidiaries shall
suffer any money judgment, writ, warrant of attachment or other order that
involves an amount or value in excess of $250,000, and such judgment, writ,
warrant or other order shall continue unsatisfied and unstayed for a period of
thirty (30) days; or
(k) There shall occur any Change in Control; or
(l) The LLCP Representative, if appointed pursuant to Section
1.1 of the Investor Rights Agreement, shall be removed from the Board of
Directors of the Company, or the LLCP Representative shall not be elected or
appointed to such Board at any future election of directors, and, in each such
case, the Company shall not have caused any other individual designated by the
Purchaser as the LLCP Representative to have been elected or appointed as a
member of such Board within five (5) days after the Purchaser shall have
designated such other individual (PROVIDED, HOWEVER, that the removal by the
Purchaser of the LLCP Representative shall not be deemed to constitute an Event
of Default under this clause (l));
(m) (i) Any Termination Event shall occur that, when taken
together with all other Termination Events that have occurred, could result in a
liability to any Company Party or any ERISA Affiliate in excess of $100,000;
(ii) any Company Party or any ERISA Affiliate shall have committed a failure
described in Section 302(f)(1) of ERISA and the amount determined under Section
302(f)(3) of ERISA is at least $100,000; (iii) any failure to make full payment
(including all required installments) when due of all amounts that, under the
provisoins of any Benefit Plan or Applicable Law, any Company Party or any ERISA
Affiliate is required to pay as contributions thereto, which would result in a
liability to any Company Party or ERISA Affiliate in excess of $100,000; or (iv)
any Company Party or any ERISA Affiliate shall have incurred any accumulated
funding deficiency in excess of $100,000, whether or not waived, with respect to
any Benefit Plan; or
(n) There shall occur any "Major Event" or "Triggering Event"
(as such terms are defined in the Statement of the Designations, Preferences,
Rights and Privileges of the Series A Preferred which was filed by or on behalf
of the Company with the Arizona Corporation Commission on March 24, 1999) or
other event which grants to the holders of the Series A Preferred the right to
require the Company to redeem any shares of Series A Preferred to the Company,
and such holders exercise its or their right to require the Company to redeem
all or any portion of its shares of Series A Preferred to the Company.
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The foregoing Events of Default shall be deemed to have occurred,
respectively, and any adjustments in the interest rate under any Note or other
remedies available to the Purchaser hereunder or thereunder shall begin to
apply, at the following times:
(i) In the case of the clause (a) above, as of 2:00 p.m.(noon)
(Los Angeles time) on the day on which such payment is due but has not
been paid;
(ii) In the case of clause (b) above, as of the close of
business on the fifth Business Day after any such officer of the
Company becomes aware or should have become aware of such failure or
breach, if such breach or failure shall not have been cured, or as of
the close of business on the day such breach or violation shall have
occurred, if such breach or failure cannot be cured;
(iii) In the case of clause (c)(i) or (ii), immediately upon
the occurrence of any such breach or failure;
(iv) In the case of clause (d) above, as of the close of
business on the day on which the Company first became aware, or should
have become aware, that such representation or warranty was false or
misleading when made;
(v) In the case of clause (e) above, as of the occurrence of a
"Default" or "Event of Default" under the Bank Credit Agreement or
other Bank Credit Document or such other "default" or "event of
Default;"
(vi) In the case of clause (f)(i) above, as of the close of
business on the day on which such payment of principal or interest is
due, or in the case of clause (f)(ii), as of the close of business on
the tenth (10th) day following such breach or default if such breach or
default has not been waived by the Person or Persons entitled to give
such waiver;
(vii) In the case of clause (g) above, as of the close of
business on the day such Investment Document or provision, as the case
may be, ceases to be enforceable or is contested, repudiated, revoked
or disavowed;
(viii) In the case of clauses (h) and (i) above, immediately
prior to the occurrence of any of the events enumerated therein;
(ix) In the case of clause (j) above, as of the close of
business on the last day of such thirty (30) day period if such
judgment, writ, warrant or order is unsatisfied or unstayed;
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(xi) In the case of clause (k) above, immediately upon the
occurrence of the Change in Control;
(xii) In the case of clause (l) above, as of the close of
business on the last day of such five (5) day period if the Board of
Directors of the Company shall not have duly elected or appointed such
other LLCP Representative to such Board;
(xiii) In the case of clause (m) above, immediately upon the
occurrence of any such events; or
(xiv) In the case of clause (n) above, immediately upon the
occurrence of such Major Transaction or Triggering Event, as the case
may be.
11.2 ACCELERATION. If any Event of Default (other than an Event of
Default specified in clause (h) or (i) of SECTION 11.1) occurs and is
continuing, the Purchaser may, by written notice to the Company, declare all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Notes, and all other Obligations, to be due and
payable. Upon any such declaration of acceleration, such principal, premium, if
any, interest and other amounts shall become immediately due and payable. If an
Event of Default specified in clause (h) or (i) of SECTION 11.1 occurs, all
outstanding principal of, premium, if any, accrued and unpaid interest on, and
all other amounts under the Notes, and all other Obligations, shall become
immediately due and payable without any declaration or other act on the part of
the Purchaser. The Company Parties hereby waive all presentment for payment,
demand, protest, notice of protest and notice of dishonor, and all other notices
of any kind to which it may be entitled under Applicable Laws or otherwise.
11.3 OTHER REMEDIES. If any Default or Event of Default shall occur and
be continuing, the Purchaser may proceed to protect and enforce its rights and
remedies under this Agreement and any other Investment Document by exercising
all rights and remedies available under this Agreement, any other Investment
Document or Applicable Laws (including, without limitation, the Code), either by
suit in equity or by action at law, or both, whether for the collection of
principal of or interest on the Notes, to enforce the specific performance of
any covenant or other term contained in this Agreement or any other Investment
Document. No remedy conferred in this Agreement upon the Purchaser is intended
to be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
11.4 APPOINTMENT OF RECEIVER. In addition to all other rights, powers
and remedies that the Purchaser has under this Agreement, any other Investment
Document or Applicable Laws, the Purchaser shall, upon the occurrence of an
Event of Default, be entitled (to the extent permitted by Applicable Laws) to,
and the Company Parties hereby consent in advance to, the appointment of a
receiver by any court of competent jurisdiction to take control of the Company
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Parties and their Subsidiaries for the purpose of operating and thereafter
selling the Company Parties and/or their Subsidiaries to satisfy its obligations
to creditors, including the Purchaser.
11.5 WAIVER OF PAST DEFAULTS. The Purchaser may, by written notice to
the Company, waive any specified Default or Event of Default and its
consequences with respect to this Agreement, the Notes or any other Investment
Document; PROVIDED, HOWEVER, that no such waiver will extend to any subsequent
or other Default or Event of Default or impair any rights of the Purchaser which
may arise as a result of such other Default or Event of Default.
12. TERMINATION.
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) By the Purchaser if, between the date hereof and the
Closing Date: (i) any event or condition occurs that has resulted in or could
reasonably be expected to result in a Material Adverse Change; (ii) any
representation or warranty of the Company Parties contained in this Agreement
shall have been breached such that the conditions set forth in SECTION 6 would
not or could not be satisfied on the earlier of (A) the Closing Date and (B)
February 15, 2000; (iii) the Company Parties (or any one of them) shall not have
complied with any covenant or other agreement to be complied with by it and
contained in this Agreement; or (iv) any Company Party makes a general
assignment for the benefit of creditors, or any proceeding shall be instituted
by or against any Company Party seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Applicable
Laws relating to bankruptcy, insolvency or reorganization;
(b) By the Purchaser, on the one hand, or the Company (for
itself and the other Company Parties), on the other hand, if the Closing Date
shall not have occurred on or before February 15, 2000; PROVIDED, HOWEVER, that
the right to terminate this Agreement under this SECTION 12.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing Date to occur on or prior to such date;
(c) By the Purchaser, on the one hand, or the Company (for
itself and the other Company Parties), on the other hand, if there shall have
been issued any injunction, order, decree or ruling that prohibits or limits any
of the transactions contemplated by this Agreement or the other Investment
Documents and such injunction, order, decree or ruling shall have become final
and non-appealable;
(d) By the Purchaser, if the Purchaser decides at any time
after the date hereof that it will not proceed with the transactions
contemplated by this Agreement based solely on its due diligence investigation
of the Company and its Subsidiaries and other Affiliates; or
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(e) By the mutual written consent of the Company (for itself
and the other Company Parties) and the Purchaser.
12.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in SECTION 12.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party, except (a) for
SECTIONS 1, 8, 12 AND 13 and any other Sections or provisions which survive the
termination of this Agreement by their terms and (b) that nothing herein shall
relieve any party from liability for any breach or violation of this Agreement
or payment of any obligations hereunder.
12.3 WAIVER. The Purchaser may (a) extend the time for the performance
of any of the obligations or other acts of the Company, (b) waive any
inaccuracies in the representations or warranties of the Company or (c) waive
compliance with any of the conditions, covenants or agreements of the Company
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument signed by the Purchaser. Any waiver of the breach of any term
or condition shall not be construed as a waiver of any other breach or
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement. The failure of by the Purchaser to assert any of
its rights hereunder shall not constitute a waiver of any such rights.
12.4 ALTERNATIVE TRANSACTION FEE. If (a) this Agreement is terminated
by the Company (for itself and/or the other Company Parties) or the Purchaser
for any reason (other than as provided in the last sentence of this SECTION
12.4) and, within one hundred eighty (180) days after the date of such
termination, any Company Party enters into any agreement, transaction or
understanding with any other Person relating to an Alternative Transaction or a
Permitted Alternative Transaction, or (b) prior to the termination of this
Agreement, the Company or any of its Subsidiaries enters into an agreement,
transaction or understanding with any other Person relating to an Alternative
Transaction or a Permitted Alternative Transaction, then, in either case, in
addition to any damages due to the Purchaser for breach or violation of this
Agreement or any other Investment Document by the Company or any of its
Subsidiaries and any costs, expenses, Losses or other amounts due under SECTION
8 or otherwise, the Company Parties shall jointly and severally pay to the
Purchaser an amount in cash equal to $1,000,000 (the "ALTERNATIVE TRANSACTION
FEE,") which Alternative Transaction Fee shall compensate the Purchaser for the
loss of opportunity in connection with the transactions contemplated by this
Agreement. The Alternative Transaction Fee shall be due and payable to the
Purchaser immediately upon the entering into of such agreement, transaction or
understanding. The Company Parties shall not be obligated to pay to the
Purchaser the Alternative Transaction Fee if the Purchaser terminates this
Agreement pursuant to SECTION 12.1(d).
13. MISCELLANEOUS.
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; PURCHASER
INVESTIGATION. All representations, warranties, covenants and agreements of the
Company Parties (or any one of
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them) contained herein, or made in writing by or on behalf of the Company
Parties pursuant hereto or in connection herewith, shall survive the execution
and delivery of this Agreement, the issuance, sale and delivery of the
Securities, the repayment of the Notes and the exercise of the Warrant and the
due diligence or other investigation of the Company and its Subsidiaries made by
and on behalf of the Purchaser. The Company hereby agrees that neither the
Purchaser's review of the books and records or condition (financial or
otherwise), business, assets, properties, operations or prospects of the Company
or any of its Subsidiaries or other Affiliates, nor any other due diligence
investigation conducted by or on behalf of the Purchaser, shall be deemed to
constitute knowledge by the Purchaser of the existence or absence of any facts
or any other matters so as so reduce the Purchaser's right to rely on the
accuracy of the representations and warranties of the Company contained in this
Agreement or any other Investment Document.
13.2 CONSENT TO AMENDMENTS. No amendment, supplement or other
modification to this Agreement or any other Investment Document shall be
effective unless the same shall be in writing and signed by the Purchaser, and
the Company Parties may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, if, and only if, the Company
Parties shall have obtained the prior written consent of the Purchaser to such
action or omission. No course of dealing between the Company Parties, on the one
hand, and the Purchaser (or any successor or assignee thereof), on the other
hand, nor any delay in exercising any rights hereunder or under the Notes or any
other Investment Document shall operate as a waiver of any rights of the
Purchaser (or any other Holder).
13.3 ENTIRE AGREEMENT. This Agreement, together with the Exhibits, and
the Disclosure Schedules which are all incorporated herein by this reference and
are an integral part of this Agreement, the Notes, the Warrant and the other
Investment Document constitute the full and entire agreement and understanding
between the Purchaser, on the one hand, and the Company Parties, on the other
hand, relating to the subject matter hereof and thereof, and supersede all prior
oral and written, and all contemporaneous oral, agreements and understandings
relating to the subject matter hereof, including, without limitation, (a) the
Confidentiality Agreement dated December 21, 1998, between the Company and an
Affiliate of the Purchaser, (b) the investment proposal letter agreement dated
November 22, 1999, between the Company and an Affiliate of the Purchaser, (c)
the Confidentiality Agreement Regarding Automotive Business Information dated
December 8, 1999, between the Company and an Affiliate of the Purchaser and the
notification letter dated December 10, 1999, from an Affiliate of the Purchaser
to the Company, (d) the letter agreement dated December 10, 1999, among the
Company, the Purchaser and the Bank and (e) the investment proposal letter
agreement dated December 16, 1999, between the Company and an Affiliate of the
Purchaser.
13.4 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
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13.5 SUCCESSORS AND ASSIGNS; ASSIGNMENTS. This Agreement shall inure to
the benefit of, and be binding upon, the parties and their respective successors
and permitted assigns. The Purchaser may, without the consent of any Company
Party, sell, assign or delegate to one or more Persons (each an "ASSIGNEE") all
or any part of its right, title and interest in and to this Agreement and the
other Investment Documents, including, without limitation, all or any part of
the Obligations, subject to compliance with applicable federal and state
securities laws; PROVIDED, HOWEVER, that, in any privately negotiated
transaction involving a sale or assignment by the Purchaser of any such right,
title or interest, the Purchaser shall obtain from the Assignee in writing
investment intent representations which would be customarily obtained in
transactions of such nature; and PROVIDED FURTHER, HOWEVER, that the Company
Parties may continue to deal solely and directly with the Purchaser in
connection with any right, title or interest so assigned until written notice of
such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company.
If the Purchaser assigns to any Assignee a fifty percent (50.0%) or lesser
interest in and to the aggregate principal amount of the Notes then outstanding,
any decisions that the Purchaser is entitled to make under this Agreement, the
Notes and the other Investment Documents shall be made by the Purchaser, and the
Company may continue to deal solely and directly with respect to the Purchaser
in connection with the interests so assigned to the Assignee. If the Purchaser
assigns to any Assignee more than a fifty percent (50.0%) interest in and to the
aggregate principal amount of the Note then outstanding, any decisions that the
Purchaser is entitled to make under this Agreement, the Notes and the other
Investment Documents shall be made by the Holders of a majority of the aggregate
principal amount of the Notes outstanding at the time such decision is or is to
be made.
13.6 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(i) If to the Purchaser, to:
Levine Leichtman Capital Partners II, L.P.
c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Telecopier: (310) 275-1441
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WITH A COPY TO:
Riordan & McKinzie
300 South Grand Avenue, Suite 2900
Los Angeles, CA 90071
Attention: Mitchell S. Cohen, Esq.
Telephone: (213) 629-4824
Telecopier: (213) 629-8550
(ii) If to the Company Parties (or any one of them),
to:
Simula, Inc.
2700 N. Central Avenue, Suite 1000
Phoenix, AZ 85004
Attention: Donald W. Townsend
Telephone: (602) 631-4005
Telecopier: (602) 631-9005
WITH A COPY TO:
Fennemore Craig
3003 North Central Avenue, Suite 2600
Phoenix, AZ 85012-2913
Attention: Robert J. Hackett, Esq.
Telephone: (602) 916-5336
Telecopier: (602) 916-5536
or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this SECTION
13.6.
13.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
13.8 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
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13.9 CONSENT TO JURISDICTION AND VENUE. EACH COMPANY PARTY AND THE
PURCHASER HEREBY CONSENTS AND AGREES THAT ALL ACTIONS, SUITS OR OTHER
PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTS
LOCATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY AND ALL
CLAIMS, CONTROVERSIES AND DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR ANY OTHER INVESTMENT DOCUMENT. NOTWITHSTANDING THE FOREGOING, NOTHING
CONTAINED IN THIS SECTION 13.9 SHALL PRECLUDE THE PURCHASER FROM BRINGING ANY
ACTION, SUIT OR OTHER PROCEEDING IN THE COURTS OF ANY OTHER LOCATION WHERE THE
COMPANY PARTIES OR ANY ONE OF THEM OR ANY OF ITS OR THEIR ASSETS OR THE
COLLATERAL MAY BE FOUND OR LOCATED OR TO ENFORCE ANY JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE PURCHASER.
EACH COMPANY PARTY AND THE PURCHASER HEREBY (A) IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION, SUIT OR OTHER PROCEEDING COMMENCED IN ANY SUCH
COURT, (B) WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR ANY OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION OR IMPROPER VENUE AND (C) CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH COMPANY
PARTY AND THE PURCHASER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
OR OTHER PROCESS ISSUED IN ANY SUCH ACTION, SUIT OR OTHER PROCEEDING AND AGREES
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN
SECTION 13.6 (NOTICES) AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF SUCH PERSON'S ACTUAL RECEIPT THEREOF OR FIVE DAYS AFTER DEPOSIT
IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID.
TO THE EXTENT PERMITTED UNDER THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, EACH COMPANY PARTY HEREBY WAIVES, IN RESPECT OF ANY SUCH ACTION,
SUIT OR OTHER PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW
OR HEREAFTER, BY REASON OF SUCH PERSON'S PRESENT OR FUTURE DOMICILE, OR
OTHERWISE, MAY BE AVAILABLE TO IT.
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13.10 CONFIDENTIALITY. The Purchaser will maintain any confidential
information that it has or may receive from the Company Parties pursuant to this
Agreement confidential and shall not disclose such information to third parties
without the prior consent of the Company, except for disclosures of such
confidential information (a) to legal counsel, accountants and other
professional advisors to the Purchaser, (b) to the partners, officers, directors
and employees of the Purchaser, (c) regulatory officials having jurisdiction
over the Purchaser, (d) required by Applicable Laws or in connection with any
legal proceeding, (e) to any other Person in connection with any assignment of
the Notes or the Warrant or any interest therein, (f) to prospective purchasers
of Collateral after an Event of Default and (g) of information that has been
previously disclosed publicly without breach of this Agreement. The Purchaser
hereby acknowledges that the federal securities laws prohibit any person who has
material non-public information regarding a company from purchasing or selling
securities of such company, or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities, in reliance upon such
information.
13.11 LIMITATION OF LIABILITY. No claim shall be made by any Company
Party or any of its or their Affiliates against the Purchaser, or any
Affiliates, partners, directors, officers, employees, agents or representatives
of the Purchaser, for any special, indirect, consequential or punitive damages
in respect of any claim for breach of contract or under any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement or any other Investment Document, or any act, omission or event
occurring in connection therewith. Each Company Party hereby waives, releases
and agrees not to sue upon any claim for such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
13.12 PUBLICITY. The Company Parties and their Affiliates, on the one
hand, and the Purchaser, on the other hand, will consult with the other before
issuing, and provide each other the opportunity to review and comment upon, and
use reasonable efforts to agree on the form and substance of, any press release
or other public statement with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make such other public
announcement prior to such consultation, except as required under Applicable
Laws. The parties agree that the initial press release to be issued with respect
to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties. Notwithstanding anything to the contrary,
the Company Parties hereby consent to the preparation and publication by the
Purchaser of an advertisement "tombstone" publicly disclosing the closing of the
transactions contemplated by this Agreement.
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13.13 WAIVER OF TRIAL BY JURY. EACH COMPANY PARTY AND THE PURCHASER
HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER
PROCEEDING ARISING OUT OF, CONNECTED WITH OR RELATED TO THIS AGREEMENT OR ANY
OTHER INVESTMENT DOCUMENT, OR ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF
OR RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF
WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be executed and delivered by their duly authorized representatives
as of the date first written above.
COMPANY
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Executive Vice President and Chief Financial
Officer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
OTHER COMPANY PARTIES
SIMULA SAFETY SYSTEMS, INC., an Arizona
corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
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SIMULA TRANSPORTATION EQUIPMENT
CORPORATION (formerly known as Intaero, Inc.),
an Arizona corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
AIRLINE INTERIORS, INC., an Arizona corporation
By: /s/ James C. Dodd
---------------------------------
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
ARTCRAFT INDUSTRIES CORP., an Arizona
corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
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SIMULA COMPOSITES CORPORATION (formerly
known as Viatech, Inc.), a Delaware corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an
Arizona corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
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INTERNATIONAL CENTER FOR SAFETY
EDUCATION, an Arizona corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
SIMULA POLYMER SYSTEMS, INC., an Arizona
corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
SIMULA AUTOMOTIVE SAFETY DEVICES LIMITED,
a company organized and existing under the
laws of the United Kingdom
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
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CCEC CAPITAL CORP., an Arizona corporation
By: /s/ James C. Dodd
---------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
---------------------------------
Nora T. Harden
Assistant Secretary
PURCHASER
LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
a California limited partnership
By: LLCP California Equity Partners II, L.P.,
a California limited partnership,
its General Partner
By: Levine Leichtman Capital Partners, Inc.,
a California corporation,
its General Partner
By: /s/ Arthur E. Levine
--------------------------
Arthur E. Levine
President
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THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION.
PAYMENT OF THE INDEBTEDNESS EVIDENCED BY THIS SECURITY, INCLUDING PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST, IS SUBJECT TO THE TERMS AND CONDITIONS OF AN
INTERCREDITOR AGREEMENT DATED OF EVEN DATE HEREWITH BETWEEN LEVINE LEICHTMAN
CAPITAL PARTNERS II, L.P., AS THE INITIAL HOLDER OF THIS SECURITY, AND THE CIT
GROUP/BUSINESS CREDIT, INC. A COPY OF SUCH INTERCREDITOR AGREEMENT MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (OID).
PURSUANT TO TREASURY REGULATION SECTION 1.1275-3(b)(1), JAMES C. DODD, A
REPRESENTATIVE OF THE ISSUER, WILL, BEGINNING TEN DAYS AFTER THE ISSUE
DATE OF THIS SECURITY, PROMPTLY MAKE AVAILABLE TO THE HOLDER UPON
REQUEST THE INFORMATION DESCRIBED IN TREASURY REGULATION SECTION 1.1275-
3(b)(1)(i). MR. DODD MAY BE REACHED AT TELEPHONE NUMBER (602) 631-4005.
SECURED SENIOR NOTE DUE 2000
$5,000,000.00 December 31, 1999
FOR VALUE RECEIVED, SIMULA, INC., an Arizona corporation (the
"COMPANY"), SIMULA SAFETY SYSTEMS, INC., an Arizona corporation ("SSSI"), SIMULA
TRANSPORTATION EQUIPMENT CORPORATION (formerly known as Intaero, Inc.), an
Arizona corporation ("SIMTECH"), AIRLINE INTERIORS, INC., an Arizona corporation
("AIRLINE INTERIORS"), ARTCRAFT INDUSTRIES CORP., an Arizona corporation
("ARTCRAFT INDUSTRIES"), SIMULA COMPOSITES CORPORATION (formerly known as
Viatech, Inc.), a Delaware corporation ("COMPOSITES"), SIMULA AUTOMOTIVE SAFETY
DEVICES, INC., an Arizona corporation ("SASD"), SIMULA TECHNOLOGIES, INC., an
Arizona corporation ("STI"), INTERNATIONAL CENTER FOR SAFETY EDUCATION, INC., an
Arizona corporation ("ICSE"), SIMULA POLYMER SYSTEMS, INC., an Arizona
corporation ("POLYMER"), SIMULA AUTOMOTIVE SAFETY DEVICES LIMITED, a company
organized and existing under the laws of the United Kingdom ("SIMULA AUTOMOTIVE
TERM A NOTE
<PAGE>
UK"), and CCEC CAPITAL CORP., an Arizona corporation ("CCEC" and, together with
the Company, SSSI, SimTech, Airline Interiors, Artcraft Industries, Composites,
SASD, STI, ICSE, Polymer and Simula Automotive UK, the "COMPANY PARTIES"),
hereby jointly and severally promise to pay to the order of LEVINE LEICHTMAN
CAPITAL PARTNERS II, L.P., a California limited partnership (the "PURCHASER"),
or any registered assigns (including the Purchaser, the "HOLDER"), the sum of
FIVE MILLION DOLLARS ($5,000,000.00) in immediately available funds and in
lawful money of the United States of America, together with interest thereon,
all as provided in this Secured Senior Note Due 2000 (this "NOTE"). This Note is
being issued in connection with the consummation of the transactions
contemplated by the Securities Purchase Agreement dated of even date herewith
among the Company Parties and the Purchaser (as it may be amended, supplemented
or otherwise modified and in effect from time to time, the "SECURITIES PURCHASE
AGREEMENT"). All capitalized terms used and not otherwise defined in this Note
shall have the meanings set forth in the Securities Purchase Agreement.
The Indebtedness evidenced by this Note, including the payment of
principal of, premium, if any, interest on and all other amounts owing under
this Note, shall rank PARI PASSU with all other Senior Indebtedness of the
Company Parties. Without limiting the generality of the foregoing, the
Indebtedness evidenced by this Note shall constitute "Senior Indebtedness" as
such term is defined in the Indenture dated as of April 1, 1997, among the
Company, the "Subsidiary Guarantors" (as such term is defined therein) and Bank
One, Columbus, NA, as trustee thereunder.
1. PAYMENT OF INTEREST; DEFAULT RATE. So long as no Default or
Event of Default shall have occurred and be continuing, the Company Parties
jointly and severally agree to pay interest in cash on the unpaid principal
balance of this Note from the date hereof until fully paid at a rate per annum
equal to fifteen percent (15.0%). Interest on this Note shall be payable
monthly in arrears on the last Business Day of each calendar month (or portion
thereof), commencing on January 31, 2000 (each an "INTEREST PAYMENT DATE").
Interest shall be computed on the basis of the actual number of days elapsed
over a 360-day year, including the first and the last day.
If any Default or Event of Default shall occur and be
continuing, then, in addition to the rights and remedies available to the
Holder under the Securities Purchase Agreement, this Note, the other Investment
Documents and Applicable Laws, the Company Parties jointly and severally agree
to pay interest in cash on the unpaid principal balance of, premium, if any,
accrued and unpaid interest on, and all other amounts owing under this Note at
a rate per annum (the "DEFAULT RATE") equal to fifteen percent (15.0%), PLUS
two percent (2.0%) during the first sixty (60) days that such Default or Event
of Default remains uncured or unwaived and, thereafter, such rate shall further
increase by one percent (1.0%) per annum over the applicable rate during the
first sixty (60) day period or subsequent thirty (30) day
2
TERM A NOTE
<PAGE>
period, as the case may be, for each additional thirty (30) days that such
Default or Event of Default remains uncured or unwaived.
2. PAYMENT OF PRINCIPAL; MATURITY DATE. The Company Parties
jointly and severally agree to pay in full the entire outstanding principal
balance of this Note, outstanding premium, if any, accrued and unpaid interest
and all other unpaid amounts owing under this Note on September 30, 2000 (the
"MATURITY DATE").
3. [INTENTIONALLY OMITTED.]
4. MANDATORY PREPAYMENTS. In addition to the mandatory
prepayments required to be made by the Company pursuant to SECTION 5:
(a) ASSET SALES. If at any time any Company Party intends to
consummate any Asset Sale (including, without limitation, any Asset Sale
involving the sale of the Voting Stock, or all or substantially all of the
assets, of any of its Subsidiaries) in any Fiscal Year (which Asset Sale, when
taken together with any other Asset Sales in the same Fiscal Year, exceeds
aggregate proceeds of $25,000), it shall, within ten (10) Business Days prior to
the proposed date of consummation of such Asset Sale, notify the Holder in
writing of the proposed Asset Sale (including, without limitation, the subject
matter and the material terms thereof and the proposed date of consummation) and
the proposed use of the proceeds to be derived from such Asset Sale. Within two
(2) Business Days following the Holder's receipt of such written notice, the
Holder may, by written notice furnished to the Company, direct the applicable
Company Party to apply all Net Available Cash derived from such Asset Sale to
prepay the outstanding principal balance of, premium, if any, and accrued and
unpaid interest on this Note. If the Holder directs such Company Party to make
the mandatory prepayment contemplated by this SECTION 4(a), such Company Party
shall make such prepayment within one (1) Business Day following the receipt of
the Net Available Cash derived from such Asset Sale.
In addition, to the extent that any Company Party receives any
cash or cash equivalents upon the sale, conversion, collection or other
liquidation of any non-cash proceeds from such Asset Sale, the Company shall
notify the Holder in writing within two (2) Business Days of such receipt. The
Holder may, within five (5) Business Days after receipt of such written notice,
direct such Company Party (by written notice furnished to the Company) to make a
mandatory prepayment under this SECTION 4(a) with such cash or cash equivalents
and, if the Holder so directs such Company Party, such Company Party shall make
such mandatory prepayment within one (1) Business Day following its receipt of
the Holder's notice.
(b) [INTENTIONALLY OMITTED.]
3
TERM A NOTE
<PAGE>
The mandatory prepayments provided for in this SECTION 4 shall
be paid at 100.0% (I.E., without premium) of the principal amount required to be
prepaid, and shall be accompanied by the payment of any accrued and unpaid
interest on, and other amounts owing under, this Note through the date of
prepayment, all as provided for above.
5. CHANGE IN CONTROL. If a Change in Control shall occur at any
time, the Holder may, at its sole election, require the Company Parties to
prepay this Note, in whole or in part, at any time during the one hundred and
eighty (180) day period following the occurrence of the Change in Control, at
102.0% of the principal balance of this Note, PLUS all accrued and unpaid
interest on, and other amounts owing under, this Note through the date of
prepayment. The Company shall notify the Holder in writing, if possible, of any
Change in Control at least five (5) days prior to the date that such Change in
Control is scheduled to occur. The Company shall also notify the Holder of the
date on which any Change in Control shall have actually occurred within one (1)
Business Day after such date and shall inform the Holder, in such notification,
of the Holder's right to require the Company Parties to prepay this Note as
provided in this SECTION 5 and of the date on which such right shall terminate.
If the Holder elects to require the Company Parties to prepay this Note
pursuant to this SECTION 5, it shall furnish a written notice to the Company
advising the Company of such election and the outstanding principal balance
hereof, premium, accrued and unpaid interest and all other amounts to be
prepaid. The Company Parties jointly and severally agree to prepay this Note in
accordance with this SECTION 5, SECTION 7 and such written notice within one
(1) Business Day after its receipt of such written notice.
6. HOLDER ENTITLED TO CERTAIN BENEFITS. This Note is one of the
"Notes" referred to in, and the Holder is entitled to the rights and benefits
under, the Securities Purchase Agreement, including, without limitation, the
right to accelerate the outstanding principal balance of, premium, if any,
accrued and unpaid interest on, and all other amounts owing under this Note
upon the occurrence of an Event of Default. In addition, this Note is secured
by the "Collateral" referred to in the Collateral Documents and is guaranteed
by the Subsidiary Guarantors under the Guaranty.
7. MANNER OF PAYMENT. Payments of principal, interest and other
amounts due under this Note shall be made no later than 2:00 p.m. (noon) (Los
Angeles time) on the date when due and in lawful money of the United States of
America and (by wire transfer in funds immediately available at the place of
payment) to such account as the Holder may designate in writing to the Company
and, if to the Purchaser, to: Bank of America, Century City, Private Banking,
2049 Century Park East, Los Angeles, California 90067; ABA No. 121000358;
Account No. 1154603239; Attention: Cheryl Stewart (or such other place of
payment as the Purchaser may designate in writing). All such payments shall be
made without any deduction whatsoever, including, without limitation, any
deduction for set-off, recoupment, counterclaim or taxes. Any payments received
after 2:00 p.m. (noon) (Los Angeles time) shall be deemed
4
TERM A NOTE
<PAGE>
to have been received on the next succeeding Business Day. Any payments due
hereunder which are due on a day which is not a Business Day shall be payable on
the immediately preceding Business Day, together with all accrued and unpaid
interest through the actual due date of payment.
8. MAXIMUM LAWFUL RATE OF INTEREST. The rate of interest payable
under this Note shall in no event exceed the maximum rate permissible under
Applicable Law. If the rate of interest payable on this Note is ever reduced as
a result of this SECTION 8 and at any time thereafter the maximum rate
permitted under Applicable Law exceeds the rate of interest provided for in
this Note, then the rate provided for in this Note shall be increased to the
maximum rate provided for under Applicable Law for such period as is required
so that the total amount of interest received by the Holder is that which would
have been received by the Holder but for the operation of the first sentence of
this SECTION 8.
9. WAIVERS. Each Company Party hereby waives presentment for
payment, demand, protest, notice of protest and notice of dishonor, and all
other notices of any kind whatsoever to which it may be entitled under
Applicable Law or otherwise, except for notices to which the Company Parties
are expressly entitled under this Note.
10. REGISTRATION OF NOTES. Each Company Party shall maintain at
its principal executive office a register in which it shall register this Note,
any Assignments of this Note or any other notes issued hereunder and any other
notes issued upon surrender hereof and thereof. At the option of the Holder,
this Note may be exchanged for one or more new notes of like tenor in the
principal denominations requested by the Holder, and the Company Parties shall,
within three (3) Business Days after the surrender of this Note at the
Company's principal executive offices, deliver to the Holder such new note or
notes. In addition, each Assignment of this Note, in whole or in part, shall be
registered on the register immediately following the surrender of this Note at
the Company's principal executive offices. The Company may require the Holder,
as a condition to the registration of any Assignment hereunder, to represent
and warrant to the Company that the Assignment complies with applicable federal
or state securities laws and to deliver an opinion of its legal counsel to such
effect.
11. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of any Assignment, the Company Parties may treat
the Person in whose name any Note is registered as the owner and Holder of such
Note for all purposes whatsoever, and the Company Parties shall not be affected
by notice to the contrary. Subject to the preceding sentence, the Holder may
grant to any other Person participations from time to time in all or any part
of this Note on such terms and conditions as may be determined by the Holder in
its sole and absolute discretion, subject to applicable federal and state
securities laws. Notwithstanding anything to the contrary contained herein or
otherwise, nothing in this Note, the Securities Purchase Agreement or any other
Investment Document or otherwise shall
5
TERM A NOTE
<PAGE>
confer upon the participant any rights in the Securities Purchase Agreement or
any other Investment Document, and the Holder shall retain all rights with
respect to the administration, waiver, amendment, collection and enforcement of,
compliance with and consent to the terms and provisions of this Note, the
Securities Purchase Agreement and any other Investment Document.
In addition, the Holder may, without the consent of the
participant, give or withhold its consent or agreement to any amendments to or
modifications of this Note, the Securities Purchase Agreement or any other
Investment Document, waive any of the provisions hereof or thereof or exercise
or refrain from exercising any other rights or remedies which the Holder may
have under this Note, the Securities Purchase Agreement, any other Investment
Document or otherwise. Notwithstanding the foregoing, the Holder will not agree
with the Company Parties, without the prior written consent of the participant
(which consent shall be given or affirmatively withheld not later than three (3)
Business Days after the Holder's written request therefor): (a) to reduce the
principal of or rate of interest on this Note or (b) to postpone the date fixed
for payment of principal of or interest on the Indebtedness evidenced by this
Note. If the participant does not timely reply to the Holder's request for such
consent, the participant shall be deemed to have consented to such agreement and
the Holder may take such action in such manner as the Holder determines in the
exercise of its independent business judgment.
12. ASSIGNMENT AND TRANSFER. Subject to Applicable Law, the
Holder may, at any time and from time to time and without the consent of any
Company Party, assign or transfer to one or more Persons all or any portion of
this Note or any portion thereof (but not less than $500,000 in principal
amount in any single assignment (unless such lesser amount represents the
entire outstanding principal balance hereof)). Upon surrender of this Note at
the Company's principal executive office for registration of any such
assignment or transfer, accompanied by a duly executed instrument of transfer,
the Company Parties shall, at their expense and within three (3) Business Days
of such surrender, execute and deliver one or more new notes of like tenor in
the requested principal denominations and in the name of the assignee or
assignees and bearing the legend set forth on the face of this Note, and this
Note shall promptly be canceled. If the entire outstanding principal balance of
this Note is not being assigned, the Company Parties shall issue to the Holder
hereof, within three (3) Business Days of the date of surrender hereof, a new
note which evidences the portion of such outstanding principal balance not
being assigned. If this Note is divided into one or more Notes and is held at
any time by more than one Holder, any payments of principal of, premium, if
any, and interest or other amounts on this Note which are not sufficient to pay
all interest or other amounts due thereunder, shall be made PRO RATA with
respect to all such Notes in accordance with the outstanding principal amounts
thereof, respectively.
6
TERM A NOTE
<PAGE>
13. LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS NOTE. Upon
receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Note and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity agreement or other
indemnity reasonably satisfactory to the Company or, in the case of any such
mutilation, upon surrender and cancellation of such mutilated Note, the
Company Parties shall issue and deliver within three (3) Business Days a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
14. COSTS OF COLLECTION. The Company Parties jointly and severally
agree to pay to the Holder all costs and expenses, including the fees and
expenses of all attorneys, accountants and other experts retained by the
Holder, which are expended or incurred by or on behalf of the Holder in
connection with (a) the collection and enforcement of this Note, whether or
not any action, suit or other proceeding is commenced; (b) any actions for
declaratory relief in any way related to this Note or the Indebtedness
evidenced hereby; (c) the protection or preservation of any rights or
remedies of the Holder under this Note; (d) any actions taken by the Holder
in negotiating any amendment, waiver, consent or release of or under this
Note; (e) any actions taken in reviewing the Company's or any of its
Subsidiaries' financial affairs if any Default or Event of Default shall have
occurred or the Holder shall have determined in good faith that a Default or
an Event of Default may likely occur, which actions shall include, but not be
limited to, the following: (i) inspect the facilities of the Company and its
Subsidiaries or conduct audits or appraisals of the financial condition of
the Company and its Subsidiaries; (ii) have an accounting or other firm
selected by the Holder review the books and records of the Company and any of
its Subsidiaries and perform a thorough and complete examination thereof;
(iii) interview the Company's and each of its Subsidiaries' employees,
attorneys, accountants, customers and any other Persons related to the
Company or such Subsidiaries which the Holder believes may have relevant
information concerning the business, condition (financial or otherwise),
results of operations or prospects of the Company or any of its Subsidiaries;
and (iv) undertake any other action which the Holder believes is necessary to
assess accurately the financial condition and prospects of the Company and/or
its Subsidiaries; (f) any refinancing, restructuring (whether in the nature
of a "work out" or otherwise), bankruptcy or insolvency proceeding involving
the Company, any of its Subsidiaries or any other Affiliate of the Company
that is guarantying or otherwise securing the payment and performance of this
Note; (g) any actions taken to verify, maintain, perfect and protect any Lien
granted to the Holder to secure repayment of this Note; or (h) any effort by
the Holder to protect, assemble, complete, collect, sell, liquidate or
otherwise dispose of any Collateral, including in connection with any case
under Bankruptcy Law. The Company Parties hereby consent to the taking of the
foregoing actions by the Holder.
7
TERM A NOTE
<PAGE>
15. EXTENSION OF TIME. The Holder may, at its sole option, extend
the time for payment of this Note, postpone the enforcement hereof, or grant
any other indulgence without affecting or diminishing the Holder's right to
full recourse against the Company Parties hereunder, which right is expressly
reserved.
16. NOTATIONS. Before disposing of this Note or any portion
thereof, the Holder may make a notation thereon (or on a schedule attached
thereto) of the amount of all principal payments previously made by the
Company Parties with respect thereto.
17. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
18. CAPTIONS; CONSTRUCTION AND INTERPRETATION. The captions
contained in this Note are for convenience of reference only, do not
constitute a part of this Note and are not to be considered in construing or
interpreting this Note. The Company Parties and the Holder have each been
represented by counsel in the negotiation and drafting of this Note, and
neither the Company Parties nor the Holder nor their respective counsel shall
be deemed the drafter of this Note for purposes of construing the provisions
of this Note. All provisions of this Note shall be construed in accordance
with their fair meaning, and not strictly for or against the Company Parties
or the Holder.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
8
TERM A NOTE
<PAGE>
19. WAIVER OF JURY TRIAL. EACH COMPANY PARTY AND THE HOLDER (BY
ACCEPTANCE THEREOF) HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING BROUGHT TO RESOLVE ANY CLAIM, CONTROVERSY OR DISPUTE
ARISING UNDER OR RELATING TO THIS NOTE, ANY OTHER INVESTMENT DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH PARTY
INITIATES SUCH ACTION, SUIT OR OTHER PROCEEDING.
IN WITNESS WHEREOF, the Company Parties have caused this Note
to be executed and delivered by its or their duly authorized representatives
on the date first above written.
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
-----------------------------------------
James C. Dodd
Executive Vice President and Chief
Financial Officer
By: /s/ Nora T. Harden
------------------------------------------
Nora T. Harden
Assistant Secretary
SIMULA SAFETY SYSTEMS, INC., an Arizona
corporation
By: /s/ James C. Dodd
-----------------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
-----------------------------------------
Nora T. Harden
Assistant Secretary
9
TERM A NOTE
<PAGE>
SIMULA TRANSPORTATION EQUIPMENT
CORPORATION (formerly known as Intaero, Inc.), an
Arizona corporation
By: /s/ James C. Dodd
-----------------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
-----------------------------------------
Nora T. Harden
Assistant Secretary
AIRLINE INTERIORS, INC., an Arizona corporation
By: /s/ James C. Dodd
-----------------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
-----------------------------------------
Nora T. Harden
Assistant Secretary
ARTCRAFT INDUSTRIES CORP., an Arizona corporation
By: /s/ James C. Dodd
-----------------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
-----------------------------------------
Nora T. Harden
Assistant Secretary
10
TERM A NOTE
<PAGE>
SIMULA COMPOSITES CORPORATION (formerly
known as Viatech, Inc.), a Delaware corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an
Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
11
TERM A NOTE
<PAGE>
INTERNATIONAL CENTER FOR SAFETY
EDUCATION, an Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA POLYMER SYSTEMS, INC., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA AUTOMOTIVE SAFETY DEVICES LIMITED,
a company organized and existing under the
laws of the United Kingdom
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
12
TERM A NOTE
<PAGE>
CCEC CAPITAL CORP., an Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
13
TERM A NOTE
<PAGE>
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE
STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION.
PAYMENT OF THE INDEBTEDNESS EVIDENCED BY THIS SECURITY, INCLUDING PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST, IS SUBJECT TO THE TERMS AND CONDITIONS OF AN
INTERCREDITOR AGREEMENT DATED OF EVEN DATE HEREWITH BETWEEN LEVINE LEICHTMAN
CAPITAL PARTNERS II, L.P., AS THE INITIAL HOLDER OF THIS SECURITY, AND THE
CIT GROUP/BUSINESS CREDIT, INC. A COPY OF SUCH INTERCREDITOR AGREEMENT MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (OID). PURSUANT TO
TREASURY REGULATION SECTION 1.1275-3(b)(1), JAMES C. DODD, A REPRESENTATIVE
OF THE ISSUER, WILL, BEGINNING TEN DAYS AFTER THE ISSUE DATE OF THIS
SECURITY, PROMPTLY MAKE AVAILABLE TO THE HOLDER UPON REQUEST THE INFORMATION
DESCRIBED IN TREASURY REGULATION SECTION 1.1275-3(b)(1)(i). MR. DODD MAY BE
REACHED AT TELEPHONE NUMBER (602) 631-4005.
SECURED SENIOR NOTE DUE 2003
$15,000,000.00 December 31, 1999
FOR VALUE RECEIVED, SIMULA, INC., an Arizona corporation (the
"COMPANY"), SIMULA SAFETY SYSTEMS, INC., an Arizona corporation ("SSSI"),
SIMULA TRANSPORTATION EQUIPMENT CORPORATION (formerly known as Intaero,
Inc.), an Arizona corporation ("SIMTECH"), AIRLINE INTERIORS, INC., an
Arizona corporation ("AIRLINE INTERIORS"), ARTCRAFT INDUSTRIES CORP., an
Arizona corporation ("ARTCRAFT INDUSTRIES"), SIMULA COMPOSITES CORPORATION
(formerly known as Viatech, Inc.), a Delaware corporation ("COMPOSITES"),
SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an Arizona corporation ("SASD"),
SIMULA TECHNOLOGIES, INC., an Arizona corporation ("STI"), INTERNATIONAL
CENTER FOR SAFETY EDUCATION, INC., an Arizona corporation ("ICSE"), SIMULA
POLYMER SYSTEMS, INC., an Arizona corporation ("POLYMER"), SIMULA AUTOMOTIVE
SAFETY DEVICES LIMITED, a company organized and existing under the laws of
the United Kingdom ("SIMULA AUTOMOTIVE
TERM B NOTE
<PAGE>
UK"), and CCEC CAPITAL CORP., an Arizona corporation ("CCEC" and, together
with the Company, SSSI, SimTech, Airline Interiors, Artcraft Industries,
Composites, SASD, STI, ICSE, Polymer and Simula Automotive UK, the "COMPANY
PARTIES"), hereby jointly and severally promise to pay to the order of LEVINE
LEICHTMAN CAPITAL PARTNERS II, L.P., a California limited partnership (the
"PURCHASER"), or any registered assigns (including the Purchaser, the
"HOLDER"), the sum of FIFTEEN MILLION DOLLARS ($15,000,000.00) in immediately
available funds and in lawful money of the United States of America, together
with interest thereon, all as provided in this Secured Senior Note Due 2003
(this "NOTE"). This Note is being issued in connection with the consummation
of the transactions contemplated by the Securities Purchase Agreement dated
of even date herewith among the Company Parties and the Purchaser (as it may
be amended, supplemented or otherwise modified and in effect from time to
time, the "SECURITIES PURCHASE AGREEMENT"). All capitalized terms used and
not otherwise defined in this Note shall have the meanings set forth in the
Securities Purchase Agreement.
The Indebtedness evidenced by this Note, including the payment of
principal of, premium, if any, interest on and all other amounts owing under
this Note, shall rank PARI PASSU with all other Senior Indebtedness of the
Company Parties. Without limiting the generality of the foregoing, the
Indebtedness evidenced by this Note shall constitute "Senior Indebtedness" as
such term is defined in the Indenture dated as of April 1, 1997, among the
Company, the "Subsidiary Guarantors" (as such term is defined therein) and
Bank One, Columbus, NA, as trustee thereunder.
1. PAYMENT OF INTEREST; DEFAULT RATE. So long as no Default or
Event of Default shall have occurred and be continuing, the Company Parties
jointly and severally agree to pay interest on the unpaid principal balance
of this Note from the date hereof until fully paid as follows:
(a) Interest ("CASH INTEREST") at a rate per annum equal to
twelve and one-quarter percent (12.25%), payable in cash; and
(b) Interest ("PIK INTEREST") at a rate per annum equal to three
percent (3.0%), payable in additional secured senior notes of like tenor
(valued at 100.0% of the interest payment due and including the same terms
and other provisions contained in this Note (including, without limitation,
the interest terms contained in this SECTION 1)) with a principal amount
equal to the amount of such interest payment.
Interest on this Note shall be payable monthly in arrears on the last
Business Day of each calendar month (or portion thereof), commencing on
December 31, 1999 (each an "INTEREST PAYMENT DATE"). Interest shall be
computed on the basis of the actual number of days elapsed over a 360-day
year, including the first and the last day.
2
TERM B NOTE
<PAGE>
If any Default or Event of Default shall occur and be
continuing, then, in addition to the rights and remedies available to the
Holder under the Securities Purchase Agreement, this Note, the other
Investment Documents and Applicable Laws, the Company Parties jointly and
severally agree to pay, in addition to the PIK Interest payable under clause
(b) above, interest in cash on the unpaid principal balance of, premium, if
any, accrued and unpaid interest on, and all other amounts owing under this
Note at a rate per annum (the "DEFAULT RATE") equal to the rate per annum
then applicable to Cash Interest payable under clause (i) above PLUS two
percent (2.0%) during the first sixty (60) days that such Default or Event of
Default remains uncured or unwaived and, thereafter, such rate shall further
increase by one percent (1.0%) per annum over the applicable rate during the
first sixty (60) day period or subsequent thirty (30) day period, as the case
may be, for each additional thirty (30) days that such Default or Event of
Default remains uncured or unwaived.
2. PAYMENT OF PRINCIPAL; MATURITY DATE. The Company Parties jointly
and severally agree to pay in full the entire outstanding principal balance
of this Note, outstanding premium, if any, accrued and unpaid interest and
all other unpaid amounts owing under this Note on June 30, 2003 (the
"MATURITY DATE").
3. OPTIONAL PREPAYMENTS.
(a) The Company may not make any prepayments of the principal
balance of this Note at any time prior to December 31, 2000. Thereafter, the
Company may voluntarily prepay this Note, in whole or in part, as follows:
(i) at 105.0% of the principal balance being prepaid at
any time on or before December 31, 2001;
(ii) at 102.5% of the principal balance being prepaid
at any time after December 31, 2001 and on or before December 31,
2002; and
(iii) at 100.0% of the principal balance being prepaid at
any time after December 31, 2002 and on or before June 30, 2003.
Each percentage set forth above is referred to herein as the "PREPAYMENT
PERCENTAGE" applicable to any prepayment. Any prepayment of this Note made
under this SECTION 3 shall also include premium, if any, and all accrued and
unpaid interest on the then outstanding principal balance of this Note
through the date of prepayment.
(b) If the Company elects to prepay all or any portion of this
Note, the Company shall furnish written notice to the Holder with respect to
each voluntary prepayment not less than thirty (30) days prior to the date of
prepayment. Such notice shall specify the
3
TERM B NOTE
<PAGE>
principal balance of this Note to be prepaid on such date and shall be
irrevocable. Notice of prepayment having been given as aforesaid, the Company
shall make a prepayment to the Holder on such prepayment date in an amount
equal to (i) the Prepayment Percentage applicable to such prepayment,
MULTIPLIED BY (ii) the principal amount of this Note specified in such
prepayment notice to be prepaid on such prepayment date, together with
premium, if any, and all accrued and unpaid interest on the then outstanding
principal balance of this Note through the date of prepayment.
4. [INTENTIONALLY OMITTED].
5. CHANGE IN CONTROL. If a Change in Control shall occur at any
time, the Holder may, at its sole election, require the Company Parties to
prepay this Note, in whole or in part, at any time during the one hundred and
eighty (180) day period following the occurrence of the Change in Control, at
102.0% of the principal balance of this Note, PLUS all accrued and unpaid
interest on, and other amounts owing under, this Note through the date of
prepayment. The Company shall notify the Holder in writing, if possible, of
any Change in Control at least five (5) days prior to the date that such
Change in Control is scheduled to occur. The Company shall also notify the
Holder of the date on which any Change in Control shall have actually
occurred within one (1) Business Day after such date and shall inform the
Holder, in such notification, of the Holder's right to require the Company
Parties to prepay this Note as provided in this SECTION 5 and of the date on
which such right shall terminate. If the Holder elects to require the Company
Parties to prepay this Note pursuant to this SECTION 5, it shall furnish a
written notice to the Company advising the Company of such election and the
outstanding principal balance hereof, premium, accrued and unpaid interest
and all other amounts to be prepaid. The Company Parties jointly and
severally agree to prepay this Note in accordance with this SECTION 5,
SECTION 7 and such written notice within one (1) Business Day after its
receipt of such written notice.
6. HOLDER ENTITLED TO CERTAIN BENEFITS. This Note is one of the
"Notes" referred to in, and the Holder is entitled to the rights and benefits
under, the Securities Purchase Agreement, including, without limitation, the
right to accelerate the outstanding principal balance of, premium, if any,
accrued and unpaid interest on, and all other amounts owing under this Note
upon the occurrence of an Event of Default. In addition, this Note is secured
by the "Collateral" referred to in the Collateral Documents and is guaranteed
by the Subsidiary Guarantors under the Guaranty.
7. MANNER OF PAYMENT. Payments of principal, interest and other
amounts due under this Note shall be made no later than 2:00 p.m. (noon) (Los
Angeles time) on the date when due and in lawful money of the United States
of America and (by wire transfer in funds immediately available at the place
of payment) to such account as the Holder may designate in writing to the
Company and, if to the Purchaser, to: Bank of America, Century City, Private
4
TERM B NOTE
<PAGE>
Banking, 2049 Century Park East, Los Angeles, California 90067; ABA No.
121000358; Account No. 1154603239; Attention: Cheryl Stewart (or such other
place of payment as the Purchaser may designate in writing). All such
payments shall be made without any deduction whatsoever, including, without
limitation, any deduction for set-off, recoupment, counterclaim or taxes. Any
payments received after 2:00 p.m. (noon) (Los Angeles time) shall be deemed
to have been received on the next succeeding Business Day. Any payments due
hereunder which are due on a day which is not a Business Day shall be payable
on the immediately preceding Business Day, together with all accrued and
unpaid interest through the actual due date of payment.
8. MAXIMUM LAWFUL RATE OF INTEREST. The rate of interest payable
under this Note shall in no event exceed the maximum rate permissible under
Applicable Law. If the rate of interest payable on this Note is ever reduced
as a result of this SECTION 8 and at any time thereafter the maximum rate
permitted under Applicable Law exceeds the rate of interest provided for in
this Note, then the rate provided for in this Note shall be increased to the
maximum rate provided for under Applicable Law for such period as is required
so that the total amount of interest received by the Holder is that which
would have been received by the Holder but for the operation of the first
sentence of this SECTION 8.
9. WAIVERS. Each Company Party hereby waives presentment for
payment, demand, protest, notice of protest and notice of dishonor, and all
other notices of any kind whatsoever to which it may be entitled under
Applicable Law or otherwise, except for notices to which the Company Parties
are expressly entitled under this Note.
10. REGISTRATION OF NOTES. Each Company Party shall maintain at its
principal executive office a register in which it shall register this Note,
any Assignments of this Note or any other notes issued hereunder and any
other notes issued upon surrender hereof and thereof. At the option of the
Holder, this Note may be exchanged for one or more new notes of like tenor in
the principal denominations requested by the Holder, and the Company Parties
shall, within three (3) Business Days after the surrender of this Note at the
Company's principal executive offices, deliver to the Holder such new note or
notes. In addition, each Assignment of this Note, in whole or in part, shall
be registered on the register immediately following the surrender of this
Note at the Company's principal executive offices. The Company may require
the Holder, as a condition to the registration of any Assignment hereunder,
to represent and warrant to the Company that an Assignment complies with
applicable federal or state securities laws and to deliver an opinion of its
legal counsel to such effect.
11. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of any Assignment, the Company Parties may treat the Person
in whose name any Note is registered as the owner and Holder of such Note for
all purposes whatsoever, and the Company Parties shall not be affected by
notice to the contrary. Subject to the preceding
5
TERM B NOTE
<PAGE>
sentence, the Holder may grant to any other Person participations from time
to time in all or any part of this Note on such terms and conditions as may
be determined by the Holder in its sole and absolute discretion, subject to
applicable federal and state securities laws. Notwithstanding anything to the
contrary contained herein or otherwise, nothing in this Note, the Securities
Purchase Agreement or any other Investment Document or otherwise shall confer
upon the participant any rights in the Securities Purchase Agreement or any
other Investment Document, and the Holder shall retain all rights with
respect to the administration, waiver, amendment, collection and enforcement
of, compliance with and consent to the terms and provisions of this Note, the
Securities Purchase Agreement and any other Investment Document.
In addition, the Holder may, without the consent of the
participant, give or withhold its consent or agreement to any amendments to
or modifications of this Note, the Securities Purchase Agreement or any other
Investment Document, waive any of the provisions hereof or thereof or
exercise or refrain from exercising any other rights or remedies which the
Holder may have under this Note, the Securities Purchase Agreement, any other
Investment Document or otherwise. Notwithstanding the foregoing, the Holder
will not agree with the Company Parties, without the prior written consent of
the participant (which consent shall be given or affirmatively withheld not
later than three (3) Business Days after the Holder's written request
therefor): (a) to reduce the principal of or rate of interest on this Note or
(b) to postpone the date fixed for payment of principal of or interest on the
Indebtedness evidenced by this Note. If the participant does not timely reply
to the Holder's request for such consent, the participant shall be deemed to
have consented to such agreement and the Holder may take such action in such
manner as the Holder determines in the exercise of its independent business
judgment.
12. ASSIGNMENT AND TRANSFER. Subject to Applicable Law, the Holder
may, at any time and from time to time and without the consent of any Company
Party, assign or transfer to one or more Persons all or any portion of this
Note or any portion thereof (but not less than $500,000 in principal amount
in any single assignment (unless such lesser amount represents the entire
outstanding principal balance hereof)). Upon surrender of this Note at the
Company's principal executive office for registration of any such assignment
or transfer, accompanied by a duly executed instrument of transfer, the
Company Parties shall, at their expense and within three (3) Business Days of
such surrender, execute and deliver one or more new notes of like tenor in
the requested principal denominations and in the name of the assignee or
assignees and bearing the legend set forth on the face of this Note, and this
Note shall promptly be canceled. If the entire outstanding principal balance
of this Note is not being assigned, the Company Parties shall issue to the
Holder hereof, within three (3) Business Days of the date of surrender
hereof, a new note which evidences the portion of such outstanding principal
balance not being assigned. If this Note is divided into one or more Notes
and is held at any time by more than one Holder, any payments of principal
of, premium, if any, and
6
TERM B NOTE
<PAGE>
interest or other amounts on this Note which are not sufficient to pay all
interest or other amounts due thereunder, shall be made PRO RATA with respect
to all such Notes in accordance with the outstanding principal amounts
thereof, respectively.
13. LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS NOTE. Upon
receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Note and, in the case of any such
loss, theft or destruction, upon receipt of an indemnity agreement or other
indemnity reasonably satisfactory to the Company or, in the case of any such
mutilation, upon surrender and cancellation of such mutilated Note, the
Company Parties shall issue and deliver within three (3) Business Days a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
14. COSTS OF COLLECTION. The Company Parties jointly and severally
agree to pay to the Holder all costs and expenses, including the fees and
expenses of all attorneys, accountants and other experts retained by the
Holder, which are expended or incurred by or on behalf of the Holder in
connection with (a) the collection and enforcement of this Note, whether or
not any action, suit or other proceeding is commenced; (b) any actions for
declaratory relief in any way related to this Note or the Indebtedness
evidenced hereby; (c) the protection or preservation of any rights or
remedies of the Holder under this Note; (d) any actions taken by the Holder
in negotiating any amendment, waiver, consent or release of or under this
Note; (e) any actions taken in reviewing the Company's or any of its
Subsidiaries' financial affairs if any Default or Event of Default shall have
occurred or the Holder shall have determined in good faith that a Default or
an Event of Default may likely occur, which actions shall include, but not be
limited to, the following: (i) inspect the facilities of the Company and its
Subsidiaries or conduct audits or appraisals of the financial condition of
the Company and its Subsidiaries; (ii) have an accounting or other firm
selected by the Holder review the books and records of the Company and any of
its Subsidiaries and perform a thorough and complete examination thereof;
(iii) interview the Company's and each of its Subsidiaries' employees,
attorneys, accountants, customers and any other Persons related to the
Company or such Subsidiaries which the Holder believes may have relevant
information concerning the business, condition (financial or otherwise),
results of operations or prospects of the Company or any of its Subsidiaries;
and (iv) undertake any other action which the Holder believes is necessary to
assess accurately the financial condition and prospects of the Company and/or
its Subsidiaries; (f) any refinancing, restructuring (whether in the nature
of a "work out" or otherwise), bankruptcy or insolvency proceeding involving
the Company, any of its Subsidiaries or any other Affiliate of the Company
that is guarantying or otherwise securing the payment and performance of this
Note; (g) any actions taken to verify, maintain, perfect and protect any Lien
granted to the Holder to secure repayment of this Note; or (h) any effort by
the Holder to protect, assemble, complete, collect, sell, liquidate or
otherwise dispose of any Collateral, including in connection with any case
under Bankruptcy Law. The Company Parties hereby consent to the taking of the
foregoing actions by the Holder.
7
TERM B NOTE
<PAGE>
15. EXTENSION OF TIME. The Holder may, at its sole option, extend
the time for payment of this Note, postpone the enforcement hereof, or grant
any other indulgence without affecting or diminishing the Holder's right to
full recourse against the Company Parties hereunder, which right is expressly
reserved.
16. NOTATIONS. Before disposing of this Note or any portion
thereof, the Holder may make a notation thereon (or on a schedule attached
thereto) of the amount of all principal payments previously made by the
Company Parties with respect thereto.
17. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
18. CAPTIONS; CONSTRUCTION AND INTERPRETATION. The captions
contained in this Note are for convenience of reference only, do not
constitute a part of this Note and are not to be considered in construing or
interpreting this Note. The Company and the Holder have each been represented
by counsel in the negotiation and drafting of this Note, and neither the
Company Parties nor the Holder nor their respective counsel shall be deemed
the drafter of this Note for purposes of construing the provisions of this
Note. All provisions of this Note shall be construed in accordance with their
fair meaning, and not strictly for or against the Company Parties or the
Holder.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
8
TERM B NOTE
<PAGE>
19. WAIVER OF JURY TRIAL. EACH COMPANY PARTY AND THE HOLDER (BY
ACCEPTANCE THEREOF) HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING BROUGHT TO RESOLVE ANY CLAIM, CONTROVERSY OR DISPUTE
ARISING UNDER OR RELATING TO THIS NOTE, ANY OTHER INVESTMENT DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH PARTY
INITIATES SUCH ACTION, SUIT OR OTHER PROCEEDING.
IN WITNESS WHEREOF, the Company Parties have caused this Note
to be executed and delivered by its or their duly authorized representatives
on the date first above written.
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Executive Vice President and Chief
Financial Officer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA SAFETY SYSTEMS, INC., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
9
TERM B NOTE
<PAGE>
SIMULA TRANSPORTATION EQUIPMENT
CORPORATION (formerly known as Intaero, Inc.),
an Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
ARTCRAFT INDUSTRIES CORP., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
10
TERM B NOTE
<PAGE>
SIMULA COMPOSITES CORPORATION (formerly known
as Viatech, Inc.), a Delaware corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA AUTOMOTIVE SAFETY DEVICES, INC., an
Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA TECHNOLOGIES, INC., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
11
TERM B NOTE
<PAGE>
INTERNATIONAL CENTER FOR SAFETY
EDUCATION, an Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA POLYMER SYSTEMS, INC., an Arizona
corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
SIMULA AUTOMOTIVE SAFETY DEVICES LIMITED, a
company organized and existing under the laws
of the United Kingdom
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
12
TERM B NOTE
<PAGE>
CCEC CAPITAL CORP., an Arizona corporation
By: /s/ James C. Dodd
----------------------------------
James C. Dodd
Vice President and Treasurer
By: /s/ Nora T. Harden
----------------------------------
Nora T. Harden
Assistant Secretary
13
TERM B NOTE
<PAGE>
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE
WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION OR
QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
WARRANT NO. LL-1 December 31, 1999
SIMULA, INC.
WARRANT TO PURCHASE 850,000 SHARES OF COMMON STOCK
FOR VALUE RECEIVED, SIMULA, INC., an Arizona corporation (the
"COMPANY"), hereby certifies that LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
a California limited partnership, or its successors or assigns (the
"HOLDER"), is entitled to purchase, on the terms and subject to the
conditions contained herein, 850,000 shares (the "WARRANT SHARES") of the
Company's common stock, $.01 par value per share ("COMMON STOCK"), at the
exercise price of $5.00 per Warrant Share (the "WARRANT PURCHASE PRICE") at
any time and from time to time during the Exercise Period (as such term is
defined below). The number of Warrant Shares and the Warrant Purchase Price
are subject to adjustment as provided in SECTION 4. This Warrant is being
issued in connection with the consummation of the transactions contemplated
by the Securities Purchase Agreement dated of even date herewith by and
between the Company and the Holder (as it may be amended, supplemented or
otherwise modified and in effect from time to time, the "SECURITIES PURCHASE
AGREEMENT").
This Warrant is subject to the following terms and conditions:
1. DEFINITIONS. Unless otherwise indicated in this Warrant,
capitalized terms used and not otherwise defined in this Warrant have the
meanings set forth in the Securities Purchase Agreement. In addition, the
following capitalized terms have the following meanings:
"COMMON STOCK" has the meaning set forth in the preamble.
"COMPANY" has the meaning set forth in the preamble.
<PAGE>
"CONVERTIBLE SECURITIES" means, when used in this Agreement,
any securities or other obligations issued or issuable by the Company
or any other Person that are exercisable or exchangeable for, or
convertible into, any Capital Stock of the Company.
"CURRENT MARKET PRICE" per share of Common Stock means, as of
any specified date on which the Common Stock is publicly traded, the
average of the daily market prices of the Common Stock over the twenty
(20) consecutive trading days immediately preceding (and not including)
such date. The 'daily market price' for each such trading day shall be
(i) the closing sales price on such day on the NYSE or such other
principal securities exchange on which the Common Stock is then listed
or admitted to trading or on Nasdaq, as applicable, (ii) if no sale
takes place on such day on any such securities exchange or system, the
average of the closing bid and asked prices, regular way, on such day
for the Common Stock as officially quoted on any such securities
exchange or system, (iii) if the Common Stock is not then listed or
admitted to trading on any securities exchange or system, the last
reported sale price, regular way, on such day for the Common Stock, or
if no sale takes place on such day, the average of the closing bid and
asked prices for the Common Stock on such day, as reported by Nasdaq or
the National Quotation Bureau, and (iv) if the Common Stock is not then
listed or admitted to trading on any securities exchange and if no such
reported sale price or bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation
in the City of Los Angeles, State of California, customarily published
on each Business Day. If the daily market price cannot be determined
for the twenty (20) consecutive trading days immediately preceding such
date in the manner specified in the foregoing sentence, then the Common
Stock shall not be deemed to be publicly traded as of such date.
"DESIGNATED OFFICE" has the meaning set forth in SECTION 2.1.
"DOJ" has the meaning set forth in SECTION 3.
"EFFECTIVE DATE" means the issue date of this Warrant.
"EXCLUDED SECURITIES" means, collectively, (i) shares of
capital stock issued pursuant to a stock dividend or a stock split or
other subdivision of shares; (ii) Common Stock issued upon exercise of
this Warrant; (iii) Common Stock issued by the Company in any public
offering registered under the Securities Act, which offering results in
net proceeds to the Company of at least $10,000,000 and a price per
share of Common Stock of not less than the Warrant Purchase Price then
in effect; and (iv) shares of Common Stock issued, issuable or reserved
for issuance to directors, officers and employees of the Company or any
other Company Party in connection with their
2
<PAGE>
services as directors, officers or employees pursuant to any Options
issued by the Company pursuant to any Company Stock Plan which has been
duly adopted and approved by the shareholders of the Company and in
existence on the date hereof.
"EXERCISE NOTICE" has the meaning set forth in SECTION 2.1.
"EXERCISE PERIOD" means the period commencing on the Effective
Date and ending on (and including) the Expiration Date.
"EXPIRATION DATE" means December 31, 2006.
"FAIR MARKET VALUE" with respect to the Warrant Shares means,
as of any specified date:
(i) if the Common Stock is publicly traded on
such date, the Current Market Price per share; or
(ii) if the Common Stock is not publicly traded (or
deemed not to be publicly traded) on such date, the fair
market value per share of Common Stock as determined by an
independent valuation of the Company, its Subsidiaries and
their respective businesses conducted by an investment banking
firm of recognized national standing selected by the mutual
written agreement of the Company and the Holder; PROVIDED,
HOWEVER, that if the Company and the Holder are unable to
mutually agree on any such investment banking firm within ten
(10) days after the date upon which the right or obligation to
select an investment banking firm arises, each of the Holder
and the Company shall, within three (3) Business Days
thereafter, select one investment banking firm, and the two
(2) selected firms shall, within three (3) Business Days of
their selection, select a third investment banking firm which
shall make the relevant determination (which determination
shall be final and binding) within ten (10) Business Days of
the submission of this matter to such third firm; and PROVIDED
FURTHER, HOWEVER, that, in determining the fair market value
per share of Common Stock, such investment banking firm shall
not give effect or take into account any "minority discount"
but shall value the Company in its entirety on an enterprise
basis.
"FTC" has the meaning set forth in SECTION 3.
"HOLDER" has the meaning set forth in the preamble.
"HSR ACT" has the meaning set forth in SECTION 3.
3
<PAGE>
"OPTIONS" means, when used in this Warrant, any warrants,
options or similar rights to subscribe for or purchase any Capital
Stock of the Company, including, without limitation, any options or
similar rights issued or issuable under any employee stock option plan,
pension plan or other employee benefit plan of the Company.
"OTHER PROPERTY" has the meaning set forth in SECTION 4.5.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder, all as
the same shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" has the meaning set forth in
the preamble of this Warrant.
"WARRANT PURCHASE PRICE" has the meaning set forth in the
preamble of this Warrant (as adjusted in accordance with the terms of
this Warrant).
"WARRANT" means this Warrant, any amendment or other
modification of this Warrant, and any warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any
other such warrant. All such Warrants shall at all times be identical
as to terms and conditions and date, except as to the number of Warrant
Shares for which they may be exercised.
"WARRANT SHARES" has the meaning set forth in the preamble.
2. EXERCISE.
2.1 EXERCISE; DELIVERY OF CERTIFICATES. Subject to the
provisions of SECTION 3, this Warrant may be exercised at the option of the
Holder, in whole or in part, at any time and from time to time during the
Exercise Period, by (a) delivering to the Company at its principal executive
office (the "DESIGNATED OFFICE") (i) a notice of exercise, in substantially the
form attached hereto (the "EXERCISE NOTICE"), duly completed and signed by the
Holder, and (ii) this Warrant, and (b) paying the Warrant Purchase Price
pursuant to SECTION 2.2 for the number of Warrant Shares being purchased. The
Warrant Shares being purchased under this Warrant will be deemed to have been
issued to the Holder, as the record owner of such Warrant Shares, as of the
close of business on the date on which payment therefor is made by the Holder
pursuant to SECTION 2.2. Stock certificates representing the Warrant Shares so
purchased shall be delivered to the Holder within three (3) Business Days after
this Warrant has been exercised (or, if applicable, after the conditions set
forth in SECTION 3 have been satisfied); PROVIDED, HOWEVER, that in the case of
a purchase of less than all of the Warrant Shares issuable upon exercise of this
Warrant, the Company shall cancel this
4
<PAGE>
Warrant and, within three (3) Business Days after this Warrant has been
surrendered, execute and deliver to the Holder a new Warrant of like tenor
representing the number of Warrant Shares that have not been exercised. Each
stock certificate representing the number of Warrant Shares purchased or
purchasable under this Warrant shall be registered in the name of the Holder or,
subject to compliance with Applicable Law, such other name as shall be
designated by the Holder.
2.2 PAYMENT OF WARRANT PRICE. Payment of the Warrant
Purchase Price may be made, at the option of the Holder, by (i) certified or
cashier's check, (ii) wire transfer, (iii) instructing the Company to
withhold and cancel a number of Warrant Shares then issuable upon exercise of
this Warrant with respect to which the excess of the Fair Market Value over
the Warrant Purchase Price for such canceled Warrant Shares is at least equal
to the Warrant Purchase Price for the shares being purchased, (iv) surrender
to the Company of shares of Common Stock previously acquired by the Holder
with a Fair Market Value equal to the Warrant Purchase Price for the shares
then being purchased or (v) any combination of the foregoing. The Company
shall issue fractional shares of Common Stock upon the exercise of this
Warrant.
3. ANTI-TRUST NOTIFICATION. If the Company or the Holder
determines, in its sole judgment upon the advice of counsel, that an exercise
of this Warrant pursuant to the terms hereof would be subject to the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), the Company shall, within seven (7) Business Days
after (a) receiving a notice from the Holder of the applicability of the HSR
Act or (b) after such a determination by the Company, file with the United
States Federal Trade Commission (the "FTC") and the United States Department
of Justice (the "DOJ") the notification and report form and any supplemental
information required to be filed by it pursuant to the HSR Act in connection
with the exercise of this Warrant. Any such notification and report form and
supplemental information will be in full compliance with the requirements of
the HSR Act. The Company will furnish to the Holder promptly (but in no event
more than three (3) Business Days) such information and assistance as the
Holder may reasonably request in connection with the preparation of any
filing or submission required to be filed by the Holder under the HSR Act.
The Company shall respond promptly after receiving any inquiries or requests
for additional information from the FTC or the DOJ (and in no event more than
five (5) Business Days after receipt of such inquiry or request). The Company
shall keep the Holder apprised periodically and at the Holder's request of
the status of any communications with, and any inquiries or requests for
additional information from, the FTC or the DOJ. The Company shall bear all
filing or other fees required to be paid by the Company and the Holder (or
the "ultimate parent entity" of the Holder, if any) under the HSR Act or any
other Applicable Law in connection with such filings and all costs and
expenses (including, without limitation, attorneys' fees and expenses)
incurred by the Company and the Holder in connection with the preparation of
such filings and responses to inquiries or
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requests. In the event that this SECTION 3 is applicable to any exercise of this
Warrant, the purchase by the Holder of the Warrant Shares subject to the
Exercise Notice, and the payment by the Holder of the Warrant Purchase Price,
shall be subject to the expiration or earlier termination of the waiting period
under the HSR Act.
4. ADJUSTMENTS TO THE NUMBER OF WARRANT SHARES AND TO THE
WARRANT PURCHASE PRICE. The number of Warrant Shares for which this Warrant
is exercisable and the Warrant Purchase Price shall be subject to adjustment
from time to time as set forth in this SECTION 4.
4.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If
at any time the Company:
(a) pays a dividend or makes any other
distribution with respect to its Common Stock in shares of Common Stock or
shares of any other class or series of Capital Stock,
(b) subdivides its outstanding shares of Common
Stock into a larger number of shares of Common Stock, or
(c) combines its outstanding shares of Common
Stock into a smaller number of shares of Common Stock,
then the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior to the record date for such dividend or distribution or the
effective date of such subdivision or combination, as the case may be, shall be
adjusted so that the Holder shall thereafter be entitled to receive upon
exercise of this Warrant the kind and number of shares of Common Stock that the
Holder would have owned or have been entitled to receive immediately after such
record date or effective date, as the case may be, had this Warrant been
exercised immediately prior to such record date or effective date. Any
adjustment made pursuant to this SECTION 4.1 shall become effective immediately
after the effective date of such event, but be retroactive to the record date,
if any, for such event.
Upon any adjustment to the number of Warrant Shares
purchasable upon the exercise of this Warrant as herein provided, the Warrant
Purchase Price per share shall be adjusted by multiplying the Warrant Purchase
Price immediately prior to such adjustment by a fraction, the numerator of which
shall be the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment and the denominator of which shall
be the number of Warrant Shares so purchasable immediately thereafter.
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4.2 ISSUANCE OF OPTIONS. If at any time the Company
issues (without payment of any consideration) to all holders of outstanding
Common Stock any Options, the Company shall also distribute such Options to
the Holder as if this Warrant had been exercised immediately prior to the
effective date of such issuance.
4.3 DISTRIBUTION OF ASSETS OR SECURITIES. If at any
time the Company makes a distribution to its stockholders (other than in
connection with the liquidation, dissolution or winding up of the Company) of
any asset or security other than those referred to in SECTIONS 4.1, 4.2 OR
4.5, the Warrant Purchase Price shall be adjusted and shall be equal to the
Warrant Purchase Price in effect immediately prior to the close of business
on the date fixed for the determination of stockholders entitled to receive
such distribution, MULTIPLIED BY a fraction (which shall not be less than
zero), the numerator of which shall be the Fair Market Value per share of
Common Stock on the date fixed for such determination, LESS the then fair
market value of the portion of the assets, or the fair market value of the
portion of the securities, as the case may be, so distributed applicable to
one share of Common Stock, and the denominator of which shall be the Fair
Market Value per share of Common Stock. Such adjustment to the Warrant
Purchase Price shall become effective immediately prior to the opening of
business on the day immediately following the date fixed for the
determination of stockholders entitled to receive such distribution. Upon any
adjustment in the Warrant Purchase Price as provided in this SECTION 4.3, the
number of shares of Common Stock issuable upon the exercise of this Warrant
shall also be adjusted and shall be equal to the number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to such adjustment
MULTIPLIED BY a fraction, the numerator of which is the Warrant Purchase
Price in effect immediately prior to such adjustment and the denominator of
which is the Warrant Purchase Price as so adjusted.
4.4 ISSUANCE OF EQUITY SECURITIES AT LESS THAN FAIR
MARKET VALUE.
(a) If, at any time after the date hereof, the
Company shall issue or sell (or, in accordance with SECTION 4.4(b), shall be
deemed to have issued or sold) any shares of Common Stock without consideration
or for a consideration per share that is less than either the Fair Market Value
per share of Common Stock determined as of the date of such issuance or sale or
the Warrant Purchase Price in effect immediately prior to such issuance or sale,
then, effective immediately upon such issuance or sale, the Warrant Purchase
Price shall be reduced (calculated to the nearest $.001 and without regard to
any other provisions hereof) to an amount equal to the product obtained by
multiplying (i) the Warrant Purchase Price in effect immediately prior to such
issuance or sale, by (ii) a fraction, the numerator of which shall be the sum of
(A) the product obtained by multiplying (1) the number of shares of Common Stock
outstanding (on a Fully Diluted Basis) immediately prior to such issuance or
sale by (2) the lesser of the Fair Market Value per share of Common Stock as of
the date of such issuance or sale and the Warrant Purchase Price in effect
immediately prior to such issuance or sale, PLUS (B) the cash consideration, if
any, received by the Company upon such issuance or sale, and
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the denominator of which shall be the product obtained by multiplying (C) the
number of shares of Common Stock outstanding (on a Fully Diluted Basis)
immediately after such sale or issuance, by (D) the lesser of the Fair Market
Value per share of Common Stock as of the date of such issuance or sale and the
Warrant Purchase Price in effect immediately prior to such issuance or sale.
Upon each such adjustment of the Warrant Purchase Price hereunder, the number of
Warrant Shares which may be obtained upon exercise of this Warrant shall be
increased to the number of shares determined by multiplying (x) the number of
Warrant Shares which could be obtained upon exercise of such Warrant immediately
prior to such adjustment by (y) a fraction, the numerator of which shall be the
Warrant Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Warrant Purchase Price in effect immediately
after such adjustment. Adjustments shall be made successively whenever such an
issuance or sale is made.
(b) For the purpose of determining the adjusted
Warrant Purchase Price under SECTION 4.4(a), the following shall be applicable:
(i) ISSUANCE OF OPTIONS. If the Company
in any manner issues or grants any Options or Convertible Securities and
the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities
is less than either the Fair Market Value per share of Common Stock
determined as of the date of such issuance or grant of such Options or the
Warrant Purchase Price in effect immediately prior to such issuance or
grant of Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options (or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon
the exercise of such Options) shall be deemed to be outstanding and to have
been issued and sold by the Company for such lower price per share. For
purposes of this paragraph, the price per share for which Common Stock is
issuable upon exercise of Options or upon conversion or exchange of
Convertible Securities issuable upon exercise of Options shall be
determined by dividing (A) the total amount, if any, received or receivable
by the Company as consideration for the issuing or granting of such
Options, PLUS the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, PLUS in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of shares
of Common Stock issuable upon exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
If the Company in any manner issues or grants any Convertible Securities
having an exercise or conversion or
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exchange price per share of Common Stock which is less than either the
Fair Market Value per share of Common Stock determined as of the date
of such issuance or sale or the Warrant Purchase Price in effect
immediately prior to such issuance or sale, then the maximum number of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have
been issued and sold by the Company for such lower price per share. For
purposes of this paragraph, the price per share for which Common Stock
is issuable upon conversion or exchange of Convertible Securities is
determined by dividing (A) the total amount received by the Company as
consideration for the issuance or sale of such Convertible Securities,
PLUS the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities.
(iii) CHANGE IN EQUITY PRICE OR CONVERSION
RATE. If the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issuance, conversion or exchange of
any Convertible Securities or the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock changes at any
time, then the Warrant Purchase Price in effect at the time of such
change shall be readjusted to the Warrant Purchase Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold and the number of
Warrant Shares shall be correspondingly readjusted.
(iv) CALCULATION OF CONSIDERATION
RECEIVED. If any Common Stock, Options or Convertible Securities are
issued or sold or deemed to have been issued or sold for cash, then the
consideration received therefor shall be deemed to be the net amount
received by the Company therefor. If any Common Stock, Options or
Convertible Securities are issued or sold for consideration other than
cash, then the amount of consideration received by the Company shall be
the fair value of such consideration determined in good faith by the Board
of Directors of the Company, subject to the Holder's rights under
SECTION 4.8(e).
(v) TREASURY SHARES. The number of
shares of Common Stock outstanding at any time does not include shares
owned or held by or for the account of the Company or any Subsidiary of
the Company, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
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(vi) RECORD DATE. If the Company takes a
record of the holders of Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such distribution or the date of the
granting or such right of subscription or purchase, as the case may be.
(c) No adjustment shall be made pursuant to this
SECTION 4.4 with respect to the issuance of Excluded Securities.
4.5 REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. If at any time the Company
reorganizes its capital, reclassifies its capital stock, consolidates, merges
or combines with or into another Person (where the Company is not the
surviving corporation or where there is any change whatsoever in, or
distribution with respect to, the outstanding Common Stock), or the Company
sells, transfers or otherwise disposes of all or substantially all of its
property, assets or business to another Person, other than in a transaction
provided for in SECTIONS 4.1, 4.2, 4.3, 4.4 OR 4.6, and, pursuant to the
terms of such reorganization, reclassification, consolidation, merger,
combination, sale, transfer or other disposition of assets, (i) shares of
capital stock of the successor or acquiring Person or the Company (if it is
the surviving corporation) or (ii) any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring Person or the Company ("OTHER PROPERTY") are to be
received by or distributed to the holders of Common Stock who are holders
immediately prior to such transaction, then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares of
Common Stock, common stock of the successor or acquiring Person, and/or Other
Property which holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event would have owned or
received immediately after and as a result of such event. In such event, the
aggregate Warrant Purchase Price otherwise payable for the Warrant Shares
issuable upon exercise of this Warrant shall be allocated among such
securities and Other Property in proportion to the respective fair market
values of such securities and Other Property as determined in good faith by
the Board of Directors of the Company, subject to the Holder's rights under
SECTION 4.8(e).
In case of any such event, the successor or acquiring Person
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as the Holder may approve
in writing (and memorialized by resolutions of the Board of Directors of
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the Company) in order to provide for adjustments of any shares of common stock
of such successor or acquiring Person for which this Warrant thus becomes
exercisable, which modifications shall be as equivalent as practicable to the
adjustments provided for in this SECTION 4.5. For purposes of this SECTION 4,
"common stock of the successor or acquiring Person" shall include stock or other
equity securities, or securities that are exercisable or exchangeable for or
convertible into equity securities, of such corporation, or other securities if
such Person is not a corporation, of any class that is not preferred as to
dividends or assets over any other class of stock of such corporation or Person
and that is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities that are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this SECTION 4.5 shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers and other
dispositions of assets.
4.6 DISSOLUTION, TOTAL LIQUIDATION OR WINDING-UP. If at
any time there is a voluntary or involuntary dissolution, total liquidation
or winding-up of the Company, other than as contemplated by SECTION 4.5, then
the Company shall cause to be mailed (by registered or certified mail, return
receipt requested, postage prepaid) to the Holder at the Holder's address as
shown on the Warrant register, at the earliest practicable time (and, in any
event, not less than thirty (30) calendar days before any date set for
definitive action) written notice of the date on which such dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the record holders of shares of
Common Stock shall be entitled to exchange their shares for securities, money
or other property deliverable upon such dissolution, liquidation or
winding-up, as the case may be. On such date, the Holder shall be entitled to
receive upon surrender of this Warrant the cash or other property, LESS the
Warrant Purchase Price for this Warrant then in effect, that the Holder would
have been entitled to receive had this Warrant been exercised immediately
prior to such dissolution, liquidation or winding-up. Upon receipt of the
cash or other property, any and all rights of the Holder to exercise this
Warrant shall terminate in their entirety. If the cash or other property
distributable in the dissolution, liquidation or winding-up has a fair market
value which is less than the Warrant Purchase Price for this Warrant then in
effect, this Warrant shall terminate and be of no further force or effect
upon the dissolution, liquidation or winding-up.
4.7 OTHER DILUTIVE EVENTS. If any event occurs as to
which the other provisions of this SECTION 4 are not strictly applicable but
as to which the failure to make any adjustment would not protect the purchase
rights represented by this Warrant in accordance with the intent and
principles hereof, then, in each such case, the Holder may appoint on behalf
of the Company an investment banking or accounting firm of recognized
national standing which shall give its opinion as to the adjustment, if any,
on a basis consistent with the
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intent and principles established herein, necessary to preserve the purchase
rights represented by this Warrant. Upon receipt of such opinion, the Company
will mail (by registered or certified mail, return receipt requested, postage
prepaid) a copy thereof to the Holder within three (3) Business Days and shall
make the adjustments described therein. If an adjustment is made pursuant to
this SECTION 4.7, the fees and expenses of such investment banking or accounting
firm shall be borne by the Company. If, however, no adjustment is made, the
Holder shall bear such fees and expenses.
4.8 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER
THIS SECTION. The following provisions shall be applicable to the adjustments
provided for pursuant to this SECTION 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The
adjustments required by this SECTION 4 shall be made whenever and as often as
any specified event requiring such an adjustment shall occur. For the purpose
of any such adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence.
(b) RECORD DATE. If the Company fixes a record
date of the holders of Common Stock for the purpose of entitling them to (i)
receive a dividend or other distribution payable in shares of Common Stock or
in shares of any other class or series of capital stock or securities
convertible into or exchangeable for Common Stock or shares of any other
class or series of capital stock or (ii) subscribe for or purchase shares of
Common Stock or such other shares or securities, then all references in this
SECTION 4 to the date of the issuance or sale of such shares of Common Stock
or such other shares or securities shall be deemed to be references to that
record date.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the
Company fixes a record date of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution or
subscription or purchase rights to which the provisions of SECTION 4.1 would
apply, but shall, thereafter and before the distribution to stockholders,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(d) NOTICE OF ADJUSTMENTS. Whenever the number
of shares of Common Stock for which this Warrant is exercisable or the
Warrant Purchase Price shall be adjusted or recalculated pursuant to this
SECTION 4, the Company shall, as soon as practicable but in no event more
than five (5) Business Days thereafter, prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment or recalculation and the method by
which such adjustment or recalculation was calculated, specifying the number
of shares of Common Stock for which this
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Warrant is exercisable and (if such adjustment was made pursuant to SECTION 4.5)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any related change in the Warrant
Purchase Price, after giving effect to such adjustment, recalculation or change.
The Company shall mail to the Holder (by registered or certified mail, return
receipt requested, postage prepaid) a signed copy of such certificate prior to
the end of the five (5) Business Day period referenced above. The Company shall
keep at the Designated Office copies of all such certificates and cause them to
be available for inspection at the Designated Office during normal business
hours by the Holder or any prospective transferee of this Warrant designated by
the Holder.
(e) CHALLENGE TO GOOD FAITH DETERMINATION.
Whenever the Board of Directors of the Company is required to make a
determination in good faith of the fair market value of this Warrant or the
Warrant Shares under this SECTION 4, such determination may be challenged or
disputed by the Holder. If the Holder wishes to challenge or dispute any such
fair market value determination, it shall furnish written notice to the
Company of its intention to challenge the same. If the Company and the Holder
cannot resolve the dispute between or among themselves, then such dispute
shall be submitted for final determination to an investment banking or
accounting firm pursuant to the valuation procedures set forth in clause (ii)
under the definition of Fair Market Value. The Company shall bear all fees,
costs and expenses incurred by the Company and the Holder in connection with
the determination of the Fair Market Value of this Warrant or the Warrant
Shares, and any challenge or dispute thereof, including, without limitation,
all fees and expenses of any investment banking, valuation or accounting
firm(s) engaged by the Company or the Holder and of attorneys in connection
with such calculation; PROVIDED, HOWEVER, that the Holder shall bear all such
fees, costs and expenses if, after the Holder challenges or disputes any fair
market value determination by the Board of Directors of the Company, the
difference between (a) the fair market value determined pursuant to the
valuation procedures set forth in clause (ii) under the definition of Fair
Market Value and (b) the fair market value determined by the Holder, is less
than five percent (5.0%) of the fair market value determined by the Board of
Directors of the Company.
(f) INDEPENDENT APPLICATION. Except as
otherwise provided herein, all subsections of this SECTION 4 are intended to
operate independently of one another (but without duplication). If an event
occurs that requires the application of more than one subsection, all
applicable subsections shall be given independent effect without duplication.
(g) OTHER ANTI-DILUTION PROVISIONS. To the
extent that the initial Holder continues to hold this Warrant, in whole or in
part, at any time at which the Company takes any action which would have
resulted in an adjustment to the exercise price of, and the number of shares
of Common Stock issuable pursuant to, this Warrant (a "DILUTIVE ISSUANCE"),
then, to the extent that the initial Holder has exercised all or any portion
of this Warrant prior
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to such time, the Company shall immediately issue to the initial Holder upon
such Dilutive Issuance, without the payment of any further consideration of any
kind, such number of additional shares of Common Stock as shall equal the
difference between (i) the number of shares of Common Stock issuable upon the
exercise of this Warrant to the extent held unexercised by the initial Holder at
such time after giving effect to the adjustment thereto resulting from such
Dilutive Issuance and (ii) the number of shares of Common Stock which would have
been issuable upon exercise of this Warrant after giving effect to such Dilutive
Issuance if this Warrant had not been exercised in any part.
4.9 FIDUCIARY DUTIES OF COMPANY. The Company and its
directors shall owe the Holder the same fiduciary duties that the Company and
its directors would owe to the Warrant Shares underlying the Warrant.
5. MISCELLANEOUS.
5.1 RESTRICTIVE LEGEND. This Warrant and, unless
registered under the Securities Act, any Warrant Shares issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legends required under applicable state
securities laws):
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION
OR QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION.
The legend shall be appropriately modified upon issuance of
certificates for shares of Common Stock.
Upon request of the holder of a Common Stock certificate, the
Company shall issue to that holder a new certificate free of the foregoing
legend, if, with such request, such holder provides the Company with an opinion
of counsel that is reasonably acceptable to the Company (PROVIDED that Riordan &
McKinzie, A Professional Law Corporation, shall be deemed to be acceptable to
the Company) to the effect that the securities evidenced by such
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certificate may be sold without restriction under Rule 144 (or any other rule
permitting resales of securities without restriction) promulgated under the
Securities Act.
5.2 HOLDER ENTITLED TO BENEFITS UNDER OTHER AGREEMENTS.
The Holder of this Warrant is entitled to certain rights, benefits and
privileges with respect to this Warrant and the Warrant Shares pursuant to
the terms of the Securities Purchase Agreement, the Registration Rights
Agreement (it being understood that the Warrant Shares constitute
"Registrable Securities" thereunder), the Investor Rights Agreement and
certain other Investment Documents.
5.3 OTHER COVENANTS. Without limiting the generality of
SECTION 5.2, the Company covenants and agrees that, as long as this Warrant
remains outstanding or any Warrant Shares are issuable with respect to this
Warrant, the Company will perform all of the following covenants for the
express benefit of the Holder: (a) the Warrant Shares shall, upon issuance,
be duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock; (b) each Holder shall, upon the exercise thereof in accordance
with the terms hereof, receive good and marketable title to the Warrant
Shares, free and clear of all voting and other trust arrangements to which
the Company is a party or by which it is bound, preemptive rights of any
stockholder, liens, encumbrances, equities and claims whatsoever, including,
but not limited to, all Taxes, Liens and other charges with respect to the
issuance thereof; (c) at all times prior to the Expiration Date, the Company
shall have reserved for issuance a sufficient number of authorized but
unissued shares of Common Stock, or other securities or property for which
this Warrant may then be exercisable, to permit this Warrant (or if this
Warrant has been divided, all outstanding Warrants) to be exercised in full;
(d) the Company shall deliver to the initial Holder, and each subsequent
private placement Holder who executes a confidentiality agreement in
substantially the form of Section 13.10 of the Securities Purchase Agreement,
the information and reports described in SECTION 9.3 of the Securities
Purchase Agreement as contemplated therein; (e) the Company shall extend to
the Holder the investment monitoring and other rights set forth in the
Investor Rights Agreement; and (f) the Company shall provide each Holder with
notice of all corporate actions in the same manner and to the same extent as
the shareholders of the Company; provided, however, that the information to
be provided by the Company under clauses (d) through (f) above is expressly
subject to the provisions of Section 13.10 of the Securities Purchase
Agreement.
5.4 ISSUE TAX. The issuance of shares of Common Stock
upon the exercise of this Warrant shall be made without charge to the Holder
for any issue tax in respect thereof.
5.5 CLOSING OF BOOKS. The Company will at no time close
its transfer books against the transfer of this Warrant or of any Warrant
Shares in any manner which interferes with the timely exercise hereof.
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5.6 NO VOTING RIGHTS; LIMITATION OF LIABILITY. Except as
expressly set forth in this Warrant, nothing contained in this Warrant shall be
construed as conferring upon the Holder (a) the right to vote or consent as a
stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matter, (b) the right to receive dividends, except
as set forth in SECTION 4, or (c) any other rights as a stockholder of the
Company, except as set forth in SECTION 4 and in the Investor Rights Agreement.
No provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for the
Warrant Purchase Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by its creditors.
5.7 MODIFICATION AND WAIVER. This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement is sought.
5.8 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Warrant shall be
in writing and shall be deemed to have been duly given if transmitted by
telecopier with receipt acknowledged, or upon delivery, if delivered personally
or by recognized commercial courier with receipt acknowledged, or upon the
expiration of seventy-two (72) hours after mailing, if mailed by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to the Holder, at:
c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Facsimile: (310) 275-1441
WITH A COPY TO:
Riordan & McKinzie
300 South Grand Avenue, Suite 2900
Los Angeles, CA 90071
Attention: Mitchell S. Cohen, Esq.
Telephone: (213) 629-4824
Telecopier: (213) 629-8550
16
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(b) If to any other Holder, at:
such Holder's address as shown on the books
of the Company.
(c) If to the Company, at:
Simula, Inc.
2700 North Central Avenue, Suite 1000
Phoenix, AZ 85004
Attention: Donald W. Townsend
Telephone: (602) 631-4005
Telecopier: (602) 631-9005
WITH A COPY TO:
Fennemore Craig
3003 North Central Avenue, Suite 2600
Phoenix, AZ 85012-2913
Attention: Robert J. Hackett, Esq.
Telephone: (602) 916-5336
Telecopier: (602) 916-5536
or at such other address or addresses as the Holder or the Company, as the case
may be, may specify by written notice given in accordance with this SECTION 5.8.
5.9 SUCCESSORS AND ASSIGNS. The Company may not assign
any of its rights, or delegate any of its obligations, under this Warrant
without the prior written consent of the Holder (which consent may be withheld
for any reason or no reason at all). Subject to the requirements of Applicable
Laws, the Holder may assign this Warrant, in whole or in part, at any time or
from time to time, without the consent of the Company. Each assignment of this
Warrant shall be registered on the books of the Company to be maintained for
such purpose upon surrender of this Warrant at the Designated Office, together
with appropriate instruments of assignment, duly completed and executed. Upon
such surrender, the Company shall, within three (3) Business Days of surrender,
at its own expense, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees specified in such assignment and in the
denominations specified therein and this Warrant shall promptly be canceled. If
any portion of this Warrant is not being assigned, the Company shall, at its
own expense, within three (3) Business Days issue to the Holder a new Warrant
evidencing the portion not so assigned. If the Holder assigns this Warrant to
one or more Persons, any decisions that the Holder is entitled to make at any
time hereunder shall be made by the Holders holding more than fifty percent
(50.0%) of the aggregate number of Warrant Shares issuable upon exercise of all
of the
17
<PAGE>
then exercisable Warrants. The Company may require the Holder, as a condition to
the execution and delivery of any new Warrant in connection with an assignment
of this Warrant, to represent and warrant to the Company that such assignment
complies with applicable federal or state securities laws and to deliver an
opinion of its legal counsel to such effect.
This Warrant shall be binding upon and inure to the benefit of
the Company, the Holder and their respective successors and permitted assigns,
and shall include, with respect to the Company, any Person succeeding the
Company by merger, consolidation, combination or acquisition of all or
substantially all of the Company's assets, and in such case, except as expressly
provided herein and in the Securities Purchase Agreement, all of the obligations
of the Company hereunder shall survive such merger, consolidation, combination
or acquisition.
5.10 CAPTIONS; CONSTRUCTION AND INTERPRETATION. The
captions in this Warrant are for convenience of reference only, do not
constitute a part of this Agreement and are not to be considered in construing
or interpreting this Warrant. All section, preamble, recital, exhibit,
schedule, disclosure schedule, annex, clause and party references are to this
Warrant unless otherwise stated. No party, nor its counsel, shall be deemed the
drafter of this Warrant for purposes of construing the provisions of this
Warrant, and all provisions of this Warrant shall be construed in accordance
with their fair meaning, and not strictly for or against any party.
5.11 LOST WARRANT OR CERTIFICATES. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant or of a stock certificate evidencing Warrant
Shares and, in the case of any such loss, theft or destruction, upon receipt of
an indemnity reasonably satisfactory to the Company or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant or stock
certificate, the Company shall make and deliver to the Holder, within three (3)
Business Days of receipt by the Company of such documentation, a new Warrant or
stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
5.12 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its charter documents or regulations or
through any reorganization, reclassification, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of the Holder against
impairment. Without limiting the generality of the foregoing, the Company will
(i) not increase the par value (if any) of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (ii) take
all such action as may be necessary or appropriate in order that the Company
may validly and
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<PAGE>
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, free and clear of all liens, encumbrances, equities
and claims, and (iii) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant. The Company shall not be required to register the Warrant
Shares under the Securities Act except pursuant to the provisions of the
Registration Rights Agreement.
5.13 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT
STATE (WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS
THEREOF) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
5.14 REMEDIES. If the Company fails to perform, comply
with or observe any covenant or agreement to be performed, complied with or
observed by it under this Warrant, the Holder may proceed to protect and
enforce its rights by suit in equity or action at law, whether for specific
performance of any term contained in this Warrant or for an injunction against
the breach of any such term or in aid of the exercise of any power granted in
this Warrant or to enforce any other legal or equitable right, or to take any
one or more of such actions. The Company hereby agrees that the Holder shall
not be required or otherwise obligated to, and hereby waives any right to
demand that the Holder, post any performance or other bond in connection with
the enforcement of its rights and remedies hereunder. The Company agrees to pay
all fees, costs, and expenses, including, without limitation, fees and expenses
of attorneys, accountants and other experts retained by the Holder, and all
fees, costs and expenses of appeals, incurred or expended by the Holder in
connection with the enforcement of this Warrant or the collection of any sums
due hereunder, whether or not suit is commenced. None of the rights, powers or
remedies conferred under this Warrant shall be mutually exclusive, and each
right, power or remedy shall be cumulative and in addition to any other right,
power or remedy whether conferred by this Warrant or now or hereafter available
at law, in equity, by statute or otherwise.
19
<PAGE>
5.15 WAIVER OF JURY TRIAL. THE COMPANY AND THE HOLDER
(BY ACCEPTANCE HEREOF) HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING ARISING OUT OF, CONNECTED WITH OR RELATED TO THIS
WARRANT OR ANY OTHER INVESTMENT DOCUMENT, OR ANY CLAIM, CONTROVERSY OR DISPUTE
ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
and issued by its duly authorized representatives on the date first above
written.
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
---------------------------------------
James C. Dodd
Executive Vice President and Chief
Financial Officer and Treasurer
By: /s/ Nora T. Harden
---------------------------------------
Nora T. Harden
Assistant Secretary
20
<PAGE>
SIMULA, INC.
FORM OF EXERCISE SUBSCRIPTION
(To be signed only upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise its Warrant to
purchase __________________________________________________ (_______) shares of
Common Stock for an aggregate Warrant Purchase Price of ________________________
Dollars ($______).
[If the Holder has determined upon advice of counsel that compliance
with the HSR Act is required, include the following sentences: "The undersigned
has determined that this exercise is subject to the HSR Act and requests that
the Company file the requisite notification and report form with, and pay all
requisite filing fees to, the FTC and the DOJ as promptly as possible. The
purchase of the shares described above and the payment of the Warrant Purchase
Price are subject to the expiration or earlier termination of the waiting period
under the HSR Act."]
The Warrant Purchase Price to be paid as follows (check as applicable):
__ Certified or official bank check in the amount of $______;
__ Wire transfer in the amount of $_________;
__ Cancellation of _______________________ Warrant Shares; or
__ Surrender of __________________ shares of Common Stock.
The undersigned hereby requests that [if the Holder has determined upon
advice of counsel that compliance with the HSR Act is required, include the
following phrase: "upon the expiration or earlier termination of the waiting
period under the HSR Act"] a certificate(s) for the shares of Common Stock be
issued in the name of _________________________, and delivered to,
____________________, whose address is ________________________________________.
The undersigned hereby represents that it is acquiring such shares of
Common Stock for its own account for investment purposes only and not with a
view to or for sale in connection with any distribution thereof.
Dated: _____________________________________________________
Name of the Holder (must conform precisely to the
name specified on the face of the Warrant)
_____________________________________________________
Signature of authorized representative of the Holder
_____________________________________________________
Print or type name of authorized representative
Social Security Number or Employer
Tax Identification Number of the Holder: ____________
Address of the Holder: ____________________________
____________________________
____________________________
<PAGE>
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT is entered into as of the 31st day of
December 1999 (this "AGREEMENT"), by and among SIMULA, INC., an Arizona
corporation (the "COMPANY"), LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P., a
California limited partnership ("LLCP"), and STANLEY P. DESJARDINS
("DESJARDINS"), DONALD W. TOWNSEND ("TOWNSEND"), JAMES A. SAUNDERS ("SAUNDERS")
and BRADLEY P. FORST ("FORST" and, together with Desjardins, Townsend and
Saunders, the "PRINCIPAL SHAREHOLDERS").
R E C I T A L S
A. The Company, the other Company Parties and LLCP are parties
to the Securities Purchase Agreement dated of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "SECURITIES PURCHASE
AGREEMENT") pursuant to which, on the date hereof, the Company Parties are
jointly and severally issuing and selling to LLCP, and LLCP is purchasing from
the Company Parties, the Notes, and the Company is issuing and selling to LLCP,
and LLCP is purchasing from the Company, the Warrant, all on the terms and
subject to the conditions set forth in the Securities Purchase Agreement.
Unless otherwise indicated, capitalized terms used and not otherwise defined in
this Agreement shall have the meanings set forth in the Securities Purchase
Agreement.
B. The execution of this Agreement by the Company and the
Principal Shareholders is a condition precedent to the obligation of LLCP to
consummate the transactions contemplated by the Securities Purchase Agreement.
C. In addition, in consideration of the substantial direct and
indirect benefits which the Company and the Principal Shareholders will realize
from the consummation of the transactions contemplated by the Securities
Purchase Agreement, the Company has agreed to grant to LLCP the investment
monitoring and other rights set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
1. INVESTMENT MONITORING RIGHTS.
1.1 ELECTION OF LLCP REPRESENTATIVE TO BOARD UPON EVENT OF DEFAULT.
(a) If an Event of Default shall occur, LLCP shall have
the right to require the Company to cause to be elected or appointed to the
Board of Directors of the Company (the "BOARD") an individual designated by
LLCP in an LLCP Representative Request (as such term is defined below) (the
"LLCP REPRESENTATIVE") furnished to the Company, in accordance with the
following terms:
(i) The Company shall, within five (5) Business
Days after its receipt of an LLCP Representative Request, take or
cause to be taken as soon as practicable such actions (including,
without limitation, creating a vacancy) as may be necessary or
advisable to cause the LLCP Representative to be elected or appointed
to the Board and to remain a duly elected or appointed member of the
Board until the later to occur of (A) the 180th day after the
effective date of such election or appointment and (ii) the date upon
which the next annual meeting of the shareholders of the Company at
which directors are to be elected shall occur (it being understood
that the occurrence of each and every Event of Default shall trigger
the right of LLCP to cause the Company to elect or appoint the LLCP
Representative to the Board and the Company's obligations with respect
thereto (PROVIDED that only one LLCP Representative shall serve as a
member of the Board at any time)); and
(ii) In connection with any such election of
appointment of the LLCP Representative to the Board pursuant to this
SECTION 1.1, each Principal Shareholder agrees that he will vote (or
cause to be voted) all shares of Capital Stock of the Company owned
beneficially and of record by him, directly or indirectly, whether now
owned or hereafter acquired, so that the LLCP Representative shall be
elected or appointed to the Board for the period required under clause
(i) above.
For purposes of this Agreement, the term "LLCP REPRESENTATIVE REQUEST"
shall mean a written request delivered by or on behalf of LLCP to the Company
notifying the Company of LLCP's election under this SECTION 1.1 to have an LLCP
Representative elected or appointed to the Board and naming the individual who
has been so designated.
(b) In no event shall the Company, the Board, any
Principal Shareholder or any other Person (other than LLCP) have the power to
remove the LLCP Representative from the Board, without the prior written
consent of LLCP, other than pursuant to an order or decree of any Governmental
Authority or for "cause" (which shall include conviction of a felony or any act
involving moral turpitude or willful failure to perform his duties as a
director).
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<PAGE>
(c) In the event of the death or resignation of the LLCP
Representative at any time, or in the event the LLCP Representative shall not
be elected to the Board at any election of directors for any reason, the
Company shall, upon the request of LLCP, promptly (and in any event within five
(5) days of such request) take such steps as may be necessary or appropriate to
cause another Person designated by LLCP to become the LLCP Representative on
the Board, including increasing the size of the Board and/or filling the
resulting vacancy with an LLCP Representative. Such steps may include calling
and holding, in accordance with the Bylaws of the Company and Applicable Laws,
a special meeting of the Board or the shareholders of the Company or
circulating a written consent for execution by members of the Board and/or the
shareholders. To the extent that the Board delegates any of its duties to an
executive committee or other committee, the LLCP Representative shall, upon the
request of LLCP, be appointed to such committee.
(d) The agreements set forth in this SECTION 1.1 are
intended to constitute enforceable voting agreements within the scope of
Section 706(a) of the General Corporation Law of the State of California.
1.2 OBSERVATION RIGHTS. Without limiting any of the rights of
LLCP in this SECTION 1, and whether or not any LLCP Representative is then
serving on the Board, LLCP shall receive notice of and be entitled to have, at
LLCP's option, two (2) representatives or one (1) representative and one (1)
advisor to such representative, attend as observers all meetings of the Board
and of all committees thereof and at all meetings of the shareholders of the
Company. Notice of such meetings shall be given to LLCP in the same manner and
at the same time as to the members of the Board or such committees (which in
any event shall not be less than forty-eight (48) hours prior to such meeting
unless otherwise agreed to by LLCP in advance and in writing) and at the same
time as to the shareholders of the Company, as the case may be. LLCP shall be
provided with copies of (i) a meeting agenda, if any is prepared, (ii) all
information that is provided to the members of the Board or such committees or
to the shareholders of the Company (whether prior to, at, or subsequent to any
such meetings), as the case may be, at the same time as such materials are
provided to the members of the Board or such committee or to the shareholders
of the Company, as the case may be, and (iii) copies of the minutes of all
meetings of the Board and such committees and of all meetings of shareholders
concurrently with the distribution of such minutes to one or more members of
the Board or such committees or shareholders, as the case may be, but in no
event later than forty-five (45) days after each such meeting.
1.3 MONTHLY OPERATING MEETINGS. In each calendar month after the
date hereof, representatives of LLCP and of the Company shall meet to review
the financial condition of the Company and its Subsidiaries as reflected in the
financial information furnished to SECTION 9.3 of the Securities Purchase
Agreement. Each meeting shall at all times be comprised of at least two (2)
members of senior management of the Company, who initially shall be Donald
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<PAGE>
W. Townsend and James A. Saunders, and two (2) individuals designated by LLCP
(who shall be representatives of Levine Leichtman Capital Partners, Inc. ("LLCP
INC."), an Affiliate of LLCP). The financial officers and other members of
senior management of the Company shall be available at each meeting to review
financial information and discuss other matters. LLCP and the Company shall
mutually agree in each calendar month on the date and time for the meeting to be
held in the immediately succeeding calendar month (PROVIDED that the failure to
agree on such date and time in any month shall not be construed as an agreement
not to hold a meeting in the immediately succeeding month). Meetings may be
conducted by telephone so long as each of the persons attending can hear each of
the other persons attending the meeting.
1.4 SURVIVAL OF RIGHTS. The rights granted to LLCP under SECTIONS
1.1 (Election of LLCP Representative to Board Upon Certain Events of Default),
SECTION 1.2 (Observation Rights) and SECTION 1.3 (Monthly Operating Meetings)
shall be effective as of the date hereof and shall continue for so long as the
Obligations remain outstanding; PROVIDED, HOWEVER, that the rights granted to
LLCP under such Sections shall survive the repayment and performance of all
Obligations to the extent that LLCP holds any portion of the Indebtedness
evidenced by the Note or any Warrant Shares and informs the Company in writing
that it believes in good faith that it is required to retain such rights to
qualify as a "venture capital operating company" for purposes of complying with
ERISA and, if requested by the Company, LLCP will furnish to the Company
written advice of its counsel with respect to such qualification.
2. INDEMNIFICATION AND INSURANCE.
2.1 The Company shall, to the maximum extent permitted by law,
indemnify, defend and hold harmless the LLCP Representative, LLCP and the
employees, partners, principals, agents, attorneys, accountants,
representatives and other Affiliates of LLCP (including, without limitation,
LLCP Inc.) (collectively, the "LLCP PARTIES"), from and against all costs,
expenses, liabilities, claims, judgments, damages and losses, including,
without limitation, all attorneys' fees and the cost of any investigation and
preparation incurred in connection therewith, incurred in connection with any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (collectively, "LIABILITIES AND COSTS"),
arising out of or in any way related to the fact that any LLCP Party is or was
a director, officer, employee or other agent of the Company or any subsidiary
of the Company, is or was serving as an observer of the Board, or is or was
serving at the request of the Company as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise and, in connection with any
LLCP Party serving as such director, officer, employee or other agent, that
such LLCP Party acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company.
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<PAGE>
2.2 Upon request by any LLCP Party, the Company, shall advance
(within five (5) Business Days of such request) any and all expenses,
including, without limitation, any and all attorneys' fees and the cost of any
investigation and preparation incurred in connection with any matter for which
such LLCP Party is or may be entitled to indemnification hereunder. The Company
shall also indemnify each LLCP Party from and against any and all Liabilities
and Costs incurred in connection with any claim or action brought to enforce
such LLCP Party's rights under this SECTION 2, or under Applicable Law or the
Company's charter or bylaws now or hereafter in effect relating to
indemnification, or for recovery under directors' and officers' liability
insurance policies maintained by the Company, regardless of whether such LLCP
Party is ultimately determined to be entitled to such indemnification or
insurance recovery, as the case may be. If, for any reason, the foregoing
indemnification is not available for any reason or is not sufficient to
indemnify and hold the LLCP Parties harmless from all such Liabilities and
Costs, then the Company shall contribute to the amount of all such Liabilities
and Costs paid or payable by any LLCP Party in such proportion as is
appropriate to reflect not only the relative benefits received by the Company,
on the one hand, and LLCP, on the other hand, but also the relative fault of
each, as well as any other equitable considerations. The Company's
reimbursement, indemnity and contribution obligations shall be in addition to
any liability the Company may otherwise have at law or under any other
agreement, including, without limitation, the Securities Purchase Agreement,
and such obligations shall extend, upon the same terms, to all LLCP Parties.
This SECTION 2 shall survive indefinitely the termination of this Agreement.
2.3 At any time that an LLCP Representative is serving on the
Board, the Company shall have in place and shall maintain in force and effect
one or more directors and officers liability insurance policies providing at
least $10,000,000 in insurance coverage for director liability, including
coverage for claims under federal and state securities laws.
3. CO-SALE AGREEMENT.
3.1 If one or more Principal Shareholders propose to sell or
transfer any shares of Common Stock now owned or held by it or them ("CO-SALE
SHARES") in any transaction (or series of related transactions) that does not
constitute a Public Sale, then such Principal Shareholder or Principal
Shareholders shall promptly notify the Company and LLCP in writing (the
"CO-SALE NOTICE") at least twenty (20) days prior to the closing of such
proposed sale or transfer. The Co-Sale Notice shall describe in reasonable
detail the proposed sale or transfer, including, without limitation, the number
of Co-Sale Shares to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid and the name and address of each
prospective purchaser or transferee. In the event that the sale or transfer is
being made pursuant to the provisions of SECTION 3.8, the Notice shall state
under which paragraph and subparagraph the sale or transfer is being made. For
purposes of this Agreement, the term "PUBLIC SALE" shall mean a sale, transfer
or other disposition of Common Stock pursuant to
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<PAGE>
Rule 144 promulgated under the Securities Act or in a public offering pursuant
to an effective registration statement under the Securities Act. It is
acknowledged and understood that each Principal Shareholder may pledge his
shares or transfer or "gift" his shares for estate planning purposes, PROVIDED
that such shares continue to be subject to the provisions of this SECTION 3.
3.2 LLCP shall have the right, exercisable upon written notice
to the Principal Shareholders within fifteen (15) days after receipt of the
Co-Sale Notice, to participate in such sale on the same terms and conditions as
specified in the Co-Sale Notice. To the extent that LLCP exercises such right
of participation in accordance with the terms and conditions set forth in this
SECTION 3, the number of Co-Sale Shares that the Principal Shareholders may
sell in the transaction(s) shall be correspondingly reduced.
3.3 If there shall be a decrease in the price to be paid by the
proposed purchaser for the Co-Sale Shares to be purchased from the price set
forth in the Co-Sale Notice, which decrease is acceptable to the Principal
Shareholders, or any other material change in the terms or conditions set forth
in the Co-Sale Notice which are less favorable to the Principal Shareholders
but which are acceptable to the Principal Shareholders, the Principal
Shareholders shall immediately notify LLCP in writing of such decrease or other
change, and LLCP shall have five (5) Business Days from the date of receipt of
such written notice to modify the number of shares of Common Stock it will sell
to the purchaser, as previously indicated in the written notice delivered by
LLCP pursuant to SECTION 3.2.
3.4 LLCP may sell all or any portion of that number of shares of
Common Stock equal to the product of (a) the aggregate number of shares of
Common Stock covered by the Co-Sale Notice, MULTIPLIED BY (b) a fraction, the
numerator of which is the number of shares of Common Stock or Warrant Shares,
as applicable, owned by LLCP at the time of the sale or transfer (collectively,
the "LLCP SHARES"), and the denominator of which is the total number of issued
and outstanding shares of Common Stock owned by the Principal Shareholders and
LLCP at the time of the sale or transfer. In no event shall LLCP be required to
make any representation or warranty in connection with the sale to any
prospective purchase other than as to the organization and authority of LLCP,
title to the shares of Common Stock to be sold by LLCP and the absence of
conflict with laws or material agreements of LLCP.
3.5 LLCP shall effect its participation in the sale by promptly
delivering to the Principal Shareholders for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent:
(a) the type and number of shares of Common Stock which
LLCP elects to sell; or
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<PAGE>
(b) that number of Warrant Shares which is at such time
convertible into the number of shares of Common Stock which LLCP elects to sell;
PROVIDED, HOWEVER, that if the prospective purchaser objects to the delivery of
Warrant Shares in lieu of Common Stock, LLCP shall convert such Warrant Shares
into Common Stock and deliver Common Stock as provided in SECTION 3.4(a). The
Company agrees to make any such conversion concurrent with the actual transfer
of such shares to the purchaser.
3.6 The stock certificate or certificates that LLCP delivers to
the Principal Shareholders pursuant to SECTION 3.4 shall be transferred to the
prospective purchaser in consummation of the sale of the Common Stock pursuant
to the terms and conditions specified in the Co-Sale Notice, and the Principal
Shareholders shall concurrently therewith remit to LLCP by wire transfer in
immediately available funds that portion of the sale proceeds to which LLCP is
entitled by reason of LLCP's participation in such sale. To the extent that any
prospective purchaser prohibits such assignment or otherwise refuses to
purchase shares or other securities from LLCP, the Principal Shareholders shall
not sell to such prospective purchaser any shares of Common Stock unless and
until, simultaneously with such sale, the Principal Shareholders shall purchase
such shares or other securities from LLCP. Subject to the foregoing sentence,
if the Principal Shareholders do not complete the proposed sale or transfer for
any reason, the Principal Shareholders shall immediately return to LLCP all
documents (including, without limitation, the Warrant and all stock
certificates, stock assignments and/or powers of attorney) which LLCP delivered
to the Principal Shareholders pursuant to this SECTION 3 or otherwise in
connection with such sale or other transfer.
3.7 The exercise or non-exercise of the rights of LLCP hereunder
to participate in one or more sales of Co-Sale Shares by the Principal
Shareholders shall not adversely affect its rights to participate in subsequent
sales of Co-Sale Shares by the Principal Shareholders.
3.8 PROHIBITED TRANSFERS.
(a) In the event of any sale or purported sale
(including, without limitation, the entering into of any agreement, arrangement
or understanding to sell) of Co-Sale Shares by any Principal Shareholder in
contravention of the co-sale rights of LLCP hereunder (a "PROHIBITED
TRANSFER"), LLCP shall have, in addition to all other rights, powers or
remedies available at law, in equity, under this Agreement or any other
Investment Document or under Applicable Law, the right to exercise the
Prohibited Transfer Put (as such term is defined below), and such Principal
Shareholder agrees that he shall be bound by the applicable provisions hereof.
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<PAGE>
(b) In the event of a Prohibited Transfer by a Principal
Shareholder:
(i) The Company shall, upon the request of LLCP,
instruct the Company's transfer agent not to enter such Prohibited
Transfer on the stock ledger or other similar records of the Company;
and
(ii) LLCP may exercise a right (the "PROHIBITED
TRANSFER PUT") to require such Principal Shareholder to purchase a
number of shares of Common Stock equal to the number of shares LLCP
would have been entitled to sell to the purchaser under SECTION 3.2 had
the Prohibited Transfer been effected pursuant to and in compliance
with the terms hereof. Such sale shall be made on the following terms
and conditions:
(A) The price per share at which shares are
to be sold to such Principal Shareholder shall be equal to the
price per share paid by the purchaser to such Principal
Shareholder in the Prohibited Transfer. Such Principal
Shareholder shall also reimburse LLCP for any and all fees and
expenses, including attorneys, accountants and other expenses,
incurred pursuant to the exercise or attempted exercise of
LLCP's rights under SECTION 3;
(B) Within thirty (30) days after the later
of the dates on which LLCP (x) received notice of the
Prohibited Transfer or (y) otherwise became aware of the
Prohibited Transfer, LLCP shall, if exercising the Prohibited
Transfer Put, deliver to such Principal Shareholder the
certificate or certificates representing the shares to be
sold, each certificate to be properly endorsed for transfer;
(C) Such Principal Shareholder shall, upon
receipt of the certificate or certificates representing the
shares to be sold by LLCP, pay to LLCP the aggregate purchase
price therefor and the amount of reimbursable fees and
expenses, as specified in SECTION 3.9(b)(i), by wire transfer
in immediately available funds; and
(D) Notwithstanding the foregoing, any
attempt by such Principal Shareholder to transfer any Co-Sale
Shares in violation of SECTION 3 shall be void and the Company
agrees that it will not effect such a transfer nor will it
treat any alleged transferee as the holder of such shares
without the written consent of LLCP.
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<PAGE>
3.9 EXEMPT SALES BY DESJARDINS. The provisions of this SECTION 3
shall not apply to the first one million (1,000,000) shares of Common Stock now
beneficially owned or held by Desjardins which are sold by him, whether or not
pursuant to a Public Sale.
3.10 TERMINATION OF CO-SALE RIGHTS. The rights of LLCP under this
SECTION 3 with respect to the Co-Sale Shares owned or held by any Principal
Shareholder (and only with respect to such Principal Shareholder) shall
terminate on the date that is 180 days immediately following the date that the
employment by the Company of such Principal Shareholder, if applicable, is
terminated.
3.11 EXPIRATION OF CO-SALE RIGHTS. The rights granted to LLCP
under this SECTION 3 shall expire on the seventh anniversary of this Agreement.
4. PREEMPTIVE RIGHTS.
4.1 The Company hereby grants to LLCP the right to purchase up to
a PRO RATA share of New Securities (as such term in defined below) which the
Company may from time to time propose to sell and issue, and the Company shall
not issue any New Securities without complying with the provisions of this
SECTION 4. For purposes of this SECTION 4.1, LLCP's PRO RATA share shall be
equal to a percentage based on a fraction, the numerator of which is the number
of shares of Common Stock held by LLCP or issuable upon the exercise of the
Warrant or other Equity Rights of the Company held by LLCP immediately prior to
the issuance of the New Securities, and the denominator of which is the sum of
the total number of shares of Common Stock outstanding immediately prior to the
issuance of the New Securities.
4.2 The term "NEW SECURITIES" shall mean any Capital Stock
(including Common Stock or preferred stock) of the Company whether now
authorized or not, and any Equity Rights of the Company; PROVIDED, HOWEVER,
that the term New Securities does not include any securities issued in a public
offering pursuant to an effective registration statement under the Securities
Act with an aggregate offering price to the public of at least $10,000,000 nor
shares of Common Stock issued, issuable or reserved for issuance to directors,
officers and employees of the Company or any other Company Party in connection
with their services as directors, officers or employees pursuant to any Equity
Rights issued by the Company pursuant to any Company Stock Plan which has been
duly adopted and approved by the shareholders of the Company and in existence
on the date hereof.
4.3 If the Company proposes to undertake an issuance of New
Securities, it shall give LLCP written notice (an "ISSUANCE NOTICE") of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. LLCP shall
have thirty (30) days after its receipt of the Issuance Notice to agree to
purchase LLCP's pro rata share of such New Securities for the price and upon
the terms specified in the notice by giving
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<PAGE>
written notice to the Company and indicating therein the quantity of New
Securities to be purchased.
4.4 The rights granted under this SECTION 4 shall expire on the
earlier to occur of (a) the seventh anniversary of the date of this Agreement
and (b) the date upon which LLCP ceases to own or hold beneficially or of
record, directly or indirectly, at least 250,000 Warrant Shares.
5. LIMITATION ON PURCHASES OF COMMON STOCK BY LLCP. LLCP shall not,
without the prior written consent of the Company, purchase or otherwise acquire
shares of Common Stock at any time after the date hereof if, after giving
effect to the number of shares of Common Stock then owned or held by LLCP, LLCP
would beneficially own or hold more than fifteen percent (15.0%) of the Common
Stock calculated at such time on a Fully Diluted Basis. Nothing in this SECTION
5 or otherwise shall prohibit, restrict or otherwise limit the right of LLCP to
beneficially own or hold at any time up to fifteen percent (15.0%) of the
shares of Common Stock calculated at such time on a Fully Diluted Basis without
the consent of the Company or any Principal Shareholder.
6. MISCELLANEOUS.
6.1 LEGENDS. All certificates representing shares of Capital
Stock of the Company now owned or held or hereafter acquired by the Principal
Shareholders shall have stamped or endorsed thereon a legend substantially in
the following form (in addition to any legends required under applicable state
securities laws):
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF AN INVESTOR RIGHTS AGREEMENT DATED AS OF
DECEMBER 31, 1999, BY AND AMONG THE HOLDER, THE COMPANY AND
CERTAIN OTHER PERSONS. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED FROM THE COMPANY UPON WRITTEN REQUEST.
6.2 STOCK TRANSFER RECORDS. The Company shall make appropriate
notations in its stock transfer records of the restrictions on transfer
provided for in this Agreement and shall not record any transfers of capital
stock not made in strict compliance with the terms of this Agreement. The
Company acknowledges that any such transfer shall constitute an Event of
Default under Section 10.1 of the Securities Purchase Agreement.
6.3 SUCCESSORS AND ASSIGNS. The rights and obligations of LLCP
under this Agreement shall be freely assignable in connection with any transfer
of the Warrant or any portion thereof or of any shares of Common Stock issued
upon the exercise thereof in whole or
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<PAGE>
in part. Any assignee of such rights shall be entitled to all of the benefits of
this Agreement as if such assignee were an original party hereto.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire agreement and understanding among the parties with respect to the
subject matter hereof and supersedes all prior oral and written, and all
contemporaneous oral, agreements and understandings relating to the subject
matter hereof.
6.5 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if transmitted by
telecopier with receipt acknowledged, or upon delivery, if delivered personally
or by recognized commercial courier with receipt acknowledged, or upon the
expiration of 72 hours after mailing, if mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(1) If to LLCP, to:
Levine Leichtman Capital Partners II, L.P.
c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Telecopier: (310) 275-1441
WITH A COPY TO:
Riordan & McKinzie
300 South Grand Avenue, Suite 2900
Los Angeles, CA 90071
Attention: Mitchell S. Cohen, Esq.
Telephone: (213) 629-4824
Telecopier: (213) 629-8550
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<PAGE>
(2) If to the Company or any Principal
Shareholder, at:
Simula, Inc.
2700 North Central Avenue, Suite 1000
Phoenix, AZ 85004
Attention: Donald W. Townsend
Telephone: (602) 631-4005
Telecopier: (602) 631-9005
WITH A COPY TO:
Fennemore Craig
3003 North Central Avenue, Suite 2600
Phoenix, AZ 85012-2913
Attention: Robert J. Hackett, Esq.
Telephone: (602) 916-5336
Telecopier: (602) 916-5536
or at such other address or addresses as LLCP, such assignee, the Company or any
Principal Shareholder, as the case may be, may specify by written notice given
in accordance with this SECTION 6.5.
6.6 SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be an original, but all of
which together shall constitute one instrument.
6.8 DESCRIPTIVE HEADINGS, CONSTRUCTION AND INTERPRETATION. The
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement
and are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of
this Agreement for purposes of construing the provisions of this Agreement, and
all provisions of this Agreement shall be construed in accordance with their
fair meaning, and not strictly for or against any party.
- 12 -
<PAGE>
6.9 WAIVERS AND AMENDMENTS. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally or by
course of dealing, but only by a statement in writing signed by all of the
parties.
6.10 REMEDIES. In the event that the Company or any Principal
Shareholder fails to observe or perform any covenant or agreement to be
observed or performed under this Agreement, LLCP may proceed to protect and
enforce its rights by suit in equity or action at law, whether for specific
performance of any term contained in this Agreement or for an injunction
against the breach of any such term or in aid of the exercise of any power
granted in this Agreement or to enforce any other legal or equitable right of
LLCP, or to take any one or more of such actions. The Company and the Principal
Shareholders hereby agree that LLCP shall not be required or otherwise
obligated to, and hereby waive any right to demand that LLCP, post any
performance or other bond in connection with the enforcement of its rights and
remedies hereunder. The Company agrees to pay all fees, costs, and expenses,
including, without limitation, fees and expenses of attorneys, accountants and
other experts retained by LLCP, and all fees, costs and expenses of appeals,
incurred or expended by LLCP in connection with the enforcement of this
Agreement or the collection of any sums due hereunder, whether or not suit is
commenced. None of the rights, powers or remedies conferred under this
Agreement shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to any other right, power or remedy whether
conferred by this Agreement or now or hereafter available at law, in equity, by
statute or otherwise.
6.11 PRINCIPAL SHAREHOLDERS.
(a) REPRESENTATIONS AND COVENANTS. Each Principal
Shareholder hereby represents and warrants to LLCP that (a) he has the sole
power and authority to execute, deliver and perform his obligations under this
Agreement, without obtaining the Consent of any other Person, (b) this
Agreement has been duly executed and delivered by such Principal Shareholder
and constitutes the legal, valid and binding obligation of such Principal
Shareholder, enforceable against such Principal Shareholder in accordance with
its terms, and (c) the execution and delivery of this Agreement by such
Principal Shareholder, and the performance by such Principal Shareholder of his
obligations hereunder, does not and will not breach or violate any agreement,
instrument or other document to which such Principal Shareholder is a party or
to which such Principal Shareholder's assets are bound or any Applicable Laws.
In addition, each Principal Shareholder hereby represents and warrants to LLCP
that he has carefully read this Agreement and has had sufficient time and
opportunity to consider its terms and to obtain legal advice, if desired, and
he fully understands the final and binding effect of this Agreement. Each
Principal Shareholder hereby covenants and agrees with LLCP that he will not
sell, transfer or otherwise dispose of in any transaction which does
- 13 -
<PAGE>
not constitute a Public Sale any shares of Capital Stock of the Company
beneficially owned or held by him without the prior written consent of LLCP.
(b) CAPACITIES. Notwithstanding anything to the contrary
contained in this Agreement, the parties acknowledge that the Principal
Shareholders have signed this Agreement in their individual capacities, and not
as representatives of the Company, solely for the purposes of the provisions of
SECTION 3 regarding Co-Sale, for the purposes of making the representations and
warranties set forth in this SECTION 6.11 and for the purposes of the applicable
miscellaneous provisions set forth in this SECTION 6, and shall have no personal
liability for any other provisions contained herein.
(c) SPOUSAL CONSENTS. Each Principal Shareholder
covenants and agrees that he will deliver to LLCP, as soon as practicable but
not later than the close of business on Friday, January 7, 2000, a Spousal
Consent to this Agreement, in substantially the form of EXHIBIT A, duly
executed by his spouse.
(d) ACKNOWLEDGMENT. It is acknowledged and understood
that each Principal Shareholder may pledge his shares or transfer or "gift" his
shares for estate planning purposes, PROVIDED that such shares continue to be
subject to the provisions of SECTION 3.
6.12 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
6.13 CONSENT TO JURISDICTION AND VENUE. THE COMPANY, EACH PRINCIPAL
SHAREHOLDER AND LLCP HEREBY CONSENTS AND AGREES THAT ALL ACTIONS, SUITS OR OTHER
PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTS
LOCATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY AND ALL
CLAIMS, CONTROVERSIES AND DISPUTES ARISING OUT OF THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT OR ANY OTHER MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT. NOTWITHSTANDING THE FOREGOING,
NOTHING CONTAINED IN THIS SECTION 6.13 SHALL PRECLUDE LLCP FROM BRINGING ANY
ACTION,
- 14 -
<PAGE>
SUIT OR OTHER PROCEEDING IN THE COURTS OF ANY OTHER LOCATION WHERE THE COMPANY
OR ANY OF ITS ASSETS OR THE COLLATERAL MAY BE FOUND OR LOCATED OR TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LLCP.
THE COMPANY, EACH PRINCIPAL SHAREHOLDER AND LLCP HEREBY (A)
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION, SUIT OR OTHER PROCEEDING COMMENCED IN ANY
SUCH COURT, (B) WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR ANY OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION OR IMPROPER VENUE AND (C) CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY,
EACH PRINCIPAL SHAREHOLDER AND LLCP HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT OR OTHER PROCESS ISSUED IN ANY SUCH ACTION, SUIT OR OTHER
PROCEEDING AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE
ADDRESS SET FORTH IN SECTION 6.5 (NOTICES) AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH PERSON'S ACTUAL RECEIPT THEREOF OR
FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
TO THE EXTENT PERMITTED UNDER THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, THE COMPANY AND EACH PRINCIPAL SHAREHOLDER HEREBY EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH ACTION, SUIT OR OTHER PROCEEDING, THE
JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR HEREAFTER, BY REASON OF
SUCH PERSON'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
6.14 WAIVER OF JURY TRIAL. THE COMPANY, EACH PRINCIPAL SHAREHOLDER
AND LLCP HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER
PROCEEDING UNDER THIS AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT OR ANY CLAIM,
CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED HEREBY OR BY ANY OTHER INVESTMENT DOCUMENT, REGARDLESS OF WHICH
PARTY INITIATES SUCH ACTION OR ACTIONS.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the date
first written above.
COMPANY
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
----------------------------------------
James C. Dodd
Executive Vice President and Chief
Financial Officer
By: /s/ Nora T. Harden
----------------------------------------
Nora T. Harden
Assistant Secretary
LLCP
LEVINE LEICHTMAN CAPITAL PARTNERS II,
L.P., a California limited partnership
By: LLCP California Equity Partners
II, L.P., a California limited
partnership, its General Partner
By: Levine Leichtman Capital
Partners, Inc., a
California corporation,
its General Partner
By: /s/ Arthur E. Levine
------------------------
Arthur E. Levine
President
- 16 -
<PAGE>
PRINCIPAL SHAREHOLDERS
/s/ Stanley P. Desjardins
--------------------------------
Stanley P. Desjardins
/s/ Donald W. Townsend
--------------------------------
Donald W. Townsend
/s/ James A. Saunders
--------------------------------
James A. Saunders
/s/ Bradley P. Forst
--------------------------------
Bradley P. Forst
- 17 -
<PAGE>
EXHIBIT A
FORM OF
SPOUSAL CONSENT
The undersigned is the spouse of ________________, one of the
individuals who has executed, delivered and agreed to be bound by the above
Investor Rights Agreement. The undersigned hereby acknowledges that she has
read and understands the terms and other provisions of the Investor Rights
Agreement. Further, the undersigned hereby consents to, approves of and agrees
to be bound by the terms and other provisions of the Investor Rights Agreement
for all purposes as if she were a party thereto, including, without limitation,
in order to bind any community property interest she has or may have in any
Co-Sale Shares owned by her and her spouse that is the subject of the Investor
Rights Agreement.
------------------------------------
[Name]
- 18 -
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of the 31st
day of December 1999 (this "AGREEMENT"), by and between SIMULA, INC., an
Arizona corporation (the "COMPANY"), and LEVINE LEICHTMAN CAPITAL PARTNERS
II, L.P., a California limited partnership ("LLCP").
R E C I T A L S
A. The Company, the other Company Parties and LLCP are parties to
the Securities Purchase Agreement dated of even date herewith (as amended
from time to time, the "SECURITIES PURCHASE AGREEMENT") pursuant to which,
among other things, on the date hereof, the Company is issuing to LLCP, and
LLCP is purchasing from the Company, a Warrant No. LL-1 to Purchase 850,000
Shares of Common Stock dated of even date herewith (as amended, augmented,
supplemented or otherwise modified from time to time, the "WARRANT"), all on
the terms and subject to the conditions set forth therein.
B. The execution and delivery of this Agreement by the Company is a
condition precedent to the obligations of LLCP to purchase the Securities and
to consummate the other transactions contemplated by the Securities Purchase
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. DEFINITIONS. Unless otherwise indicated, all capitalized terms not
otherwise defined herein shall have the meaning set forth in the Securities
Purchase Agreement. In addition, the following terms shall have the following
meanings:
"COMMISSION" shall mean the Securities and Exchange Commission, or
any successor federal agency.
"COMMON STOCK" shall mean the Common Stock, $.01 par value per
share, of the Company.
"COMPANY" shall have the meaning set forth in the preamble.
<PAGE>
"DEMANDING HOLDERS" shall mean LLCP only or, if LLCP does not hold a
majority of the Registrable Securities at any time, the holders of greater
than fifty percent (50.0%) of the outstanding Registrable Securities.
"DEMAND REGISTRATION" shall have the meaning specified in SECTION
2.1(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
"INDEMNIFIED PARTY" shall have the meaning specified in SECTION 4.3.
"INDEMNIFYING PARTY" shall have the meaning specified in SECTION 4.3.
"INSPECTORS" shall have the meaning specified in SECTION 3.1(h).
"LLCP" shall have the meaning set forth in the preamble.
"LLCP INDEMNIFIED PARTY" shall have the meaning specified in SECTION
4.1.
"MAXIMUM NUMBER OF SHARES" shall have the meaning specified in
SECTION 2.1(d).
"PIGGY-BACK REGISTRATION" shall have the meaning specified in
SECTION 2.2(a).
"REGISTER," "REGISTERED" and "REGISTRATION" shall mean a
registration effected by preparing and filing a registration statement or
similar document in compliance with the requirements of the Securities Act,
and the applicable rules and regulations promulgated thereunder, and such
registration statement becoming effective.
"REGISTRABLE SECURITIES" shall mean (i) the Warrant Shares, (ii) any
warrants, shares of Capital Stock or other securities of the Company issued
as a dividend or other distribution with respect to or in exchange for or in
replacement of the Warrant Shares and (iii) any other shares of Common Stock
acquired by LLCP after the date hereof. A security shall cease to be a
Registrable Security when (a) a Registration Statement covering such
Registrable Security shall have been declared effective under the Securities
Act and such Registrable Security shall have been sold in accordance with
such Registration Statement; (b) such Registrable Security shall have been
distributed and sold to the public pursuant to Rule 144 (or any successor
rule or regulation) promulgated under the Securities Act; (c) a new
certificate representing such Registrable Security has been delivered (to the
LLCP or any subsequent transferee) by the Company free from any restrictive
legend and without issuance of stop transfer or other instructions to the
Company's transfer agent and the Holder of such Registrable Security shall
have been advised by counsel acceptable to it that subsequent disposition of
such security will
2
<PAGE>
not require registration or qualification under the Securities Act or any
state securities or "blue sky" laws then in effect; or (d) such Registrable
Security shall have ceased to be outstanding.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission in compliance with the Securities Act and the
rules and regulations promulgated thereunder for a public offering and sale
of its Common Stock (other than a registration statement on Form S-8 or Form
S-4, or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another entity).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"SECURITIES PURCHASE AGREEMENT" shall have the meaning set forth in
the recitals.
"UNDERWRITER" shall mean a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as
part of such dealer's market-making activities.
"WARRANT" shall have the meaning set forth in the recitals and, in
addition, shall include (i) any new warrant or warrants issued upon the
transfer of all or any portion of the warrant issued pursuant to the
Securities Purchase Agreement and (ii) any warrant or warrants issued upon
the further transfer, division or combination of any such new warrant or
warrants.
"WARRANT SHARES" shall mean the shares of Common Stock issued or
issuable upon the exercise of the Warrant, and the holder of the Warrant or
any portion thereof shall be deemed to be the holder of the Warrant Shares
issuable upon the exercise thereof.
2. REGISTRATION RIGHTS.
2.1 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. At any time on or after the
date of this Agreement, the Demanding Holders may request in writing that the
Company effect the registration under the Securities Act of all or any
portion of Registrable Securities (a "DEMAND REGISTRATION"). Any request for
a Demand Registration shall specify the number of shares of Registrable
Securities proposed to be sold and the intended method(s) of distribution
thereof. Upon any such request, the Demanding Holders shall be entitled to
have Registrable Securities included in the Demand Registration, subject to
SECTION 2.1(d) and the provisos set forth in SECTION 3.1(a), PROVIDED that
the Demanding Holders reasonably cooperate with the Company in respect of the
preparation of the Registration Statement, including, for example, furnishing
such information to the Company as may be required pursuant to the rules and
regulations promulgated under the Securities Act. The Company shall not be
obligated to effect more than
3
<PAGE>
one (1) Demand Registration under this SECTION 2.1(a). The right of any
Demanding Holder to make Demand Registrations under this SECTION 2.1(a) shall
be suspended on the second anniversary of the date upon which such Demanding
Holder is first permitted to sell all of its Registrable Securities under
Rule 144(k) promulgated under the Securities Act; PROVIDED, HOWEVER, that at
any time thereafter such Demanding Holder becomes ineligible to sell any
Registrable Securities under Rule 144(k), such Demanding Holder may make
Demand Registrations under this SECTION 2.1(a) until it becomes eligible
again to sell its Registrable Securities under Rule 144(k), at which time the
right of such Demanding Holder to make Demand Registrations shall be
suspended again.
(b) EFFECTIVE REGISTRATION. Except in the case of a
withdrawal governed by the last sentence of SECTION 2.1(e), a registration
will not count as a Demand Registration until the Registration Statement
filed with the Commission with respect to such Demand Registration has been
declared effective and the Company has complied with all of its obligations
under this Agreement with respect thereto; PROVIDED, HOWEVER, that, after
such Registration Statement has been declared effective, if the offering of
Registrable Securities pursuant to a Demand Registration is interfered with
by any stop order, injunction or other order or requirement of the Commission
or any other Governmental Authority, such Demand Registration shall not be
deemed to have been made for purposes of this SECTION 2.1.
(c) UNDERWRITTEN OFFERING. If the Demanding Holders wish to
distribute Registrable Securities covered by its request by means of an
underwritten offering, it shall so advise the Company as a part of its
request made pursuant to SECTION 2.1(a). The Demanding Holders shall have the
right, but not the obligation, to select one or more firms of investment
bankers to act as the managing Underwriter or Underwriters in connection with
such offering and may select any additional managers to be used in connection
with such offering. If the Demanding Holders decide to select such managing
Underwriter or Underwriters, they will consult with the Company prior to the
final selection.
(d) REDUCTION OF OFFERING. If the managing Underwriter or
Underwriters for a Demand Registration that is to be an underwritten offering
advises the Company and the Demanding Holders in writing that the dollar
amount or number of shares of Registrable Securities which the Demanding
Holders desire to sell, taken together with all other shares of Common Stock
or other securities which the Company desires to sell and the shares of
Common Stock, if any, as to which registration has been requested pursuant to
the piggy-back registration rights, if any, which other shareholders of the
Company desire to sell, exceeds the maximum dollar amount or maximum number
of shares that can be sold in such offering without adversely affecting the
proposed offering price, the timing, the distribution method or the
probability of success of such offering (the "MAXIMUM NUMBER OF SHARES"),
then the Company shall include in such registration:
4
<PAGE>
(i) first, the Registrable Securities as to which
Demand Registration has been requested by the Demanding Holders (PRO
RATA in accordance with the number of shares of Registrable Securities
held by each Demanding Holder, regardless of the number of shares of
Registrable Securities which such Demanding Holder has requested be
included in such registration) that can be sold without exceeding the
Maximum Number of Shares;
(ii) second, to the extent the Maximum Number of
Shares has not been reached under the foregoing clause (i), the shares
of Common Stock or other securities that the Company desires to sell
that can be sold without exceeding the Maximum Number of Shares;
(iii) third, to the extent the Maximum Number of
Shares has not been reached under the foregoing clauses (i) and (ii)
above, the shares of Common Stock for the account of other Shareholders
of the Company that the Company is obligated to register (to be
allocated among the Persons requesting inclusion in such registration
pursuant to such agreements PRO RATA in accordance with the number of
shares of Common Stock with respect to which such Persons has the right
to request such inclusion under such agreements, regardless of the
number of shares which such Person has actually requested be included
in such registration) that can be sold without exceeding the Maximum
Number of Shares, to the extent that the Company is contractually
permitted as of the date hereof to "cutback" such shares; and
(iv) fourth, to the extent the Maximum Number of
Shares has not been reached under the foregoing clauses (i), (ii) and
(iii) above, the shares of Common Stock that other shareholders desire
to sell that can be sold without exceeding the Maximum Number of
Shares.
(e) WITHDRAWAL. At any time prior to the effectiveness of a
Registration Statement with the Commission, the Demanding Holders or any one
of them may withdraw their Registrable Securities from any proposed offering
being effected pursuant to a Demand Registration by giving written notice to
the Company of their election to withdraw prior to the filing of the
Registration Statement. If the Demanding Holders so withdraw their
Registrable Securities from such proposed offering, the withdrawing Demanding
Holders shall not be obligated to pay any of the expenses incurred in
connection with such Registration Statement and no Demand Registration shall
be deemed to have been made for purposes of SECTION 2.1(a).
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2.2 PIGGY-BACK REGISTRATION.
(a) PIGGY-BACK RIGHTS. If at any time or from time to time
the Company proposes to file a Registration Statement under the Securities
Act with respect to an offering of Common Stock by the Company for its own
account or by shareholders of the Company for their own account (or by the
Company and by shareholders of the Company) (other than a Registration
Statement (i) on Form S-4 or S-8 (or any substitute or successor form that
may be adopted by the Commission), (ii) filed in connection with any employee
stock option or other benefit plan, (iii) for an exchange offer or offering
of securities solely to the Company's existing shareholders or (iv) for a
dividend reinvestment plan), the Company shall (x) give written notice of
such proposed filing to the holders of Registrable Securities as soon as
practicable but in no event less than thirty (30) days before the anticipated
filing date, which notice shall describe the amount and type of securities to
be included in such offering, the intended method(s) of distribution, and the
name of the proposed managing Underwriter or Underwriters, if any, of the
offering; and (y) offer to the holders of Registrable Securities in such
notice the opportunity to register such number of shares of Registrable
Securities as such holders may request in writing within fifteen (15) days
following receipt of such notice (a "PIGGY-BACK REGISTRATION"). The Company
shall cause such Registrable Securities to be included in such registration
and shall use its best efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be
included on the same terms and conditions as any similar securities of the
Company and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method(s) of distribution thereof.
(b) REDUCTION OF OFFERING. If the managing Underwriter or
Underwriters for a Piggy-Back Registration that is to be an underwritten
offering of shares for the Company's account advises the Company and the
holders of Registrable Securities in writing that the dollar amount or number
of shares of Common Stock which the Company desires to sell, taken together
with the Registrable Securities as to which registration has been requested
hereunder and the shares of Common Stock, if any, as to which registration
has been requested pursuant to the piggy-back registration rights which other
shareholders of the Company desire to sell, exceeds the Maximum Number of
Shares, then the Company shall include in such registration:
(i) first, the shares of Common Stock or other
securities that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares;
(ii) second, to the extent the Maximum Number of
Shares has not been reached under the foregoing clause (i) above, the
Registrable Securities as to which registration has been or may be
requested under this SECTION 2.2; and
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(iii) third, to the extent the Maximum Number of
Shares has not been reached under the foregoing clauses (i) and (ii)
above, the shares of Common Stock, if any, as to which registration has
been requested pursuant to the piggy-back registration rights which
such other shareholders desire to sell that can be sold without
exceeding the Maximum Number of Shares.
(c) WITHDRAWAL. At any time prior to the effectiveness of a
Registration Statement with the Commission, any holder of Registrable Securities
may withdraw such holder's request for inclusion of Registrable Securities in
any Piggy-Back Registration by giving written notice to the Company of its
election to withdraw prior to the effectiveness of the Registration Statement.
The Company may also elect to withdraw a Registration Statement at any time
prior to the effectiveness of the Registration Statement. Notwithstanding any
such withdrawal, the Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back Registration as
provided in SECTION 3.3.
2.3 REGISTRATIONS ON FORM S-3. If the registration of Registrable
Securities is permitted to be made on a Registration Statement on Form S-3
(or any similar short-form registration which may be available at such time)
(a "FORM S-3"), the holders of Registrable Securities may at any time request
in writing that the Company register the resale of any or all of its or their
Registrable Securities on a Form S-3 (PROVIDED, HOWEVER, that if the Company
does not have a Form S-3 then on file with the Commission pursuant to this
SECTION 2.3, the Company may postpone for not more than ninety (90) days, on
one occasion only with respect to any requested registration under this
SECTION 2.3, the filing of a Form S-3 if the Company advises the holders in
writing that it is engaged in a major corporate transaction that would be
adversely affected by such filing). Upon receipt of a written request for
registration of Registrable Securities on Form S-3 (a "FORM S-3 NOTICE"), the
Company will promptly (but not later than three (3) Business Days after
receipt of such Form S-3 Notice) furnish written notice of the proposed
registration to all other holders of Registrable Securities, if any. The
Company shall cause to be filed with the Commission, as soon as practicable
after receipt of a Form S-3 Notice but not later than sixty (60) days
thereafter, a Form S-3 covering all of such holder's or holders' Registrable
Securities as specified in the Form S-3 Notice and all of the Registrable
Securities of any other holders who join in such request as specified in a
written request given within fifteen (15) days after receipt of such written
notice from the Company. In addition, the Company shall use its best efforts
to cause each such Form S-3 to become effective as soon as practicable but
not later than ninety (90) days after the date of receipt by the Company of
the relevant Form S-3 Notice. The Company shall use its best efforts to
maintain each Form S-3 continuously effective, supplemented and amended until
the Registrable Securities covered thereby have been sold. No registration
effected pursuant to this SECTION 2.3 shall be counted as a Demand
Registration effected pursuant to SECTION 2.1. The registration rights
provided to the holders of Registrable Securities hereunder shall survive
until the third anniversary of the date upon which the first Form S-3 filed
with the Commission hereunder is declared effective by the Commission.
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2.4 PURCHASE (AND EXERCISE) OF THE WARRANT BY THE UNDERWRITERS.
Notwithstanding any other provision of this Agreement to the contrary, in
connection with any Demand Registration or Piggy-Back Registration which is to
be an underwritten offering, to the extent all or any portion of the
Registrable Securities to be included in such registration consist of Warrant
Shares, the holders of such Registrable Securities may request that the
Underwriter or Underwriters purchase (and exercise) the Warrant or any portion
thereof rather than require the holders of the Registrable Securities to
exercise the Warrant or portion thereof in connection with such registration,
unless the Underwriters inform such holders that such a purchase and exercise
of the Warrant will materially and adversely affect the proposed offering. The
Company shall take all such action and provide all such assistance as may be
reasonably requested by the holders of Registrable Securities to facilitate any
such purchase (and exercise) of the Warrant agreed to by the Underwriter or
Underwriters, including, without limitation, issuing the Warrant Shares or any
portion thereof to be issued within such time period as will permit the
Underwriters to make and complete the distribution contemplated by the
underwriting.
3. REGISTRATION PROCEDURES.
3.1 FILINGS; INFORMATION. Whenever the Company is required to
effect the registration of any Registrable Securities pursuant to SECTION 2,
the Company shall use its best efforts to effect the registration and sale of
such Registrable Securities in accordance with the intended method(s) of
distribution thereof as expeditiously as practicable, and in connection with
any such request:
(a) FILING REGISTRATION STATEMENT. The Company shall, as
expeditiously as possible, prepare and file with the Commission, within sixty
(60) days after receipt of a request for a Demand Registration pursuant to
SECTION 2.1, a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of all Registrable Securities to be
registered thereunder in accordance with the intended method(s) of distribution
thereof, and shall use its best efforts to cause such Registration Statement to
become and remain effective for the period required by SECTION 3.1(c);
PROVIDED, HOWEVER, that the Company shall have the right to defer such
registration for up to ninety (90) days if the Company shall furnish to the
holders a certificate signed by the President and Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board of Directors
of the Company, it would be materially detrimental to the Company and its
shareholders for such Registration Statement to be effected at such time;
PROVIDED FURTHER, HOWEVER, that in the event the Company elects to exercise
such right with respect to any registration, it shall not have the right to
exercise such right again prior to the date which is twelve (12) months after
the date on which the Registration Statement relating to such deferred
registration is declared effective.
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(b) COPIES. The Company shall, prior to filing a
Registration Statement or prospectus, or any amendment or supplement thereto,
furnish without charge to the holders of Registrable Securities included in
such registration, and such holders' legal counsel, copies of such Registration
Statement as proposed to be filed, each amendment and supplement to such
Registration Statement (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in such
Registration Statement (including each preliminary prospectus), and such other
documents as the holders of Registrable Securities included in such
registration or legal counsel for any such holders may request in order to
facilitate the disposition of the Registrable Securities owned by such holders.
(c) AMENDMENTS AND SUPPLEMENTS. The Company shall
prepare and file with the Commission such amendments, including post-effective
amendments, and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective and in compliance with the provisions of the Securities Act
until all Registrable Securities and other securities covered by such
Registration Statement have been disposed of in accordance with the intended
method(s) of distribution set forth in such Registration Statement (which
period shall not exceed, in each case other than a Form S-3, the sum of one
hundred twenty (120) days PLUS any period during which any such disposition is
interfered with by any stop order, injunction or other order or requirement of
the Commission or any governmental agency or court) or such securities have
been withdrawn.
(d) NOTIFICATION. After the filing of a Registration
Statement, the Company shall promptly, and in no event more than two (2)
Business Days, notify the holders of Registrable Securities included in such
registration statement, and confirm such advice in writing: (i) when such
Registration Statement has been filed or amended or supplemented and becomes
effective, (ii) when any post-effective amendment to such Registration
Statement becomes effective, (iii) of any stop order issued or threatened by
the Commission (and the Company shall use its best efforts to prevent the entry
of such stop order or to remove it if entered) and (iv) of any request by the
Commission for any amendment or supplement to such Registration Statement or
any prospectus relating thereto or for additional information or of the
occurrence of an event requiring the preparation of a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of the
securities covered by such Registration Statement, such prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and promptly make available to the holders of Registrable
Securities included in such Registration Statement any such supplement or
amendment; except that before filing with the Commission a Registration
Statement or prospectus or any amendment or supplement thereto, including
documents incorporated by reference, the Company shall furnish to the holders
of Registrable Securities included in such Registration Statement and to the
legal counsel for any such holders, copies of all such documents proposed to be
filed sufficiently in advance of filing (and in no event less than three (3)
Business Days prior to filing) to provide such holders and legal counsel with a
reasonable opportunity to
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review such documents and comment thereon, and the Company shall not file any
Registration Statement or prospectus or amendment or supplement thereto,
including documents incorporated by reference, to which such holders or their
legal counsel shall reasonably object.
(e) STATE SECURITIES LAWS COMPLIANCE. The Company shall
use its best efforts to (i) register or qualify the Registrable Securities
covered by the Registration Statement under such securities or "blue sky" laws
of such jurisdictions in the United States as the holders of Registrable
Securities included in such Registration Statement (in light of their intended
plan of distribution) may request and (ii) cause such Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other Governmental Authorities as may be necessary by virtue of the business
and operations of the Company and do any and all other acts and things that may
be necessary or advisable to enable the holders of Registrable Securities
included in such Registration Statement to consummate the disposition of such
Registrable Securities in such jurisdictions; PROVIDED, HOWEVER, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
SECTION 3.1(e), or subject itself to taxation in any such jurisdiction.
(f) AGREEMENTS FOR DISPOSITION. The Company shall enter
into customary agreements (including, if applicable, an underwriting agreement
in customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of such Registrable Securities.
The representations, warranties and covenants of the Company in any
underwriting agreement which are made to or for the benefit of any Underwriters
shall also be made to and for the benefit of the holders of Registrable
Securities included in such registration statement. No holder of Registrable
Securities included in such registration statement shall be required to make
any representations or warranties in the underwriting agreement except, if
applicable, with respect to such holder's organization, good standing,
authority, title to Registrable Securities, lack of conflict of such sale with
such holder's material agreements and organizational documents, and with
respect to written information relating to such holder that such holder has
furnished in writing expressly for inclusion in such registration statement.
(g) COOPERATION. The Company shall cause the President
and Chief Executive Officer of the Company, the Chief Financial Officer of the
Company, any vice president of the Company and any other members of the
management of the Company to cooperate fully in any offering of Registrable
Securities hereunder, which cooperation shall include, without limitation, the
preparation of the Registration Statement with respect to such offering and all
other offering materials and related documents, and participation in meetings
with Underwriters, attorneys, accountants and potential investors.
(h) RECORDS. The Company shall make available for
inspection by the holders of Registrable Securities included in such
Registration Statement, any Underwriter participating in any disposition
pursuant to such registration statement and any attorney,
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accountant or other professional retained by any holder of Registrable
Securities included in such Registration Statement or any Underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, as shall be necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any of them in connection with
such registration statement.
(i) OPINIONS AND COMFORT LETTERS. The Company shall
furnish to each holder of Registrable Securities included in any Registration
Statement a signed counterpart, addressed to such holder, of (i) any opinion of
counsel to the Company delivered to any Underwriter and (ii) any comfort letter
from the Company's independent public accountants delivered to any Underwriter.
In the event no legal opinion is delivered to any Underwriter, the Company
shall furnish to each holder of Registrable Securities included in such
Registration Statement, at any time that such holder elects to use a
prospectus, an opinion of counsel to the Company to the effect that the
Registration Statement containing such prospectus has been declared effective
and that no stop order is in effect.
(j) EARNINGS STATEMENT. The Company shall comply with
all applicable rules and regulations of the Commission and the Securities Act,
and make available to its shareholders, as soon as practicable, an earnings
statement covering a period of twelve (12) months, beginning within three (3)
months after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder.
(k) LISTING. The Company shall use its best efforts to
cause all Registrable Securities included in any registration to be listed on
such national securities exchange or otherwise designated for trading in the
same manner as similar securities issued by the Company are then listed or
designated or, if no such similar securities are then listed or designated, in
a manner satisfactory to the holders of a majority of the Registrable
Securities included in such registration.
3.2 OBLIGATION TO SUSPEND DISTRIBUTION. Upon receipt of any
notice from the Company of the happening of any event of the kind described in
SECTION 3.1(d)(iv), each holder of Registrable Securities included in any
registration shall immediately discontinue disposition of such Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder receives the supplemented or amended prospectus
contemplated by SECTION 3.1(d)(iv), and, if so directed by the Company, each
such holder will deliver to the Company all copies, other than permanent file
copies then in such holder's possession, of the most recent prospectus covering
such Registrable Securities at the time of receipt of such notice.
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3.3 REGISTRATION EXPENSES. The Company shall bear all costs and
expenses incurred in connection with any Demand Registration pursuant to
SECTION 2.1, any Piggy-Back Registration pursuant to SECTION 2.2 and any
registration on Form S-3 pursuant to SECTION 2.3 and all expenses incurred in
performing or complying with its other obligations under this Agreement,
whether or not the Registration Statement becomes effective, including, without
limitation, (i) all registration and filing fees; (ii) fees and expenses of
compliance with state securities or "blue sky" laws (including fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities); (iii) printing expenses; (iv) the Company's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees); (v) the fees and expenses incurred in connection with
the listing of the Registrable Securities as required by SECTION 3.1(k); (vi)
National Association of Securities Dealers, Inc. fees, if any; (vii) fees and
disbursements of counsel for the Company and fees and expenses for independent
certified public accountants retained by the Company (including the expenses or
costs associated with the delivery of any opinions or comfort letters requested
pursuant to SECTION 3.1(i)); (viii) the fees and expenses of any special
experts retained by the Company in connection with such registration; (ix) the
purchase of selling stockholder errors and omissions insurance for the benefit
of LLCP in any amount equivalent to the gross proceeds to be received by LLCP
in connection with any registration under this Agreement, on terms and
conditions satisfactory to LLCP, provided, however, that the Company shall not
be obligated to pay any premium for such insurance in excess of $50,000, and
(x) all fees and expenses incurred by LLCP in connection with its participation
in such registration, including, without limitation, the fees and expenses of
LLCP's legal counsel, accountants and other experts selected by LLCP. The
Company shall have no obligation to pay any underwriting fees, discounts or
selling commissions attributable to the Registrable Securities being sold by
LLCP, which expenses shall be borne by LLCP.
3.4 INFORMATION. The holders of Registrable Securities shall
provide such information as reasonably requested by the Company in connection
with the preparation of any registration statement, including amendments and
supplements thereto, in order to effect the registration of any Registrable
Securities under the Securities Act pursuant to SECTIONS 2.
4. INDEMNIFICATION AND CONTRIBUTION.
4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless LLCP and each other holder of Registrable
Securities, and each of their respective officers, employees, Affiliates
(including, without limitation, Levine Leichtman Capital Partners, Inc.),
directors, partners, members, attorneys and agents, and each Person, if any,
who controls LLCP and each other holder of Registrable Securities (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
(each, an "LLCP INDEMNIFIED PARTY"), from and against any expenses, losses,
judgments, claims, damages or liabilities, whether joint or several, arising
out of or based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any Registration Statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
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prospectus, final prospectus or summary prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arising out of or based upon any omission (or alleged omission) to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation promulgated thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration; and the Company shall promptly, but in no event more than
five (5) Business Days after request for payment, pay directly or reimburse each
LLCP Indemnified Party for any legal and any other expenses reasonably incurred
by such LLCP Indemnified Party in connection with investigating and defending
any such expense, loss, judgment, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent that
any such expense, loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus, final prospectus, or summary prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by such selling holder and stated to be
specifically for use therein. The Company also shall indemnify any Underwriter
of the Registrable Securities, their officers, affiliates, directors, partners,
members and agents and each Person who controls such Underwriters on
substantially the same basis as that of the indemnification provided above in
this SECTION 4.1.
4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each
selling holder of Registrable Securities will, in the event that any
Registrable Securities held by such selling holder as to which any registration
is being effected under the Securities Act pursuant to this Agreement,
indemnify and hold harmless (severally and not jointly) the Company, each of
its directors and officers and each Underwriter (if any), and each other
Person, if any, who controls such selling holder or such Underwriter within the
meaning of the Securities Act, against any losses, claims, judgments, damages
or liabilities, whether joint or several, insofar as such losses, claims,
judgments, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement of a material fact contained in any
Registration Statement under which such Registrable Securities were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or arise out of or are based upon any
omission to state a material fact required to be stated therein or necessary to
make the statement therein not misleading, if the statement or omission was
made in reliance upon and in conformity with information furnished in writing
to the Company by such selling holder and stated to be specifically for use
therein, and shall, within five (5) Business Days after a request therefor,
reimburse the Company, its directors and officers, and each such controlling
Person for any legal or other expenses reasonably incurred by any of them in
connection with investigation or defending any such loss, claim, damage,
liability or action. Notwithstanding anything to the contrary, in no event
shall any holder of Registrable Securities be liable or responsible for any
amount in excess of the net proceeds actually received by such holder after
Taxes from the sale of Registrable Securities.
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4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after
receipt by any Person of any written notice of any loss, claim, damage or
liability or any action in respect of which indemnity may be sought pursuant to
SECTION 4.1 or 4.2, such Person (the "INDEMNIFIED PARTY") shall, if a claim in
respect thereof is to be made against any other Person for indemnification
hereunder, notify such other Person (the "INDEMNIFYING PARTY") in writing of
the loss, claim, judgment, damage, liability or action; PROVIDED, HOWEVER, that
the failure by the Indemnified Party to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability which the Indemnifying Party
may have to such Indemnified Party hereunder, except to the extent the
Indemnifying Party is actually prejudiced by such failure. If the Indemnified
Party is seeking indemnification with respect to any claim or action brought
against the Indemnified Party, then the Indemnifying Party shall be entitled to
participate in such claim or action, and, to the extent that it wishes, jointly
with all other Indemnifying Parties, to assume the defense thereof with counsel
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; PROVIDED, HOWEVER, that in any action in which both the
Indemnified Party and the Indemnifying Party are named as defendants, the
Indemnified Party shall have the right to employ separate counsel (but no more
than one such separate counsel) to represent the Indemnified Party and its
controlling Persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, with the fees and expenses of such counsel to be paid by
such Indemnifying Party if, based upon the written opinion of counsel of such
Indemnified Party, representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld), consent to entry of
judgment or effect any settlement of any claim or pending or threatened
proceeding in respect of which the Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such judgment or settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such claim or proceeding.
4.4 CONTRIBUTION. If the indemnification provided for in the
foregoing SECTIONS 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in
respect of any loss, claim, damage, liability or action referred to herein,
then each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, claim, damage, liability or action in such proportion
as is appropriate to reflect the relative fault of the Indemnified Parties and
the Indemnifying Parties in connection with the actions or omissions which
resulted in such loss, claim, damage, liability or action, as well as any other
relevant equitable considerations. The relative fault of any Indemnified Party
and any Indemnifying Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such Indemnified
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Party or such Indemnifying Party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this SECTION 4.4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of any loss, claim,
damage, liability or action referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding anything to
the contrary, in no event shall any holder of Registrable Securities be required
to contribute any amount in excess of the net proceeds actually received by such
holder after Taxes from the sale of Registrable Securities which gave rise to
such contribution obligation. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
5. UNDERWRITING AND DISTRIBUTION.
5.1 RULE 144. The Company covenants that it shall file any
reports required to be filed by it under the Securities Act and the Exchange
Act and shall take such further action as the holders of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act, as such Rules may be amended from time to time, or
any similar Rule or regulation hereafter adopted by the Commission.
5.2 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The Company
agrees that (a) it will not effect any public sale or distribution of any
securities similar to those being registered in accordance with SECTION 2.1, or
any securities convertible into or exchangeable or exercisable for such
securities, during the ninety (90) days prior to, and during the one hundred
eighty (180) day period commencing on, the effective date of any Demand
Registration (except as part of such Demand Registration to the extent
permitted by SECTION 2.1(d)); and (b) any agreement entered into after the date
hereof pursuant to which the Company issues or agrees to issue any privately
placed securities shall contain a provision under which holders of such
securities agree not to effect any sale or distribution of any such securities
during the periods described in (a) above, in each case including a sale
pursuant to Rule 144 under the Securities Act (except as part of any such
registration, if permitted); PROVIDED, HOWEVER, that the provisions of this
SECTION 5.2 shall not prevent the conversion or exchange of any securities
pursuant to their terms into or for other securities and shall not prevent the
issuance of securities by the Company under any employee benefit, stock option
or stock subscription plans.
15
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6. MISCELLANEOUS.
6.1 OTHER REGISTRATION RIGHTS.
(a) The Company hereby represents and warrants to LLCP
that no Person has any right to require the Company to register any shares of
the Capital Stock of the Company for sale or to include any shares of the
Capital Stock of the Company in any registration filed by the Company for the
sale of shares of Capital Stock for its own account or for the account of any
other Person.
(b) From and after the date of this Agreement, the
Company shall not, without the prior written consent of LLCP, (i) enter into
any agreement granting any demand registration right (I.E., the right to
require the Company to register the sale of any shares of the Company's capital
stock), (ii) enter into any agreement granting any piggy-back registration
right (I.E., the right to require the Company to register the sale of any
shares of the Company's capital stock in any registration filed by the Company
for the sale of shares of capital stock for its own account or for the account
of any other Person) which is inconsistent with, equal to or superior to any
registration rights granted hereunder or (iii) enter into any agreement that
adversely affects the rights granted to the holders of Registrable Securities
hereunder.
6.2 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of, and be binding upon, the parties and their respective successors
and permitted assigns. The rights and obligations of LLCP under this Agreement
shall be freely assignable in whole or in part. Each such assignee, by
accepting such assignment of the rights of the assignor hereunder, shall be
deemed to have agreed to and be bound by the obligations of the assignor
hereunder. The rights and obligations of the Company hereunder may not be
assigned or delegated.
6.3 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if transmitted by
telecopier with receipt acknowledged, or upon delivery, if delivered personally
or by recognized commercial courier with receipt acknowledged, or upon the
expiration of 72 hours after mailing, if mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(i) If to LLCP, to: Levine Leichtman Capital Partners II, L.P.
c/o Levine Leichtman Capital Partners, Inc.
335 North Maple Drive, Suite 240
Beverly Hills, CA 90210
Attention: Arthur E. Levine, President
Telephone: (310) 275-5335
Telecopier: (310) 275-1441
16
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WITH A COPY TO:
Riordan & McKinzie
300 South Grand Avenue, Suite 2900
Los Angeles, CA 90071
Attention: Mitchell S. Cohen, Esq.
Telephone: (213) 629-4824
Telecopier: (213) 629-8550
(ii) If to the Company, at:
Simula, Inc.
2700 North Central Avenue, Suite 1000
Phoenix, AZ 85004
Attention: Donald W. Townsend
Telephone: (602) 631-4005
Telecopier: (602) 631-9005
WITH A COPY TO:
Fennemore Craig
3003 North Central Avenue, Suite 2600
Phoenix, AZ 85012-2913
Attention: Robert J. Hackett, Esq.
Telephone: (602) 916-5336
Telecopier: (602) 916-5536
or at such other address or addresses as the Purchaser or the Company, as the
case may be, may specify by written notice given in accordance with this SECTION
6.3.
6.4 SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be an original, but all of
which together shall constitute one and the same instrument.
6.6 DESCRIPTIVE HEADINGS, CONSTRUCTION AND INTERPRETATION. The
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement
and are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital, clause and party references are to this Agreement
unless otherwise stated. No party, nor its counsel, shall be deemed the drafter
of this Agreement for purposes of construing the provisions of this Agreement,
and all
17
<PAGE>
provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.
6.7 WAIVERS AND AMENDMENTS. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally or by
course of dealing, except by a statement in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought.
6.8 REMEDIES. In the event that the Company fails to observe or
perform any covenant or agreement to be observed or performed under this
Agreement, LLCP or any other holder of Registrable Securities may proceed to
protect and enforce its rights by suit in equity or action at law, whether for
specific performance of any term contained in this Agreement or for an
injunction against the breach of any such term or in aid of the exercise of any
power granted in this Agreement or to enforce any other legal or equitable
right, or to take any one or more of such actions. The Company hereby agrees
that LLCP shall not be required or otherwise obligated to, and hereby waives
any right to demand that LLCP, post any performance or other bond in connection
with the enforcement of its rights and remedies hereunder. The Company agrees
to pay all fees, costs, and expenses, including without limitation, fees and
expenses of attorneys, accountants and other experts, and all fees, costs and
expenses of appeals, incurred by LLCP or any other holder of Registrable
Securities in connection with the enforcement of this Agreement or the
collection or any sums due hereunder, whether or not suit is commenced. None of
the rights, powers or remedies conferred under this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.
6.9 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
18
<PAGE>
6.10 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND LLCP HEREBY
WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING
ARISING OUT OF, CONNECTED WITH OR RELATED TO THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT, OR ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR
RELATED TO THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, REGARDLESS OF WHICH
PARTY INITIATES SUCH ACTION OR ACTIONS.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered by their duly authorized representatives
as of the date first written above.
COMPANY
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
-----------------------------------
James C. Dodd
Executive Vice President and Chief
Financial Officer
By: /s/ Nora T. Harden
-----------------------------------
Nora T. Harden
Assistant Secretary
LLCP
LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P.,
a California limited partnership
By: LLCP California Equity Partners
II, L.P., a California limited
partnership, its General Partner
By: Levine Leichtman Capital
Partners, Inc., a
California corporation,
its General Partner
By: /s/ Arthur E. Levine
-----------------------
Arthur E. Levine
President
19
<PAGE>
FIRST AMENDMENT TO
INVESTOR RIGHTS AGREEMENT
THIS FIRST AMENDMENT is entered into as of the 31st day of December
1999 (this "AMENDMENT"), by and among SIMULA, INC., an Arizona corporation (the
"COMPANY"), LEVINE LEICHTMAN CAPITAL PARTNERS II, L.P., a California limited
partnership ("LLCP"), and STANLEY P. DESJARDINS ("DESJARDINS"), DONALD W.
TOWNSEND ("Townsend"), JAMES A. SAUNDERS ("SAUNDERS") and BRADLEY P. FORST
("FORST" and, together with Desjardins, Townsend and Saunders, the "PRINCIPAL
SHAREHOLDERS").
R E C I T A L S
A. The parties have entered into the Investor Rights Agreement dated as
of December 31, 1999 (the "INVESTOR RIGHTS AGREEMENT"), pursuant to which, among
other things, the Company and the Principal Shareholders granted certain
investment monitoring, voting and other rights to the Purchaser as more fully
set forth therein. Unless otherwise indicated, all capitalized terms used and
not otherwise defined herein have the meanings set forth in the Investor Rights
Agreement.
B. The parties wish to amend clause (b) of Section 6.11 (Principal
Shareholders) of the Investor Rights Agreement to identify and clarify the
provisions in the Investor Rights Agreement to which the Principal Shareholders
have agreed to be bound in their personal capacities.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, conditions and provisions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENT OF SECTION 6.11(b). Clause (b) (Capacities) of Section
6.11(Principal Shareholders) of the Investor Rights Agreement is hereby amended
by deleting such Section in its entirety and replacing it with the following:
"(b) CAPACITIES. Notwithstanding anything to the contrary
contained in this Agreement, the parties acknowledge that the Principal
Shareholders have signed this Agreement in their individual capacities, and
not as representatives of the Company, for the purposes of SECTION 1.1,
SECTION 1.4 (to the
<PAGE>
extent that such Section relates to the obligations of the Principal
Shareholders under SECTION 1.1), SECTION 3 and SECTION 6, for the purposes
of making the representations and warranties set forth in SECTION 6.11(a),
and no Principal Shareholder shall have any personal liability under any
other provisions contained herein."
2. INCORPORATION OF SECTION 6 (MISCELLANEOUS). The provisions in
Sections 6 (Miscellaneous) of the Investor Rights Agreement are hereby
incorporated herein by this reference, to the extent applicable.
3. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by facsimile, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
4. FULL FORCE AND EFFECT. This Amendment amends the Investor Rights
Agreement on and as of December 31, 1999, and the Investor Rights Agreement
shall remain in full force and effect as amended hereby. The Investor Rights
Agreement, as amended hereby, is hereby ratified and affirmed by the parties in
all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment, or have
caused this Amendment to be executed and delivered by their duly authorized
representatives, as of the date first written above.
COMPANY
SIMULA, INC., an Arizona corporation
By:
-----------------------------------
James C. Dodd
Executive Vice President and Chief
Financial Officer
By:
-----------------------------------
Nora T. Harden
Assistant Secretary
2
<PAGE>
LLCP
----
LEVINE LEICHTMAN CAPITAL PARTNERS II,
L.P., a California limited partnership
By: LLCP California Equity Partners II, L.P., a California
limited partnership, its General Partner
By: Levine Leichtman Capital Partners, Inc., a
California corporation, its General Partner
By:
--------------------------------------
Arthur E. Levine
President
PRINCIPAL SHAREHOLDERS
------------------------------
Stanley P. Desjardins
------------------------------
Donald W. Townsend
------------------------------
James A. Saunders
------------------------------
Bradley P. Forst
3
