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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NO. 1-12410
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SIMULA, INC.
(Exact name of Registrant as specified in its charter)
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ARIZONA 86-0320129
(State of Incorporation) (I.R.S. Employer Identification No.)
2700 NORTH CENTRAL AVENUE, SUITE 1000
PHOENIX, ARIZONA 85004
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 631-4005
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
8% Senior Subordinated Convertible Notes Due 2004 New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive Proxy incorporated by
reference in Part III of this Form 10-K. X
As of March 28, 2000, the number of shares of Common Stock outstanding was
11,103,827 and the aggregate market value of the Common Stock (based on the
closing price as quoted on the New York Stock Exchange on that date) held by
non-affiliates of Registrant was $32,809,430.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement to be filed with the Commission
in connection with its Annual Meeting of Shareholders to be held June 22, 2000
are incorporated by reference in Part III of this report.
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PART I
ITEM 1. BUSINESS
With the exception of historical information, the matters discussed in
this report on Form 10-K may be estimates or constitute forward-looking
statements that describe matters that involve risks and uncertainties which
could cause the Company's actual results to differ materially from those
discussed herein. See, "Management's Discussion and Analysis and Financial
Condition and Results of Operations" - "Forward Looking Information" and "Risks
and Uncertainties in the Business."
THE COMPANY
Simula, Inc. is an acknowledged world leader in providing crash
resistant and energy absorption technologies that safeguard human lives. In its
role as a safety technology company, Simula invents, manufactures, and markets
advanced occupant seating and restraint systems installed in air, ground, and
sea transport vehicles for the military, aircraft, and automotive industries.
Simula, Inc. conducts its business through eight wholly-owned operating units.
As used herein, the terms "Company" or "Simula" refer collectively to Simula,
Inc. and its consolidated subsidiaries.
SEGMENTS AND MARKETS OVERVIEW
During 1999 Simula was a holding company for operating units in two
business segments. The Commercial Transportation Products segment includes
technology development, manufacturing and assembly operations for seating
systems for airliners and products and safety systems for automobiles and
trucks. The Company's Government and Defense segment includes technology
development and manufacturing operations for military aircraft seating, armor,
and crew safety systems sold principally to U.S. and foreign armed forces.
Financial information about the Company and its segments is found in Item 6, 7,
and 8 of this report.
1999 Recapitalization and Business Realignment
During the period 1999 through early 2000, the Company completed major
steps in recapitalizing the Company to provide additional working capital and
focus the Company on its profitable core businesses. In August, 1999, the
Company completed the sale of its rail seating operation which was reported as a
discontinued operation. On December 31, 1999, the Company obtained a new credit
facility with an asset based lender to replace its existing bank line and issued
$20 million in secured senior notes in a transaction with a private investor. In
December, 1999 the Company entered into an agreement for the sale of the assets
of its operating unit engaged in the commercial airline seating business, for
cash and the assumption of liabilities. This transaction was completed in
January 2000. "See Management's Discussion and Analysis of Financial Results."
Following this recapitalization the remaining operations of the Company
are in the automotive safety and government and defense businesses. Although the
recapitalization and operating results of its rail and airline seating units
resulted in substantial charges on disposition and an operating loss in the
fourth quarter, on a stand-alone basis, the automotive safety and government and
defense businesses were profitable in each quarter of 1999. The Company believes
that the recapitalization will allow Simula to continue to achieve these results
through its focus on these profitable core businesses.
Strategic Repositioning
As part of the changes in 1999, the Company began implementing its
strategic repositioning plan. The first element of this three part plan is to
focus the Company on its core competencies, that is those businesses which
historically have proven capable of operating on a profitable basis and
financial performance. The Company has instituted economic value added
performance metrics to better align its operating results with shareholder
value.
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The second element of the plan is the reduction of costs, particularly fixed
expenses, to ensure positive cash flow. The last element of the repositioning
plan is improving its technology and product development process for new
projects and technologies. This process will systematically introduce new
technologies and shorten technology development and product introduction
timelines.
CORE PRODUCTS AND TECHNOLOGIES
Through its operating divisions and subsidiaries, Simula develops,
manufactures, licenses, and sells products and technologies in six major
categories. The products and technologies are typically developed into a number
of different applications which are provided across a range of markets to
different types of customers:
- Inflatable Restraints - Simula has numerous patented inflatable
restraint devices, embodying technologies and designs that are
significantly different than the conventional airbag, which are
used to protect occupants in automobiles and aircraft. The
products and technologies are used in both military and
commercial markets.
- Seating Systems - The Company has expertise in crash resistant,
energy absorbing, technologies used in protective seating systems
for aircraft pilots and crews. The systems are used principally
in military aircraft but also have commercial applications and
customers.
- Sensors - The Company has developed and patented a variety of
sensors including one used to detect rollover incidents for land
vehicles and another used to detect crash incidents in aircraft.
The sensors trigger the deployment of safety devices, including
inflatable restraints and airbags. The sensors have application
in both commercial and military markets.
- Armor - In connection with its military seating systems, Simula
developed extensive technology and an array of armor products.
Armor in numerous designs is used in military aircraft and land
vehicles. Products are also sold and licensed in the civilian
market, including for vehicles and "body armor" for law
enforcement and similar personnel.
- Polymer Products - Simula sells and licenses a family of
proprietary polymer materials. The materials are transparent,
high impact, and have high optical properties. The materials are
suited for a variety of applications in both military and
commercial markets, including ophthalmic lenses, protective
eyewear, and armor systems.
- Protective Equipment and Parachutes - The Company has patented
designs for state-of-the-art parachutes with numerous competitive
advantages. Parachutes are marketed for pilots in military
branches around the world. Simula also has military customers for
a related set of crew and pilot protective equipment including
inflatable life vests utilizing the Company's inflatable
restraint technology.
COMMERCIAL TRANSPORTATION PRODUCTS SEGMENT
In 1999, the Commercial Transportation Segment included five operating
units in automotive safety, airline seating and airline soft goods, and polymer
materials businesses.
AUTOMOBILE SAFETY SYSTEMS
Overview
The Company designs and manufactures advanced occupant restraint systems
for automobiles and trucks. In 1994, the Company made a strategic decision to
enter the inflatable restraint market for automobiles utilizing its proprietary
technology, the Inflatable Tubular Structure ("ITS(R)"). The Company completed
its development of this technology and substantially completed the start-up of
its manufacturing facilities in 1996. The ITS(R) began in product delivery
production in April 1997. The Company's automotive safety product line has been
one of its most
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profitable businesses. In 1999, this business benefited significantly from
increased production volumes, manufacturing efficiencies, cost downs and quality
standards and certifications.
Over the past several years, the demand for vehicle safety systems has
increased dramatically due to consumer demand for increased safety and changes
in government regulations mandating more effective safety components in
vehicles. After frontal collisions, side-impact collisions are the second
leading cause of injuries in vehicle crashes and account for approximately 25
percent of all injuries and 34 percent of all fatalities. A significant portion
of side-impact injuries are to the head and neck. Rollover crashes are the third
leading cause of injuries, and the second leading cause of fatalities in
crashes. The ITS(R) was the first product designed specifically to protect
vehicle occupants' heads and necks in side-impact collisions, and provides
significant protection for vehicle occupants in the event of secondary
collisions or rollovers.
Since its introduction in BMW automobiles in 1997, the ITS(R) has proven
to be an effective countermeasure against the grave effects of numerous
categories of crashes. In several cases reported to the National Highway Traffic
and Safety Administration (NHTSA), the ITS(R) has demonstrated its lifesaving
qualities in protecting vehicle occupants from severe injury or death.
In 1998, NHTSA amended a federal motor vehicle safety standard that
governs the level of side-impact protection that vehicles are required to have.
As a part of the new mandate, U.S. auto manufacturers may now replace some
interior padding with a side-impact head protection system mounted on a
vehicle's roof rail, such as the ITS(R). The new regulation underscores the
increasing trend towards making side-impact safety a necessary component of
every vehicle's safety system, and should create the impetus for automobile
manufacturers to install these systems on an accelerated basis.
The worldwide market for frontal and side-impact airbags in all vehicle
positions (front and rear) is growing rapidly. In anticipation of such increased
demand, the Company has developed several strategic partnerships with first-tier
automotive suppliers resulting in 19 platform awards from 5 OEM's.
Current Products and Technologies
Inflatable Tubular Structure - The ITS(R) provides protection beyond
that provided by conventional airbags currently utilized in automobiles. Unlike
a conventional airbag, which must be backed by a structure such as a steering
wheel, dashboard, or door, the ITS(R) is attached to and supported by the
structure of the vehicle frame and door pillars. During a side-impact crash, a
tube located above the door inflates and becomes shorter in length, which causes
it to drop out of its molding and form a tight diagonal structure across the
side window. It deploys as a tubular or curtain-like structure. As a result the
ITS(R) provides protection despite the window being open or breaking upon
impact. A conventional airbag would not have adequate support in these
situations. Therefore, the ITS(R) is able to substantially reduce head rotation
to the side and prevent contact with vehicle components. Additionally, the
diagonal arrangement of the activated ITS(R) offers protection for occupants of
different sizes and seating positions, and in different types of side-impact
collisions, as well as in rollover, secondary impact, and ejection situations.
The ITS(R) is not an "aggressive" airbag and thus does not pose some of the
threats to smaller, or out of position vehicle occupants, as do
conventional frontal airbags. It also has an extended inflation time, enabling
the unit to offer protection in the event of secondary impacts or rollovers.
The Company is currently manufacturing the ITS(R) for sale to BMW, a
major European automobile manufacturer and recognized safety leader in the
automotive industry. The Company has achieved adoptions for the ITS(R) for
nineteen platforms for various automakers, that will be delivered for series
production during upcoming model years through 2003. The Company is consistently
engaged in ongoing sales and marketing efforts for ITS(R) adoption by automakers
in their routine planning and production cycles.
In 1998, the Company entered into license and manufacturing agreements
with TRW Inc. and Delphi Automotive Systems, Inc., major first tier automotive
component suppliers, for the marketing, development and production of ITS(R) for
automotive platforms. The Company entered into a similar agreement with Indiana
Mills & Manufacturing Inc. for the marketing, development and production of
ITS(R) for truck platforms. The Company enters into such strategic alliances
with first tier component suppliers to leverage off the size and industry
strength
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of such large manufacturers, and to benefit from their market access to OEMs.
The Company believes it will continue to achieve product adoptions and increased
volumes in the coming years. Customary industry price reductions for products
are expected as volumes grow.
The Company has been involved in a dispute regarding its 1995
distributor agreement with Autoliv, Inc. The Company has alleged that Autoliv
violated fair competition laws and misappropriated some of its proprietary
technology. The Company is also disputing Autoliv's position regarding second
sourcing and the supply and manufacturing rights of the Company. See,
"Litigation." See also, "Forward Looking Information" and "Trends and
Uncertainties in the Business."
Inflatable Tubular Torso Restraint ("ITTR") - The Company has developed
various additional applications for its ITS(R)-related technology. To date, the
most notable among them is the Inflatable Tubular Torso Restraint. The ITTR is a
patented seat belt device that incorporates an inflatable tube into the torso
portion of the belt. The ITTR has generated significant interest in the
automotive market both for its innovative design and its potential to offer
greatly enhanced occupant protection.
In addition to the ITS(R) agreement described above, in 1998 the Company
entered into a license and supply agreement with TRW for the marketing of the
ITTR. TRW is one of the largest suppliers of restraint systems in the world and
the ITTR is the only such system in its product portfolio. Numerous automakers
are in discussions with TRW and this product is in an accelerated market
position as compared to the ITS at a similar time in its development cycle.
Rollover Sensors, Inflators, and Integrated Systems - The Company is
completing development and testing of an innovative rollover sensor and airbag
inflator device, both of which are subject to patents. Both of these
technologies have been introduced to automakers and have the potential to become
a major component of the Company's automobile safety product offerings.
Additional products such as these that are complementary to currently
manufactured inflatable restraint systems, may position the Company for more
direct access as a supplier to automakers, and could increase market share for
the Company as an integrated systems supplier.
COMMERCIAL AIRCRAFT SYSTEMS
Seating
In 1993, the Company made a strategic decision to enter the commercial
airliner seating market to bring its proprietary energy-absorbing technologies,
established in connection with the Company's government and defense contracting
business, to a new industry and take advantage of industry growth. To implement
its decision, the Company acquired Airline Interiors, Inc. ("Airline
Interiors"), which then was primarily involved with the refurbishment,
re-upholstery, reconditioning, and reconfiguring of existing passenger seats.
This acquisition provided certain FAA certifications, enhanced the Company's
management team and customer base, and provided assembly capacity.
Through Airline Interiors, the Company entered the commercial airliner
new seating business in 1996. In 1997, 1998, and 1999 the Company made a
substantial investment in ramping up this business. The Company's efforts
resulted in Airline Interiors becoming the first successful entrant into the
airline seating market in 25 years, achieving an estimated 6% worldwide market
share by December 31, 1999. However, the Company never achieved profitable
operations in this business and completed the sale of this operating unit to a
major competitor in January 2000 under an agreement dated December 24, 1999.
Airline Soft Goods
The Company retains its operation which repairs, refurbishes, and
retrofits existing commercial aircraft seats. Services include the supply of
seat components, including upholstery, cushioning, and fire blocking.
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ADVANCED POLYMER MATERIALS
Simula has developed and tested a number of advanced polymers and
polyurethanes possessing a wide variety of potential product applications, and
has introduced these materials to a variety of customers in numerous markets.
These patented and proprietary transparent plastic materials are high-strength,
impact resistant, lightweight, dye compatible, and withstand extreme
temperatures and chemical abrasion. Potential uses for such materials include
transparent armor, laser protective devices, aircraft canopies, high performance
windows for aircraft and automobiles, industrial and protective lenses and
visors, and sun, sport, and ophthalmic lenses. The Company has obtained numerous
research and product development contracts for these materials and is
negotiating supply contracts with commercial customers in various markets. In
1999, the Company's newest operating unit actively pursued commercialization of
the polymer technology and product manufacturing. In 1999 this unit successfully
aligned with two strategic partners who licensed the material for their markets.
The Company intends to leverage this license portfolio to move up the
distribution channel and manufacture products for other applications.
GOVERNMENT AND DEFENSE SEGMENT
In 1999, the Government and Defense Segment included four operating
units in seating systems, airbag, parachute, sensor, and protective devices
businesses.
Overview
The Company manufactures a number of safety systems for military and
other government customers. Simula is the world's leading supplier of
energy-absorbing seating systems for military helicopters, and a manufacturer of
advanced armor systems, inflatable restraints for aircraft, state of the art
vacuum-packed parachutes, and related safety systems and products.
Despite dynamic market and governmental policy changes in recent years,
the market for government and defense contracts remains healthy but very
competitive. There are two significant trends in the business. First, although
there have been recent indications of increased military and defense funding,
military procurement budgets have been shrinking in recent years. This has
generally been the trend regardless of the number of trouble spots in the world
or regardless of the political party in power. Accordingly, businesses have been
competing for fewer defense dollars. The second significant trend is the
consolidation in the defense industry. As a result of mergers and acquisitions
in the last several years, there remain only six U.S. Government
mega-contractors. This consolidation also has caused a consolidation and
shake-up at the subcontractor and component supplier levels. Defense contractors
are bringing increasingly significant pressure on margins and profitability of
subcontractors while reducing the number of suppliers.
The size of the military procurement market is difficult to predict
beyond an analysis of currently funded programs, and is based on specific
programs that are subject to needs assessments and funding issues by the
Government.
Current Products and Technologies
Military Aircraft Seating Systems - The Company has been a major
supplier of energy-absorbing seating systems for military helicopters and other
military aircraft to various branches of the United States armed forces and
their prime defense contractors, and foreign customers for over 20 years. This
market is estimated to be $20 million annually. The military aircraft seating
systems focus on reducing injury and increasing survivability in aircraft
crashes. These crashworthy seating systems contain proprietary energy-absorbing
devices that activate upon crash impact to absorb shock that otherwise would be
absorbed by the seat occupant.
Based on internal market surveys and data, the Company believes that it
is the leading provider of energy-absorbing helicopter seats purchased by the
United States and foreign armed forces. Aircraft for which the
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Company has designed and manufactured seat assemblies for pilots, flight crews,
troops, or SONAR operators include the AH-64A Apache attack helicopter; UH-60A
Blackhawk transport and cargo helicopter; SH-60B Sea Hawk reconnaissance
helicopter; SH-3 Sea King utility helicopter; CH-53 Sea Stallion transport and
cargo helicopter; V-22 Osprey tilt-rotar aircraft; India's Hindustan
Aeronautics, Ltd. ALH utility helicopter; and C-17 fixed wing utility aircraft.
Aircraft manufacturers in the Company's military aircraft customer base include
Boeing, Sikorsky Aircraft Corporation, Bell Helicopters Textron, Inc., and GKN
Westland Helicopters Ltd.
Armor Systems - As an outgrowth of its military aircraft seating systems
the Company has developed an expertise in armor, which makes up a significant
portion of both materials in, and costs of, such seating systems. In addition,
the Company has developed a variety of other armor and composite materials for
integration in its existing and proposed products and for sale as base materials
to customers. Advanced composites materials with which the Company has expertise
include fiber reinforcements of Kevlar, carbon, Spectra, S-glass, E-glass, and
hybrid weaves matched with boron carbide, aluminum oxide, and other ceramics.
The Company also has the capability to process thermoset resins including
epoxies, polyesters, and vinyl esters.
The Company's high-strength, lightweight armor systems have been
incorporated into a variety of United States armed forces vehicles. The size of
this total market is approximately $30 million annually, and the Company is a
principal supplier of such lightweight armor systems in the United States. The
Company develops and manufactures armor systems for seats as well as for
structural and other components of military aircraft. Aircraft components
incorporating armors developed or produced by the Company include V-22 Osprey
crew seats; C-17 cockpit components; AH-64A Apache crew seats; Blackhawk crew
seats and floor armor; CH-53 Sea Stallion crew seats; United States Navy landing
craft air cushion pilot station armor; and high-mobility, multi-wheeled vehicles
("HMMWV") and transport vehicles ("HEMTT").
The Company's armor business, including new "body armor" products for
personnel, has grown significantly and the Company anticipates it will devote
continuing and additional efforts to increase its market share in both defense
and civilian markets.
Aircraft Inflatable Restraint Systems - The Company has completed
development of various inflatable restraint systems for military and commercial
aircraft. These systems include the Cockpit Airbag System ("CABS") for the
protection of the flight crew in military aircraft. The Company developed CABS
under a contract with the United States Army. CABS incorporates airbags in a
configuration surrounding the aviator that inflate following sensor detection of
crash impact from a variety of directions. CABS then deflates following
deployment and thereby protects against mishaps caused by accidental deployment
during the normal operations of the aircraft. Development and qualification was
completed in 1998. The Company has been awarded contracts and will commence
production of CABS in 2000.
Parachutes - Under contract with the United States Navy, the Company has
applied its technologies and overall knowledge of materials and structures to
develop a parachute that solves numerous functional problems attendant to
traditional military parachutes. The Company's parachute, unlike many parachutes
traditionally used by the military is small, lightweight, unisex, capable of
being worn during flight, and vacuum-packed so that it maintains a long-term
shelf life without repacking. The Company is the sole source on this Navy
contract.
Information About Government Contracting
As a contractor and subcontractor to the United States government, the
Company is subject to various laws and regulations that are more restrictive
than those applicable to non-government contractors, and many of the Company's
products are governed by rules favoring the government's contractual position.
As a consequence, such contracts may be subject to protest or challenge by
unsuccessful bidders or to termination, reduction, or modification in the event
of changes in government requirements, reductions of federal spending, or other
factors. The Company's government-related revenue has resulted almost
exclusively from firm, fixed-price contracts. Fixed-price contracts involve
certain inherent risks to the Company, including under estimating costs,
problems with new technologies, and economic and other changes that may occur
over the contract period. The accuracy and appropriateness of certain costs and
expenses used to substantiate direct and indirect costs of the Company for the
United States government under both cost-plus and fixed-price contracts are
subject to extensive regulation and
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audit by the Defense Contract Audit Agency ("DCAA") arm of the United States
Department of Defense. The DCAA has the right to challenge the Company's cost
estimates or allocations with respect to such contract.
TECHNOLOGY DEVELOPMENT
The Company supports a large design, development, research, testing, and
engineering capability for the modification and improvement of existing products
and invention and development of new technologies and products. The Company
regards it research and development capabilities as a superior competitive
strength and intends to continue to devote substantial resources to support this
part of its business. The Company employs an interdisciplinary team of
biomedical experts, crash safety analysts, chemists, and physicists. The Company
has a state of the art testing facility for a variety of functions including
ballistics and crash dynamics. The Company's research and testing facilities
support intracompany projects and also generate revenue from external services
contracting.
The Company retains proprietary rights in the products and services it
develops, including those initially financed under government contracts. As an
integral component of its strategy, the Company seeks to transfer all of its
technology to product applications. The Company's costs for research and
development in 1999, 1998, and 1997 were approximately $12.0 million, $13.5
million, and $11.8 million, respectively. These amounts include
government-funded, other customer-funded, and Company-funded research and
development contracts.
Since much of its research and development generates proprietary
technology, the Company has patent protection on certain products. The Company's
ability to compete effectively depends, in part, on its ability to maintain the
proprietary nature of its technologies. The Company also relies on unpatented
proprietary information and know-how, typically protecting such information as
trade secrets.
The Company holds 23 patents. In addition, the Company has 16 patent
applications pending for various technologies. United States patents protect
inventions for a period of 20 years after the application is first filed. The
Company does not presently own or maintain any trademarks that are material to
its business.
PRODUCTION AND MANUFACTURING
The Company's production and manufacturing consists principally of the
machining, bending and welding of metals, molding of composite materials,
processing, sewing, upholstery, component fabrication, and final assembly. After
assembly, products are functionally tested on a sample basis as required by
applicable contracts. The Company's manufacturing capability features
computer-integrated manufacturing programs which, among other things, schedule
and track production, update inventories, and issue work orders to the
manufacturing floor. All products manufactured must meet rigorous standards and
specifications for workmanship, process, raw materials, procedures, and testing,
and in some cases regulatory requirements. Customers, and in some cases the
United States government as the end user, perform periodic quality audits of the
manufacturing process. Certain customers, including the United States
government, periodically send representatives to the Company's facilities to
monitor quality assurance. A total of four of the Company's operating units are
ISO certified.
The Company conducts manufacturing operations principally in
metro-Phoenix, Arizona. The Company also has manufacturing operations in
Atlanta, Georgia and Asheville, North Carolina. Simula Automotive Safety
Devices, Inc. operates two new state of the art manufacturing facilities
including a high volume, just in time provider, in the United Kingdom to support
customers located in Europe. See, "Item 2. Properties."
DISTRIBUTION, MARKETING AND SALES
Most of the Company's products are distributed as a component supplier
to OEMs or subcontractor to prime contractors. The Company does not directly
serve mass consumer markets and supplies directly from manufacturing facilities,
which does not involve significant inventory, warehousing, or shipping
methodologies.
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Depending upon the product, the Company typically employs one of four
methods for marketing: (i) direct sales, (ii) technical teams, typically
comprised of a combination of sales personnel and engineers, which it utilizes
in the marketing of automotive safety devices, (iii) strategic alliances with
first tier component suppliers, which it utilizes in the marketing to OEMs, and
(iv) responses to formal request for proposals in bidding for government
contracts.
Approximately 55% of the Company's total revenue in 1999 resulted from
products sold internationally. The Company anticipates that its international
sales will continue to grow. The initial customer of the ITS(R) has been
Autoliv, a European first tier automobile supplier that is supplying to BMW. The
Company believes that there are opportunities for additional sales of the ITS(R)
in Europe and Asia. Military procurement has traditionally had a large
international base. Countries in which the Company is actively marketing include
Germany, Canada, Italy, the United Kingdom, Ireland, Japan, India, Korea,
Australia, and Canada. Sales of the Company's products to all branches of the
United States armed forces represented approximately 10%, 12%, and 13% of the
Company's revenue in 1999, 1998, and 1997, respectively. Sales to Continental
Airlines accounted for approximately 12% of the Company's revenue in 1997.
The Company's historical and acquired businesses have relied to a great
extent on relatively few major customers, although the mix of major customers
has varied from year to year depending on the status of then existing contracts.
The Company believes that historical customers, such as the United States Army
and other branches of the United States armed forces and their prime
contractors, to which the Company has supplied products for over 20 years, will
continue to represent major customers although the percentage of the Company's
revenue attributable to them can be expected to decrease as a result of the
Company's expanding commercial operations. The loss of or reduction in sales to
a major customer may have a more adverse effect on the Company's operations or
financial condition than if the Company's revenue was less concentrated by
that customer.
COMPETITION
The worldwide automobile airbag market is currently dominated by five
large suppliers, all of which are producing airbag systems in commercial
quantities. The market served by the Company's inflatable restraint systems is
intensely competitive. The Company has entered into strategic alliances with a
number of the largest suppliers of conventional automotive airbags, including
TRW, Delphi Automotive Systems, and others, to market and produce the Company's
products.
Numerous suppliers compete for government defense contracts as prime
contractors or subcontractors. Competition relates primarily to technical
know-how, cost, and marketing efforts. The competition for government contracts
relates primarily to the award of contracts for the development of proposed
products rather than for the supply of products that have been developed under
contracts. The Company's principal competitors in the crashworthy military
seating market are Martin Baker (England) and Israel Aircraft Industries, Ltd.
Most of the Company's competitors have greater marketing capabilities
and financial resources than the Company. The Company's competitive strategy is
to be a technology innovator and strategic partner with larger industry leaders.
The Company's present or future products could be rendered obsolete by
technological advances by one or more of its competitors or by future entrants
into its markets.
RAW MATERIALS AND SUPPLIES
The Company purchases raw materials, components, devices, and
subassemblies from a wide variety of sources. Principal raw materials used by
the Company include plastics, urethanes, ceramics, Kevlar, aluminum, steel,
airbag materials, hoses, woven materials, upholstery and fabric products and
foam. Components include aluminum subassemblies, restraints and related
hardware, harnesses, and gas generators for inflatable restraint products. The
Company generally purchases supplies and components pursuant to individual or
blanket purchase orders. Blanket purchase orders usually provide for the
purchase of a large amount of items at fixed prices for delivery and payment on
specific dates. Most of the raw materials used by the Company are widely
available.
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BACKLOG
The Company's backlog at December 31, 1999 and 1998 was approximately
$74 million and $121 million, respectively. The backlog at December 31, 1999 and
1998 consisted of approximately $56 million and $62 million, respectively, under
defense contracts and approximately $18 million and $59 million, respectively,
with commercial customers.
The backlog includes contracts for major current products as well as for
supplies and replacement components. In the case of government contracts,
backlog consists of aggregate contract values for firm product orders, exclusive
of the portion previously included in operating revenue utilizing the percentage
completion accounting method. All orders included in the backlog are believed to
be firm and are expected to be filled over the next 5 years. In the case of
automotive safety devices the backlog only includes anticipated production for
the next 6 months.
EMPLOYEES
The Company had approximately 1,300 full-time employees at its locations
in Arizona, California, Illinois, New York, North Carolina, Georgia, and
Ashington, England through most of 1999, that was reduced to approximately 700
employees after the 1999-2000 business restructuring. The Company believes that
its continued success depends on its ability to attract and retain highly
qualified personnel. The Company's employees are not unionized.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to a variety of federal, state, and
local environmental regulations, including laws regulating air and water quality
and hazardous materials and regulations implementing those laws. The Company's
principal environmental focus is the handling and disposal of paints, solvents,
and related materials in connection with product finishes, welding, and
composite fabrication. The Company contracts with qualified waste disposal
companies for services. The Company regards its business as being subject to
customary environmental regulations, but does not believe it faces unique or
special problems. The cost to the Company of complying with environmental
regulations is not significant.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located in Phoenix, Arizona.
The Company conducts operations in three U.S. states and in the United Kingdom.
Manufacturing facilities are located in Tempe, Arizona; Atlanta, Georgia;
Asheville, North Carolina; and Ashington, England. In addition, the Company
maintains extensive research and development labs and testing facilities in
Phoenix. The Company leases most of its facilities.
ITEM 3. LEGAL PROCEEDINGS
In February 1998, the Company filed a complaint in United States
District Court for the District of Arizona against Autoliv, Inc., seeking
injunctive relief from alleged anti-competitive acts and practices by Autoliv.
The complaint alleges numerous unlawful actions taken by Autoliv in connection
with a license from the Company to market and distribute the Company's ITS(R).
The legal action asserts that Autoliv has suppressed technology and is
unlawfully interfering with the Company's rights to market the ITS(R) and
related products to other first tier automotive safety equipment suppliers and
to automobile manufacturers. In 1998, the District Court stayed the proceedings
and ruled that the dispute between the parties was a contractual one and was
subject to arbitration pursuant to a contract provision. On November 3, 1998,
the Company filed a separate complaint against Autoliv in the United States
District Court for the District of Delaware seeking injunctive relief and
damages for patent infringement. The Company's complaint alleges that Autoliv
developed, offered, and sold a side impact head protection device in the United
States that infringes the patent that Simula owns for the ITS(R). The Company
9
<PAGE> 11
became aware of the potential infringement in early October 1998 as Autoliv
introduced this device into production automobiles being offered for the first
time in the United States. In late 1999, the Delaware court similarly stayed the
proceedings pending arbitration. In 1999, the Company commenced an international
arbitration proceeding under the rules of the International Chamber of Commerce.
The arbitration includes the same legal claims as made in the U.S. litigation.
The forum is in Zurich, Switzerland. This arbitration is pending.
In addition, the Company is involved in other litigation in the ordinary
course of business from time to time. The Company presently is not a party to
any threatened or pending litigation, the negative outcome of which would be
material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of fiscal 1999 to a
vote of security holders, through the solicitation of proxies, or otherwise.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "SMU." The following table sets forth the high and low closing prices
of the Company's Common Stock for each calendar quarter of the year indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1998:
First Quarter........................................................ $17.13 $13.50
Second Quarter....................................................... 18.19 13.50
Third Quarter........................................................ 17.00 8.25
Fourth Quarter....................................................... 8.75 5.25
1999:
First Quarter........................................................ $ 8.75 $ 4.94
Second Quarter....................................................... 7.81 4.44
Third Quarter........................................................ 7.44 4.81
Fourth Quarter....................................................... 7.38 4.50
2000:
First Quarter........................................................ $ 6.69 $ 3.50
</TABLE>
The number of holders of the Common Stock of the Company, including
beneficial holders of shares held in street name, as of the close of business on
March 29, 2000, is estimated to be greater than 2,000. On March 28, 2000, the
closing price of the Common Stock was $4.19 Per share.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data presented below has been derived
from historical audited consolidated financial statements of the Company for
each of the five years in the period ended December 31, 1999. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and the Notes thereto.
11
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income statement data:
Revenue $ 131,392 $ 100,645 $ 67,362 $ 42,125 $ 35,153
Cost of revenue 102,984 85,724 51,781 36,769 20,029
--------- --------- --------- --------- ---------
Gross margin 28,408 14,921 15,581 5,356 15,124
Administrative expenses 26,729 20,421 18,698 15,861 11,847
Restructuring charge 18,327
--------- --------- --------- --------- ---------
Operating (loss) income (16,648) (5,500) (3,117) (10,505) 3,277
Interest expense (7,246) (5,099) (4,173) (1,700) (983)
Other 1,298
--------- --------- --------- --------- ---------
(Loss) income before taxes (23,894) (10,599) (5,992) (12,205) 2,294
Income tax benefit (expense) 8,444 3,786 2,390 5,010 (158)
--------- --------- --------- --------- ---------
(Loss) earnings before discontinued operations,
cumulative effect of change in accounting
principle and extraordinary loss (1) (2) (15,450) (6,813) (3,602) (7,195) 2,136
(Loss) earnings from discontinued
operations (1) (2,320) 62 277 521
Loss on disposal (1) (7,238) (18,576)
Cumulative effect of change in
accounting principle (2) (3,132)
Extraordinary loss on early retirement
of debt (151)
--------- --------- --------- --------- ---------
Net (loss) earnings $ (22,839) $ (27,709) $ (3,540) $ (10,050) $ 2,657
Dividends on preferred stock 280
--------- --------- --------- --------- ---------
Net (loss) earnings available for common
shareholders $ (23,119) $ (27,709) $ (3,540) $ (10,050) $ 2,657
========= ========= ========= ========= =========
PER SHARE AMOUNTS (3):
Earnings per common share - basic:
(Loss) earnings before discontinued operations,
accounting change and extraordinary item $ (1.54) $ (0.69) $ (0.39) $ (0.79) $ 0.26
(Loss) earnings from discontinued operations -- (0.23) 0.01 0.03 0.07
Loss on disposal (0.71) (1.88) -- -- --
Cumulative effect of accounting change -- -- -- (0.36)
Extraordinary loss on early retirement of debt (0.01) -- -- -- --
========= ========= ========= ========= =========
Net (loss) earnings $ (2.26) $ (2.80) $ (0.38) $ (1.12) $ 0.33
========= ========= ========= ========= =========
Earnings per common share - assuming dilution:
(Loss) earnings before discontinued operations,
accounting change and extraordinary item $ (1.54) $ (0.69) $ (0.39) $ (0.79) $ 0.25
(Loss) earnings from discontinued operations -- (0.23) 0.01 0.03 0.06
Loss on disposal (0.71) (1.88) -- -- --
Cumulative effect of accounting change -- -- -- (0.36) --
Extraordinary loss on early retirement of debt (0.01) -- -- -- --
========= ========= ========= ========= =========
Net (loss) earnings $ (2.26) $ (2.80) $ (0.38) $ (1.12) $ 0.31
========= ========= ========= ========= =========
PRO FORMA AMOUNTS (2) (3):
Net earnings $ 194
=========
Earnings per share - basic $ 0.02
=========
Earnings per share - assuming dilution $ 0.02
=========
OTHER DATA:
Research and development
Funded by the Company $ 4,350 $ 3,383 $ 4,394 $ 1,916 $ 1,419
Costs incurred on funded contracts $ 7,642 $ 10,066 $ 7,383 $ 8,588 $ 4,722
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Assets:
Current assets $ 52,907 $ 62,424 $ 73,409 $ 44,280 $ 29,211
Property and equipment - net 13,947 21,495 18,666 17,462 10,476
Deferred income taxes 33,438 20,550 4,477 1,782 812
Deferred costs 4,898 2,628 3,137 929 6,206
Intangibles - net 1,788 3,452 3,701 3,832 3,758
Other 362 430 498 731 1,800
Net assets of discontinued operations 13,471 13,926 13,166
-------- -------- -------- -------- --------
Total assets $107,340 $110,979 $117,359 $ 82,942 $ 65,429
======== ======== ======== ======== ========
Liabilities:
Current liabilities $ 47,895 $ 45,176 $ 24,754 $ 21,075 $ 8,142
Long-term debt 53,820 47,233 46,963 24,680 11,200
-------- -------- -------- -------- --------
Total liabilities 101,715 92,409 71,717 45,755 19,342
Redeemable convertible preferred stock 2,250
--------
Shareholders' equity (4) 3,375 18,570 45,642 37,187 46,087
-------- -------- -------- -------- --------
Total liabilities and shareholders' equity $107,340 $110,979 $117,359 $ 82,942 $ 65,429
======== ======== ======== ======== ========
</TABLE>
(1) In 1998, the Company's board of directors adopted a plan to dispose of
its rail and mass transit operations. Accordingly, the operating
results of these operations including a provision for estimated loss
upon disposition, have been segregated from continuing operations and
are reported as discontinued operations. In August 1999, the Company
completed the sale of the rail and mass transit operations resulting in
an additional loss upon disposal.
(2) During 1996, the Company adopted a new method of accounting for
pre-contract costs. These costs were previously deferred and recovered
over the revenue streams from the Company's customers. Effective
January 1, 1996, these costs have been expensed. Pro forma amounts for
1995 assume the new accounting method is applied retroactively.
(3) In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share. SFAS No. 128 requires the dual presentation of basic and diluted
earnings per share on the face of the income statement and the
disclosure of the reconciliation between the numerators and
denominators of basic and diluted earnings per share calculations.
Earnings per share amounts for the years ended December 31, 1999, 1998
and 1997 are calculated using only weighted average outstanding shares
of 10,230,720, 9,880,283 and 9,288,416, respectively. Options to
purchase common stock and shares to be issued upon conversion of the
Preferred Stock, 8% Notes and 10% Notes totaling 6,119,039 for the year
ended December 31, 1999 were not used for computing diluted earnings
per share because the result would be anti-dilutive. Options to
purchase common stock and shares to be issued upon conversion of the 8%
Notes and 10% Notes totaling 4,546,065 and 3,896,966 for the years
ended December 31, 1998 and 1997, respectively were not used for
computing diluted earnings per share because the result would be
anti-dilutive. Basic earnings per share for the year ended December 31,
1995 is calculated using weighted average shares outstanding of
8,175,300 and earnings per share assuming dilution is calculated
including 401,517 additional shares for stock options and warrants.
(4) The Company has not paid any cash dividends on common stock since its
April 1992 initial public offering.
13
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition for the three years
ended December 31, 1999 compared to the same periods of the prior years. This
discussion should be read in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Form 10-K. Except
for the historical information contained herein, this discussion contains
forward looking statements (including statements in the future tense and
statements using the terms "believe," "anticipate," "except," "intend," or
similar terms) which are made pursuant to safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward looking statements
involve risks and uncertainties that could cause the Company's actual results to
differ materially from those discussed herein. See Forward Looking Information
and Risks of the Business.
OVERVIEW
The Company designs and manufactures occupant safety systems and devices
engineered to safeguard human life in a wide range of air, ground, and sea
transportation vehicles. Utilizing its substantial proprietary technology in
energy-absorbing seating, inflatable restraints, and composite materials, the
Company focuses on reducing injury and increasing survivability in vehicle and
aircraft crashes.
Since its founding in 1975, the Company's historic core business has been
as a government and defense contractor. Additionally, commencing with
acquisitions and commercial product developments since 1993, the Company became
supplier of seating systems for rail and other mass transit vehicles and a new
entrant in the manufacture of new commercial airliner seating. Utilizing its
proprietary safety technology, the Company has introduced crashworthy systems
for a variety of vehicles and aircraft and various inflatable restraint systems
for automobiles including the Inflatable Tubular Structure ("ITS").
In 1993 and 1994, the Company pursued an acquisition strategy designed to
enable the Company to exploit its energy absorption technology within the
commercial airline seating business. In 1993, it acquired an airline passenger
seat reupholstery and refurbishing business, which provided certain FAA
certifications and seat assembly capacity. In 1994, it acquired two competing
companies in the rail and mass transit seating business, which provided large
scale manufacturing capacity synergistic with the airline seating business. In
1996, the Company the commercial airline seating market. In 1998, the Company
decided to discontinue its rail and mass transit businesses when its commercial
airline seating business no longer needed the manufacturing capacity supplied by
these operations, and it sold these businesses in 1999. In late 1999 the Company
decided to sell its commercial airline seating business in 1999 to concentrate
on more profitable businesses.
In 1994, the Company made a strategic decision to enter the inflatable
restraint market for automobiles utilizing its proprietary ITS technology.
Through 1996, the Company completed its development of this technology and
start-up of its manufacturing facilities. In 1997, the Company began
manufacturing the ITS for sale to BMW, a major European automobile manufacturer.
Simula's revenue has historically been derived from three sources: sales of
Company manufactured products; contract research and development for third
parties; and technology sales and royalties. A substantial portion of its
current revenue from the government and defense segment is accounted for under
the percentage of completion method of accounting. Under this method, revenue is
recorded as production progresses so that revenue less costs incurred to date
yields the percentage of gross margin estimated for each contract. Overall gross
margin percentages can increase or decrease based upon changes in estimated
gross margin percentages over the lives of individual contracts. Note 18 of the
Notes to Consolidated Financial Statements provides a break down of revenues for
each significant segment of the Company.
14
<PAGE> 16
Note 16 of the Notes to Consolidated Financial Statements provides the revenues
and related costs associated with contract research and development for third
parties.
The Company is a holding company for wholly owned subsidiaries which
operate in two primary business segments. The Commercial Transportation Products
segment includes operations which primarily manufacture seating systems for
domestic and foreign passenger airlines and operations producing inflatable
restraints and related safety technologies for automobiles. The Government and
Defense segment includes operations that design and manufacture crash resistant
seats and components, energy absorbing devices, and ballistic armor, principally
in connection with United States armed forces procurement. The remaining
segment, entitled Other, represents general corporate operations.
<TABLE>
<CAPTION>
RESULTS OF CONTINUING OPERATIONS YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997
--------- --------- ---------
(Dollars in Thousands)
REVENUE:
<S> <C> <C> <C>
Commercial Transportation Products $ 83,603 $ 64,749 $ 36,997
Government and Defense 47,588 35,877 30,348
Other 201 19 17
--------- --------- ---------
Total $ 131,392 $ 100,645 $ 67,362
========= ========= =========
GROSS MARGIN:
Commercial Transportation Products $ 14,775 $ 4,141 $ 4,781
Government and Defense 13,432 10,760 10,792
Other 201 20 8
--------- --------- ---------
Total $ 28,408 $ 14,921 $ 15,581
========= ========= =========
ADMINISTRATIVE EXPENSES:
Commercial Transportation Products $ 14,744 $ 9,842 $ 7,207
Government and Defense 10,360 9,225 10,096
Other 1,625 1,354 1,395
--------- --------- ---------
Total $ 26,729 $ 20,421 $ 18,698
========= ========= =========
OPERATING (LOSS)/INCOME:
Commercial Transportation Products $ (18,296) $ (5,701) $ (2,427)
Government and Defense 3,072 1,536 696
Other (1,424) (1,335) (1,386)
--------- --------- ---------
Total $ (16,648) $ (5,500) $ (3,117)
========= ========= =========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company defines liquidity as the ability to access cash to meet
operating and capital needs. The Company's primary source of cash in the 1999
period was from financing activities.
The Company's ability to fund working capital requirements and debt service
during the next year will be dependent upon improved cash flow from the
remaining operating units. Following the 1999 restructuring, the remaining
operations have a recent history of profitability and positive cash flow. The
Company has significantly reduced it's working capital needs and believes that
existing availability under its RLC is adequate to fund its operations. The
Company is continuing to work with it's investment banker to address the
September 1999 maturity of the $5.0 million Term Note. The alternatives
currently being considered include repayment of the note through a combination
of cash flow and availability under the RLC, refinance the note through an
expansion of a banking facility or a new note, work with the note holder to
extend the note beyond the current due date until one of the above is
accomplished or strategic asset sales or technology licensing.
Company believes it has sufficient manufacturing capacity, at December 31,
1999, to meet its anticipated future delivery requirements.
The Company may, however, seek to obtain additional capital should demand
for it's products exceed current capacity. The raising of capital in public
markets will be primarily dependent upon prevailing market conditions and the
demand for the Company's products and technologies.
During the fourth quarter of 1999, the Company undertook a
restructuring plan which included the refinancing of its then outstanding bank
debt and certain term notes payable which were maturing. On December 30, 1999
the company executed a Financing Agreement (the "Financing Agreement") with an
asset based lender which provided a $17.0 million Revolving Line of Credit (the
"RLC") and a $5.0 million term note. The proceeds from this financing, together
with the proceeds from the Senior Secured Notes discussed below, were used to
retire the then existing Senior Credit Agreement and two term notes payable to a
bank and to retire $4.3 million of the Company's Senior Subordinated Convertible
Notes. The Company's availability under the RLC is dependent upon the relative
balances of accounts receivable and inventories and each of their relative
advance percentages. The RLC accrues interest payable monthly at the Chase
Manhattan prime rate or LIBOR plus 2.4% based upon the rate selected by the
Company. The RLC matures on December 30, 2003 and renews automatically unless
terminated by either party with 60 days notice prior to each anniversary date of
the agreement. If the Financing Agreement is terminated at any other time, an
early termination fee based upon the outstanding principal under the revolving
line of credit of 1 1/2% during the first year and 3/4% after the first
anniversary and before the second anniversary shall be assessed. At December 31,
1999, the Company had available and outstanding borrowings of $17.0 million and
$12.8 million, respectively.
The Financing Agreement contains covenants that require the maintenance of
certain defined financial ratios and income and limits additional borrowings and
capital expenditures. The Financing Agreement is secured by the assets of the
Company. The $5.0 million term note was retired on February 2, 2000 with
proceeds received from the sale of the Company's airline new seat manufacturing
operation. At December 31, 1999 the Company was in compliance with all covenants
relating to the Financing Agreement.
On December 30, 1999, the Company executed an agreement with an accredited
investor for two Senior Secured Notes in the amounts of $5,000,000 (the "Term
Note A") and $15,000,000 (the "Term Note B") (together the "Term Notes") and a
warrant to purchase 850,000 shares of common stock at $5.00 per share. The
warrant is immediately exercisable and expires in 7 years. The Term Note A
matures on September 30, 2000, accrues interest payable monthly at 15% and
provides for an additional monthly bridge fee of $25,000. The Term Note A may be
redeemed with a 30 day notice at any time without penalty. The Term Note B
matures on June 30, 2003 and provides for cash interest to be paid monthly at
12.25% and interest which is to be capitalized into the note principal balance
at 3% per month. The Term Note B may be redeemed with a 30 day notice at certain
specified redemption prices plus accrued interest payable to the redemption
date.
The Term Notes contain covenants that require the maintenance of certain
defined financial ratios and income and limits additional borrowings and capital
expenditures. The Term Notes are secured by the assets of the Company. At
December 31, 1999 the Company was in compliance with all covenants relating to
the Term Notes.
In October and December 1999 the Company entered into two separate $1
million Promissory Notes with it's Chairman of the Board of Directors. The notes
bear interest at 12%, and each note provides for a placement fee of $20,000 to
be paid upon maturity or any accelerated repayment of the note. One note was
paid with the proceeds from the Term Notes and the remaining note matures on
December 31, 2003. Voluntary prepayment of the note is prohibited, however, the
note is subject to mandatory prepayment at the option of the holder if all of
the following conditions have been satisfied: (1) The $5,000,000 Senior Secured
Note to the asset based lender has been paid in full; (2) The $5,000,000 Senior
Secured Note to the outside accredited investor has been paid in full; (3) after
giving effect to the mandatory prepayment to be made hereunder, the availability
under the Company's revolving line of credit is not less the $2,000,000.
On March 29, 1999, the Company completed a private placement to an
accredited investor of $7.5 million of the Company's Series A Convertible
Preferred Stock (the "Series A"). The Series A bears a coupon rate of 6% per
annum payable quarterly in cash, or in stock that will be valued at 90% of fair
market value at the time of payment. The Series A may be converted into shares
of the Company's Common Stock at any time at 101% of the average closing price
of any 15 out of the 30 consecutive trading days preceding conversion, up to a
specified maximum conversion price (the "Conversion Cap"). The Conversion Cap
was initially set at $8.60 per share and was subject to an interim adjustment.
On August 1, 1999 the Conversion Cap was adjusted to $8.04. In addition, the
Conversion Cap is subject to an annual adjustment to the lesser of the then
existing Conversion Cap or 130% of the average of the closing bid price for 20
consecutive trading days immediately proceeding the annual adjustment
anniversary date. Conversion of the Series A is limited to 10% of the initial
amount per month, accumulating monthly up to a maximum of 30% of the accumulated
convertible amount in any month. The Company may require the conversion of the
Series A if the market price of the Company's Common Stock exceeds the
Conversion Cap by at least 50% for at least 20 consecutive trading days, subject
to the same conversion limitations imposed upon the Series A holders. The Series
A is subject to mandatory redemption at May 1, 2004. The proceeds from this
offering were used to pay down the then existing revolving line of credit.
During 1999 $5.25 million of the Series A plus accrued dividends of $.175
million were exchanged for 1,077,074 shares of the Company's common stock. In
1999, dividends totaling $279,536 were paid on the Series A. At December 31,
1999 $2.25 million of the series A remain outstanding.
The Company's liquidity is greatly impacted by the nature of the billing
provisions under its contracts. Generally, in the early period of contracts,
cash expenditures and accrued profits are greater than allowed billings while
contract completion results in billing previously unbilled costs and profits.
With regard to operating units retained by the company, contract receivables,
net of contract advances, increased $3.8 million for the year ended December 31,
1999 principally due to the timing of work performed and the billing provisions
of the related contracts. In addition, trade receivables in the Commercial
Transportation Products segment decreased $1.1 million for the year ended
December 31, 1999 due to the timely collection of amounts due.
Operating activities required the use of $9.0 million of cash during the
year ended December 31, 1999, compared to the use of $19.2 million of cash
during the same period in 1998. Cash used for operating activities in 1999 was
primarily used to fund operating losses and working capital needs of businesses
disposed of during the year. With regard to operating units retained by the
company, cash was utilized to fund contract and trade receivables noted above,
total inventories remained constant and accounts payable and accrued liabilities
increased by $11.0 million
15
<PAGE> 17
Investing activities required the use of $3.7 million of cash during the
year ended December 31, 1999. Approximately $2.8 million was used for capital
improvements and the amounts were equally split between the two operating
segments. In the second quarter of 1999, the Company sold real property in a
sale and leaseback transaction. The sale generated net cash proceeds of $2.4
million that was used to pay down the revolving line of credit at that time.
Financing activities provided $17.0 million of cash during the year ended
December 31, 1999 with $7.5 million coming from placement of the Series A
Preferred Stock offset partially by $0.1 million in dividends paid thereon, $0.5
million for issuance of common shares, and the balance, $9.1 million coming
from net borrowing after reduction of the revolving line of credit by $4.1
million.
1999 Compared to 1998
Revenue for the year ended December 31, 1999 increased 31% to $131.4
million from $100.6 million for the comparable period in 1998. Commercial
Transportation Products revenue increased 29% or $18.8 million principally as a
result of increased deliveries of ITS, new commercial airliner seats and growth
in the airliner seat refurbishing business. Government and Defense revenue
increased 33% or $11.7 million due to a general increase in ongoing government
contracts.
For the year ended December 31, 1999, gross margin increased 90% to $28.4
million from $14.9 million for the comparable period in 1998. As a percent of
sales, gross margins increased to 22% from 15%. Gross margins for Commercial
Transportation Products increased 257% or $10.6 million and the gross margin
percentage increased to 18% in 1999 from 6% in 1998. Profitability of the new
airliner seating business was seriously impacted in the last six months of 1999
by the Company's efforts to sell the
16
<PAGE> 18
assets of the business. Despite the disruption, gross margin associated with the
production of new airliner seating improved from a negative margin of ($9.9)
million in 1998 to a negative margin of ($2.9) million in 1999. This change
resulted from improved manufacturing efficiency, fewer pre-contract and start-up
costs and fewer new seat design certifications as the business concentrated on
producing to its existing backlog and repeat orders. Gross margins associated
with the Company's airliner seat refurbishing business improved primarily due to
a more experienced work force and efficiencies from higher volumes. The
increased gross margin as a percentage of sales associated with airline seating
products was partially offset by a 2% decline in the gross margin as a
percentage of sales associated with the Company's automotive products. Although
gross margin as a percentage of sales declined in automotive products as the
result of customer sales volume discounts gross margin dollars increased $1.4
million in 1999 due to the realization of increased customer sales. Gross margin
percentages for Government and Defense decreased to 28% in 1999 from 30% for the
comparable 1998 period. The decrease in gross margin percentages at Government
and Defense was primarily due to less external funding on research and
development contracts.
Administrative expenses for the year ended December 31, 1999 increased
34% to $27.3 million from $20.4 million for the comparable period in 1998. As a
percent of sales, administrative expenses increased to 21% from 20% for the
comparable 1998 period. Commercial Transportation Products administrative
expenses increased $4.9 million or 50% and as a percentage of sales increased to
18% from 15% primarily due to sales growth in these businesses. Government and
Defense administrative expenses increased $1.1 million or 12% and is related to
the 29% increase in internally funded research and development expenses to $4.4
million from $3.4 million in the comparable 1998 period. Government and Defense
administrative expenses as a percentage of sales decreased to 22% from 26% and
is attributable to increased sales. Corporate operating expenses increased
$880,000 or 65% as compared to the comparable period in 1998. This increase is
primarily related to approximately $600,000 in non-cash compensation recognized
in relation to certain stock option exercises and an increase in legal expenses
principally related to the Company's claim of patent infringement on its ITS(R).
In December 1999, management of the Company, with the approval of the board
of directors, committed itself to a plan of restructuring and recorded a charge
to income of $18.3 million. The plan of restructuring included a refinancing of
its outstanding bank line of credit and certain term notes and the divestiture
of the Company's new airline seat manufacturing operation. The Company completed
the sale of substantially all the assets of the airline seat manufacturing
operation in January 2000 and closed the operating facility at that time
terminating approximately 300 management and production employees. Total
proceeds from the sale was approximately $21.9 million and included the
assumption of liabilities of approximately $11.6 million and resulted in a loss
on sale of $10.3 million. The remaining restructuring charge is comprised of
severance costs of $1.6 million, $2.5 million related to the abandonment of
leased operating facilities and equipment, $2.3 million related to the write
down to net realizable value for inventory and fixed assets and $1.6 million in
recognition of additional liabilities related primarily to outstanding purchase
order commitments which were non-cancelable. The Company expects cash flow
savings as a result of not having to fund continued operating losses to offset
the cash required in implementing the restructuring plan within the first year.
The airline seat manufacturing operation had sales of $41.9 million, $32.0
million and $ 27.7 million and operating losses of $25.4 million, $14.5 million
and $3.3 million during the years ended 1999, 1998 and 1997, respectively.
Interest expense for the year ended December 31, 1999 increased 42% to $7.2
million from $5.1 million for the comparable period in 1998. This increase was
due to increased borrowings on the Company's bank credit facilities and monthly
penalty charges assessed by the Company's previous lender. These increased
borrowings were made to fund increased working capital needs and acquire fixed
assets necessary to support the growth in revenues.
The effective income tax rate for the year ended December 31, 1999 and 1998
approximated 35%.
1998 Compared to 1997
Revenue for the year ended December 31, 1998 increased 49% to $100.6
million from $67.4 million for the comparable period in 1997. Commercial
Transportation Products revenue increased 75% or $27.8 million principally as a
result of increased deliveries of ITS and new commercial airliner seats.
Government and Defense revenue increased 18% or $5.5 million due to a general
increase in ongoing government contracts.
17
<PAGE> 19
For the year ended December 31, 1998, gross margin decreased 4% to $14.9
million from $15.6 million for the comparable period in 1997. As a percent of
sales, gross margins decreased to 15% from 23%. Gross margins for Commercial
Transportation Products decreased 13% or $0.6 million and the gross margin
percentage decreased to 6% from 13% in 1997. The decrease in gross margins
resulted primarily from increased pre-contract and start-up costs and production
cost inefficiencies from the penetration of additional sales channels in the
airliner seating market, a $2.0 million write down of certain inventory used in
the refurbishment of airliner seating which is no longer a significant component
of operations, and costs incurred related to the move of the airliner seating
operations to a new facility which provided for additional capacity. The effect
of the above results in the airliner seat business was partially offset by
increased gross margins on the ITS as a result of increased volume and a
complete year of operations. Gross margin percentages of Government and Defense
decreased to 30% from 36%. The decrease in gross margin percentages at
Government and Defense was primarily due to higher funding on research and
development contracts.
Administrative expenses for the year ended December 31, 1998 increased 9%
to $20.4 million from $18.7 million for the comparable period in 1997. As a
percent of sales, administrative expenses decreased to 20% from 28% due to the
increase in revenue noted above. Commercial Transportation Products
administrative expenses increased $2.6 million or 37% and as a percentage of
sales decreased to 15% from 19% primarily due to increased sales volume.
Government and Defense administrative expenses decreased $0.9 million or 9% and
is related to the 23% decrease to $3.4 million from $4.4 million of internally
funded research and development expenses. The decreased research and development
expenses were partially attributable to an increase in certain Government and
Defense production contracts, which resulted in greater production resources
being assigned to contract programs. As a percent of sales, Government and
Defense administrative expenses decreased to 26% from 33% attributable to
increased sales and lower expense levels as noted above.
Interest expense for the year ended December 31, 1998 increased 22% to $5.1
million from $4.2 million for the comparable period in 1997. These increases
were due to increased borrowings on the Company's bank credit facilities. These
borrowings were made to fund operations and acquire fixed assets necessary to
support the growth in revenues for 1998 and subsequent years.
The effective income tax rate for the year ended December 31, 1998
approximated 35% as compared to 40% for the comparable period in 1997. The
decrease in the Company's 1998 effective tax rate is attributable to the
expiration of certain foreign tax credits and the recognition of a valuation
allowance for certain state net operation loss and foreign tax credit carry
forwards.
DISCONTINUED OPERATIONS
In 1998, the Company's board of directors adopted a plan to dispose
of its rail and mass transit seating operations. Accordingly, the operating
results of these rail and mass transit operations, including a provision for
estimated loss upon disposition, have been segregated from continuing operations
and are reported as discontinued operations.
The Company executed the sale of its rail and mass transit seating
operation on August 31, 1999 under an Asset Purchase and Sale Agreement dated
June 30, 1999, as amended and restated August 31, 1999 and subsequently on
October 21. 1999, a Note Refinancing Agreement was executed. A former director
of the Company wholly owned the acquiring company. Consideration received
consisted of $100,000 cash, assumptions of approximately $4,700,000 in
liabilities and a promissory note for $9,996,000 which matured on October 15,
1999. On October 21, 1999, the parties entered into the Note Refinancing
Agreement which refinanced the note as two separate notes in the amount of
$1,996,000 and $8,118,008 and reflects the capitalization of $118,008 of
interest related to the original note into principal outstanding. The notes each
carry an interest rate of 8 1/2% and mature on October 15, 2004. Interest is
required to be paid quarterly beginning April 2000 on the $1,996,000 promissory
note and semi-annually beginning April 2001 on the $8,118,008 promissory note.
The negotiated interest rate on the notes did not properly reflect the risk and
current market conditions. Therefore, the company has computed the net present
value of the notes using a discount rate of 23%, which is the Company's
determination of the market rate of interest and market value of the notes.
Management believes this more properly reflects the risk related to the notes
due to their subordinated nature. This resulted in a net present value discount
of $6,750,000 assuming principal only payment at the end of the term.
18
<PAGE> 20
The notes are secured by the underlying assets and a Pledge and Proxy Security
Agreement in the stock of the underlying company and stock of Beacon Industries,
Inc. which is owned under common control of the acquirer and subordinated to
short-term capital financing received subsequent to its disposal. Although a
legal transfer of assets occurred at August 31, 1999, the sale could not be
recognized as a divestiture for accounting purposes at that time because there
was an absence of a significant investment in the business by the buyer. As a
result of losses by the rail and mass transit seating operation since the sale
date and the uncertainty of the ultimate recovery of the entire principal and
interest on a timely basis in accordance with the terms of the contract, a
valuation allowance for the remaining balance has been recorded. This
uncertainty is based on the operating losses sustained by the business
subsequent to disposal, its inability to acquire adequate long-term financing
for repayment of the notes under the terms of the contract, or obtain additional
equity investment. While the contract between the parties remains fully
enforceable, and the Company believes some recovery may occur, the company can
not accurately predict the precise timing and amount of the collection of
principal and interest, accordingly the carrying value of the notes is zero. Any
future payments of principal received will be accounted for under the cost
recovery method of accounting as a component of discontinued operations.
Under the Asset Purchase and Sale Agreement the Company has retained the
liability for claims incurred through August 31, 1999 under its self funded
health insurance plan and has agreed to indemnify the acquiring company for any
customary warranty and litigation claims. An additional charge upon the final
disposal of the rail and mass transit discontinued operation of $7,238,109, net
of tax benefit of $3,898,000, was recorded in the year ended December 31, 1999.
Revenues for the rail and mass transit operations were $8,247,294 for the
eight months ended August 31, 1999, and $15,781,983 and $23,059,525 for the
years ended 1998 and 1997, respectively. Interest expense has been allocated to
discontinued operations based on the ratio of the discontinued operations' net
assets to consolidated net assets. General corporate administrative expenses are
not allocated to discontinued operations.
19
<PAGE> 21
INFLATION
The Company does not believe that it is significantly impacted by
inflation.
RESEARCH AND DEVELOPMENT
The Company's research and development occurs primarily under fixed-price,
government-funded contracts as well as Company-sponsored efforts. The revenue
received under government-funded contracts is recorded under the percentage
completion method of accounting, and the costs of independent research and
development efforts are expensed as incurred.
Historically, research and development efforts have fluctuated based upon
available government-funded contracts. The Company anticipates that future
fluctuations may also occur and that absent government funded research, the
Company will directly fund research and development efforts to expand its
inflatable restraint, commercial airliner seating, and other technologies. As
noted in Note 16 to the Consolidated Financial Statements, the Company's costs
for research and development to advance its technologies were $12.0 million in
1999, of which $4.4 million was internally funded.
SEASONALITY
The Company does not believe that it is currently significantly impacted by
seasonal factors.
FORWARD LOOKING INFORMATION AND FINANCIAL TARGETS
The Company believes that in 1999 and early 2000 it successfully addressed
the manufacturing inefficiencies, operating losses, cash flow and liquidity
problems that Simula experienced in recent years. The Company believes that it
has significant competitive advantages based on its current and developing
technologies and products, and that Simula will continue to benefit from its
worldwide recognition as a premier safety technology company. Management
believes the Company is positioned for consistent revenue and earnings growth
during the next five years.
Management estimates that revenues should exceed $100 million in 2000,
earnings should be in the range of $2.5-3.0 million, and EBITDA should exceed
$17.0 million. It is estimated that revenues, earnings, and EBITDA should exceed
$130 million, $6.0 million, and $20 million, respectively, in 2002. By 2004,
management anticipates that the Company's business will have grown substantially
and targets revenues, earnings, and EBITDA in excess of $200 million, $20
million, and $35 million, respectively.
This forward looking information is subject to, and qualified by, the
trends and uncertainties in the Company's business described below and elsewhere
in this Report.
20
<PAGE> 22
RISKS AND UNCERTAINTIES IN THE BUSINESS
Projected operating results will be affected by a wide variety of factors
which could adversely impact revenues, profitability and cash flows. The
Company's liquidity and available working capital will be dependent upon cash
flow from operations, availability of funds under its credit agreement, and
extensions or refinancings of certain indebtedness or, potentially, proceeds
from asset sales or licensing. Other factors pertinent to the Company's ability
to meet its current and five year financial projections include its leveraged
status and the level and cost of debt; success in efforts to reduce fixed
expenses and improve cash flows; ability to maintain margins or grow volumes in
its automotive segment; success in building strategic alliances with large prime
contractors and first tier suppliers to OEMs; competition and competitive
pressures on pricing including from first tier supplier partners; customer order
patterns and seasonally; the cyclical nature of the automobile industry and
other markets addressed by the Company's products; the level and makeup of
military expenditures; the costs of legal proceedings; contract mix and shifting
production and delivery schedules among the Company's two business segments;
amount of resources committed to independent research and development from time
to time; proof of concept and production validation of certain of the Company's
new technologies and proposed products; technological changes; the level of
orders which are received and can be shipped and invoiced in a quarter;
manufacturing capacity and yield; costs of labor, raw materials, supplies, and
equipment; reliability of vendor base, and economic conditions in the United
States and worldwide markets.
As used throughout this report, the words "estimate," "anticipate,"
"expect," "should," "intend," "project," "target," or other expressions that
indicate future events identify forward looking statements which are made
pursuant to safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Actual results and trends may differ materially. Risks include
those described herein and in the Company's registration statements and periodic
reports filed with the U.S. Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has short-term borrowings supported by a long-term revolving
Financing Agreement which subjects the Company to the risk of loss associated
with movements in market interest rates.
At December 31, 1999, the Company had $12.8 million in short-term
borrowings outstanding and $68.0 million in long-term debt outstanding after
giving effect to the $2.3 million original issue discount. Of the long-term debt
outstanding, $60.7 million is fixed-rate debt and, accordingly, does not expose
the Company to risk of earnings loss due to changes in market interest rates
(see Note 7 to the Company's Consolidated Financial Statements). While the
remaining $5 million of long-term debt was at a variable rate, it's retirement
in February 2000 eliminated any significant exposure to the Company to interest
rate risk. The short-term borrowings of $12.8 million are variable rate
obligations.
If the variable rates were to change by 10% from December 31, 1999, annual
interest expense associated with the variable-rate debt would change by
approximately $108,000, pretax.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are set forth in this
report on Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
<PAGE> 23
PART III
In accordance with Instruction G (3) to Form 10-K, Items 10, 11, 12 and
13 of Form 10-K are incorporated herein by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934.
22
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. Financial Statements. Financial Statements appear beginning at page F-1.
b. Reports on Form 8-K. The Company reported the disposition of its rail and
mass transit seating business, through the sale of its wholly-owned subsidiary,
Coach and Car Equipment Corporation, with its report on Form 8-K filed effective
October 25, 1999. No financial statements were filed with the report.
c. Exhibits. The following Exhibits are included pursuant to Item 601 of
Regulation S-K.
<TABLE>
<CAPTION>
NO. DESCRIPTION REFERENCE
--- ----------- ---------
<S> <C> <C>
3.1 Articles of Incorporation of Simula, Inc., as amended and restated......... (2)
3.2 Bylaws of Simula, Inc., as amended and restated............................ (1)
*4.7 Indenture dated April 1, 1997, in connection with the Company's issuance
of the 8% Senior Subordinated Convertible Notes due May 1, 2004............ (4)
10.11 1992 Stock Option Plan, as amended effective September 15, 1998............ (8)
10.12 1992 Restricted Stock Plan................................................. (1)
10.21 1994 Stock Option Plan, as amended effective September 15, 1998............ (8)
10.26 Simula, Inc. Employee Stock Purchase Plan.................................. (2)
10.29 Form of Change of Control Agreements, as amended, between the Company and
Donald W. Townsend, Bradley P. Forst, and James A. Saunders................ (6)
10.30 Form of Employment Agreements between the Company and Donald W. Townsend,
Bradley P. Forst, and James A. Saunders.................................... (7)
10.32 Employment Agreement between the Company and James C. Dodd dated March 2,
1999....................................................................... (10)
10.33 Change of Control Agreement between the Company and James C. Dodd dated
March 2, 1999.............................................................. (10)
10.37 Simula, Inc. 1999 Incentive Stock Option Plan.............................. (11)
10.38 Amended and Restated Asset Purchase Agreement for the sale of Coach and
Car Equipment Corporation, a wholly-owned subsidiary of the Company, dated
August 31, 1999 and Note Refinancing Agreement dated October 21, 1999...... (12)
10.39 Promissory Note between the Company and Stanley P. Desjardins dated
October 15, 1999 and Guarantees by Don and Nelda Townsend, James and Linda
Saunders and Bradley and Teresa Forst dated November 2, 1999............... (13)
*10.40 Asset Purchase Agreement for the sale of Airline Interiors, Inc., a
wholly-owned subsidiary of the Company, dated December 24, 1999............
*10.41 Financing Agreement with The CIT Group/Business Credit, Inc. dated
December 30, 1999..........................................................
10.42 Securities Purchase Agreement with Levine Leichtman Capital Partners II,
L.P. dated December 31, 1999............................................... (14)
*10.43 Employment Agreement between the Company and Joseph W. Coltman dated
February 1, 2000...........................................................
*10.44 Change of Control Agreement between the Company and Joseph W. Coltman
dated February 1, 2000.....................................................
*10.45 Promissory Note between the Company and Stanley P. Desjardins dated
December 31, 1999, effective December 14, 1999.............................
18. Preference Letter re: change in accounting principles...................... (3)
*21. Subsidiaries of the Company................................................
*23. Independent Auditors' Consent..............................................
+24. Powers of Attorney - Directors............................................. (5)(9)
*27. Financial Data Schedule
</TABLE>
- ----------
* Filed herewith.
+ Power of Attorney of S. Thomas Emerson filed herewith. All other Powers
of Attorney filed as noted.
<PAGE> 25
(1) Filed with Registration Statement on Form S-18, No. 33-46152-LA, under
the Securities Act of 1933, effective April 13, 1992.
(2) Filed with Definitive Proxy on May 15, 1996, for the Company's Annual
Meeting of Shareholders held on June 20, 1996.
(3) Filed with report on Form 10-Q/A for the quarter ended June 30, 1996.
(4) Filed with Registration Statement on Form S-3/A, No. 333-13499, under
the Securities Act of 1933, effective April 21, 1997.
(5) Filed with report on Form 10-K for the year ended December 31, 1997.
(6) Filed with report on Form 10-Q for the quarter ended March 31, 1998. The
Change of Control Agreements for Messrs. Townsend, Forst and Saunders
are substantially identical and differ materially only in that Mr.
Townsend is entitled to an amount equal to five (5) years base salary
and benefits upon a change of control while Messrs. Forst and Saunders
are entitled to an amount equal to four (4) years base salary and
benefits upon a change of control.
(7) Filed with report on Form 10-Q for the quarter ended March 31, 1998. The
Employment Agreements for Messrs. Townsend, Forst and Saunders are
substantially identical and differ materially only in the following two
respects: (i) the initial term of the agreement with Mr. Townsend is
five (5) years while the initial term of the agreement with Messrs.
Forst and Saunders is three (3) years; and (ii) the post-termination
non-compete period with Mr. Townsend is thirty (30) months while it is
eighteen (18) months with Messrs. Forst and Saunders.
(8) Filed with report on Form 10-Q for the quarter ended September 30, 1998.
(9) Filed with report on Form 10-K for the year ended December 31, 1998.
(10) Filed with report on Form 10-Q for the quarter ended March 31, 1999.
(11) Filed as Appendix A with Definitive Proxy on May 14, 1999, for the
Company's Annual Meeting of Shareholders held on June 17, 1999.
(12) Filed with report on Form 8-K, under the Securities Act of 1933,
effective October 25, 1999.
(13) Filed with report on Form 10-Q for the quarter ended September 30, 1999.
(14) Filed with Schedule 13D, under the Securities Exchange Act of 1934, on
January 10, 2000 effective December 31, 1999 by Levine Leichtman Capital
Partners II, L.P.
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Phoenix, State of Arizona, on April 14, 2000.
SIMULA, INC.
By /s/ Donald W. Townsend
----------------------
Donald W. Townsend, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald W. Townsend President and Director April 14, 2000
- ------------------------------------
Donald W. Townsend
/s/ James C. Dodd Executive Vice President, Chief April 14, 2000
- ------------------------------------ Financial Officer and Treasurer
James C. Dodd (Principal Financial and
Accounting Officer)
/s/ Bradley P. Forst Executive Vice President, General April 14, 2000
- ------------------------------------- Counsel, Secretary and Director
Bradley P. Forst
/s/ James A. Saunders Executive Vice President, Chief April 14, 2000
- ------------------------------------ Operating Officer
James A. Saunders
* Chairman of the Board of Directors April 14, 2000
- ------------------------------------
Stanley P. Desjardins
* Director April 14, 2000
- ------------------------------------
James C. Withers
* Director April 14, 2000
- ------------------------------------
Robert D. Olliver
* Director April 14, 2000
- ------------------------------------
John M. Leinonen
* Director April 14, 2000
- ------------------------------------
Lon A. Offenbacher
* Director April 14, 2000
- ------------------------------------
S. Thomas Emerson
*By: /s/Bradley P. Forst
-------------------------------
Bradley P. Forst
Attorney-in-Fact
</TABLE>
25
<PAGE> 27
SIMULA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report........................................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998........................... F-3
Consolidated Statements of Operations for the three years ended December 31, 1999...... F-4
Consolidated Statements of Shareholders' Equity and Comprehensive Income
for the three years ended December 31, 1999...................................... F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 1999...... F-6 to F-7
Notes to Consolidated Financial Statements............................................. F-8 to F-26
</TABLE>
F-1
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
Directors and Shareholders
Simula, Inc. and Subsidiaries
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of Simula, Inc. and
subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity and comprehensive
income, and of cash flows for each of the three years in the period ended
December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Simula, Inc. and subsidiaries at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
March 29, 2000
Phoenix, Arizona
F-2
<PAGE> 29
SIMULA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,223,236 $ 933,462
Contract and trade receivables - Net 24,756,984 27,113,757
Inventories 7,540,570 26,021,433
Deferred income taxes 2,621,000 3,173,000
Prepaid expenses and other 728,772 601,614
Net assets held for sale 12,036,242 --
Net current assets of discontinued operations -- 4,580,773
------------- -------------
Total current assets 52,906,804 62,424,039
PROPERTY, EQUIPMENT and LEASEHOLD IMPROVEMENTS - Net 13,947,099 21,494,535
DEFERRED INCOME TAXES 33,438,000 20,550,000
DEFERRED FINANCING COSTS 4,897,773 2,627,765
INTANGIBLES - Net 1,788,057 3,452,402
OTHER ASSETS 362,368 430,340
------------- -------------
TOTAL $ 107,340,101 $ 110,979,081
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit $ 12,751,595 $ 16,900,000
Trade accounts payable 6,104,583 11,028,062
Accrued restructuring costs 6,742,000 --
Other accrued liabilities 8,267,305 7,496,841
Advances on contracts 2,121,232 2,220,737
Current portion of long-term debt 11,908,303 7,530,222
------------- -------------
Total current liabilities 47,895,018 45,175,862
LONG-TERM DEBT - Less current portion 53,820,177 47,233,558
------------- -------------
Total liabilities 101,715,195 92,409,420
REDEEMABLE CONVERTIBLE 6% SERIES A PREFERRED STOCK,
$.05 par value - issued 2,250 shares 2,250,000
-------------
SHAREHOLDERS' EQUITY
Preferred stock, $.05 par value - authorized 50,000,000 shares;
issued 2,250 shares redeemable convertible 6% series A preferred stock
Common stock, $.01 par value - authorized, 50,000,000 shares;
issued 11,103,827 and 9,915,391 111,038 99,154
Additional paid-in capital 59,987,309 51,742,593
Accumulated deficit 56,384,215 (33,452,571)
Accumulated other comprehensive income (339,226) 180,485
------------- -------------
Total shareholders' equity 3,374,906 18,569,661
------------- -------------
TOTAL $ 107,340,101 $ 110,979,081
============= =============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 30
SIMULA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenue $ 131,392,426 $ 100,644,678 $ 67,362,456
Cost of revenue 102,984,129 85,723,846 51,781,020
------------- ------------- -------------
Gross margin 28,408,297 14,920,832 15,581,436
Administrative expenses 26,679,304 20,420,763 18,697,971
Restructuring charge 18,377,239
------------- ------------- -------------
Operating loss (16,648,246) (5,499,931) (3,116,535)
Interest expense (7,246,105) (5,099,194) (4,173,273)
Other income 1,298,026
------------- ------------- -------------
Loss before income taxes, discontinued operations (23,894,351) (10,599,125) (5,991,782)
and extraordinary item
Income tax benefit 8,437,000 3,786,000 2,390,049
------------- ------------- -------------
Loss before discontinued operations and
extraordinary item (15,457,351) (6,813,125) (3,601,733)
Discontinued Operations:
(Loss) earnings from discontinued operations, net
of the related income tax benefit (expense) of
$1,276,000 and ($126,000) (2,319,388) 62,207
Estimated loss on disposal, net of the
related income tax benefit of $3,898,000 and
$10,224,000 (7,238,109) (18,576,000)
Extraordinary loss on early retirement of debt,
net of the related income tax benefit of $81,000 (151,295)
------------- ------------- -------------
Net loss (22,846,755) (27,708,513) (3,539,526)
Dividends on preferred stock 279,536
------------- ------------- -------------
Net loss available for common shareholders $ (23,126,291) $ (27,708,513) $ (3,539,526)
============= ============= =============
(Loss) earnings per common share - basic and diluted:
(Loss) earnings before discontinued operations and
extraordinary loss $ (1.54) $ (0.69) $ (0.39)
(Loss) earnings from discontinued operations -- (0.23) 0.01
Estimated loss on disposal (0.71) (1.88)
Extraordinary loss on early extinguishment of debt (0.01)
------------- ------------- -------------
Net loss $ (2.26) $ (2.80) $ (0.38)
============= ============= =============
</TABLE>
F-4
<PAGE> 31
SIMULA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Additional Accumulated
Common Stock Paid-In (Deficit)
Shares Amount Capital Earnings
------ ------ ------- --------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997 8,992,598 $ 89,926 $39,031,453 $ (1,966,296)
Net loss (3,539,526)
Issuance of Common shares 178,601 1,786 2,059,132
Conversion of Series C 10% Senior
Subordinated Convertible Notes 679,633 6,796 9,586,245
Tax benefit from options exercised 433,000
Currency translation adjustment
---------- -------- ----------- ------------
BALANCE, December 31, 1997 9,850,832 98,508 51,109,830 (5,505,822)
Net loss (27,708,513)
Issuance of common shares 64,559 646 622,763
Recognition of Minimum (238,236)
Pension Liability
Tax benefit from options exercised 10,000
Currency translation adjustment
---------- -------- ----------- ------------
BALANCE, December 31, 1998 9,915,391 99,154 51,742,593 (33,452,571)
Net loss (22,846,755)
Issuance of common shares 111,362 1,114 1,538,362
Conversion of redeemable convertible
Series A Preferred Stock and
accrued dividends thereon 1,077,074 10,770 4,382,354
Preferred Stock dividends (279,536)
Minimum pension liability adjustment 194,647
Warrants Issued 2,300,000
Tax benefit from options exercised 24,000
Currency translation adjustment
---------- -------- ----------- ------------
BALANCE, December 31, 1999 11,103,827 $111,038 $59,987,309 $(56,377,215)
========== ======== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated Total
Other Comprehensive Shareholders' Comprehensive
Income Equity Income
---------- ------ ------
<S> <C> <C> <C>
BALANCE, January 1, 1997 $ 32,414 $37,187,497
Net loss (3,539,526) $ (3,539,526)
Issuance of Common shares 2,060,918
Conversion of Series C 10% Senior
Subordinated Convertible Notes 9,593,041
Tax benefit from option exercises 433,000
Currency translation adjustment (92,524) (92,524) (92,524)
--------- ----------- ------------
BALANCE, December 31, 1997 (60,110) 45,642,406 $ (3,632,050)
============
Net loss (27,708,513) $(26,540,513)
Issuance of common shares 623,409
Recognition of Minimum (238,236) (238,236)
Pension Liability
Tax benefit from options exercised 10,000
Currency translation adjustment 240,595 240,595 240,595
--------- ----------- ------------
BALANCE, December 31, 1998 180,485 18,569,661 $(26,538,154)
============
Net loss (22,846,755) $(22,846,755)
Issuance of common shares 1,539,476
Conversion of redeemable convertible
Series A Preferred Stock and
accrued dividends thereon 4,393,124
Preferred Stock dividends (279,536) (279,536)
Minimum pension liability adjustment 194,647 194,647
Warrants Issued 2,300,000
Tax benefit from options exercised 24,000
Currency translation adjustment (519,711) (519,711) (519,711)
--------- ----------- ------------
BALANCE, December 31, 1999 $(339,226) $ 3,374,906 $
========= =========== ============
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 32
SIMULA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows used for operating activities:
Net loss $ (22,846,755) $ (27,708,513) $ (3,539,526)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 5,807,563 4,646,531 3,505,328
Deferred income taxes (12,442,000) (15,314,000) (2,262,000)
Currency translation adjustment (519,711) 240,595 (92,524)
Provision for loss on disposal of
discontinued operations 11,136,109 28,800,000
Restructuring Charge 18,326,819
Write down of trade accounts receivable 1,290,394
Gain on sale of property (385,349) (1,298,026)
Loss on early extinguishment of debt 232,295
Changes in net assets and liabilities:
Contract and trade receivables, net of advances (5,515,796) (3,159,038) (8,628,705)
Inventories 431,069 (2,249,003) (10,868,627)
Income taxes receivable 942,665
Prepaid expenses and other (127,158) 733,752 374,448
Deferred costs (229,758)
Other assets 67,972 67,485 233,462
Net assets of discontinued operations (4,398,565) (7,635,772) (628,900)
Trade accounts payable 294,143 1,195,854 3,389,723
Other accrued liabilities (161,662) 1,436,789 2,317,844
------------- ------------- -------------
Net cash used by operating activities (8,810,632) (19,175,078) (16,554,838)
------------- ------------- -------------
Cash flows used for investing activities:
Purchase of property and equipment (2,800,376) (6,188,725) (7,980,581)
Proceeds from sale of property and equipment 2,980,717 6,100,000
Costs incurred to obtain intangibles (4,099,284) (235,273) (326,796)
------------- ------------- -------------
Net cash used by investing activities (3,918,943) (6,423,998) (2,207,377)
------------- ------------- -------------
Cash flows from financing activities:
Net (repayments) borrowings under line of credit (4,148,405) 16,900,000 (6,900,000)
Issuance of 9-1/2% notes - net of expenses 962,054
Issuance of 8% notes - net of expenses 31,186,226
Borrowings under other debt arrangements 27,160,631 7,569,081 4,895,636
Principal payments under other debt arrangements (13,895,931) (8,889,037) (4,412,275)
Issuance of common shares - net of expenses 507,355 623,409 2,060,918
Issuance of preferred shares - net of expenses 7,500,000
Preferred stock dividends (104,301)
------------- ------------- -------------
Net cash provided by financing activities 17,019,349 17,165,507 26,830,505
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 4,289,774 (8,433,569) 8,068,290
Cash and cash equivalents at beginning of year 933,462 9,637,031 1,298,741
------------- ------------- -------------
Cash and cash equivalents at end of year $ 5,223,236 $ 933,462 $ 9,637,031
============= ============= =============
</TABLE>
F-6
<PAGE> 33
SIMULA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE YEARS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid $7,587,792 $5,534,092 $3,284,192
========== ========== ==========
Taxes paid $ 36,513 $ 41,200 $ 125,900
========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
In 1999, $5,250,000 of Series A Preferred
Stock plus accrued dividends of $175,234
were exchanged for 1,077,074 shares of
common stock.
Tax benefits from exercise of stock options $ 202,000 $ 10,000 $ 433,000
========== ========== ==========
In 1997, $9,550,000 of Series C 10% Senior
Subordinated Convertible Notes and accrued
interest of $475,548 less deferred net
issuance costs of $432,507 were exchanged
for 679,633 shares of common stock. $9,593,041
==========
Property and equipment acquired under capital leases $ 396,411
==========
</TABLE>
F-7
<PAGE> 34
SIMULA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1999
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of Simula, Inc. ("Simula") and its subsidiaries (collectively the
"Company"). All of the subsidiaries are wholly owned. All intercompany
transactions are eliminated in consolidation.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Described below are those
generally accepted accounting principles particularly significant to the
Company, including those selected from acceptable alternatives.
a. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
b. Revenue related to government contracts results principally from
long-term fixed price contracts and is recognized on the
percentage-of-completion method calculated utilizing the cost-to-cost
approach. The percent deemed to be complete is calculated by comparing
the costs incurred to date to estimated total costs for each contract.
This method is used because management considers costs incurred to be
the best available measure of progress on these contracts. Adjustments
to this measurement are made however, when management believes that
costs incurred materially exceed effort expended. Contract costs
include all direct material and labor costs, along with certain
overhead costs related to contract production. Provisions for any
estimated total contract losses on uncompleted contracts are recorded
in the period in which it is concluded that such losses will occur.
Revenue derived from sales of airline and automotive commercial
products is recognized at contractual amounts when the product is
shipped.
c. Inventories include raw materials not yet applied to contracts and raw
materials, work-in-process and finished goods applicable to commercial
products. Inventories are recorded at cost and are carried at the lower
of cost or net realizable value. Amounts are removed from inventory
using the first-in first-out method.
d. Property, equipment and leasehold improvements are stated at cost.
Amortization of capital leases and leasehold improvements is calculated
on a straight-line basis over the life of the asset or term of the
lease, whichever is shorter. Depreciation on equipment is calculated on
a straight-line basis over estimated useful lives of three to twelve
years and buildings are depreciated on a straight-line basis over
estimated useful lives of thirty years.
e. Deferred financing costs are amortized over the life of the related
debt using the effective interest method.
f. Intangibles are recorded at cost. The Company acquires intangible
assets in the normal course of business. The Company periodically
reviews for changes in circumstances to determine whether there are
conditions that indicate that the carrying amount of such assets may
not be recoverable. If such conditions are deemed to exist, the Company
will determine whether estimated future undiscounted cash flows are
less than the carrying amount of such assets, in which case the
F-8
<PAGE> 35
Company will calculate an impairment loss. Impairment losses, if any,
will be recorded as a component of operating earnings. Intangibles are
amortized on a straight-line basis over 7 to 20 years.
g. Foreign currency assets and liabilities are translated into United
States dollars using the exchange rates in effect at the balance sheet
date. The effects of exchange rate fluctuations on translation of
assets and liabilities are reported as a separate component of
shareholders' equity.
h. Statements of Cash Flows - Cash and cash equivalents presented in the
statements of cash flows consist of cash on hand and highly liquid
investments with an original maturity of three months or less.
i. (Loss) earnings per common share - In 1997, the Financial Accounting
Standards Board (the "FASB") issued Statement of Financial Accounting
Standards No. 128, Earnings Per Share. SFAS No. 128 requires the dual
presentation of basic and diluted earnings per share on the face of the
income statement and the disclosure of the reconciliation between the
numerators and denominators of basic and diluted earnings per share
calculations. Earnings per share amounts for the years ended December
31, 1999, 1998 and 1997 are calculated using only weighted average
outstanding shares of 10,230,720, 9,880,283 and 9,288,416,
respectively. Options to purchase common stock and shares to be issued
upon conversion of the Preferred Stock, 8% Notes and 10% Notes totaling
6,119,039 for the year ended December 31, 1999 were not used for
computing diluted earnings per share because the result would be
anti-dilutive. Options to purchase common stock and shares to be issued
upon conversion of the 8% Notes and 10% Notes totaling 4,546,065 and
3,896,966 for the years ended December 31, 1998 and 1997, respectively
were not used for computing diluted earnings per share because the
result would be anti-dilutive.
j. New accounting pronouncements - In June 1998, the FASB issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133, requires that entities record all derivatives as assets or
liabilities, measured at fair value, with the change in fair value
recognized in earning or in other comprehensive income, depending on
the use of the derivative and whether it qualifies for hedge
accounting. SFAS No. 133 (as amended) is effective for the fiscal year
ending 2001. The Company has not completed evaluating the effects this
statement will have on its financial position or results of operations.
2. RECEIVABLES
Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenue recognized on long-term contracts in excess of billings
because amounts were not billable at the balance sheet date. Amounts receivable
from the United States Government or receivable under United States Government
related subcontracts will generally be billed in the following month or when the
contract and all options thereunder are completed. Amounts due on other
contracts are generally billed as shipments are made, subject to retainages. It
is estimated that substantially all of such amounts will be billed and collected
within one year, although contract extensions may delay certain collections
beyond one year.
F-9
<PAGE> 36
At December 31, receivables include the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
United States Government:
Billed receivables $ 3,137,800 $ 1,702,085
Costs and estimated earnings in excess of billings 5,577,074 6,366,253
------------ ------------
Total United States Government 8,714,874 8,068,338
------------ ------------
Other contracts:
Billed receivables 4,135,118 3,171,740
Costs and estimated earnings in excess of billings 6,910,775 4,624,648
------------ ------------
Total other contracts 11,045,893 7,796,388
------------ ------------
Other trade receivables 5,196,217 11,449,031
Less allowance for doubtful accounts (200,000) (200,000)
------------ ------------
Contract and trade receivables - net $ 24,756,984 $ 27,113,757
============ ============
</TABLE>
3. INVENTORIES
At December 31, inventories consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Raw Materials $ 5,101,426 $15,581,952
Work-in-process 1,967,397 9,077,849
Finished goods 471,747 1,361,632
----------- -----------
Total inventories $ 7,540,570 $26,021,433
=========== ===========
</TABLE>
4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
At December 31, property, equipment and leasehold improvements consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Land $ 816,888 $ 1,603,870
Buildings and leasehold improvements 2,061,674 4,120,501
Equipment 21,931,912 26,295,766
------------ ------------
Total 24,810,474 32,020,137
Less accumulated depreciation and amortization (10,863,375) (10,525,602)
------------ ------------
Property, equipment and leasehold improvements - net $ 13,947,099 $ 21,494,535
------------ ------------
</TABLE>
F-10
<PAGE> 37
5. INTANGIBLES
At December 31 intangibles consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Patents and licenses $ 1,570,385 $ 1,245,270
Other 783,963 783,968
Covenants not to compete -- 2,489,356
Goodwill -- 1,059,553
----------- -----------
Total 2,354,348 5,578,147
Less accumulated amortization (566,291) (2,125,745)
=========== ===========
Intangibles - net $ 1,788,057 $ 3,452,402
=========== ===========
</TABLE>
6. REVOLVING LINE OF CREDIT
On December 30, 1999, the Company executed a Financing Agreement with an
asset based-lender which provided for a $17,000,000 revolving line of credit
and a $5,000,000 Senior Secured term note payable. The proceeds received from
this financing together with the proceeds received from the Senior Secured Notes
discussed below, were utilized primarily to replace the Company's then revolving
line of credit and two term notes payable with a bank and retire $4,250,000 of
the Company's 10% Senior Subordinated Convertible Notes (the "10% Notes").
The Company's availability under the revolving line of credit is dependent
upon the relative balances of accounts receivable and inventories and each of
their relative advance percentages. The revolving line of credit accrues
interest at the Chase Manhattan prime rate or LIBOR plus 2.4% based upon the
rate selected by the Company and matures December 30, 2003 and renews
automatically unless terminated by either party with proper notice. The
outstanding balance under this line of credit was $12,751,595 and the average
interest rate was 8.5% at December 31, 1999.
The Financing Agreement contains covenants that require the maintenance of
certain defined financial ratios and income and limits additional borrowings and
capital expenditures. The Company was in compliance with all of these covenants
at December 31, 1999. The Financing Agreement may be terminated with 60 days
notice prior to each anniversary date of the agreement at no additional cost. If
the Financing Agreement is terminated at any other time, an early termination
fee based upon the outstanding principal under the revolving line of credit of
1 1/2% during the first year and 3/4% after the first anniversary and before
the second anniversary shall be assessed. The Financing Agreement is secured by
the assets of the Company.
F-11
<PAGE> 38
7. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
8% Senior Subordinated Convertible Notes $ 34,500,000 $ 34,500,000
Senior Secured Notes, net of discount of $2,300,000 22,700,000 --
10% Senior Subordinated Convertible Notes -- 4,750,000
9 1/2% Senior Subordinated Notes 3,238,000 3,238,000
Note Payable to Chairman of the Board 2,000,000 --
Various loans payable, secured by property and equipment 1,024,224 10,287,560
Various mortgage notes payable, secured by land and buildings 2,036,789 1,330,944
Obligations under capital leases, interest at 10% (Note 13) 229,467 657,276
------------ ------------
Total 65,728,480 54,763,780
Less current portion (11,908,303) (7,530,222)
------------ ------------
Long-term debt $ 53,820,177 $ 47,233,558
============ ============
</TABLE>
On December 30, 1999, the Company executed agreements with an asset based
lender for a $17,000,000 revolving line of credit (Note 6) and a $5,000,000
Senior Secured Note, and with an accredited investor for two Senior Secured
Notes totaling $20,000,000. Net proceeds under these agreements was $34,831,949
and were used to replace the Company's then outstanding revolving line of credit
and two term notes payable with a bank totaling $29,333,334, retire $4,250,000
the Company's 10% Senior Subordinated Convertible Notes and repay one note
payable to the Chairman of the Board in the amount of $1,000,000. As a result of
the above refinancing, a pre-tax extraordinary charge on early retirement of
debt was recorded for the year ended 1999 related to the write-off of deferred
financing fees of $232,295.
The $5,000,000 Senior Secured term note payable with the asset based lender
was retired on February 2, 2000 with proceeds received from the sale of the
Company's airline new seat manufacturing operation. Two Senior Secured Notes in
the amounts of $5,000,000 (the "Term Note A") and $15,000,000 (the "Term Note
B") (together the "Term Notes") were issued with a warrant to purchase 850,000
shares of common stock at $5.00 per share. The warrant is immediately
exercisable and will expire in 7 years. The Company has recorded an original
issue discount related to the stock warrant of $2,300,000 and shall be amortized
over the term of the underlying notes using the effective interest method. The
Term Note A matures on September 30, 2000, accrues interest payable monthly at
15% and provides for an additional monthly bridge fee of $25,000. The Term Note
A may be redeemed with a 30 day notice at any time without penalty. The Term
Note B matures on June 30, 2003 and provides for cash interest to be paid
monthly at 12.25% and interest which is to be capitalized into the note
principal balance at 3% per month. The Term Note B may be redeemed with a 30 day
notice at certain specified redemption prices plus accrued interest payable to
the redemption date.
The Term Notes contain covenants that require the maintenance of certain
defined financial ratios and income and limits additional borrowings and capital
expenditures. The Company was in compliance with all of these covenants at
December 31, 1999. The Term Notes are secured by the assets of the Company.
On October 15, 1999, the Company entered into a $1,000,000 Promissory Note
with it's Chairman of the Board of Directors. The note bears interest at 12%,
matures on October 15, 2000, and provides for a placement fee of $20,000 to be
paid upon maturity or any accelerated repayment of the note. In addition, the
note provides for an accelerated maturity in the event the Company completes a
senior credit banking agreement, or a public or private offering of debt or
equity securities for proceeds of $10,000,000 or more.
F-12
<PAGE> 39
'The Company repaid the October 15, 1999 note in full on January 6, 2000 from
the proceeds received from the Senior Secured Notes issued on December 30, 1999
discussed above.
On December 14, 1999, the Company entered into a second $1,000,000
Promissory Note with it's Chairman of the Board of Directors. The note is
unsecured and subordinated to the Company's Senior Secured Notes. The note bears
interest at 12%, matures on December 31, 2003, and provides for a placement fee
of $20,000 to be paid upon maturity. Voluntary prepayment of the note is
prohibited, however, the note is subject to mandatory prepayment at the option
of the holder if all of the following conditions have been satisfied: (1) The
$5,000,000 Senior Secured Note to the asset based lender has been paid in full;
(2) The $5,000,000 Senior Secured Note to an outside accredited investor has
been paid in full; (3) after giving effect to the mandatory prepayment to be
made hereunder, the availability under the Company's revolving line of credit is
not less the $2,000,000.
In November 1998, the Company completed a private placement to accredited
investors of $3,238,000 of it 9 1/2% Senior Subordinated Notes (the "9 1/2%
Notes") and received proceeds of $1,025,000 and exchanged $2,213,000 of its 12%
Notes. The 9 1/2% Notes are due on September 30, 2003 and bear interest at
9 1/2% per annum, payable semi-annually. The 9 1/2% Notes may be redeemed at the
Company's option, upon at least 30 days' notice, in whole or in part on a pro
rata basis, on and after April 30, 1999, at 102% of par value plus accrued
interest payable to the redemption date. The net proceeds received under the
9 1/2% Notes were utilized in the retirement of the 12% Notes upon maturity.
During 1997, the Company completed the public offering of $34.5 million of
its 8% Senior Subordinated Convertible Notes (the "8% Notes"). The 8% Notes are
due May 1, 2004 and bear interest at 8% per annum, payable semi-annually. The 8%
Notes are convertible into shares of the Company's common stock at a price of
$17.55 per share of common stock. The 8% Notes may be redeemed at the Company's
option in whole or in part on a pro rata basis, on and after May 1, 1999, at
certain specified redemption prices plus accrued interest payable to the
redemption date. However, on or after May 1, 1999 and prior to April 30, 2000,
the 8% Notes will not be redeemable unless the closing price of the Company's
common stock has equaled or exceeded $23.625 for 20 trading days within a period
of 30 consecutive trading days.
The indenture relating to the 9 1/2% Notes and the 8% Notes contains
certain covenants including limitations on additional indebtedness, the sale of
assets, liens securing indebtedness other than senior indebtedness, payment
restrictions affecting subsidiaries, transactions with affiliates, future senior
subordinated indebtedness and mergers and consolidations. In accordance with the
indenture, the Company may incur indebtedness under senior credit facilities up
to $50 million and may incur other indebtedness based upon a specified ratio of
cash flow, as defined, to interest expense. The Company was in compliance with
all of the covenants of this indenture at December 31, 1999.
The aggregate principal payments required after amortization of the
original issue discount for the five years subsequent to December 31, 1999 are:
<TABLE>
<CAPTION>
<S> <C>
2000 $11,908,303
2001 792,114
2002 640,443
2003 19,280,954
2004 34,535,945
Thereafter 870,720
-----------
Total $68,028,480
===========
</TABLE>
F-13
<PAGE> 40
Interest expense for the years ended December 31 is comprised of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Interest $6,847,559 $5,234,857 $4,342,715
Amortization of deferred financing costs 846,808 801,836 725,147
---------- ---------- ----------
Interest expense $7,694,367 $6,036,693 $5,067,862
========== ========== ==========
</TABLE>
Interest expense allocated to discontinued operations for the years ended
1999, 1998 and 1997 was $448,262, $937,499 and $894,589, respectively.
Based on borrowing rates currently available to the Company and the quoted
market prices for the 8% Notes, the fair value of long-term debt at December 31,
1999 is approximately $53,653,480.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
On March 29, 1999, the Company completed a private placement to an
accredited investor of $7.5 million of the Company's Series A Convertible
Preferred Stock (the "Series A"). Under the terms of this offering the Series A
bears a dividend rate of 6% per annum payable quarterly in cash, or in stock
that will be valued at 90% of fair market value at the time of payment. The
Series A may be converted into shares of the Company's Common Stock at market
value at any time at 101% of the average closing price of any 15 out of 30
consecutive trading days preceding conversion, up to a specified maximum
conversion price (the "Conversion Cap"). The Conversion Cap for the first twelve
months is $8.60 per share and is subject to an annual adjustment to the lesser
of the then existing Conversion Cap or 130% of the average of the closing bid
prices for 20 consecutive trading days immediately proceeding the annual
adjustment anniversary date. In addition, the first year Conversion Cap was
subject to an interim adjustment on August 1, 1999 and was adjusted on that date
to $8.04 per share. Conversion of the Series A is limited to 10% of the initial
amount per month, accumulating monthly up to a maximum of 30% of the accumulated
convertible amount in any month. The Company may require the conversion of the
Series A if the Market price of the Company's Common Stock exceeds the
Conversion Cap by at least 50% for at least 20 consecutive trading days, subject
to the same conversion limitations imposed upon the Series A holders.
Series A Preferred Stock is subject to a mandatory redemption of the
remaining outstanding shares on May 1, 2004 at which time the Company is
required to redeem all such shares at the greater of 130% of the preferred stock
stated value plus accrued and unpaid dividends, or the average of the closing
bid prices on the ten consecutive trading days immediately preceding the
redemption date. The holders of the Company's Series A Preferred Stock have the
option to require the company to redeem all or a portion of the Series A
Preferred Stock at a redemption price equal to 105% of the preferred stock
stated value plus accrued and unpaid dividends if the Company consolidates or
merges with or into another company.
During the year ended December 31, 1999, $5,250,000 of Series A Preferred
Stock plus accrued dividends of $175,234 were exchanged for 1,077,074 shares of
the Company's common stock.
9. STOCK OPTIONS AND STOCK PLANS
In 1992, the Company adopted the 1992 Stock Option Plan which provided for
the issuance of up to 360,000 shares of common stock. All options available
under the 1992 Plan have been granted. In August 1994, the Company adopted the
1994 Stock Option Plan which reserves up to 2,500,000 shares of common stock for
issuance under the Plan. In June 1999, the Company adopted the 1999 Stock Option
Plan which
F-14
<PAGE> 41
reserves up to 2,000,000 shares of common stock for issuance under the Plan.
Options granted under the 1994 and 1999 Plans as of December 31, 1999 were
3,060,488. Information with respect to the Plans is as follows:
<TABLE>
<CAPTION>
OPTION WEIGHTED AVERAGE
SHARES OPTION PRICE
------ ------------
<S> <C> <C>
Outstanding at December 31, 1996 921,929 $11.78
Granted 858,900 $13.84
Exercised (126,575) $10.51
Canceled (3,100) $13.91
---------
Outstanding at December 31, 1997 1,651,154 $12.94
Granted 676,517 $14.07
Exercised (9,700) $12.01
Canceled (29,600) $13.04
---------
Outstanding at December 31, 1998 2,288,371 $13.83
Granted 753,900 $ 5.64
Exercised (16,250) $ 5.27
Canceled (34,525) $ 7.08
---------
Outstanding at December 31, 1999 2,991,496
=========
</TABLE>
Options are generally exercisable one year from the date of grant for up to
ten years at a price equal to 100% of the fair market value at the date of grant
or 85% of fair market value in the case of non-statutory options. As of December
31, 1999, 1998, and 1997, exercisable options were 2,622,345, 1,976,854, and
1,127,304, respectively. The Company resinded certain 1999 stock option
exercises subsequent to their original exercise and accordingly, these exercises
are not reflected in the above table.
On December 1, 1998, 584,392 options that had been previously granted to
the Company's non-executive management employees were repriced at $7.00 per
share which represents the fair market value at the date of repricing. These
options retain the same characteristics as their original grant.
The following information, aggregated by option price ranges, is applicable to
options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Range of exercise prices ............................................... $3.25-$7.00 $8.63-$20.50
Shares outstanding in range ............................................ 1,071,920 1,842,719
Weighted-average exercise price ........................................ 6.15 12.79
Weighted-average remaining contractual life ............................ 8.01 7.06
Shares currently exercisable ........................................... 823,520 1,721,968
Weighted-average exercise price of shares currently exercisable ........ 6.29 13.16
</TABLE>
The estimated fair value of options granted during 1999 was $2.75 Per share. The
Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans. Had
compensation cost for the Company's stock option plans been recognized based on
the fair value at the grant dates for awards under those plans consistent with
the method of Statement of Financial Accounting Standards No. 123, the Company's
net (loss) earnings and net (loss) earnings per share for the three years ended
December 31, 1999 would have been reduced to the pro forma amounts indicated
below:
F-15
<PAGE> 42
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net loss available to common shareholders - as reported $ (22,846,755) $ (27,708,513) $ (3,539,526)
============== ============== ==============
Net loss available to common shareholders - pro forma $ (24,005,217) $ (29,683,277) $ (6,222,900)
============== ============== ==============
Loss per share - basic - as reported $ (2.26) $ (2.80) $ (0.38)
============== ============== ==============
Loss per share - basic - pro forma $ (2.37) $ (3.00) $ (0.67)
============== ============== ==============
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options pricing model. For the year ended December 31, 1999
the assumptions used for grants were no dividend yield, and expected volatility
of 61%, a risk free interest rate of 5% and expected lives of 3.5 years. For the
year ended December 31, 1998, the assumptions used for grants were no dividend
yield, an expected volatility of 53%, a risk-free interest rate of 4.5% and
expected lives of 3 years. For the years ended December 31, 1997, the
assumptions used for grants were no dividend yield, an expected volatility of
46%, a risk-free interest rate of 5.5% and expected lives of 3 years.
RESTRICTED STOCK PLAN - In 1992, the Company adopted the 1992 Restricted
Stock Plan authorizing the Company to grant to key employees of the Company the
right to purchase up to an aggregate of 19,500 shares of common stock at $.01
per share. The Company has reserved 19,500 shares of common stock for issuance
pursuant to the Restricted Stock Plan, of which 4,623 shares have been awarded.
EMPLOYEE STOCK PURCHASE PLAN - On June 20, 1996, the Company adopted the
Employee Stock Purchase Plan (the "ESPP") to allow eligible employees of the
Company to acquire shares of the Company's common stock at periodic intervals,
paid for with accumulated payroll deductions over a six month offering period. A
total of 400,000 shares of the Company's common stock have been reserved for
issuance under the ESPP. The first offering period under the ESPP began October
1, 1996.
10. BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan (the "Plan")
for employees. To be eligible to participate, employees must have completed six
months of continuous employment and have attained the age of 21. Benefits are
based on length of service and the employee's final pay (averaged over the five
highest consecutive years of the last ten years of participation). The Company
makes contributions to the Plan based upon actuarially determined amounts.
Effective July 1, 1999, the Company froze the Plan for new participants.
F-16
<PAGE> 43
The Plan's funded status and amounts recognized in the Company's balance sheet
at December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 2,843,693 $ 2,574,688
Nonvested benefits 479,676 470,672
----------- -----------
Accumulated benefit obligation 3,323,369 3,045,360
Effect of projected future compensation increases 971,316 659,652
----------- -----------
Projected benefit obligation 4,294,685 3,705,012
Plan assets at fair value 2,689,792 2,212,953
----------- -----------
Unfunded status 1,604,893 1,492,059
Unrecognized prior service costs 50,038 216,977
Unrecognized loss (1,075,877) (1,353,003)
Unrecognized transition liability 73,486 79,138
----------- -----------
Accrued benefit cost 652,540 435,171
Additional minimum liability 72,589 397,236
----------- -----------
Accrued benefit liability 725,129 832,407
Accumulated other comprehensive income adjustments 72,589 397,236
----------- -----------
Net amount recognized $ 652,540 $ 435,171
=========== ===========
</TABLE>
Reconciliation of the Plan benefit obligation is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning benefit obligation $ 3,705,012 $ 2,914,208
Service cost 483,703 366,594
Interest Cost 275,689 211,324
Actuarial (gain)/loss (184,837) 547,798
Plan amendments 154,641 (230,547)
Benefits paid (139,523) (104,365)
----------- -----------
Ending benefit obligation $ 4,294,685 $ 3,705,012
=========== ===========
</TABLE>
Reconciliation of the fair value of plan assets is as follows:
<TABLE>
<CAPTION>
1998 1998
---- ----
<S> <C> <C>
Beginning fair value of plan assets $ 2,212,953 $ 2,034,500
Employer contributions 457,884 444,081
Actual gain/(loss) 156,925 (161,263)
Benefits paid (137,970) (104,365)
----------- -----------
Ending fair value of plan assets $ 2,689,792 $ 2,212,953
=========== ===========
</TABLE>
F-17
<PAGE> 44
Net periodic pension cost includes the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Service Cost $ 483,703 $ 366,594 $ 307,249
Interest Cost 275,689 211,324 175,039
Expected return on assets (187,260) (172,330) (144,306)
Transition asset recognition (5,652) (5,652) (5,652)
Prior service cost (12,298) (28,809) (4,572)
Net loss recognition 122,624 52,995 13,021
--------- --------- ---------
Net periodic benefit cost $ 676,806 $ 424,122 $ 340,779
========= ========= =========
</TABLE>
Assumptions at December 31 used in the accounting for the Plan were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount or settlement rate 7.75% 6.75% 7.25%
Rate of increase in compensation levels 3.75% 3.00% 3.25%
Expected long-term rate of return on Plan assets 8.00% 8.00% 8.00%
</TABLE>
The Plan's assets consist of money market accounts and investments in
common stocks, bonds and mutual funds.
In addition, the Company has a 401(k) plan for substantially all employees.
Company contributions to the 401(k) plan were $79,474, $48,597 and $38,355 for
the years ended December 31, 1999, 1998 and 1997, respectively.
11. OTHER INCOME
Other income for the year ended December 31, 1997 represents the net gain
on real estate transactions.
12. INCOME TAXES
The income tax (benefit) provision for the years ended December 31 are as
follows:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 50,000 $ 36,000 $ 431,000
Deferred (12,466,000) (15,483,000) (2,695,000)
------------ ------------ ------------
(Benefit) provision for income taxes $(12,416,000) $(15,447,000) $ (2,264,000)
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes 1.7 2.1 5.3
Tax credits and other ( .5) ( .7) ( .3)
---- ---- ----
Effective rate 35.2% 35.4% 39.0%
==== ==== ====
</TABLE>
F-18
<PAGE> 45
The provision for deferred income taxes consists of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Accruals and reserves $ (922,000) $(11,257,000) $ (448,000)
Depreciation and amortization expense (880,000) 371,000 554,000
Net operating loss carryforward (10,575,000) (4,656,000) (2,425,000)
Minimum tax credit carryforwards (199,000) (226,000) (376,000)
Change in valuation allowance 110,000 285,000
------------ ------------ ------------
Total $(12,466,000) $(15,483,000) $ (2,695,000)
============ ============ ============
</TABLE>
The significant tax effected temporary differences comprising deferred taxes at
December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current:
Net operating loss carryforwards $ (9,026,000) $ 1,380,000
Extraordinary loss 7,536,000
Accrued vacation and self insurance 356,000 489,000
Inventory and warranty reserves 1,119,000 1,004,000
Other 3,636,000 300,000
------------ ------------
Total current deferred tax asset 2,621,000 3,173,000
------------ ------------
Long-term:
Excess of tax over book depreciation and amortization 19,000 (861,000)
Net operating loss carryforwards 31,988,000 9,848,000
Minimum tax credit carryforward 963,000 764,000
Deferred start-up costs 313,000 313,000
Discontinued Operations -- 10,385,000
Other 285,000 101,000
------------ ------------
Total long-term deferred tax asset 33,678,000 20,550,000
------------ ------------
Net deferred tax asset $ 36,189,000 $ 23,723,000
------------ ------------
</TABLE>
The company increased its deferred tax valuation allowance $110,000 in 1999
and $285,000 in 1998 because certain tax credits and operating loss carry
forwards are unlikely to be utilized. At December 31, 1999, the Company had
approximately $82,700,000 of net operating loss carry forwards which expire
through 2018.
13. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment under capital lease agreements and
certain facilities under noncancellable operating leases with various renewal
options. Leased assets of $1,078,384 and $2,030,635 (net of accumulated
depreciation of $772,236 and $1,144,166) are included in property and equipment
as of December 31, 1999 and 1998, respectively.
The following is a schedule of minimum rental payments due under the leases
described above and for other operating leases for the years ending December 31:
F-19
<PAGE> 46
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
1999 $162,948 $ 1,369,304
2000 44,357 1,088,906
2001 35,409 825,109
2002 5,595 734,949
2003 661,977
Thereafter 6,085,693
-------- -----------
Total minimum lease payments 248,309 $10,765,938
===========
Less amounts representing interest (18,842)
--------
Present value of net minimum lease payments $229,467
========
</TABLE>
Rent expense was $3,370,505, $2,530,932 and $1,889,660 for the years ended
December 31, 1999, 1998 and 1997, respectively.
14. DISCONTINUED OPERATIONS
In 1998, the Company's board of directors adopted a plan to dispose of its
rail and mass transit seating operations. Accordingly, the operating results of
these rail and mass transit operations, including a provision for estimated loss
upon disposition, have been segregated from continuing operations and are
reported as discontinued operations.
The Company executed the sale of its rail and mass transit seating
operation on August 31, 1999 under an Asset Purchase and Sale Agreement dated
June 30, 1999, as amended and restated August 31, 1999 and subsequently on
October 21, 1999, a Note Refinancing Agreement was executed. A former director
of the Company wholly owned the acquiring company. Consideration received
consisted of $100,000, assumption of approximately $4,700,000 in liabilities
cash and a promissory note for $9,996,000 which matured on October 15, 1999. On
October 21, 1999, the parties entered into the Note Refinancing Agreement which
refinanced the note as two separate notes in the amount of $1,996,000 and
$8,118,008 and reflects the capitalization of $118,008 of interest related to
the original note into principal outstanding. The notes each carry an interest
rate of 8 1/2% and mature on October 15, 2004. Interest is required to be paid
quarterly beginning April 2000 on the $1,996,000 promissory note and
semi-annually beginning April 2001 on the $8,118,008 promissory note. The
negotiated interest rate on the notes did not properly reflect the risk and
current market conditions. Therefore, the company has computed the net present
value of the notes using a discount rate of 23%, which is the Company's
determination of the market rate of interest and market value of the notes.
Management believes this more properly reflects the risk related to the notes
due to their subordinated nature. This resulted in a net present value discount
of $6,750,000 assuming principal only payment at the end of the term. The notes
are secured by the underlying assets and a Pledge and Proxy Security Agreement
in the stock of the underlying company and stock of another company which is
owned under common control of the acquirer and subordinated to short-term
capital financing received subsequent to its disposal. Although a legal transfer
of assets occurred at August 31, 1999, the sale could not be recognized as a
divestiture for accounting purposes at the time because there was an absence of
a significant investment in business by the buyer. As a result of losses by
the rail and mass transit seating operation since the sale date and the
uncertainty of the ultimate recovery of the entire principal and interest on a
timely basis in accordance with the terms of the contract, a valuation allowance
for the remaining balance has been recorded. This uncertainty is based on the
operating losses sustained by the business subsequent to disposal, its inability
to acquire adequate long-term financing for repayment of the notes under the
terms of the contract, or obtain additional equity investment. While the
contract between the parties remains fully enforceable, and the Company believes
some recovery may occur, the Company can not accurately predict the precise
timing and amount of the collection of principal and interest, accordingly the
carrying value of the notes is zero. Any future payments of principal received
will be accounted for under the cost recovery method of accounting as a
component of discontinued operations.
Under the Asset Purchase and Sale Agreement the Company has retained the
liability for claims incurred through August 31, 1999 under its self funded
health insurance plan and has agreed to indemnify the acquiring company for any
customary warranty and litigation claims. An additional charge upon the final
disposal of the rail and mass transit discontinued operation of $7,238,109, net
of tax benefit of $3,898,000, was recorded in the year ended December 31, 1999.
Revenues for the rail and mass transit operations were $8,247,294 for the
eight months ended August 31, 1999, and $15,781,983 and $23,059,525 for the
years ended 1998 and 1997, respectively. Interest expense has been allocated to
discontinued operations based on the ratio of the discontinued operations' net
assets to consolidated net assets. General corporate administrative expenses are
not allocated to discontinued operations.
F-20
<PAGE> 47
15. RESTRUCTURING
In December 1999, management of the Company, with the approval of the board
of directors, committed itself to a plan of restructuring and recorded a charge
to income of $18.3 million. The plan of restructuring included a refinancing of
its outstanding bank line of credit and certain term notes (Note 7) and the
divestiture of the Company's new airline seat manufacturing operation. The
Company entered into an agreement to sell substantially all the assets of the
airline seat manufacturing operation in December 1999 and completed the
transaction in January 2000. The operating facility closed at that time
terminating approximately 300 management and production employees. Total
proceeds from the sale was approximately $12 million resulting in a loss on sale
of $10.3 million. The remaining restructuring charge is comprised of severance
costs of $1.6 million, $2.5 million related to the abandonment of leased
operating facilities and equipment, $2.3 million related to the write down to
net realizable value for inventory and fixed assets and $1.6 million in
recognition of additional liabilities related primarily to outstanding purchase
order commitments which were non-cancelable. The Company expects cash flow
savings as a result of not having to fund continued operating losses to offset
the cash required in implementing the restructuring plan within the first year.
The airline seat manufacturing operation had sales of $41.9 million, $32.0
million and $ 27.7 million and operating losses of $25.4 million, $14.5 million
and $3.3 million during the years ended 1999, 1998 and 1997, respectively.
16. OTHER
The Company's research and development efforts arise from funded
development contracts and proprietary research and development. Amounts arising
from such efforts for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Research and development expenses classified
as general and administrative expenses $ 4,350,162 $ 3,383,082 $ 4,394,359
============ ============= ============
Funded contracts:
Revenues funded by customers $ 6,495,209 $ 8,916,222 $ 6,933,661
Research and development expenses classified
as cost of such revenue (7,642,366) (10,066,340) (7,382,734)
------------ ------------- ------------
Funded contract deficiency $(1,147,157) $ (1,150,118) $ (449,073)
============ ============= ============
</TABLE>
17. EXPORT SALES
Export sales for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Germany $37,420,006 $ 9,949,416 $ 8,879,713
United Kingdom 19,129,958 14,355,817 2,571,566
Ireland 8,061,186 1,045,417 2,279,659
Canada 3,614,972 1,958,905 3,414,059
Japan 1,713,915 925,578 1,167,752
Other 2,157,756 2,554,393 2,864,530
----------- ----------- -----------
Total export sales $72,097,793 $30,789,526 $21,177,279
=========== =========== ===========
</TABLE>
F-21
<PAGE> 48
18. SEGMENT REPORTING
The Company is a holding company for wholly owned subsidiaries which
operate in two primary business segments. The Commercial Transportation Products
segment includes operations which primarily manufacture seating systems for
domestic and foreign passenger airlines and includes operations encompassing
inflatable restraints and related technology for automobiles. The Government and
Defense segment includes operations that design and deliver crash resistant
components, energy absorbing devices, ballistic armor and composites principally
in connection with branches of the United States armed forces procurement. The
remaining segment, entitled Other, represents general corporate operations.
For the years ended December 31, 1999, 1998 and 1997, inter-segment sales
were insignificant and total intercompany sales of $4,736,052, $10,643,702 and
$10,085,025, respectively, have been eliminated.
<TABLE>
<CAPTION>
1999
------------------------------------------------------------------------------
Commercial
Government Transportation
and Defense Products Other Total
----------- -------- ----- -----
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 46,871,663 $ 46,871,663
Product sales:
Airline seat systems 51,313,904 51,313,904
Automotive safety systems 31,372,799 31,372,799
Other 716,712 $ 201,123 917,835
Technology sales and royalties 916,225 916,225
------------- ------------- ------------- -------------
Total revenue $ 47,588,375 $ 83,602,928 $ 201,123 $ 131,392,426
============= ============= ============= =============
Operating (loss) income $ 3,072,246 $ (18,295,659) $ (1,424,833) $ (16,648,246)
Identifiable assets 32,871,455 29,377,329 45,091,307 107,340,101
Depreciation and amortization 1,258,134 3,323,170 1,226,259 5,807,563
Capital expenditures 1,521,939 1,262,161 16,276 2,800,376
</TABLE>
Revenue from three major customers accounted for approximately 42% of total
revenue for the year ended December 31, 1999. Contract and trade receivables
from these customers accounted for approximately 31% of the total contract and
trade receivables at December 31, 1999. The Commercial Transportation Products
segment recognized revenue from Autoliv and Boeing Aircraft that accounted for
approximately 23% and 9%, respectively, of total revenue. The Government and
Defense segment recognized revenue from all branches of the United States armed
forces that accounted for approximately 10% of total revenue for the year ended
December 31, 1999.
The Company anticipates that total sales to Autoliv may increase in the
future, however, as a percentage of revenue may decrease as shipments to
additional first-tier suppliers begin as new vehicle platforms begin in
production. The Company does not expect to have significant sales to Boeing in
the future because of the sale of its new airline seat manufacturing operation
in January 2000 (Note 15). The Company has performed work for the United States
armed forces since 1975 and has no reason to believe that there will be any
change in these customer relationships.
F-22
<PAGE> 49
The Company's external sales based upon the customers country of origin and
investment in long-lived assets by geographic area is as follows:
<TABLE>
<CAPTION>
1999
--------------------------------
Long-Lived
Revenues Assets
-------- ------
<S> <C> <C>
United States $ 59,294,633 $ 48,781,071
Germany 37,420,006
United Kingdom 19,129,958 5,652,226
Ireland 8,061,186
Other foreign countries 7,486,643
------------ ------------
Total $131,392,426 $ 54,433,297
============ ============
</TABLE>
<TABLE>
<CAPTION>
1998
------------------------------------------------------------------------------
Commercial
Government Transportation
and Defense Products Other Total
----------- -------- ----- -----
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 32,430,873 $ 4,778,566 $ 37,209,439
Product sales:
Airline seat systems 30,932,898 30,932,898
Automotive safety systems 27,992,525 27,992,525
Other 3,445,639 $ 19,598 3,465,237
Technology sales and royalties 1,044,579 1,044,579
------------- ------------- ------------- -------------
Total revenue $ 35,876,512 $ 64,748,568 $ 19,598 $ 100,644,678
============= ============= ============= =============
Operating (loss) income $ 1,535,526 $ (5,701,323) $ (1,334,134) $ (5,499,931)
Identifiable assets 30,544,223 47,811,797 32,623,061 110,979,081
Depreciation and amortization 1,251,642 2,486,144 908,745 4,646,531
Capital expenditures 889,119 5,171,569 128,037 6,188,725
</TABLE>
Revenue from three major customers accounted for approximately 27% of total
revenue for the year ended December 31, 1998. Contract and trade receivables
from these customers accounted for approximately 44% of the total contract and
trade receivables at December 31, 1998. The Government and Defense segment
recognized revenue from all branches of the United States armed forces which
accounted for approximately 12% of total revenue for the year ended December 31,
1998.
F-23
<PAGE> 50
The Company's external sales based upon the customers country of origin and
investment in long-lived assets by geographic area is as follows:
<TABLE>
<CAPTION>
1998
-----------------------------------
Revenues Long-Lived Assets
-------- -----------------
<S> <C> <C>
United States $ 69,855,152 $ 40,824,266
United Kingdom 14,355,817 7,730,776
Germany 9,949,416
Other foreign countries 6,484,293
------------ ------------
Total $100,644,678 $ 48,555,042
============ ============
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------------
Commercial
Government Transportation
and Defense Products Other Total
----------- -------- ----- -----
<S> <C> <C> <C> <C>
Revenue:
Contract revenue $ 29,104,203 $ 431,563 $ 29,535,766
Product sales:
Airline seat systems 27,405,305 27,405,305
Automotive safety systems 8,879,713 8,879,713
Other 1,243,302 $ 18,321 1,261,623
Technology sales and royalties 280,049 280,049
------------- ------------- ------------- -------------
Total revenue $ 30,347,505 $ 36,996,630 $ 18,321 $ 67,362,456
============= ============= ============= =============
Operating (loss) income $ 696,485 $ (2,426,666) $ (1,386,354) $ (3,116,535)
Identifiable assets 28,357,665 42,986,193 46,015,416 117,359,274
Depreciation and amortization 1,185,753 1,473,145 846,430 3,505,328
Capital expenditures 2,742,281 5,564,297 (325,997) 7,980,581
</TABLE>
Revenue from three major customers accounted for approximately 55% of total
revenue for the year ended December 31, 1997. Contract and trade receivables
from these customers accounted for approximately 33% of the total contract and
trade receivables at December 31, 1997. The Government and Defense segment
recognized revenue from all branches of the United States armed forces which
accounted for approximately 13% of total revenue for the year ended December 31,
1997. The Commercial Transportation Products segment recognized revenue from
Continental Airlines that accounted for approximately 12% of total revenue for
the year ended December 31, 1997.
The Company anticipates that it will fulfill current delivery requirements
to Continental Airlines in early 1999 and it will not represent as significant
of a customer in 1998 and following years. The Company believes that in the
ordinary course of its airline seating business, the programs with Continental
Airlines will be replaced by programs with other customers.
F-24
<PAGE> 51
The Company's external sales based upon the customers country of origin and
investment in long-lived assets by geographic area is as follows:
<TABLE>
<CAPTION>
1997
---------------------------------
Revenues Long-Lived Assets
-------- -----------------
<S> <C> <C>
United States $46,185,177 $37,532,376
Germany 8,879,713
Canada 3,414,059
United Kingdom 2,571,566 6,417,780
Other foreign countries 6,311,941
----------- -----------
Total $67,362,456 $43,950,156
=========== ===========
</TABLE>
F-25
<PAGE> 52
19. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1999
------------------------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
Revenue $ 31,928,262 $ 34,026,137 $ 33,169,131 $ 32,268,896
Cost of Revenue 23,414,109 25,161,644 23,468,135 30,940,241
------------ ------------ ------------ ------------
Gross margin $ 8,514,153 $ 8,864,493 $ 9,700,996 $ 1,328,655
============ ============ ============ ============
Net earnings (loss) from continuing operations $ 484,269 $ 715,729 $ 1,033,731 $(17,691,080)
Discontinued Operations:
Loss on disposal, net of tax $ (7,238,109)
Extraordinary loss on early extinguishment
of debt, net of tax $ (151,295)
------------ ------------ ------------ ------------
Net loss $ 484,269 $ 715,729 $ 1,033,731 $(25,080,484)
Dividends on preferred stock $ (111,205) $ (93,834) $ (74,497)
------------ ------------ ------------ ------------
Earnings (loss) available for common shareholder $ 484,269 $ 604,524 $ 939,897 $(25,154,981)
============ ============ ============ ============
Net earnings per common share - basic
and assuming dilution $ 0.05 $ 0.06 $ 0.09 $ (2.36)
</TABLE>
<TABLE>
<CAPTION>
1998
------------------------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
<S> <C> <C> <C> <C>
Revenue $ 22,542,178 $ 25,739,419 $ 23,680,404 $ 28,682,677
Cost of Revenue 16,615,993 19,067,593 18,197,029 31,843,231
------------ ------------ ------------ ------------
Gross margin $ 5,926,185 $ 6,671,826 $ 5,483,375 $ (3,160,554)
============ ============ ============ ============
Net (loss) earnings from continuing operations $ 228,679 $ 502,976 $ (559,150) $ (6,985,630)
Discontinued Operations:
(Loss) earnings from discontinued
operations, net of tax $ (223,978) $ (1,932,410) $ (163,000)
Estimated loss on disposal, net of tax $ (4,680,000) $(13,896,000)
------------ ------------ ------------ ------------
Net (loss) earnings $ 4,701 $ (6,109,434) $ (559,150) $(21,044,630)
============ ============ ============ ============
Net earnings per common share - basic
and assuming dilution $ - $ (0.62) $ (0.06) $ (2.12)
</TABLE>
F-26
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION REFERENCE
--- ----------- ---------
<S> <C> <C>
3.1 Articles of Incorporation of Simula, Inc., as amended and restated......... (2)
3.2 Bylaws of Simula, Inc., as amended and restated............................ (1)
4.7 Indenture dated April 1, 1997, in connection with the Company's issuance
of the 8% Senior Subordinated Convertible Notes due May 1, 2004............ (4)
10.11 1992 Stock Option Plan, as amended effective September 15, 1998............ (8)
10.12 1992 Restricted Stock Plan................................................. (1)
10.21 1994 Stock Option Plan, as amended effective September 15, 1998............ (8)
10.26 Simula, Inc. Employee Stock Purchase Plan.................................. (2)
10.29 Form of Change of Control Agreements, as amended, between the Company and (6)
Donald W. Townsend, Bradley P. Forst, and James A. Saunders................
10.30 Form of Employment Agreements between the Company and Donald W. Townsend,
Bradley P. Forst, and James A. Saunders.................................... (7)
10.32 Employment Agreement between the Company and James C. Dodd dated March 2, (10)
1999.......................................................................
10.33 Change of Control Agreement between the Company and James C. Dodd dated
March 2, 1999.............................................................. (10)
10.37 Simula, Inc. 1999 Incentive Stock Option Plan.............................. (11)
10.38 Amended and Restated Asset Purchase Agreement for the sale of Coach and
Car Equipment Corporation, a wholly-owned subsidiary of the Company, dated
August 31, 1999 and Note Refinancing Agreement dated October 21, 1999...... (12)
10.39 Promissory Note between the Company and Stanley P. Desjardins dated
October 15, 1999 and Guarantees by Don and Nelda Townsend, James and Linda
Saunders and Bradley and Teresa Forst dated November 2, 1999............... (13)
*10.40 Asset Purchase Agreement for the sale of Airline Interiors, Inc., a
wholly-owned subsidiary of the Company, dated December 24, 1999............
*10.41 Financing Agreement with The CIT Group/Business Credit, Inc. dated
December 30, 1999..........................................................
10.42 Securities Purchase Agreement with Levine Leichtman Capital Partners II,
L.P. dated December 31, 1999............................................. (14)
*10.43 Employment Agreement between the Company and Joseph W. Coltman dated
February 1, 2000...........................................................
*10.44 Change of Control Agreement between the Company and Joseph W. Coltman
dated February 1, 2000.....................................................
*10.45 Promissory Note between the Company and Stanley P. Desjardins dated
December 31, 1999, effective December 14, 1999.............................
18. Preference Letter re: change in accounting principles...................... (3)
*21. Subsidiaries of the Company................................................
*23. Independent Auditors Consent...............................................
+24. Powers of Attorney - Directors............................................. (5)(9)
*27. Financial Data Schedule
</TABLE>
- ----------
* Filed herewith.
+ Power of Attorney of S. Thomas Emerson filed herewith. All other Powers
of Attorney filed as noted.
<PAGE> 54
(1) Filed with Registration Statement on Form S-18, No. 33-46152-LA, under
the Securities Act of 1933, effective April 13, 1992.
(2) Filed with Definitive Proxy on May 15, 1996, for the Company's Annual
Meeting of Shareholders held on June 20, 1996.
(3) Filed with report on Form 10-Q/A for the quarter ended June 30, 1996.
(4) Filed with Registration Statement on Form S-3/A, No. 333-13499, under
the Securities Act of 1933, effective April 21, 1997.
(5) Filed with report on Form 10-K for the year ended December 31, 1997.
(6) Filed with report on Form 10-Q for the quarter ended March 31, 1998. The
Change of Control Agreements for Messrs. Townsend, Forst and Saunders
are substantially identical and differ materially only in that Mr.
Townsend is entitled to an amount equal to five (5) years base salary
and benefits upon a change of control while Messrs. Forst and Saunders
are entitled to an amount equal to four (4) years base salary and
benefits upon a change of control.
(7) Filed with report on Form 10-Q for the quarter ended March 31, 1998. The
Employment Agreements for Messrs. Townsend, Forst and Saunders are
substantially identical and differ materially only in the following two
respects: (i) the initial term of the agreement with Mr. Townsend is
five (5) years while the initial term of the agreement with Messrs.
Forst and Saunders is three (3) years; and (ii) the post-termination
non-compete period with Mr. Townsend is thirty (30) months while it is
eighteen (18) months with Messrs. Forst and Saunders.
(8) Filed with report on Form 10-Q for the quarter ended September 30, 1998.
(9) Filed with report on Form 10-K for the year ended December 31, 1998.
(10) Filed with report on Form 10-Q for the quarter ended March 31, 1999.
(11) Filed as Appendix A with Definitive Proxy on May 14, 1999, for the
Company's Annual Meeting of Shareholders held on June 17, 1999.
(12) Filed with report on Form 8-K, under the Securities Act of 1933,
effective October 25, 1999.
(13) Filed with report on Form 10-Q for the quarter ended September 30, 1999.
(14) Filed with Schedule 13D, under the Securities Exchange Act of 1934, on
January 10, 2000 effective December 31, 1999 by Levine Leichtman Capital
Partners II, L.P.
<PAGE> 1
Exhibit 10.40a
ASSET PURCHASE AGREEMENT
AMONG
AIRLINE INTERIORS, INC.,
SIMULA TRANSPORTATION EQUIPMENT CORPORATION,
AND
SIMULA, INC.
AS SELLING PARTIES
AND
WEBER AIRCRAFT, INC.
AS PURCHASER
<PAGE> 2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is executed as of this
24th day of December, 1999, by and among AIRLINE INTERIORS, INC., an Arizona
corporation ("Seller"), SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona
corporation ("Simtec"), and SIMULA, INC., an Arizona corporation ("Simula"), and
WEBER AIRCRAFT, INC., a Delaware corporation ("Purchaser"), with reference to
the facts set forth in the Preliminary Statements below.
PRELIMINARY STATEMENTS
A. Simula is the sole shareholder of Simtec, which is in turn the sole
shareholder of Seller.
B. Simula and Simtec may sometimes be hereafter collectively referred
to as the "Shareholder." Seller and Shareholder may sometimes be hereafter
collectively referred to as the "Selling Parties."
C. Seller owns and operates a business involving the design,
manufacture, and sale of new commercial aircraft passenger seats. Seller
conducts this business in Poway, California.
D. Seller desires to sell Purchaser certain assets used in such
business of Seller.
E. In connection with the subject transaction, Purchaser will buy
certain assets of Seller and assume certain liabilities of Seller, all as more
fully provided below in this Agreement.
F. The parties are executing this Agreement in order to memorialize
their understanding concerning said transaction.
AGREEMENT
NOW, THEREFORE, in consideration of the above Preliminary Statements
and the mutual covenants of the parties set forth below in this Agreement, the
parties hereby agree as follows:
ARTICLE 0
KEY BUSINESS TERMS AND DEFINITIONS
0.1 KEY BUSINESS TERMS.
(a) PURCHASE PRICE. The Purchase Price shall be a
variable amount, consisting of the Cash Payment (as defined below) and
the assumption of the Assumed Liabilities (as defined below). The
amount of the Cash Payment shall be determined as provided in Section
1.2(d) below.
<PAGE> 3
The amount of the Assumed Liabilities shall be determined effective as of the
Closing, as provided in Section 0.3(m) below.
(b) INITIAL DEPOSIT. $2,000,000. See Section 1.6 below.
(c) EFFECTIVE DATE. December 31, 1999. See Section 1.10 below.
(d) BALANCE SHEET CUT-OFF DATE. Seven (7) days before the Target
Closing Date. See Section 0.3(tt) below.
(e) TARGET CLOSING DATE. January 25, 2000. See Section 1.6(a)
below.
(f) CLOSING DEADLINE: February 29, 2000. See Section 0.3(o) below.
(g) INDEMNITY CAP. $1,500,000. See Section 8.6(b) below.
(h) INDEMNITY PERIOD. An eighteen (18) month period which is more
precisely defined in Section 0.3(cc). See Section 8.6(b) below.
(i) ACCOUNTING STANDARDS. Except as may be otherwise expressly
provided in this Agreement, all financial and accounting information delivered
to Purchaser by Selling Parties or to be prepared by Seller pursuant to this
Agreement, including without limitation Seller's Financial Statements (as
defined below) shall be prepared in accordance with generally accepted
accounting principles ("GAAP") in the United States, consistently applied. It is
agreed that it will not be necessary to reiterate this principle elsewhere in
this Agreement. The only permitted exceptions to or deviations from GAAP are
expressly noted below.
0.2 DEFINED TERMS GENERALLY. Terms used in this Agreement which begin
with initial capital letters are defined terms which shall have the meanings
ascribed to them in the Preliminary Statements above, in Section 0.3 below, or
elsewhere in this Agreement
0.3 LISTING OF CERTAIN DEFINED TERMS. Terms defined in this
Section 0.3 are as follows:
(a) ACCOUNTS RECEIVABLE. The term "Accounts Receivable" shall
have the meaning given it in Section 1.1(a) below.
(b) AGREED INVENTORY VALUE. The term "Agreed Inventory Value"
shall mean the value of the Included Inventory to be used in calculating
Seller's Adjusted Net Worth. The initial amount of the Agreed Inventory Value
shall be mutually agreed upon by Purchaser and Seller on or before the Balance
Sheet Cut-Off Date. The final amount of the Agreed Inventory Value shall be
determined as part of the Post-Closing Accounting Adjustments. The Agreed
Inventory Value shall be determined in accordance with the procedures set forth
in the Inventory Valuation Methodology attached hereto as Exhibit "B" and the
Inventory Reserve Methodology attached hereto as Exhibit "C." The Agreed
Inventory Value (net of any inventory reserve established pursuant to
2
<PAGE> 4
Paragraph C of Exhibit "C") shall be inserted on line 6 of the Pre-Closing
Balance Sheet; provided, however, that the aggregate amount of the inventory
reserve computed pursuant to Paragraph 2 of Exhibit "C" shall not exceed thirty
percent (30%).
(c) AGREED OFFSETS. The term "Agreed Offsets" shall have the
meaning given it in Section 0.3(nn)(3) below.
(d) ASSETS. The term "Assets" shall mean all the assets of Seller,
whether used in the Business or other businesses of Seller. The Assets consist
of the Included Assets and the Excluded Assets. Purchaser is purchasing only the
Included Assets.
(e) ASSUMED LIABILITIES.
(1) The term "Assumed Liabilities" shall mean the stated
liabilities of Seller with respect to the Business to be assumed by Purchaser
effective as of the Closing. As of the date of this Agreement, the nature and
amount of the liabilities to be included in the Assumed Liabilities are not
known. The parties will make a good faith estimate of the Assumed Liabilities as
of the Balance Sheet Cut-Off Date. The Assumed Liabilities shall only consist of
the specific contractual obligations of Seller to be assumed pursuant to the
Assignment and Assumption Agreement, i.e., (i) certain Vendor Contracts, (ii)
certain Customer Contracts, (iii) certain Equipment Leases (whether operating or
capital leases), and (iv) such other obligations and commitments of Seller as
shall be specified in the Assignment and Assumption Agreement at the Closing.
The Assumed Liabilities will be listed on Schedule 0.3(e). Purchaser and Selling
Parties shall amend this Agreement to reflect their agreement on the items to be
listed on Schedule 0.3(e) before the Balance Sheet Cut-Off Date.
(2) Subject to adjustments to reflect the Post-Closing
Accounting Adjustments, the aggregate amount of the Assumed Liabilities shall
not exceed the sum of the following items listed on the Pre-Closing Balance
Sheet: (i) Seller's trade accounts payable (line 14 on the Pre-Closing Balance
Sheet), (ii) certain of Seller's other accrued liabilities for items approved by
Purchaser (line 15 on the Pre-Closing Balance Sheet); and (iii) certain
inter-company trade payables (the "Simula Payables") in an amount not to exceed
$2,432,000 owing by Seller to Simula Composites Corporation and Simula
Technologies, Inc. for services and materials provided with respect to the
Products (line 16 on the Pre-Closing Balance Sheet). The estimated amount (as of
December 21, 1999) of each such balance sheet entry to be included as part of
the Assumed Liabilities is shown on the Pro Forma Closing Date Balance Sheet
attached hereto as Exhibit "A."
(f) BALANCE SHEET CUT-OFF DATE. The term "Balance Sheet Cut-Off
Date" shall mean the date as of which the Pre-Closing Balance Sheet shall be
prepared. The Balance Sheet Cut-Off Date shall be as specified in Section 0.1(d)
above.
(g) BEST KNOWLEDGE OF SELLER'S RESPONSIBLE EMPLOYEES. The term
"Best Knowledge of Seller's Responsible Employees" shall mean the knowledge of
Seller's Responsible Employees after (1) due inquiry of Seller's employees,
officers, and directors and (2) a review of Seller's books, records and files.
3
<PAGE> 5
(h) Best Knowledge of Selling Parties. The term "Best Knowledge of
Selling Parties" shall mean the Best Knowledge of Shareholder's Corporate
Management and the Best Knowledge of Seller's Responsible Employees,
collectively.
(i) Best Knowledge of Shareholder's Corporate Management. The term
"Best Knowledge of Shareholder's Corporate Management" shall mean the knowledge
of the following officers of Simula: Donald W. Townsend, Bradley P. Forst, James
A. Saunders, and James C. Dodd after due inquiry of Selling Parties' employees,
officers and directors.
(j) Books and Records. The term "Books and Records" shall have the
meaning given it in Section 1.1(b) below.
(k) Business. The term "Business" shall mean the business
conducted by Seller in the Poway Facility involving the design, manufacture and
sale of the Products.
(l) Cash Payment. The term "Cash Payment" shall mean the cash
portion of the Purchase Price payable to Seller by Purchaser for the Included
Assets. The amount of the Cash Payment is a variable amount equal to (1) the sum
of (i) Seller's Adjusted Net Worth determined effective as of the Closing and
(ii) goodwill in the amount of Six Million Five Hundred Thousand Dollars
($6,500,000), (2) reduced by the outstanding principal balance of the Operating
Loan as of the Closing. The amount of the Cash Payment shall be determined as of
the Closing as provided in Section 1.2 below. To illustrate, assuming that
Seller's Adjusted Net Worth as shown on the Pre-Closing Balance Sheet is Six
Million Five Hundred Thousand Dollars ($6,500,000), and the principal balance of
the Operating Loan is One Million Dollars ($1,000,000), the Cash Payment would
be equal to Twelve Million Dollars ($12,000,000). It is understood that the
actual amount of the Cash Payment payable at the Closing will be based on the
amount of Seller's Adjusted Net Worth determined on the basis of the Pre-Closing
Balance Sheet and will be adjusted by the Post-Closing Accounting Adjustments.
(m) Closing. The term "Closing" shall have the meaning given it in
Section 1.6(a) below.
(n) Closing Date. The term "Closing Date" shall mean the date on
which the Closing occurs.
(o) Closing Deadline. The term "Closing Deadline" shall mean the
last date by which the Closing may occur. The Closing Deadline may be extended
by mutual agreement of the parties or as provided in this Agreement. As of the
date of this Agreement, the Closing Deadline is as specified in Section 0.1(f)
above.
(p) Closing Documents. The term "Closing Documents" shall mean and
include:
(1) Assignment and Assumption Agreement (Exhibit "D");
(2) Assignment of Intellectual Property (Exhibit "J");
4
<PAGE> 6
(3) Bill of Sale (Exhibit "E");
(4) Consents to the assignment of the Customer's
Contracts pursuant to Section 2.12 below;
(5) Asset Acquisition Statement (IRS Form 8594); and
(6) Patent License Agreement (Exhibit "H").
(q) Code. The term "Code" shall mean the Internal Revenue Code of
1986, as amended.
(r) Equipment Leases. The term "Equipment Leases"shall have the
meaning given it in Section 1.1(d) below.
(s) Escrow. The term "Escrow" shall mean the escrow to be opened
with Escrowholder pursuant to Section 1.9 below for the purpose of holding the
Initial Deposit and the Closing Documents pending the Closing.
(t) Escrowholder. The term "Escrowholder" shall mean BankOne,
N.A., Columbus, Ohio.
(u) Excluded Assets. The term "Excluded Assets" shall mean those
Assets of Seller which are not being purchased by Purchaser, as listed on
Schedule 0.3(u).
(v) Excluded liabilities. The term "Excluded Liabilities" shall
mean all liabilities of Seller which are not being specifically assumed by
Purchaser as part of the Assumed Liabilities. As noted above, as of the date of
this Agreement, Purchaser does not yet know the exact nature or amount of the
Excluded Liabilities. The Excluded Liabilities shall consist of those
liabilities of Seller to be listed on Schedule 0.3(v) and all other liabilities
of Seller (whether stated or unstated or whether arising out of the Business or
otherwise) which are not part of the Assumed Liabilities to be listed on
Schedule 0.3(e). Schedule 0.3(v) will be prepared at the same time as Schedule
0.3(e).
(w) Funding agreement. The term "Funding Agreement" shall mean
that certain Funding Agreement to be entered into by Purchaser and Selling
Parties pursuant to Section 1.11 below.
(x) Governmental Airworthiness Approvals. The term "Governmental
Airworthiness Approvals" shall have the meaning given it in Section 1.1(e)
below.
(y) HSR Act. The term "HSR Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(z) Included Assets. The term "Included Assets"shall mean those
Assets being
5
<PAGE> 7
purchased by Purchaser pursuant to this Agreement. Generally, the Included
Assets are listed in Sections 1.1(a)-(n) below. However, Purchaser reserves the
right to purchase less than all of the following items listed in Section 1.1 as
being part of the Included Assets: Software Licenses, Supplies, Tangible
Personal Property and Vendor Contracts. At least five (5) business days before
the Balance Sheet Cut-Off Date, Purchaser shall give Selling Parties written
notice of the actual identification and/or quantity of such items which
Purchaser desires to purchase. Upon receipt of such notice from Purchaser,
Purchaser and Selling Parties shall amend the schedules to this Agreement that
may be affected by Purchaser's decisions and adjust the Pre-Closing Balance
Sheet appropriately.
(aa) Included Inventories. The term "Included Inventories" shall
have the meaning given it in Section 1.1(f) below.
(bb) Indemnity Cap. The term "Indemnity Cap" shall mean the maximum
amount which either Selling Parties or Purchaser is obligated to indemnify the
other under Article 8 below. The amount of the Indemnity Cap is specified in
Section 0.1(g) above.
(cc) Indemnity Period. The term "Indemnity Period" shall mean an
eighteen (18) month period beginning on the Closing Date and ending on the last
day of the calendar month in which falls the 18th month anniversary of the
Closing. See Section 8.6(b) below.
(dd) Intellectual Property. The term "Intellectual Property"shall
have the meaning given it in Section 1.1(g) below.
(ee) Manufacturers' Warranties. The term "Manufacturers'
Warranties"shall have the meaning given it in Section 1.1(h) below.
(ff) Operating Loan. The term "Operating Loan" shall mean that
certain loan to be made before the Closing by Purchaser to Seller pursuant to
the Funding Agreement and as provided in Section 1.11 below.
(gg) Post-Closing Accounting Adjustments. The term "Post-Closing
Accounting Adjustments" shall have the meaning given it in Section 0.3(hh)(2)
below.
(hh) Pre-Closing Balance Sheet.
(1) The term "Pre-Closing Balance Sheet" shall mean a
preliminary balance sheet for the Business prepared as of the Balance Sheet
Cut-Off Date by Seller and approved by Purchaser pursuant to Section 1.2(c)
below. The Pre-Closing Balance Sheet shall be prepared in substantially the same
format as the Pro Forma Closing Date Balance Sheet attached hereto as Exhibit
"A." The parties shall agree on the methodology by which the items to be
included as part of the Included Assets shall be reflected on the Pre-Closing
Balance Sheet before the Balance Sheet Cut-Off Date.
(2) It is understood that the Pre-Closing Balance Sheet
may not accurately
6
<PAGE> 8
reflect the actual financial condition of Seller on the Closing, because it will
not be possible to make all necessary accounting entries and adjustments (the
"Post-Closing Accounting Adjustments") to properly close Seller's accounting
books effective as of the Closing until some time thereafter. Accordingly, it is
agreed that the parties shall make the Post-Closing Accounting Adjustments as
provided in Section 7.16 below.
(ii) POST-CLOSING DOCUMENTS. The term "Post-Closing Documents"
shall mean the Transition Support Agreement (Exhibit "I"), Non- Competition
Agreement (Exhibit "F"), and any other documents which the parties may be
required to execute after the Closing in order to fulfill their obligations
under Article 7 below.
(jj) POWAY FACILITY. The term "Poway Facility" shall mean the
industrial building leased by Seller in which the Business is conducted. The
Poway Facility is located at 12325 Kerran Street, Poway, California 92064.
(kk) PRODUCTS. The term "Products" shall mean the new commercial
aircraft passenger seats designed, manufactured and sold by Seller as part of
the Business. The Products are identified by Seller as Model Nos. AI-1000
(economy-class seats) and AI-2000 (business-class and first-class seats).
(ll) PRO FORMA CLOSING DATE BALANCE SHEET. The term "Pro Forma
Closing Date Balance Sheet" shall mean the pro forma or specimen balance sheet
for the Business which is attached hereto as Exhibit "A." The Pre-Closing
Balance Sheet shall be prepared in substantially the same format as the Pro
Forma Closing Date Balance Sheet.
(mm) PURCHASE PRICE. The term "Purchase Price" shall mean the
purchase price to be paid by Purchaser for the Included Assets. The Purchase
Price is a variable amount, as specified in Section 0.1(a) above. The Purchase
Price consists of the Cash Payment and the assumption of the Assumed
Liabilities. See also Section 1.2 below.
(nn) SELLER'S ADJUSTED NET WORTH.
(1) The term "Seller's Adjusted Net Worth" shall be equal
to the difference between: (i) the net aggregate value of the Included Assets
and (ii) the sum of the Assumed Liabilities and the outstanding balance of the
Operating Loan as of the Closing. The parties' initial estimate of Seller's
Adjusted Net Worth shall be reflected on the Pre-Closing Balance Sheet. For
purposes of computing Seller's Adjusted Net Worth, the net aggregate value of
the Included Assets shall be equal to the difference between the Gross Asset
Value and the Agreed Offsets.
(2) The "Gross Asset Value" shall be equal to the sum of
the following:
(i) The Accounts Receivable, as shown on line 4
of the Pre-Closing Balance Sheet;
(ii) An amount equal to the Agreed Inventory
Value, as shown on
7
<PAGE> 9
line 5 of the Pre-Closing Balance Sheet.
(iii) The book value of the items
historically included as part of Seller's "property and equipment" (but only to
extent same are part of the Included Assets), as shown on line 8 of the
Pre-Closing Balance Sheet but not less than $608,000; and
(iv) The value of the items which have
been historically included on Seller' balance sheets in the category of "other
assets" (but only to the extent same are part of the Included Assets), as shown
on line 10 of the Pre-Closing Balance Sheet.
(3) The "Agreed Offsets" shall be equal to the
sum of (i) a warranty offset in the amount of One Million Seven Hundred
Twenty-One Thousand Nine Hundred Twelve Dollars ($1,721,912) and (ii) a
certification offset in the amount of Five Hundred Sixty Thousand Dollars
($560,000). The procedures to be followed in computing the Agreed Inventory
Value will reflect an inventory reserve computed in accordance with Exhibit "C."
(oo) SELLER'S FINANCIAL STATEMENTS. The term "Seller's
Financial Statements" shall have the meaning given it in Section 2.13 below.
(pp) SELLER'S RESPONSIBLE EMPLOYEES. The term "Seller's
Responsible Employees" shall mean and include: (1) the following employees of
the Selling Parties: Donald Rutter, Jim Bucci, Daniel W. Henke, Gary
Perschbacher, Thomas Nobles, and Mary Ann Brimhall, and (2) such other employees
as may be identified by employment position in the various sections of Article 2
below in which this defined term is used.
(qq) SHARED USE PATENT. The term "Shared Use Patent" shall
mean that patent currently owned by Seller which is known as "16g load limiting
technology" and which is identified as U.S. Patent No. 5,730,492 on Schedule
1.1(g). The Shared Use Patent is part of the Intellectual Property to be
acquired by Purchaser as part of the Included Assets.
(rr) SIMULA PAYABLES. The term "Simula Payables" shall
have the meaning given it in Section 0.3(e)(2) above.
(ss) TANGIBLE PERSONAL PROPERTY. The term " Tangible
Personal Property" shall have the meaning given it in Section 1.1(l) below.
(tt) TARGET CLOSING DATE. The term "Target Closing Date" shall
mean the date on which the parties reasonably anticipate that the Closing will
occur. The Target Closing Date shall be as specified in Section 0.1(e) above.
(uu) TOOLING. The term "Tooling" shall have the meaning
given it in Section 1.1(m) below.
(vv) TRANSITION PERIOD. The term "Transition Period" shall
mean a period of time following the Closing during which Purchaser will operate
in the Poway Facility pursuant to the
8
<PAGE> 10
Transition Support Agreement in order to prepare the Business for relocation to
Purchaser's manufacturing facility in Gainesville, Texas.
ARTICLE 1
SALE AND TRANSFER OF ASSETS
1.1 SALE OF INCLUDED ASSETS. Subject to all the terms and
conditions of this Agreement, at the Closing Seller hereby agrees to sell,
transfer, assign and deliver to Purchaser, and Purchaser hereby agrees to
purchase, all of Seller's right, title and interest in and to the Included
Assets. The Included Assets shall consist of the following:
(a) ACCOUNTS RECEIVABLE. All accounts receivable and
other rights to receive payment (collectively, the "Accounts Receivable") under
the Customer Contracts or otherwise, as may arise in the normal course of
business and are in existence at the Closing and all deposits, prepayments,
bonds, and refunds, as listed on Schedule 1.1(a);
(b) BOOKS AND RECORDS. All documents, customer files,
records, operating manuals, files and computer software which pertain to the
Business, whether printed or in electronic format, including without limitation
all procedure manuals, all vendor and supplier lists, customer lists, ledgers,
journals and general operational business and financial books and records
necessary to the uninterrupted operation of the Business (collectively, the
"Books and Records");
(c) CUSTOMER CONTRACTS. All open written contracts and
open written purchase orders (the "Customer Contracts"), with customers of
Seller for the sale of the Products, including without limitation components
thereof and related equipment or modifications and replacement parts, which are
open or incomplete as of the Closing, including without limitation those
contracts and purchase orders under which either (1) Seller has not completed
performance of its production or delivery obligations to its customers (i.e.
customer order backlog), or (2) such customers have not made payment in full to
Seller in accordance with applicable contractual provisions, as listed on
Schedule 1.1(c);
(d) EQUIPMENT LEASES. The leases (the "Equipment Leases")
for equipment used in the Business, but only those listed on Schedule 1.1(d);
(e) GOVERNMENTAL AIRWORTHINESS APPROVALS. To the extent
assignable or transferable, all approvals, authorizations, licenses,
certificates, accreditations and registrations and other licenses or permits
(collectively, the "Governmental Airworthiness Approvals") issued by
governmental airworthiness authorities anywhere in the world with respect to the
Products or in connection with the operation of the Business, including without
limitation the permits, approvals and licenses listed on Schedule 1.1(e);
(f) INCLUDED INVENTORIES. Subject to Section 2.10 below,
all inventories (the "Included Inventories") of the Products, including without
limitation raw materials and parts, work-in-process and finished goods, together
with such additions and deletions thereto as may arise in the
9
<PAGE> 11
ordinary course of business before the Closing, as listed on Schedule 1.1(f);
(g) INTELLECTUAL PROPERTY. All intangible property
(collectively, the "Intellectual Property") related to the Business, including
without limitation the patents, copyrights, licenses, intellectual property,
drawings, formulas and rights listed on Schedule 1.1(g);
(h) MANUFACTURERS' WARRANTIES. All warranties (the
"Manufacturers' Warranties") provided by any third-party manufacturers or
vendors with respect to any components or parts used in manufacturing the
Products;
(i) OTHER ASSETS. Any other assets (the "Other Assets")
of Seller utilized in the Business, wheresoever situated, excluding, however,
the Excluded Assets (Schedule 0.3(u));
(j) SOFTWARE LICENSES. The software licenses, including
appurtenant documentation and object and source code (the "Software Licenses"),
for the computer software programs used by Seller in the Business listed on
Schedule 1.1(j), it being agreed that Schedule 1.1(j) shall list only those
items which Purchaser elects to purchase as provided above;
(k) SUPPLIES. To the extent not part of the Included
Inventories, the inventories of manufacturing supplies, office supplies and
other disposables and consumables (the "Supplies") owned by Seller which are
used in connection with the Business, together with such additions and deletions
thereto as may arise in the ordinary course of business before the Closing as
listed on Schedule 1.1(k), it being agreed that Schedule 1.1(k) shall list only
those items which Purchaser elects to purchase as provided above;
(l) TANGIBLE PERSONAL PROPERTY. Certain tangible personal
property (the "Tangible Personal Property") used in connection with the
Business, including without limitation appurtenant manufacturing equipment and
machinery, furniture, computers, fixtures, office furnishings, and samples of
the Products, as listed on Schedule 1.1(l), but only those items which Purchaser
elects to purchase as provided above;
(m) TOOLING. All tooling, fixtures, molds, jigs, assembly
tools, and patterns and sample parts used to manufacture any parts or components
of the Products (collectively, the "Tooling"), whether located in the Poway
Facility or at the facilities of Seller's vendors, as listed on Schedule 1.1(m);
and
(n) VENDOR CONTRACTS. Those contracts and purchase orders
(collectively, the "Vendor Contracts") issued by Seller to its vendors for
parts, components, materials and other supplies used to manufacture the
Products, as listed on Schedule 1.1(n), it being agreed that Schedule 1.1(n)
shall list only those Vendor Contracts which Purchaser elects to acquire or
assume.
1.2 PURCHASE TRANSACTION.
(a) GENERAL. At the Closing, Purchaser shall purchase the
Included Assets for the Purchase Price as preliminarily determined on the basis
of the Pre-Closing Balance Sheet, which
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shall be prepared as provided in the following provisions of this Section 1.2.
See also Section 0.1(a) above. The Purchase Price is subject to adjustment to
reflect the Post-Closing Accounting Adjustments, as provided in Section 0.3(hh)
above. The Purchase Price shall be paid as provided in Section 1.6 below.
(b) CERTAIN PRE-CLOSING ACTIONS. No less than five (5)
business days before the Balance Sheet Cut-Off Date, Purchaser shall advise
Selling Parties of those items of Seller's Assets which Purchaser desires to be
included among the Included Assets pursuant to Section 1.1 above. In addition,
Seller and Purchaser shall cooperate with one another in order to assist
Purchaser in selecting the employees of Seller whom Purchaser desires to hire
after the Closing. See Section 4.1(b) and 5.2(m) below.
(c) DETERMINATION OF PRE-CLOSING BALANCE SHEET. At least
three (3) business days before the Target Closing Date, Seller shall deliver to
Purchaser the Pre-Closing Balance Sheet for the Business prepared on a basis
consistent with: (1) Seller's Financial Statements and (2) Seller's accounting
practices prior to the date of this Agreement. The Pre-Closing Balance Sheet
shall be used to make a preliminary estimate of Seller's Adjusted Net Worth and
the amount of the Assumed Liabilities as of the Closing. Purchaser shall have
two (2) business days after receipt from Seller in which to review and approve
the Pre-Closing Balance Sheet. If Purchaser disapproves of the Pre-Closing
Balance Sheet as prepared by Seller, Purchaser shall send Seller a written
notice to such effect. Purchaser's failure to timely object to the Pre-Closing
Balance Sheet as prepared by Seller shall mean that Purchaser has approved of
same. If Purchaser timely disapproves of Seller's Pre-Closing Balance Sheet, the
parties shall meet and confer in order to agree on a mutually agreeable
Pre-Closing Balance Sheet. If the parties are unable to agree on the Pre-Closing
Balance Sheet within two (2) business days after the Purchaser sends its
disapproval notice, the matter shall be promptly resolved by Selling Parties'
accounting firm, Deloitte & Touche, LLP, and Purchaser's accounting firm, Ernst
& Young, LLP, in a fair and impartial manner. Resolution of disagreements over
the Pre-Closing Balance Sheet shall extend the Target Closing Date until such
time as the matter is resolved. Extensions of the Target Closing Date pursuant
to the preceding sentence shall extend the Closing Deadline for an equal amount
of time.
(d) AMOUNT OF CASH PAYMENT. The Cash Payment shall then
be calculated as provided in Section 0.3(l) above. The Cash Payment shall be
paid all in cash at the Closing, as more fully provided in Section 1.6 below.
After the Post-Closing Accounting Adjustments are made, the amount of the Cash
Payment shall be appropriately adjusted as provided in Section 0.3(hh) above.
(e) AMOUNT OF ASSUMED LIABILITIES. The estimated amount
of the Assumed Liabilities shall be as set forth on the Pre-Closing Balance
Sheet approved by Seller and Purchaser pursuant to Section 1.2(c) above. The
Assignment and Assumption Agreement (Exhibit "D") shall list the specific items
to be included among the Assumed Liabilities, as set forth on Schedule 0.3(e).
1.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated by Purchaser and Seller on the basis of an allocation of the value of
the Included Assets made by the parties and their respective accounting
advisors, Ernst & Young, LLP and Deloitte & Touche, LLP. Seller shall cooperate
in providing the information necessary for the completion and filing of IRS Form
8594,
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Asset Acquisition Statement, under Section 1060 of the Code. The parties
shall each deliver executed copies of said Form 8594 at the Closing.
1.4 ASSUMPTION OF ASSUMED LIABILITIES. Subject to all the terms
and conditions of this Agreement, effective as of the Closing, Purchaser shall
assume the Assumed Liabilities by executing and delivering to Seller the
Assignment and Assumption Agreement substantially in the form of Exhibit "D"
hereto. The Assumed Liabilities shall be listed on Schedule 0.3(e).
Notwithstanding anything in this Agreement to the contrary, the Assumed
Liabilities shall not include any of the Excluded Liabilities.
1.5 CALIFORNIA SALES TAX. Purchaser shall pay any and all state
and local sales or transfer taxes that may be payable in connection with the
sale of the Included Assets.
1.6 CLOSING MATTERS.
(a) GENERAL.
(1) The consummation (the "Closing") of the
transactions contemplated in this Agreement shall occur at one time after all
conditions to the Closing have been waived or satisfied. The Closing shall take
place at the offices of Hillyer & Irwin in San Diego, California, or at such
other place as Purchaser and Seller may agree upon in writing.
(2) The parties anticipate that the Closing will
occur on the Target Closing Date specified in Section 0.1(e) above. The Target
Closing Date may be extended to such other date as may be mutually agreed upon
by the parties or as provided in this Agreement. The Closing shall occur as soon
as practical after the expiration of the applicable waiting period under the HSR
Act, but not later than the Closing Deadline, as the same may be extended. See
Article 5.2(s) below. Extensions of the Target Closing Date under applicable
provisions of this Agreement shall also extend the Closing Deadline on a
day-for-day basis, notwithstanding anything in this Agreement to the contrary.
(b) DEPOSIT OF PURCHASER'S FUNDS. Promptly upon execution
of this Agreement by both parties, Purchaser shall deposit the Initial Deposit
into the Escrow. Between the date of the deposit of the Initial Deposit and the
Effective Date, the Escrow shall remain a unilateral escrow for the exclusive
benefit of Purchaser. After the Effective Date, the Escrow shall become a
bilateral escrow for the joint benefit of Seller and Purchaser, subject to all
the terms and conditions of this Agreement and the Funding Agreement. The
Initial Deposit shall be disbursed to fund the Operating Loan pursuant to the
Funding Agreement. See Section 1.11 below. The balance of the Initial Deposit
shall be credited against the Cash Payment. Interest accrued on funds deposited
into the Escrow while they are in Escrow shall accrue to the benefit of
Purchaser.
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(c) CLOSING PROCEDURES. At the Closing:
(1) Seller shall deliver to Escrowholder the
documents necessary to transfer title to the Included Assets, as more fully
provided in Section 1.8 below;
(2) Purchaser and Seller shall execute and
deliver to Escrowholder the Closing Documents;
(3) Purchaser shall deposit the unpaid balance
of the Cash Payment into the Escrow by wire transfer of immediately available
funds; and
(4) Purchaser and Seller shall execute and
deliver all other agreements and documents described in or contemplated in
Articles 4, 5, and 6 below (to the extent not included in the Closing Documents)
and all other documents reasonably agreed by the parties' respective legal
counsel to be required to be delivered and/or executed at or prior to Closing in
order to complete the transactions contemplated by this Agreement.
1.7 Bulk sale transfer notice. As a condition to the Closing,
Purchaser shall give notice to Seller's creditors of the bulk transfer
contemplated by this Agreement pursuant to Division 6 of the California
Commercial Code. At least thirty (30) days before the Target Closing Date,
Selling Parties will furnish Purchaser with the information necessary to prepare
this notice, including all names and business addresses used by it within the
last three (3) years and the location of all the Included Assets.
1.8 Instruments of Conveyance and Transfer. At the Closing, Seller
shall deliver (a) the executed Closing Documents, (b) the executed Post-Closing
Documents, (c) such additional documents as may be required to transfer title to
the Intellectual Property to Purchaser, and (d) other good and sufficient
endorsements, assignments and instruments of conveyance and transfer, and
releases of liens, in form and substance reasonably satisfactory to Purchaser's
legal counsel, may be required to vest in Purchaser title to the Included Assets
free and clear of all liens and encumbrances. Simultaneously with such delivery,
Seller shall take all such steps as may be reasonably required to put Purchaser
in actual possession and complete operating control of the Included Assets and
the Business.
1.9 Escrow Instructions. This Agreement shall constitute escrow
instructions to Escrowholder. By signing the signature page of this Agreement in
the space provided below, Escrowholder agrees to comply with said escrow
instructions. Seller and Purchaser agree to execute such supplemental and/or
general escrow instructions as Escrowholder may reasonably request. However, in
the event of a conflict between this Agreement and such supplemental or general
escrow instructions, this Agreement shall control. Selling Parties shall pay all
costs of the Escrow.
1.10 Effective Date. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall not be effective on its execution. Rather, it
shall become effective as of the Effective Date specified in Section 0.1(c)
above, provided Seller has delivered the executed Funding
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Agreement to Purchaser and delivered to Escrowholder the executed Promissory
Note and the executed Guaranty of Simula provided for under the Funding
Agreement. Seller's delivery of the Funding Agreement, said Promissory Note and
said Guaranty shall be a condition precedent to Purchaser's obligations under
the Funding Agreement.
1.11 Funding Agreement. In order to assist Seller in meeting its
obligations under Section 4.1(a) below concerning the conduct of the Business
before the Closing, Purchaser has agreed to loan Seller up to One Million
Dollars ($1,000,000) (the "Operating Loan") pursuant to a certain Funding
Agreement (the "Funding Agreement") attached as Exhibit "G", to be entered into
by Purchaser, Seller and Simula. The proceeds of the Operating Loan shall be
used only for the following purposes: operating expenses of the Business
incurred in the ordinary course of business and trade payables of Seller
existing (as of December 31, 1999) with respect to the Business. The Operating
Loan shall not be used to pay inter-company loans or purchase parts or materials
to be used to manufacture the Products or fixed assets. The Funding Agreement
shall contain more detailed provisions for the use of the proceeds of the
Operating Loan. The Operating Loan shall be funded from the Initial Deposit in
the Escrow. As a condition to the disbursement of the proceeds of the Operating
Loan, Seller shall execute a Promissory Note and Simula shall execute a
Guaranty, both in form and substance reasonably satisfactory to the parties. The
loan proceeds shall be disbursed in increments. In order to draw down on the
Operating Loan, Seller shall submit a loan draw request to Escrowholder and
Purchaser describing in reasonable detail the purposes for which the draw
request is being submitted. If Purchaser approves the loan draw request,
Escrowholder shall issue a check payable to the order of the payee(s) specified
in Seller's draw request. Interest shall accrue on the Operating Loan only as
provided in the Funding Agreement. The Funding Agreement shall contain a more
complete statement of the parties' understanding concerning the Operating Loan.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Neither Seller nor Shareholder makes any representations or warranties
concerning the subject transactions, except as expressly provided in this
Article 2 or elsewhere in this Agreement. Neither Seller nor Shareholder makes
any representations or warranties as to pro forma financial information and
forecasts previously given Purchaser, except that they were prepared in good
faith. In addition, except as expressly set forth in this Agreement, neither
Seller nor Shareholder makes any warranty regarding the accuracy of the
information in any marketing materials or business summaries provided by CIBC
World Markets Corp., or in oral presentations (including the written materials
used therein) by Selling Parties' management personnel and/or CIBC World Markets
Corp., except that such materials and summaries were prepared in good faith.
Subject to the foregoing, Seller and Shareholder hereby represent,
warrant and agree that the following representations and warranties of the
Selling Parties are true, accurate and complete as of the date of this Agreement
and will be true, accurate and complete as of the Closing:
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2.1 ORGANIZATION AND STANDING. Selling Parties are corporations
duly organized, validly existing and in good standing under the laws of the
State of Arizona and qualified to do business as foreign corporations in
California and any other jurisdictions where such qualification is required.
Selling Parties have all requisite power and authority to carry on their
respective businesses as such businesses are now being conducted and to own the
properties and assets each now owns. Selling Parties have heretofore delivered
to Purchaser true, accurate and complete copies of their respective Articles of
Incorporation and Bylaws, together, in each case, with all amendments thereto
which have been adopted by requisite corporate action.
2.2 AUTHORITY FOR AGREEMENT. The respective Boards of Directors of
Seller and Shareholder have taken all actions required by law, their respective
Articles of Incorporation and Bylaws or otherwise to authorize the execution and
delivery of this Agreement, on behalf of Seller and Shareholder, the performance
by Seller and Shareholder of their respective obligations under this Agreement
and the consummation of the transactions contemplated hereby.
2.3 OWNERSHIP OF SELLER. Simtec owns one hundred percent (100%) of
the common stock of Seller. No other securities of Seller have been issued.
Simula owns one hundred percent (100%) of the common stock of Simtec. No other
securities of Simtec have been issued.
2.4 NO DEFAULTS OR VIOLATIONS. Except as disclosed on Schedule
2.4, neither the execution and delivery of this Agreement, nor the performance
by Selling Parties of their obligations under this Agreement nor the
consummation of the transactions contemplated hereby will: (a) violate any
provision of their respective Articles of Incorporation or Bylaws, or any
financing or other agreements by which any of them may be bound; (b) violate, or
be in conflict with, or constitute a default under, or permit the termination of
any of the Government Airworthiness Licenses or any customer agreement or
contract by which Selling Parties are bound, or result in the creation or
imposition of any lien upon any of the Included Assets; (d) require the
agreement or consent of any third party; or (e) violate any material statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Selling Parties or the Business may be subject.
2.5 TAXES. Selling Parties have filed all federal, state,
employment, and local tax returns or information returns required to be filed by
them. All of such returns have been prepared and filed in accordance with the
applicable laws and regulations. Selling Parties have paid or accrued for all
taxes and assessments (including, without limitation, income, excise,
unemployment, worker's compensation, social security, occupation, franchise,
property, sales and use taxes, import duties or charges, and all penalties and
interest in respect thereof) due and payable. Selling Parties have not been
audited by any taxing authority, nor are Selling Parties aware that any taxing
authority contemplates such an audit, nor have Selling Parties signed any
consent or extension agreement with any taxing authority. None of the Selling
Parties is a party to any dispute about taxes of any nature in any jurisdiction.
2.6 LITIGATION. Except as disclosed on Schedule 2.6, as of the
date of this Agreement, there is no investigation, audit, litigation, action,
suit or proceeding of any nature pending, or, to the Best Knowledge of Selling
Parties, threatened, against any Selling Party, their properties or any of their
officers or directors before any court or governmental agency, which if
adversely decided which
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could: (a) result in any material liability for Purchaser; (b) result in any
lien on any of the Included Assets; (c) have a material adverse effect on
Selling Parties' ability to perform their obligations under this Agreement; or
(d) have a materially adverse effect on the Business. For purposes of this
Section 2.6, the term "Seller's Responsible Employees" shall include Bradley P.
Forst, and Seller's quality assurance personnel and field service personnel.
2.7 COMPLIANCE WITH LAW AND REGULATIONS. To the Best Knowledge of
Selling Parties, Selling Parties are in compliance with all material
requirements of all applicable domestic and foreign laws, and all material
requirements of all domestic and foreign governmental bodies or agencies having
jurisdiction over the Selling Parties relating to the conduct of the Business
and the use of the Products in the commercial aircraft industry. For purposes of
this Section 2.7, the term "Seller's Responsible Employees" shall include
Bradley P. Forst, and Seller's human resources personnel,
manufacturing/production personnel, and quality assurance personnel.
2.8 GOVERNMENTAL APPROVALS. Schedule 1.1(e) lists all Governmental
Airworthiness Approvals granted to Seller by the United States Federal Aviation
Administration ("FAA") and the United Kingdom Civil Aviation Authority ("CAA")
that are material and necessary to the conduct of the Business. Except as
otherwise disclosed on Schedule 1.1(e), the conduct of the Business is in
compliance in all material respects with the Governmental Airworthiness
Approvals. In addition, Selling Parties have obtained, are subject only to and
are in full compliance with the other material governmental licenses, permits,
and other authorizations necessary to the conduct of the Business which are
listed on Schedule 2.8.
2.9 TITLE TO AND CONDITION OF INCLUDED ASSETS. Seller does not own
any real property. Except as set forth on Schedule 2.9, Seller has good and
marketable title to all the Included Assets which are not leased, free and clear
of liabilities, liens, security interests, defects, rights, charges and
encumbrances. Seller has good and valid leasehold estates in the equipment
leased under the Equipment Leases and is not in default under any of the
Equipment Leases. All of the Tangible Personal Property, the Included
Inventories and the Tooling are in good operating condition and repair, ordinary
wear and tear excepted. All the Books and Records are located in the Poway
Facility.
2.10 INVENTORIES. Schedule 1.1(f) is a true, accurate and complete
listing of the Included Inventories (including work-in-process). Except for
obsolete items that have been adequately reserved for, written off or written
down to net realizable value in accordance with the methodology set forth on
Exhibit "C" hereto, the Included Inventories: (a) are new and of a quality and
condition that comply with the warranties for the Products customarily given to
Seller's customers, (b) are of a commercially acceptable quality consistent with
quality standards generally prevailing in the commercial aircraft industry, and
(c) comply with Seller's design and manufacturing specifications for the
Products. All items included as part of the Included Inventory are capable of
being incorporated into the Products "as is" without rework or modification to
meet current drawing requirements. As of the Closing, no seat cushions which are
part of the Included Inventories will be older than ninety (90) days after the
applicable original date of manufacture. The amount stated on line 5 of the Pro
Forma Pre-Closing Balance Sheet as the Agreed Inventory Value for the Included
Inventory does not include any amount for Seller's refurbishment inventory
(which is not part of the Business) or engineering or testing costs incurred
with respect to the Products.
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2.11 OBLIGATIONS TO THIRD PARTIES OTHER THAN CUSTOMERS.
(a) LISTING. Schedule 2.11 is a true, accurate and
complete listing (effective as of the date hereof) of all material written
agreements and commitments of Seller to third parties who are not customers of
Seller, to which Seller is a party or by which it or any of the Included Assets
may be bound. The information contained on Section 2.11 may be duplicative of
information provided on other schedules of Seller. Such agreements and
commitments include the following:
(1) Notes, loans, credit agreements, mortgages,
indentures, security agreements, and other agreements and instruments relating
to the borrowing of money by, or the extension of credit to, Seller;
(2) Credit agreements, guarantees, etc. executed
by Shareholder for the benefit of Seller;
(3) Written employment and consulting
agreements;
(4) Written sales agency, representative, broker
or distributorship agreements;
(5) Equipment and real property leases,
including the Equipment Leases;
(6) Open contracts, open purchase orders and
other written agreements, orders or commitments for the purchase by Seller of
raw materials, supplies or finished products exceeding Two Thousand Five Hundred
Dollars ($2,500) in any one instance or Five Thousand Dollars ($5,000) in the
aggregate to any single vendor; and
(7) Open purchase orders and other written
agreements, orders or commitments for the purchase by Seller of services
exceeding Two Thousand Five Hundred Dollars ($2,500) in any one instance or Five
Thousand Dollars ($5,000) in the aggregate to any single vendor.
(b) DELIVERY OF DOCUMENTS. Prior to the execution of this
Agreement, Seller shall has delivered to Purchaser true, accurate and complete
copies of all of the agreements and commitments listed on Schedule 2.11,
together with all amendments thereto. Except the agreements and commitments
listed on Schedule 2.11, Seller does not now have (and at the Closing will not
have) any written agreements or commitments, contingent or otherwise, (1) to
incur any indebtedness in any amount, (2) for the purchase of supplies, services
or other similar items in excess of Two Thousand Five Hundred Dollars ($2,500)
in any one instance, or (3) for the purchase of any raw materials, supplies,
equipment, or machinery in excess of Two Thousand Five Hundred Dollars ($2,500)
in any one instance.
2.12 CUSTOMER CONTRACTS. Schedule 1.1(c) is a true, accurate and
complete listing (effective as of the date of this Agreement) of: (a) all the
Customer Contracts and (b) a true, accurate
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and complete listing (by customer name) of all of Seller's current customer
order backlog. Prior to the execution of this Agreement, Seller has delivered to
Purchaser (to the extent not previously delivered to Purchaser) true, accurate
and complete copies of all the Customer Contracts, together with all amendments
thereto. The Customer Contracts are assumable by Purchaser according to their
terms, it being agreed, however, that Purchaser shall be obligated to assume and
Seller shall be obligated to assign only such Customer Contracts as may be
specified in the Assignment and Assumption Agreement. Seller shall use
commercially reasonable efforts to obtain consents for the assignment of the
Customer Contracts, as may be reasonably requested by Purchaser. During the
period between the date of this Agreement and the Closing, Seller shall not
negotiate or execute any contracts for the sale or manufacture of the Products
(or spare parts for the Products) without first obtaining Purchaser's prior
written consent thereto, which consent shall not be unreasonably withheld or
delayed.
2.13 FINANCIAL STATEMENTS. The unaudited financial statements of
Seller for the years ended December 31, 1997 and December 31, 1998, and for the
eleven (11) months ended November 30, 1999 listed on Schedule 2.13
(collectively, "Seller's Financial Statements") are true, accurate and complete
in all material respects, and fairly present the financial condition of Seller
as of the respective dates thereof and the results of the operations of Seller
for the periods covered thereby.
2.14 ABSENCE OF MATERIAL CHANGES. Except as disclosed on Schedule
2.14, since the date of the last audited financial statement of Simula, there
has not been any:
(a) Sales of the Products by Seller except in the
ordinary course of business;
(b) Capital expenditure by Seller exceeding Five Thousand
Dollars ($5,000) in any one instance or Ten Thousand Dollars ($10,000) in the
aggregate;
(c) Material adverse change in the financial condition,
liabilities, assets, customer order backlog, production backlog, business, or
prospects of Selling Parties;
(d) Destruction, damage, or loss of any Included Asset
(whether insured or uninsured) that would materially and adversely affect the
financial condition, business, or prospects of Selling Parties;
(e) Change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Seller;
(f) Revaluation by Seller of any of the Included Assets;
(g) Increase in the salary or other compensation payable
or to become payable by Seller to any of its respective officers, directors,
employees, or declaration, payment, or obligation of any kind for payment, by
Seller, of a bonus or other additional salary or compensation of any such person
other than in the ordinary course of business;
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(h) Sale or transfer of any of the Included Assets,
except in the ordinary course of business;
(i) Amendment or termination of any Customer Contract,
except in the ordinary course of business;
(j) Loan made by Seller to any person or entity or
guaranty by Seller of any loan or indebtedness for the benefit of any third
party;
(k) Mortgage, pledge, or other encumbrance of any
Included Asset by Seller;
(l) Waiver or release of any right or claim of Seller
relating to the Included Assets, except in the ordinary course of business;
(m) To the Best Knowledge of Selling Parties,
commencement or notice or threat of commencement of any civil or criminal
litigation or any governmental proceeding against or investigation of any
Selling Party or the affairs of any one of them, the adverse determination of
which would materially affect the Business or the Included Assets; or
(n) Claim of unlawful labor practice or employment
discrimination action.
2.15 NO OTHER LIABILITIES OR ADVERSE CONDITIONS. Except for (a) the
liabilities set forth on Seller's Financial Statements and on Schedules 1.1(c),
2.13, or 2.14, (b) liabilities incurred by Seller in the ordinary course of
business since December 31, 1998, and (c) the Agreed Offsets, to the Best
Knowledge of Selling Parties, Seller has no other liabilities of any nature,
whether absolute, accrued, contingent or otherwise, or whether due or to become
due, that are of a material nature, and, to the Best Knowledge of Selling
Parties, there is no basis known to Selling Parties for the assertion against
Seller of any such liability. All liabilities incurred since such date were
incurred in the ordinary course of business and are usual and normal in amount,
both individually and in the aggregate. For purposes of this Section 2.15, the
term "Seller's Responsible Employees" shall include Seller's quality assurance
and field service personnel.
2.16 ACCOUNTS RECEIVABLE. Schedule 1.1(a) is a true, accurate and
complete listing of all the Accounts Receivable, with the balances due Seller as
of the dates indicated. Except as expressly disclosed on Schedule 1.1(a), the
Accounts Receivable are free of any liens or encumbrances and are collectible in
full in the ordinary course of business. Except in the ordinary course of
business, Seller has no obligation to accept returns from, or to extend credit
terms to, its customers and has no policy, custom or practice of: (a) accepting
returns or extending credit, whether or not legally obligated to do so, other
than in the ordinary course of business, or (b) providing free or discounted
goods to customers that would affect the valuation of the Accounts Receivable or
Seller's customer order backlog. Except as may be disclosed on Schedules 2.9 and
1.1(a), no person has a security interest in the Accounts Receivable.
Shareholder has agreed to guarantee the collectability of the Accounts
Receivable pursuant to Section 7.3 below. Schedule 2.16 is a true, accurate and
complete listing of any Accounts Receivable which Selling Parties presently deem
to be uncollectable.
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2.17 ACCOUNTS PAYABLE. Schedule 2.17 is a true, accurate and
complete listing of all accounts payable of Seller and any collateral or
security applicable to the indebtedness owed by Seller to its creditors is
listed on Schedule 2.17.
2.18 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except as
disclosed on Schedule 2.18 and as may be required under the HSR Act, no consent,
approval or authorization of, or declaration, filing or registration with, any
governmental, quasi-governmental, or regulatory authority is required to be made
or obtained by Seller in connection with the execution, delivery and performance
of this Agreement by Seller. Seller has filed all reports and returns required
by federal, state or municipal authorities with respect to the Business prior to
the date of this Agreement and has paid or will pay all sums that will become
due with respect to such reports and returns before the Closing.
2.19 LABOR, EMPLOYMENT CONTRACTS AND EMPLOYEE BENEFITS PLANS.
(a) EMPLOYEE POLICIES AND BENEFITS. Schedule 2.19(a)(1)
is a true, accurate and complete listing of all written personnel employment
agreements, policies, procedures, practices and employee rules and manuals which
are provided to employees, whether or not legally binding, including but not
limited to policies with respect to hiring, compensation, disability, sick
leave, vacation, leaves of absence, tuition reimbursement, relocation and
termination. Schedule 2.19(a)(2) is a listing of all of Seller's group
insurance, group hospitalization and other employee insurance benefit plans.
(b) MATERIAL OBLIGATIONS TO EMPLOYEES. Except as set
forth on Schedule 2.19(b), Seller has no material obligations, contingent or
otherwise, written or oral, under any employment contract, collective bargaining
agreement, pension or retirement plan, bonus plan, or other employee contract or
non-terminable agreement, expressed or implied, except (1) normal salary or wage
accruals, and (2) normal paid vacations and sick leave accruals.
(c) PAYROLL ROSTER. The names and current aggregate
annual compensation rates as of the date of this Agreement of each employee of
the Seller receiving regular compensation, and designations as a union or
non-union employee, are set forth in Schedule 2.19(c).
(d) ACCRUED VACATION AND SICK DAY ALLOWANCES. The amount
of currently accrued vacation and sick day allowances due to each employee on
the date hereof is listed by employee name on Schedule 2.19(d).
(e) INS FORM I-9. Seller has obtained Form I-9 from all
of its employees and Seller is in compliance with all rules and regulations of
the U.S. Immigration and Naturalization Service.
(f) ERISA COMPLIANCE. The Selling Parties have complied
with all material state and federal regulations for each of their respective
employee benefit plans, including without limitation ERISA.
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EXHIBIT 10.40a
(g) SEVERANCE PAY. Seller has no agreements to pay severance pay
to any of its officers or employees except as set forth on Schedule 2.19(g).
Seller shall pay any severance payments that may be due employees of Seller as
listed on Schedule 2.19(g). See Section 7.9 below for a discussion of severance
pay obligations to be assumed by Purchaser under the Transition Support
Agreement.
2.20 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE WITH ENVIRONMENTAL LAWS. To the Best Knowledge of
Selling Parties, Seller is in compliance with all material rules and regulations
(and applicable standards and requirements) of the United States Environmental
Protection Agency (the "EPA") and the agencies and authorities of the City of
Poway, the County of San Diego, and the State of California, and any other
political subdivision in which it conducts the Business, which have jurisdiction
over environmental matters. Selling Parties have received no notice of, and, to
their best knowledge, has not during its operation of the Business made any act
or omission that would result in: (1) potential responsibility or liability for
environmental damage, or (2) any suit, claim, action or proceeding before any
court, governmental agency or board or other forum, nor is any such action
threatened by any person or entity or any basis for such suit, claim, action or
proceeding, for (x) noncompliance by Seller with any environmental law, rule or
regulation, (y) personal injury, wrongful death or other conduct relating to
materials, commodities or products used, sold, transferred, disposed or
manufactured by Seller, or (z) relating to the presence in or release or
discharge into the environment by Seller of any toxic or hazardous material,
substance, or waste generated by Seller whether or not occurring at or on a site
owned, leased or operated by Seller.
(b) PHASE 1 ESA. Purchaser is not assuming any environmental
liability of Seller. A Phase I environmental site assessment of the Poway
Facility will be conducted before the Closing to establish the condition of the
Poway Facility as of that date and as a baseline for this representation of
Seller. The cost of such environmental site assessment will be split evenly
between Purchaser and Seller. For purposes of this Section 2.20, the term
"Seller's Responsible Employees" shall include Seller's personnel charged with
responsibilities for compliance with environmental laws.
2.21 INSURANCE. Prior to the execution of this Agreement, Seller has
provided Purchaser with a true, accurate and complete listing of and a summary
description (including premiums, exclusions, deductible and coinsurance amounts,
broker and carrier) of all insurance policies maintained by Seller, or by
Shareholder on Seller's behalf. Such policies are in full force and effect, all
premiums due thereon have been paid, and Selling Parties have complied in all
material respects with the provisions of such policies. Except as disclosed on
Schedule 2.21, there are no claims pending under any of such insurance policies.
Selling Parties have sufficient insurance in force in general to properly
conduct the Business.
2.22 PRODUCT WARRANTIES. Schedule 2.22(a) is a true, accurate and
complete copy of the standard warranty of Seller that has at all times been
applicable to the Products from the date the first unit of the Products was
sold. Except disclosed on Schedule 2.22(b), Seller has received no notice of any
product liability or service warranty claims with respect to its entire
installed base of
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the Products, whether reserved for or not. Seller and Purchaser have agreed on
the amount of a warranty offset to be shown on line 15 of Seller's Pre-Closing
Balance Sheet. This warranty offset will be an adequate and reasonable estimate
of Seller's present and future, known and unknown, warranty obligations for all
Products delivered by Seller through the Closing. There are no unique or special
warranty arrangements with any customers of Seller which are at variance with
Seller's standard warranty, except as disclosed on Schedule 2.22(c). To the Best
Knowledge of Selling Parties, a warranty offset for all existing warranty and
service bulletin issues for Seller's existing base of airline passenger seats in
the amount of One Million Seven Hundred Twenty-One Thousand Nine Hundred Twelve
Dollars ($1,721,912) is adequate. Purchaser believes that the correct amount of
the warranty offset is at least One Million Dollars ($1,000,000) greater than
this amount. However, in consideration of Selling Parties' agreement, under
Section 7.8 below, that Selling Parties shall be liable under Article 8 to
indemnify Purchaser if actual warranty claims for the Products exceed the
foregoing warranty offset amount, Purchaser has agreed to use the foregoing
warranty offset amount in establishing the Agreed Offsets, without prejudice to
Purchaser's right to seek to collect a greater amount if the actual amount of
warranty claims exceeds the above warranty offset during the Indemnity Period.
2.23 BANKS. Schedule 2.23 is a true, accurate, and complete listing, as
of the date hereof, of (a) each bank or other financial institution, trust
company or brokerage firm at which Seller has an account or safe deposit box,
and (b) the account number and the names of all persons authorized to draw
thereon, have access thereto or transact business therewith.
2.24 TRADE NAMES, LOGOS, TRADEMARKS, AND COPYRIGHTS. Schedule 2.24 is a
true, accurate and complete listing of all trade names, logos, trademarks,
service marks, and copyrights and their registrations (collectively, the
"Seller's Trade Names") owned by Selling Parties which are used in the Business,
or to which they have any rights or licenses, together with a brief description
of each. Selling Parties have no knowledge of any infringement or alleged
infringement by others of Seller's Trade Names. In the conduct of the Business,
Selling Parties have not infringed, and are not now infringing, on any trade
name, logo, trademark, service mark, or copyright belonging to any other person,
firm, or corporation. Except as set forth in Schedule 2.24, Selling Parties are
not parties to any license, agreement, or arrangement, whether as licensor,
licensee, franchiser, franchisee, or otherwise, with respect to any copyrights
or any trademarks, service marks, trade names, logos, or applications for them
used in the Business. Selling Parties own or hold adequate licenses or other
rights to use all trademarks, logos, service marks, trade names, and copyrights
necessary for the Business as it is now conducted by Seller (including Seller's
Trade Names). Such use by Selling Parties does not, and will not, violate any
rights of others. Selling Parties have the right to sell or assign to Purchaser
all of Seller's Trade Names.
2.25 PATENT AND PATENT RIGHTS.
(a) LISTING. Schedule 2.25 is a true, accurate and complete
listing of all patents, patent applications, inventions, industrial models,
processes, designs, and applications for patents used in the Business which are
owned by the Selling Parties or in which they have any rights, licenses, or
immunities (collectively, "Seller's Patents"). Except as set forth on Schedule
2.25, no Selling Party is a party to any license, agreement, or arrangement,
whether as licensee, licensor, or otherwise,
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with respect to any patent, patent application, invention, design, model,
process, trade secret, or formula used in the Business. Seller's Patents are
valid and in full force and effect and are not subject to any taxes, maintenance
fees, or actions falling due within ninety (90) days after the Closing Date.
(b) NO INFRINGEMENT. There have been no interference actions or
other judicial, arbitration, or other adversary proceedings concerning the
patents or applications for Seller's Patents. The manufacture, use, or sale of
the inventions, models, designs, and systems covered by Seller's Patents, to the
Best Knowledge of Selling Parties, does not violate or infringe on any patent or
any proprietary or personal right of any person, firm, or corporation; and to
the Best Knowledge of Selling Parties, no Selling Party has infringed or is now
infringing on any patent or other right belonging to any person, firm, or
corporation.
(c) RIGHT TO TRANSFER. The Selling Parties have the right and
authority to use and to transfer to Purchaser such inventions, trade secrets,
processes, models, designs, and formulas as are necessary to enable them to
continue to conduct all phases of the Business in the manner presently conducted
by Seller and, to the Best Knowledge of Selling Parties, such use will not
violate any patent or other rights of others. For purposes of this Section 2.25,
the term "Seller's Responsible Employees" shall include Seller's engineering and
design personnel.
(d) NO FOREIGN PATENTS. Seller owns no patents or patent
applications with respect to the Products which have been registered or are in
the process of being registered in any jurisdiction outside the United States.
2.26 NO SALES AGENTS. Except as disclosed on Schedule 2.26, Seller has
no contracts, agreements or understandings (oral or written) with any sales
agents or representatives employed by or on behalf of Seller for the purpose of
selling or facilitating the sale of the Products. Schedule 2.26 lists any fees
or commissions that may become due or payable after the Closing to past or
present officers, employers, agents or employees of Seller for sales of the
Products initiated by Seller, whether completed before or after the Closing.
Seller has adequately accrued on Seller's Financial Statements (and will accrue
on the Pre-Closing Balance Sheet) an amount sufficient to pay any such fees or
commissions in full.
2.27 SOFTWARE LICENSES. Schedule 1.1(j) is a true, accurate and
complete listing of the Software Licenses. To the Best Knowledge of Selling
Parties, Seller is not in breach of any of the Software Licenses, and the number
of copies of software programs used by Seller is consistent with the applicable
Software Licenses. For purposes of this Section 2.27, the term "Seller's
Responsible Employees" shall include Seller's MIS personnel.
2.28 Y2K COMPLIANCE. Seller's material office automation, engineering
and information technology systems are currently in "Year 2000" compliance.
2.29 CUSTOMERS AND SALES. Schedule 2.29 is a true, correct and complete
listing of all customers of Seller, together with summaries of the sales made to
each such customer during the most recent fiscal year of Seller. Except as
indicated in Schedule 2.29, no Selling Party has received any notice that any of
these customers intends to cease doing business with Seller or materially alter
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the amount of the business they are presently doing with Seller, although no
affirmative commitments have been made by any customers to continue any
particular amount of business.
2.30 INTEREST IN CUSTOMERS, SUPPLIERS, AND COMPETITORS. Except as set
forth in Schedule 2.30, none of the Selling Parties and no officer, director, or
employee of the Selling Parties, nor any spouse or child of any of them, has any
material, direct or indirect, interest in any competitor, supplier, or customer
of the Selling Parties or in any person from whom or to whom any Selling Party
leases any real or personal property, or in any other person with whom any
Selling Party is doing business.
2.31 NO LIABILITY FOR EXCLUDED LIABILITIES. Selling Parties shall be
solely responsible for paying or otherwise satisfying the Excluded Liabilities
and Purchaser shall have no liability of any kind, contingent or otherwise, with
respect to the Excluded Liabilities.
2.32 FCPA COMPLIANCE. To the Best Knowledge of Selling Parties, Seller
is in full compliance with the Foreign Corrupt Practices Act of 1977 ("FCPA"),
as amended (15 U.S.C. Section 78dd-2, et seq.) and no agent, representative or
employee of Seller has engaged in conduct which would constitute a violation of
the FCPA. For purposes of this Section 2.32, the term "Seller's Responsible
Employees" shall include Seller's sales and marketing personnel.
2.33 [INTENTIONALLY DELETED]
2.34 [INTENTIONALLY DELETED]
2.35 [INTENTIONALLY DELETED]
2.36 SERVICE BULLETINS. Schedule 2.36 contains a true, accurate and
complete listing of all service bulletins issued by Seller with respect to any
of the Products, whether related to a warranty claim or a customer order.
2.37 OWNERSHIP OF TOOLING. Schedule 1.1(m) is a true, accurate and
complete listing of all the Tooling. The Tooling is located as specified on
Schedule 1.1(m). Seller is the sole owner of all of the Tooling, regardless of
where the Tooling may be located and no vendor of Seller has any right, title or
interest in any of the Tooling.
2.38 CUSTOMER ORDER BACKLOG. Schedule 2.38 is a true, accurate and
complete listing of the customer order backlog for the Products, listing all
customer orders for which Products have not been either manufactured or shipped.
All of Seller's customer order backlog is supported or backed by a Customer
Contract.
2.39 [INTENTIONALLY DELETED]
2.40 BID AND PROPOSAL LIST. Within two (2) business days after the date
of execution of this Agreement, Seller shall deliver to Purchaser a copy of all
outstanding bids and proposals made by Seller for sale of the Products to
customers. Upon delivery of such list to Purchaser, Selling
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Parties shall be deemed to be representing and warranting that such list is
true, accurate and complete.
2.41 NO SIDE AGREEMENTS. No past or present officer, director,
employee, representative or agent of Selling Parties has made any promise or
commitment (oral or written) to grant any customer of Seller any concession or
consideration for orders for the Products which is not expressly set forth in
Schedule 1.1(c).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Selling Parties as of the
Closing as follows:
3.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Purchaser has full power and authority
to carry on its business as now conducted and as contemplated by this Agreement.
3.2 AUTHORITY FOR AGREEMENT. The execution and delivery of this
Agreement and the performance by Purchaser of its obligations under this
Agreement have been authorized in accordance with applicable corporate
requirements and no further corporate authorization is necessary on the part of
Purchaser.
3.3 NO THIRD PARTY CONSENTS. No consent, approval, or authorization of,
or declaration, filing, or registration with, any federal or state governmental
or regulatory authority in the United States or France is required to be made or
obtained by Purchaser in connection with the execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement, except for the filing under the HSR Act.
3.4 NO DEFAULTS; NO VIOLATIONS. Except as disclosed on Schedule 3.4,
neither the execution and delivery of this Agreement, nor the performance by the
Purchaser of its obligations hereunder, nor the consummation of the transactions
contemplated hereby will: (a) violate any provision of its Articles of
Incorporation or Bylaws or any financing or other agreements to which Purchaser
is a party; (b) require the agreement or consent of any other party; or (c)
violate any material statute or law or any judgment, decree, order, regulation
or rule of any court or governmental authority to which Purchaser is subject;
except in the case of clauses (b) and (c) for violations, conflicts or defaults
which individually or in the aggregate would not materially adversely hinder or
impair the consummation of the transactions contemplated hereby.
3.5 ACKNOWLEDGMENT BY PURCHASER. Purchaser acknowledges that neither
Seller nor Shareholder makes any representations or warranties except as
expressly provided in Article 2 above.
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ARTICLE 4
CERTAIN COVENANTS OF THE PARTIES
4.1 COVENANTS OF SELLING PARTIES.
(a) CONDUCT OF BUSINESS. Except as may be otherwise contemplated
by this Agreement or required by any of the documents listed in the schedules
attached to this Agreement or except as Purchaser may otherwise consent to in
writing (which consent shall not be unreasonably withheld or delayed), from the
date of this Agreement and through the Closing, Selling Parties shall (1) in all
material respects, operate the Business only in the ordinary course; (2) use
reasonable efforts to preserve intact Seller's business organization; (3)
maintain the Included Assets in good operating condition and repair to enable
Seller to conduct the Business in all material respects in the manner in which
the Business is currently conducted except for maintenance required by reason of
fire, flood, earthquake, or other acts of God; (4) continue, or cause to be
continued, all material existing insurance policies (or comparable insurance) in
full force and effect; (5) not increase the rate or terms of compensation
payable or to become payable by Seller to its directors, officers, or key
employees, and not increase the rate or terms of any bonus, pension, or other
employee benefit plan covering any of their respective directors, officers, or
key employees, except in each case increases occurring in the ordinary course of
business in accordance with its customary practices (including normal periodic
performance reviews and related compensation and benefits increases); and (6)
use its reasonable efforts to preserve its relationships with its lenders,
suppliers, customers, licensors and licensees, and others having material
business dealings with Seller such that the Business will not be materially
impaired.
(b) COOPERATION WITH PURCHASER. Commencing on the date of
execution of this Agreement and continuing through the Closing, Selling Parties
shall grant Purchaser complete and unrestricted access to the Poway Facility,
Seller's Books and Records, and Seller's employees, including without limitation
those employees of Seller who fall within the definition of "Seller's
Responsible Employees." In the course of meeting with Seller's employees,
Purchaser shall have the right to interview and identify employees whom
Purchaser would be interested in hiring to work for Purchaser after the Closing,
either on a temporary or permanent basis. Purchaser agrees to exercise its
rights hereunder in a reasonable manner so as to minimize disruption of Seller's
ongoing business operations. Selling Parties shall use commercially reasonable
efforts to obtain requisite waivers and consents of private parties and
governmental agencies to the assignment of Customer Contracts and/or
Governmental Airworthiness Approvals from Seller to Purchaser.
4.2 COVENANT OF PURCHASER. From the date of this Agreement and through
the Closing, Purchaser shall use its best efforts, and shall cooperate with
Seller, to secure all necessary consents, approvals, authorizations, exemptions,
and waivers from third parties, including without limitation the FAA and the
CAA, as may be required in order to enable Purchaser to effect the transactions
contemplated in this Agreement. Purchaser will use its best efforts to cause the
consummation of such transactions in accordance with the terms and conditions of
this Agreement.
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4.3 JOINT COVENANTS OF SELLER AND PURCHASER.
(a) LISTING. As promptly as practicable after execution of this
Agreement, Seller and Purchaser shall cooperate with each other to allow
Purchaser and its representatives access to Seller's facilities, as follows:
(1) Purchaser and Seller shall cooperate with Ernst & Young,
LLP in conducting a physical inventory count of the Included Inventory and
valuation of same in accordance with Exhibits "B" and "C" which will be used for
the Pre-Closing Balance Sheet and such other reasonable procedures as may be
mutually agreed on; provided, however, that the inventory count and valuation
will be done without unreasonable interference with the Business and without
material disruption to the ongoing conduct of the Business;
(2) Purchaser shall review organizational charts, personnel
records, and conduct interviews with personnel as reasonably necessary to make
its determination with respect to the employees whom it shall retain during the
Transition Period and/or thereafter; and
(3) Selling Parties shall assist Purchaser in ascertaining
the location of all the Included Assets and verifying the quantity and condition
of same.
(b) PUBLIC DISCLOSURE. Except as may otherwise be required by
applicable securities laws of the United States and the Republic of France,
Selling Parties and Purchaser shall first consult with each other and cooperate
with one another before issuing any press releases or otherwise making public
statements with respect to the transactions contemplated by this Agreement. In
recognition of the Effective Date and to allow Purchaser the opportunity for
access to the Poway Facility for transition planning and employee
communications, the parties agree that no public disclosure of this Agreement or
the transactions contemplated herein shall occur until after the close of the
NYSE on January 3, 2000.
(c) HSR ACT FILING. As promptly as practicable after the
execution of this Agreement, Seller and Purchaser shall cooperate with each
other to prepare all filings required to be made by them to consummate the
transactions contemplated by this Agreement, specifically including all filings
required under the HSR Act.
ARTICLE 5
CONDITIONS TO CLOSING IN FAVOR OF PURCHASER
5.1 GENERAL. The obligation of Purchaser under this Agreement to
purchase the Included Assets and to assume the Assumed Liabilities is subject to
the satisfaction, at or before the Closing, of all the conditions set out below
in this Article 5. Purchaser may waive any or all of these conditions in whole
or in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by Purchaser of any of Purchaser's other
rights or remedies, at law or in equity, if Selling Parties are in default of
any of their representations, warranties, or covenants contained in this
Agreement. Any obligations of Purchaser to consummate the purchase of the
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Included Assets and the assumption of the Assumed Liabilities are subject to the
fulfillment (or the written waiver thereof by Purchaser) of each of the
conditions precedent set forth below in this Article 5.
5.2 PURCHASER'S CONDITIONS PRECEDENT TO CLOSING. The conditions
precedent to the Closing in favor of Purchaser shall consist of the following:
(a) PERFORMANCE BY SELLING PARTIES. Each of the representations
and warranties of Selling Parties contained in Article 2 shall be true, accurate
and complete in all material respects. In addition, Selling Parties shall, on or
before the Closing, have substantially performed all of their covenants and
obligations under this Agreement which by the terms of this Agreement are to be
performed on or before the Closing. All actions necessary to authorize the
execution, delivery, and performance of this Agreement by Selling Parties and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by the board of directors of Selling Parties. Selling Parties
shall have obtained all authorizations, consents, and permits of others required
to permit the consummation of the transactions contemplated in this Agreement.
No temporary restraining order, preliminary injunction or permanent injunction
or other order preventing the consummation of the transactions contemplated by
this Agreement shall have been issued by any federal or state court and remain
in effect.
(b) COMPLIANCE WITH THIS AGREEMENT. Selling Parties shall have
substantially performed and complied with all covenants and conditions required
by this Agreement to be performed and complied with by them prior to or at the
Closing.
(c) APPROVAL OF DOCUMENTS. All actions, proceedings, instruments,
and documents required to carry out this Agreement or any undertaking incidental
thereto, and all other related legal matters shall be reasonably satisfactory in
form and substance to Purchaser and its legal counsel.
(d) NO LEGAL PROCEEDINGS. No action, suit, or other proceeding
shall be instituted or, so far as may be known to Purchaser or Selling Parties,
threatened before any court or governmental agency in which it is sought to: (1)
restrain, prohibit, invalidate, or set aside (in whole or in part) the
transactions contemplated by this Agreement; (2) affect the right of Purchaser
to operate or control the Business or to use and enjoy the Included Assets after
the Closing; or (3) obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement which, if
decided adversely, could reasonably have a material adverse affect on Purchaser.
(e) DELIVERY OF DOCUMENTS. Selling Parties shall have delivered to
Escrowholder, on or before the Target Closing Date, the Closing Documents and
such other documents and instruments as may be required to be delivered by
Seller in order to complete the transactions contemplated in this Agreement.
(f) NO MATERIAL ADVERSE CHANGE. During the period between the date
of this Agreement and the Closing, Seller will have not sustained any material
adverse change in its financial
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condition, liabilities, assets, customer order backlog, production backlog,
business or prospects that would materially affect Purchaser's ability to
conduct the Business after the Closing, it being agreed that no such change
shall be deemed to be a "material adverse change" if the parties agree, through
mutually good faith negotiations, that it can be corrected by an adjustment of
the Purchase Price so as to maintain the parties' respective economic
expectations under this Agreement.
(g) CONSENTS AND APPROVALS. The lessors under the Equipment
Leases, the parties (other than Selling Parties) to any contract or agreement to
which Seller is a party or subject, and any governmental or regulatory body or
authority having jurisdiction over Selling Parties to the extent that their
consent or approval is required or necessary under the pertinent lease,
contract, agreement, or other document or instrument, or under applicable
orders, laws, rules, or regulations, for the consummation of the transactions
contemplated hereby in the manner herein provided, shall have granted such
consent or approval; provided, however, that (1) FAA or CAA approval of or
authorization for the transfer of any FAA or CAA certificate or license and (2)
consents of Seller's customers under the Customer Contracts shall not be a
condition to the Closing.
(h) APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments, and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved by Hillyer & Irwin, counsel for Purchaser, in the exercise of
their reasonable judgment. Selling Parties shall also have delivered to
Purchaser such other documents, instruments, certifications, and further
assurances as such counsel may reasonably require.
(i) CORPORATE APPROVAL. The execution and delivery of this
Agreement by Selling Parties, and the performance of its covenants and
obligations under it, will have been duly authorized by all necessary corporate
action, and Purchaser will have received copies of all resolutions pertaining to
that authorization, certified by the corporate secretary of each Selling Party.
(j) ASSIGNMENT OF INTELLECTUAL PROPERTY. The Selling Parties shall
assign all of the Intellectual Property to Purchaser. The patent assignment
instruments shall be in form satisfactory to legal counsel for Purchaser.
(k) PURCHASE PRICE ALLOCATION. The parties shall have agreed on
the allocation of the Purchase Price as provided in Section 1.3 above.
(l) NON-COMPETITION AGREEMENT. Each of the Selling Parties shall
have executed and delivered to Purchaser a Non-Competition Agreement
substantially in the form of Exhibit "F" hereto. Such agreement shall provide,
among other things, that Selling Parties shall be prohibited from soliciting
employees of Purchaser to work for Selling Parties.
(m) WARN ACT NOTICE. Promptly after the Effective Date, Seller
shall grant Purchaser unrestricted access to Seller's Poway Facility in order to
enable Purchaser to identify before the Balance Sheet Cut-Off Date - the
employees of Seller whom Purchaser desires to hire after the Closing. See also
Section 4.1(b). After Seller receives Purchaser's list of employees whom
Purchaser desires to hire, Seller shall give its employees appropriate notices
under the WARN Act
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at least one (1) business day before the Closing pursuant to Section 7.10 below.
(n) PHASE I ESA. Seller has previously provided Purchaser with a
copy of a Phase I environmental site assessment for the Poway Facility which
shall be reasonably satisfactory to Purchaser in form and substance.
(o) GOVERNMENTAL APPROVALS. To the extent required, Purchaser
shall have received confirmation that all necessary licenses, certifications,
permits and approvals relating to the Business issued by federal, state and
local governmental units (excluding the Governmental Airworthiness Approvals)
listed on Schedule 1.1(e)) shall be in effect after the Closing so as to permit
Purchaser to continue to operate in the Poway Facility during the Transition
Period.
(p) UCC SEARCH. Seller shall have delivered to Purchaser at least
five (5) business days before the Target Closing Date a UCC lien search report
prepared by a recognized reporting service with respect to liens, judgment
liens, tax liens, and other mortgages and encumbrances that may be filed against
any of the Included Assets. Such report shall be dated no more than thirty (30)
days preceding the Target Closing Date. Seller shall, at the Closing, arrange
for the application of the Cash Payment to the payment of any secured creditors
of Seller and deliver to Purchaser in connection therewith copies of payoff
demands from all such secured creditors. Selling Parties shall furnish evidence
to Purchaser that all such liens are promptly released after the Closing. In the
event that Purchaser ascertains that any such lien remains unpaid more than
thirty (30) days after the Closing, Purchaser shall have the right to either
demand that any Selling Party discharge the subject lien or pay the amount
required to discharge the subject lien. The Selling Parties shall be jointly and
severally liable to reimburse any amount so paid by Purchaser without regard to
the Indemnity Cap.
(q) BID AND PROPOSAL LIST. Seller has previously delivered to
Purchaser the bid and proposal list for sales of the Products pursuant to
Section 2.40 above.
(r) OPINION OF LEGAL COUNSEL. Purchaser shall have been furnished
with the opinion of legal counsel to Simula, dated as of the Closing, to the
effect that:
(1) Selling Parties are corporations duly organized, validly
existing, and in good standing under the laws of the State of Arizona with full
power and authority to enter into and perform their obligations under this
Agreement, and are qualified to do business in any jurisdiction where such
qualification is required.
(2) Selling Parties have full corporate power and authority
to enter into and consummate the transactions contemplated by this Agreement.
(3) All proceedings required to be taken on the part of
Selling Parties to authorize them to enter into, carry out and fully comply with
the provisions of this Agreement, the Closing Documents, and any other documents
to be executed by any Selling Party, and to transfer and deliver the Included
Assets, have been duly, validly and properly taken. The execution, delivery and
performance of the foregoing agreements of Selling Parties do not violate any
provision of the
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Articles of Incorporation or Bylaws of Selling Parties, or any agreements to
which any Selling Party is bound.
(4) This Agreement and all other agreements to be executed by
the Selling Parties pursuant hereto are valid and legally binding obligations of
Selling Parties, enforceable in accordance with their respective terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the rights and remedies
of creditors generally and by the general principles of equity.
(5) Except as to the matters described in Schedule 2.6, no
Selling Party is a party to any pending or, to the knowledge of such counsel,
threatened litigation, proceedings, claim or governmental investigation or audit
which may either (1) materially adversely affect the Included Assets or impair
the Purchaser's right or ability to operate the Business in the manner presently
conducted by Seller, or (2) seek to prevent, restrain or interfere with the
performance by Selling Parties of this Agreement.
(s) HSR ACT CLEARANCE. The applicable waiting period under the HSR
Act with respect to the transactions contemplated by this Agreement shall have
expired or shall have otherwise terminated without the U.S. Department of
Justice or the Federal Trade Commission taking any action to delay or block the
transactions contemplated in this Agreement.
(t) PRODUCT LIABILITY INSURANCE TAIL COVERAGE. Seller shall have
provided Purchase with evidence that Seller has purchased the product liability
tail coverage specified in Section 7.7 below.
ARTICLE 6
CONDITIONS TO CLOSING IN FAVOR OF SELLING PARTIES
Selling Parties' obligation to consummate this Agreement and the
transactions contemplated by this Agreement is subject to the fulfillment (or
the written waiver thereof by Selling Parties) of each of the following
conditions precedent on or before the Closing, as specified below:
6.1 PERFORMANCE BY PURCHASER. Each of the representations and
warranties of Purchaser contained in Article 3 shall be true and correct.
Purchaser shall, on or before the Closing, have performed all of its obligations
under this Agreement and the Funding Agreement, which by the terms of this
Agreement are to be performed on or before the Closing. All actions necessary to
authorize the execution, delivery, and performance of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by Purchaser. Purchaser shall
have obtained all authorizations, consents, and permits of others required to
permit the consummation of the transactions contemplated in this Agreement.
6.2 ABSENCE OF LITIGATION. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transactions
contemplated in this Agreement or to its consummation, will have been instituted
or threatened on or before the Closing. No governmental
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authority shall have asserted that the transactions contemplated herein
constitute a violation of law or give rise to liability on the part of any
Selling Party.
6.3 APPROVAL OF PROCEEDINGS. All actions, proceedings, instruments, and
documents required to carry out this Agreement and all other related legal
matters shall be reasonably satisfactory in substance to Seller and its counsel.
6.4 DELIVERY OF DOCUMENTS AND FUNDS. Purchaser shall have delivered to
Escrowholder on or before the Closing all documents to be signed by both
Purchaser and any Selling Party, including without limitation the Closing
Documents and the Cash Payment.
6.5 TERMINATION OF HSR ACT WAITING PERIOD. The applicable waiting
period under the HSR Act with respect to the transactions contemplated by this
Agreement shall have expired or shall have otherwise terminated without the U.S.
Department of Justice and the Federal Trade Commission taking action to delay or
block the transactions contemplated by this Agreement.
6.6 LICENSE BACK OF PATENT RIGHTS. Purchaser and Shareholder shall have
entered into a Patent License Agreement substantially in the form of Exhibit H
hereto pursuant to which Shareholder and its affiliates are granted a license to
utilize the 16G load limiting technology covered by the Shared Use Patent in
accordance with the Patent License Agreement.
6.7 TRANSITION SUPPORT AGREEMENT. Purchaser and Seller shall have
entered into the Transition Support Agreement. The Transition Support Agreement
shall be substantially in the form of Exhibit I attached hereto.
ARTICLE 7
POST CLOSING MATTERS
7.1 POST-CLOSING COVENANTS OF SELLING PARTIES. All the obligations to
be performed by Selling Parties after the Closing pursuant to this Article 7
shall be deemed to be covenants for which Selling Parties shall be jointly and
severally liable.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties contained in this Agreement shall survive the
Closing and continue in full force and effect until the last day of the
Indemnity Period.
7.3 COLLECTION OF ACCOUNTS RECEIVABLE.
(a) GUARANTY OF PAYMENT. Selling Parties shall guarantee to
Purchaser that the unpaid balance of all Accounts Receivable of Seller acquired
by Purchaser at the Closing will be paid within a collection period (the
"Collection Period") of one hundred eighty (180) days following the Closing.
Purchaser shall diligently exercise customary efforts to collect the Accounts
Receivable in the ordinary course of business during the Collection Period. It
is agreed that if Purchaser reduces or compromises any Account Receivable
without a reasonable basis for doing so which arises out of
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(1) problems with respect to Products sold by Seller or (2) errors in invoice
preparation, Selling Parties shall have no obligation to pay the amount of the
reduction or compromise granted by Purchaser. Any Accounts Receivable still
outstanding at the end of the Collection Period shall be assigned by Purchaser
back to Seller and, within ten (10) business days thereafter, Selling Parties
shall pay to Purchaser the amount of the unpaid Accounts Receivable, in cash,
less (1) the amount of the reserve for doubtful accounts reflected in the books
of Seller on the Closing, and (2) the amount of any Accounts Receivable written
off as uncollectible by Seller before the Closing but actually paid to Purchaser
during the Collection Period. If more than one invoice is outstanding for any
customer, the "first-in, first out" principle will be applied in determining the
invoice to which a payment relates, unless the payment by its terms specifies or
clearly indicates the invoice to which it relates.
(b) PURCHASER'S COLLECTION EFFORTS. Purchaser will exercise prompt
and diligent efforts to collect all unpaid Accounts Receivable before the end of
the Collection Period; provided, however, that Purchaser will not be required to
initiate legal proceedings for this purpose. Purchaser will cause all unpaid
Accounts Receivable to be assigned to Seller, without recourse, at the time of
Seller's payment of such Accounts Receivable.
(c) CUSTOMER NOTICES. If requested by Purchaser, Seller shall
cooperate with Purchaser in installing so-called "lock boxes" at all of
Purchaser's banks so as to insure that payments made by customer of Seller after
the Closing are paid to Purchaser and not Seller. After the Closing, Purchaser
and Seller shall send a joint notice (signed by both Seller and Purchaser) to
all of Seller's customers and vendors informing them of the Closing and
instructing them about procedures to be followed in making payment to Purchaser
and/or submitting invoices for payment by Purchaser. Such notices shall be
prepared by Purchaser and sent out according to a schedule established by
Purchaser.
7.4 DISCHARGE OF BUSINESS OBLIGATIONS. From and after the Closing,
except for the Assumed Liabilities, Seller shall pay and discharge, in
accordance with its past practices but not less than on a timely basis, all of
its obligations and liabilities in respect of the Business, its operations or
the Included Assets and the properties used in the business, including without
limitation any liabilities or obligations to employees, trade creditors, and
customers of the Business.
7.5 MAINTENANCE OF BOOKS AND RECORDS. Selling Parties shall preserve
until the third (3rd) anniversary of the Closing Date all records possessed or
to be possessed by any such party relating to any of the Included Assets, the
Assumed Liabilities, or the Business prior to the Closing. After the Closing,
where there is a legitimate purpose, such party shall provide the other parties
with access, upon prior reasonable written request specifying the need therefor,
during regular business hours, to (a) the officers and employees of such party
and (b) the books of account and records of such party, but, in each case, only
to the extent relating to the Included Assets, the Assumed Liabilities, or the
Business prior to the Closing, and the other parties and their representatives
shall have the right to make copies of such books and records; provided,
however, that the foregoing right of access shall not be exercisable in such a
manner as to interfere unreasonably with the normal business operations of such
party. Such records may nevertheless be destroyed by a party if such party sends
to the other parties written notice of its intent to destroy records, specifying
with particularity the contents of the records to be destroyed. Such records may
then be destroyed after the thirtieth (30th) day after such notice is given
unless another party objects to the destruction in
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which case the party seeking to destroy the records shall deliver such records
to the objecting party. After the Closing, Selling Parties and Purchaser shall
have the right to copy any financial records of Seller.
7.6 TITLE TRANSFER DOCUMENTS. From and after the Closing, Selling
Parties shall promptly refer all inquiries with respect to ownership of the
Included Assets to Purchaser. In addition, Selling Parties shall execute such
documents and financing statements as Purchaser may request from time to time to
evidence transfer of the Included Assets to Purchaser, including any necessary
assignments of financing statements affecting the Included Assets.
7.7 POST-CLOSING PRODUCT LIABILITY CLAIMS. In the event that a product
liability claim is asserted after the Closing with respect to Products which
were sold by Seller at any time before the Closing, Seller shall be solely
responsible for paying all such claims and Seller shall defend, indemnify, and
hold Purchaser harmless from any loss, cost, or expense, including without
limitation, reasonable attorneys' fees, arising out of any such claims. All
other product liability claims shall be the sole responsibility of Purchaser and
Purchaser shall indemnify Selling Parties from all losses, costs or expenses
associated therewith in accordance with Article 8. Seller shall purchase an
aviation products liability "tail coverage" insurance policy with limits of
liability of at least Two Million Dollars ($2,000,000) per occurrence and a term
of at least four (4) years unless such policy is duplicative of the insurance in
force on the date hereof for all relevant time periods during which Seller has
been selling the Products.
7.8 PRODUCT WARRANTY CLAIMS. Seller and Purchaser have agreed on an
offset for warranty claims for Products sold by Seller before the Closing in the
amount of $1,721,912. Notwithstanding anything in this Agreement to the
contrary, it is agreed that if the actual amount of warranty claims experienced
by Purchaser after the Closing during the Indemnity Period exceeds the foregoing
offset amount, Purchaser shall be entitled to assert claims against Selling
Parties for any such excess warranty claims, subject, however, to the Indemnity
Cap. Accordingly, Purchaser shall be solely responsible for handling (a) all
unresolved warranty claims asserted by purchasers of the Products before the
Closing, and (b) all warranty claims for Products sold by Seller which are
asserted after the Closing. In addition, Purchaser shall be solely responsible
for all warranty claims asserted after the Closing with respect to Products sold
by Purchaser. Purchaser shall administer warranty claims for the Products in a
business-like manner in accordance with Purchaser's usual business practices
without unwarranted concessions or compromises for marketing purposes.
7.9 TRANSITION SUPPORT AGREEMENT. After the Closing during the
Transition Period, Selling Parties shall assist Purchaser in the orderly
transition of Seller's manufacturing operations from Poway, California to the
Weber Aircraft, Inc. facility in Gainesville, Texas. All of the respective
obligations of the parties during this period shall be set out in a Transition
Support Agreement substantially in the form of Exhibit I. Among other things,
the Transition Support Agreement will provide that:
(a) Purchaser shall be obligated to pay the lease obligations of
Seller under Seller's lease for the Poway Facility for a period of six (6)
months on the same terms and conditions stated in Seller's lease for such
facility;
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(b) Selling Parties shall provide necessary corporate support for
all computer systems used in the Business during the Transition Period;
(c) Seller shall grant Purchaser a license to use such Assets
which are to be utilized by Purchaser during the Transition Period, but which
are not part of the Included Assets;
(d) Effective as of the Closing, Purchaser shall become the
employer of the individuals whom it elects to hire. Seller will cooperate in
connection with the necessary transition of employees from its payroll to the
payroll and benefits systems of Purchaser.
(e) Actual out of pocket facilities costs, and other costs,
incurred by Seller on behalf of Purchaser during the Transition Period will be
paid by Purchaser without mark up. However, property, plant, equipment, tooling,
and leasehold improvements used by Purchaser during the Transition Period but
not purchased as part of the Included Assets shall be leased by Purchaser from
Seller for a rental factor equal to one hundred fifteen percent (115%) of the
applicable depreciation cost during the Transition Period. This 115% rental
factor shall not be applied to the rent or other amounts due under Seller's
lease for the Poway Facility.
7.10 WARN ACT COMPLIANCE. Seller shall be responsible for giving all
notices required under the WARN Act (29 U.S.C. Section 2101, et seq.) to be
given to Seller's employees and for paying all costs that may arise thereunder.
The WARN Act notice shall be given not earlier than before the Closing. See
Section 5.1(m). Any costs that may be imposed on Purchaser with respect to
Seller's failure to comply with the WARN Act compliance shall not be subject to
the Indemnity Cap.
7.11 PAYMENTS TO SELLER'S EMPLOYEES. In addition to payments due under
the WARN Act, Seller shall be solely responsible for paying all amounts due its
terminated employees under applicable law, including without limitation
severance pay, accruals for paid time off, etc., and Purchaser shall have no
responsibility therefor.
7.12 NO BANKRUPTCY FILING. Selling Parties agree that the transactions
contemplated in this Agreement do not constitute a "fraudulent transfer" within
the meaning of 11 U.S.C. Section 548. Shareholder covenants and agrees that it
will not cause or permit Seller to file a voluntary or involuntary bankruptcy
petition at any time during the twelve (12) months following the Closing.
7.13 UNDISCLOSED COMMITMENTS TO SELLER'S CUSTOMERS. In the event that
after the Closing any customer of Seller asserts a claim against Purchaser for a
price or other concession relating to the sale of the Products (or spare parts
therefor) made before the Closing which Selling Parties failed to disclose to
Purchaser before the Closing, Selling Parties shall promptly resolve the claim,
at Selling Parties' sole cost and expense, in a commercially reasonable manner
so that the valuable business relationship between Purchaser and its customer is
maintained. Selling Parties shall promptly notify Purchaser in writing of any
such claim that may be asserted by a customer of Seller. A final determination
(through arbitration or litigation) that any such claim by a customer of Seller
is valid shall constitute a breach of Seller's representations and warranties.
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7.14 PAYMENT OF SIMULA PAYABLES. Purchaser shall pay the Simula
Payables within two (2) business days after the date on which the Post-Closing
Accounting Adjustments are made, subject, however, to Purchaser's offset rights
under Section 0.3(hh)(2) above.
7.15 CHANGE OF SELLER'S CORPORATE NAME. Purchaser shall have the
exclusive right to use the mark "Airline Interiors" after the Closing.
Accordingly, Seller agrees to change its corporate name no later than thirty
(30) days after the Closing.
7.16 POST-CLOSING ACCOUNTING ADJUSTMENTS.
(a) GENERAL. The parties shall determine the amount of the
Post-Closing Accounting Adjustments in good faith in a manner consistent with
this Agreement as soon as practicable after the Closing, but no later than
thirty (30) days thereafter. After Purchaser and Selling Parties agree on the
amount of the Post-Closing Accounting Adjustments, they will promptly make
appropriate adjustments to the Cash Payment. If it is determined that Purchaser
owes Seller additional funds, Purchaser shall pay the amount due within ten (10)
days after the Post-Closing Accounting Adjustments are agreed on. If it is
determined that Seller owes Purchaser funds because of an overpayment of the
Cash Payment, Purchaser shall be entitled to offset the amount so owed Purchaser
by Seller against the amount of the Simula Payables. If the amount of the
Post-Closing Accounting Adjustments that may be due Purchaser exceeds the amount
of the Simula Payables, Simula shall pay any amount due Purchaser within five
(5) business days after demand.
(b) INVENTORY COUNT ADJUSTMENTS. As part of the Post-Closing
Accounting Adjustments, the parties shall verify the parts count used in
determining the valuation of the Included Inventory as shown on the Pre-Closing
Balance Sheet in the manner provided in this Section 7.16(b). Immediately after
the Closing, Purchaser shall conduct a physical inventory (utilizing procedures
approved by Purchaser's outside auditors) of the Included Inventory in order to
verify that the inventory count used to fix the value of same on the Pre-Closing
Balance Sheet was accurate as of the Closing. Selling Parties' representatives
may participate in this post-Closing inventory count. If it is later determined
that the assumed physical inventory count used to prepare the Pre-Closing
Balance Sheet was in error, an appropriate adjustment shall be made to the Cash
Payment at the time specified in Section 7.16(a), it being agreed that Purchaser
shall have, if applicable, the same right of offset against the Simula Payables
under this Section 7.16(b) as provided in the last sentence of said section.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLING PARTIES. The indemnification obligations
of Selling Parties under this Section 8.1 are in addition to any other
indemnification obligations which they may have under other provisions of this
Agreement. Selling Parties agree to defend, indemnify, and hold harmless
Purchaser (and companies owned by or under common control of Zodiac, S.A.), and
their respective employees, representatives, officers, directors, and agents
from and against any costs, losses, damages, liabilities, and expenses except as
disclosed in this Agreement and the schedules
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hereto (including without limitation interest, penalties, and reasonable
attorneys' fees) of any kind or nature whatsoever which may be sustained or
suffered by Purchaser by reason of any claim, action, or proceeding asserted or
instituted and based upon or involving (a) a breach of any representation,
warranty, covenant, or obligation of Seller or Shareholder in this Agreement or
in any schedule, exhibit, certificate, or financial statement delivered
hereunder or in connection herewith, or (b) the Excluded Liabilities
(collectively, the "Indemnifiable Claims").
8.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to defend,
indemnify, and hold harmless Selling Parties, their respective employees,
representatives, officers, directors, and agents from and against any costs,
damages, liabilities, losses, lawsuits, and expenses (including without
limitation interest, penalties, and reasonable attorneys' fees) of any kind or
nature whatsoever which may be sustained or suffered by Selling Parties by
reason of any claim, action, or proceeding asserted or instituted and based upon
or involving (a) a breach of any representation, warranty, covenant, or
obligation made by Purchaser in this Agreement or (b) the Assumed Liabilities.
8.3 NOTICE; DEFENSE OF CLAIMS. This Section 8.3 shall relate to the
handling of Indemnifiable Claims. Purchaser shall have the right to control the
defense of any third-party claim, action, or proceeding filed against it with
respect to any Indemnifiable Claims. Purchaser shall give prompt written notice
to the Selling Parties of each Indemnifiable Claim. Such notice shall be given
no later than thirty (30) days after Purchaser receives notice or actual
knowledge thereof, and shall specify the amount and nature of the claim, and of
any other relevant information. Selling Parties shall have the right to
participate at their own expense in the defense of any such matter or its
settlement, if, in the opinion of Purchaser, the Business acquired by Purchaser
would not be impaired thereby. Purchaser may authorize the Selling Parties, if
they so desire, to take over the defense of such matter so long as such defense
is handled in a diligent and expeditious manner. Purchaser and Selling Parties
agree to render to each other such assistance as they may reasonably require of
each other in order to ensure the proper and adequate defense of any such claim,
action, or proceeding.
8.4 PAYMENT OF INDEMNIFIABLE CLAIMS. Indemnifiable Claims shall be paid
or otherwise satisfied by the Selling Parties, within ninety (90) days after
notice of a bona fide Indemnifiable Claim is given to Selling Parties by
Purchaser, unless such claim is disputed pursuant to Section 8.5 below.
8.5 DISPUTE RESOLUTION. If Selling Parties or Purchaser dispute their
liability with respect to any Indemnifiable Claim, such dispute, or any other
dispute in connection with this Article 8 shall be resolved by arbitration
pursuant to Section 10.12 below.
8.6 LIMITATIONS ON OBLIGATIONS TO INDEMNIFY.
(a) THRESHOLD. Except in the event of claims based upon fraud,
neither Selling Parties nor Purchaser shall have any obligation to indemnify the
indemnitee in respect of any single Loss or Losses, the aggregate amount of
which is equal to or less than Seventy-Five Thousand Dollars ($75,000). If any
Loss or Losses exceeds that amount, the indemnifying party shall be obligated to
indemnify the indemnified party for the full amount of the Loss or Losses on a
"dollar one" basis. In other words, if the amount of a Loss were to exceed
Seventy-Five Thousand Dollars
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($75,000), the indemnifying party would be obligated to indemnify the
indemnified party for the full amount of the Loss, not just the portion in
excess of Seventy-Five Thousand Dollars ($75,000).
(b) MAXIMUM AMOUNT AND TIME LIMIT. Neither Selling Parties nor
Purchaser shall have any obligation to indemnify the other in respect of Losses
exceeding the Indemnity Cap in the aggregate, or in respect of any Loss, a claim
for which is made after the end of the Indemnity Period.
ARTICLE 9
TERMINATION OF AGREEMENT
9.1 TERMINATION OF AGREEMENT. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date as
follows:
(a) By mutual written consent of Purchaser and Seller;
(b) By any party if it reasonably determines that the purchase of
the Included Assets has become impractical by reason of the institution by
state, local or federal governmental authorities or any other person or entity
of any material litigation, arbitration, grievance or other proceedings relating
to this transaction against any of the parties, and notifies the other parties
in writing of such determination;
(c) By any party if the transactions contemplated in this
Agreement have not closed on or before the Closing Deadline through no fault of
either party, by giving the other party at least ten (10) business days prior
written notice of termination; or
(d) By Purchaser or Selling Parties pursuant to Section 9.2 below,
due to the failure to obtain HSR Act clearance on or before the Closing
Deadline. If the parties mutually agree, the Closing Deadline shall be extended
for a reasonable period of time in order to permit the parties to pursue
regulatory appeals with governmental agencies having jurisdiction over the HSR
Act approval process.
9.2 FAILURE TO OBTAIN HSR ACT CLEARANCE. Notwithstanding anything in
this Agreement to the contrary, Purchaser and Selling Parties shall have the
right to terminate this Agreement and cancel the Escrow if the Closing does not
occur before the Closing Deadline because the parties fail to obtain HSR Act
clearance under Section 5.2(s) above. A party may elect to cancel this Agreement
by giving written notice (the "Termination Notice") to the other parties and
Escrowholder at any time after the Closing Deadline. Upon receipt of the
Termination Notice, Escrowholder shall refund to Purchaser all funds then held
in the Escrow, including accrued interest, and return all documents in the
Escrow to the parties who had deposited same. If a Termination Notice is sent,
Purchaser shall promptly vacate the Poway Facility and return to Seller all
property of Seller which may then be in Purchaser's possession.
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ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 NOTICES.
(a) METHOD OF DELIVERY. Any notice, request, demand, consent,
approval or other communication (hereafter "notice") required or permitted under
this Agreement or by law shall be in writing and delivered by any of the
following means: (1) personally delivering the notice to a senior officer or
duly authorized representative of the other party, (2) depositing the notice in
the United States mail, postage prepaid, duly certified (return-receipt
requested), (3) sending the notice by a commercial overnight delivery service
(such as FedEx) which maintains delivery records, or (4) sending the notice by
electronic facsimile or telecopier ("fax") (with the sending party retaining
evidence of the time and date of transmission). Confirmations of any notices
sent by fax shall be sent by mail as provided above.
(b) ADDRESSES. Notices shall be addressed as follows:
If to Seller: Airline Interiors, Inc.
12325 Kerran Street
Poway, CA 92064
Attn: Donald Rutter
Fax No.: (858) 748-0590
With copies to: Simula, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to Purchaser: Weber Aircraft, Inc.
2000 Weber Drive
Gainesville, Texas 76240
Attn: Michel Labarre
Fax: (940) 668-4853
With copies to: Zodiac, S.A.
2, rue Maurice Mallet
92137, Issy-les-Moulineaux Cedex
France
Attn: Jean-Jacques Jegou
Fax No: (011-331) 41 23 23 10
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Hillyer & Irwin
550 West C Street, 16th Floor
San Diego, CA 92101
Attn: William A. Reavey, Esq.
Fax No.: (619) 595-1313
Any party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for that specified above. It is
agreed that separate notices need not be sent to Simtec. Notices sent to Simula
shall be deemed to have been sent to Simtec.
(c) EFFECTIVENESS. All notices shall be deemed effective upon
receipt. If personally delivered, notices shall be deemed received at the time
of delivery. If sent by mail, notices shall be deemed fully delivered and
received three (3) business days after the date of the postmark on the certified
mail receipt. If sent by commercial overnight delivery service, notices shall be
deemed fully delivered and received one (1) business day after the date of
deposit with such commercial overnight delivery service. If sent by fax, notices
shall be deemed received twenty-four (24) hours after transmission. Notices may
not be sent by e-mail. Rejection or other refusal to accept a notice or the
inability to deliver the same because of a changed address of which no notice
was given shall be deemed to be receipt of the notice sent. In the event of a
postal strike, all notices shall be personally delivered, sent by commercial
overnight delivery service, or sent by fax.
10.2 EXPENSES. Except for liabilities expressly assumed by Purchaser in
the Assignment and Assumption Agreement, Purchaser and Seller shall each pay
their own costs and expenses (including, without limitation, the fees and
expenses of their counsel, auditors and accountants and any finders' fees)
incidental to the preparation and carrying out of this Agreement and the
transactions contemplated hereby.
10.3 FINDERS' FEES. Each of the parties represents and warrants to the
other that, to the extent it has engaged any broker, finder or other person who
is entitled to a brokerage or other fee or commission in respect of the
execution of this Agreement and the consummation of the transactions
contemplated hereby, such fee is the sole responsibility of such party.
Purchaser shall indemnify and hold Seller harmless against and in respect of any
and all claims, liabilities and/or expenses which may be asserted against Seller
by any such broker or other person on the basis of any arrangement or agreement
made or alleged to have been made by Purchaser, its agents or employees; and
Seller shall indemnify and hold Purchaser harmless in respect of any and all
claims, liabilities and/or expenses which may be asserted against Purchaser by
any such broker or other person on the basis of any arrangement or agreement
made or alleged to have been made by Seller, its agents or employees.
10.4 INTEGRATION AND AMENDMENT. This Agreement supersedes any and all
previous agreements between the parties with respect to the subject matter
herein and may not be amended other than by a written instrument executed by
Purchaser and Seller, except for the Confidentiality Agreements dated March 15,
1999 and July 2, 1999, which shall remain in effect through the Closing
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and which shall remain in effect in the event this Agreement is terminated. This
Agreement is one of a series of agreements referenced in this Agreement which
are part of an integrated transaction. All such agreements shall be taken as a
whole in order to ascertain the intent of the parties. In the event of a
conflict between this Agreement and the other ancillary agreements referenced in
this Agreement, this Agreement shall control.
10.5 CAPTIONS. The captions and headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the
same instrument.
10.7 PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
10.8 ASSIGNMENT. No party hereto shall assign this Agreement without
first obtaining the written consent of the other parties; provided, however,
that notwithstanding anything in this Agreement to the contrary, Purchaser shall
be entitled to assign this Agreement, in whole or in part, to any wholly-owned
subsidiary of Purchaser, it being agreed, however, that no such assignment shall
release or relieve Purchaser from any liability under this Agreement.
10.9 INTERPRETATION. The language in all parts of this Agreement shall
be construed, in all cases, according to its fair meaning, and not for or
against any party hereto. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
10.10 GOVERNING LAW; VENUE. This Agreement and any interpretation
hereof and the resolution of any dispute hereunder shall be governed by the laws
of the State of California, and subject to the parties' obligation to arbitrate
and dispute any action to enforce any provision of this Agreement or to obtain
any remedy with respect hereto may be brought in the appropriate state or
federal court in San Diego County, California. For this purpose each party
hereto hereby expressly and irrevocably consents to the jurisdiction of said
court, it being understood and agreed that the parties are obligated to
arbitrate disputes between them pursuant to Section 10.12.
10.11 LISTING OF SCHEDULES AND EXHIBITS. The schedules and exhibits
referenced to this Agreement are listed on Annex 1 and Annex 2, respectively.
All such schedules and exhibits are hereby incorporated into this Agreement by
this reference. Said schedules and exhibits are not attached to this Agreement,
but shall be attached to this Agreement by execution of an amendment of this
Agreement prepared for such purpose. Such amendment shall be executed at least
five (5) business days before the Balance Sheet Cut-Off Date.
41
<PAGE> 43
10.12 ARBITRATION.
(a) GENERAL. Any controversy, claim, or dispute among the parties
hereto arising out of or related to this Agreement or the breach thereto, which
cannot be settled amicably by the parties, shall be submitted for binding
arbitration in accordance with the provisions contained herein and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
("Rules"); provided, however, that notwithstanding any provisions of such Rules,
the parties shall have the right to take depositions and obtain discovery
regarding the subject matter of the arbitration, as provided in Title III of
Part 4 (commencing with Section 1985) of the California Code of Civil Procedure.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall determine all questions of fact and
law relating to any controversy, claim, or dispute hereunder, including but not
limited to whether or not any such controversy, claim, or dispute is subject to
the arbitration provisions contained herein.
(b) THIRD-PARTY CONTROVERSY. If a controversy, claim, or dispute
arises among the parties hereto which is subject to the arbitration provisions
hereunder, and there exists or later arises a controversy, claim, or dispute
between the parties hereto and any third party, which controversy, claim, or
dispute arises out of or relates to the same transaction or series of
transactions, said third party controversy, claim, or dispute shall be
consolidated with the arbitration proceedings hereunder; provided, however, that
any such third party must be a party to an agreement with a party hereto which
provides for arbitration of disputes thereunder in accordance with rules and
procedures substantially the same in all material respects as provided for
herein or, if not, must consent to arbitration as provided for hereunder.
(c) VENUE. All arbitration proceedings shall be held in San Diego,
California.
(d) NOTICES. Notice of the demand for arbitration shall be filed
in writing with Purchaser and Simula (on behalf of all Selling Parties), as
applicable, to this Agreement and with the American Arbitration Association.
10.13 GUARANTEE BY ZODIAC, S.A.. Purchaser is a wholly-owned subsidiary
of Zodiac, S.A., a French corporation ("Zodiac"). By signing below, Zodiac
agrees to unconditionally guarantee the full and complete performance of all of
Purchaser's obligations under this Agreement, including without limitation,
Purchaser's obligation to pay the Cash Payment in accordance with this
Agreement. Such guarantee shall, however, terminate as of the Closing.
10.14 STATUS OF SCHEDULES AND EXHIBITS. As of the date of this
Agreement, not all of the schedules listed on Annex 1 and all of the exhibits
listed on Annex 2 have been put in final form. The status of such schedules and
exhibits as of the date of execution of this Agreement is set forth in the
following tables. The parties shall agree on the final form of said schedules
and exhibits on or before the Effective Date.
42
<PAGE> 44
ANNEX 1
LIST OF ATTACHED SCHEDULES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CONTROL SCHEDULE DESCRIPTION STATUS
NO. NO.
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
1 0.3(e) Schedule of Assumed Liabilities Open
- ---------------------------------------------------------------------------------
2 0.3(u) Schedule of Excluded Assets Open
- ---------------------------------------------------------------------------------
3 0.3(v) Schedule of Excluded Liabilities Open
- ---------------------------------------------------------------------------------
4 1.1(a) Schedule of Accounts Receivable Update
- ---------------------------------------------------------------------------------
5 1.1(c) Schedule of Customer Contracts Complete
- ---------------------------------------------------------------------------------
6 1.1(d) Schedule of Equipment Leases Complete
- ---------------------------------------------------------------------------------
7 1.1(e) Schedule of Governmental Airworthiness Complete
Approvals
- ---------------------------------------------------------------------------------
8 1.1(f) Schedule of Included Inventories Update
- ---------------------------------------------------------------------------------
9 1.1(g) Schedule of Intellectual Property Complete
- ---------------------------------------------------------------------------------
10 1.1(i) Schedule of Other Assets Complete
- ---------------------------------------------------------------------------------
11 1.1(j) Schedule of Software Licenses Update
- ---------------------------------------------------------------------------------
12 1.1(k) Schedule of Supplies Complete
- ---------------------------------------------------------------------------------
13 1.1(l) Schedule of Tangible Personal Property Complete
- ---------------------------------------------------------------------------------
14 1.1(m) Schedule of Tooling Complete (no
location)
- ---------------------------------------------------------------------------------
15 1.1(n) Schedule of Vendor Contracts Complete
- ---------------------------------------------------------------------------------
16 2.4 Schedule of Defaults and Violations Complete
- ---------------------------------------------------------------------------------
17 2.6 Schedule of Pending Litigation Matters Complete
- ---------------------------------------------------------------------------------
18 2.8 Schedule of Other Governmental Licenses, Complete
Permits, and Authorizations
- ---------------------------------------------------------------------------------
19 2.9 Schedule of Title Exceptions Complete
- ---------------------------------------------------------------------------------
20 2.11 Schedule of Obligations and Commitments to Open
Third Parties Other than Customers
- ---------------------------------------------------------------------------------
21 2.13 Schedule of Financial Statements Income Stmt?
- ---------------------------------------------------------------------------------
22 2.14 Schedule of Material Adverse Changes Open
- ---------------------------------------------------------------------------------
23 2.16 Schedule of Uncollectible Accounts Complete
Receivable
- ---------------------------------------------------------------------------------
24 2.17 Schedule of Accounts Payable Update
- ---------------------------------------------------------------------------------
25 2.18 Schedule of Required Consents and Complete
Approvals
- ---------------------------------------------------------------------------------
26 2.19(a)(1) Schedule of Personnel Agreements, Policies, Complete
Procedures, etc.
- ---------------------------------------------------------------------------------
27 2.19(a)(2) Schedule of Group Health Insurance Benefits Complete
- ---------------------------------------------------------------------------------
28 2.19(b) Schedule of Material Employee-Related Complete
- ---------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 45
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CONTROL SCHEDULE DESCRIPTION STATUS
NO. NO.
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
Obligations
- ---------------------------------------------------------------------------------
29 2.19(c) Schedule of Personnel Payroll Roster Complete
- --------------------------------------------------------------------------------
30 2.19(d) Schedule of Accrued Vacation and Sick Day Complete
Allowances
- --------------------------------------------------------------------------------
31 2.19(g) Schedule of Severance Pay Obligations Update
- --------------------------------------------------------------------------------
32 2.21 Schedule of Material Pending Insurance Complete
Claims
- --------------------------------------------------------------------------------
33 2.22(a) Schedule of Standard Product Warranty Complete
- --------------------------------------------------------------------------------
34 2.22(b) Schedule of Material Warranty Claims Open
- --------------------------------------------------------------------------------
35 2.22(c) Schedule of Special Warranty Arrangements Complete
- --------------------------------------------------------------------------------
36 2.23 Schedule of Banks and Financial Institutions Complete
- --------------------------------------------------------------------------------
37 2.24 Schedule of Trade Names, Logos, Complete
Trademarks, and Copyrights
- --------------------------------------------------------------------------------
38 2.25 Schedule of Patents and Patent Rights Complete
- --------------------------------------------------------------------------------
39 2.26 Schedule of Sales Agents Complete
- --------------------------------------------------------------------------------
40 2.29 Schedule of Customer List Complete
- --------------------------------------------------------------------------------
41 2.30 Schedule of Interests in Customers, Complete
Suppliers, and Competitors
- --------------------------------------------------------------------------------
42 2.34 INTENTIONALLY DELETED
- --------------------------------------------------------------------------------
43 2.36 Schedule of Service Bulletins Complete
- --------------------------------------------------------------------------------
44 2.38 Schedule of Customer Order Backlog Complete
- --------------------------------------------------------------------------------
45 3.4 Schedule of Violations by Purchaser Complete
- --------------------------------------------------------------------------------
</TABLE>
ANNEX 2
LIST OF ATTACHED EXHIBITS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONTROL EXHIBIT DESCRIPTION STATUS
NO. NO.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
46 A Pro Forma Closing Date Balance Sheet Approved
- --------------------------------------------------------------------------------
47 B Inventory Valuation Methodology Approved
- --------------------------------------------------------------------------------
48 C Inventory Reserve Methodology Approved
- --------------------------------------------------------------------------------
49 D Assignment and Assumption Agreement Not Approved
- --------------------------------------------------------------------------------
50 E Bill of Sale Not Approved
- --------------------------------------------------------------------------------
51 F Non-Competition Agreement Not Approved
- --------------------------------------------------------------------------------
52 G Funding Agreement Not Approved
- --------------------------------------------------------------------------------
53 H Patent License Agreement Not Approved
- --------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 46
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
54 I Transition Support Agreement Not Approved
- --------------------------------------------------------------------------------
55 J Assignment of Intellectual Property Not Approved
- --------------------------------------------------------------------------------
</TABLE>
10.15 LOCATION OF DUE DILIGENCE MATERIALS. The due diligence materials
referenced on the schedules listed on Annex 1 will not be attached to this
Agreement. Rather, such materials are located in binders containing such due
diligence materials maintained by Hillyer & Irwin.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
45
<PAGE> 47
IN WITNESS WHEREOF, the parties have duly executed this Asset Purchase
Agreement
as of the date first set forth above.
"SELLER" AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Brad Forst
----------------------------------------
Printed Name: Brad Forst
------------------------------
Its: Secretary
---------------------------------------
"SIMTEC" SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Brad Forst
----------------------------------------
Printed Name: Brad Forst
------------------------------
Its: Secretary
---------------------------------------
"SIMULA" SIMULA, INC., an Arizona corporation
By: /s/ Brad Forst
----------------------------------------
Printed Name: Brad Forst
------------------------------
Its: Exec. Vice President - General Council
---------------------------------------
"PURCHASER" WEBER AIRCRAFT, INC., a Delaware corporation
By: /s/ Michel Labarre
----------------------------------------
Michel Labarre, President
[SIGNATURE PAGE CONTINUES]
46
<PAGE> 48
SIGNATURE OF GUARANTOR
The undersigned is executing this signature page for the limited
purpose of confirming that the undersigned is guaranteeing the obligations of
Purchaser under the above Agreement, as more fully provided in Section 10.13
above.
Dated: 12/27/99 ZODIAC, S.A., a French corporation
------------------
By: /s/ Jegou J. Jacques
--------------------------------------
Printed Name: Jegou J. Jacques
----------------------------
Its: Chief Financial Officer
-------------------------------------
ACCEPTANCE OF ESCROW
By signing below, the undersigned Escrowholder accepts the Escrow and
agrees to comply with the escrow instructions contained in the above Agreement.
Dated: 1-10-2000 Bank One, Arizona, NA
------------------ -----------------------------------------
By: /s/ Susan J. McCord
--------------------------------------
Printed Name: Susan J. McCord
----------------------------
Its: Vice President
-------------------------------------
47
<PAGE> 49
EXHIBIT A
TERM LOAN PROMISSORY NOTE
December 30, 1999
$5,000,000
FOR VALUE RECEIVED, each of the undersigned, jointly and severally
(collectively, the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") at its office located at 300 South
Grand Avenue, 3rd Floor, Los Angeles, California 90071, in lawful money of the
United States of America and in immediately available funds, the principal
amount of Five Million Dollars ($5,000,000) payable in equal monthly principal
installments of $555,556 each commencing on the date 90 days after the Closing
Date, and each subsequent installment shall be due on the same day of the month,
followed by an installment of the remaining principal balance together with
accrued and unpaid interest at the maturity date hereof on August 31, 2000. In
any event, the principal balance hereof and any accrued and unpaid interest
shall be due and payable upon the maturity of the Obligations under the
Financing Agreement.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8, Paragraph 2 of the Financing
Agreement of even date herewith between the Company and CITBC (the "Financing
Agreement"). Capitalized terms used herein and defined in the Financing
Agreement shall have the same meanings as set forth therein unless otherwise
specifically defined herein.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is the Term Loan Promissory Note referred to in the Financing
Agreement, evidences the Term Loan thereunder, and is subject to, and entitled
to, all provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining
51
<PAGE> 50
unpaid on this Note may become, or be declared to be, at the sole election of
CITBC, immediately due and payable as provided in the Financing Agreement.
SIMULA, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Executive Vice President & CFO
------------------------------
AIRLINE INTERIORS, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
ARTCRAFT INDUSTRIES CORP.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
SIMULA TRANSPORTATION
EQUIPMENT CORPORATION
(formerly known as INTAERO INC.)
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
52
<PAGE> 51
SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
SIMULA COMPOSITES
CORPORATION
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
SIMULA POLYMER SYSTEMS, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
SIMULA SAFETY SYSTEMS, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
SIMULA TECHNOLOGIES, INC.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
53
<PAGE> 52
SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
CCEC CAPITAL CORP.
By /s/ James C. Dodd
-----------------------------------
Title: Treasurer
------------------------------
54
<PAGE> 53
CIT / SIMULA
Schedule 1
Existing Liens (Attached)
<PAGE> 54
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
===============================================================================================================================
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIMULA, INC. SOS, AZ 774717 AVNET COMPUTER TECHNOLOGIES, INC. Equipment 12-10-99
UCC 02-08-94
- -------------------------------------------------------------------------------------------------------------------------------
774719 AVNET COMPUTER TECHNOLOGIES, INC. Equipment
02-08-94
- -------------------------------------------------------------------------------------------------------------------------------
806105 AVNET COMPUTER TECHNOLOGIES, INC. Equipment
10-24-94
- -------------------------------------------------------------------------------------------------------------------------------
924130 US BANCORP LEASING & FINANCIAL Equipment and proceeds
07-02-96
- -------------------------------------------------------------------------------------------------------------------------------
935636 US BANCORP LEASING & FINANCIAL Specific Equipment
09-18-96
- -------------------------------------------------------------------------------------------------------------------------------
940491 US BANCORP LEASING & FINANCIAL Equipment and proceeds
10-22-96
- -------------------------------------------------------------------------------------------------------------------------------
948142 US BANCORP LEASING & FINANCIAL Specific Equipment
12-17-96
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 1 of 9
<PAGE> 55
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
955078 US BANCORP LEASING Specific Equipment
02-07-97 & FINANCIAL
- -----------------------------------------------------------------------------------------------------------------------------------
984273 WELLS FARGO LEASING Computer Equipment
9-11-97 CORPORATION (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
01042061 BANK ONE, ARIZONA, Blanket
11-18-98 NA
- -----------------------------------------------------------------------------------------------------------------------------------
01001258 WELLS FARGO LEASING Computer Equipment
01-20-98 CORPORATION (lease)
- -----------------------------------------------------------------------------------------------------------------------------------
1060115 NEW ENGLAND CAPITAL Communications
03-30-99 CORPORATION Equipment
- -----------------------------------------------------------------------------------------------------------------------------------
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
- -----------------------------------------------------------------------------------------------------------------------------------
AIRLINE INTERIORS, SOS, AZ 1042065 BANK ONE, ARIZONA, Blanket 12-10-99
INC. UCC 11-18-98 NA
- -----------------------------------------------------------------------------------------------------------------------------------
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 2 of 9
<PAGE> 56
SCHEDULE 1
Existing Liens
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AIRLINE INTERIORS, INC. SOS, CA 9508760473 SOUTHWEST YALE MATERIAL 1 forklift 12-01-99
UCC 03-23-95 HANDLING COMPANY
- ------------------------------------------------------------------------------------------------------------------------------
9530760787 MASTER LEASE DIV OF TOKAI IDS phone system
11-01-95
- ------------------------------------------------------------------------------------------------------------------------------
9634860727 U.S. BANCORP LEASING Specific Equipment
12-13-96 & FINANCIAL (lease)
- ------------------------------------------------------------------------------------------------------------------------------
9705060100 U.S. BANCORP LEASING Specific Equipment
02-10-97 & FINANCIAL (lease)
- ------------------------------------------------------------------------------------------------------------------------------
9705660817 MINOLTA BUSINESS SYSTEMS 1 copier (lease)
02-18-97
- ------------------------------------------------------------------------------------------------------------------------------
9709760767 TOKAI FINANCIAL SERVICES, IDS phone system
03-31-97 INC.
- ------------------------------------------------------------------------------------------------------------------------------
9823660539 NEW ENGLAND CAPITAL Specific Equipment
08-20-98 CORPORATION (lease)
- ------------------------------------------------------------------------------------------------------------------------------
9906760112 CROWN CREDIT COMPANY Specific Equipment
02-25-99
- ------------------------------------------------------------------------------------------------------------------------------
9924560183 MINOLTA BUSINESS SYSTEMS Copiers (lease)
08-20-99
- ------------------------------------------------------------------------------------------------------------------------------
ARTCRAFT INDUSTRIES CORP. SOS, AZ 1042066 BANK ONE, ARIZONA, NA Blanket
UCC 11-18-98
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 3 of 9
<PAGE> 57
SCHEDULE 1
Existing Liens
<TABLE>
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
ARTCRAFT Maricopa County, AZ 10-27-99
INDUSTRIES CORP. UCC, Tax Liens, Clear
Judgments, Suits
____________________________________________________________________________________________________________________________________
SOS, WI 1714065 FBS BUSINESS FINANCE Specific Equipment 10-28-99
UCC 11-10-97 CORPORATION (lease)
____________________________________________________________________________________________________________________________________
1727698 FBS BUSINESS FINANCE Specific Equipment
01-12-98 CORPORATION
____________________________________________________________________________________________________________________________________
1736595 U.S. BANCORP LEASING 6 commercial sewing
02-16-98 & FINANCIAL machines
____________________________________________________________________________________________________________________________________
1750761 LPI SOFTWARE FUNDING Specific Equipment
04-13-98 GROUP, INC. (lease)
____________________________________________________________________________________________________________________________________
1805630 BANK ONE, ARIZONA, NA Blanket
11-19-98
____________________________________________________________________________________________________________________________________
1805631 BANK ONE, ARIZONA, NA Blanket
11-19-98
____________________________________________________________________________________________________________________________________
Clayton County, GA 031-98-003184 U.S. BANCORP LEASING commercial sewing 12-03-99
UCC, Tax Liens, 05-19-98 & FINANCIAL machines
Judgments, Suits
____________________________________________________________________________________________________________________________________
Fulton County, GA 23430 FBS BUSINESS Specific Equipment 11-16-99
UCC, Tax Liens, 11-12-97 FINANCE CORPORATION (lease)
Judgments, Suits
____________________________________________________________________________________________________________________________________
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 4 of 9
<PAGE> 58
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- ------------- ------------ ----------- ------------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
ARTCRAFT INDUSTRIES CORP. Gwinnett County, GA 12-08-99 unofficial
UCC, Tax Liens, Clear search
Judgments, Suits
INTERNATIONAL CENTER FOR SOS, AZ 1042071 BANK ONE, ARIZONA, NA Blanket 12-10-99
SAFETY EDUCTION, INC. UCC 11-18-98
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
SIMULA AUTOMOTIVE SOS, AZ 945969 US BANCORP LEASING Computer
SAFETY DEVICES, INC. UCC 12-03-96 & FINANCIAL Equipment
948141 US BANCORP LEASING Computer
12-17-96 & FINANCIAL Equipment
955077 US BANCORP LEASING Equipment
02-07-97 & FINANCIAL
1042063 BANK ONE, ARIZONA, NA Blanket
11-18-98
1042070 BANK ONE, ARIZONA, NA Blanket
11-18-98
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 5 of 9
<PAGE> 59
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
===============================================================================================================================
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIMULA AUTOMOTIVE SAFETY United Kingdom
DEVICES, LIMITED
- --------------------------------------------------------------------------------------------------------------------------------
SIMULA COMPOSITES SOS, AZ 12-10-99
CORPORATION UCC Clear
- --------------------------------------------------------------------------------------------------------------------------------
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments
- --------------------------------------------------------------------------------------------------------------------------------
SOS, DE 11-30-99
UCC Clear
- --------------------------------------------------------------------------------------------------------------------------------
SIMULA POLYMER SOS, AZ 12-10-99
SYSTEMS, INC. UCC
- --------------------------------------------------------------------------------------------------------------------------------
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
- --------------------------------------------------------------------------------------------------------------------------------
SIMULA PROTECTIVE United Kingdom
SYSTEMS, LIMITED
- --------------------------------------------------------------------------------------------------------------------------------
SIMULA SAFETY SYSTEMS, SOS, AZ 1042062 BANK ONE, ARIZONA, NA Blanket 12-10-99
INC. UCC 11-18-98
- --------------------------------------------------------------------------------------------------------------------------------
1049869 GE CAPITAL Business Machinery/
01-19-99 Equipment
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 6 of 9
<PAGE> 60
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
====================================================================================================================================
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIMULA SAFETY SYSTEMS, INC. Coconino County, AZ 12-06-99
UCC, Tax Liens Clear
Judgments, Suits
- ------------------------------------------------------------------------------------------------------------------------------------
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
- ------------------------------------------------------------------------------------------------------------------------------------
Yavapai County, AZ 11-25-99
UCC, Tax Liens, Clear
Judgments, Suits
- ------------------------------------------------------------------------------------------------------------------------------------
SOS, NC 199887977 BANK ONE ARIZONA Blanket 10-22-99
UCC 11-20-98
- ------------------------------------------------------------------------------------------------------------------------------------
199931144 TRIMARC FINANCIAL, Specific Equipment
03-30-99 INC. (lease)
- ------------------------------------------------------------------------------------------------------------------------------------
Buncombe County, NC 12-10-99
UCC, Tax Liens, Clear
Judgments, Suits
- ------------------------------------------------------------------------------------------------------------------------------------
SIMULA TECHNOLOGIES, INC. SOS, AZ 948138 US BANCORP LEASING Equipment 12-10-99
UCC 12-17-96 & FINANCIAL
- ------------------------------------------------------------------------------------------------------------------------------------
955075 US BANCORP LEASING Equipment
02-07-97 & FINANCIAL
- ------------------------------------------------------------------------------------------------------------------------------------
01021448 MAX MACHINERY, INC. Equipment
06-19-98
- ------------------------------------------------------------------------------------------------------------------------------------
SIMULA TECHNOLOGIES, INC. 1041771 NEW ENGLAND CAPITAL Equipment 12-10-99
(continued) 11-16-98 CORPORATION
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 7 of 9
<PAGE> 61
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- ------------- ------------ ----------- ------------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1042069 BANK ONE, ARIZONA, NA Blanket
11-18-98
1049371 FIDELITY LEASING, INC. Specific Equipment
01-14-99 (lease)
1059879 NEW ENGLAND CAPITAL Equipment
03-29-99 CORPORATION
Maricopa County, AZ 99-0329415 TRIMARC FINANCIAL, INC. Specific Equipment
UCC, Tax Liens, 04-07-99 (lease)
Judgments, Suits
98-1101538 TRIMARC FINANCIAL, INC. Specific Equipment
12-07-98 (lease)
SIMULA GOVERNMENT SOS, AZ 862182 ADVANTA BUSINESS Inventory
PRODUCTS, INC. UCC 01-11-96 SERVICES CORP.
945970 US BANCORP LEASING Equipment
12-03-96 & FINANCIAL
945974 US BANCORP LEASING Equipment
12-03-96 & FINANCIAL
948140 US BANCORP LEASING Equipment
12-17-96 & FINANCIAL
955076 US BANCORP LEASING Equipment
02-07-97 & FINANCIAL
SIMULA GOVERNMENT PRODUCTS SOS, AZ 963864 THE CIT GROUP/EQUIPMENT Equipment 12-10-99
INC. (continued) UCC 04-15-97 FINANCING
INTAERO, INC. SOS, AZ 1042072 BANK ONE, ARIZONA, NA Blanket 12-10-99
UCC 11-18-98
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 8 of 9
<PAGE> 62
SCHEDULE 1
Existing Liens
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FILE NUMBER THRU DATE/
NAME SEARCHED JURISDICTION DATE SECURED PARTY COLLATERAL STATUS ACTION
- ------------------------------------------------------------------------------------------------------------------
Maricopa County, AZ 10-27-99
UCC, Tax Liens, Clear
Judgments, Suits
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
CIT\SIMULA\SCHEDULE 1 Page 9 of 9
<PAGE> 63
CIT/SIMULA
SCHEDULE 2
a) Location of Chief Executive Office:
2700 N. Central Avenue
Suite 1000
Phoenix, Arizona 85004
b) Location of Collateral:
All collateral is located on the premises of the Company's operating
subsidiaries (or under the control of the subsidiaries), the description of
which is attached.
<PAGE> 64
COMPANY INFORMATION
UPDATED: DECEMBER 1999
<TABLE>
<CAPTION>
================================================================================================================================
COMPANY PHONE/FAX FEDERAL I.D. DIRECTORS OFFICERS CONTACT(S)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Simula, Inc. ph. (602) 631-4005 Arizona Stan Desjardins Chairman - Stan Desjardins Don Townsend
2700 North Central fax (602) 631-9005 86-0320129 Don Townsend President & CEO - Don Townsend
Avenue Brad Forst Secretary - Brad Forst
Suite 1000 Jim Saunders Treasurer - James Dodd
Phoenix, Arizona John Leinonen Assistant Treasurer - Scott Huson
85004 Don Olliver
James Withers
Lon Offenbacher
Thomas Emerson
- --------------------------------------------------------------------------------------------------------------------------------
Airline Interiors, Inc. ph. (858) 748-1117 Arizona Don Rutter President - Don Rutter Jim Saunders
12325 Kerran Street fax (858) 748-1937 doing business Jim Saunders Treasurer - Gary Perschbacher
Poway, CA 92064 in CA Don Townsend Secretary - Brad Forst
86-0768865 Brad Forst Assistant Treasurer - James Dodd
- --------------------------------------------------------------------------------------------------------------------------------
Artcraft Industries ph. (404) 768-8377 Arizona Brad Forst Rick Zaugg - President Rick Zaugg
Corp. fax (404) 768-0735 Jim Saunders Dan Dunn - Treasurer
4753 Aviation Parkway Don Townsend Jim Dodd - Assistant Treasurer
Suite F Brad Forst - Secretary
College Park, GA 30349
- --------------------------------------------------------------------------------------------------------------------------------
International Center for ph: (602) 631-4005 Arizona Stan Desjardins President - Stan Desjardins Joe Coltman
Safety Education, Inc. fax (602) 631-4020 86-0787589 Don Townsend Secretary - Brad Forst
10016 South 51st Street Joe Coltman Treasurer - James Dodd
Phoenix, Arizona 85044
- --------------------------------------------------------------------------------------------------------------------------------
Simula Automotive ph. (480) 831-6129 Arizona Don Townsend President - Gershon Yaniv Gershon Yaniv
Safety Devices, Inc. fax (480) 831-5543 86-0789385 Jim Saunders Secretary - Brad Forst
(ASD - Simula) Brad Forst Treasurer - James Dodd
7360 S. Kyrene Road Gershon Yaniv
Suite 106
Tempe, Arizona 85283
================================================================================================================================
</TABLE>
G/Legal/Corporate/Subsidiaries/Address List with Officers
1
<PAGE> 65
COMPANY INFORMATION
UPDATED: DECEMBER 1999
<TABLE>
<CAPTION>
================================================================================================================================
COMPANY PHONE/FAX FEDERAL I.D. DIRECTORS OFFICERS CONTACT(S)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Simula Automotive Safety ph. 011-44-1670-562000 United Kingdom Don Townsend President -- David Horn David Horn
Devices, Limited fax 011-44-1670-8555-590 Jim Saunders Secretary -- Brad Forst Gershon Yaniv
Unit 2 Gershon Yaniv
Wansbeck Business Park
Rotary Parkway, Ashington
Northumberland NE63 8QZ
United Kingdom
(subsidiary of ASD --
Simula in U.S.)
- -----------------------------------------------------------------------------------------------------------------------------------
Simula Composites Corporation ph. (480) 894-9100 Delaware Stan Desjardins President -- Harry Jones Harry Jones
2495 South Industrial Park fax (480) 894-9111 86-0763930 Don Townsend Secretary -- Brad Forst
Avenue doing business Brad Forst Treasurer -- James Dodd
Tempe, Arizona 85282 in Arizona
- -----------------------------------------------------------------------------------------------------------------------------------
Simula Polymer Systems, Inc. ph. (480) 753-2000 Arizona Joe Coltman Brad Forst -- President Brad Forst
10016 South 51st Street fax (480) 893-8643 Corporation Brad Forst Joe Coltman -- Vice
Phoenix, Arizona 85044 ID Applied For Don Townsend President
James Dodd -- Secretary/
Treasurer
- -----------------------------------------------------------------------------------------------------------------------------------
Simula Protective Systems, see Don Townsend United Kingdom Don Townsend N/A Don Townsend
Limited
Unit 2
Wansbeck Business Park
Rotary Parkway, Ashington
Northumberland NE63 8QZ
United Kingdom
(ASD-UK)
- -----------------------------------------------------------------------------------------------------------------------------------
Simula Safety Systems, Inc., ph. (480) 893-7533 Arizona Stan Desjardins President -- Sherwin Hudson
Applied Technologies fax (480) 893-8643 86-0742551 Don Townsend Stan Desjardins San Desjardins
Division (ATD) Brad Forst Secretary -- Mike Haerle Bill Rogers
7414 South Harl Avenue Jim Saunders Assistant Secretary --
Tempe, Arizona 85283 Sherwin Hudson Brad Forst
Treasurer -- Mike Haerle
Assistant Treasurer --
James Dodd
- -----------------------------------------------------------------------------------------------------------------------------------
Simula Safety Systems, Inc., ph. (828) 277-1979 A division of Barry Shope, GM
SEI Division fax (828) 274-1627 SSSI Sherwin Hudson
Safety Equipment
International (SEI)
537 Sweeten Creek Industrial
Park
Asheville, North Carolina
28803
===================================================================================================================================
</TABLE>
G/Legal/Corporate/Subsidiaries/Address List with Officers
2
<PAGE> 66
COMPANY INFORMATION
UPDATED: December 1999
<TABLE>
<CAPTION>
====================================================================================================================================
COMPANY PHONE/FAX FEDERAL I.D. DIRECTORS OFFICERS CONTACT(S)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Simula Safety Systems Inc., Sedona ph. (520) 204-1404 A division of Vern Dorrell, GM
Scientific Division fax (520) 282-4998 SSSI Sherwin Hudson
Sedona Scientific (SS)
(Division of SSSI)
30 Kayenta Court
Sedona, Arizona 86336-3729
- ------------------------------------------------------------------------------------------------------------------------------------
Simula Technologies, Inc. (STI) ph. (480) 753-2000 Arizona Stan Desjardins President - Joe Coltman Joe Coltman
10016 South 51st Street fax (480) 893-8643 86-0842935 Don Townsend Secretary - Brad Forst
Phoenix, Arizona 85044 Joe Coltman Treasurer - James Dodd
Brad Forst
- ------------------------------------------------------------------------------------------------------------------------------------
Simula Transportation Equipment ph. (619) 535-9056 Arizona Don Townsend President - Don Rutter Don Rutter
Corporation (SIMTEC) fax (619) 535-9628 authorized in Don Rutter Secretary - Brad Forst Jim Saunders
(formerly Intaero, Inc.) CA as Intaero Brad Forst Treasurer - James Dodd
9940 Mesa Rim Road Holdings, Inc.
San Diego, CA 92121 86-0742552
- ------------------------------------------------------------------------------------------------------------------------------------
CCEC Capital Corp. (formerly Coach 86-0763929 Brad Forst President - Brad Forst Ben Clark
and Car Equipment Corporation) Ben Clark Secretary - James Dodd
Treasurer - James Dodd
- ------------------------------------------------------------------------------------------------------------------------------------
Inataero, Limited (inactive)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
G\Legal\Corporate/Subsidiaries/Address List with Offices
3
<PAGE> 67
EXHIBIT 10.40b
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (the "Amendment") is
executed as of this 1st day of February, 2000, by and among AIRLINE INTERIORS,
INC., an Arizona corporation ("Seller"), SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation ("Simtec"), and SIMULA, INC., an Arizona
corporation ("Simula"), and WEBER AIRCRAFT, INC., a Delaware corporation
("Purchaser"), with reference to the facts set forth in the Recitals below.
RECITALS
A. Seller, Simula, Simtec and Purchaser are parties to a certain Asset
Purchase Agreement dated December 24, 1999 (the "Asset Purchase Agreement").
B. Seller, Simula and Simtec are sometimes collectively referred to as
the "Selling Parties."
C. At the time that the Asset Purchase Agreement was executed, none of
the exhibits were attached to the Agreement and all of the schedules (the
"Schedules") to the Asset Purchase Agreement were incomplete.
D. The parties have agreed on the form of the documents comprising the
Exhibits and now desire to amend the Asset Purchase Agreement to incorporate the
Exhibits.
E. Selling Parties have provided Purchaser with the information needed
to complete the Schedules and the parties also desire to amend the Asset
Purchase Agreement to incorporate the Schedules.
F. The parties also desire to amend the Asset Purchase Agreement to
incorporate certain other provisions and to correct certain errors contained in
the Asset Purchase Agreement.
G. The parties are executing this Amendment in order to memorialize
their understanding concerning the matters referenced above.
1
<PAGE> 68
AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the
above Recitals, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. INTERPRETATION. Except as amended by this Amendment, the Asset
Purchase Agreement shall remain in full force and effect. In the event of a
conflict between the provisions of this Amendment and those of the Asset
Purchase Agreement, this Amendment shall control. Terms with initial capital
letters are defined terms which shall have the respective meanings given them in
the Asset Purchase Agreement, unless the context of this Amendment requires
otherwise.
2. SCHEDULES. The Schedules referred to in the Asset Purchase Agreement
have now been completed and are listed in Annex 1 to the Asset Purchase
Agreement. Annex 1 and the Schedules listed therein are attached to this
Amendment and are hereby incorporated into the Asset Purchase Agreement by this
reference.
3. EXHIBITS. The Exhibits referred to in the Asset Purchase Agreement
have now been completed and are listed on Annex 2 to the Asset Purchase
Agreement. Annex 2 and the Exhibits listed below are attached to this Amendment
and are hereby incorporated into the Asset Purchase Agreement by this reference.
(a) Control No. 46: Exhibit A - Pro Forma Closing Date Balance
Sheet,
(b) Control No. 47: Exhibit B - Inventory Valuation Methodology
(c) Control No. 48: Exhibit C - Inventory Reserve Methodology
(d) Control No. 49: Exhibit D - Assignment and Assumption
Agreement,
(e) Control No. 50: Exhibit E - Bill of Sale,
(f) Control No. 51: Exhibit F - Non-Competition Agreement,
(g) Control No. 52: Exhibit G - Funding Agreement,
(h) Control No. 53: Exhibit H - Patent License Agreement,
(i) Control No. 54: Exhibit I - Transition Support Agreement,
(j) Control No. 55: Exhibit J - Assignment of Intellectual
Property, and
(k) Control No. 56: Exhibit K - Pre-Closing Balance Sheet.
2
<PAGE> 69
4. PRE-CLOSING BALANCE SHEET. The parties have agreed on the final form
of the Pre-Closing Balance Sheet. The final form of the Pre-Closing Balance
Sheet is attached hereto as Exhibit "K." The parties acknowledge that the Agreed
Inventory Value on line 5 of the Post-Closing Date Balance Sheet is in error.
The value of the Included Inventory will be adjusted downward as part of the
Post-Closing Accounting Adjustments to reflect the application of a 70%
valuation factor (as opposed to a 100% valuation factor) on the items identified
as LDC UK and LDC-1.
5. AMENDMENT OF SECTION 0.1(g). Section 0.1(g) of the Asset Purchase
Agreement is hereby amended and restated in is entirety to read as follows:
"(g) Indemnity Cap . $2,050,000. See Section 8.6(b) below."
6. AMENDMENT OF SECTION 0.1(h). Section 0.1(h) of the Asset Purchase
Agreement is hereby amended and restated in its entirety to read as follows:
"(h) INDEMNITY PERIOD. The period of time specified in Section
0.3(cc). See also Section 8.6 below."
7. AMENDMENT OF SECTION 0.3(p). Section 0.3(p) of the Asset Purchase
Agreement is hereby amended and restated in its entirety to read as follows:
"(p) CLOSING DOCUMENTS. The term "Closing Documents" shall mean and
include:
(1) Assignment and Assumption Agreement (Exhibit "D"),
(2) Bill of Sale (Exhibit "E"),
(3) Non-Competition Agreement (Exhibit "F"),
(4) Patent License Agreement (Exhibit "H"),
(5) Transition Support Agreement (Exhibit "I"),
(6) Assignment of Intellectual Property (Exhibit "J"),
(7) Pre-Closing Balance Sheet (Exhibit "K"),
(8) Asset Acquisition Statement (IRS Form 8594), and
(9) Such other documents and agreements as may be reasonably
required to carry out and implement the transactions contemplated in this
Agreement."
3
<PAGE> 70
8. AMENDMENT OF SECTION 0.3(cc). Section 0.3(cc) of the Asset Purchase
Agreement is hereby amended and restated in its entirety to read as follows:
"0.3(cc) INDEMNITY PERIOD. The term "Indemnity Period" shall mean a
period beginning on the Closing Date and ending at two different
times. The Indemnity Period shall end as to all Indemnifiable
Claims (as defined in Section 8.1 below) on the last day (the
"First Termination Date") of the calendar month in which falls the
18th month anniversary of the Closing. As to warranty claims for
Products sold by Seller, the Indemnity Period shall extend to the
last day of the calendar month in which falls the 24th month
anniversary of the Closing. After the First Termination Date, the
only Indemnifiable Claims which Purchaser may assert are the
warranty claims specified in the preceeding sentence. See Section
8.6(b) below."
9. AMENDMENT OF SECTION 0.3(nn)(3). Section 0.3(nn)(3) is hereby
amended and restated in its entirety as follows:
"(3) The "Agreed Offsets" shall be equal to the sum of (i) a
warranty offset in the amount of One Million Seven Hundred
Twenty-One Thousand Nine Hundred Twelve Dollars ($1,721,912), (ii)
a certification offset in the amount of Five Hundred Sixty Thousand
Dollars ($560,000), (iii) a reserve for passenger control units
sold by Seller in the amount of Five Hundred Thousand Dollars
($500,000) (as set out in Schedule 2.22(b) and due diligence
document Z-005), and (iv) a reserve for certain contractual
liabilities of Seller to Air 2000, Air Tours, ILFC/Flying Colors
and ILFC/Asiana in the amount of One Hundred Forty Three Thousand
Dollars ($143,000) (as set out in Schedule 2.41). The procedures to
be followed in computing the Agreed Inventory Value will reflect an
inventory reserve computed in accordance with Exhibit "C."
10. AMENDMENT OF SECTION 2.40. Section 2.40 of the Asset Purchase
Agreement is hereby amended and restated to read as follows:
"2.40 BID AND PROPOSAL LIST. Schedule 2.40 is a true, correct and
complete listing of all outstanding bids and proposals (as of the
Closing) made by Seller for the sale of the Products to customers."
11. AMENDMENT OF SECTION 2.41. Section 2.41 of the Asset Purchase
Agreement is hereby amended and restated to read as follows:
"2.41 NO SIDE AGREEMENTS. Except as set forth on Schedule 2.41, no
past or present officer, director, employee, representative or
agent of Selling Parties has made
4
<PAGE> 71
any promise or commitment (oral or written) to grant any customer
of Seller any concession or consideration for orders for the
Products and there are no other contractual commitments to
customers."
12. AMENDMENT OF SECTION 7.16(b). Section 7.16(b) of the Asset Purchase
Agreement is hereby amended by replacing the last sentence of said section with
the following:
"If it is later determined that the assumed physical inventory
count used to prepare the Pre-Closing Balance Sheet was in error,
an appropriate adjustment shall be made to the Cash Payment at the
time the Post-Closing Accounting Adjustments are made, it being
agreed that Purchaser shall have, if applicable, the same right of
offset against the Simula Payables under this Section 7.16(b) as
provided in Section 7.16(a). If the amount of the Post-Closing
Accounting Adjustments that may be due Purchaser under any part of
this Section 7.16 exceeds the amount of the Simula Payables, Simula
shall pay any amount due Purchaser within five (5) business days
after demand."
13. AMENDMENT OF SECTION 7.7. Section 7.7 of the Asset Purchase
Agreement is hereby amended by adding the following after the last sentence of
said section:
"Purchaser shall waive the requirement for said "tail coverage,"
provided Selling Parties maintain in effect for a term of at least
four (4) years after the Closing the coverage reflected on the
Certificate of Insurance dated July 30, 1999 identified as number
602-381-2800 issued by Acordia of Arizona identifying Simula as the
insured and provided further that Purchaser is included as an
additional named insured on said policy."
14. AMENDMENT OF SECTION 10.6. Section 10.6 of the Asset Purchase
Agreement is hereby amended and restated as follows:
"10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of
which shall constitute one Agreement. The facsimile signatures of
the parties shall be deemed to constitute original signatures, and
facsimile copies hereof shall be deemed to constitute duplicate
original counterparts."
15. NEW SECTION 10.16. The Asset Purchase Agreement is hereby amended
by adding the following provision as Section 10.16:
"10.16 WAIVER. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by
a written instrument duly executed by such party. The failure of
any of the parties to this Agreement to require the performance of
term or obligation under this Agreement or the waiver by any of the
parties to this Agreement of any breach thereunder or hereunder
shall not prevent
5
<PAGE> 72
subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach thereunder or hereunder."
16. NEW SECTION 10.17. The Asset Purchase Agreement is hereby amended
by adding the following provision as Section 10.17:
"10.17 SEVERABILITY. In case any one or more of the provisions of
this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable provision or part of a provision had
never been contained herein. In the event of any inaccuracy or
breach of any representation, warranty, covenant or agreement
contained in this Agreement, the rights and remedies of the
aggrieved party shall not be impaired or limited by reason of the
fact that the act, omission, occurrence, or other statement of
facts giving rise to such inaccuracy or breach may also be the
subject matter of any other representation, warranty, covenant or
agreement contained in this Agreement (or any other agreement
between the parties) as to which there is no inaccuracy or breach."
17. NEW SECTION 10.18. The Asset Purchase Agreement is hereby amended
by adding the following provision as Section 10.18:
"10.18 ATTORNEYS' FEES. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Agreement, or any
judgment based on this Agreement, in any legal proceeding
whatsoever, including insolvency, bankruptcy, arbitration,
declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto
reimbursement for all attorneys' fees and all costs, including but
not limited to service of process costs, filing fees, court and
court reporter costs, investigative costs, expert witness fees and
the cost of any bonds, whether taxable or not. Any such
reimbursement shall be included in any judgment or final order or
award issued in that proceeding. "Prevailing Party" means the party
determined to most nearly prevail and not necessarily the one in
whose favor a judgment or award is rendered. Attorneys' fees
incurred in enforcing any judgment or award are recoverable as a
separate item, and this provision for post-judgment or post-award
attorneys' fees shall survive any judgment or award and shall not
be deemed merged into any judgment or award."
18. NEW SECTION 10.19. The Asset Purchase Agreement is hereby amended
by adding the following provision as Section 10.19.
"10.19 NON-ASSUMPTION OF CERTAIN CUSTOMER CONTRACTS. The parties
understand that Purchaser is not assuming all of the Customer
Contracts. The Customer Contracts which Purchaser is assuming are
listed on Exhibit "A" to the
6
<PAGE> 73
Assignment and Assumption Agreement. As for those Customer
Contracts (the "Unassumed Customer Contracts") which Purchaser is
not assuming and which are open as of the Closing, Purchaser may
seek to negotiate new contractual arrangements for the sale of
Products to the customers under the Unassumed Customer Contracts
after the Closing. In such event, Purchaser shall use its best
efforts to cause such customers to release Seller from any
liability which Seller may have to such customers under the
Unassumed Customer Contracts. Nothing in this Section 10.19 shall
be construed as meaning or implying that Seller has any liability
to such customers."
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE> 74
IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 1
to Asset Purchase Agreement as of the date first set forth above.
"SELLER" AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Bradley P. Forst
--------------------------------------------
Printed Name: Bradley P. Forst
----------------------------------
Its: Secretary
-------------------------------------------
"SIMTEC" SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Bradley P. Forst
--------------------------------------------
Printed Name: Bradley P. Forst
----------------------------------
Its: Secretary
-------------------------------------------
"SIMULA" SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
--------------------------------------------
Printed Name: James C. Dodd
----------------------------------
Its: CFO
-------------------------------------------
"PURCHASER" WEBER AIRCRAFT, INC., a Delaware corporation
By: /s/ Michel Labarre
--------------------------------------------
Michel Labarre, President
8
<PAGE> 75
CONTROL NO. 56
EXHIBIT "K"
Pre-Closing Date Balance Sheet
(as of January 24, 2000)
<TABLE>
<CAPTION>
Pro Forma Amount
----------------
<S> <C>
1. ASSETS
2. CURRENT ASSETS
3. - Cash and Cash Equivalents(1) $ -0-
4. - Accounts Receivable (net of reserve of $687,825.40)(2) $ 6,758,865.51
5. - Agreed Inventory Value(3) $ 6,881,773.67
6. - Prepaid Expenses $ -0-
7. TOTAL CURRENT ASSETS $ 13,640,639.18
8. Property and equipment - (net)(4) $ 608,000.00(5)
9. Intangibles - (net) $ 6,500,000.00
10. Other assets(6) $ -0-
11. TOTAL ASSETS $ 20,748,639.18
</TABLE>
- ----------
(1) Seller shall retain all cash.
(2) The Accounts Receivable reserve will be eliminated as part of the
Post-Closing Accounting Adjustments.
(3) After valuation adjustment per Exhibit "B," and after applying a reserve
factor pursuant to Exhibit "C." The value of the Included Inventory will be
adjusted downward as part of the Post-Closing Accounting Adjustments to reflect
the application of a 70% valuation factor as opposed to a 100% valuation factor
on the items identified as LDC UK and LDC-1.
(4) "Property and Equipment" consists of all of the following items:
<TABLE>
<S> <C>
(a) Demonstration/Sample Seats [no allocation]
(b) Tooling
(c) Computers
(d) Manufacturing Equipment
----------
TOTAL $ 608,000
==========
</TABLE>
(5) This amount is fixed and will not change.
(6) The term"other assets" as used here is not synonymous with the term Other
Assets as used in the Agreement.
<PAGE> 76
<TABLE>
<CAPTION>
Pro Forma Amount
----------------
<S> <C>
12. LIABILITIES AND
SHAREHOLDER'S EQUITY
13. CURRENT LIABILITIES
14. - Trade Accounts Payable $ 3,858,304.84
15. - Other Accrued Liabilities(7) $ 150,000.00
16. - Simula Payables(8) $ 2,456,762.69
17A. - Agreed Offset: Warranty offset(9) $ 1,721,912.00
17B. - Agreed Offset: Certification offset(9) $ 560,000.00
17C. - Agreed Offset: Passenger control unit offset(9) $ 500,000.00
17D. - Agreed Offset: Contractual liability offset(9) $ 143,000.00
18. TOTAL CURRENT LIABILITIES $ 9,389,979.53
19. Long-Term Debt -0-
20. TOTAL LIABILITIES $ 9,389,979.53
21. SHAREHOLDER'S EQUITY (Seller's Adjusted Net Worth)
22. - Shareholder's Equity $11,358,659.65
23. INTENTIONALLY LEFT BLANK
24. TOTAL LIABILITIES AND $20,748,639.18
SHAREHOLDER'S EQUITY
</TABLE>
- ----------
(7) This item reflects the cost of GECAS Six Sigma Training which Seller agreed
to provide to this customer.
(8) See Section 0.3(e)(2) of the Agreement.
(9) See Section 0.3(nn)(3) of the Agreement.
<PAGE> 77
Exhibit 10.40c
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Section 1.4)
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement") is executed as
of this 1st day of February 2000, by and among AIRLINE INTERIORS, INC., an
Arizona corporation ("Seller"), SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an
Arizona corporation ("Simtec"), SIMULA, INC., an Arizona corporation ("Simula"),
and WEBER AIRCRAFT, INC., a Delaware corporation ("Purchaser"), with reference
to the facts set forth in the Recitals below.
RECITALS
A. Seller and Purchaser, among others, are parties to that certain Asset
Purchase Agreement dated December 24, 1999, as amended (the "Asset Purchase
Agreement"). This Agreement is being executed pursuant to Sections 1.1 and 1.4
of the Asset Purchase Agreement.
B. Simula is the sole shareholder of Simtec, which is in turn the sole
shareholder of Seller. Simula, Simtec and Seller are sometimes collectively
referred to as the "Selling Parties."
C. Pursuant to the Asset Purchase Agreement, Seller has agreed to sell to
Purchaser certain assets referred to in Section 1.1 of the Asset Purchase
Agreement as the Included Assets.
D. Section 1.1 of the Asset Purchase Agreement provides that, as a part of
the sale of the assets contemplated in the Asset Purchase Agreement, that Seller
shall assign to Purchaser all of its right, title and interest in and to the
Included Assets.
E. This Agreement is intended to assign certain of those Included Assets to
Purchaser. The other Included Assets shall be sold, transferred, delivered or
assigned to Purchaser in the Bill of Sale and the Assignment of Intellectual
Property.
F. Section 1.4 of the Asset Purchase Agreement, provides that Purchaser
will assume at the Closing the Assumed Liabilities of Seller with respect to the
Business, which are set forth on Exhibit "A" hereto. The Assumed Liabilities
shall not include the Excluded Liabilities, which are set forth on the Schedule
of Excluded Liabilities attached as Control No. 3 (Schedule 0.3(v)).
G. The parties are executing this agreement in order to memorialize their
understanding concerning the foregoing.
1
<PAGE> 78
AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the above
Recitals, the mutual covenants contained below in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1
INTERPRETATION
1.1 INTERPRETATION. This Agreement is intended to implement the terms and
conditions of the Asset Purchase Agreement. In the event of a conflict between
the provisions of this Agreement, the Bill of Sale and those of the Asset
Purchase Agreement, the Asset Purchase Agreement shall control. Terms with
initial capital letters are defined terms which shall have the respective
meanings given them in the Asset Purchase Agreement unless the context of this
Agreement requires otherwise.
1.2 PARTIES' INTENT. Subject to the Closing of the transactions
contemplated in the Asset Purchase Agreement, the parties intend that:
(a) Seller shall assign and Purchaser shall assume any and all right,
title and interest to all of the Included Assets by virtue of this Agreement,
the Bill of Sale and the Assignment of Intellectual Property;
(b) Purchaser shall be solely responsible for the Assumed Liabilities
assumed pursuant to this Agreement. The Excluded Liabilities are not part of the
Assumed Liabilities. Selling Parties shall be responsible for paying or
otherwise satisfying the Excluded Liabilities. Purchaser shall have no liability
of any kind, contingent or otherwise, with respect to the Excluded Liabilities.
1.3 EFFECTIVE DATE. The Effective Date of this Agreement shall be the
Closing Date.
ARTICLE 2
ASSIGNMENT OF INCLUDED ASSETS
2.1 ASSIGNMENT BY SELLER. Subject to the Closing of the transaction
contemplated in the Asset Purchase Agreement and subject to the terms and
conditions set forth herein and in the Asset Purchase Agreement, Seller hereby
assigns to Purchaser the following Included Assets (the "Assigned Assets"):
(a) All Accounts Receivable (as defined in Section 1.1(a) of the Asset
Purchase Agreement);
2
<PAGE> 79
(b) The Customer Contracts (as defined in Section 1.1(c) of the Asset
Purchase Agreement) listed on the Schedule of Assigned Assets attached hereto as
Exhibit "A."
(c) The Equipment Leases (as defined in Section 1.1(d) of the Asset
Purchase Agreement) listed on the Schedule of Assigned Assets attached hereto as
Exhibit "A";
(d) All Governmental Airworthiness Approvals (as defined in Section
1.1(e) of the Asset Purchase Agreement);
(e) All Manufacturers' Warranties (as defined in Section 1.1(h) of the
Asset Purchase Agreement);
(f) The Other Assets (as defined in Section 1.1(i) of the Asset
Purchase Agreement) listed on the Schedule of Assigned Assets attached hereto as
Exhibit "A";
(g) The Software Licenses (as defined in Section 1.1(j) of the Asset
Purchase Agreement) listed on the Schedule of Assigned Assets attached hereto as
Exhibit "A";
(h) The Vendor Contracts (as defined in Section 1.1(n) of the Asset
Purchase Agreement) listed on the Schedule of Assigned Assets attached hereto as
Exhibit "A";
2.2 CONSENTS TO ASSIGNMENT. Seller represents and warrants that the
Assigned Assets, as reasonably required by Purchaser including without
limitation the Customer Contracts, are assumable by Purchaser according to their
terms. Seller shall, as a condition of the Closing, obtain all necessary
consents for the assignment of the Assigned Assets as required in Section 5.2(g)
of the Asset Purchase Agreement.
2.3 SELLING PARTIES' CONTINUING OBLIGATION. From and after the Closing,
Selling Parties shall promptly refer all inquiries with respect to the Assigned
Assets to Purchaser. In addition, Selling Parties shall execute such documents
and financing statements as Purchaser may reasonably request from time to time
to evidence transfer of the Assigned Assets to Purchaser, including any
necessary assignments of financing statements affecting the Assigned Assets.
2.4 ASSUMPTION BY PURCHASER. Subject to all the terms and conditions of
this Agreement and the Asset Purchase Agreement, Purchaser hereby accepts the
assignment of the Assigned Assets and agrees to assume all of the terms,
covenants, obligations and conditions imposed upon Seller in its capacity as a
contracting party with respect to the Assigned Assets, except for those
obligations and liabilities set forth on the Schedule of Excluded Liabilities.
ARTICLE 3
ASSIGNMENT AND ASSUMPTION OF LIABILITIES
3.1 ASSIGNMENT BY SELLER. Subject to the Closing of the transaction
contemplated in the Asset Purchase Agreement and subject to the terms and
conditions set forth herein and in the Asset
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Purchase Agreement, Seller hereby assigns to Purchaser the Assumed Liabilities
listed on the Schedule of Assumed Liabilities attached hereto as Exhibit "B."
3.2 ASSUMPTION BY PURCHASER. Subject to all the terms and conditions of
this Agreement and the Asset Purchase Agreement, Purchaser hereby assumes from
Seller the Assumed Liabilities and agrees to assume all of the terms covenants,
obligations and conditions imposed upon Seller with respect to the Assumed
Liabilities.
3.3 SELLING PARTIES' CONTINUING OBLIGATION. From and after the Closing,
Selling Parties shall promptly refer all inquiries with respect to the Assumed
Liabilities to Purchaser. In addition, Selling Parties shall execute such
documents and financing statements as Purchaser may reasonably request from time
to time to evidence transfer of the Assumed Liabilities to Purchaser, including
any necessary assignments of financing statements affecting the Assumed
Liabilities.
3.4 AMOUNT OF ASSUMED LIABILITIES. The amount of the Assumed Liabilities
shall be as set forth on the Pre-Closing Date Balance Sheet as approved by
Seller and Purchaser pursuant to Section 1.2(c) of the Asset Purchase Agreement
and as adjusted under the Post-Closing Accounting Adjustments. The aggregate
amount of the Assumed Liabilities as of the Closing shall not exceed the amount
determined in accordance with Section 1.2(c) of the Asset Purchase Agreement.
3.5 NO LIABILITY FOR EXCLUDED LIABILITIES. Selling Parties shall be
responsible for paying or otherwise satisfying the Excluded Liabilities and
Purchaser shall have no liability of any kind, contingent or otherwise, with
respect to the Excluded Liabilities.
3.6 CONDITION TO ASSIGNMENT AND ASSUMPTION. Any obligations of Purchaser to
assume the Assumed Liabilities are subject to the fulfillment (or the written
waiver thereof by Purchaser) of each of the conditions precedent set forth in
Section 5.2 of the Asset Purchase Agreement. Purchaser may waive any or all of
the conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by Purchaser of any of
Purchaser's other rights or remedies, at law or in equity, if Selling Parties
are in default of any of their representations, warranties, or covenants
contained in the Asset Purchase Agreement.
3.7 INDEMNIFICATION. This Agreement is subject to the indemnification
provisions set forth in Article 8 of the Asset Purchase Agreement.
ARTICLE 4
MISCELLANEOUS PROVISIONS
4.1 ASSIGNMENT BY PURCHASER. Purchaser shall have the right to assign this
Agreement and to assign its rights and delegate its duties under this Agreement,
either in whole or in part, at any time and without Seller's consent. Purchaser
shall give Seller written notice of any such assignment. The assignment shall
neither affect or diminish any rights or duties that Seller or Purchaser may
have under this Agreement. Absent an express signed written agreement between
the parties to the contrary, no assignment of any of the rights or obligations
under this Agreement shall result in a
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novation or in any way release the Selling Parties from their obligations under
this Agreement.
4.2 JOINT AND SEVERAL LIABILITY. Selling Parties and Seller shall be
jointly and severally liable for the obligations of Selling Parties or Seller
pursuant to this Agreement.
4.3 COSTS AND EXPENSES. Except for liabilities expressly assumed by
Purchaser in this Agreement, each of the parties will bear its own expenses in
connection with negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses.
4.4 GOVERNING LAW AND VENUE. This Agreement and any interpretation hereof
and the resolution of any dispute hereunder shall be governed by the laws of the
State of California, and subject to the parties' obligation to arbitrate and
dispute any action to enforce any provision of this Agreement or to obtain any
remedy with respect hereto may be brought in the appropriate state or federal
court in San Diego County, California. For this purpose each party hereto hereby
expressly and irrevocably consents to the jurisdiction of said court, it being
understood and agreed that the parties are obligated to arbitrate disputes
between them pursuant to Section 4.13 below.
4.5 INTERPRETATION. This Agreement shall not be interpreted against a party
by virtue of such party's participation in the drafting of the Agreement or any
provisions herein.
4.6 AMENDMENT. This Agreement may be amended, modified, or supplemented
only by an instrument in writing signed by all parties to this Agreement whose
rights or obligations are affected by such amendment, modification or
supplement.
4.7 INUREMENT. This Agreement shall be binding upon and inure to the
benefit to the successors and/or assigns of the parties hereto.
4.8 NOTICES.
(A) METHOD OF DELIVERY. Any notice, request, demand, consent, approval
or other communication (hereafter "notice") required or permitted under this
Agreement or by law shall be in writing and delivered by any of the following
means: (1) personally delivering the notice to a senior officer or duly
authorized representative of the other party, (2) depositing the notice in the
United States mail, postage prepaid, duly certified (return-receipt requested),
(3) sending the notice by a commercial overnight delivery service (such as
FedEx) which maintains delivery records, or (4) sending the notice by electronic
facsimile or telecopier ("fax") (with the sending party retaining evidence of
the time and date of transmission). Confirmations of any notices sent by fax
shall be sent by mail as provided above.
(B) ADDRESSES. Notices shall be addressed as follows:
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If to Selling Parties: Simula, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Att.: Bradley P. First
Fax No.: (602) 631-9005
If to Purchaser: Weber Aircraft, Inc.
2000 Weber Drive
Gainesville, TX 76240
Attn.: Michel Labarre
Fax No. (940) 668-4853
With a copy to: Zodiac S.A.
2, Rue Maurice Mallet
92137, Issy-les-Molineaux Cedex
France
Att.: Jean-Jacques Jegou
Fax No: (011-331) 41 23 23 62
With a copy to: Hillyer & Irwin
550 West C Street, 16th Floor
San Diego, CA 92101
Attn: William A. Reavey, Esq.
Fax No. (619) 595-1313
Any party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for that specified above.
(C) EFFECTIVENESS. All notices shall be deemed effective upon receipt.
If personally delivered, notices shall be deemed received at the time of
delivery. If sent by mail, notices shall be deemed fully delivered and received
three (3) business days after the date of the postmark on the certified mail
receipt. If sent by commercial overnight delivery service, notices shall be
deemed fully delivered and received one (1) business day after the date of
deposit with such commercial overnight delivery service. If sent by fax, notices
shall be deemed received twenty-four (24) hours after transmission. Notices may
not be sent by e-mail. Rejection or other refusal to accept a notice or the
inability to deliver the same because of a changed address of which no notice
was given shall be deemed to be receipt of the notice sent. In the event of a
postal strike, all notices shall be personally delivered, sent by commercial
overnight delivery service, or sent by fax.
4.9 HEADINGS. The headings of the sections of this Agreement are for the
convenience of reference only, and do not form a part hereof, and in no way
modify, interpret or construe the meanings of the parties.
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4.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement. The facsimile signatures of the parties shall be
deemed to constitute original signatures, and facsimile copies hereof shall be
deemed to constitute duplicate original counterparts.
4.11 WAIVER. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any of the parties to this Agreement to
require the performance of term or obligation under this Agreement or the waiver
by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder.
4.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement but this Agreement shall be construed as
if such invalid or illegal or unenforceable provision or part of a provision had
never been contained herein. In the event of any inaccuracy or breach of any
representation, warranty, covenant or agreement contained in this Agreement, the
rights and remedies of the aggrieved party shall not be impaired or limited by
reason of the fact that the act, omission, occurrence, or other statement of
facts giving rise to such inaccuracy or breach may also be the subject matter of
any other representation, warranty, covenant or agreement contained in this
Agreement (or any other agreement between the parties) as to which there is no
inaccuracy or breach.
4.13 ARBITRATION.
(A) GENERAL. Any controversy, claim, or dispute among the parties
hereto arising out of or related to this Agreement or the breach thereto, which
cannot be settled amicably by the parties, shall be submitted for binding
arbitration in accordance with the provisions contained herein and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
("Rules"); provided, however, that notwithstanding any provisions of such Rules,
the parties shall have the right to take depositions and obtain discovery
regarding the subject matter of the arbitration, as provided in Title III of
Part 4 (commencing with Section 1985) of the California Code of Civil Procedure.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall determine all questions of fact and
law relating to any controversy, claim, or dispute hereunder, including but not
limited to whether or not any such controversy, claim, or dispute is subject to
the arbitration provisions contained herein.
(B) THIRD PARTY CONTROVERSY. If a controversy, claim, or dispute arises
among the parties hereto which is subject to the arbitration provisions
hereunder, and there exists or later arises a controversy, claim, or dispute
between the parties hereto and any third party, which controversy, claim, or
dispute arises out of or relates to the same transaction or series of
transactions, said third party controversy, claim, or dispute shall be
consolidated with the arbitration proceedings
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hereunder; provided, however, that any such third party must be a party to an
agreement with a party hereto which provides for arbitration of disputes
thereunder in accordance with rules and procedures substantially the same in all
material respects as provided for herein or, if not, must consent to arbitration
as provided for hereunder.
(C) VENUE. All arbitration proceedings shall be held in San Diego,
California.
(D) NOTICES. Notice of the demand for arbitration shall be filed in
writing with the other party to this Agreement and with the American Arbitration
Association.
4.14 ATTORNEYS' FEES. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment based on this
Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all attorneys' fees and all costs, including but not limited to service of
process costs, filing fees, court and court reporter costs, investigative costs,
expert witness fees and the cost of any bonds, whether taxable or not. Any such
reimbursement shall be included in any judgment or final order or award issued
in that proceeding. "Prevailing Party" means the party determined to most nearly
prevail and not necessarily the one in whose favor a judgment or award is
rendered. Attorneys' fees incurred in enforcing any judgment or award are
recoverable as a separate item, and this provision for post-judgment or
post-award attorneys' fees shall survive any judgment or award and shall not be
deemed merged into any judgment or award.
4.15 CONSTRUCTION. Whenever the context so requires in this Agreement, all
words used in the singular shall be construed to have been used in the plural
(and vice versa), each gender shall be construed to include any other genders,
and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate, or any
other entity.
4.16 AUTHORITY OF SIGNATORIES. Each individual signing this Agreement on
behalf of a corporation warrants that he or she is duly authorized to execute
and deliver this Agreement on behalf of the corporation, in accordance with a
duly adopted resolution of the board of directors of the corporation or in
accordance with the bylaws of the corporation, and that this Agreement is
binding on the corporation in accordance with its terms.
4.17 ENTIRE AGREEMENT. This Agreement is one of a series of agreements
executed as part of an integrated transaction described in the Asset Purchase
Agreement. This Agreement, together with the Asset Purchase Agreement and with
all other agreements, assignments and exhibits expressly referred to therein or
herein, constitutes the entire agreement between the parties hereto with respect
to the subject matter of this Agreement. All prior agreements, representations,
negotiations and understandings of the parties hereto, oral or written, express
or implied, are hereby superseded and merged herein. To the maximum extent
permitted by law, each party expressly waives any right of
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rescission and all claims for damages by reason of any statement,
representation, warranty, promise and/or agreement, if any, not contained or
referenced to in this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Assumption Agreement to be executed effective as of the date first set forth
above.
"SELLER:" AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"SIMTEC:" SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"SIMULA:" SIMULA, INC., an Arizona corporation
By:/s/ James C. Dodd
Printed Name: James C. Dodd
Its: CFO
"PURCHASER:" WEBER AIRCRAFT, INC.,
a Delaware corporation
By: /s/ Michael Labarre
Printed Name: Michael Labarre
Its: President
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EXHIBIT "A"
SCHEDULE OF ASSIGNED ASSETS
1. All Accounts Receivable (as defined in Section 1.1(a) of the Asset
Purchase Agreement).
2. The Customer Contracts to be assigned to and assumed by Purchaser shall
consist of those Customer Contracts identified as assumed with an indication of
"yes" on Schedule 1.1(c).
3. No Equipment Leases shall be assigned to and assumed by Purchaser.
4. All Governmental Airworthiness Approvals (as defined in Section 1.1(e)
of the Asset Purchase Agreement).
5. All Manufacturers' Warranties (as defined in Section 1.1(h) of the Asset
Purchase Agreement).
6. There are no Other Assets that will be assigned to and assumed by
Purchaser.
7. The Software Licenses to be assigned and assumed by Purchaser shall
consist of those Software Licenses identified as assumed with an indication of
"yea" on Schedule 1.1(j).
8. The Vendor Contracts to be assigned to and assumed by Purchaser shall
consist of those Vendor Contracts identified as assumed on Schedule 1.1(n).
<PAGE> 88
EXHIBIT "B"
SCHEDULE OF ASSUMED LIABILITIES
Purchaser shall assume only those liabilities set forth on Schedule 0.3(e).
<PAGE> 89
EXHIBIT "C"
SCHEDULE OF EXCLUDED LIABILITIES
Purchaser shall not assume any liabilities that are not specifically
identified on Schedule 0.3(e), including without limitation those liabilities
listed on Schedule 0.3(v), the Schedule of Excluded Liabilities.
<PAGE> 90
Exhibit 10.40d
BILL OF SALE
(Section 0.3(p)(3))
This BILL OF SALE (the "Bill of Sale") is made as of this 1st day of
February 2000 by and between AIRLINE INTERIORS, INC., an Arizona corporation
("Seller"), and WEBER AIRCRAFT, INC., a Delaware corporation ("Purchaser"), with
reference to the facts set forth in the Recitals below.
RECITALS
A. Seller and Purchaser are parties to that certain Asset Purchase
Agreement dated December 24, 1999, as amended (the "Asset Purchase Agreement").
This Bill of Sale is being executed pursuant to Section 0.3(p)(3) of the Asset
Purchase Agreement.
B. Seller owns all right, title and interest to and in the following
personal property (the "Personal Property"):
(1) The Books and Records (as defined in Section 1.1(b) of the
Asset Purchase Agreement);
(2) The Included Inventories (as defined in Section 1.1(f) of
the Asset Purchase Agreement);
(3) The Software Licenses (as defined in Section 1.1(j) of the
Asset Purchase Agreement);
(4) The Supplies (as defined in Section 1.1(k) of the Asset
Purchase Agreement);
(5) The Tangible Personal Property (as defined in Section
1.1(l) of the Asset Purchase Agreement); and
(6) The Tooling (as defined in Section 1.1(m) of the Asset
Purchase Agreement).
C. Section 1.1 of the Asset Purchase Agreement provides that, as a part
of the sale of the
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assets contemplated in the Asset Purchase Agreement, Seller shall convey to
Purchaser all of its right, title and interest in and to the Personal Property.
D. The parties are executing this Bill of Sale in order to convey the
Personal Property from Seller to Purchaser pursuant to the provisions of the
Asset Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the
above Recitals and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. INTERPRETATION. This Bill of Sale is intended to implement the terms
and conditions of the Asset Purchase Agreement. In the event of a conflict
between the provisions of this Bill of Sale and those of the Asset Purchase
Agreement, the Asset Purchase Agreement shall control. Terms with initial
capital letters are defined terms which shall have the respective meanings given
them in the Asset Purchase Agreement, unless the context of this Bill of Sale
requires otherwise.
2. TRANSFER OF PERSONAL PROPERTY. Subject to all the terms and
conditions of the Asset Purchase Agreement and this Bill of Sale, Seller does
hereby give, grant, bargain, sell, transfer, set over, assign, convey, release,
confirm and deliver to Purchaser, free and clear of all liens, charges and
encumbrances, and Purchaser hereby accepts, all of Seller's right, title and
interest in and to the Personal Property.
3. FURTHER ASSURANCES. Seller agrees, without cost to Purchaser, to
execute all instruments and documents and take all actions as may be reasonably
required to effectuate this Bill of Sale, including without limitation to
execute all rightful oaths, assignments, powers of attorney and other documents
which Purchaser shall consider desirable or necessary for vesting title to the
Personal Property.
4. EFFECTIVE DATE. This Bill of Sale shall be effective as of the
Closing.
5. SELLER'S WARRANTIES.
(A) SELLER'S AUTHORITY. Seller represents, warrants and covenants
that the persons executing this Bill of Sale on behalf of Seller have been duly
authorized to do so by requisite corporate action and that this Bill of Sale
shall be binding and enforceable against Seller.
(B) DEFENSE OF TITLE. Seller does, for itself, its successors and
assigns, covenant and agree to warrant and defend the title to the Personal
Property against any and all claims and demands against the Personal Property.
6. GOVERNING LAW AND VENUE. This Bill of Sale and any interpretation
hereof and the
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resolution of any dispute hereunder shall be governed by the laws of the State
of California. Disputes arising out of this Bill of Sale shall be arbitrated as
provided in the Asset Purchase Agreement.
7. ATTORNEYS' FEES. Should any party hereto employ an attorney
for the purpose of enforcing or construing this Bill of Sale, or any judgment
based on this Bill of Sale, in any legal proceeding whatsoever, including
insolvency, bankruptcy, arbitration, declaratory relief or other litigation, the
prevailing party shall be entitled to receive from the other party or parties
thereto reimbursement for all attorneys' fees and all costs, including but not
limited to service of process costs, filing fees, court and court reporter
costs, investigative costs, expert witness fees and the cost of any bonds,
whether taxable or not. Any such reimbursement shall be included in any judgment
or final order or award issued in that proceeding. "Prevailing Party" means the
party determined to most nearly prevail and not necessarily the one in whose
favor a judgment or award is rendered. Attorneys' fees incurred in enforcing any
judgment or award are recoverable as a separate item, and this provision for
post-judgment or post-award attorneys' fees shall survive any judgment or award
and shall not be deemed merged into any judgment or award.
IN WITNESS WHEREOF, Seller and Purchaser have caused their duly
authorized representatives to execute and deliver this Bill of Sale as of the
day and year first above written.
"SELLER": AIRLINE INTERIORS, INC,
an Arizona corporation
By: /s/ Bradley P. Forst
________________________________
Printed name: Bradley P. Forst
______________________
Its: Secretary
_______________________________
"PURCHASER": WEBER AIRCRAFT, INC.,
a Delaware corporation
By: /s/ Michael LaBarre
________________________________
Printed Name: Michael LaBarre
______________________
Its: President
_______________________________
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EXHIBIT 10.40e
NON-COMPETITION AGREEMENT
(SECTION 5.2(l))
This NON-COMPETITION AGREEMENT (the "Agreement") is made as of this 1st
day of February 2000, by and between AIRLINE INTERIORS, INC., an Arizona
corporation ("Seller"), SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona
corporation ("Simtec"), SIMULA TECHNOLOGIES, INC., an Arizona corporation
("STI"), SIMULA, INC., an Arizona corporation ("Simula"), and WEBER AIRCRAFT,
INC., a Delaware corporation ("Weber"), with reference to the facts set forth in
the Recitals below.
RECITALS
A. Simula, Simtec and Seller are sometimes collectively referred to as
the "Selling Parties."
B. STI is an affiliate of Simula.
C. Selling Parties and Weber are parties to that certain Asset Purchase
Agreement dated December 24, 1999, as amended (the "Asset Purchase Agreement").
Pursuant to the terms and conditions of the Asset Purchase Agreement, Seller has
sold the Included Assets to Seller.
D. Selling Parties and Weber are also parties to that certain
Assignment of Intellectual Property Of even date herewith (the "IP Assignment").
E. Simula, STI and Weber are also parties to that certain Patent
License Agreement of even date herewith (the "Patent License Agreement")
concerning the Shared Use Patent.
F. As a material part of the transactions contemplated by the Asset
Purchase Agreement, the IP Assignment, and the Patent License Agreement, Selling
Parties desire to protect Weber, and Weber desires to be protected, against
certain competitive activities on the part of Selling Parties and STI so that
Weber will obtain the full benefit of the Included Assets, including without
limitation, the Intellectual Property.
G. The parties are executing this Agreement in order to memorialize
their understanding concerning the foregoing.
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AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the
above Recitals, the mutual covenants contained below in this Agreement and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. INTERPRETATION. This Agreement is intended to implement the terms
and conditions of the Asset Purchase Agreement. In the event of a conflict
between the provisions of this Agreement and those of the Asset Purchase
Agreement, the Asset Purchase Agreement shall control. Terms with initial
capital letters are defined terms which shall have the respective meanings given
them in the Asset Purchase Agreement unless the context of this Agreement
requires otherwise.
2. CERTAIN DEFINITIONS.
(a) BUSINESS JET MARKET. The term "Business Jet Market" shall
mean the executive or business jet aircraft market.
(b) COMMERCIAL AIRLINE MARKET. The term "Commercial Airline
Market" shall mean the commercial airline market, which expressly includes
commuter airliners.
(c) CONFIDENTIAL INFORMATION. The term "Confidential
Information" shall mean any information which is proprietary or unique to the
Business, including without limitation, customer lists or other customer
information, trade secrets, matters of a technical nature such as processes,
devices, techniques, data and formulas, research subjects and results, know-how,
or marketing methods, plans or strategies, financial information, or any
observations, data, written plans or proposals, records or documents used by or
relating to the Business, or the reasonably foreseeable business of Weber,
whether or not such information was developed, devised or otherwise created in
whole or in part by the efforts of Selling Parties, unless such information is a
matter of public knowledge, except as a result of unauthorized disclosure to the
general public by Selling Parties.
(d) RESTRICTED BUSINESS. The term "Restricted Business" shall
mean any business activity relating to (1) the design, development,
manufacturing, marketing, distribution or sale of any passenger seats of any
type or design (regardless of the technology involved) in or for the use in
Commercial Airline Market in any part of the Territory and (2) the design,
development, manufacturing, marketing, distribution or sale of any products
utilizing the technology and inventions covered by the Shared Use Patent in the
Commercial Airline Market or the Business Jet Market in any part of the
Territory.
(e) PERSON. The term "Person" shall mean and include an
individual, a partnership, a corporation, an association, a company, a trust, a
joint venture, an unincorporated organization or a governmental entity.
(f) TERRITORY. The term "Territory" shall mean any territory
or country in the world.
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3. COVENANT NOT TO COMPETE. Subject to all the terms and conditions of
this Agreement, for a period of ten (10) years commencing with the Closing Date,
Selling Parties and STI covenant and agree that they shall not, directly or
indirectly, either as principal, agent, manager, owner, partner, shareholder, or
otherwise as a participant in any other capacity:
(a) NO INVESTMENT IN RESTRICTED BUSINESS. Own, manage,
operate, engage in, control, assist, give or lend funds to or otherwise finance,
consult with, be employed by or an agent for, participate in, or be connected in
any manner with, or acquire any ownership or equity interest in any Person
involved, engaged in or participating in the Restricted Business, directly or
indirectly.
(b) NO SOLICITATION OF CUSTOMERS. Solicit, divert, or take
away or attempt to solicit, divert or take away from Weber any of the Business,
or any present customer of the Business, or any customer who does business with
Weber during said period.
(c) NO PRODUCT DEVELOPMENT. Design, develop, manufacture,
assemble, distribute, sell, market, service, support, assist with or modify any
product for use in the Restricted Business; provided, however, that the Selling
Parties may retain their current repair and refurbishment business for
commercial airline aircraft passenger seats and retain their current testing
services business at STI.
4. NON-DISCLOSURE COVENANT. For a period of ten (10) years commencing
with the Closing Date, Selling Parties and STI covenant and agree that they will
not disclose, reveal, divulge or make known to any Person (other than Weber or
its affiliates) any Confidential Information that relates to the Business or the
reasonably foreseeable business of Weber or any of its affiliates.
5. NON-INTERFERENCE COVENANT. For a period of ten (10) years commencing
with the Closing Date, Selling Parties and STI covenant and agree that they will
not, whether for their own account or for the account of any other Person,
directly or indirectly, (a) hire, offer to hire, induce or attempt to induce any
Person who is an employee of Weber or employ such individual for a period of six
(6) months after the Person terminates employment with Weber; or (b) solicit any
supplier to Weber to purchase or distribute information, products or services of
or on behalf of Selling Parties and/or STI that are competitive with the
information, products or services provided by Weber.
6. PERMITTED COMPETITION. Notwithstanding anything in this Agreement to
the contrary, it is agreed that Selling Parties and STI may (a) use the
technology covered by the Shared Use Patent to design, develop, manufacture,
market, distribute or sell passenger seats for use in the military aviation
business or executive helicopter and the general aviation markets, as more fully
provided in the Patent License Agreement, (b) design, develop, manufacture,
market, distribute or sell any products not utilizing the technology covered by
the Shared Use Patent for use in the Business Jet Market, and (c) complete a
certain amended purchase order dated December 21, 1999 issued to STI by Britax
Contours for four hundred and seventy (470) 16G load limiting energy absorber
devices for installation in said customer's commercial airline aircraft
passenger seats. it is agreed that said Britax order shall be completed no later
than september 30, 2000. STI shall be solely responsible for resolving all
warranty and other claims that may arise out of said Britax order. STI shall not
accept any additional follow-up orders for such devices from Britax Contours.
3
<PAGE> 96
7. REASONABLENESS OF RESTRICTIONS; REMEDIES. Selling Parties and STI
have carefully read all of the terms and conditions of this Agreement and have
given careful consideration to the covenants and restrictions imposed upon them
herein, and agree that the same are necessary for the reasonable and proper
protection of Weber and the Business and have been separately bargained for and
agree that Weber has been induced to enter into the Asset Purchase Agreement and
the Patent License Agreement by the representations of Selling Parties and STI
that they will abide by and be bound by each of the covenants and restrictions
that apply to them. Selling Parties and STI further acknowledge that each and
every one of the covenants and restrictions contained in this Agreement is
reasonable with respect to the subject matter, length of time and area embraced
therein, and agree that said covenants and restrictions shall be operative
during the full period or periods herein mentioned and throughout areas herein
described.
8. SEVERABILITY AND ENFORCEABILITY. The covenants contained in this
Agreement shall be construed as if each covenant is divided into separate and
distinct covenants with respect to the Business, each capacity in which Selling
Parties and STI are prohibited from competing, and each part of the Territory.
Each such covenant shall constitute a separate and several covenant distinct
from all other such covenants. Each of the parties hereto recognizes that the
territorial restrictions contained herein are properly required for the adequate
protection of Weber. In the event that any covenant or any provision contained
in this Agreement shall for any reason be deemed invalid, illegal, or
unenforceable in any respect, any such invalidity, illegality, or
unenforceability shall not affect any other provision of this Agreement, and
this Agreement shall be construed as if such invalid, illegal, or unenforced
provision has been limited or modified (consistent with its general intent) to
the extent necessary so that it shall be valid, legal and enforceable. If it
shall not be possible to so limit or modify such invalid or illegal or
unenforceable provision or part of a provision, this Agreement shall be
construed as if such invalid or illegal or unenforceable provision or part of a
provision had never been contained herein, and the parties will use their best
efforts to substitute a valid, legal, and enforceable provision which, insofar
as practicable, implements the purpose and intention thereof.
9. BREACH. Each provision of this Agreement to be performed by Selling
Parties and STI shall be deemed both a covenant and a condition and shall be a
material consideration for the performance of Weber's obligations under the
Asset Purchase Agreement and the Patent License Agreement. Any breach hereof by
Selling Parties and STI shall be deemed a material default under the Asset
Purchase Agreement, the Patent License Agreement, and this Agreement.
10. REMEDIES. Selling Parties, STI and Weber acknowledge that (1) the
covenants and the restrictions contained in this Agreement are necessary,
fundamental and are required for the protection of Weber; (2) such covenants
relate to matters which are of a special, unique and extraordinary character
that gives each of such covenants a special, unique, and extraordinary value;
and (3) a breach of any covenants or any other provision of this Agreement will
result in irreparable harm and damages to Weber which cannot be adequately
compensated by a monetary reward. Accordingly, it is expressly agreed that in
addition to all other remedies available at law or in equity, Weber shall be
entitled to the immediate remedy of a temporary restraining order, preliminary
injunction, or such other form of injunctive or equitable relief as maybe used
by any court of competent jurisdiction to restrain and enjoin Selling Parties
and STI from breaching any such covenant or provision or to specifically enforce
the provisions hereof. All rights, remedies,
4
<PAGE> 97
undertakings, obligations, options, covenants, conditions and agreements
contained in this Agreement or provided by law shall be cumulative and no one of
them shall be exclusive of any other. A party may pursue any one or more of its
rights, options or remedies hereunder or may seek damages or specific
performance in the event of the other party's breach hereunder, or may pursue
any other remedy by law or equity, whether or not stated in this Agreement.
11. COSTS AND EXPENSES. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses.
12. GOVERNING LAW AND VENUE. This Agreement and any interpretation
hereof and the resolution of any dispute hereunder shall be governed by the laws
of the State of California, and subject to the parties' obligation to arbitrate
and dispute any action to enforce any provision of this Agreement or to obtain
any remedy with respect hereto may be brought in the appropriate state or
federal court in San Diego County, California. For this purpose each party
hereto hereby expressly and irrevocably consents to the jurisdiction of said
court, it being understood and agreed that the parties are obligated to
arbitrate disputes between them pursuant to Section 21.
13. INTERPRETATION. This Agreement shall not be interpreted against a
party by virtue of such party's participation in the drafting of the Agreement
or any provisions herein.
14. AMENDMENT. This Agreement may be amended, modified, or supplemented
only by an instrument in writing signed by all parties to this Agreement whose
rights or obligations are affected by such amendment, modification or
supplement.
15. INUREMENT. This Agreement shall be binding upon and inure to the
benefit to the successors and/or assigns of the parties hereto.
16. NOTICES.
(a) METHOD OF DELIVERY. Any notice, request, demand, consent,
approval or other communication (hereafter "notice") required or permitted under
this Agreement or by law shall be in writing and delivered by any of the
following means: (1) personally delivering the notice to a senior officer or
duly authorized representative of the other party, (2) depositing the notice in
the United States mail, postage prepaid, duly certified (return-receipt
requested), (3) sending the notice by a commercial overnight delivery service
(such as FedEx) which maintains delivery records, or (4) sending the notice by
electronic facsimile or telecopier ("fax") (with the sending party retaining
evidence of the time and date of transmission). Confirmations of any notices
sent by fax shall be sent by mail as provided above.
(b) ADDRESSES. Notices shall be addressed as follows:
5
<PAGE> 98
<TABLE>
<S> <C> <C>
If to Seller: Airline Interiors, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to Simula: Simula, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to Simtec: Simula Transportation Equipment Corporation
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to STI: Simula Technologies, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to Weber: Weber Aircraft, Inc.
2000 Weber Drive
Gainesville, Texas 76240
Attn: Michel Labarre
Fax: (940) 668-4853
With copies to: Zodiac, S.A.
2, rue Maurice Mallet
92137, Issy-les-Moulineaux Cedex
France
Attn: Jean-Jacques Jegou
Fax No: (011-331) 41 23 23 62
</TABLE>
6
<PAGE> 99
<TABLE>
<S> <C>
Hillyer & Irwin
550 West C Street, 16th Floor
San Diego, CA 92101
Attn: William A. Reavey, Esq.
Fax No.: (619) 595-1313
</TABLE>
Any party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for that specified above. It is
agreed that separate notices need not be sent to Simtec. Notices sent to Simula
shall be deemed to have been sent to Simtec.
(c) EFFECTIVENESS. All notices shall be deemed effective upon
receipt. If personally delivered, notices shall be deemed received at the time
of delivery. If sent by mail, notices shall be deemed fully delivered and
received three (3) business days after the date of the postmark on the certified
mail receipt. If sent by commercial overnight delivery service, notices shall be
deemed fully delivered and received one (1) business day after the date of
deposit with such commercial overnight delivery service. If sent by fax, notices
shall be deemed received twenty-four (24) hours after transmission. Notices may
not be sent by e-mail. Rejection or other refusal to accept a notice or the
inability to deliver the same because of a changed address of which no notice
was given shall be deemed to be receipt of the notice sent. In the event of a
postal strike, all notices shall be personally delivered, sent by commercial
overnight delivery service, or sent by fax.
17. HEADINGS. The headings of the sections of this Agreement are for
the convenience of reference only, and do not form a part hereof, and in no way
modify, interpret or construe the meanings of the parties.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement. The facsimile signatures of the parties shall be
deemed to constitute original signatures, and facsimile copies hereof shall be
deemed to constitute duplicate original counterparts.
19. WAIVER. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party. The failure of any of the parties to this Agreement
to require the performance of term or obligation under this Agreement or the
waiver by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder.
20. SEVERABILITY. In case any one or more of the provisions of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement but this Agreement shall be construed as
if such invalid or illegal or unenforceable provision or part of a provision had
never been contained herein. In the event of any inaccuracy or breach of any
representation, warranty, covenant or agreement contained in this Agreement, the
rights and remedies of the aggrieved party shall not be impaired or limited by
reason of the fact that the act, omission, occurrence, or other statement of
facts giving rise to such inaccuracy or breach may also be the subject matter of
any
7
<PAGE> 100
other representation, warranty, covenant or agreement contained in this
Agreement (or any other agreement between the parties) as to which there is no
inaccuracy or breach.
21. ARBITRATION.
(a) GENERAL. Any controversy, claim, or dispute among the
parties hereto arising out of or related to this Agreement or the breach
thereto, which cannot be settled amicably by the parties, shall be submitted for
binding arbitration in accordance with the provisions contained herein and in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("Rules"); provided, however, that notwithstanding any provisions of
such Rules, the parties shall have the right to take depositions and obtain
discovery regarding the subject matter of the arbitration, as provided in Title
III of Part 4 (commencing with Section 1985) of the California Code of Civil
Procedure. Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction. The arbitrator shall determine all questions of
fact and law relating to any controversy, claim, or dispute hereunder, including
but not limited to whether or not any such controversy, claim, or dispute is
subject to the arbitration provisions contained herein.
(b) THIRD-PARTY CONTROVERSY. If a controversy, claim, or
dispute arises among the parties hereto which is subject to the arbitration
provisions hereunder, and there exists or later arises a controversy, claim, or
dispute between the parties hereto and any third party, which controversy,
claim, or dispute arises out of or relates to the same transaction or series of
transactions, said third party controversy, claim, or dispute shall be
consolidated with the arbitration proceedings hereunder; provided, however, that
any such third party must be a party to an agreement with a party hereto which
provides for arbitration of disputes thereunder in accordance with rules and
procedures substantially the same in all material respects as provided for
herein or, if not, must consent to arbitration as provided for hereunder.
(c) VENUE. All arbitration proceedings shall be held in San
Diego, California.
(d) NOTICES. Notice of the demand for arbitration shall be
filed in writing with the other parties to this Agreement and with the American
Arbitration Association., it being understood, however, that notices intended
for the Selling Parties need only be given to Simula and that separate notices
need not be given to AI or Simula.
22. ATTORNEYS' FEES. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment based on this
Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all attorneys' fees and all costs, including but not limited to service of
process costs, filing fees, court and court reporter costs, investigative costs,
expert witness fees and the cost of any bonds, whether taxable or not. Any such
reimbursement shall be included in any judgment or final order or award issued
in that proceeding. "Prevailing Party" means the party determined to most nearly
prevail and not necessarily the one in whose favor a judgment or award is
rendered. Attorneys' fees incurred in enforcing any judgment or award are
recoverable as a separate item, and this provision for post-judgment or
post-award attorneys' fees shall survive any judgment or award and shall not be
deemed merged into any judgment or award.
8
<PAGE> 101
23. CONSTRUCTION. Whenever the context so requires in this Agreement,
all words used in the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to include any other
genders, and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate, or any
other entity.
24. FURTHER ASSURANCES. Each party to this Agreement shall execute all
instruments and documents and take all actions as may be reasonably required to
effectuate this Agreement.
25. AMENDMENTS. No addition to or modification of any provision
contained in this Agreement shall be effective unless fully set forth in a
writing signed by all parties.
26. AUTHORITY OF SIGNATORIES. Each individual signing this Agreement on
behalf of a corporation warrants that he or she is duly authorized to execute
and deliver this Agreement on behalf of the corporation, in accordance with a
duly adopted resolution of the board of directors of the corporation or in
accordance with the bylaws of the corporation, and that this Agreement is
binding on the corporation in accordance with its terms.
27. ENTIRE AGREEMENT. This Agreement is one of a series of agreements
executed as part of an integrated transaction described in the Asset Purchase
Agreement. This Agreement, together with the Asset Purchase Agreement and with
all other agreements, assignments and exhibits expressly referred to therein or
herein, constitutes the entire agreement between the parties hereto with respect
to the subject matter of this Agreement. All prior agreements, representations,
negotiations and understandings of the parties hereto, oral or written, express
or implied, are hereby superseded and merged herein. To the maximum extent
permitted by law, each party expressly waives any right of rescission and all
claims for damages by reason of any statement, representation, warranty, promise
and/or agreement, if any, not contained or referenced to in this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
9
<PAGE> 102
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver, this Non-Competition Agreement as of the
day and year first above written.
"SELLER" AIRLINE INTERIORS, INC., an Arizona corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"SIMTEC" SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona
corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its Secretary
"SIMULA" SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
Printed Name: James C. Dodd
Its: CFO
"STI" SIMULA TECHNOLOGIES, INC., an Arizona corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"WEBER" WEBER AIRCRAFT, INC., a Delaware corporation
By: /s/ Michel Labarre
Michel Labarre
President
10
<PAGE> 103
PATENT LICENSE AGREEMENT
(SECTION 6.6)
This PATENT LICENSE AGREEMENT (the "Agreement") is made as of the 1st day
of February 2000 by and between WEBER AIRCRAFT, INC., a Delaware corporation
("Licensor"), and SIMULA, INC., an Arizona corporation ("Licensee"), and SIMULA
TECHNOLOGIES, INC., an Arizona corporation ("STI"), with reference to the
following Recitals:
RECITALS
A. Licensor and Licensee, among others, are parties to that certain Asset
Purchase Agreement dated December 24, 1999, as amended (the "Asset Purchase
Agreement") and that certain Non-Competition Agreement of even date herewith
(the "Non-Compete Agreement").
B. Licensee is the inventor and the former owner of United States Patent
No. 5,730,492 entitled "16 G Load-Limiting Seat Technology" issued on March 24,
1998 (the "Patent"). The Patent is referred to as the "Shared Use Patent" in the
Asset Purchase Agreement.
C. Pursuant to the terms and conditions of the Asset Purchase Agreement,
Licensee has sold the Patent, and has assigned all of its right, title and
interest in and to the Patent to Licensor. Section 6.6 of the Asset Purchase
Agreement provides that Licensor shall grant Licensee and its affiliates a
license to utilize the Patent in the Included Markets (as defined below).
D. STI is an affiliate of Licensee.
E. The parties are executing this Agreement in order to memorialize their
understanding concerning the foregoing matters.
AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the sale
of the Patent to Licensor, the above Recitals, the mutual covenants contained
below in this Agreement and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
<PAGE> 104
1. INTERPRETATION. This Agreement is intended to implement Section 6.6 and
other provisions of the Asset Purchase Agreement referring to the licensing of
the Patent by Licensee. In the event of a conflict between the provisions of
this Agreement and those of the Asset Purchase Agreement, this Agreement shall
control. In the event of a conflict between this Agreement and the Non-Compete
Agreement, the Non-Compete Agreement shall control. Terms with initial capital
letters are defined terms which shall have the respective meanings given them in
the Asset Purchase Agreement, unless the context of this Agreement requires
otherwise.
2. GRANT. Subject to all the terms and conditions of this Agreement,
including without limitation Section 3 below, Licensor hereby grants, and
Licensee and hereby accepts, a perpetual, worldwide, exclusive license (the
"License") to make, use, market and sell products utilizing the technology and
inventions set forth in the Patent. The grant of the License is extended only to
Licensee and not to STI or any other affiliates of Licensee. Notwithstanding the
foregoing, it is agreed that STI shall have the right to use the technology
covered by the Patent as provided in Section 6 of the Non-Competition Agreement.
3. SCOPE. The scope of the License shall be limited to the military
aviation, executive and business helicopter and general aviation aircraft
markets anywhere in the world (collectively, the "Included Markets"). The
Included Markets shall not include either the Business Jet Market (as defined in
the Non-Compete Agreement) or the Commercial Airline Market (as defined in the
Non-Compete Agreement) (collectively, the "Excluded Markets"). Licensee shall
not design, develop, manufacture, market, distribute or sell any products
utilizing the technology or inventions covered by the Patent in, or for use in,
the Excluded Markets. Licensor shall not design, develop, manufacture, market,
distribute or sell any products utilizing the technology or inventions covered
by the Patent in, or for use in, the Included Markets.
4. ROYALTIES. The License shall be royalty free and Licensee shall not be
obligated to make any payments to Licensor for the utilization of the technology
and inventions covered by the Patent.
5. OWNERSHIP AND LICENSE OF IMPROVEMENTS. The parties agree that all
enhancements or betterments of the Patent or the technology set forth in the
Patent (collectively, the "Improvements") developed or acquired by Licensee, its
employees or agents during the term of this Agreement shall be considered a part
of the technology covered by the Patent and shall be owned solely by Licensor.
Licensee, its employees and agents shall not have any right, title or interest
in or to any Improvement; provided, however, that all Improvements shall be
licensed to Licensee subject to all the same terms and conditions of this
Agreement, including without limitation Section 3 and Section 4 above. None of
Licensee, its employees or agents shall, at any time during or after the term of
this Agreement, dispute or contest, directly or indirectly, Licensor's exclusive
right and title to the Improvements. Licensee agrees (a) to take, or cause to be
taken, all actions, (b) to do, or cause to be done, all things, and (c) to
execute, or cause to be executed, any documents, instruments or conveyances of
any kind which may be necessary, proper or advisable (y) to evidence Licensor's
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<PAGE> 105
sole right, title and interest in and to any Improvement, or (z) to register
such Improvement in Licensor's name.
6. INFRINGEMENT/ LITIGATION.
(A) THIRD PARTY INFRINGEMENT. During the term of this Agreement, each
party agrees to notify the other promptly in the event such party becomes aware
of any infringement or potential infringement of the Patent by a third party.
Licensor shall have the sole and exclusive right to pursue, at its expense and
in its own name, all actions for damages or equitable relief against third
parties who infringe the Patent. Licensee shall not pursue independently on any
lawsuits or causes of action for infringement of the Patent unless its licensed
use is infringed and Licensor elects not to enforce the License after having
received notice of such infringement. Licensor shall not be obligated to pursue
any action for infringement of the Patent, and Licensor may settle or otherwise
dispose of any action brought by it in any manner it sees fit, including without
limitation consenting to the entry of any judgement or binding judicial
determination, notwithstanding that such entry of judgement or binding judicial
determination might impair the validity of or materially adversely affect the
Patent or any claims thereof and provided it is not detrimental to Licensee's
rights hereunder. Licensor shall be entitled to all money or property awarded or
paid during or after the term of this Agreement from any judgment or settlement
resulting from any action or counterclaim brought by Licensor concerning the
Patent.
(B) PATENT DEFENSE. In the event any action or proceeding is filed
against Licensor or Licensee alleging that the Patent is invalid or infringes on
any other patent or intellectual property right of any third party, Licensor
may, but shall not be obligated to defend such action or proceeding at its sole
expense. If Licensor elects to defend such action or proceeding, Licensee agrees
to cooperate fully with Licensor and its representatives in the defense of any
such action. Licensor may settle or otherwise dispose of any action brought by
it in any manner it sees fit, including without limitation consenting to the
entry of any judgement or binding judicial determination, notwithstanding that
such entry of judgement or binding judicial determination might impair the
validity of or materially adversely affect the Patent or any claims thereof.
7. TERM. This Agreement shall become effective on the Effective Date and
shall terminate automatically without notice in the event that (a) Licensor
elects to not further maintain the Patent (in which case the License shall be
considered fully paid-up and irrevocable), or (b) Licensee (i) designs,
develops, manufactures, markets, distributes or sells any products utilizing the
technology or inventions covered by the Patent in, or for use in, the Excluded
Markets, other than specifically allowed under this Agreement, (ii) attempts to
assign or transfer its rights under this Agreement or the License, (iii)
attempts to sublicense the technology and inventions covered by the Patent in
contravention of Section 8 below, (iv) fails to maintain insurance as required
under this Agreement, or (v) files a petition in bankruptcy or is adjudicated
bankrupt or insolvent, or makes an assignment for the benefit of creditors, or
an arrangement pursuant to any bankruptcy law, or discontinues or dissolves its
business, or if a receiver is appointed for the Licensee or for the Licensee's
business.
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<PAGE> 106
8. ASSIGNMENT. Licensee shall not be entitled to assign its rights under
this Agreement or to sublicense the technology or the inventions covered by the
Patent, except as permitted in this Section 8. Notwithstanding anything in this
Agreement to the contrary, it is agreed that (a) Licensee may sublicense the
License to a Simula Affiliate (as defined below) subject to all the terms and
conditions of this Agreement and (b) Licensee (or a permitted sublicensee), may
assign the License (or a permitted sublicense) in conjunction with the sale of
the business of a Simula Affiliate to whom the License has been sublicensed,
provided Licensee first obtains Licensor's prior written consent to such
assignment. Licensor's consent to such assignment of the License (or a permitted
sublicense) in conjunction with the sale of the business of a Simula Affiliate
shall not be unreasonably withheld. The term "Simula Affiliate" shall mean any
corporation which is owned by, controlled by, or under common control of Simula,
Inc.
9. INSURANCE. As a material inducement to Licensor to grant the License,
Licensee agrees to provide and maintain throughout the term of this Agreement,
at its own cost and expense, Comprehensive General Liability insurance including
Blanket Contractual Liability and Broad Form Property damage coverage in an
amount not less than Ten Million Dollars ($10,000,000) combined single limit,
per occurrence ("CGL Insurance") endorsed to include products liability
coverage, insuring the Licensee, its officers, directors, agents and employees
against injury, harm or damage, whether to persons or property, arising out of
Licensee's marketing, selling, or using products utilizing the technology or the
inventions covered by the Patent, and designating Licensor as an additional
named insured. All CGL Insurance shall be primary and be required to respond and
pay prior to any other available coverage. Not later than ten (10) days upon
written request by Licensor to Licensee, Licensee shall furnish evidence of such
coverage as well as notice of renewal, cancellation or change in such coverage
to Licensor
10. INDEMNIFICATION. In addition to any and all duties of Licensee set
forth in the Asset Purchase Agreement and this Agreement and as material
inducement to Licensor to grant the License to Licensee, Licensee hereby agrees
to defend, indemnify, and hold harmless Licensor against all Claims (as defined
below) and any costs, damages, liabilities, losses, lawsuits, and expenses
(including without limitation interest, penalties and reasonable attorneys'
fees) arising out of or relating to such Claims. For the purpose of this Section
10, the term "Claims" shall mean any costs, expenses, claims and liabilities
(including without limitation reasonable attorneys' fees) arising from or
pertaining to Licensee's marketing or selling of products or devices utilizing
the technology or inventions covered by the Patent.
11. COSTS AND EXPENSES. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses.
12. GOVERNING LAW AND VENUE. This Agreement and any interpretation hereof
and the resolution of any dispute hereunder shall be governed by the laws of the
State of California, and
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<PAGE> 107
subject to the parties' obligation to arbitrate and dispute any action to
enforce any provision of this Agreement or to obtain any remedy with respect
hereto may be brought in the appropriate state or federal court in San Diego
County, California. For this purpose each party hereto hereby expressly and
irrevocably consents to the jurisdiction of said court, it being understood and
agreed that the parties are obligated to arbitrate disputes between them
pursuant to Section 21.
13. INTERPRETATION. This Agreement shall not be interpreted against a party
by virtue of such party's participation in the drafting of the Agreement or any
provisions herein.
14. AMENDMENT. This Agreement may be amended, modified, or supplemented
only by an instrument in writing signed by all parties to this Agreement whose
rights or obligations are affected by such amendment, modification or
supplement.
15. INUREMENT. This Agreement shall be binding upon and inure to the
benefit to the successors and/or assigns of the parties hereto.
16. NOTICES.
(A) METHOD OF DELIVERY. Any notice, request, demand, consent, approval
or other communication (hereafter "notice") required or permitted under this
Agreement or by law shall be in writing and delivered by any of the following
means: (1) personally delivering the notice to a senior officer or duly
authorized representative of the other party, (2) depositing the notice in the
United States mail, postage prepaid, duly certified (return-receipt requested),
(3) sending the notice by a commercial overnight delivery service (such as
FedEx) which maintains delivery records, or (4) sending the notice by electronic
facsimile or telecopier ("fax") (with the sending party retaining evidence of
the time and date of transmission). Confirmations of any notices sent by fax
shall be sent by mail as provided above.
(B) ADDRESSES. Notices shall be addressed as follows:
If to Licensee: Simula, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to STI: Simula Technologies, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
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<PAGE> 108
If to Licensor: Weber Aircraft, Inc.
2000 Weber Drive
Gainesville, Texas 76240
Attn: Michel Labarre
Fax: (940) 668-4853
With copies to: Zodiac, S.A.
2, rue Maurice Mallet
92137, Issy-les-Moulineaux Cedex
France
Attn: Jean-Jacques Jegou
Fax No: (011-331) 41 23 23 10
Hillyer & Irwin
550 West C Street, 16th Floor
San Diego, CA 92101
Attn: William A. Reavey, Esq.
Fax No.: (619) 595-1313
Any party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for that specified above. It is
agreed that separate notices need not be sent to Simtec. Notices sent to Simula
shall be deemed to have been sent to Simtec and STI.
(C) EFFECTIVENESS. All notices shall be deemed effective upon receipt.
If personally delivered, notices shall be deemed received at the time of
delivery. If sent by mail, notices shall be deemed fully delivered and received
three (3) business days after the date of the postmark on the certified mail
receipt. If sent by commercial overnight delivery service, notices shall be
deemed fully delivered and received one (1) business day after the date of
deposit with such commercial overnight delivery service. If sent by fax, notices
shall be deemed received twenty-four (24) hours after transmission. Notices may
not be sent by e-mail. Rejection or other refusal to accept a notice or the
inability to deliver the same because of a changed address of which no notice
was given shall be deemed to be receipt of the notice sent. In the event of a
postal strike, all notices shall be personally delivered, sent by commercial
overnight delivery service, or sent by fax.
17. HEADINGS. The headings of the sections of this Agreement are for the
convenience of reference only, and do not form a part hereof, and in no way
modify, interpret or construe the meanings of the parties.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement. The facsimile signatures of the parties shall be
deemed to constitute original signatures, and facsimile copies hereof shall be
deemed to constitute duplicate original counterparts.
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19. WAIVER. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any of the parties to this Agreement to
require the performance of any term or obligation under this Agreement or the
waiver by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder.
20. SEVERABILITY. In case any one or more of the provisions of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement but this Agreement shall be construed as
if such invalid or illegal or unenforceable provision or part of a provision had
never been contained herein. In the event of any inaccuracy or breach of any
representation, warranty, covenant or agreement contained in this Agreement, the
rights and remedies of the aggrieved party shall not be impaired or limited by
reason of the fact that the act, omission, occurrence, or other statement of
facts giving rise to such inaccuracy or breach may also be the subject matter of
any other representation, warranty, covenant or agreement contained in this
Agreement (or any other agreement between the parties) as to which there is no
inaccuracy or breach.
21. ARBITRATION.
(A) GENERAL. Any controversy, claim, or dispute among the parties
hereto arising out of or related to this Agreement or the breach thereto, which
cannot be settled amicably by the parties, shall be submitted for binding
arbitration in accordance with the provisions contained herein and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
("Rules"); provided, however, that notwithstanding any provisions of such Rules,
the parties shall have the right to take depositions and obtain discovery
regarding the subject matter of the arbitration, as provided in Title III of
Part 4 (commencing with Section 1985) of the California Code of Civil Procedure.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall determine all questions of fact and
law relating to any controversy, claim, or dispute hereunder, including but not
limited to whether or not any such controversy, claim, or dispute is subject to
the arbitration provisions contained herein.
(B) THIRD PARTY CONTROVERSY. If a controversy, claim, or dispute arises
among the parties hereto which is subject to the arbitration provisions
hereunder, and there exists or later arises a controversy, claim, or dispute
between the parties hereto and any third party, which controversy, claim, or
dispute arises out of or relates to the same transaction or series of
transactions, said third party controversy, claim, or dispute shall be
consolidated with the arbitration proceedings hereunder; provided, however, that
any such third party must be a party to an agreement with a party hereto which
provides for arbitration of disputes thereunder in accordance with rules and
procedures substantially the same in all material respects as provided for
herein or, if not, must consent to arbitration as provided for hereunder.
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(C) VENUE. All arbitration proceedings shall be held in San Diego,
California.
(D) NOTICES. Notice of the demand for arbitration shall be filed in
writing with the other party to this Agreement and with the American Arbitration
Association.
22. ATTORNEYS' FEES. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment based on this
Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all attorneys' fees and all costs, including but not limited to service of
process costs, filing fees, court and court reporter costs, investigative costs,
expert witness fees and the cost of any bonds, whether taxable or not. Any such
reimbursement shall be included in any judgment or final order or award issued
in that proceeding. "Prevailing Party" means the party determined to most nearly
prevail and not necessarily the one in whose favor a judgment or award is
rendered. Attorneys' fees incurred in enforcing any judgment or award are
recoverable as a separate item, and this provision for post-judgment or
post-award attorneys' fees shall survive any judgment or award and shall not be
deemed merged into any judgment or award.
23. CONSTRUCTION. Where appropriate in this Agreement, words in the
singular shall include the plural, and words in the masculine shall include the
feminine.
24. AUTHORITY OF SIGNATORIES. Each individual signing this Agreement on
behalf of a corporation warrants that he or she is duly authorized to execute
and deliver this Agreement on behalf of the corporation, in accordance with a
duly adopted resolution of the board of directors of the corporation or in
accordance with the bylaws of the corporation, and that this Agreement is
binding on the corporation in accordance with its terms.
25. ENTIRE AGREEMENT. This Agreement is one of a series of agreements
executed as part of an integrated transaction described in the Asset Purchase
Agreement. This Agreement, together with the Asset Purchase Agreement and with
all other agreements, assignments and exhibits expressly referred to therein or
herein, constitutes the entire agreement between the parties hereto with respect
to the subject matter of this Agreement. All prior agreements, representations,
negotiations and understandings of the parties hereto, oral or written, express
or implied, are hereby superseded and merged herein. To the maximum extent
permitted by law, each party expressly waives any right of rescission and all
claims for damages by reason of any statement, representation, warranty, promise
and/or agreement, if any, not contained or referenced in this Agreement.
26. CAPACITY OF STI. STI is not acquiring any rights in the Patent or the
License by virtue of this Agreement. STI is executing this Agreement for the
limited purpose of confirming its agreement with the foregoing.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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<PAGE> 111
IN WITNESS WHEREOF, the parties hereto have caused this Patent License
Agreement to be executed effective as of the date set forth above.
"LICENSEE:" SIMULA, INC.,
an Arizona corporation
By:/s/ James C. Dodd
Printed Name: James C. Dodd
Its: CFO
"STI" SIMULA TECHNOLOGIES, INC.,
an Arizona corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"LICENSOR:" WEBER AIRCRAFT, INC.,
a Delaware corporation
By: /s/ Michael Labarre
Printed Name: Michael Labarre
Its: President
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Exhibit 10.40g
ASSIGNMENT OF INTELLECTUAL PROPERTY
(Section 5.2(j))
This ASSIGNMENT OF INTELLECTUAL PROPERTY (the "Assignment") is made as of
the 1st day of February 2000, by and between AIRLINE INTERIORS, INC., an Arizona
corporation, SIMULA, INC., an Arizona corporation (collectively the
"Assignors"), and WEBER AIRCRAFT, INC., a Delaware corporation ("Assignee"),
with reference to the facts set forth in the Recitals below.
RECITALS
A. Assignors and Assignee are parties to that certain Asset Purchase
Agreement dated December 24, 1999, as amended (the "Asset Purchase Agreement").
This Agreement is being executed pursuant to Section 5.2(j) of the Asset
Purchase Agreement.
B. Simula, Inc. owns all right, title and interest in and to United States
Patent No. 5,730,492 entitled " Load-Limiting Seat" issued March 24, 1998 (the
"Patent"). Airline Interiors, Inc. owns all right, title and interest to and in
the remaining intellectual property The Patent and the remaining intellectual
property are collectively referred to as the "Intellectual Property," and is
defined more fully in Section 1.1(g) of the Asset Purchase Agreement and listed
in the Schedule of Intellectual Property attached hereto as Exhibit "A."
C. Section 1.1(g) of the Asset Purchase Agreement provides that, as a part
of the sale of the assets contemplated in the Asset Purchase Agreement,
Assignors shall assign to Assignee all of their right, title and interest in and
to the Intellectual Property.
D. The parties are executing this Assignment in order to memorialize their
understanding concerning the assignment of the Intellectual Property.
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<PAGE> 113
AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the above
Recitals and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. INTERPRETATION. This Assignment is intended to implement the terms and
conditions of the Asset Purchase Agreement. In the event of a conflict between
the provisions of this Assignment and those of the Asset Purchase Agreement, the
Asset Purchase Agreement shall control. Terms with initial capital letters are
defined terms which shall have the respective meanings given them in the Asset
Purchase Agreement, unless the context of this Assignment requires otherwise.
2. TITLE TO INTELLECTUAL PROPERTY. Assignors own all right, interest and
title, legal and equitable, as to the (a) the Intellectual Property, (b) all
intellectual property rights (the "Associated Rights") associated with such
Intellectual Property in the United States and in all foreign countries
throughout the world (including any reissues, renewals, divisions continuations,
or foreign counterparts of such Intellectual Property), (c) all causes of
action, claims, damages and other rights (the "Ownership Rights") arising out of
or relating to the Intellectual Property or ownership thereof, including but not
limited to any and all claims for current or past infringement and the right to
sue therefor, and (d) all goodwill (the "Goodwill") associated with or related
to the Intellectual Property. Assignors have the right to use, free and clear of
claims or rights of others, the Intellectual Property, the Associated Rights the
Ownership Rights and the Goodwill and the same are freely transferable by
Assignors. Assignors have not entered into any license agreement or similar
agreement that would entitle any other person than Assignors to use the
Intellectual Property, the Associated Rights the Ownership Rights and the
Goodwill.
3. NO INFRINGEMENT. Assignors are not aware, to the best of their
knowledge, of any infringement by others of Assignors' proprietary rights in the
Intellectual Property, the Associated Rights, the Ownership Rights and the
Goodwill, nor of any other current unauthorized use by other persons. There are
no claims or demands of any other person pertaining to the Intellectual Property
and no proceedings have been instituted, or are pending or threatened, which
challenge Assignors' right, title or interest to and in the Intellectual
Property, the Associated Rights the Ownership Rights and the Goodwill. Simula,
Inc. has paid all maintenance fees required to be paid in order to keep the
Patent in effect. The Patent is in full force and effect.
4. ASSIGNMENT BY ASSIGNORS. Subject to all of the terms and conditions of
the Asset Purchase Agreement and this Assignment, Assignors hereby assign to
Assignee all of Assignors' right, title and interest to and in the following:
(a) the Intellectual Property, (b) Associated Rights , (c) all Ownership Rights
arising out of or relating to the Intellectual Property or ownership thereof,
including but not limited to any and all claims for current or past infringement
and the right to sue therefor, and (d) the Goodwill associated with or related
to the Intellectual Property.
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<PAGE> 114
5. ACCEPTANCE BY ASSIGNEE. Subject to all the terms and conditions of the
Asset Purchase Agreement and this Assignment, Assignee hereby accepts the
assignment of the Intellectual Property, the Associated Rights and the Ownership
Rights.
6. FURTHER ASSURANCES. Assignors agree, without cost to Assignee, to
execute all instruments and documents and take all actions as may be reasonably
required to effectuate this Assignment, including without limitation to execute
all rightful oaths, assignments, powers of attorney and other documents which
Assignee shall consider desirable or necessary for (a) vesting title to the
Intellectual Property, the Goodwill, the Associated Rights and the Ownership
Rights in Assignee, or (b) for registering such rights with governmental
authorities in Assignee's name in the United States or worldwide.
7. EFFECTIVE DATE. This Assignment shall be effective as of the Closing.
8. BINDING EFFECT. This Assignment shall be binding upon, and inure to the
benefit of the respective successors and assignees of Assignee and
Assignors.
9. GOVERNING LAW AND VENUE. This Agreement and any interpretation hereof
and the resolution of any dispute hereunder shall be governed by the
laws of the State of California, and subject to the parties' obligation
to arbitrate and dispute any action to enforce any provision of this
Agreement or to obtain any remedy with respect hereto may be brought in
the appropriate state or federal court in San Diego County, California.
For this purpose each party hereto hereby expressly and irrevocably
consents to the jurisdiction of said court, it being understood and
agreed that the parties are obligated to arbitrate disputes between
them pursuant to Section 16 below.
10. INTERPRETATION. This Agreement shall not be interpreted against a party
by virtue of such party's participation in the drafting of the
Agreement or any provisions herein.
11. AMENDMENT. This Agreement may be amended, modified, or supplemented
only by an instrument in writing signed by all parties to this
Agreement whose rights or obligations are affected by such amendment,
modification or supplement.
12. INUREMENT. This Agreement shall be binding upon and inure to the
benefit to the successors and/or assigns of the parties hereto.
13. NOTICES.
(a) METHOD OF DELIVERY. Any notice, request, demand, consent, approval
or other communication (hereafter "notice") required or permitted under this
Agreement or by law shall be in writing and delivered by any of the following
means: (1) personally delivering the notice to a senior officer or duly
authorized representative of the other party, (2) depositing the notice in the
United States mail, postage prepaid, duly certified (return-receipt requested),
(3) sending the notice by a commercial overnight delivery service (such as
FedEx) which maintains delivery records, or (4) sending the notice by electronic
facsimile or telecopier ("fax") (with the sending party retaining
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<PAGE> 115
evidence of the time and date of transmission). Confirmations of any notices
sent by fax shall be sent by mail as provided above.
(B) ADDRESSES. Notices shall be addressed as follows:
If to Assignors: Simula, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst
Fax No.: (602) 631-9005
If to Assignee: Weber Aircraft, Inc.
2000 Weber Drive 5
Gainesville, TX 76240
Attn: Michel Labarre
Fax No. (940) 668-4853
With a copy to: Zodiac S.A.
2, Rue Maurice Mallet
92137, Issy-les-Molineaux Cedex
France
Attn: Jean-Jacques Jegou
Fax No: (011-331) 41 23 23 10
With a copy to: Hillyer & Irwin
550 West C Street, 16th Floor
San Diego, CA 92101
Attn: William A. Reavey, Esq.
Fax No. (619) 595-1313
Any party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for that specified above. Notices
sent to Simula, Inc. shall be deemed to have been sent to Airline Interiors,
Inc.
(C) EFFECTIVENESS. All notices shall be deemed effective upon receipt.
If personally delivered, notices shall be deemed received at the time of
delivery. If sent by mail, notices shall be deemed fully delivered and received
three (3) business days after the date of the postmark on the certified mail
receipt. If sent by commercial overnight delivery service, notices shall be
deemed fully delivered and received one (1) business day after the date of
deposit with such commercial overnight delivery service. If sent by fax, notices
shall be deemed received twenty-four (24) hours after transmission. Notices may
not be sent by e-mail. Rejection or other refusal to accept a notice or the
inability to deliver the same because of a changed address of which no notice
was given shall be deemed to be receipt of the notice sent. In the event of a
postal strike, all notices
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<PAGE> 116
shall be personally delivered, sent by commercial overnight delivery service, or
sent by fax.
14. HEADINGS. The headings of the sections of this Agreement are for the
convenience of reference only, and do not form a part hereof, and in no way
modify, interpret or construe the meanings of the parties.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement. The facsimile signatures of the parties shall be
deemed to constitute original signatures, and facsimile copies hereof shall be
deemed to constitute duplicate original counterparts.
16. WAIVER. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any of the parties to this Agreement to
require the performance of term or obligation under this Agreement or the waiver
by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder.
17. SEVERABILITY. In case any one or more of the provisions of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement but this Agreement shall be construed as
if such invalid or illegal or unenforceable provision or part of a provision had
never been contained herein. In the event of any inaccuracy or breach of any
representation, warranty, covenant or agreement contained in this Agreement, the
rights and remedies of the aggrieved party shall not be impaired or limited by
reason of the fact that the act, omission, occurrence, or other statement of
facts giving rise to such inaccuracy or breach may also be the subject matter of
any other representation, warranty, covenant or agreement contained in this
Agreement (or any other agreement between the parties) as to which there is no
inaccuracy or breach.
18. ARBITRATION.
(a) GENERAL. Any controversy, claim, or dispute among the parties
hereto arising out of or related to this Agreement or the breach thereto, which
cannot be settled amicably by the parties, shall be submitted for binding
arbitration in accordance with the provisions contained herein and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
("Rules"); provided, however, that notwithstanding any provisions of such Rules,
the parties shall have the right to take depositions and obtain discovery
regarding the subject matter of the arbitration, as provided in Title III of
Part 4 (commencing with Section 1985) of the California Code of Civil Procedure.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall determine all questions of fact and
law relating to any controversy, claim, or dispute hereunder, including but not
limited to whether or not any such controversy, claim, or dispute is subject to
the arbitration provisions contained herein.
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(b) THIRD PARTY CONTROVERSY. If a controversy, claim, or dispute arises
among the parties hereto which is subject to the arbitration provisions
hereunder, and there exists or later arises a controversy, claim, or dispute
between the parties hereto and any third party, which controversy, claim, or
dispute arises out of or relates to the same transaction or series of
transactions, said third party controversy, claim, or dispute shall be
consolidated with the arbitration proceedings hereunder; provided, however, that
any such third party must be a party to an agreement with a party hereto which
provides for arbitration of disputes thereunder in accordance with rules and
procedures substantially the same in all material respects as provided for
herein or, if not, must consent to arbitration as provided for hereunder.
(c) VENUE. All arbitration proceedings shall be held in San Diego,
California.
(d) NOTICES. Notice of the demand for arbitration shall be filed in
writing with the other party to this Agreement and with the American Arbitration
Association.
19. ATTORNEYS' FEES. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment based on this
Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all attorneys' fees and all costs, including but not limited to service of
process costs, filing fees, court and court reporter costs, investigative costs,
expert witness fees and the cost of any bonds, whether taxable or not. Any such
reimbursement shall be included in any judgment or final order or award issued
in that proceeding. "Prevailing Party" means the party determined to most nearly
prevail and not necessarily the one in whose favor a judgment or award is
rendered. Attorneys' fees incurred in enforcing any judgment or award are
recoverable as a separate item, and this provision for post-judgment or
post-award attorneys' fees shall survive any judgment or award and shall not be
deemed merged into any judgment or award.
20. CONSTRUCTION. Whenever the context so requires in this Agreement, all
words used in the singular shall be construed to have been used in the plural
(and vice versa), each gender shall be construed to include any other genders,
and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate, or any
other entity.
21. AUTHORITY OF SIGNATORIES. Each individual signing this Agreement on
behalf of a corporation warrants that he or she is duly authorized to execute
and deliver this Agreement on behalf of the corporation, in accordance with a
duly adopted resolution of the board of directors of the corporation or in
accordance with the bylaws of the corporation, and that this Agreement is
binding on the corporation in accordance with its terms.
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22. ENTIRE AGREEMENT. This Agreement is one of a series of agreements
executed as part of an integrated transaction described in the Asset Purchase
Agreement. This Agreement, together with the Asset Purchase Agreement and with
all other agreements, assignments and exhibits expressly referred to therein or
herein, constitutes the entire agreement between the parties hereto with respect
to the subject matter of this Agreement. All prior agreements, representations,
negotiations and understandings of the parties hereto, oral or written, express
or implied, are hereby superseded and merged herein. To the maximum extent
permitted by law, each party expressly waives any right of rescission and all
claims for damages by reason of any statement, representation, warranty, promise
and/or agreement, if any, not contained or referenced to in this Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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<PAGE> 119
IN WITNESS WHEREOF, Assignors and Assignee have executed this Assignment of
Intellectual Property as of the date first above written.
"ASSIGNOR:" AIRLINE INTERIORS, INC.,
an Arizona corporation
By: /s/ Bradley P. Forst
___________________________
Printed Name: Bradley P. Forst
Its: Secretary
"ASSIGNOR:" SIMULA, INC.,
an Arizona corporation
By:/s/ James C. Dodd
_________________________
Printed Name: James C. Dodd
Its: CFO
"ASSIGNEE:" WEBER AIRCRAFT, INC.,
a Delaware corporation
By: /s/ Michael Labarre
___________________________
Printed Name: Michael Labarre
Its: President
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EXHIBIT "A"
SCHEDULE OF INTELLECTUAL PROPERTY
Trademarks, Tradenames, and Service Marks
- Common Law Trademark "AIRLINE INTERIORS' (Corporate Name)
- Common Law Trademark "AIRLINE INTERIORS" plus design (Corporate Logo)
- Common Law Trademark "AI-1000" for Tourist Class Airplane Seats
- Common Law Trademark "AI-2000" for Business Class Airplane Seats
Patent Concepts or Ideas
- United States Patent No. 5,730,492 entitled "16 G Load-Limiting Seat
Technology" issued March 24, 1998 (the "Patent")
- All concepts, technology and inventions set forth in the Patent
Copyrights
- Logo "AIRLINE INTERIOR"
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Exhibit 10.40h
TRANSITION SUPPORT AGREEMENT
(Section 7.9)
This TRANSITION SUPPORT AGREEMENT (the "Agreement") is made as of the 1st
day of February 2000 by and between AIRLINE INTERIORS, INC., an Arizona
corporation ("AI"), SIMULA TRANSPORTATION EQUIPMENT CORPORATION, an Arizona
corporation ("Simtec"), SIMULA, INC., an Arizona corporation ("Simula"), and
WEBER AIRCRAFT, INC., a Delaware corporation ("Weber"), with reference to the
following Recitals:
RECITALS
A. Simula is the sole shareholder of Simtec, which is in turn the sole
shareholder of AI. AI, Simula and Simtec are sometimes collectively referred to
herein as the "Selling Parties."
B. AI is engaged in the business (the "Business") of manufacturing and
marketing new aircraft passenger seats. AI operates its main manufacturing and
service facility (the "Poway Facility") for the Business in Poway, California.
C. Weber is also engaged in the business of manufacturing and marketing new
aircraft passenger seats. Weber is headquartered and maintains a manufacturing
facility ("Weber's Facility") in Gainesville, Texas.
D. Selling Parties and Weber are parties to that certain Asset Purchase
Agreement dated December 24, 1999, as amended (the "Asset Purchase Agreement").
E. Pursuant to the Asset Purchase Agreement, AI has sold to Weber certain
assets, which are defined in the Asset Purchase Agreement as the "Included
Assets." The Included Assets are substantially all the assets currently used by
AI in connection with the Business.
F. This Agreement is being executed pursuant to Section 7.9 of the Asset
Purchase Agreement, which provides that AI will assist Weber in the orderly
relocation of the Business from the Poway Facility to Weber's Facility after the
Closing.
G. The parties are executing this Agreement in order to memorialize their
understanding concerning the foregoing matters.
<PAGE> 122
AGREEMENT
NOW, THEREFORE, in consideration of the Asset Purchase Agreement, the above
Recitals, the mutual covenants contained below in this Agreement and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE 1
INTRODUCTORY MATTERS
1.1 Interpretation. In the event of a conflict between the provisions of
this Agreement and those of the Asset Purchase Agreement, this Agreement shall
control. Terms with initial capital letters are defined terms which shall have
the respective meanings given them in the Asset Purchase Agreement, unless the
context of this Agreement requires otherwise.
1.2 Certain Definitions.
(a) AI's Transition Team. The term "AI's Transition Team" shall have
the meaning given it in Section 1.4 below.
(b) AT Sublease. The term "AT Sublease" shall have the meaning given it
in Section 4.1(a) below.
(c) Covered Claims.
(1) The term "Covered Claims" shall mean all liabilities (including
without limitation reasonable attorneys' fees) arising out of or pertaining to
any claim (other than an Excluded Claim) arising out of acts or circumstances
occurring or existing before or after the Closing which may be asserted at any
time against Weber:
(i) By any person who was employed by AI before or after the
Closing, including without limitation claims based on employment discrimination,
workers compensation, unpaid wages, salaries or benefits, personal injury,
sexual harassment, termination of employment and payments required under the
WARN Act in laying off its employees employed in the Poway Facility;
(ii) By any governmental agency based on or arising out of AI's
alleged failure to comply with the WARN Act in laying off its employees employed
in the Poway Facility;
(iii) By the landlord under the Poway Lease for any alleged
breach of the Poway Lease at any time (except as otherwise provided in Section
3.2 below with respect to damage or destruction caused by the negligence or
willful misconduct of Weber);
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<PAGE> 123
(iv) By any third party arising out of the use or occupancy of
the Poway Facility; or
(v) By the subtenant under the AT Sublease.
(2) The term Covered Claims shall not include the Excluded Claims.
Notwithstanding anything in this Agreement to the contrary, it is agreed that
the Covered Claims shall, however, include claims that may be asserted by the
Temporary Personnel for injuries that occur after the Closing which are covered
by worker's compensation insurance, unless such claims are Excluded Claims.
(d) Excluded Claims. The term "Excluded Claims" shall mean (1) any
claims asserted after the Closing by Weber's Permanent Hires with respect to
acts or omissions of Weber in its capacity as the new employer of Weber's
Permanent Hires; (2) any claims asserted after the Closing by the Temporary
Personnel for sexual harassment or other employment law violations by Weber's
employees, or personal injury resulting from the gross negligence or willful
misconduct of Weber; (3) any claims by the landlord under the Poway Lease for
any damage or destruction of the Poway Facility caused by the negligence or
willful misconduct of Weber; and (4) any claims by any third party arising out
of Weber's use or occupancy of the Poway Facility during the Transition Period
in violation of the subject lease.
(e) Prohibited Transactions. The term "Prohibited Transactions" shall
have the meaning given it in Section 3.4 below.
(f) Rent. The term "Rent" shall have the meaning given it in Section
4.1(a) below.
(g) Termination Notice. The term "Termination Notice" shall have the
meaning given it in Section 1.2(j) below.
(h) Temporary Personnel. The term "Temporary Personnel" shall have the
meaning given it in Section 2.1(b) below.
(i) Temporary Personnel Costs. The term "Temporary Personnel Costs"
shall have the meaning given it in Section 2.1(b) below.
(j) Transition Period. The term "Transition Period" shall mean a period
of time following the Closing during which Weber will operate in the Poway
Facility pursuant to this Agreement in order to prepare the Business for
relocation to Weber's Facility. The Transition Period will begin immediately
after the Closing and end when Weber vacates the Poway Facility, it being
agreed, however, that the Transition Period shall not extend beyond July 31,
2000. Weber shall give AI written notice (the "Termination Notice") of when
Weber has vacated the Poway Facility. The last day of the Transition Period
shall be the day on which AI receives the Termination Notice from Weber.
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(k) Weber's Permanent Hires. The term "Weber's Permanent Hires" shall
have the meaning given it in Section 2.1(a) below.
(l) Weber's Transition Team. The term "Weber's Transition Team" shall
have the meaning given it in Section 2.1 (b) below.
1.3 Parties' Intent. Initially, the parties anticipated that Weber would
continue manufacturing Products in the Poway Facility during the Transition
Period. Weber no longer plans to conduct manufacturing operations in the Poway
Facility after the Closing. Instead, after the Closing, Weber anticipates that
it will promptly relocate and transfer the Business and all the Included Assets
from the Poway Facility to Weber's Facility. During the Transition Period, Weber
expects to shut down the Business in preparation for its immediate relocation to
Weber's Facility. Selling Parties shall assist Weber in relocating the Business
and Weber will reimburse Selling Parties for certain expenses related thereto,
as more fully provided below. All decisions affecting the Business shall be made
by Weber. Subject to all the provisions of this Agreement, AI shall perform the
Services in the manner specified in this Agreement in order to meet the
day-to-day operational requirements of the Business during the Transition
Period, as well as the requirements for an orderly relocation of the Business to
Weber's Facility. AI shall not engage in any Prohibited Transactions without
Weber's prior written approval.
1.4 Scope of Services. Using the Temporary Personnel, AI's Transition Team,
Simula's corporate MIS support staff in Phoenix, AZ and AI's computer and
telephone systems, and other equipment of AI in the Poway Facility, Selling
Parties shall provide to Weber the administrative and operational support
services (the "Services") reasonably required to cease manufacturing the
Products in the Poway Facility and to move the Business and the Included Assets
in an orderly manner to Weber's Facility. The specific Services to be provided
by Simula and AI are listed on the Schedule of Services attached hereto as
Exhibit "A" and elsewhere in this Agreement. Weber shall exercise reasonable
care and supervision in assigning tasks to be performed by the Temporary
Personnel. Before the Closing, Selling Parties shall appoint a facilities
manager and a transition manager (collectively, "AI's Transition Team") to
manage the Poway Facility after the Closing and to coordinate the performance of
the Services with Weber's Transition Team. AI shall pay the cost of AI's
Transition Team. AI's Transition Team shall not be part of the Temporary
Personnel. Weber shall inform and consult with AI's Transition Team on a
frequent basis during the Transition Period. AI shall not undertake any other
business activities or ventures in its Poway Facility or elsewhere which would
prevent AI from performing the Services. No compensation shall be required to be
paid to Selling Parties for providing the Services except as provided in Article
4 below.
1.5 Mutual Cooperation. The parties' respective Transition Teams shall
cooperate with one another and provide services to one another that do not
interfere with their respective primary duties as provided in this Section 1.5.
Weber's Transition Team's primary duties shall be to support Weber. AI's
Transition Team's primary duties shall be to support AI. As part of the
cooperation contemplated in this Section 1.5, it is agreed that Greg Wallick and
Thomas Nobles, who will be
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assigned as Temporary Personnel to Weber's Transition Team, will provide certain
certification and DIMR Services for the benefit of Selling Parties. The parties
shall also cooperate with one another on (1) security and lock changing matters
relating to the Poway Facility and (2) the copying of AI's business records.
ARTICLE 2
PERSONNEL MATTERS
2.1 Weber's Transition Team.
(a) Weber's Permanent Hires. Prior to the Closing, Weber shall identify
those employees (the "Weber's Permanent Hires") of AI whom Weber desires to hire
to work in the Poway Facility (or elsewhere) during the Transition Period and
thereafter. As of the Closing, Weber's Permanent Hires shall cease to be
employees of AI and shall become employees of Weber. At that time, Weber shall
be solely responsible for paying all salaries, wages and benefits of Weber's
Permanent Hires in accordance with applicable law. Selling Parties shall assist
and cooperate with the transition of Weber's Permanent Hires from AI's payroll
to the payroll and benefits systems of Weber. Before the Closing, Weber shall
give Selling Parties notice of each offer of permanent employment made to AI's
employees and the terms thereof, whether accepted or not.
(b) Temporary Staffing. In order to supply the temporary personnel
assistance needed to help Weber relocate the Business and the Included Assets,
AI shall "lease" certain of AI's employees (the "Temporary Personnel") to Weber
during the Transition Period. Before the Closing, Weber shall give Selling
Parties notice of each offer of temporary employment made to AI's employees and
the terms thereof, whether accepted or not. AI shall be deemed to be the
employer of record for the Temporary Personnel for all purposes. Weber shall,
however, be entitled to identify the tasks to be performed by the Temporary
Personnel, subject to the supervision of appropriate AI and Weber personnel. The
Temporary Personnel shall include AI personnel required to relocate the Business
and the Included Assets to Weber's facility and to operate and maintain the
Poway Facility and the telephone and computer systems located therein during the
Transition Period. Selling Parties are not obligated to provide these employees
to Weber if Weber is unable to induce them to continue working after the
Closing. Weber shall reimburse AI for the actual amount of the Temporary
Personnel's wages, FICA and other payroll taxes, benefits and a reasonable
amount to compensate AI for the cost of health and worker's compensation
insurance premiums during the Transition Period (collectively, the "Temporary
Personnel Costs"). The cost of such insurance is listed on the Schedule of
Insurance Costs for Temporary Personnel attached hereto as Exhibit "B." Weber
shall be entitled to pay - through AI's auspices - a "stay-bonus" to the
Temporary Personnel. The amount of the stay-bonus shall be determined by Weber.
The stay-bonus shall not be used to offset or reduce any payments due the
Temporary Personnel under the WARN Act. Hereafter, Weber's Permanent Hires and
the Temporary Personnel may sometimes be collectively referred to as "Weber's
Transition Team."
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ARTICLE 3
OPERATION OF BUSINESS DURING TRANSITION PERIOD
3.1 Relationship of Parties - No Agency. During the Transition Period,
neither party shall be agents of the other. Neither party shall have authority
to bind, obligate or commit the other in any capacity or to execute contracts on
behalf of the other. Neither AI nor Weber shall be deemed to be a partner, joint
venturer, alter ego, manager, controlling person, or other business associate or
participant of any kind of the other in connection with the Business or the
Poway Facility.
3.2 Poway Lease. During the Transition Period, AI shall, for all purposes,
remain and be deemed to be the tenant under that certain Standard
Industrial/Commercial Multi-Tenant Lease-Modified Net dated September 15, 1997
(the "Poway Lease") between AI, as tenant, and W. H. Pomerado, LLC, as landlord.
Weber shall not be deemed to have either assumed the Poway Lease, or subleased
the Poway Facility (in whole or in part). AI hereby grants Weber an irrevocable
license to use the Poway Facility during the Transition Period, subject to this
Agreement and the Poway Lease. Because of Weber's limited rights as a licensee,
Weber shall not be deemed in control of the Poway Facility. In exercising its
rights under such license, Weber shall at all times comply with the Poway Lease
and shall pay - without mark-up or increase - the Rent payable by AI under the
Poway Lease as specified in Section 4.1(a) below; provided, however, that in no
event shall Weber be obligated to pay for any repairs or maintenance of the
Poway Facility or for any other expense which is capital in nature, unless such
repairs or maintenance work is caused by the negligence or willful misconduct of
Weber, its employees, or member of Weber's Transition Team. It is understood and
agreed that Selling Parties shall have the right to show the Poway Facility to
potential tenants /subtenants during the Transition Period, but the Poway Lease
shall not be terminated or assigned (which shall be deemed to include any
subleasing of the Poway Facility) in a manner which would interfere with Weber's
rights under this Agreement until the end of the Transition Period. Weber shall
not be responsible for surrendering the Poway Facility to the landlord or
delivering same to successor tenants or subtenants or for returning any leased
equipment to the lessors thereof. The Rent, premiums for insurance coverages
required under the Poway Lease, and property taxes for the Poway Facility shall
not be deemed to be part of AI's trade accounts payable to be assumed by Weber
under the Asset Purchase Agreement. AI shall be solely responsible for paying
for such items out of its own funds, except as provided in this Agreement during
the Transition Period.
3.3 Operation of Business. Unless otherwise instructed by Weber in writing,
during the Transition Period AI shall:
(a) Cease operating the Business during the Transition Period except as
necessary to provide the Services;
(b) Cease all manufacturing operations in the Poway Facility effective
as of the close of business on the Closing Date;
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(c) Assist Weber in assuming control over the Business and in
transferring title to and possession of the Included Assets to Weber;
(d) Continue to operate and maintain the Poway Facility in accordance
with the Poway Lease; and
(e) Provide the Services to Weber, as provided elsewhere in this
Agreement.
3.4 Prohibited Transactions. During the Transition Period, AI shall not do,
or agree to do, any of the following acts ("Prohibited Transactions") in
connection with or relating to the operation of the Business and the transfer of
the Business to Weber's Facility without the prior written approval of Weber:
(a) Issue or approve any purchase orders;
(b) Enter into any contract, commitment, or transaction on behalf of
Weber, in any amount or for any purpose;
(c) Write checks drawn on accounts owned by Weber;
(d) Agree to any payment arrangements (for extending credit or
deferring payment) with suppliers or vendors which are not approved in advance
by Weber;
(e) Accept from vendors any non-conforming goods or merchandise, i.e.,
raw materials, supplies, or other items for which reimbursement will be sought
from Weber which (1) do not comply with the standard descriptions for the
Products or such other items, or (2) do not comply with orders placed with the
vendors by AI at the direction of Weber;
(f) Ship any Products;
(g) Respond to or otherwise handle any product liability claims for any
Product;
(h) Sell any Products of any kind or in any quantity;
(i) Open any new customer accounts;
(j) Resolve or compromise any customer warranty disputes or any items
listed in service bulletins; or
(k) Terminate or modify the Poway Lease, or do anything that would
prevent Weber from operating in the Poway Facility during the Transition Period.
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3.5 Collection of Monies. Except as may be expressly provided otherwise in
the Asset Purchase Agreement, all monies collected by any Selling Party in
connection with or relating to the sale of the Products and/or the operation of
the Business during the Transition Period shall be deemed to be collected by any
Selling Party for the account of and benefit of Weber, it being understood that
Weber has purchased all of AI's accounts receivables pursuant to the Asset
Purchase Agreement . Any monies that may be collected or received by AI after
the Closing in connection with or relating to the sale of Products and/or
Business shall belong to Weber and such funds shall not be commingled with funds
of Selling Parties and shall be deposited without delay into bank accounts owned
by Weber.
3.6 No Conflicting Duties. During the Transition Period, AI and its
directors and officers shall not serve as officers, directors, employees,
consultants or advisors to any business which competes, directly or indirectly,
with the Business, without the prior written consent of Weber. AI confirms that
it is under no contractual commitments inconsistent with its obligations set
forth in this Agreement, and that during the Transition Period, it will not
render or perform services, or enter into any contract to do so, for any other
corporation, firm, entity or person, including Simula and Simtec, which are
inconsistent with the provisions of this Agreement.
3.7 Regulatory Compliance. During the Transition Period, AI shall comply
with the internal risk management procedures and controls established by Weber
and all federal, state and local licensing, certification, permit, and approval
requirements applicable to the Business or the Poway Facility.
3.8 Assistance From Selling Parties. Subject to Weber's payment of the
amounts specified in Article 4 below, Selling Parties hereby agree to use their
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things reasonably required by Weber to consummate the relocation of
the Business to Weber's Facility and to implement the transactions contemplated
by this Agreement, including without limitation to provide adequate
administrative and computer support and to make available to Weber immediately
upon Weber's request all test records, technical data, numerical dynamic models
and the like in connection with or relating to the Products, to the extent same
are part of the Included Assets.
ARTICLE 4
FINANCIAL MATTERS
4.1 Payments to AI. As compensation for the Services, Weber shall pay AI
the following amounts:
(a) Rent. Weber shall pay the Base Rent and the Common Area Operating
Expenses (collectively "Rent") payable by AI under the Poway Lease for the six
(6) month period beginning on the Closing and ending July 31, 2000; provided,
however, that any rental payments received by AI from Aerospace Technologies in
connection with or relating to the sublease (the "AT Sublease") of a portion of
the Poway Facility by Aerospace Technologies during said six-month
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period shall be credited to reduce the amount so payable by Weber for the Rent.
The Rent shall be paid as provided in Section 4.2 below. The amount of the Rent
is specified on the Invoice dated January 6, 2000 attached hereto as Exhibit
"C." Weber's obligation to pay the Rent for the above referenced six-month
period will continue beyond the end of the Transition Period. Termination of the
Transition Period shall not reduce or end Weber's obligation to pay the Rent. If
AI should become excused from paying the rent due under the Poway Lease (due to
damage or destruction of the Poway Facility or otherwise but not for subletting
or assigning), Weber's obligation to pay the Rent shall be reduced to the same
extent.
(b) Approved Cost Items. Weber shall reimburse AI for the actual amount
of the following direct, out-of-pocket costs and expenses ("Approved Cost
Items") reasonably incurred by AI in connection with or relating to the
operation of the Business during the Transition Period and the transfer of the
Business to Weber's Facility:
(1) The cost of electrical, gas, water and telephone service to the
Poway Facility during the Transition Period; provided, however, that the cost of
long distance telephone calls shall be subject to audit and review by Weber in
order to verify that such calls were made in furtherance of the Business and/or
its relocation;
(2) Rent for any equipment leased by AI (to the extent not part of
the Included Assets) which is used by Weber in furtherance of the Business
and/or its relocation;
(3) Property and general liability insurance premiums payable with
respect to the Poway Facility during the Transition Period;
(4) Real property taxes for the Poway Facility during the Transition
Period; and
(5) Such other out-of-pocket expenses as may be reasonably incurred
by AI in providing the Services; provided, however, that without Weber's prior
written approval, Weber shall not be obligated to reimburse AI for any type or
category of cost which is not expressly listed in this Section 4.1 or on Exhibit
"A."
(c) Temporary Personnel Costs. In addition to the other items listed in
this Section 4.1, Weber shall reimburse AI for the Temporary Personnel Costs.
Weber and AI shall agree on a mutually satisfactory mechanism for payment of the
Temporary Personnel Costs before the Closing.
(d) Corporate Support Costs. Weber shall not be required to pay Selling
Parties any additional amount for any corporate support services provided as
part of the Services by any Selling Party during the Transition Period, except
as provided in this Section 4.1(d). Terri Harden and Bob Wolski will be on-site
at Poway regularly during the Transition Period and shall fully cooperate and
provide the Services without cost to Weber. Notwithstanding anything to the
contrary, if Weber requests that either Terri Harden or Bob Wolski travel to San
Diego, California to work
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exclusively for the benefit of Weber, Weber shall (1) pay Simula $1,250 per day
(prorated for partial days) for each day that such individuals work in San Diego
and (2) reimburse Simula for the reasonable out-of-pocket travel costs for
airline fares, car rentals, and hotel rooms incurred by such individuals.
4.2 Time of Payment. . Weber shall pay the Rent in installments on the
first day of each calendar month for which Weber is obligated to pay the Rent,
beginning on February 2, 2000. The installment due on February 2, 2000 shall
cover the period beginning at midnight on the Closing Date and ending on
February 28, 2000. Unless otherwise agreed in writing, Weber shall pay the other
amounts payable by it under Section 4.1 above twice monthly. In order to be
reimbursed by the fifteenth (15th) day of a calendar month, AI shall submit to
Weber - not later than the fifth (5th) day of such month - invoices stating in
reasonable detail the amount of and the reason for each item for which payment
is being sought and the justification/explanation for Weber's obligation to pay
same; provided, however, that AI's failure to submit such invoices in a timely
manner shall not release Weber from its obligations to make the payments
provided for in this Article 4.
ARTICLE 5
TERM AND TERMINATION
5.1 Term. This Agreement shall become effective at the Closing. The term of
this Agreement shall commence on the Closing and shall continue until the end of
the Transition Period.
5.2 Termination for Cause. Either party may terminate this Agreement for
cause with immediate effect at any time by giving written notice of the
termination to the other party. "Cause" shall include, without limitation, the
following:
(a) Appointment of a receiver or trustee to manage the assets of AI;
(b) Assignment for the benefit of creditors of the assets of AI;
(c) AI's filing for bankruptcy protection; or
(d) Any material breach of this Agreement by either party, which is not
cured to the reasonable satisfaction of the non-breaching party within five (5)
business days after the breaching party's receipt of notice of default from the
non-breaching party. Weber shall be in material breach of this Agreement if it
fails to pay amounts due to AI within fifteen (15) days of notice of non-payment
from AI.
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ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by AI. In addition to any and all duties of AI set
forth in the Asset Purchase Agreement and this Agreement, AI shall defend,
indemnify, and hold Weber harmless from any costs, damages, liabilities, losses,
lawsuits, and expenses (including without limitation interest, penalties and
reasonable attorneys' fees) arising out of or relating to the Covered Claims.
6.2 Indemnification by Weber. In addition to any and all duties of Weber
set forth in the Asset Purchase Agreement and this Agreement, Weber shall
defend, indemnify, and hold AI harmless from any costs, damages, liabilities,
losses, lawsuits, and expenses (including, without limitation interest,
penalties and reasonable attorneys' fees) arising out of or relating to the
Excluded Claims.
6.3 Dispute Resolution. If the parties dispute their liability with respect
to any Covered Claim or Excluded Claim, such dispute, or any other dispute
arising out of this Agreement, shall be resolved by arbitration pursuant to
Section 7.11 below.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 Costs and Expenses. Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses.
7.2 Governing Law and Venue. This Agreement and any interpretation hereof
and the resolution of any dispute hereunder shall be governed by the laws of the
State of California, and subject to the parties' obligation to arbitrate and
dispute any action to enforce any provision of this Agreement or to obtain any
remedy with respect hereto may be brought in the appropriate state or federal
court in San Diego County, California. For this purpose each party hereto hereby
expressly and irrevocably consents to the jurisdiction of said court, it being
understood and agreed that the parties are obligated to arbitrate disputes
between them pursuant to Section 7.11 below.
7.3 Interpretation. This Agreement shall not be interpreted against a party
by virtue of such party's participation in the drafting of the Agreement or any
provisions herein.
7.4 Amendment. This Agreement may be amended, modified, or supplemented
only by an instrument in writing signed by all parties to this Agreement whose
rights or obligations are affected by such amendment, modification or
supplement.
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7.5 Inurement. This Agreement shall be binding upon and inure to the
benefit to the successors and/or assigns of the parties to this Agreement.
7.6 Notices.
(a) Method of Delivery. Any notice, request, demand, consent, approval
or other communication (hereafter "notice") required or permitted under this
Agreement or by law shall be in writing and delivered by any of the following
means: (1) personally delivering the notice to a senior officer or duly
authorized representative of the other party, (2) depositing the notice in the
United States mail, postage prepaid, duly certified (return-receipt requested),
(3) sending the notice by a commercial overnight delivery service (such as
FedEx) which maintains delivery records, or (4) sending the notice by electronic
facsimile or telecopier ("fax") (with the sending party retaining evidence of
the time and date of transmission). Confirmations of any notices sent by fax
shall be sent by mail as provided above.
(b) Addresses. Notices shall be addressed as follows:
If to AI: Airline Interiors, Inc.
12325 Kerran Street
Poway, CA 92064
Attn: Donald Rutter
Fax No.: (858) 748-0590
With a copy to: Simula, Inc.
2700 North Central Avenue
Suite 1100
Phoenix, AZ 85004
Attn: Bradley P. Forst, Esq.
Fax No.: (602) 631-9005
If to Purchaser: Weber Aircraft, Inc.
2000 Weber Drive
Gainesville, Texas 76240
Attn: Michel Labarre
Fax: (940) 668-4853
With copies to: Zodiac, S.A.
2, rue Maurice Mallet
92137, Issy-les-Moulineaux Cedex
France
Attn: Jean-Jacques Jegou
Fax No: (011-331) 41 23 23 62
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Hillyer & Irwin
550 West C Street, 16th Floor
San Diego, CA 92101
Attn: William A. Reavey, Esq.
Fax No.: (619) 595-1313
Any party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for that specified above. It is
agreed that separate notices need not be sent to Simtec. Notices sent to Simula
shall be deemed to have been sent to Simtec.
(c) Effectiveness. All notices shall be deemed effective upon receipt.
If personally delivered, notices shall be deemed received at the time of
delivery. If sent by mail, notices shall be deemed fully delivered and received
three (3) business days after the date of the postmark on the certified mail
receipt. If sent by commercial overnight delivery service, notices shall be
deemed fully delivered and received one (1) business day after the date of
deposit with such commercial overnight delivery service. If sent by fax, notices
shall be deemed received twenty-four (24) hours after transmission. Notices may
not be sent by e-mail. Rejection or other refusal to accept a notice or the
inability to deliver the same because of a changed address of which no notice
was given shall be deemed to be receipt of the notice sent. In the event of a
postal strike, all notices shall be personally delivered, sent by commercial
overnight delivery service, or sent by fax.
7.7 Headings. The headings of the sections of this Agreement are for the
convenience of reference only, and do not form a part hereof, and in no way
modify, interpret or construe the meanings of the parties.
7.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement. The facsimile signatures of the parties shall be
deemed to constitute original signatures, and facsimile copies hereof shall be
deemed to constitute duplicate original counterparts.
7.9 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party. The failure of any of the parties to this Agreement to
require the performance of term or obligation under this Agreement or the waiver
by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder.
7.10 Severability. In case any one or more of the provisions of this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement but this Agreement shall be construed as
if such invalid or illegal or unenforceable provision or part of a provision had
never been contained herein. In the event of any inaccuracy or breach of any
representation, warranty, covenant or agreement contained in this Agreement, the
rights and remedies of the aggrieved party
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shall not be impaired or limited by reason of the fact that the act, omission,
occurrence, or other statement of facts giving rise to such inaccuracy or breach
may also be the subject matter of any other representation, warranty, covenant
or agreement contained in this Agreement (or any other agreement between the
parties) as to which there is no inaccuracy or breach.
7.11 Arbitration.
(a) General. Any controversy, claim, or dispute among the parties
hereto arising out of or related to this Agreement or the breach thereto, which
cannot be settled amicably by the parties, shall be submitted for binding
arbitration in accordance with the provisions contained herein and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
("Rules"); provided, however, that notwithstanding any provisions of such Rules,
the parties shall have the right to take depositions and obtain discovery
regarding the subject matter of the arbitration, as provided in Title III of
Part 4 (commencing with Section 1985) of the California Code of Civil Procedure.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The arbitrator shall determine all questions of fact and
law relating to any controversy, claim, or dispute hereunder, including but not
limited to whether or not any such controversy, claim, or dispute is subject to
the arbitration provisions contained herein.
(b) Third-Party Controversy. If a controversy, claim, or dispute arises
among the parties hereto which is subject to the arbitration provisions
hereunder, and there exists or later arises a controversy, claim, or dispute
between the parties hereto and any third party, which controversy, claim, or
dispute arises out of or relates to the same transaction or series of
transactions, said third party controversy, claim, or dispute shall be
consolidated with the arbitration proceedings hereunder; provided, however, that
any such third party must be a party to an agreement with a party hereto which
provides for arbitration of disputes thereunder in accordance with rules and
procedures substantially the same in all material respects as provided for
herein or, if not, must consent to arbitration as provided for hereunder.
(c) Venue. All arbitration proceedings shall be held in San Diego,
California.
(d) Notices. Notice of the demand for arbitration shall be filed in
writing with the other parties to this Agreement and with the American
Arbitration Association, it being understood, however, that notices intended for
the Selling Parties need only be given to Simula and that separate notices need
not be given to AI or Simula.
7.12 Attorneys' Fees. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment based on this
Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy,
arbitration, declaratory relief or other litigation, the prevailing party shall
be entitled to receive from the other party or parties thereto reimbursement for
all attorneys' fees and all costs, including but not limited to service of
process costs, filing fees, court and court reporter costs, investigative costs,
expert witness fees and the cost of any bonds, whether taxable or not. Any such
reimbursement shall be included in any judgment or final order or award issued
in that proceeding. "Prevailing Party" means the party determined to
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most nearly prevail and not necessarily the one in whose favor a judgment or
award is rendered. Attorneys' fees incurred in enforcing any judgment or award
are recoverable as a separate item, and this provision for post-judgment or
post-award attorneys' fees shall survive any judgment or award and shall not be
deemed merged into any judgment or award.
7.13 Construction. Whenever the context so requires in this Agreement, all
words used in the singular shall be construed to have been used in the plural
(and vice versa), each gender shall be construed to include any other genders,
and the word "person" shall be construed to include a natural person, a
corporation, a firm, a partnership, a joint venture, a trust, an estate, or any
other entity.
7.14 Authority of Signatories. Each individual signing this Agreement on
behalf of a corporation warrants that he or she is duly authorized to execute
and deliver this Agreement on behalf of the corporation, in accordance with a
duly adopted resolution of the board of directors of the corporation or in
accordance with the bylaws of the corporation, and that this Agreement is
binding on the corporation in accordance with its terms.
7.15 Entire Agreement. This Agreement is one of a series of agreements
executed as part of an integrated transaction described in the Asset Purchase
Agreement. This Agreement, together with the Asset Purchase Agreement and with
all other agreements, assignments and exhibits expressly referred to therein or
herein, constitutes the entire agreement between the parties hereto with respect
to the subject matter of this Agreement. All prior agreements, representations,
negotiations and understandings of the parties hereto, oral or written, express
or implied, are hereby superseded and merged herein. To the maximum extent
permitted by law, each party expressly waives any right of rescission and all
claims for damages by reason of any statement, representation, warranty, promise
and/or agreement, if any, not contained or referenced to in this Agreement.
7.16 Calculation of Business Days. For purposes of this Agreement, the term
"business days" shall mean days of the week other than Saturdays, Sundays and
legal holidays in the United States.
7.17 Approvals by Weber. The only persons authorized to grant any approval
or consent required of Weber under this Agreement shall be Michel Labarre or
such other person(s) to whom he may delegate this responsibility.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
15
<PAGE> 136
IN WITNESS WHEREOF, the parties hereto have caused this Transition
Support Agreement to be executed effective as of the date set forth above.
"AI:" AIRLINE INTERIORS, INC., an Arizona
corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"WEBER:" WEBER AIRCRAFT, INC., a Delaware corporation
By: /s/ Michael LaBarre
Printed Name: Michael LaBarre
Its: President
"SIMTEC:" SIMULA TRANSPORTATION EQUIPMENT
CORPORATION, an Arizona corporation
By: /s/ Bradley P. Forst
Printed Name: Bradley P. Forst
Its: Secretary
"SIMULA:" SIMULA, INC.,
an Arizona corporation
By:/s/ James C. Dodd
Printed Name: James C. Dodd
Its: CFO
16
<PAGE> 137
EXHIBIT "A"
(TO TRANSITION SUPPORT AGREEMENT)
SCHEDULE OF SERVICES
Subject to Weber's financial obligations under Article 4, in addition to
any Services listed elsewhere in the Agreement, Selling Parties shall provide
the following Services during the Transition Period:
1. Providing the Temporary Personnel who receive and accept offers of
employment from Weber and services reasonably required to operate and maintain
the building systems in the Poway Facility, including without limitation
telephone and computer systems, facilities management, facilities security,
trash removal and other similar services;
2. During the Transition Period, Selling Parties shall also provide - at no
cost or expense to Weber - necessary corporate support for all computer systems
used in the Business, including by way of illustration but not limitation: the
Man-Fact software program, the Solid Works and
3. Autocad software programs, subject, however, to Section 4.1(d) above.
Such services shall exclude data conversion to Weber's systems, but Simula shall
provide reasonable support and advice to Weber's personnel for such process;
4. Providing such administrative services deemed necessary by Weber to
operate the Business and to transfer the Business and the Included Assets to
Weber's Facility;
5. Maintaining customer service support functions as deemed necessary by
Weber for customers of the Business;
6. Providing after sale services to customers of the Business and end users
of the Products;
7. Providing support as reasonably required by Weber to ship the Included
Assets to Weber's Facility;
8. Managing the warehouse where the Included Inventory is stored;
9. Collecting the accounts receivables included in the Included Assets as
directed by Weber;
10. Providing MIS support services to computer systems in the Poway
Facility from Simula's headquarters in Phoenix, AZ, subject to Section 4.1 (d)
above; and
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<PAGE> 138
11. Providing accounting support by Terri Harden of Simula in Phoenix, AZ,
subject to Section 4.1 (d) above.
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<PAGE> 139
EXHIBIT "B"
(TO TRANSITION SUPPORT AGREEMENT)
SCHEDULE OF INSURANCE COSTS
FOR TEMPORARY PERSONNEL
AIRLINES INTERIORS, INC.
COBRA MONTHLY INSURANCE RATES
<TABLE>
<CAPTION>
Employee Only Employee and Family
<S> <C> <C>
1. Health, Life & Ancillary $ 232.73 $651.82
2. Vision $ 8.09 $ 18.03
3. Worker's Compensation $ 94.23 NA
</TABLE>
19
<PAGE> 140
EXHIBIT "C"
(To Transition Support Agreement)
INVOICE
- ------------------------
|POMERADO LEASING NO. 1|
|P.O. BOX 12440 |
|SAN DIEGO, CA 92112 |
- ------------------------
- ------------------------ ----------------------------
|AIRLINE INTERIORS | |INVOICE DATE: JAN 06, 2000|
|ATTN: ACCOUNTS PAYABLE| | |
|12325 KERRAN ST | |REFERENCE: DECREASE IN CAM|
|POWAY, CA 92064 | | CHARGE |
- ------------------------ ----------------------------
- -------------------------------------------------------
|THE FOLLOWING REPRESENTS RENT DUE EFFECTIVE 01/01/00:|
| |
|CURRENT MONTHLY RENT: $55,342.|
|MONTHLY OPERATING EXPENSES: $15,120.|
|MONTHLY TENANT IMPROVEMENT CHARGE: $ 8,954.|
|MONTHLY AMOUNT DUE EFFECTIVE 01/01/00: $79,416.|
- -------------------------------------------------------
- -------------------------------------------------------
|REMITTANCE ADVICE: |
|WE DO NOT INVOICE ON A MONTHLY BASIS. |
| |
|PLEASE MAKE CHECKS PAYABLE TO: |
|POMERADO LEASING NO. 1 |
| |
|TOTAL DUE MONTHLY (EFFECTIVE 01/01/00): $79,416. |
- -------------------------------------------------------
<PAGE> 1
Exhibit 10.41a
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
SIMULA, INC.
AND ITS SUBSIDIARIES
(AS BORROWERS)
DATED: DECEMBER 30, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1. Definitions .................................................. 1
SECTION 2. Conditions Precedent ......................................... 13
SECTION 3. Revolving Loans .............................................. 18
SECTION 4. Term Loan .................................................... 23
SECTION 5. Letters of Credit ............................................ 24
SECTION 6. Collateral ................................................... 26
SECTION 7. Representations, Warranties and Covenants .................... 30
SECTION 8. Interest, Fees and Expenses .................................. 37
SECTION 9. Powers ....................................................... 40
SECTION 10. Events of Default and Remedies ............................... 41
SECTION 11. Termination .................................................. 44
SECTION 12. Miscellaneous ................................................ 45
SIGNATURES ................................................................ 47
</TABLE>
EXHIBIT
Exhibit A - Form of Term Loan Promissory Note
SCHEDULES
Schedule 1 - Existing Liens
Schedule 2 - Collateral Locations and Chief Executive Office
<PAGE> 3
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, (hereinafter
"CITBC") with offices located at 300 South Grand Avenue, 3rd Floor, Los Angeles,
California 90071, is pleased to confirm the terms and conditions under which
CITBC shall make revolving loans, term loans and other financial accommodations
to SIMULA, INC. (herein "Simula"), an Arizona corporation with a principal place
of business at 2700 North Central Avenue, Suite 1000, Phoenix, Arizona 85004,
and Simula's subsidiaries AIRLINE INTERIORS, INC. (herein "AII"), an Arizona
corporation with a principal place of business at 12325 Kerran Street, Poway,
California 92064, ARTCRAFT INDUSTRIES CORP. (herein "AIC"), an Arizona
corporation with a principal place of business at 4753 Aviation Parkway, Suite
F, College Park, Georgia 30349, SIMULA TRANSPORTATION EQUIPMENT CORPORATION
(formerly known as INTAERO INC.; herein "STEC"), an Arizona corporation with a
principal place of business at 9940 Mesa Rim Road, San Diego, California 92121,
INTERNATIONAL CENTER FOR SAFETY EDUCATION, INC. (herein "ISFSE"), an Arizona
corporation with a principal place of business at 10016 South 51st Street,
Phoenix, Arizona 85044, SIMULA AUTOMOTIVE SAFETY DEVICES, INC. (herein "SASD"),
an Arizona corporation with a principal place of business at 7360 S. Kyrene
Road, Suite 106, Tempe, Arizona 85283, SIMULA COMPOSITES CORPORATION (herein
"SCC"), an Arizona corporation with a principal place of business at 2495 South
Industrial Park Avenue, Tempe, Arizona 85282, SIMULA POLYMER SYSTEMS, INC.
(herein "SPS"), an Arizona corporation with a principal place of business at
10016 South 51st Street, Phoenix, Arizona 85044, SIMULA SAFETY SYSTEMS, INC.
(herein "SSS"), an Arizona corporation with a principal place of business at
7414 South Harl Avenue, Tempe, Arizona 85283, SIMULA TECHNOLOGIES, INC. (herein
"STI"), an Arizona corporation with a principal place of business at 10016 South
51st Street, Phoenix, Arizona 85044, CCEC CAPITAL CORP., an Arizona corporation
with a principal place of business at 2700 North Central Avenue, Suite 1000,
Phoenix, Arizona 85004, and SIMULA AUTOMOTIVE SAFETY DEVICES, LIMITED (herein
"SASD Limited"), a United Kingdom corporation with a principal place of business
at Unit 2, Wansbeck Business Park, Rotary Parkway, Ashington, Northumberland
NE63 8QZ, United Kingdom (Simula and such subsidiaries may be referred to herein
individually as a "Company" and collectively as the "Companies").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Companies' now existing and future: (A) accounts
(as defined in the U.C.C.) and any and all other receivables (whether or not
specifically listed on schedules furnished to CITBC), including, without
limitation, all accounts created by or arising from all of their sales of goods
or rendition of services to their customers, and all accounts arising from sales
or rendition of services made under any of their trade names or styles, or
through any of their divisions; (B) any and all instruments (as defined in the
U.C.C.), documents (as defined in the U.C.C.), contract rights (as defined in
the U.C.C.) and chattel paper (as defined in the U.C.C.); (C) unpaid seller's
rights (including rescission,
1
<PAGE> 4
replevin, reclamation and stoppage in transit) relating to the foregoing or
arising therefrom; (D) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (E) reserves and credit
balances arising hereunder; (F) guarantees or collateral for any of the
foregoing; (G) insurance policies or rights relating to any of the foregoing;
and (H) cash and non-cash proceeds of any and all the foregoing.
ACCOUNTS RECEIVABLE ADVANCE PERCENTAGE shall mean eighty-five percent (85%).
ADMINISTRATIVE MANAGEMENT FEE shall mean the sum of $35,000 which shall be paid
to CITBC in accordance with Section 8, Paragraph 11 hereof to offset the
expenses and costs (excluding Out-of-Pocket Expenses) of CITBC in connection
with record keeping, periodic examinations, analyzing and evaluating the
Collateral.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the date
hereof and the same date in every year thereafter.
AVAILABILITY shall mean, as to any Company, at any time the excess of the sum of
a) Eligible Accounts Receivable of such Company multiplied by the Accounts
Receivable Advance Percentage, and b) the lesser of (i) Eligible Inventory of
such Company multiplied by the Inventory Advance Percentage or (ii) the
Inventory Loan Cap, and c) the lesser of (i) Revenue in Excess of Billing of
such Company multiplied by the Revenue in Excess of Billing Advance Percentage
or (ii) the Revenue in Excess of Billing Loan Cap over the sum of x) the
outstanding aggregate amount of all Obligations of such Company, including,
without limitation, all Obligations with respect to Revolving Loans and Letters
of Credit but excluding the Term Loan and y) the Availability Reserve of such
Company.
AVAILABILITY RESERVE shall mean, as to any Company, the sum of two (2) months
rental payments on all of its leased premises (determined in accordance with
Schedule 1 hereto) for which it has not delivered to CITBC a landlord's waiver
(in form and substance satisfactory to CITBC in the exercise of its reasonable
business judgment), provided that such amount shall be increased to the sum of
three (3) months rental payments with respect to all such leased premises as to
CITBC has not received a landlord's waiver within 90 days of the Closing Date,
as such amounts may be adjusted from time to time hereafter upon (i) delivery to
CITBC of any such acceptable waiver, (ii) the opening or closing of a Collateral
location and/or (iii) any change in rental payment.
BILLINGS shall mean, as to any Company, the amounts billed by such Company under
a contract between such Company and a third party, which contract provides for
progress billings and payments or otherwise entitles such Company to payment
upon such billing.
2
<PAGE> 5
BUSINESS DAY shall mean any day that CITBC is open for business in New York, New
York, which is not (i) a Saturday, Sunday or legal holiday in the state of New
York or (ii) a day on which banking institution chartered by the state of New
York or the United States are legally required to close.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Companies' business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Companies.
CHASE BANK RATE shall mean the rate of interest per annum announced by The Chase
Manhattan Bank from time to time as its prime rate in effect at its principal
office in the City of New York. (The prime rate is not intended to be the lowest
rate of interest charged by The Chase Manhattan Bank to its borrowers).
CLOSING DATE shall mean December 30, 1999.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, Real Estate and Other Collateral of the
Companies.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for Parent,
the Companies and the consolidated subsidiaries of each eliminating all
inter-company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for Parent, the Companies, and the subsidiaries of
each showing all elimination of inter-company transactions and prepared in
accordance with GAAP and including a balance sheet for each Company exclusively.
CUSTOMARILY PERMITTED LIENS shall mean
(a) liens of local or state authorities for franchise or other like taxes
provided the aggregate amounts of such liens shall not exceed $100,000.00 in the
aggregate for the Companies at any one time;
3
<PAGE> 6
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which (i)
are listed in Schedule B of the title insurance policy delivered to CITBC
herewith or (ii) in the aggregate (x) do no materially interfere with the
occupation, use or enjoyment by the Companies in their business of the property
so encumbered and (y) in the reasonable business judgment of CITBC does not
materially and adversely affect the value of such Real Estate.
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: a) two percent (2%) plus b) the applicable contract rate of interest
based upon the applicable increment over the Chase Bank Rate as determined under
Section 8 hereof, which CITBC shall be entitled to charge the Companies on all
Obligations due CITBC by the Companies to the extent provided in Section 10,
Paragraph 2 of this Financing Agreement.
DEPOSITORY ACCOUNTS shall have the meaning specified in Section 3, Paragraph 4
hereof.
DIVESTITURE shall mean the consummation of the sale by Simula of the capital
stock or substantially all of the assets of AII.
4
<PAGE> 7
DOCUMENTATION FEE shall mean CITBC's standard fees relating to any and all
modifications, waivers, releases, amendments or additional collateral with
respect to this Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the U.C.C.) including, without limitation all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Companies terminate this
Financing Agreement or the Line of Credit which date is prior to an Anniversary
Date.
EARLY TERMINATION FEE shall: I) mean the fee CITBC is entitled to charge the
Companies in the event they terminate the Line of Credit or this Financing
Agreement on a date prior to an Anniversary Date; and II) be determined by
multiplying the Line of Credit by (x) one and one-half percent (1-1/2%) if the
Early Termination Date occurs on or prior to one (1) year after the Closing
Date, or (y) three-fourths percent (3/4%) if the Early Termination Date occurs
after one (1) year after the Closing Date but prior to two (2) years after the
Closing Date.
EBITDA shall mean, in any period, all earnings before all (i) interest and tax
obligations, (ii) depreciation, and (iii) amortization for said period, all
determined in accordance with GAAP on a basis consistent with the latest audited
financial statements of the Companies but excluding the effect of extraordinary
and/or non-reoccurring gains or losses for such period.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean, as to any Company, the gross amount of
such Company's Trade Accounts Receivable that are subject to a valid, first
priority and fully perfected security interest in favor of CITBC and which
conform to the warranties contained herein and at all times continue to be
acceptable to CITBC in the exercise of its reasonable business judgment, less,
without duplication, the sum of a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted or outstanding) and b)
reserves for: i) sales to the United States of America or to any agency,
department or division thereof (other than Trade Accounts Receivable as to which
such Company has complied with the federal Assignment of Claims Act for the
benefit of CITBC); ii) foreign sales other than sales x) secured by stand-by
letters of credit (in form and substance satisfactory to CITBC) issued or
confirmed by, and payable at, banks having a place of business in the United
States of America and payable in United States currency, or y) covered by credit
insurance in form and substance satisfactory to CITBC, or z) otherwise deemed
creditworthy and acceptable by CITBC; iii) Accounts that remain unpaid more than
ninety (90) days from invoice date (but with respect to Accounts as to which the
5
<PAGE> 8
payment terms are up to ninety (90) days from invoice date, Accounts that remain
unpaid for 30 days past due date but in no event unpaid one hundred twenty (120)
days or more past invoice date); iv) contras; v) sales to Parent, any
subsidiary, or to any company affiliated with the Companies or Parent in any
way; vi) bill and hold (deferred shipment) or consignment sales; vii) sales to
any customer which is a) insolvent, b) the debtor in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law, c) negotiating, or has called a meeting of its creditors
for purposes of negotiating, a compromise of its debts or d) financially
unacceptable to CITBC or has a credit rating unacceptable to CITBC; viii) all
sales to any customer if fifty percent (50%) or more of either x) all
outstanding invoices or y) the aggregate dollar amount of all outstanding
invoices, are unpaid more than ninety (90) days from invoice date; ix) a
concentration reserve, at CITBC's discretion, against sales to any customer
(other than AutoLiv and its affiliates as to which the concentration reserve
shall be up to 35% (and up to 45% after consummation of the Divestiture), as
determined in CITBC's discretion as against the aggregate of all Eligible
Accounts Receivable of the Companies) which are in excess of an amount up to
twenty percent (20%) (as determined in CITBC's discretion) of all Eligible
Accounts Receivable; x) any other reasons deemed necessary by CITBC in its
reasonable business judgment and which are customary either in the commercial
finance industry or in the lending practices of CITBC; xi) an amount
representing, historically, returns, discounts, claims, credits and allowances;
and xii) such other reserves as CITBC deems necessary in its commercially
reasonable judgment as a result of a) negative forecasts and/or trends in such
Company's business, industry, prospects, profits, operations or financial
condition, or b) other issues, circumstances or facts that could otherwise
negatively affect such Company, its business, prospects, profits, operations,
industry, financial condition or assets.
ELIGIBLE INVENTORY shall mean, as to any Company, the gross amount of such
Company's Inventory that is subject to a valid, first priority and fully
perfected security interest in favor of CITBC and which conform to the
warranties contained herein and which at all times continue to be acceptable to
CITBC in the exercise of its reasonable business judgment less any
work-in-process, supplies (other than raw material), goods not present in the
United States of America, goods returned or rejected by its customers other than
goods that are undamaged and resaleable in the normal course of business, goods
to be returned to its suppliers, goods in transit to third parties (other than
its agents or warehouses), Inventory in possession of a warehouseman, bailee or
other third party unless such warehouseman, bailee or third party has executed a
notice of security interest agreement (in form and substance satisfactory to
CITBC) and CITBC has taken all other action required to perfect its security
interest in such Inventory, and less any reserves required by CITBC in its
reasonable discretion for special order goods, market value declines and bill
and hold (deferred shipment) or consignment sales.
6
<PAGE> 9
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the U.C.C.) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds of
whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
EXECUTIVE OFFICERS shall mean the Chairman, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Executive Vice President(s),
Senior Vice President(s), Treasurer, Controller and Secretary of the Companies.
FISCAL QUARTER shall mean each three (3) month period ending on March 31, June
30, September 30 and December 31 of each year.
FISCAL YEAR shall mean each twelve (12) month period commencing on January 1
each year and ending on the following December 31.
FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the ratio
determined by dividing EBITDA by the sum of (i) all interest obligations paid in
cash, (ii) the amount of principal repaid or scheduled to be repaid on
Indebtedness, but excluding the Term Loan or the LLCP Term Loan A Debt repaid
due to the consummation of the Divestiture or the sale of the stock or assets of
a Company, (iii) Capital Expenditures and (iv) all federal, state and local
income tax expenses paid in cash.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
GENERAL INTANGIBLES shall have the meaning set forth in the U.C.C. and shall
include, without limitation, all present and future right, title and interest in
and to all tradenames, Trademarks (together with the goodwill associated
therewith), Patents, licenses, customer lists, distribution agreements, supply
agreements and tax refunds, together with all monies and claims for monies now
or hereafter due and payable in connection with any of the foregoing or
otherwise, and all cash and non-cash proceeds thereof.
GUARANTORS shall mean i) Parent, and ii) the Companies.
7
<PAGE> 10
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of money
(borrowed or otherwise) or for the deferred purchase price of property, services
or assets, other than Inventory, or (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INTERCREDITOR AGREEMENT shall mean that certain Intercreditor Agreement, dated
on or about the date hereof, between CITBC and LLCP.
INVENTORY shall mean all of the Companies' present and hereafter acquired
inventory (as defined in the U.C.C. including, without limitation all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY ADVANCE PERCENTAGE shall mean fifty percent (50%).
INVENTORY LOAN CAP shall mean $7,000,000; provided that upon the earlier of the
consummation of the Divestiture or the first anniversary of the Closing Date,
such amount shall be reduced to $5,000,000.
ISSUING BANK shall mean the bank issuing Letters of Credit for the Companies.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
CITBC by the Issuing Bank for or on behalf of the Companies.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by CITBC to the
Issuing Bank of the Companies' reimbursement obligation under the Issuing Bank's
reimbursement agreement, application for letter of credit or other like
document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee CITBC may charge the Companies
under Section 8, Paragraph 6 of this Financing Agreement for: i) issuing the
Letter of Credit Guaranty or ii) otherwise aiding the Companies in obtaining
Letters of Credit.
LETTER OF CREDIT SUB-LINE shall mean $3,000,000 in the aggregate for the
Companies.
LIBOR shall mean at any time of determination, and subject to availability, for
each interest period the higher of the applicable London Interbank Offered rate
paid in London on dollar deposits from other banks as (x) quoted by The Chase
Manhattan Bank, (y) published under "Money Rates" in the new York City edition
of the Wall Street Journal or if there is no such publication or statement
therein as to Libor then in any publication used in the
8
<PAGE> 11
New York City financial community or (z) determined by CITBC based upon
information presented on Telerate Systems at Page 3750 as of 11:00 a.m. (London
Time).
LIBOR LOAN shall mean those Revolving Loans for which the Companies have elected
to use Libor for interest rate computations.
LIBOR PERIOD shall mean the Libor for one month, two month, three month or six
month U.S. dollar deposits, as selected by the Companies.
LINE OF CREDIT shall mean the commitment of CITBC to make Revolving Loans
pursuant to Section 3 of this Financing Agreement and to assist the Companies in
opening Letters of Credit pursuant to Section 5 of this Financing Agreement, in
the aggregate amount equal to $17,000,000 for the Companies.
LLCP shall mean Levine Leichtman Capital Partners II, L.P.
LLCP DEBT shall mean the LLCP Term Loan A Debt and the LLCP Term Loan B Debt, or
such portion thereof as may be outstanding from time to time.
LLCP TERM LOAN A DEBT shall mean indebtedness in the original principal amount
of $5,000,000 advanced to the Companies by LLCP on or about the date hereof with
a stated maturity of September 30, 1999.
LLCP TERM LOAN B DEBT shall mean indebtedness in the original principal amount
of $15,000,000 advanced to the Companies by LLCP on or about the date hereof
with a stated maturity of June 30, 2003.
LOAN FACILITY FEE shall mean the fee payable to CITBC in accordance with, and
pursuant to, the provisions of Section 8, Paragraph 10 of this Financing
Agreement.
OBLIGATIONS shall mean all loans and advances made or to be made by CITBC to the
Companies or to others for the Companies' account (including, without
limitation, all Revolving Loans, Letters of Credit, and the Term Loan); any and
all indebtedness and obligations which may at any time be owing by the Companies
to CITBC howsoever arising, whether now in existence or incurred by the
Companies from time to time hereafter; whether secured by pledge, lien upon or
security interest in any of the Companies' assets or property or the assets or
property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Companies are liable to CITBC for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include indebtedness owing to CITBC by the Companies under this
Financing Agreement or under any other agreement or arrangement now or hereafter
entered into between the
9
<PAGE> 12
Companies and CITBC; indebtedness or obligations incurred by, or imposed on,
CITBC as a result of environmental claims (other than as a result of actions of
CITBC) arising out of the Companies' operation, premises or waste disposal
practices or sites; the Companies' liability to CITBC as maker or endorser on
any promissory note or other instrument for the payment of money; the Companies'
liability to CITBC under any instrument of guaranty or indemnity, or arising
under any guaranty, endorsement or undertaking which CITBC may make or issue to
others for the Companies' account, including any accommodation extended with
respect to applications for Letters of Credit, CITBC's acceptance of drafts or
CITBC's endorsement of notes or other instruments for the Companies' account and
benefit.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired deposits
accounts maintained with any bank or financial institutions; all cash and other
monies and property in the possession or control of CITBC; all now owned and
after acquired investment property; all books, records, ledger cards, disks and
related data processing software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon, and all
cash and non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's present and future expenses
incurred relative to this Financing Agreement, whether incurred heretofore or
hereafter, which expenses shall include, without being limited to, the cost of
record searches, all costs and expenses incurred by CITBC in opening bank
accounts, depositing checks, receiving and transferring funds, and any charges
imposed on CITBC due to "insufficient funds" of deposited checks and CITBC's
standard fee relating thereto, any amounts paid by CITBC, incurred by or charged
to CITBC by the Issuing Bank under the Letter of Credit Guaranty or the
Companies' Reimbursement Agreement, Application for Letter of Credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and CITBC's standard fees relating to the Letters of Credit and any
drafts thereunder, reasonable travel, lodging and similar expenses of CITBC's
personnel in inspecting and monitoring the Collateral from time to time
hereunder local counsel fees, title insurance premiums, real estate survey
costs, fees and taxes relative to the filing of financing statements, costs of
preparing and recording mortgages/deeds of trust against the Real Estate and all
expenses, costs and fees set forth in Section 10, Paragraph 3 of this Financing
Agreement.
OVERADVANCE RATE shall mean a rate equal to one-half of one percent (1/2%) per
annum in excess of the applicable contract rate of interest determined in
accordance with Section 8, Paragraph 1(a) of this Financing Agreement.
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PARENT shall mean Simula.
PATENTS shall mean all present and hereafter acquired patents and/or patent
rights of the Companies and all cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: i) liens existing on the date hereof on
specific items of Equipment and listed on Schedule 1 hereto and other liens
expressly permitted, or consented to, by CITBC (including the liens securing the
LLCP Debt as contemplated under the Intercreditor Agreement); ii) Purchase Money
Liens; iii) Customarily Permitted Liens; iv) liens granted CITBC by the
Companies; v) liens of judgment creditors provided such liens do not exceed, in
the aggregate for the Companies, at any time, $50,000.00 (other than liens
bonded or insured to the reasonable satisfaction of CITBC); and vi) liens for
taxes not yet due and payable or which are being diligently contested in good
faith by the Companies by appropriate proceedings and which liens are not x)
other than with respect to Real Estate, senior to the liens of CITBC or y) for
taxes due the United States of America.
PERMITTED INDEBTEDNESS shall mean: i) current indebtedness maturing in less than
one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; ii) the indebtedness secured by
the Purchase Money Liens; iii) Subordinated Debt (or refinancings or renewals
thereof if on substantially the same or more favorable terms and structure,
including but not limited to the maturity, debt service, interest rates and such
other terms as CITBC deems material in its reasonable commercial judgment); iv)
indebtedness arising under the Letters of Credit and this Financing Agreement;
v) deferred taxes and other expenses incurred in the ordinary course of
business; vi) LLCP Debt; and vii) other indebtedness existing on the date of
execution of this Financing Agreement and listed in the most recent financial
statement delivered to CITBC or otherwise disclosed to CITBC in writing.
PROMISSORY NOTE shall mean the note, in the form of Exhibit A attached hereto,
delivered by The Companies to CITBC to evidence the Term Loan pursuant to, and
repayable in accordance with, the provisions of Section 4 of this Financing
Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of equipment acquired after
the date of this Financing Agreement provided that i) each such lien shall
attach only to the property to be acquired, ii) a description of the property so
acquired is furnished to CITBC, and iii) the debt incurred in connection with
such acquisitions shall not exceed in the aggregate $4,000,000 in any Fiscal
Year plus, from and after January 1, 2001, the difference between the amount
permitted hereunder during the prior Fiscal Year and the amount actually
expended.
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REAL ESTATE shall mean the Companies' fee and/or leasehold interests in real
property, which has been, or will be, encumbered, mortgaged, pledged or assigned
to CITBC or its designee.
REVENUE IN EXCESS OF BILLINGS shall mean, as to any Company, with respect to
contracts between such Company and unaffiliated third parties acceptable to
CITBC in its discretion, the costs and estimated earnings which such Company
certifies to CITBC have been earned and will be payable to such Company upon the
billing therefor by such Company under the applicable contract, and which
amounts are not subject to any right of offset, deduction, or other claim except
as consented to in writing by CITBC.
REVENUE IN EXCESS OF BILLING ADVANCE PERCENTAGE shall mean fifteen percent
(15%). REVENUE IN EXCESS OF BILLING LOAN CAP shall mean $1,500,000.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Companies by CITBC pursuant to Section 3 of this
Financing Agreement.
REVOLVING LOAN ACCOUNT(S) shall have the meaning specified in Section 3,
Paragraph 6 hereof.
SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the note
evidencing such) which has been subordinated, by a Subordination Agreement, to
the prior payment and satisfaction of the Obligations of the Companies to CITBC
(in form and substance satisfactory to CITBC); the debt of approximately
$3,238,000 as of the date hereof issued pursuant to that certain Indenture,
dated April 1, 1997 among Simula, certain of its subsidiaries and Bank One,
Columbus, N.A. as Trustee (the "1997 Indenture"); and the debt of approximately
$34,500,000 as of the date hereof issued pursuant to the 1997 Indenture.
SUBORDINATING CREDITOR shall mean any party hereafter executing a Subordination
Agreement.
SUBORDINATION AGREEMENT shall mean an agreement among the Companies, a
Subordinating Creditor and CITBC pursuant to which Subordinated Debt is
subordinated to the prior payment and satisfaction of the Companies' Obligations
to CITBC (in form and substance satisfactory to CITBC).
TERM LOAN PROMISSORY NOTE shall mean the promissory note in the form of Exhibit
A hereto executed by the Companies to evidence the Term Loan made by CITBC under
Section 4 hereof.
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TERM LOAN shall mean the term loan in the principal amount of $5,000,000 made by
CITBC pursuant to, and repayable in accordance with, the provisions of Section 4
of this Financing Agreement.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of Accounts which arises from
the sale of Inventory or the rendition of services in the ordinary course of
business.
TRADEMARKS shall mean all present and hereafter acquired trademarks and/or
trademark rights (together with the goodwill associated therewith) and all cash
and non-cash proceeds thereof.
U.C.C. shall mean the Uniform Commercial Code as in effect from time to time in
the state of California.
UNUSED LINE FEE shall: i) mean the fee due CITBC at the end of each month for
the Line of Credit, and ii) be determined by multiplying the difference between
the Line of Credit, and the sum of (x) the average daily balance of Revolving
Loans of the Companies plus (y) the average daily balance of Letters of Credit
of the Companies of the Companies for said month by three-eighths of one percent
(3/8%) per annum for the number of days in said month.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
SECTION 2. CONDITIONS PRECEDENT AND SUBSEQUENT
The obligation of CITBC to make loans hereunder is subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with, or
subsequent to (where indicated), the making of such loans, the following
conditions precedent:
a) LIEN SEARCHES - CITBC shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CITBC for all locations presently
occupied or used by the Companies.
b) CASUALTY INSURANCE - The Companies shall have delivered to CITBC
evidence satisfactory to CITBC that casualty insurance policies listing CITBC as
loss payee or mortgagee, as the case may be, are in full force and effect, all
as set forth in Section 7, Paragraph 5 of this Financing Agreement.
c) MORTGAGES/DEEDS OF TRUST - The Companies shall have executed and
delivered to either CITBC or an agent of CITBC or of a title insurance Company
acceptable to CITBC such mortgages and deeds of trust as CITBC may reasonably
require to obtain first liens on the Real Estate; provided that this condition
may be satisfied within 30 days following the Closing Date, and any failure to
do so will constitute an Event of Default hereunder.
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d) UCC FILINGS - Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of CITBC, a first
and (other than Permitted Encumbrances) exclusive perfected security interest in
the Collateral with respect to which a security interest may be perfected by a
filing under the U.C.C. shall have been properly filed in each office in each
jurisdiction required in order to create in favor of CITBC a perfected lien on
the Collateral. CITBC shall have received acknowledgement copies of all such
filings (or, in lieu thereof, CITBC shall have received other evidence
satisfactory to CITBC that all such filings have been made); and CITBC shall
have received evidence that all necessary filing fees and all taxes or other
expenses related to such filings have been paid in full.
e) TITLE INSURANCE POLICIES - Together with the execution and delivery of
the deeds of trust and mortgages under c) above, CITBC shall have received, in
respect of each mortgage or deed of trust, a mortgagee's title policy or
marked-up unconditional binder for such insurance. Each such policy shall (i) be
in an amount satisfactory to CITBC; (ii) insure that the mortgage or deed of
trust insured thereby creates a valid first lien on the property covered by such
mortgage or deed of trust, free and clear of all defects and encumbrances except
those acceptable to CITBC; (iii) name CITBC as the insured thereunder; and (iv)
contain such endorsements and effective coverage as CITBC may reasonably
request, including without limitation the revolving line of credit endorsement.
CITBC shall also have received evidence that all premiums in respect of such
policies have been paid and that all charges for mortgage recording taxes, if
any, shall have been paid.
f) SURVEYS - If reasonably required by CITBC, together with the execution
and delivery of the deeds of trust and mortgages under c) above, CITBC and the
title insurance company issuing each policy referred to in the immediately
preceding paragraph (each, a "Title Insurance Company") shall have received maps
or plats of a perimeter or boundary of the site of each of the properties
covered by the mortgages or deeds of trust, dated a date satisfactory to CITBC
and the relevant Title Insurance Company prepared by an independent professional
licensed land surveyor satisfactory to CITBC and the relevant Title Insurance
Company, which maps or plats and the surveys on which they are based shall be
made in accordance with the Minimum Standard Detail Requirements for Land Title
Surveys jointly established and adopted by the American Land Title Association
and the American Congress on Surveying and Mapping; and, without limiting the
generality of the foregoing, there shall be surveyed and shown on the maps or
plats or surveys the following: (i) the locations on such sites of all the
buildings, structures and other improvements and the established building
setback lines insofar as the foregoing affect the perimeter or boundary of such
property; (ii) the lines of streets abutting the sites and width thereof; (iii)
all access and other easements appurtenant to the sites or necessary or
desirable to use the sites; (iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances affecting the
sites, whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (v) any encroachments on any adjoining property
by the building structures and improvements on the sites; and (vi) if the site
is designated as being on a filed map, a
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legend relating the survey to said map. Further, the survey shall x) be
certified to CITBC and the Title Insurance Company and y) contain a legend
reciting as to whether or not the site is located in a flood zone.
g) GUARANTIES - The Guarantors shall have executed and delivered to CITBC
guaranties, in form acceptable to CITBC, guaranteeing all present and future
obligations of the Companies to CITBC.
h) OPINIONS - Counsel for the Companies and the Guarantors shall have
delivered to CITBC opinions satisfactory to CITBC opining, inter alia, that,
subject to the i) filing, priority and remedies provisions of the Uniform
Commercial Code, ii) the provisions of the Bankruptcy Code, insolvency statutes
or other like laws, iii) the equity powers of a court of law and iv) such other
matters as may be agreed upon with CITBC: (A)(a) this Financing Agreement, (b)
the Guaranty of the Guarantors, and (c) all other loan documents of the
Companies and the Guarantors are x) valid, binding and enforceable according to
their terms, y) are duly authorized and z) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of the Companies or the
Guarantors or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement or indenture to
which the Companies or the Guarantors is a signatory or by which the Companies
or the Guarantors or their assets are bound; and (B) the provisions of all
federal and state securities laws and the Hart-Scott-Rodino Anti-Trust
Improvements Act have been fully complied with or that compliance is not legally
required and the reasons supporting such non-compliance.
i) PLEDGE AGREEMENT - Parent and such Companies as hold stock of other
Companies or of other subsidiaries shall a) execute and deliver to CITBC a
pledge and security agreement and stock powers pledging to CITBC as additional
collateral for the Obligations of the Companies all of the issued and
outstanding stock of the Companies and any and all subsidiaries of the Companies
and, b) deliver to CITBC the stock certificates evidencing such stock together
with duly executed stock powers with respect thereto.
j) ADDITIONAL DOCUMENTS - The Companies shall have executed and delivered
to CITBC all loan documents necessary to consummate the lending arrangement
contemplated between the Companies and CITBC.
k) LLCP DEBT AND INTERCREDITOR AGREEMENT - The Companies shall provide
CITBC with documentation evidencing the consummation of the transactions
relating to the LLCP Debt, upon terms and conditions and otherwise in form and
substance satisfactory to CITBC in its discretion (including provisions to the
effect that no principal payments shall be due thereon prior to the date three
years after the Closing Date other than principal payments with respect to the
LLCP Term Loan A Debt due upon the sale of the stock or assets of a subsidiary
of Simula after payment of Term Loan and any Revolving Loans advanced in
reliance upon any such assets or the assets of any such subsidiary), and
resulting in the advance to the Companies of $20,000,000, and LLCP shall have
executed and delivered to CITBC the Intercreditor Agreement in form and
substance satisfactory to CITBC in its discretion.
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l) DESJARDINS DEBT - The Indebtedness of $1,000,000 owing by Simula to
Stanley Desjardins shall be evidenced by instrument providing for payment on
terms acceptable to CITBC.
m) ENVIRONMENTAL REPORT - CITBC shall have received, environmental audit
reports on i) all of the Companies' leasehold and fee interests, and ii) the
Companies' waste disposal practices. The reports must x) be satisfactory to
CITBC and y) not disclose or indicate any liability (real or potential) stemming
from the Companies' premises, operations, waste disposal practices or waste
disposal sites used by Companies'.
n) BOARD RESOLUTION - CITBC shall have received a copy of the resolutions
of the Board of Directors of the Companies and the Guarantors (as the case may
be) authorizing the execution, delivery and performance of (i) this Financing
Agreement, (ii) the Guaranties and (iii) any related agreements, in each case
certified by the Secretary or Assistant Secretary of the Companies and the
Guarantors (as the case may be) as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Companies and the
Guarantors (as the case may be) as to the incumbency and signature of the
officers of the Companies and/or the Guarantors executing such agreements and
any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
o) CORPORATE ORGANIZATION - CITBC shall have received (i) a copy of the
Certificate of Incorporation of the Companies and the Guarantors certified by
the Secretary of State of its incorporation, and (ii) a copy of the By-Laws (as
amended through the date hereof) of the Companies and the Guarantors certified
by the Secretary or Assistant Secretary thereof.
p) OFFICER'S CERTIFICATE - CITBC shall have received an executed Officer's
Certificate of the Companies, satisfactory in form and substance to CITBC,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the date hereof; (ii) the
Companies are in compliance with all of the terms and provisions set forth
herein; and (iii) no Default or Event of Default has occurred.
q) ABSENCE OF DEFAULT - No Default, Event of Default or material adverse
change in the financial condition, business, prospects, profits, operations or
assets of the Companies shall have occurred.
r) INTENTIONALLY OMITTED.
s) DIVESTITURE - In connection with the Divestiture, the Company shall have
signed a definitive purchase agreement with Weber Aircraft, Inc. or an affiliate
thereof ("Weber") with respect to AII on terms and conditions satisfactory to
CITBC, (ii) Weber shall have paid a cash deposit of $2,000,000 with respect to
payment of the purchase price thereunder, (iii) Weber shall have made available
to AII $1,000,000 of such deposit to fund the working capital needs of AII, as a
loan on an unsecured basis, and (iii) Simula shall have provided to CITBC copies
of the Simula Hart-Scott-Rodino filing with respect to the Divestiture
sufficiently in advance of the Closing Date to allow CITBC to review such filing
prior to the Closing Date, which review shall be satisfactory to CITBC in its
sole discretion.
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t) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this Financing
Agreement, there shall be no x) litigation, investigation or proceeding
(judicial or administrative) pending or threatened against the Companies or the
Guarantors or their assets, by any agency, division or department of any county,
city, state or federal government arising out of the Divestiture or this
Financing Agreement, y) injunction, writ or restraining order restraining or
prohibiting the Divestiture or the consummation of the financing arrangements
contemplated under this Financing Agreement or z) to the best knowledge of the
Companies, suit, action, investigation or proceeding (judicial or
administrative) pending or threatened against the Companies or the Guarantors or
their assets, which, in the opinion of CITBC, if adversely determined could have
a material adverse effect on the business, operation, assets, financial
condition or Collateral of the Companies and/or the Guarantors
u) DISBURSEMENT AUTHORIZATION - The Companies shall have delivered to CITBC
all information necessary for CITBC to issue wire transfer instructions on
behalf of the Companies for the initial and subsequent loans and/or advances to
be made under this Agreement including, but not limited to, disbursement
authorizations in form acceptable to CITBC.
v) EXAMINATION & VERIFICATION - CITBC shall have completed to the
satisfaction of CITBC an examination and verification of the Accounts,
Inventory, books and records of the Companies and the Guarantors which
examination shall indicate that, after giving effect to all loans, advances and
extensions of credit to be made at closing, the Companies shall have an opening
additional aggregate Availability of $2,000,000 (not including the $1,000,000 of
funding to be made available to AII by Weber) of which no more than $500,000 is
attributable to AII. It is understood that such requirement contemplates that
all debts, obligations and payables are current in accordance with the Companies
usual business practices.
w) FINANCIAL PROJECTIONS - CITBC shall have received, reviewed and be
satisfied with a two years consolidated and consolidating financial projections,
including monthly detail and projected borrowing availability for the first
year, together with a balance sheet, profit and loss statement, and statement of
cash flows, accompanied by a management discussion and analysis as well as
detail of material assumptions, all in form an substance satisfactory to CITBC.
x) COLLECTION ACCOUNTS - The Companies shall have established a system of
bank accounts with respect to the collection of Accounts and the deposit of
proceeds of Inventory as shall be acceptable to CITBC in all respects, which
system shall include a concentration account as of the Closing Date and lock-box
collection arrangements as soon as practicable thereafter.
z) EXISTING REVOLVING CREDIT AGREEMENT - The Companies' existing credit
agreement with Bank One and Imperial Bank shall be (x) terminated, (y) all loans
and obligations of the Companies and/or the Guarantors thereunder shall be paid
or satisfied in full utilizing the proceeds of the initial Revolving Loans and
Term Loans to be made under this Financing Agreement and (z) all liens upon or
security interest in favor of Bank
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One and Imperial Bank in connection therewith shall be terminated and/or
released upon such payment.
aa) ASSIGNMENT OF CLAIMS ACT COMPLIANCE - The Companies shall comply with
the federal Assignment of Claims Act within 60 days following the Closing Date
as to such Accounts due from the U.S. government as CITBC shall have determined
appropriate in its discretion.
bb) FOREIGN PATENT FILINGS - The Companies shall have provided CITBC within
60 days of the Closing with such patent security interest and lien filings as
CITBC may require for recordation in foreign countries with respect to patents
registered therein.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and CITBC shall otherwise agree herein or in a
separate writing.
SECTION 3. REVOLVING LOANS
1. CITBC agrees, subject to the terms and conditions of this Financing
Agreement from time to time, and within x) the Availability and y) the Line of
Credit, but subject to CITBC's right to make "overadvances", to make loans and
advances to each of the Companies on a revolving basis (i.e. subject to the
limitations set forth herein, the Companies may borrow, repay and re-borrow
Revolving Loans). Such loans and advances to each Company shall be in amounts up
to the sum of: a) outstanding Eligible Accounts Receivable of such Company
multiplied by the Accounts Receivable Advance Percentage, plus b) the lesser of
(x) the Revenue in Excess of Billing Loan Cap and (y) outstanding Revenue in
Excess of Billing of such Company multiplied by the Revenue in Excess of Billing
Advance Percentage, plus c) the lesser of (x) the Inventory Loan Cap and (y) the
aggregate value of Eligible Inventory of such Company as determined at the lower
of cost or market multiplied by the Inventory Advance Percentage. Each request
shall constitute, unless otherwise disclosed in writing to CITBC, a
representation and warranty by the Companies that (i) after giving effect to the
requested advance, no Default or Event of Default has occurred and (ii) such
requested Revolving Loan is within the Line of Credit and Availability. All
requests for loans and advances must be received by an officer of CITBC no later
than 1:00 p.m., New York time, of the day on which such loans and advances are
required. Should CITBC for any reason honor requests for advances in excess of
the limitations set forth herein, such advances shall be considered
"overadvances" and shall be made in CITBC's sole discretion, subject to any
additional terms CITBC deems necessary.
2. In furtherance of the continuing assignment and security interest in the
Companies' Accounts, the Companies will, upon the creation of Accounts, execute
and deliver to CITBC in such form and manner as CITBC may reasonably require,
solely for CITBC's convenience in maintaining records of collateral, such
confirmatory schedules of
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Accounts as CITBC may reasonably request, and such other appropriate reports
designating, identifying and describing the Accounts as CITBC may reasonably
require. In addition, upon CITBC's request the Companies shall provide CITBC
with copies of agreements with, or purchase orders from, the Companies'
customers, and copies of invoices to customers, proof of shipment or delivery
and such other documentation and information relating to said Accounts and other
collateral as CITBC may reasonably require. Failure to provide CITBC with any of
the foregoing shall in no way affect, diminish, modify or otherwise limit the
security interests granted herein. The Companies hereby authorize CITBC to
regard the Companies' printed name or rubber stamp signature on assignment
schedules or invoices as the equivalent of a manual signature by one of the
Companies' authorized officers or agents.
3. Each of the Companies hereby represents and warrants that: each of its
Trade Accounts Receivable is based on an actual and bona fide sale and delivery
of goods or rendition of services to customers, made by them in the ordinary
course of their business; the goods and Inventory being sold and the Trade
Accounts Receivable created are their exclusive property and are not and shall
not be subject to any lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in
their name; and their customers have accepted the goods or services, owe and are
obligated to pay the full amounts stated in the invoices according to their
terms, without dispute, offset, defense, counterclaim or contra, except for
disputes and other matters arising in the ordinary course of business with
respect to which they have complied with the notification requirements of
Paragraph 5 of this Section 3. Each of the Companies confirms to CITBC that any
and all taxes or fees relating to its business, its sales, the Accounts or goods
relating thereto, are its sole responsibility and that same will be paid by them
when due and that none of said taxes or fees represent a lien on or claim
against the Accounts. Each of the Companies also warrants and represents that it
is a duly and validly existing corporation and is qualified in all states where
the failure to so qualify would have a adverse effect on their business or their
ability to enforce collection of Accounts due from customers residing in that
state. Each of the Companies agrees to maintain such books and records regarding
Accounts as CITBC may reasonably require and agrees that such books and records
will reflect CITBC's interest in the Accounts. All of the books and records of
the Companies will be available to CITBC at normal business hours, including any
records handled or maintained for the Companies by any other company or entity.
4. Until CITBC has advised the Companies to the contrary after the
occurrence of an Event of Default, the Companies may and will enforce, collect
and receive all amounts owing on the Accounts for CITBC's benefit and on CITBC's
behalf, but at the Companies' expense; such privilege shall terminate
automatically upon the institution by or against the Companies of any proceeding
under any bankruptcy or insolvency law or, at the election of CITBC, upon the
occurrence of any other Event of Default and until such Event of
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Default is waived in writing by CITBC or cured to CITBC's satisfaction. Any
checks, cash, notes or other instruments or property received by the Companies
with respect to any Accounts shall be held by them in trust for CITBC, separate
from their own property and funds, and immediately turned over to CITBC with
proper assignments or endorsements by deposit to the special depository accounts
in CITBC's name designated by CITBC for such purposes (the "Depository
Accounts"). All amounts received by CITBC in payment of Accounts ("Collection")
will be credited to the Companies' appropriate Revolving Loan Account upon
CITBC's receipt of "good funds" at CITBC's bank account in New York, New York on
the Business Day of receipt if received no later than 1:00 p.m. or on the next
succeeding Business Day if received after 1:00 p.m. However the Companies'
Revolving Loan Accounts will be charged monthly with the cost of one (1)
additional Business Days on all such Collections at the interest rate (based
upon the Chase Bank Rate) applicable to Revolving Loans. No checks, drafts or
other instrument received by CITBC shall constitute final payment to CITBC
unless and until such instruments have actually been collected.
5. Each of the Companies agrees to notify CITBC promptly of any matters
materially affecting the value, enforceability or collectability of any Account
and of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods. Each
of the Companies agrees to issue credit memoranda promptly (with duplicates to
CITBC upon request after the occurrence of an Event of Default) upon accepting
returns or granting allowances, and may continue to do so until CITBC has
notified the Companies that an Event of Default has occurred and that all future
credits or allowances are to be made only after CITBC's prior written approval.
Upon the occurrence of an Event of Default and until such time as such Event of
Default is waived in writing by CITBC or cured to CITBC's satisfaction and on
notice from CITBC, the Companies agree that all returned, reclaimed or
repossessed merchandise or goods shall be set aside by the Companies, marked
with CITBC's name and held by the Companies for CITBC's account as owner and
assignee.
6. (a) Subject to the provisions of paragraph (b) below, CITBC shall
maintain a separate account on its books in each of the Companies' names (herein
each a "Revolving Loan Account" and collectively the "Revolving Loan Accounts")
in which the Companies will be charged with loans and advances made by CITBC to
them or for their account, and with any other Obligations, including any and all
costs, expenses and reasonable attorney's fees which CITBC may incur in
connection with the exercise by or for CITBC of any of the rights or powers
herein conferred upon CITBC, or in the prosecution or defense of any action or
proceeding to enforce or protect any rights of CITBC in connection with this
Financing Agreement or the Collateral assigned hereunder, or any Obligations
owing to CITBC by the Companies. Each of the Companies will be credited with all
amounts received by CITBC from them or from others for their account, including,
as above set forth, all amounts received by CITBC in payment of assigned
Accounts and such amounts will be applied to payment of the Obligations. In no
event shall prior recourse to any Accounts or other
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security granted to or by the Companies be a prerequisite to CITBC's right to
demand payment of any Obligation. Further, it is understood that CITBC shall
have no obligation whatsoever to perform in any respect any of the Companies'
contracts or obligations relating to the Accounts.
(b) In order to utilize the collective borrowing powers of Simula and its
subsidiaries other than AII (collectively the "Collective Borrowers") in the
most efficient and economical manner, and in order to facilitate the handling of
the accounts of the Collective Borrowers on CITBC's books, the Collective
Borrowers have requested, and CITBC has agreed to handle accounts of the
Collective Borrowers on CITBC's books on a combined basis, all in accordance
with the following provisions: (i) In lieu of maintaining separate accounts on
CITBC's books in the name of each of the Collective Borrowers, CITBC shall
maintain one account under the name: Simula, Inc. Intercompany Account (herein
the "Collective Account"). Confirmatory assignments of Accounts will continue to
be made to CITBC by each of the Collective Borrowers. Loans and advances made by
CITBC to any of the Collective Borrowers will be charged to the Collective
Account indicated above, along with any charges and expenses under this
Financing Agreement. The Collective Account will be credited, with all amounts
received by CITBC from any of the Collective Borrowers or from others for their
account including all amounts received by CITBC in payment of Accounts assigned
to CITBC value date thereof as provided in this Financing Agreement; (ii) Each
month CITBC will render to the Collective Borrowers one extract of the combined
Collective Account, which shall be deemed to be an account stated as to each of
the Collective Borrowers and which will be deemed correct and accepted by all of
the Collective Borrowers unless CITBC receives a written statement of exceptions
from them within thirty (30) days after such extract has been rendered by CITBC.
It is expressly understood and agreed by each of the Collective Borrowers that
CITBC shall have no obligation to account separately to any of the Collective
Borrowers; (iii) Requests for loans and advances may be made by Simula as agent
for the Collective Borrowers and CITBC is hereby authorized and directed to
accept, honor and rely on such instructions and requests, subject to the
limitation and provisions set forth in this Financing Agreement. It is expressly
understood and agreed by each of the Collective Borrowers that CITBC shall have
no responsibility to inquire into the correctness of the apportionment,
allocation, or disposition of (x) any loans and advances made to any of the
Collective Borrowers or (y) any of CITBC's expenses and charges relating
thereto. All loans and advances are made for the Collective Account; (iv) The
Collective Borrowers jointly and severally unconditionally guarantee to CITBC
the prompt payment in full of (A) all loans and advances made and to be made by
CITBC to any of them under this Financing Agreement, as well as (B) all other
Obligations of the Collective Borrowers to CITBC and hereby expressly confirm in
all respects the Guaranties executed by each of the Collective Borrowers in
CITBC's favor as more fully set forth therein; (v) All Accounts assigned to
CITBC by any of the Collective Borrowers and any other collateral security now
or hereafter given to CITBC by any of the Collective Borrowers (be it Accounts
or otherwise), shall secure all loans and advances made by CITBC to any
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of the Collective Borrowers, and shall be deemed to be pledged to CITBC as
security for any and all other Obligations of the Collective Borrowers to CITBC
as set forth under this Financing Agreement, the Guaranties, or any other
agreements between CITBC and any of the Collective Borrowers; (vi) It is
understood that the handling of the accounts of the Collective Borrowers in a
combined fashion, as more fully set forth herein, is done solely as an
accommodation to the Collective Borrowers and at their request and at CITBC's
discretion, and that CITBC shall incur no liability to the Collective Borrowers
as a result hereof. To induce CITBC to do so, and in consideration thereof, each
of the Collective Borrowers hereby agrees to indemnify CITBC and hold CITBC
harmless against any and all liability, expense, loss or claim of damage or
injury, made against CITBC by any of the Collective Borrowers or by any third
party whosoever, arising from or incurred solely by reason of (1) the method of
handling the accounts of the Collective Borrowers as herein provided, (2) CITBC
relying on any instructions of any of the Collective Borrowers, or (3) any other
action taken by CITBC in accordance with this subparagraph (b) of Paragraph 6 of
Section 3 of this Financing Agreement; and (vii) The foregoing request was made
because the Collective Borrowers are engaged in an integrated operation that
requires financing on a basis permitting the availability of credit from time to
time to each of the Collective Borrowers as required for the continued
successful operation of each of the Collective Borrowers and the integrated
operation. Each of the Collective Borrowers expects to derive benefit, directly
or indirectly, from such availability since the successful operation of each of
the Collective Borrowers is dependent on the continued successful performance of
the functions of the integrated group. In addition, the Companies have informed
CITBC that: (a) Simula, to increase the efficiency and productivity of each of
the other Collective Borrowers, has centralized in itself a cash management
system which entails, in part, central disbursement and operating accounts in
which it provides the working capital needs of each of the other Collective
Borrowers and manages and timely pays the accounts payable of each other
Collective Borrowers; (b) the Collective Borrowers, taken together on a
consolidated basis, are further enhancing their collective operating
efficiencies by obtaining credit on the basis of their consolidated financial
condition; and (c) since all of the Collective Borrowers are now engaged in an
integrated operation that requires financing on an integrated basis and since
each Collective Borrower expects to benefit from the continued successful
performance of such integrated operations and in order to best utilize the
collective borrowing powers of each Collective Borrower in the most effective
and cost efficient manner and to avoid adverse effects on the operating
efficiencies of each Collective Borrower and the existing back-office practices
of the Collective Borrowers, each Collective Borrower has requested that all
Revolving Loans and advances be disbursed solely upon the request of Simula and
to bank accounts managed solely by it and that it will manage for the benefit of
each Collective Borrower the expenditure and usage of such funds.
7. After the end of each month, CITBC shall promptly send the Companies
statements showing the accounting for the charges, loans, advances and other
transactions
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occurring between CITBC and the Companies during that month. The monthly
statements shall be deemed correct and binding upon the Companies and shall
constitute an account stated between the Companies and CITBC unless CITBC
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.
8. In the event that the sum of (i) the outstanding balance of Revolving
Loans and (ii) outstanding balance of Letters of Credit exceeds (x) as to any
Company the maximum amount thereof available to such Company under Section 3 and
5 hereof or (y) for all of the Companies the Line of Credit (herein the amount
of any such excess shall be referred to as the "Excess") such Excess shall be
due and payable to CITBC immediately upon CITBC's demand therefor.
SECTION 4. TERM LOAN
TERM LOAN
1. The Companies hereby agree to execute and deliver to CITBC the Term Loan
Promissory Note, in the form of Exhibit A attached hereto, to evidence the Term
Loan to be extended by CITBC.
2. Upon receipt of such Term Loan Promissory Note, CITBC hereby agrees to
extend to The Companies the Term Loan in the principal amount of $5,000,000.
3. The principal amount of the Term Loan shall be repaid to CITBC by the
Companies, if not previously repaid pursuant to Paragraphs 5 or 6 below, by
equal monthly principal installments of $555,556 each, the first installment due
on the date which is 90 days after the Closing Date, and monthly on the same day
of the month thereafter, followed by a payment due on the final maturity date of
the remaining principal balance together with accrued and unpaid interest, due
and payable on August 31, 2000.
4. In the event this Financing Agreement or the Line of Credit is
terminated by either CITBC or the Companies for any reason whatsoever, the Term
Loan shall become due and payable on the effective date of such termination
notwithstanding any provision to the contrary in the Promissory Note or this
Financing Agreement.
5. The Companies may prepay at any time, at its option, in whole or in
part, without penalty or premium, the Term Loan, provided that on each such
prepayment, the Companies shall pay the accrued interest on the principal so
prepaid to the date of such prepayment.
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6. The Companies shall prepay the Term Loan in full upon the earlier of the
consummation of the Divestiture or the sale of all or substantially all of the
assets of a Company, in either case from the proceeds thereof.
7. Each prepayment shall be applied to the then last maturing installments
of principal of the Term Loan.
8. Each of the Companies hereby authorizes CITBC to charge its Revolving
Loan Account with the amount of all amounts due under this Section 4 as such
amounts become due. Each of the Companies confirms that any charges which CITBC
may so make to its account as herein provided will be made as an accommodation
to the Companies and solely at CITBC's discretion.
SECTION 5. LETTERS OF CREDIT
In order to assist the Companies in establishing or opening Letters of
Credit with an Issuing Bank to cover the purchase of inventory, equipment or
otherwise, the Companies have requested CITBC to join in the applications for
such Letters of Credit, and/or guarantee payment or performance of such Letters
of Credit and any drafts or acceptances thereunder through the issuance of the
Letters of Credit Guaranty, thereby lending CITBC's credit to the Companies and
CITBC has agreed to do so. These arrangements shall be handled by CITBC subject
to the terms and conditions set forth below.
1. Within the Line of Credit and Availability, CITBC shall assist the
Companies in obtaining Letter(s) of Credit in an amount not to exceed the Letter
of Credit Sub-Line in the aggregate outstanding at any one time. CITBC's
assistance for amounts in excess of the limitation set forth herein shall at all
times and in all respects be in CITBC's sole discretion. It is understood that
the form and purpose of each Letter of Credit must be acceptable to CITBC in its
reasonable business judgment. Any and all outstanding Letters of Credit shall be
treated as a Revolving Loan for Availability purpose. Notwithstanding anything
herein to the contrary, upon the occurrence of a Default and/or Event of
Default, CITBC's assistance in connection with the Letter of Credit Guaranty
shall be in CITBC's sole discretion unless such Default and/or Event of Default
is cured to CITBC's satisfaction or waived by CITBC in writing.
2. CITBC shall have the right, without notice to the Companies, to charge
the Companies' Revolving Loan Accounts on CITBC's books with the amount of any
and all indebtedness, liability or obligation of any kind incurred by CITBC
under the Letters of Credit Guaranty at the earlier of a) payment by CITBC under
the Letters of Credit Guaranty, or b) the occurrence of an Event of Default. Any
amount charged to Companies' Revolving Loan Accounts shall be deemed a Revolving
Loan hereunder and shall incur interest at the rate provided in Section 8,
Paragraph 1 of this Financing Agreement.
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3. Each of the Companies jointly and severally unconditionally indemnifies
CITBC and holds CITBC harmless from any and all loss, claim or liability
incurred by CITBC arising from any transactions or occurrences relating to
Letters of Credit established or opened for the Companies' account, the
collateral relating thereto and any drafts or acceptances thereunder, and all
Obligations thereunder, including any such loss or claim due to any action taken
by any Issuing Bank, other than for any such loss, claim or liability arising
out of the gross negligence or willful misconduct by CITBC under the Letters of
Credit Guaranty. Each of the Companies further agrees to jointly and severally
hold CITBC harmless from any errors or omission, negligence or misconduct by the
Issuing Bank.. The Companies' unconditional obligation to CITBC hereunder shall
not be modified or diminished for any reason or in any manner whatsoever, other
than as a result of CITBC's gross negligence or willful misconduct. Each of the
Companies agrees that any charges incurred by CITBC for their account by the
Issuing Bank shall be conclusive on CITBC and may be charged to their account.
4. CITBC shall not be responsible for: the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that
expressed in the documents; the validity, sufficiency or genuineness of any
documents or of any endorsements thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged;
the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions; delay, default, or fraud by the shipper and/or anyone else in
connection with the Collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and the Companies. Furthermore, without
being limited by the foregoing, CITBC shall not be responsible for any act or
omission with respect to or in connection with any Collateral.
5. Each of the Companies agrees that any action taken by CITBC, if taken in
good faith, or any action taken by any Issuing Bank, under or in connection with
the Letters of Credit, the guarantees, the drafts or acceptances, or the
Collateral, shall be binding on the them and shall not put CITBC in any
resulting liability to the Companies. In furtherance thereof, CITBC shall have
the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or airways
guaranties (and applications therefore), indemnities or delivery orders; to
grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; all in CITBC's sole name, and the Issuing Bank
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shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from CITBC, all without any notice to
or any consent from the Companies.
6. Without CITBC's express consent and endorsement in writing, each of the
Companies agrees: a) not to execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived by CITBC, not to i) clear and resolve any questions of
non-compliance of documents, or ii) give any instructions as to acceptances or
rejection of any documents or goods.
7. Each of the Companies agrees that any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and full complied with; and any
certificates in that regard that CITBC may at any time request will be promptly
furnished. In this connection, each of the Companies warrants and represents
that all shipments made under any such Letters of Credit are in accordance with
the laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. The
Companies assume all risk, liability and responsibility for, and agrees to pay
and discharge, all present and future local, state, federal or foreign taxes,
duties, or levies. Any embargo, restriction, laws, customs or regulations of any
country, state, city, or other political subdivision, where the Collateral is or
may be located, or wherein payments are to be made, or wherein drafts may be
drawn, negotiated, accepted, or paid, shall be solely the Companies' risk,
liability and responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, CITBC shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by the Companies to the Issuing Bank in any
application for Letters of Credit, any standing agreement relating to Letters of
Credit or otherwise, all of which shall be deemed to have been granted to CITBC
and apply in all respects to CITBC and shall be in addition to any rights,
remedies, duties or obligations contained herein.
SECTION 6. COLLATERAL
1. As security for the prompt payment in full of all loans and advances
made and to be made to the Companies from time to time by CITBC pursuant hereto,
as well as to
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secure the payment in full of the other Obligations, each of the Companies
hereby pledges and grants to CITBC a continuing general lien upon and security
interest in all of its:
(a) present and hereafter acquired Inventory;
(b) present and hereafter acquired Equipment;
(c) present and future Accounts;
(d) present and future Documents of Title;
(e) present and future General Intangibles;
(f) Real Estate; and
(g) present and future Other Collateral.
2. The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is presently in existence and which is owned by
the Companies or in which the Companies have any interest, whether held by them
or others for their account, and, if any Collateral is Equipment, whether the
Companies' interest in such Equipment is as owner or lessee or conditional
vendee;
(b) All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
(c) All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either CITBC or the Companies from the Companies'
customers, as well as to all supplies, goods, incidentals, packaging materials,
labels and any other items which contribute to the finished goods or products
manufactured or processed by the Companies, or to the sale, promotion or
shipment thereof.
3. The Companies agree to safeguard, protect and hold all Inventory for
CITBC's account and make no disposition thereof except in the regular course of
the business of the Companies as herein provided. Until CITBC has given the
Companies notice to the contrary, as provided for below, any Inventory may be
sold and shipped by the Companies to their customers in the ordinary course of
their business, on open account and on terms currently being extended by them to
their customers, provided that all proceeds of all sales
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(including cash, accounts receivable, checks, notes, instruments for the payment
of money and similar proceeds) are forthwith transferred, endorsed, and turned
over and delivered to CITBC in accordance with Section 3, Paragraph 4 of this
Financing Agreement. CITBC shall have the right to withdraw this permission at
any time upon the occurrence of an Event of Default and until such time as such
Event of Default is waived in writing by CITBC or cured to CITBC's satisfaction,
in which event no further disposition shall be made of the Inventory by the
Companies without CITBC's prior written approval. Cash sales or sales of
inventory in which a lien upon, or security interest in, Inventory is retained
by the Companies shall be made by the Companies only with the approval of CITBC,
and the proceeds of such sales or sales of Inventory for cash shall not be
commingled with the Companies' other property, but shall be segregated, held by
the Companies in trust for CITBC as CITBC's exclusive property, and shall be
delivered immediately by the Companies to CITBC in the identical form received
by the Companies by deposit to the Depository Accounts. Upon the sale, exchange,
or other disposition of Inventory, as herein provided, the security interest in
the Companies' Inventory provided for herein shall, without break in continuity
and without further formality or act, continue in, and attach to, all proceeds,
including any instruments for the payment of money, accounts receivable,
contract rights, documents of title, shipping documents, chattel paper and all
other cash and non-cash proceeds of such sale, exchange or disposition. As to
any such sale, exchange or other disposition, CITBC shall have all of the rights
of an unpaid seller, including stoppage in transit, replevin, rescission and
reclamation.
4. Each of the Companies agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. Each of the Companies also agrees to safeguard,
protect and hold all Equipment for CITBC's account and make no disposition
thereof unless they first obtain the prior written approval of CITBC. Any sale,
exchange or other disposition of any Equipment shall only be made by the
Companies with the prior written approval of CITBC, and the proceeds of any such
sales shall not be commingled with the Companies' other property, but shall be
segregated, held by the Companies in trust for CITBC as CITBC's exclusive
property, and shall be delivered immediately by the Companies to CITBC in the
identical form received by the Companies by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, accounts
receivable, contract rights, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, CITBC shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything hereinabove
contained to the contrary, the Companies may sell, exchange or
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otherwise dispose of obsolete Equipment or Equipment no longer needed in the
Companies' operations, provided, however, that (a) the greater of the then book
value or fair market value of the Equipment so disposed of does not exceed
$250,000 in the aggregate for the Companies in any Fiscal Year and (b) the
proceeds of such sales or dispositions are delivered to CITBC in accordance with
the foregoing provisions of this paragraph, except that the Companies may retain
and use such proceeds to purchase forthwith replacement Equipment which the
Companies determine in their reasonable business judgment to have a collateral
value at least equal to the Equipment so disposed of or sold, provided, however,
that the aforesaid right shall automatically cease upon the occurrence of an
Event of Default which is not cured within any applicable grace period or
waived.
5. The rights and security interests granted to CITBC hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that any account maintained in the Companies'
name on the books of CITBC may from time to time be temporarily in a credit
position, until the final payment in full to CITBC of all Obligations and the
termination of this Financing Agreement. Any delay, or omission by CITBC to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver be in writing and signed by
CITBC. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion.
6. To the extent that the Obligations are now or hereafter secured by any
assets or property other than the Collateral or by the guarantee, endorsement,
assets or property of any other person, then CITBC shall have the right in its
sole discretion to determine which rights, security, liens, security interests
or remedies CITBC shall at any time pursue, foreclose upon, relinquish,
subordinate, modify or take any other action with respect to, without in any way
modifying or affecting any of them, or any of CITBC's rights hereunder.
7. Any reserves or balances to the credit of the Companies and any other
property or assets of the Companies in the possession of CITBC may be held by
CITBC as security for any Obligations and applied in whole or partial
satisfaction of such Obligations when due. The liens and security interests
granted herein and any other lien or security interest CITBC may have in any
other assets of the Companies, shall secure payment and performance of all now
existing and future Obligations. CITBC may in its discretion charge any or all
of the Obligations to the Revolving Loan Accounts of the Companies when due.
8. This Financing Agreement and the obligation of the Companies to perform
all of its covenants and obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate.
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9. The Companies shall give to CITBC from time to time such mortgage(s),
deed(s) of trust or assignment(s) on the Real Estate or real estate acquired
after the date hereof as CITBC shall require to obtain a valid first lien
thereon subject only to those exceptions of title as set forth in future title
insurance policies that are satisfactory to CITBC.
10. The Companies shall give to CITBC, and/or shall cause the appropriate
party to give to CITBC, from time to time such pledge or security agreements
with respect to General Intangibles and capital stock of the Companies and any
and all of their subsidiaries as CITBC shall require to obtain valid first liens
thereon.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. Each of the Companies hereby warrants and represents and/or covenants
that: i) the fair value of its assets exceeds the book value of its liabilities;
ii) it is generally able to pay its debts as they become due and payable; and
iii) it does not have unreasonably small capital to carry on its business as it
is currently conducted absent extraordinary and unforeseen circumstances. Each
of the Companies further warrants and represents that Schedule 2 hereto
correctly and completely sets forth its chief executive office and all of its
Collateral locations; and except for the Permitted Encumbrances, the security
interests granted herein constitute and shall at all times constitute the first
and only liens on the Collateral; that, except for the Permitted Encumbrances,
the Companies are or will be at the time additional Collateral is acquired by
them, the absolute owner of the Collateral with full right to pledge, sell,
consign, transfer and create a security interest therein, free and clear of any
and all claims or liens in favor of others; that the Companies will at their
expense forever warrant and, at CITBC's request, defend the same from any and
all claims and demands of any other person other than the Permitted
Encumbrances; that the Companies will not grant, create or permit to exist, any
lien upon or security interest in the Collateral, or any proceeds thereof, in
favor of any other person other than the holders of the Permitted Encumbrances;
and that the Equipment does not comprise a part of its Inventory and that the
Equipment is and will only be used by the Companies in their business and will
not be held for sale or lease, or removed from its premises, or otherwise
disposed of by the Companies without the prior written approval of CITBC except
as otherwise permitted in Section 6, Paragraph 4 of this Financing Agreement.
2. The Companies agree to maintain books and records pertaining to the
Collateral in such detail, form and scope as CITBC shall reasonably require. The
Companies agree that, upon reasonable advance notice (unless CITBC shall deem
such notice unadvisable in its reasonable commercial judgment), CITBC or its
agents may enter upon the Companies' premises at any time during normal business
hours, and from time to time, for the purpose of inspecting the Collateral, and
any and all records pertaining thereto. The Companies agree to afford CITBC
prior written notice of any change in the location of any Collateral, other than
to locations, that as of the date hereof, are known to CITBC and at which CITBC
has filed financing statements and otherwise fully perfected its liens thereon.
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Each of the Companies is also to advise CITBC promptly, in sufficient detail, of
any material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to CITBC therein.
3. Each of the Companies agrees to: execute and deliver to CITBC, from time
to time, solely for CITBC's convenience in maintaining a record of the
Collateral, such written statements, and schedules as CITBC may reasonably
require, designating, identifying or describing the Collateral pledged to CITBC
hereunder. The Companies' failure, however, to promptly give CITBC such
statements, or schedules shall not affect, diminish, modify or otherwise limit
CITBC's security interests in the Collateral.
4. The Companies agree to comply with the requirements of all state and
federal laws in order to grant to CITBC valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CITBC
is hereby authorized by the Companies to file any financing statements covering
the Collateral whether or not the Companies' signature appears thereon. The
Companies agree to do whatever CITBC may reasonably request, from time to time,
by way of: filing notices of liens, financing statements, amendments, renewals
and continuations thereof; cooperating with CITBC's custodians; keeping stock
records; transferring proceeds of Collateral to CITBC's possession; and
performing such further acts as CITBC may reasonably require in order to effect
the purposes of this Financing Agreement. In furtherance of the foregoing, in
the event that CITBC determines that any additional subsidiaries of any of the
Companies are to parties hereto, the Companies shall cause such subsidiary to
become a party hereto in accordance with the general intent of the this
Paragraph 4.
5.(a) The Companies agree to maintain insurance on the Real Estate,
Equipment and Inventory, and with respect to products liability, under such
policies of insurance, with such insurance companies, in such reasonable amounts
and covering such insurable risks as are at all times reasonably satisfactory to
CITBC, and, in any event, with respect to products liability insurance, with
coverage at least equal to that maintained as of the Closing Date. All policies
covering the Real Estate, Equipment and Inventory are, subject to the rights of
any holders of Permitted Encumbrances holding claims senior to CITBC, to be made
payable to CITBC, in case of loss, under a standard non-contributory
"mortgagee", "lender" or "secured party" clause and are to contain such other
provisions as CITBC may require to fully protect CITBC's interest in the Real
Estate, Inventory and Equipment and to any payments to be made under such
policies. All original policies or true copies thereof are to be delivered to
CITBC, premium prepaid, with the loss payable endorsement in CITBC's favor, and
shall provide for not less than thirty (30) days prior written notice to CITBC
of the exercise of any right of cancellation. At the Companies' request, or if
the Companies fail to maintain such insurance, CITBC may arrange for such
insurance, but at the Companies' expense and without any responsibility on
CITBC's part for: obtaining the insurance, the solvency of the insurance
companies, the adequacy of
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the coverage, or the collection of claims. Upon the occurrence of an Event of
Default which is not waived or cured to CITBC's satisfaction, CITBC shall,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to CITBC, have the sole right, in the name of CITBC or the Companies, to
file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(b)(i) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory of any Company shall first reduce such
Company's Revolving Loans and then the Term Loan;
ii) In the event any part of a Company's Real Estate or Equipment is
damaged by fire or other casualty and the insurance proceeds for such damage or
other casualty (the "Proceeds") is less than or equal to $100,000.00, CITBC
shall promptly apply such Proceeds to reduce such Company's outstanding balance
in its Revolving Loan Account.
iii) As long as an Event of Default has not occurred (which is not cured to
CITBC's satisfaction), the Companies have sufficient business interruption
insurance to replace the lost profits of any of the Companies' facilities, and
the Proceeds are in excess of $100,000.00, such Company may elect (by delivering
written notice to CITBC) to replace, repair or restore such Real Estate or
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If the Companies do not, or cannot, elect to use
the Proceeds as set forth above, CITBC may, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to CITBC, apply the Proceeds to
the payment of the Obligations in such manner and in such order as CITBC may
reasonably elect.
iv) If a Company elects to use the Proceeds for the repair, replacement or
restoration of any Real Estate and/or Equipment, and there is then no Event of
Default, i) proceeds of insurance on Real Estate and/or Equipment in excess of
$100,000.00 will be applied to the reduction of the Revolving Loans of such
Company and ii) CITBC may set up a reserve against Availability for an amount
equal to the proceeds referred to in clause i) hereof. The reserve will be
reduced dollar-for-dollar upon receipt of non-cancelable executed purchase
orders, delivery receipts or contracts for the replacement, repair or
restoration of Real Estate and/or Equipment and disbursements in connection
therewith. Prior to the commencement of any restoration, repair or replacement
of Real Estate, the Companies shall provide CITBC with a restoration plan and a
total budget certified by an independent third party experienced in construction
costing. If there are insufficient Proceeds to cover the cost of restoration as
so determined, the Companies shall be responsible for the amount of any such
insufficiency, prior to the commencement of
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restoration and shall demonstrate evidence of such before the reserve will be
reduced. Completion of restoration shall be evidenced by a final, unqualified
certification of the design architect employed, if any; an unconditional
Certificate of Occupancy, if applicable; such other certification as may be
required by law; or if none of the above is applicable, a written good faith
determination of completion by the Companies (herein collectively the
"Completion"). Upon Completion, any remaining reserve as established hereunder
will be automatically released.
(v) The Companies agree to pay any reasonable costs, fees or expenses which
CITBC may reasonably incur in connection herewith.
6. Each of the Companies agrees to pay, when due, all taxes, assessments,
claims and other charges (herein "taxes") lawfully levied or assessed upon the
Companies or the Collateral and if such taxes remain unpaid after the date fixed
for the payment thereof unless such taxes are being diligently contested in good
faith by the Companies by appropriate proceedings or if any lien shall be
claimed thereunder x) for taxes due the United States of America or y) which in
CITBC's opinion might create a valid obligation having priority over the rights
granted to CITBC herein, CITBC may, on the Companies' behalf, pay such taxes,
and the amount thereof shall be an Obligation secured hereby and due to CITBC on
demand.
7. Each of the Companies: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the operation of
the Companies' business; provided that the Companies may contest any acts,
rules, regulations, orders and directions of such bodies or officials in any
reasonable manner which will not, in CITBC's reasonable opinion, materially and
adversely effect CITBC's rights or priority in the Collateral; (b) agrees to
comply with all environmental statutes, acts, rules, regulations or orders as
presently existing or as adopted or amended in the future, applicable to the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Companies. Each of the Companies hereby jointly and severally indemnifies
CITBC and agrees to defend and hold CITBC harmless from and against any and all
loss, damage, claim, liability, injury or expense which CITBC may sustain or
incur (other than as a result of actions of CITBC) in connection with: any claim
or expense asserted against CITBC as a result of any environmental pollution,
hazardous material or environmental clean-up of the Companies' real property; or
any claim or expense which results from the Companies' operations (including,
but not limited to, the Companies' off-site disposal practices) and the
Companies further agree that this indemnification shall survive termination of
this Financing Agreement as well as the payment of all Obligations or amounts
payable hereunder; and (c) shall not be deemed to
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have breached any provision of this Paragraph 7 if (i) the failure to comply
with the requirements of this Paragraph 7 resulted from good faith error or
innocent omission, (ii) the Companies promptly commence and diligently pursues a
cure of such breach and (iii) such failure is cured within fifteen (15) business
days following the Companies' receipt of notice of such failure.
8. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, unless
CITBC shall have otherwise consented in writing, the Companies will furnish to
CITBC, within ninety (90) days after the end of each Fiscal Year of the
Companies, an audited Consolidated Balance Sheet and a Consolidating Balance
Sheet which reconciles to the Consolidated Balance Sheet, as at the close of
such year, and statements of profit and loss, cash flow and reconciliation of
surplus of Parent, the Companies and all subsidiaries of each for such year,
audited (as to the consolidated financial statements) by independent public
accountants selected by the Companies and satisfactory to CITBC; within sixty
(60) days after the end of each Fiscal Quarter a Consolidated Balance Sheet and
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss, cash flow and surplus of Parent, the Companies and all
subsidiaries of each, certified by an authorized financial or accounting officer
of the Companies or of Parent; and within thirty (30) days after the end of each
month a Consolidated Balance Sheet as at the end of such period and statements
of profit and loss, cash flow and surplus of the Companies and all subsidiaries
for such period, certified by an authorized financial or accounting officer of
the Companies or of Parent; and from time to time, such further information
regarding the business affairs and financial condition of the Parent, the
Companies and/or any subsidiaries thereof as CITBC may reasonably request,
including without limitation (a) the accountant's management practice letter and
(b) annual cash flow projections in form satisfactory to CITBC. Each financial
statement which the Companies are required to submit hereunder must be
accompanied by an officer's certificate, signed by the President, Vice
President, Controller, or Treasurer of the Companies or of Parent, pursuant to
which any one such officer must certify that: (i) the financial statement(s)
fairly and accurately represent(s) the Companies' financial condition at the end
of the particular accounting period, as well as the Companies' operating results
during such accounting period, subject to year-end audit adjustments; (ii)
during the particular accounting period: (x) there has been no Default or Event
of Default under this Financing Agreement, provided, however, that if any such
officer has knowledge that any such Default or Event of Default, has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate; and (y) the Companies have not received
any notice of cancellation with respect to its property insurance policies; and
(iii) the exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement. In addition, commencing September 30, 2000, and on each
September 30 thereafter during the term hereof, the Companies shall provide to
CITBC updated annual financial projections for the next Fiscal Year.
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9. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, without
the prior written consent of CITBC, except as otherwise herein provided, the
Companies will not:
A. Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment,
(whether as a result of a purchase money or title retention
transaction, or other security interest, or otherwise) to
exist on any of its assets or goods, whether real, personal or
mixed, whether now owned or hereafter acquired, except for the
Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted
Indebtedness;
C. Borrow any money on the security of the Collateral from sources
other than CITBC;
D. Sell, lease, assign, transfer or otherwise dispose of i)
Collateral, except for the Divestiture and except as otherwise
specifically permitted by this Financing Agreement, or ii) either
all or substantially all of their assets, which do not constitute
Collateral;
E. Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, status or
existence, or enter into or engage in any operation or activity
materially different from that presently being conducted by the
Companies, except that the Companies may (i) merge with each
other and/or (ii) change their corporate name or address;
provided that in any instance under clauses (i) and (ii) (x) the
Companies shall give CITBC thirty (30) days prior written notice
thereof and (y) the Companies shall execute and deliver prior to
or simultaneously with any such action any and all documents and
agreements requested by CITBC (including, without limitation, any
and all U.C.C. financing statements) to confirm (A) the
assumption by the surviving corporation of all Obligations to
CITBC of the other Company so merged, (B) the continuation and
preservation of all security interests and liens granted to CITBC
hereunder and (C) that such surviving corporation adopts,
ratifies and confirms its agreement to be bound by and comply
with this Financing Agreement;
F. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by
the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business;
G. Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, except for: (i) loans and advances
by and among the Companies; and (ii) after repayment in full of
the Term Loan and any Revolving Loans to AII, amounts in an
aggregate not to exceed $500,000 per
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Fiscal Year if, after giving effect thereto, the Companies have
aggregate Availability of at least $2,000,000.
10. Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Companies shall:
(a) not have net income (determined in accordance with GAAP) for any
Fiscal Quarter of less than zero.
(b) maintain at the end of each Fiscal Quarter a consolidated Fixed
Charge Coverage Ratio of the Companies of not less than the following:
Fiscal Quarter ended 3/31/00 - 0.90:1.00
Fiscal Quarter ended 6/30/00 - 1.15:1.00
Fiscal Quarter ended 9/30/00 - 1.10:1.00
Fiscal Quarter ended 12/31/00 - 1.20:1.00
Thereafter, calculated on a rolling four quarter basis - 1.25:1.00
(c) maintain, on a cumulative basis, at the end of each Fiscal Quarter
EBITDA of at least the following amounts:
Fiscal Quarter ended 3/31/00 - $3,000,000
Fiscal Quarter ended 6/30/00 - $6,000,000
Fiscal Quarter ended 9/30/00 - $9,000,000
Fiscal Quarter ended 12/31/00 - $12,000,000
Thereafter, calculated on a rolling four quarter basis - $12,000,000
(d) maintain at the end of each month EBITDA of at least $500,000.
(e) in the event that the stock or all or substantially all of assets
of AIC shall have been sold, together with CITBC, reset the financial
covenant amounts in Sub-Paragraph (c) above to take into account the
effects of such sale, which reset shall include both a change in such
amounts prospectively as to the projected financial performance of AIC
and retrospectively to the beginning of the then current Fiscal Year to
the extent of the then Fiscal Year-to-date actual financial performance
of AIC.
11. Without the prior written consent of CITBC, the Companies will not: a)
enter into any Operating Lease (other than with respect to real property) if
after giving effect thereto the aggregate obligations with respect to Operating
Leases of the Companies during any Fiscal Year would exceed $200,000 or b)
contract for, purchase, make expenditures for, lease pursuant to a Capital Lease
or otherwise incur obligations with
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respect to Capital Expenditures (whether subject to a security interest or
otherwise) during any period below in the aggregate amount for the Companies in
excess of the amount set forth for such period:
a) $3,000,000 for the Fiscal Year ending December 31, 2000;
b) $3,500,000 for the Fiscal Year ending December 31, 2001;
c) $4,000,000 for the Fiscal Year ending December 31, 2002;
and for each Fiscal Year thereafter.
12. In the event the Divestiture has not yet occurred by January 31, 2000,
then the Companies shall maintain a minimum amount of unused Availability of
$1,000,000, and if the Divestiture has not occurred by February 29, 2000, then
the Companies shall maintain a minimum amount of unused Availability of
$2,000,000.
13. The Companies agree to advise CITBC in writing of: a) all expenditures
(actual or anticipated) in excess of $150,000.00 for x) environmental clean-up,
y) environmental compliance or z) environmental testing and the impact of said
expenses on the Companies' Working Capital; and b) any notices the Companies
receive from any local, state or federal authority advising the Companies of any
environmental liability (real or potential) stemming from the Companies'
operations, premises, waste disposal practices, or waste disposal sites used by
the Companies and to provide CITBC with copies of all such notices if so
required.
14. Without the prior written consent of CITBC, the Companies agree that
they will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with the Parent, any of the
Companies or any subsidiary or affiliate of either the Companies or Parent
unless any such transaction is conducted on an arms-length basis and on terms no
less beneficial to the Companies than the Companies would have obtained from any
entity that was not related in any fashion with the Companies.
15. The Companies shall take all action reasonably necessary to assure that
their computer-based systems are able to effectively process date-sensitive data
functions. The Companies represent and warrant that the "Year 2000" problem
(that is, the inability of certain computer applications to recognize and
properly perform date-sensitive functions involving certain dates on or about or
subsequent to December 31, 1999) will not result in a material adverse effect on
their business, assets or operations. The Companies reasonably anticipate that
all computer applications which are material to their business will, on a timely
basis, be able to properly perform date-sensitive functions for all dates on and
after January 1, 2000. Upon CITBC's request from time to time, the Companies
shall provide to CITBC assurances that the Companies' computer systems and
software are or will be Year 2000 compliant on a timely basis, all in form and
substance reasonably satisfactory to CITBC.
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SECTION 8. INTEREST, FEES AND EXPENSES
1(a). Interest on the Revolving Loan shall be payable monthly as of the end
of each month and shall be an amount equal to (a) the Chase Bank Rate per annum
on the average of the net balances owing by the Companies to CITBC in the
Companies' Revolving Loan Account(s) at the close of each day during such month
on balances other than Libor Loans and (b) two and four-tenths percent (2.4%)
plus the applicable Libor on any Libor Loan, on a per annum basis, on the
average of the net balances owing by the Companies to CITBC in the Companies'
Revolving Loan Account(s) at the close of each day during such month. In the
event of any change in said Chase Bank Rate, the rate under clause (a) above
shall change, as of the first of the month following any change, so as to remain
equal to the Chase Bank Rate. The rate hereunder shall be calculated based on a
360-day year. CITBC shall be entitled to charge the Companies' Revolving Loan
Account(s) at the rate provided for herein when due until all Obligations have
been paid in full. Notwithstanding the foregoing, in the event that the
Divestiture has not occurred within 60 days following the Closing Date and the
Term Loan, and the Revolving Loans advanced to AII then outstanding, have not
been repaid in full, then the rate of interest applicable to all Revolving Loans
shall be the Chase Bank Rate plus three percent (3%) per annum until such time
as the Divestiture has been consummated, and the Term Loan and Revolving Loans
to AII have been repaid, at which time the interest rate applicable to the
Revolving Loans shall revert to the rate otherwise applicable hereunder.
(b) Notwithstanding any provision to the contrary contained in this Section
8, in the event that the sum of the outstanding balance of (i) Revolving Loans
and (ii) Letters of Credit exceeds the lesser of (x) as to any Company the
maximum amount thereof available under Sections 3 and 5 of this Financing
Agreement or (y) for all Companies the Line of Credit: (A) as a result of
Revolving Loans and/or Letters of Credit advanced by CITBC at the request of a
Company (herein "Requested Overadvances"), for any one (1) or more days in any
month hereafter or (B) for any other reason whatsoever (herein "Other
Overadvances") and such Other Overadvances continuing for five (5) or more
consecutive days in any month hereafter, the average net balance of all
Revolving Loans owing by the Companies to CITBC for such month shall bear
interest at the Overadvance Rate. Upon and after the occurrence of an event of
Default and the giving of any required notice by CITBC in accordance with the
provisions of Section 10, Paragraph 2 hereof, all Obligations shall bear
interest at the Default Rate of Interest.
2. Interest on the Term Loan shall be payable monthly as of the end of each
month on the unpaid balance or on payment in full prior to maturity in an amount
equal to three percent (3.0%) plus the Chase Bank Rate per annum. In the event
of any change in said Chase Bank Rate, the rate under this Paragraph 2 shall
change, as of the first of the month following any change, so as to remain three
percent (3.0%) above the Chase Bank Rate. The rate hereunder shall be calculated
based on a 360 day year. CITBC shall be entitled
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to charge the Companies' Revolving Loan Account(s) at the rate provided for
herein when due until all Obligations have been paid in full.
3. INTENTIONALLY OMITTED.
4. INTENTIONALLY OMITTED.
5. The Companies may elect to use Libor as to any other outstanding
Revolving Loans provided A) there is then no Default or Event of Default, B) the
Companies have so advised CITBC of their election to use Libor and the Libor
Period selected no later than three (3) Business Days preceding the first day of
a Libor Period and C) the election and Libor shall be effective, provided, there
is then no Default or Event of Default, on the fourth Business Day following
said notice. The Libor elections must be for $1,000,000 or whole multiples
thereof and there shall be no more than four (4) Libor Loans outstanding at one
time. If no such election is timely made or can be made, or if the Libor rate
can not be determined, then CITBC shall use the Chase Bank Rate to compute
interest. In the event the Companies request any Libor election the Companies
shall pay to CITBC a $500 processing fee upon the effective date of each such
Libor election hereunder. In addition, the Companies shall pay to CITBC, upon
the request of CITBC such amount or amounts as shall compensate CITBC for any
loss, costs or expenses incurred by CITBC (as reasonably determined by CITBC) as
a result of: (i) any payment or prepayment on a date other than the last day of
a Libor Period for such Libor Loan, or (ii) any failure of the Companies to
borrow a Libor Loan on the date for such borrowing specified in the relevant
notice; such compensation to include, without limitation, an amount equal to any
loss or expense suffered by CITBC during the period from the date of receipt of
such payment or prepayment or the date of such failure to borrow to the last day
of such Libor Period if the rate of interest obtained by CITBC upon the
reemployment of an amount of funds equal to the amount of such payment,
prepayment or failure to borrow is less than the rate of interest applicable to
such Libor Loan for such Libor Period. The determination by CITBC of the amount
of any such loss or expense, when set forth in a written notice to the
Companies, containing CITBC calculations thereof in reasonable detail, shall be
conclusive on the Companies, in the absence of manifest error. Calculation of
all amounts payable to the CITBC under this paragraph with regard to Libor Loans
shall be made as though CITBC had actually funded the Libor Loans through the
purchase of deposits in the relevant market and currency, as the case may be,
bearing interest at the rate applicable to such Libor Loans in an amount equal
to the amount of the Libor Loans and having a maturity comparable to the
relevant interest period provided, however, that CITBC may fund each of the
Libor Loans in any manner the CITBC see fit and the foregoing assumption shall
be used only for calculation of amounts payable under this paragraph. In
addition, notwithstanding anything to the contrary contained herein, CITBC shall
apply all proceeds of Collateral, including the Accounts, and all other amounts
received by it from or on behalf of the Companies (i) initially to the Chase
Bank Rate loans and (ii) subsequently to Libor
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Loans; provided, however, x) upon the occurrence of an Event of Default or y) in
the event the aggregate amount of outstanding Libor Rate Loans exceeds
Availability or the applicable maximum levels set forth therefor, CITBC may
apply all such amounts received by it to the payment of Obligations in such
manner and in such order as CITBC may elect in its reasonable business judgment.
In the event that any such amounts are applied to Revolving Loans which are
Libor Loans, such application shall be treated as a prepayment of such loans and
CITBC shall be entitled to indemnification hereunder.
6. In consideration of the Letter of Credit Guaranty of CITBC, the
Companies shall jointly and severally pay CITBC the Letter of Credit Guaranty
Fee which shall be an amount equal to one and one-half percent (1-1/2%) per
annum, payable monthly, on the face amount of each Letter of Credit less the
amount of any and all amounts previously drawn under the Letter of Credit.
7. Any charges, fees, commissions, costs and expenses charged to CITBC for
the Companies' account by any Issuing Bank in connection with or arising out of
Letters of Credit issued pursuant to this Financing Agreement or out of
transactions relating thereto will be charged to the Companies' account in full
when charged to or paid by CITBC and when made by any such Issuing Bank shall be
conclusive on CITBC.
8. The Companies shall jointly and severally reimburse or pay CITBC, as the
case may be, for: i) all Out-of-Pocket Expenses of CITBC and ii) any applicable
Documentation Fee; provided that, after the Closing Date, such Out-of Pocket
Expenses shall not exceed $20,000 per Fiscal Year excluding anticipated
post-closing conditions and similar matters or extraordinary matters, or any
items arising after an Event of Default.
9. Upon the last Business Day of each month, commencing with the last day
of the month in which this Financing Agreement is executed the Companies shall
jointly and severally pay CITBC the Unused Line Fee.
10. To induce CITBC to enter into this Financing Agreement and to extend to
the Companies the Revolving Loan, Letters of Credit, and the Term Loan, the
Companies shall jointly and severally pay to CITBC, a Loan Facility Fee in the
amount of $500,000, fully earned and payable on the Closing Date; provided that
if the Closing Date shall occur after December 31, 1999, such fee shall be
reduced to $400,000.
11. Upon the date hereof and on each annual anniversary hereof the
Companies shall jointly and severally pay to CITBC the Administrative Management
Fee, which shall be fully earned and not refundable or rebatable when due.
12. The Companies shall jointly and severally pay CITBC's standard charges
for, and the fees and expenses of, the CITBC personnel used by CITBC for
reviewing the books
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and records of the Companies and for verifying, testing, protecting,
safeguarding, preserving or disposing of all or any part of the Collateral
provided, however, that the foregoing (other than Out-of-Pocket Expenses) shall
not be payable until the occurrence of an Event of Default if the Companies are
paying an Administrative Management Fee.
13. Each of the Companies hereby authorizes CITBC to charge its Revolving
Loan Account with CITBC with the amount of all payments due hereunder as such
payments become due. Each of the Companies confirms that any charges which CITBC
may so make to the Companies' account as herein provided will be made as an
accommodation to the Companies and solely at CITBC's discretion. CITBC may in
its sole and absolute discretion allocate any of the above fees and/or any other
payments due under this Financing Agreement to the Companies' respective
Revolving Loan Accounts in any proportion that CITBC may decide.
SECTION 9. POWERS
Each of the Companies hereby constitutes CITBC or any person or agent CITBC
may designate as its attorney-in-fact, at the Companies' cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all of the Companies' Obligations to CITBC have been
paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the name of
CITBC or the Companies, any and all checks, notes, drafts, and other documents
or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Companies and
to notify postal authorities to change the address for delivery thereof to such
address as CITBC may designate;
(c) To request from customers indebted on Accounts at any time, in the name
of CITBC or the Companies or that of CITBC's designee, information concerning
the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of CITBC's
interest therein and to notify customers indebted on Accounts to make payment
directly to CITBC for the Companies' account; and
(e) To take or bring, in the name of CITBC or the Companies, all steps,
actions, suits or proceedings deemed by CITBC necessary or desirable to enforce
or effect collection of the Accounts.
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Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (b), (d) and (e) above may only be exercised after the occurrence
of an Event of Default and until such time as such Event of Default is waived in
writing by CITBC or cured to CITBC's satisfaction. In addition, the powers set
forth in (c) above will only be exercised in the name of the Companies or a
certified public accountant designated by CITBC prior to the occurrence of such
Event of Default.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary, CITBC may
terminate this Financing Agreement immediately upon the occurrence of any of the
following (herein "Events of Default"):
a) cessation of the business of the Companies, or any one of them, or the
calling of a meeting of the creditors of the Companies, or any one of
them, for purposes of compromising their debts and obligations;
b) the failure of the Companies, or any one of them, to generally meet
debts as they mature;
c) the commencement by or against the Companies, or any one of them, of
any bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceedings under any federal or state law, provided that
in the event of any involuntary proceeding commenced against the
Companies such proceeding is not dismissed or discharged within thirty
(30) days after commencement thereof;
d) breach by the Companies, or any one of them, of any warranty,
representation or covenant contained herein (other than those referred
to in sub-paragraph e below) or in any other written agreement between
the Companies and CITBC, provided that such breach by the Companies of
any of the warranties, representations or covenants referred in this
clause d shall not be deemed to be an Event of Default unless and
until such breach shall remain unremedied to CITBC's satisfaction for
a period of ten (10) days from the date of such breach;
e) breach by the Companies, or any one of them, of any warranty,
representation or covenant of Section 3, Paragraphs 3 (other than the
third sentence of paragraph 3) and 4; Section 6, Paragraphs 3 and 4
(other than the first sentence of paragraph 4); Section 7, Paragraphs
1,5,6, and 9 through 11;
f) failure of the Companies to pay any of the Obligations within five (5)
Business Days of the due date thereof, provided that nothing contained
herein shall prohibit CITBC from charging such amounts to the
Companies' Revolving Loan Accounts on the due date thereof;
g) INTENTIONALLY OMITTED;
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h) the Companies, or any one of them, shall i) engage in any "prohibited
transaction" as defined in ERISA, ii) have any "accumulated funding
deficiency" as defined in ERISA, iii) have any Reportable Event as
defined in ERISA, iv) terminate any Plan, as defined in ERISA or v) be
engaged in any proceeding in which the Pension Benefit Guaranty
Corporation shall seek appointment, or is appointed, as trustee or
administrator of any Plan, as defined in ERISA, and with respect to
this sub-paragraph h such event or condition x) remains uncured for a
period of thirty (30) days from date of occurrence and y) could, in
the reasonable opinion of CITBC, subject the Companies to any tax,
penalty or other liability material to the business, operations or
financial condition of the Companies;
i) except as otherwise permitted hereunder, without the prior written
consent of CITBC, the Companies or any holder of any Subordinated Debt
shall x) amend or modify the Subordinated Debt, or y) make or accept,
as applicable, any payment on account of the Subordinated Debt except
as permitted in the Subordination Agreement or, with respect to the
Subordinated Debt outstanding under the 1997 Indenture, except as
permitted thereunder (but in no event any prepayments under the 1997
Indenture), or z) breach, rescind or revoke any provision of the
Subordination Agreement; or, with respect to the LLCP Debt, the
Companies shall make any prepayment (other than prepayment of the LLCP
Term Loan A Debt upon consummation of the Divestiture or other sale of
the stock or assets of a subsidiary of Simula if the Term Loan shall
have been repaid in full) thereof;
j) the occurrence of any default or event of default (after giving effect
to any applicable grace or cure periods) under any instrument or
agreement evidencing (x) Subordinated Debt or (y) any other
Indebtedness (including the LLCP Debt) of the Companies having a
principal amount in excess of $250,000;
k) any breach by LLCP in any material respect of any of its covenants
under the Intercreditor Agreement;
l) there shall occur any Change of Control (as defined in the Securities
Purchase Agreement, dated on or about the date hereof, respecting the
LLCP Debt).
2. Upon the occurrence of a Default and/or an Event of Default, at the
option of CITBC, all loans, advances and extensions of credit provided for in
Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in CITBC's
sole discretion and the obligation of CITBC to make Revolving Loans, and/or open
Letters of Credit shall cease unless such Default or Event of Default is waived
in writing by CITBC or cured to CITBC's satisfaction, and at the option of CITBC
upon the occurrence of an Event of Default: i) all Obligations shall become
immediately due and payable; ii) CITBC may charge the Companies the Default Rate
of Interest on all then outstanding or thereafter incurred Obligations in lieu
of the interest provided for in Section 8 of this Financing Agreement provided
that respect
43
<PAGE> 46
to this clause "ii)" a) CITBC has given the Companies written notice of the
Event of Default, provided, however, that no notice is required if the Event of
Default is the Event listed in paragraph 1(c) of this Section 10 and b) the
Companies have failed to cure the Event of Default within ten (10) days after x)
CITBC deposited such notice in the United States mail or y) the occurrence of
the Event of Default listed in paragraph 1(c) of this Section 10; and iii) CITBC
may immediately terminate this Financing Agreement upon notice to the Companies,
provided, however, that no notice of termination is required if the Event of
Default is the Event listed in paragraph 1(c) of this Section 10. The exercise
of any option is not exclusive of any other option which may be exercised at any
time by CITBC.
3. Immediately upon the occurrence of any Event of Default, CITBC may to
the extent permitted by law: (a) remove from any premises where same may be
located any and all documents, instruments, files and records, and any
receptacles or cabinets containing same, relating to the Accounts, or CITBC may
use, at the Companies' expense, such of the Companies' personnel, supplies or
space at the Companies' places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Companies or CITBC, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Companies or CITBC; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at CITBC's sole option and discretion, and CITBC may bid
or become a purchaser at any such sale, free from any right of redemption, which
right is hereby expressly waived by the Companies; (d) foreclose the security
interests created herein by any available judicial procedure, or to take
possession of any or all of the Inventory, Equipment and/or Other Collateral
without judicial process, and to enter any premises where any Inventory,
Equipment and/or Other Collateral may be located for the purpose of taking
possession of or removing the same and (e) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. CITBC shall have
the right, without notice or advertisement, to sell, lease, or otherwise dispose
of all or any part of the Collateral whether in its then condition or after
further preparation or processing, in the name of the Companies or CITBC, or in
the name of such other party as CITBC may designate, either at public or private
sale or at any broker's board, in lots or in bulk, for cash or for credit, with
or without warranties or representations, and upon such other terms and
conditions as CITBC in its sole discretion may deem advisable, and CITBC shall
have the right to purchase at any such sale. If any Inventory and Equipment
shall require rebuilding, repairing, maintenance or preparation, CITBC shall
have the right, at its option, to do such of the aforesaid as is necessary, for
the purpose of putting the Inventory and Equipment in such saleable form as
CITBC shall deem appropriate. The Companies agree, at the request of CITBC, to
assemble the Inventory and Equipment and to make it available to CITBC at
premises of the Companies or elsewhere and to make
44
<PAGE> 47
available to CITBC the premises and facilities of the Companies for the purpose
of CITBC's taking possession of, removing or putting the Inventory and Equipment
in saleable form. However, if notice of intended disposition of any Collateral
is required by law, it is agreed that ten (10) days notice shall constitute
reasonable notification and full compliance with the law. The net cash proceeds
resulting from CITBC's exercise of any of the foregoing rights, (after deducting
all charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by CITBC to the payment of the Companies' Obligations, whether due or to
become due, in such order as CITBC may elect, and the Companies shall remain
liable to CITBC for any deficiencies, and CITBC in turn agrees to remit to the
Companies or their successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative. The mortgage(s), deed(s) of trust and/or
assignment(s) on the Real Estate shall govern the rights and remedies of CITBC
thereto.
SECTION 11. TERMINATION
Except as otherwise permitted herein, the Companies or CITBC may terminate
this Financing Agreement and the Line of Credit only as of the initial or any
subsequent Anniversary Date and then only by giving the other at least sixty
(60) days prior written notice of termination. Notwithstanding the foregoing
CITBC may terminate the Financing Agreement immediately upon the occurrence of
an Event of Default, provided, however, that if the Event of Default is an event
listed in paragraph 1(c) of Section 10 of this Financing Agreement, CITBC may
regard the Financing Agreement as terminated and notice to that effect is not
required. This Financing Agreement, unless terminated as herein provided, shall
automatically continue from Anniversary Date to Anniversary Date.
Notwithstanding the foregoing, the Companies may terminate this Financing
Agreement and the Line of Credit prior to any applicable Anniversary Date upon
sixty (60) days' prior written notice to CITBC, provided that the Companies pay
to CITBC immediately on demand, an Early Termination Fee, if applicable.
Termination by any of the Companies shall constitute termination with respect to
all Companies. All Obligations shall become due and payable as of any
termination hereunder or under Section 10 hereof and, pending a final
accounting, CITBC may withhold any balances in the Companies' accounts (unless
supplied with an indemnity satisfactory to CITBC) to cover all of the Companies'
Obligations, whether absolute or contingent. All of CITBC's rights, liens and
security interests shall continue after any termination until all Obligations
have been paid and satisfied in full.
SECTION 12. MISCELLANEOUS
1. Each of the Companies hereby waives diligence, demand, presentment and
protest and any notices thereof as well as notice of nonpayment. No delay or
omission
45
<PAGE> 48
of CITBC or the Companies to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by CITBC of any right or remedy precludes
any other or further exercise thereof, or precludes any other right or remedy.
2. This Financing Agreement and the documents executed and delivered in
connection therewith constitute the entire agreement between the Companies and
CITBC; supersede any prior agreements; can be changed only by a writing signed
by both the Companies and CITBC; and shall bind and benefit the Companies and
CITBC and their respective successors and assigns.
3. In no event shall the Companies, upon demand by CITBC for payment of any
indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CITBC shall never be entitled to receive, charge or apply,
as interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CITBC ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Companies. This paragraph shall
control every other provision hereof and of any other agreement made in
connection herewith.
4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
5. THE COMPANIES AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT. EACH OF THE
COMPANIES HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
6. Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered when hand delivered or sent by telegram or telex, or
three days after deposit in the United State mails, with proper first class
postage prepaid and addressed to the party to be notified as follows:
46
<PAGE> 49
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
300 South Grand Avenue, 3rd Floor
Los Angeles, California 90071
Attn: Vice President and Regional Credit Manager
Fax No.: (213) 613-2501
(B) if to the Companies at:
Simula, Inc.
2700 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
Attn: Mr. James Dodd, Chief Financial Officer
Fax No.: (602) 631-9005
or to such other address as any party may designate for itself by like notice.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement
to be executed and delivered by their proper and duly authorized officers as of
the date set forth above. This Financing Agreement shall take effect as of the
date set forth above after being accepted below by an officer of CITBC after
which, CITBC shall forward to the Companies a fully executed original for their
files.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By /s/ Thomas Heyes
Senior Vice President
47
<PAGE> 50
Read and Agreed to:
SIMULA, INC.
By /s/ James C. Dodd
Title: Executive Vice President & CFO
AIRLINE INTERIORS, INC.
By /s/ James C. Dodd
Title: Treasurer
ARTCRAFT INDUSTRIES CORP.
By /s/ James C. Dodd
Title: Treasurer
SIMULA TRANSPORTATION
EQUIPMENT CORPORATION
(formerly known as INTAERO INC.)
By /s/ James C. Dodd
Title: Treasurer
INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.
By /s/ James C. Dodd
Title: Treasurer
48
<PAGE> 51
SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.
By /s/ James C. Dodd
Title: Treasurer
SIMULA COMPOSITES
CORPORATION
By /s/ James C. Dodd
Title: Treasurer
SIMULA POLYMER SYSTEMS, INC.
By /s/ James C. Dodd
Title: Treasurer
SIMULA SAFETY SYSTEMS, INC.
By /s/ James C. Dodd
Title: Treasurer
SIMULA TECHNOLOGIES, INC.
By /s/ James C. Dodd
Title: Treasurer
49
<PAGE> 52
SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED
By /s/ James C. Dodd
Title: Treasurer
CCEC CAPITAL CORP.
By /s/ James C. Dodd
Title: Treasurer
50
<PAGE> 53
Exhibit 10.41b
STOCK PLEDGE AGREEMENT
To: THE CIT GROUP/BUSINESS CREDIT, INC.
Address: 300 South Grand Avenue, 3rd Floor
Los Angeles, California 90071
December 30, 1999
Gentlemen:
Reference is made to a certain Financing Agreement dated of even date herewith,
as amended (herein called the "Financing Agreement") between you and the
undersigned (collectively, "Pledgor"), together with the subsidiaries and
affiliates of the undersigned which are parties thereto (herein collectively
called the "Company"). Capitalized terms used herein and defined in the
Financing Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein. As security for: (a) the full and
indefeasible payment and performance when due of all now existing and future
Obligations of the Company to you, whether absolute or contingent, however
acquired by you, and whether arising under the Financing Agreement as now
written or as amended or supplemented or augmented hereafter, or by virtue of
any guaranty now or hereafter executed by Pledgor in your favor, in law or
otherwise; (b) any liability or indebtedness you may incur because of any
guaranty you may issue at the request of the Company, including, without
limitation, any Letter of Credit Guaranty; (c) the amount of all expenses
(including reasonable attorneys' fees) incurred by you in collecting or
attempting to collect any of the Company's obligations to you whether from the
Company or any other obligor or in realizing upon collateral; and (d) any
interest from the due date at the Default Rate of Interest specified in the
Financing Agreement on all amounts payable to you hereunder (all of which are
herein called the "Secured Obligations"), Pledgor hereby pledges, assigns,
transfers, delivers and sets over to you all of its right, title and interest in
and to the securities listed on the attached schedule, issued as indicated on
said schedule (the "Securities").
This pledge includes all right, title and interest in and to and a continuing
lien upon and security interest in, all of said Securities together with any and
all rights, coupons, warrants or rights to subscribe, options, dividends,
liquidating dividends, splits, dividends paid in stock, dividends paid in
Securities, new or reclassified Securities, or any other property which Pledgor
is or may hereafter become entitled to receive on account of such Securities,
any and all increments, substitutions,
- 1 -
<PAGE> 54
additions or replacements thereof, and any and all proceeds thereof (all
collectively hereinafter referred to as the "Pledged Collateral").
This Stock Pledge Agreement is executed as an inducement to you to make loans or
advances to the Company or issue guaranties at the request of the Company, or
otherwise to extend credit or financial accommodations to the Company or to
enter into or continue a financing arrangement with the Company, and is executed
in consideration of your doing or having done any of the foregoing.
Pledgor agrees that any of the foregoing shall be deemed to have been done or
extended by you in consideration of and in reliance upon the execution of this
Stock Pledge Agreement.
Pledgor shall be in default under this Pledge Agreement upon the occurrence of
any Event of Default under the Financing Agreement (herein any such default
shall be referred to as an "Event of Default").
In the event of the happening of any such Event of Default, then on ten (10)
days prior notice to Pledgor, without the curing of such default within such
time, you may, without demand of performance, advertisement or notice of
intention to sell, or of the time or place of sale, and without notice to
redeem, or other notice or demand whatsoever to or upon Pledgor (all and each of
which demands, advertisements and/or notices are hereby expressly waived),
forthwith or at any time or times thereafter, transfer to and/or register in
your name, or the name of your nominee, any or all of the Pledged Collateral
and/or collect, receive, appropriate and realize upon said Pledged Collateral.
In addition, and also without any of the aforesaid demands, advertisements,
and/or notices, upon the occurrence of any Event of Default as defined herein,
you may sell, assign, transfer and deliver the whole or any part of the Pledged
Collateral then held by you under this Stock Pledge Agreement or subject to this
Stock Pledge Agreement in one or more parcels, at public or private sale or
sales, at any Exchange Broker's Board, at your office or elsewhere, on such
terms and conditions, and at such prices as you may deem advisable, for cash,
upon credit, or for future delivery, with the right on your part to become the
purchaser thereof at any such sale or sales, free and clear of any right to
equity of redemption (which right or equity is hereby expressly waived and
released). Any notice of sale, disposition, or other intended action by you
required by applicable law and sent to Pledgor at least ten (10) days prior to
such action shall constitute reasonable notice to Pledgor. Prior to exercising
your rights contained herein you may in your discretion forward the various
coupons coming due on any bonds covered hereby directly to Pledgor for
collection.
Net proceeds of any such disposition as aforesaid, after deduction all costs,
including reasonable attorney's fees and expenses of every kind incurred
therein,
-2-
<PAGE> 55
shall be applied to the payment in whole or in part, in such order as you may
elect, of any of the Secured Obligations, whether then due or not due. You agree
to pay over and return any remaining balance to Pledgor or to any person
entitled thereto, upon proper demand being made therefor, and if there be any
deficiency, Pledgor shall continue to be fully liable for same.
Further, you are hereby expressly granted the right and irrevocable proxy, in
the event of the happening of any Event of Default (as defined herein), and on
ten (10) days prior notice to Pledgor, without the curing of such Event of
Default within such time, to transfer to yourself or to your nominee any or all
of the Pledged Collateral or to register same in your name on the books of
Pledgor or entity issuing same; to receive cash dividends, coupons and income
thereon and to hold the same as additional collateral security hereunder, or to
apply it against the Secured Obligations and to exercise any voting rights with
respect to said Collateral for any purposes as you in your discretion deem
advisable, and to otherwise exercise as to such Pledged Collateral, all rights,
powers and remedies as the owner thereof.
Pledgor hereby represents and warrants that the Pledged Collateral is owned by
Pledgor absolutely, and is free and clear of all liens and encumbrances except
for the pledge in your favor and except for Permitted Encumbrances (as defined
in the Financing Agreement); that there are no restrictions upon the pledge or
transfer of any of the Pledged Collateral; that Pledgor has full right to pledge
and transfer the same in accordance with the terms and conditions of this Stock
Pledge Agreement, free of all encumbrances (except said Permitted Encumbrances)
and without the consent of any other person, firm, entity or corporation and
without the need to notify the issuing company and/or obtain their consent to
the pledge; and that said Pledged Collateral is not subject to any assessment.
Pledgor agrees to defend its title to the Pledged Collateral at its own cost and
expense, and to pay, satisfy and discharge and any all assessments, liens or
charges now or thereafter placed upon the Pledged Collateral.
In the event that it becomes necessary to comply with any Federal or State law
or regulation or to make or file any registration thereunder in order for you to
exercise any of your rights hereunder, Pledgor expressly agrees to do or will
cause to be done all acts and prepare and execute all documents necessary to
affect such compliance or registration, and to bear all reasonable costs in
connection therewith. Pledgor agrees to indemnify and to hold you harmless from
and against any claim or liability; and to hold you harmless from and against
any claim or liability caused by (i) any untrue statement of material fact, or
omission to state a material fact (as required in any registration or
prospectus) or (ii) a failure to register or comply with any such law or
regulation.
-3-
<PAGE> 56
Pledgor recognizes that you may be unable to effect a public sale of any or all
of the Collateral, by reason of certain prohibitions contained in the Securities
Act of 1933 and applicable state securities law or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obligated to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to you than if
such sale were a public sale and agrees that such circumstances shall not, in
and of themselves, result in a determination that such sale was not made in a
commercially reasonable manner. You shall be under no obligation to delay a sale
of any of the Pledged Collateral for the period of time necessary to permit the
issuer to register such securities for public sale under the Securities Act of
1933, or under applicable state securities laws, even if the issuer agrees to do
so.
Pledgor affirms and certifies that the Secured Obligations were not, and will
not be, incurred for the purpose of providing or obtaining any credit for
purchasing or trading in registered equity securities or other marketable
securities.
Pledgor hereby agrees at your request to execute all necessary stock powers in
blank, to have the signatures on said powers guaranteed, to execute a letter or
other form confirming that the Pledged Collateral is not being pledged to you
for the purpose of providing or obtaining any credit for purchasing or trading
in registered equity securities or other marketable securities, and to execute
any further documents or papers whatsoever in order to carry out the intent and
purpose of this Stock Pledge Agreement.
The pledge provided for herein shall be in addition to, and shall not be deemed
to affect, modify or limit any other rights, collateral, agreements or security
which you may now or hereafter hold whether granted or given to you by Pledgor
or by any other person, firm or corporation.
It is understood and agreed that the rights and remedies herein enumerated are
not intended to be exhaustive but are in addition to any other rights or
remedies at law or in equity. You shall have the absolute right in your sole
discretion to determine the order in which your rights and remedies are to be
exercised, and your exercise of any right or remedy shall not preclude the
exercise of any other rights or remedies or be deemed to be a waiver thereof. No
act of forbearance, or agreement to forebear the enforcement of, or extension of
the date of maturity of, any Secured Obligation, shall in any way constitute a
release of, or a waiver or relinquishment of any of your rights or remedies.
-4-
<PAGE> 57
This Stock Pledge Agreement is to be governed by the laws of the State of
California shall be binding on the heirs, administrators, executors, successors
and assigns of Pledgor, and shall inure to the benefit of you and your
successors and assigns.
Very truly yours,
SIMULA, INC.
By /s/ James C. Dodd
----------------------
Title: Executive Vice President and CFO
--------------------------------
AIRLINE INTERIORS, INC.
By /s/ James C. Dodd
----------------------
Title: Treasurer
--------------------------------
ARTCRAFT INDUSTRIES CORP.
By /s/ James C. Dodd
----------------------
Title: Treasurer
--------------------------------
SIMULA TRANSPORTATION
EQUIPMENT CORPORATION
(formerly known as INTAERO INC.)
By /s/ James C. Dodd
----------------------
Title: Treasurer
--------------------------------
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<PAGE> 58
INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.
By /s/ James C. Dodd
-----------------------
Title: Treasurer
--------------------------------
SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.
By /s/ James C. Dodd
-----------------------
Title: Treasurer
--------------------------------
SIMULA COMPOSITES
CORPORATION
By /s/ James C. Dodd
-----------------------
Title: Treasurer
--------------------------------
SIMULA POLYMER SYSTEMS, INC.
By /s/ James C. Dodd
-----------------------
Title: Treasurer
--------------------------------
SIMULA SAFETY SYSTEMS, INC.
-----------------------
By /s/ James C. Dodd
Title: Treasurer
--------------------------------
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<PAGE> 59
SIMULA TECHNOLOGIES, INC.
By /s/ James C. Dodd
-----------------------
Title: Treasurer
-------------------
SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED
By /s/ James C. Dodd
-----------------------
Title: Treasurer
-------------------
CCEC CAPITAL CORP.
By /s/ James C. Dodd
-----------------------
Title: Treasurer
-------------------
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<PAGE> 60
SCHEDULE TO
STOCK PLEDGE AGREEMENT
BETWEEN THE CIT GROUP/BUSINESS CREDIT, INC.
AND SIMULA, INC. AND CERTAIN SUBSIDIARIES (COLLECTIVELY, THE "PLEDGOR")
<TABLE>
<CAPTION>
Issuer Owner Certificate# # of Shares
------ ----- ------------ -----------
<S> <C> <C> <C>
1. Simula Safety Simula, Inc. 1 5000
Systems, Inc.
2. Simula Transportation Simula, Inc. 1 5000
Equipment Corporation
3. Simula Automotive Simula, Inc. 1 5000
Safety Devices, Inc.
4. Simula Simula, Inc. 1 5000
Technologies, Inc.
5. Simula Polymer Simula, Inc. 1 5000
Systems, Inc.
6. Airline Interiors, Inc. Simula Transportation 1 5000
Equipment Corporation
7. Artcraft Industries Corp. Simula Transportation 1 5000
Equipment Corporation
8. Simula Composites Simula Transportation 1 1000
Corporation Equipment Corporation
9. Simula Automotive Simula Automotive 2 1
Safety Devices, Limited Safety Devices, Inc.
10. International Center Simula Technologies, Inc. 1 5000
For Safety
Education, Inc.
11. CCEC Capital Corp. Simula Transportation 1 5000
Equipment Corporation
</TABLE>
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<PAGE> 61
Exhibit 10.41c
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, made and entered into the 30th day of
December, 1999, by and between STANLEY DESJARDINS ("Subordinating Creditor")
with an address at 2700 North Central Avenue, Suite 1000, Phoenix, Arizona
85004, and THE CIT GROUP/BUSINESS CREDIT, INC. ("CIT") with a place of business
at 300 South Grand Avenue, 3rd Floor, Los Angeles, California 90071.
WITNESSETH:
WHEREAS, Simula, Inc. (the "Company") has executed and delivered to
Subordinating Creditor its promissory note, dated, October 17, 1999 in the
principal amount of $1,000,000 (the "Subordinated Note");
WHEREAS, the Company desires to borrow certain sums from CIT pursuant to a
certain Financing Agreement ("Financing Agreement") and a certain Promissory
Note in the amount of $5,000,000 (the "CIT Note") executed in conjunction
therewith to evidence the Term Loan extended by CIT to the Company Simula, Inc.
thereunder;
WHEREAS, the extension of credit by CIT to the Company will benefit the
Subordinating Creditor;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinating Creditor hereby agrees with CIT as follows:
1. SUBORDINATION. The Subordinating Creditor hereby subordinates and defers
the payment (including without limitation in any Insolvency Proceeding) of any
and all amounts which may be now or hereafter owing by the Company to the
Subordinating Creditor pursuant to the Subordinated Note and/or any promissory
notes now or hereafter executed and delivered by the Company to the
Subordinating Creditor in payment of or as evidence of amounts now or hereafter
owing by the Company to the Subordinating Creditor arising pursuant to or in
connection with said Subordinated Note (the "Subordinated Debt") to the prior
payment and satisfaction in full of any and all Senior Debt which may be now or
hereafter owing to CIT by the Company. "Senior Debt," as used herein, shall mean
all Obligations (as defined in the Financing Agreement), including, without
limitation, any and all now existing and future indebtedness, obligations or
liabilities of the Company to CIT, whether direct or indirect, absolute or
contingent, secured or unsecured, arising under the Financing Agreement or the
CIT Note or any guaranty executed by the Company in favor of CIT, as now written
or as amended or supplemented hereafter, or by operation of law or otherwise,
including any and all expenses (including reasonable attorneys' fees) incurred
in connection therewith and any interest thereon, including, without limitation,
any post petition interest accruing on such Senior Debt after the Company
becomes subject to an Insolvency Proceeding (whether or not such interest is
enforceable against the Company or recoverable against the Company or its
bankruptcy estate).
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<PAGE> 62
Senior Debt shall also include all indebtedness, obligations and liabilities of
the Company (i) arising in connection with any advances made to the Company as a
debtor-in-possession, or a trustee for the Company under any Insolvency
Proceeding and (ii) to repay any amount previously paid by the Company pursuant
to the Financing Agreement which amounts have been returned to the Company or to
a trustee pursuant to sections 547 or 548 of the Bankruptcy Code.
"Insolvency Proceeding" shall mean (i) any insolvency or bankruptcy case or
proceeding or any receivership, liquidation, reorganization, readjustment,
composition or other similar case or proceeding relating to the Company or its
assets, (ii) any liquidation, dissolution, reorganization or winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy proceedings or (ii) any assignment for the benefit or
creditors or any other marshalling of the Company's assets.
2. REPRESENTATIONS AND WARRANTIES. The Subordinating Creditor hereby
warrants and represents:
2.1 That the Company owes to the Subordinating Creditor, as of the date
hereof, the Subordinated Debt; that the Subordinated Debt is not and will not be
subject to any defense, offset or counterclaim; that the Subordinating Creditor
is the exclusive owner of the Subordinated Debt; that there are, and will be, no
guarantees or collateral or security for said Subordinated Debt; and that
neither the Subordinated Debt nor any collateral or guarantees (if any) therefor
is now, nor will be subject to any lien, security interest, guarantees,
subordination or assignment except the subordination in favor of CIT.
2.2 That until such time as this Subordination Agreement is terminated as
herein below provided, the Subordinating Creditor will not, directly or
indirectly, demand or receive payment of; exchange, forgive, or modify; request
or obtain collateral or security or guarantees for; effect a subordination or
transfer to others of; grant any security interest in or lien on; or assert, or
participate in, or bring any sort of action, suit or proceeding (including
without limitation bankruptcy or insolvency proceedings) either at law or in
equity for the enforcement, collection or realization on: the whole or any part
of, the Subordinated Debt (herein "Commence Legal Action").
3. INDUCEMENT. This Subordination Agreement is executed as an inducement to
CIT to make loans or advances to the Company or otherwise to extend credit or
financial accommodations to the Company, and to enter into and continue a
financing arrangement with the Company and is executed in consideration of CIT's
doing or having done any of the foregoing. The Subordinating Creditor agrees
that any of the foregoing shall be done or extended by CIT in its sole
discretion and shall be deemed to have been done or extended by CIT in
consideration of and in reliance upon the execution of this Subordination
Agreement, but that nothing herein shall obligate CIT to do any of the
foregoing.
4. TERMINATION. This Subordination Agreement may be terminated only upon
(i) payment and satisfaction in full of all Senior Debt and termination of the
Financing Agreement and CIT's obligation to make loans, advances and/or
extensions of credit thereunder, or (ii) as of
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an Anniversary Date, as defined in the Financing Agreement, and then only upon
actual receipt by an officer of CIT of at least one hundred and twenty (120)
days prior written notice of termination sent by registered or certified mail;
provided, however, that in the event of termination of this Subordination
Agreement, the Subordinating Creditor, shall remain bound hereunder, and this
Subordination Agreement shall continue in full force and effect with respect to
any and all Senior Debt created or arising prior to the effective date of such
termination and with respect to any and all extensions, renewals or
modifications of said pre-existing Senior Debt. This is a continuing agreement
and written notice as above provided shall be the only means of termination,
notwithstanding the fact that for certain periods of time there may be no Senior
Debt owing to CIT by the Company. Subordinating Creditor acknowledges and agrees
that any such termination shall constitute an Event of Default under the
Financing Agreement.
5. RIGHTS IN INSOLVENCY PROCEEDINGS. The Subordinating Creditor irrevocably
authorizes and empowers CIT in any Insolvency Proceeding involving or relating
to the Subordinated Debt to file proof of its claim in behalf of the
Subordinating Creditor with respect to the Subordinated Debt if the
Subordinating Creditor fails to file proof of its claims prior to 30 days before
the expiration of the time period during which such claims must be submitted, to
accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Subordinated Debt in an amount
not in excess of the Senior Debt then outstanding and to take such other action
as may be reasonably necessary to effectuate the foregoing. The Subordinating
Creditor shall provide to CIT all information and documents necessary to present
claims or seek enforcement as aforesaid. The Subordinating Creditor agrees that
while it shall retain the right to vote its claims and otherwise act in any such
Insolvency Proceeding relative to the Company (including, without limitation,
the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition, or extension), the
Subordinating Creditor shall not take any action or vote in any way so as to
contest (i) the validity or the enforceability of the Financing Agreement, the
CIT Note, or the liens and security interests to the extent granted to CIT with
respect to the Senior Debt, (ii) the rights and duties of CIT established in the
Financing Agreement or any security documents with respect to such liens and
security interests, or (iii) the validity or enforceability of this
Subordination Agreement or any agreement or instrument to the extent evidencing
or relating to the Senior Debt. CIT agrees that while it shall retain the right
to vote its Senior Debt and otherwise act in any such reorganization proceeding
relative to the Company (including, without limitation, the right to vote or
accept or reject any plan of partial or complete liquidation, reorganization
arrangement, composition or extension), CIT shall not take any action or vote in
any way so as to contest the enforceability of this Subordination Agreement, the
Subordinated Note or any other agreement or instrument to the extent evidencing
or relating to Subordinated Debt.
6. NO LIABILITY; OVERPAYMENT. CIT shall in no event be liable for any
failure to prove the Subordinated Debt; for failure to exercise any rights with
respect thereto; or for failure to collect any sums payable thereon or for
failure to take any affirmative action in connection therewith. If any dividends
or payments received by CIT on the Subordinated Debt, when added to the
dividends received directly by CIT on the Senior Debt, shall exceed the total
Senior Debt, CIT agrees to pay the excess to the Subordinating Creditor.
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7. ARRANGEMENTS WITH THE COMPANY. It is agreed that CIT may enter into any
agreement or arrangements with respect to the Financing Agreement and/or the CIT
Note, and any amendments, thereto, with the Company as CIT may deem proper;
extend the time for payment of and/or renew any or all Senior Debt; surrender
any security, collateral or guarantees underlying all or any of such Senior
Debt, and make any settlements and compromises thereof; all without notice to or
consent from the Subordinating Creditor and without in any way impairing or
affecting this Subordination Agreement thereby.
8. PAYMENTS TO THE SUBORDINATING CREDITOR. (a) Subject to the provisions of
subparagraph (b) hereof, should any payment with respect to the Subordinated
Debt be received by the Subordinating Creditor in any form and from any source
whatsoever (including, without limitation, any payment or distribution of
collateral security (if any ) or the proceeds of any such collateral security)
prior to the satisfaction in full of all of the Senior Debt, the Subordinating
Creditor shall immediately deliver to CIT any monies, securities or other
property received by it, or its equivalent in cash, with proper endorsements or
assignments, if necessary; and pending such delivery the Subordinating Creditor
shall hold such monies, securities or other property as trustee for the account
of CIT.
(b) Notwithstanding anything to the contrary stated herein, the Company may
make payments of (i) interest when due, strictly in accordance with the terms
and provisions of the Subordinated Note as in effect on the date hereof, and
(ii) after full and final payment of the CIT Note, principal installments
strictly in accordance with the terms and provisions of the Subordinated Note as
in effect on the date hereof, all without prepayment or acceleration of the
Subordinated Debt, and the Subordinating Creditor may demand, receive and retain
said payments unless CIT has notified the Subordinating Creditor in writing that
an Event of Default has occurred under the Financing Agreement (a "Default
Notice"). Upon receipt of a Default Notice, and at all times thereafter until
such Event of Default shall have been cured or waived and CIT shall have
provided written notice thereof to the Subordinating Creditor, (i) the
Subordinating Creditor may not take, demand, receive or accelerate any payment
of principal or interest with respect to the Subordinated Debt and the Company
shall not give, make or permit any such payment and (ii) the Subordinating
Creditor shall not Commence Legal Action. However, notwithstanding the
foregoing, should any Insolvency Proceeding occur at any time, the Subordinated
Debt shall be subordinated to the prior payment of all Senior Debt in accordance
with paragraph 1 hereof and the aforesaid provisions of subparagraph (a) of this
paragraph.
9. ACCELERATION RIGHTS AND REMEDIES. The Subordinating Creditor shall have
no right to accelerate the Subordinated Debt or Commence Legal Action to enforce
collection of all, or any part of, the Subordinated Debt, except that the
Subordinating Creditor may accelerate and Commence Legal Action in the event
that the Company commences or has commenced against it (other than by the
Subordinating Creditor) an Insolvency Proceeding, provided that any such
involuntary Insolvency Proceeding which is commenced against the Company is not
dismissed or discharged within 60 days after commencement thereof; provided,
however that any amount received by the Subordinating Creditor as a result of
any such acceleration, prior to payment in
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full of the Senior Debt, shall be held in trust and paid to CIT in accordance
with the provisions of this Subordination Agreement.
10. ACTION AGAINST. If the Subordinating Creditor in violation of this
Subordination Agreement shall assert or bring any action, suit or proceeding
against the Company, the Company may interpose as a defense or dilatory plea the
making of this Subordination Agreement, and CIT is hereby irrevocably authorized
to intervene and to interpose such defense or plea in its name or in Company's
name. If the Subordinating Creditor shall attempt to enforce, collect or realize
upon any Subordinated Debt or, any collateral, security or guarantees (if any),
securing the Subordinated Debt in violation of this Subordination Agreement, the
Company may, by virtue of this Subordination Agreement, restrain any such
enforcement, collection or realization, or upon failure to do so, CIT may
restrain any such enforcement, collection or realization, either in its own name
or in the name of the Company.
11. ENDORSEMENT OF NOTE; OTHER DOCUMENTS. The Subordinating Creditor agrees
to mark the Subordinated Note evidencing the Subordinated Debt with a notation
in substantially the following form:
"This Note is subject to the terms and provisions of Subordination
Agreement executed by the Payee in favor of The CIT Group/Business Credit,
Inc.", and to deliver such Subordinated Note to CIT.
12. MODIFICATIONS TO THE SUBORDINATED NOTE. Without obtaining the prior
written consent of CIT, the Subordinated Note shall not be amended for (i) any
increase in the rate of interest charged thereunder (ii) any increase in the
principal amount of the Subordinated Note or any installment due thereunder,
(iii) any change of the maturity date of any payment for principal or interest
which would have the effect of accelerating payment thereof, (iv) amendment of
the form or method of payment, (v) the granting or obtaining of any collateral
security or obtaining any lien in any collateral, (vi) providing for any
additional financial covenants or events of default or making more restrictive
any existing covenants or events of default applicable to the Company, or (vii)
any other amendment which would have a material adverse effect on the operations
of the Company, CIT's security interest in the Collateral or CIT's Senior Debt.
13. NO IMPAIRMENT OF COMPANY'S OBLIGATION. Subject to all of CIT's rights
as expressly provided in this Subordination Agreement, nothing contained in this
Subordination Agreement shall impair, as between the Company and the
Subordinating Creditor, the obligation of the Company, which is unconditional
and absolute, to pay the Subordinated Debt to the Subordinating Creditor as and
when all or any portion thereof shall become due and payable in accordance with
its terms or prevent the Subordinating Creditor, upon any default under the
Subordinated Debt, from exercising all rights, powers and remedies otherwise
provided therein or by applicable law.
14. SUBROGATION. Until such time as all Senior Debt is paid in full and
this Subordination Agreement is terminated as herein provided the Subordinating
Creditor shall not assert or be entitled to any subrogation rights. Subject to
the prior sentence, if any payment or distribution to
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which the Subordinating Creditor would otherwise have been entitled (but for the
provisions of this Subordination Agreement) shall have been turned over to CIT
or otherwise applied to the payment of the Senior Debt pursuant to the
provisions of this Subordination Agreement, then the Subordinating Creditor
shall be entitled to receive from CIT any payments or distributions received by
CIT in excess of the amount sufficient to pay all Senior Debt in full, and upon
such payment in full of the Senior Debt shall be subrogated (without any
representation by, or any recourse whatsoever to CIT) to all rights of CIT to
receive all further payments or distributions applicable to the Senior Debt
until the Subordinated Debt shall have been paid in full. For purposes of the
Subordinating Creditor's subrogation rights hereunder, payments to CIT with
respect to the Senior Debt which the Subordinating Creditor would have been
entitled to receive with respect to the Subordinated Debt but for the provisions
of this Subordination Agreement shall not, as between the Company, its creditors
(other than CIT) and the Subordinating Creditor, be deemed payments with respect
to the Senior Debt. CIT makes absolutely no representation or warranty
whatsoever in connection with such rights or Senior Debt, including without
limitation any representation or warranty as to the enforceability of the
Financing Agreement, the Senior Debt, or any lien upon Collateral therefor, or
the collectability of said Senior Debt.
15. ENTIRE AGREEMENT. This Subordination Agreement embodies the whole
agreement of the parties and may not be modified except in writing. CIT's
failure to exercise any right hereunder shall not be construed as a waiver of
the right to exercise the same or any other rights at any other time and from
time to time thereafter, and such rights shall be considered as cumulative
rather than alternative. No knowledge of any breach or other non-observance by
the Subordinating Creditor of the terms and provisions of this Subordination
Agreement shall constitute a waiver thereof, nor a waiver of any obligations to
be performed by the Subordinating Creditor hereunder.
16. WAIVER OF NOTICE. The Subordinating Creditor hereby waives any and all
demands, presentments or notices (other than notices specifically provided for
in this Subordination Agreement) to which it might otherwise be entitled
(including, without limitation, any and all notice of the creation or accrual of
any Senior Debt; of any extension, modification, or renewal of any of said
Senior Debt, and of CIT's reliance on this Subordination Agreement).
17. NOTICES All notices and other communications hereunder shall be in
writing or by telex, telegram or telecopy, and shall be deemed to have been duly
made when delivered in person or sent by telex, telegram, telecopy, same day or
overnight carrier, or when deposited in the United States first class or
registered or certified mail return receipt requested, postage prepaid. Notices
shall be sent:
If to the Subordinating Creditor:
Mr. Stanley Desjardins
2700 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
Fax: 602.631.9005
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If to the Company:
Simula, Inc.
2700 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
Attention: Mr. James Dodd, Chief Financial Officer
Fax: 602.631.9005
If to CIT:
The CIT Group/Business Credit, Inc.
300 South Grand Avenue, 3rd Floor
Los Angeles, California 90071
Attention: Mr. Thomas Hayes, Vice President, Regional Credit Manager
Fax: 213.613.2501
18. GENERAL PROVISIONS. When used in this Subordination Agreement all
pronouns shall, wherever applicable, be deemed to include the plural as well as
the masculine and feminine gender. This Subordination Agreement: shall inure to
the benefit of CIT, its successors and assigns and any parent, subsidiary or
affiliate of CIT; shall be binding upon the respective successors and assigns of
the Subordinating Creditor; and shall pertain to the Company and its successors
and assigns. This Subordination Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, and
such counterparts shall together constitute but one and the same document.
19. CHOICE OF LAW. THIS SUBORDINATION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Subordination Agreement effective as of the date above set forth.
/s/ Stanley Desjardins
----------------------
Stanley Desjardins
THE CIT GROUP/BUSINESS CREDIT, INC.
By
---------------------------
Title:
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<PAGE> 69
The undersigned, the Company referred to in the foregoing Subordination
Agreement, hereby agrees to comply with all of the terms and provisions of said
Subordination Agreement in all respects. In the event of a breach by either the
Company or Subordinating Creditor in the performance of any of the terms of the
said Subordination Agreement, all of said Senior Debt shall, without notice or
demand, become immediately due and payable. The Company hereby covenants that it
will not make any payment on account of, recognize any forgiveness, assignment
or transfer of, nor give any security for, the Subordinated Debt while said
Subordination Agreement is in effect or until CIT's Senior Debt has been
satisfied in full and said Subordination Agreement is terminated as herein
provided.
SIMULA, INC.
By /s/ James C. Dodd
------------------
Title:
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<PAGE> 70
Exhibit 10.41d
GUARANTY
Dated: December 30, 1999
To: THE CIT GROUP/BUSINESS CREDIT, INC.
Address: 300 South Grand Avenue, 3rd Floor
Los Angeles, California 90071
Gentlemen:
Reference is made to that certain Financing Agreement dated of even date
herewith, as amended (herein the "Agreement") between you and each of the
undersigned (herein each a "Guarantor" and collectively the "Guarantors"). Each
of the Guarantors hereby unconditionally jointly and severally guarantees and
agrees to be liable for the full and indefeasible payment and performance when
due of all now existing and future indebtedness, obligations or liabilities of
the other Guarantors to you, howsoever arising, whether direct or indirect,
absolute or contingent, secured or unsecured, whether arising under the
Agreement as now written or as amended or supplemented hereafter, or by
operation of law or otherwise, including, without limitation, all Obligations
(as defined in the Agreement). Further each of the Guarantors agrees to pay to
you on demand the amount of all expenses (including reasonable attorney's fees)
incurred by you in collecting or attempting to collect any of the Obligations
(as hereinafter defined), whether from such Guarantor, or from the other
Guarantors or any other obligor, or in realizing upon any collateral; and agrees
to pay any interest at the highest lawful rate on all amounts payable to you
hereunder, even if such amount cannot be collected from any other obligor. (All
of the aforementioned obligations, liabilities, expenses and interest are
hereinafter collectively called the "Obligations"). To the extent you receive
payment on account of Obligations guaranteed hereby, which payment is thereafter
set aside or required to be repaid by you in whole or in part, then, to the
extent of any sum not finally retained by you (regardless of whether such sum is
recovered from you by any Guarantor, its trustee, or any other party acting for,
on behalf of or through any Guarantor or its representative), the Guarantors'
obligation to you under this Guaranty, as amended, modified or supplemented,
shall remain in full force and effect (or be reinstated) until the Guarantors
have made payment to you therefor, which payment shall be due upon demand.
This Guaranty is executed as an inducement to you to enter into or continue
the financing arrangement under the Agreement and to make the loans, advances,
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extensions of credit or financial accommodations described therein, and is
executed in consideration of your doing or having done any of the foregoing.
Each of the Guarantors agrees that any of the foregoing shall be done or
extended by you in your sole discretion, and shall be deemed to have been done
or extended by you in consideration of and in reliance upon the execution of
this Guaranty, but that nothing herein shall obligate you to do any of the
foregoing.
Notice of acceptance of this Guaranty, the making of loans or advances, or
the extension of credit under the Agreement, the amendment, execution or
termination of the Agreement or any other agreements in connection therewith,
and presentment, demand, protest, notice of protest, notice of non-payment and
all other notices to which the Guarantors may be entitled (whether under this
Guaranty or the Agreement), and your reliance on this Guaranty are hereby
waived. Each of the Guarantors also waives notice of: changes in terms or
extensions of the time of payment, the taking and releasing of collateral or
guarantees (including the release of any of the Guarantors) and the settlement,
compromise or release of any Obligations, and agree that, as to each of the
Guarantors, the amount of the Obligations shall not be diminished by any of the
foregoing. Each of the Guarantors also agrees that you need not attempt to
collect any Obligations from the other Guarantors or any other obligor or to
realize upon any collateral, but may require the Guarantors to make immediate
payment of Obligations to you when due or at any time thereafter. You shall not
be liable for failure to collect Obligations or to realize upon any collateral
or security therefor, or any part thereof, or for any delay in so doing, nor
shall you be under any obligation to take any action whatsoever with regard
thereto.
This Guaranty is absolute, unconditional and continuing, regardless of the
validity, regularity or enforceability of any of the Obligations or the fact
that a security interest or lien in any collateral or security therefor may not
be enforceable by you or may otherwise be subject to equities or defenses or
prior claims in favor of others or may be invalid or defective in any way and
for any reason, including any action, or failure to act, on your part. Payment
by the Guarantors shall be made to you at your office from time to time on
demand as Obligations become due, and one or more successive or concurrent
actions may be brought hereon against the Guarantors (or any one or more of
them) either in the same action or in separate actions. In the event any claim
or action, or action on any judgment, based on this Guaranty, is made or brought
against the Guarantors, each of the Guarantors agrees not to assert against you
any set-off or counterclaim which the other Guarantors may have, and, further,
each of the Guarantors agrees not to deduct, set-off, or seek to counterclaim
for or recoup, any amounts which are or may be owed by you to such Guarantor, or
for any loss of contribution from any other guarantor. Furthermore, in any
litigation based on the Guaranty in which you and any of the Guarantors shall be
adverse parties, the Guarantors hereby waive trial by jury and waive the right
to interpose any defense
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based upon any Statute of Limitations or any claim of laches and waive the
performance of each and every condition precedent to which the Guarantors might
otherwise be entitled by law. Each of the Guarantors hereby consents to the in
personam jurisdiction of the courts of the State of California. In the event
that you bring any action or suit in any court of record of New York State or
the Federal Government to enforce any or all liabilities of the Guarantors
hereunder, service of process may be made on the Guarantors by mailing a copy of
the summons to the Guarantors at the address below set forth.
All sums at any time to the credit of the Guarantors and any property of
the Guarantors on which you at any time have a lien or security interest, or of
which you at any time have possession, shall secure payment and performance of
all Obligations and any and all other obligations of the Guarantors to you
however arising. The Guarantors shall have no right of subrogation,
indemnification or recourse to any Obligations or collateral or guarantees
therefor, or to any assets of any of the Guarantors.
This Guaranty may be terminated as to any one of the Guarantors only as of
any Anniversary Date (as defined in the Agreement) and then only upon actual
receipt by one of your officers of at least ninety (90) days prior written
notice of termination sent by registered or certified mail; provided however,
that any of the Guarantors so terminating this Guaranty shall remain bound
hereunder, and this Guaranty shall continue in full force and effect, with
respect to any and all Obligations created or arising prior to the effective
date of such termination and with respect to any and all extensions, renewals or
modifications of said pre-existing Obligations. Termination as to any one of the
Guarantors shall not affect the obligations of any of the other Guarantors, nor
relieve the one giving such notice from liability for any post termination
collection expenses or interest. This is a continuing agreement and written
notice as above provided shall be the only means of termination, notwithstanding
the fact that for certain periods of time there may be no Obligations owing to
you under the Agreement. Guarantors acknowledge and agree that termination of
this Guaranty is an Event of Default under and as defined in the Agreement.
Your books and records showing the loan account(s) maintained under the
Agreement shall be admissible in evidence in any action or proceeding as prima
facie proof of the items therein set forth. Your monthly statements rendered
under the Agreement shall be binding upon the Guarantors (whether or not the
Guarantors received copies thereof) and shall constitute an account stated
unless you shall have received a written statement of the exceptions thereto
within thirty (30) days after the statement was mailed by you.
Each of the Guarantors expressly waives any and all rights of subrogation,
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reimbursement, indemnity, exoneration, contribution or any other claim which it
may now or hereafter have against the other Guarantors or any other person
directly or contingently liable for the Obligations guaranteed hereunder, or
against or with respect to any Guarantors property (including, without
limitation, property collateralizing its Obligations to you) arising from the
existence or performance of this Guaranty.
Each of the Guarantors consents and agrees that, without notice to or by
such Guarantor and without affecting or impairing in any way the obligations or
liability of such Guarantor hereunder, you may, from time to time, exercise any
right or remedy you may have with respect to the Obligations or any property
securing any or all of the Obligations or any guaranty thereof, including
without limitation, judicial foreclosure, nonjudicial foreclosure, exercise of a
power of sale, and taking a deed, assignment or transfer in lieu of foreclosure
as to any such property, and each Guarantor expressly waives any defense based
upon the exercise of any such right or remedy, notwithstanding the effect
thereof upon any of such Guarantor's rights, including without limitation, any
destruction of Guarantor's right of subrogation against any Borrower under the
Agreement and any destruction of such Guarantor's right of contribution or other
right against any other guarantor of any or all of the Obligations or against
any other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Pursuant to Section 2856 of the California Civil Code,
each Guarantor waives all rights and defenses that such Guarantor may have
because the Obligations are secured by real property. This means, among other
things: (a) you may collect from any Guarantor without first foreclosing on any
real or personal property collateral pledged by any Borrower or any other
guarantor; and (b) if you forecloses on any real property collateral pledged by
any Borrower or any other guarantor: (i) the amount of the Obligations may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price; and (ii) you may
collect from such Guarantor even if you, by foreclosing on such real property
collateral, has destroyed any right such Guarantor may have to collect from any
Borrower or such other guarantor. This is an unconditional and irrevocable
waiver of any rights and defenses each Guarantor may have because the
Obligations are secured by real property. These rights and defenses include, but
are not limited to, any rights or defenses based upon Section 580a, 580b, 580d,
or 726 of the California Code of Civil Procedure.
This Guaranty embodies the whole agreement of the parties and may not be
modified except in writing, and no course of dealing between you and any of the
Guarantors shall be effective to change or modify this Guaranty. Your failure to
exercise any right hereunder shall not be construed as a waiver of the right to
exercise the same or any other right at any other time and from time to time
thereafter, and
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such rights shall be considered as cumulative rather than alternative. No
knowledge of any breach or other nonobservance by any of the Guarantors of the
terms and provisions of this Guaranty shall constitute a waiver thereof, nor a
waiver of any obligations to be performed by the Guarantors hereunder.
This Guaranty may be assigned by you and shall be for your benefit and for
the benefit of any of your assignees or transferees, and shall cover any
Obligations owed to you at the time of assignment or transfer as well as any and
all future Obligations, loans, advances or extensions of credit made under the
Agreement by, or otherwise owed to, such assignee or transferee.
This instrument is executed and given in addition to, and not in
substitution, reduction, replacement, or satisfaction of, any other endorsements
or guarantees of the Obligations, now existing or hereafter executed by any or
all of the Guarantors or others in your favor.
When used in this agreement, all pronouns shall, wherever applicable, be
deemed to include the singular and plural as well as the masculine, feminine,
and neuter genders. This agreement shall inure to the benefit of you, your
successors and assigns and any parent, subsidiary or affiliate of yours; shall
be binding jointly and severally upon the Guarantors and upon the respective
heirs, executors, administrators, successors and assigns of each of the
Guarantors.
This Guaranty may be executed in any number of counterparts, each of which
when so executed shall be deemed an original and such counterparts shall
together constitute but one and the same document.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF the Guarantors have executed and delivered this Guaranty
effective as of the date above set forth.
SIMULA, INC.
By /s/ James C. Dodd
-----------------
Title: Executive Vice President and CFO
--------------------------------
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AIRLINE INTERIORS, INC.
By /s/ James C. Dodd
------------------
Title: Treasurer
---------
ARTCRAFT INDUSTRIES CORP.
By /s/ James C. Dodd
------------------
Title: Treasurer
---------
SIMULA TRANSPORTATION
EQUIPMENT CORPORATION
(formerly known as INTAERO INC.)
By /s/ James C. Dodd
------------------
Title: Treasurer
---------
INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.
By /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.
By /s/ James C. Dodd
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Title: Treasurer
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SIMULA COMPOSITES
CORPORATION
By /s/ James C. Dodd
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Title: Treasurer
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SIMULA POLYMER SYSTEMS, INC.
By /s/ James C. Dodd
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Title: Treasurer
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SIMULA SAFETY SYSTEMS, INC.
By /s/ James C. Dodd
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Title: Treasurer
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SIMULA TECHNOLOGIES, INC.
By /s/ James C. Dodd
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Title: Treasurer
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SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED
By /s/ James C. Dodd
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Title: Treasurer
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INTAERO LTD.
By /s/ James C. Dodd
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Title: Treasurer
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CCEC CAPITAL CORP.
By /s/ James C. Dodd
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Title: Treasurer
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Exhibit 10.41e
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT is entered into as of the 30th day of
December, 1999 (this "Agreement"), by and between LEVINE LEICHTMAN CAPITAL
PARTNERS II, L.P., a California limited partnership ("Term Lender"), and THE CIT
GROUP/ BUSINESS CREDIT, INC. ("Revolving/Term Lender").
R E C I T A L S
A. SIMULA, INC., an Arizona corporation ("Simula"), Simula's subsidiaries
(such subsidiaries, together with Simula, being collectively referred to as
"Debtors," and Simula or any such subsidiary being individually referred to as
"Debtor") and Term Lender 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, Debtors are jointly and severally issuing and selling to Term Lender,
and Term Lender is purchasing from Debtors, Secured Senior Notes dated of even
date herewith in the aggregate principal amount of $20,000,000 (the "Senior Term
Notes"), and Simula is issuing and selling to the Purchaser, and the Purchaser
is purchasing from Simula, a Warrant to Purchase 850,000 Shares of Common Stock
of Debtor (the "Warrant"), all on the terms and subject to the conditions
contained in the Securities Purchase Agreement.
B. In addition, concurrently with the execution of this Agreement,
Revolving/Term Lender is providing to Debtors a senior, secured revolving and
term credit facility in the aggregate principal amount of up to $22,000,000
pursuant to the Financing Agreement dated of even date herewith (the
"Revolving/Term Loan Agreement") among Revolving/Term Lender and Debtors.
C. Revolving/Term Lender and Term Lender are each unwilling to enter into
their respective financing transactions with Debtors unless the other enters
into this Agreement.
D. Term Lender hereby acknowledges and affirms that Revolving/Term Lender's
financial accommodations to Debtors constitute valuable consideration to Term
Lender. Revolving/Term Lender hereby acknowledges and affirms that Term Lender's
financial accommodations to Debtors also constitute valuable consideration to
Revolving/Term Lender.
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:
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1. Definitions. In addition to the capitalized terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following
respective 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, five percent (5%) or more of the Capital Stock of such specified
Person, or (ii) any other Person that, directly or indirectly, controls, is
controlled by, is under direct or indirect common control with, such specified
Person or any Affiliate of such specified Person.
"Collateral" shall mean all assets and property of Debtors or any of
its or their Subsidiaries, whether real or personal, tangible or intangible, now
existing or hereafter acquired, that is or may at any time be or become subject
to a Lien in favor of Revolving/Term Lender to secure the Revolving/Term
Indebtedness.
"Foreclosure Remedy" shall mean the right to enforce a lien or security
interest through foreclosure proceeding pursuant to chapter 5 of Article 9 of
the Uniform Commercial Code, through judicial or non-judicial foreclosure with
respect to real property collateral security, or through any other exercise of
rights under a lien or through a security interest against collateral by the
holder of the lien or security interest.
"Insolvency Proceeding" shall mean any liquidation, bankruptcy,
receivership, assignment for the benefit of creditors, or any other judicial,
equitable, or administrative action or proceeding commenced by or against any
Person or any of its assets or property under federal or state law and involving
the adjustment, restructuring, or liquidation of any or all of the assets,
obligations, business, or property of such Person.
"Lien" means, with respect to any assets or property, any security
deed, mortgage, deed to secure debt, deed of trust, lien, pledge, assignment,
charge, security interest, title retention agreement, negative pledge, levy,
execution, seizure, attachment, garnishment, or other encumbrance of any kind in
respect of such property, whether or not choate, vested, or perfected.
"Person" shall mean any individual, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, limited liability partnership, or governmental (whether federal, state,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof) or other entity.
"Pledged Stock" shall mean the capital stock of any Subsidiary of any
Debtor that constitutes Collateral.
"Proceeds" shall mean any cash, securities, or other property received
upon the sale, transfer, lease or other disposition or collection of any of the
Collateral, whether pursuant to foreclosure, voluntary disposition, sale or
other disposition or collection in the ordinary course of business, or
otherwise.
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"Revolving/Term Indebtedness" shall mean all indebtedness, liabilities
and other obligations of Debtors and any Revolving/Term Loan Guarantor, now
existing or hereafter arising under the Revolving/Term Loan Agreement and the
other Revolving/Term Loan Documents, as each may from time to time be amended,
supplemented, extended, renewed, modified or restated in accordance with the
terms of this Agreement, whether for principal, premium, interest, fees,
expenses, indemnities or otherwise.
"Revolving/Term Loan Default" shall mean a "Default" as defined in the
Revolving/Term Loan Agreement.
"Revolving/Term Loan Documents" shall mean (a) the Revolving/Term Loan
Agreement, (b) the Guaranty dated of even date herewith executed by the Debtors
in favor of Revolving/Term Lender, and (c) any other agreements, security
agreements, pledge agreements, instruments and documents executed on the date
hereof and delivered to, or in favor of, Revolving/Term Lender in connection
therewith.
"Revolving/Term Loan Event of Default" shall mean an "Event of Default"
as defined in the Revolving/Term Loan Agreement.
"Revolving/Term Loan Guarantor" shall mean any Person which has
guaranteed the Revolving/Term Loan.
"Senior Indebtedness" shall mean the Term Loan Indebtedness, the
Revolving/Term Loan Indebtedness or both, as applicable.
"Senior Lender" shall mean Term Lender, Revolving/Term Lender or both,
as applicable.
"Senior Loan Documents" shall mean the Term Loan Documents or the
Revolving/Term Loan Documents, as applicable.
"Standstill Notice" shall mean a written notice furnished by
Revolving/Term Lender to Term Lender that a Revolving/Term Loan Event of Default
has occurred and is continuing and containing in all capital letters the
following text: "THIS IS A STANDSTILL NOTICE UNDER THE TERMS OF THE
INTERCREDITOR AGREEMENT DATED DECEMBER 30, 1999."
"Standstill Period" shall mean the period commencing with the date of
receipt by Term Lender of a Standstill Notice and ending on the earliest to
occur of the following:
(a) Payment in full, in cash, and satisfaction of all the
Revolving/Term Indebtedness;
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(b) Acceleration of all or any portion of the Revolving/Term
Indebtedness or any exercise of any Foreclosure Remedy by Revolving/Term Lender;
(c) The initiation of any Insolvency Proceeding involving Debtor;
(d) The end of the 135-day period starting with the date of receipt of
the Standstill Notice by Term Lender; or
(e) The date which is five (5) days following the date of receipt by
Debtors of written notice from Revolving/Term Lender of its intent to terminate
or suspend its obligation to Debtor to make further advances or loans or allow
the incurrence of letter of credit obligations.
"Term Indebtedness" shall mean all indebtedness, liabilities and other
obligations of Debtors and any Term Loan Guarantor, now existing or hereafter
arising under the Term Loan Agreement and the other Term Loan Documents, as each
may from time to time be amended, supplemented, extended, renewed, modified or
restated in accordance with the terms of this Agreement, whether for principal,
premium, interest, fees, expenses, indemnities or otherwise.
"Term Loan Default" shall mean a "Default" as defined in the Securities
Purchase Agreement.
"Term Loan Documents" shall mean (i) the Securities Purchase Agreement,
(ii) the Senior Term Notes, (iii) the Guaranty; (iv) the Security Agreement
among Debtors and Term Lender, (v) the security agreement with respect to
intellectual property of even date herewith between Debtors and Term Lender,
(vi) the Stock Pledge Agreement of even date herewith between Debtors and Term
Lender, (vii) such other documents, agreements and instruments as are executed
and delivered in connection with the foregoing.
"Term Loan Event of Default" shall mean an "Event of Default" as
defined in the Securities Purchase Agreement.
"Term Loan Guarantor" shall mean any Person which has guaranteed the
Senior Term Notes.
"Term Loan Payments" shall mean all payments of any amounts due
pursuant to the Senior Term Notes or any other Term Loan Document, whether of
principal, interest or otherwise.
2. No Subordination of Indebtedness. The Revolving/Term Indebtedness and
the Term Indebtedness shall rank pari passu in right to payment with one another
and neither shall be subordinate in right of payment to the other; provided,
however, in no event shall such pari passu right to payment affect the priority
of Revolving/Term Lender as against Term Lender with respect to the Collateral
and the Proceeds as hereinafter set forth.
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3. Priority of Security Interests and of Rights to Proceeds; Release of
Liens; Insurance Proceeds.
(a) Notwithstanding the timing, order or manner of the grant or
perfection of any of their respective Liens, the Liens now or hereafter held by
Revolving/Term Lender in any Collateral and Proceeds to secure the
Revolving/Term Indebtedness shall be senior and prior to any Liens now or
hereafter held by or for the benefit of Term Lender in or to any of the
Collateral and Proceeds. The priorities set forth in this Agreement shall be
effective notwithstanding anything to the contrary contained in the
Revolving/Term Loan Documents, the Term Loan Documents, or any plan of
reorganization or similar document filed by or on behalf of any Debtor or any
Affiliate of any Debtor under any Insolvency Proceeding of any Debtor, including
any prior perfection of a Lien under the provisions of the Uniform Commercial
Code or any other applicable laws of any jurisdiction, or the existence of any
present or future filing of financing statements under the Uniform Commercial
Code or other applicable laws of any jurisdiction in which such filing has been
made, or any other recordation or filing of any document.
(b) Revolving/Term Lender and Term Lender acknowledge and agree that,
pursuant to the Revolving/Term Loan Documents all of the cash flow of Debtors is
administered by Revolving/Term Lender, is derived from the sale of inventory and
other Collateral and the collection of accounts receivable (also constituting
Collateral), is deposited into deposit accounts which are also Collateral, and,
therefore, all of the foregoing constitutes Collateral and Proceeds. As
Collateral and Proceeds, such cash flow and other assets are all subject to the
rights of Revolving/Term Lender as the holder of the senior and prior Lien in
the Collateral and the Proceeds, and, pursuant to the administration of the
Revolving/Term Indebtedness under the terms of the Revolving/Term Loan
Documents, all such cash flow and Proceeds are paid over and delivered, or
caused to be paid over and delivered, by Debtors to Revolving/Term Lender for
application against the Revolving/Term Indebtedness, subject to the Debtors'
right to repay and reborrow Revolving/Term Indebtedness under the Revolving/Term
Loan Documents.
(c) In connection with: (i) any sale or other disposition of assets
other than the capital stock of a Debtor or all or a substantial portion of the
assets of a Debtor (collectively, a "Non-Material Asset Sale"); or (ii) the sale
or other disposition of the capital stock of a Debtor or all or a substantial
portion of the assets of a Debtor (a "Material Asset Sale") occurring after the
declaration by Revolving/Term Lender of a Revolving/Term Lender Event of Default
and during the continuance thereof, arising from or associated with the
existence of overadvances under (and as defined in Section 3(1) of) the
Revolving/Term Loan Agreement (hereinafter "Overadvances"), the commencement of
an Insolvency Proceeding by any Debtor, or any similar material Revolving/Term
Lender Event of Default, or the initiation of a Foreclosure Remedy against any
of the Collateral by Revolving/Term Lender, then, in the case of either of the
foregoing clauses (i) or (ii), if Revolving/Term Lender releases any of its
Liens on any part of the Collateral in connection with any such sale or other
disposition, Term
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Lender agrees that it shall unconditionally and simultaneously release its liens
thereon and Term Lender shall execute and deliver to Revolving/Term Lender or
the Debtors, as applicable, such termination statements, releases and other
documents as Revolving/Term Lender or the Debtors may reasonably request to
effectuate such release; provided, however it is expressly understood and agreed
that the Lien granted to Term Lender shall, subject to all of the provisions of
this Agreement, continue in the Proceeds arising from any such sale or other
disposition if such Proceeds are not applied to the Revolving/Term Indebtedness
in accordance with the Revolving/Term Loan Documents, subject to the Debtors'
right to repay and reborrow Revolving/Term Indebtedness under the Revolving/Term
Loan Documents; provided, further, however, it is further understood and agreed
that any such release of Lien by Term Lender shall not be deemed to be a waiver
of or consent to any violation or breach of any provision of the Term Loan
Documents caused by any such sale or other disposition of such Collateral and
Term Lender shall continue to be entitled to all of its rights and remedies to
enforce its rights to payments of the Term Indebtedness under the Term Loan
Documents. Notwithstanding the foregoing provisions of this subsection (c), in
connection with any sale or disposition of either Non-Material Assets or
Material Assets at a time when no Revolving/Term Lender Event of Default has
occurred and is continuing, the Revolving/Term Lender's term loan under the
Revolving/Term Loan Agreement as of the date hereof has been repaid, or will be
repaid from the Proceeds of such sale or disposition, in full, in cash, and the
Term Lender's LLCP Term Loan A Debt (as defined in the Revolving/Term Loan
Agreement) has not been repaid in full, in cash, then if Term Lender releases
any of its Liens on any part of the Collateral in connection with any such sale
or disposition thereof, Revolving/Term Lender agrees that it shall
unconditionally and simultaneously release its liens thereon and consent thereto
as not constituting a Revolving/Term Loan Event of Default, and Revolving/Term
Lender shall execute and deliver to Term Lender or the Debtors, as applicable,
such termination statements, releases and other documents as Term Lender or the
Debtors may reasonably request to effectuate such release; provided that, in
light of the relative Lien priorities, the Proceeds of any such sale or
disposition shall be applied first to Revolving/Term Lender to repay such of
Revolving/Term Lender's revolving loan advances as are then outstanding as were
advanced against the assets being sold or disposed of, second to Revolving/Term
Lender in repayment of the its term loan, third to Term Lender in repayment of
the LLCP Term Loan A Debt, and finally to Revolving/Term Lender for application
against the Revolving/Term Indebtedness , subject to the Debtors' right to repay
and reborrow Revolving/Term Indebtedness under the Revolving/Term Loan
Documents.
(d) Unless and until the Revolving/Term Indebtedness is paid in full,
in cash, Revolving/Term Lender shall have the sole and exclusive right, subject
to the rights of the Debtors under the Revolving/Term Loan Documents, to adjust
settlement of claims under any insurance policy covering the Collateral in the
event of any loss thereunder and to approve any award granted in any
condemnation or similar proceeding affecting the Collateral, and all payments of
claims and awards are Proceeds hereunder. Notwithstanding the foregoing
provisions of this subsection (d), with respect to the key-man life insurance
policies respecting certain officers, directors and principals of the Debtors,
Term Lender shall have the sole and
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exclusive right to settle and adjust any claims and to receive proceeds of such
policies for application against the Term Indebtedness.
4. Standstill. During a Standstill Period, Term Lender shall not have any
right to enforce any Liens in, foreclose, levy or execute upon, or attach any
Collateral, whether by private or judicial action or otherwise. The preceding
sentence is only for the benefit of Revolving/Term Lender and, as between Term
Lender and Debtors or any Term Loan Guarantor, shall not constitute a waiver by
Term Lender of any default or event of default or of its rights, powers or
remedies with respect to Debtor or any Term Loan Guarantor.
5. Consent to Liens. Revolving/Term Lender hereby consents to the grant or
creation of Liens on the Collateral and any other assets of Debtors in favor of
Term Lender under the Term Loan Documents and agrees that the grant, perfection,
maintenance or existence of such Liens does not and shall not constitute a
Revolving/Term Loan Default or a Revolving/Term Loan Event of Default. In
addition, Term Lender hereby consents to the grant or creation of Liens on the
Collateral in favor of Revolving/Term Lender under the Revolving/Term Loan
Documents, and agrees that the grant or existence of such Liens does not and
shall not constitute a Term Loan Default or a Term Loan Event of Default.
6. Standstill Notices. Only one (1) Standstill Notice may be given within
any 365-day period, regardless of the number of Revolving/Term Loan Events of
Default which occur within or outside of any Standstill Period.
7. Amendment of Documents.
(a) The Revolving/ Term Loan Documents shall not be amended without the
prior written consent of Term Lender (which consent will not be unreasonably
withheld) for (i) a change in the amount of the "Line of Credit" (as defined in
the Revolving/ Term Loan Documents), (ii) an amendment of the definitions of
"Availability," "Availability Reserve," "Eligible Accounts Receivable" or
"Eligible Inventory," in each case as set forth in the Revolving/ Term Loan
Documents on the date hereof (or any of the definitions of the defined terms
used in such definitions), (iii) an amendment to increase the rate of interest
set for Revolving Loans pursuant to the Revolving/ Term Loan Documents or the
Default Rate of Interest (as each term is defined in the Revolving/ Term Loan
Documents on the date hereof (provided, that the foregoing shall not apply to
the application of the Default Rate of Interest in accordance with the
Revolving/ Term Loan Documents as in effect on the date hereof); (iv) a
reduction of the maturity date of any payment of principal or interest, (v) an
extension of the final maturity date of the Revolving/Term Indebtedness of three
years from the date hereof other than up to two extensions of 90 days each if
Debtors shall have failed to arrange for refinancing or other repayment in full,
in cash, of the Revolving/Term Indebtedness by such date, (vi) an amendment of
the Revolving/ Term Loan Documents as in effect as of the date hereof to either
add or amend an Event of Default (as defined in the Revolving/ Term Loan
Documents) (or any of the definitions used therein) to make, or have the effect
of making, such Event of Default more restrictive on the business or operations
of the Debtors; or (vii) an
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amendment to the Revolving/ Term Loan Documents as in effect on the date hereof
to amend any of the financial covenants set forth therein (or any of the
definitions used therein). Revolving/Term Lender shall not make any voluntary
Overadvances under the Revolving/Term Loan Documents in excess of $1,700,000
other than Overadvances, in Revolving/Term Lender's reasonable business
judgment, necessary to pay the actual, necessary costs and expenses of
preserving the Collateral (and Revolving/Term Lender shall give Term Lender
written notice with respect to any such costs and expenses as soon and as
frequently as practicable).
(b) The Term Loan Documents shall not be amended without obtaining the
prior written consent of Revolving/Term Lender (which consent will not be
unreasonably withheld) for (i) an amendment to increase the rate of interest set
for the Term Indebtedness (provided, that the foregoing shall not apply to the
application of the Default Rate in accordance with the Term Loan Documents),
(ii) any increase in the principal amount of the Term Indebtedness in excess of
$2,000,000 (which additional amount shall be permitted only if the maturity date
of such additional amount is no earlier than the maturity date of the Term
Indebtedness under the Term Loan Documents in effect as of the date hereof) or
any installment of principal due thereunder, (iii) reduction of the maturity
date of any payment of principal or interest, (iv) providing for any additional
financial covenants or events of default or making more restrictive any existing
covenants or events of default applicable to the Debtors. In addition, Term
Lender will not request or obtain any additional collateral or security for the
Term Indebtedness except to the extent that Revolving/Term Lender has been
offered a senior Lien to secure the Revolving/Term Indebtedness on such
collateral in writing.
8. Senior Indebtedness Owed Only to Senior Lenders. Each Senior Lender
represents and warrants that it has not previously assigned any interest in its
Senior Indebtedness or Senior Loan Documents, that no other Person owns an
interest in any of such Senior Indebtedness or Senior Loan Documents (whether as
joint holders, participants or otherwise), and that such entire Senior
Indebtedness is owing only to such Senior Lender.
9. Pledged Stock. As an accommodation only, Revolving/Term Lender hereby
agrees that it shall hold the Pledged Stock for its own benefit and for the
benefit of Term Lender solely, as to Term Lender, for the purpose of perfecting
Term Lender's security interest therein, and, upon full and final payment, in
cash, of the Revolving/Term Indebtedness, Revolving/Term Lender shall deliver to
Term Lender any and all certificates or other documents representing such
Pledged Stock, or as otherwise directed by Term Lender or order of any court. It
is expressly acknowledged and agreed that Revolving/Term Lender may deal with
such Pledged Stock in accordance with its usual practices in the ordinary course
of business and shall adhere to the same standards of conduct as would be the
case if there were no subordinate Liens thereon, and Revolving/Term Lender shall
have no liability to Term Lender with respect to Revolving/Term Lender's
possession of such pledged stock except for acts or omissions of Revolving/Term
Lender which are grossly negligent or constitute willful misconduct.
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10. Reinstatement. The provisions of this Agreement shall continue to be
effective or be reinstated, and the Revolving/Term Indebtedness shall not be
deemed to be paid in full, in cash, as the case may be, if at any time any
payment of Revolving/Term Indebtedness is rescinded or avoided, or must
otherwise be returned by Revolving/Term Lender pursuant to any Insolvency
Proceeding or otherwise, all as though such payment had not been made.
11. Nonimpairment. No right of either party enforce the provisions hereof
shall at any time in any way be prejudiced or impaired by any act or failure to
act by the other party or Debtors or any guarantor, or any noncompliance by
Debtors or by the other Person with the terms and provisions and covenants
herein contained, regardless of any knowledge thereof that the party may have or
with which the party may otherwise be charged.
12. Instrument Legends. Each Senior Lender shall forthwith inscribe on the
face of any promissory note and any other instrument evidencing its Senior
Indebtedness or any portion thereof a legend conspicuously indicating that it is
subject to the terms of this Agreement, and shall forthwith deliver copies
thereof to the other Senior Lender. For purposes of this Section 12, the
following legend (or a substantially similar legend) shall be acceptable:
"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."
13. Additional Remedies. If either party violates any of the terms of this
Agreement, in addition to any remedies in law, at equity or otherwise, the other
party may restrain such violation in any court of law or equity and may
interpose this Agreement as a defense in any action by the violating party.
14. Certain Waivers.
(a) All Senior Indebtedness shall be deemed to have been made or
incurred in reliance upon the terms and other provisions of this Agreement. Each
Senior Lender waives all notice of the acceptance by the other Senior Lender of
the provisions of this Agreement and agrees that the other Senior Lender has
made no representations or warranties with respect to the legality, validity,
enforceability, collectability or perfection of any Senior Indebtedness or any
liens held by it in connection therewith.
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(b) Each Senior Lender shall be entitled to manage and supervise its
loans or other financial accommodations to Debtors in accordance with applicable
laws and its normal business practices, modified from time to time as it deems
appropriate under the circumstances, without regard to the existence of any
rights that the other Senior Lender may now or hereafter have in or to any
Collateral, except that each Senior Lender shall comply with the terms of this
Agreement.
(c) No Senior Lender shall have any liability to the other Senior
Lender as a result of any and all lawful actions not in breach of this Agreement
that such Senior Lender takes or omits to take (including actions with respect
to the creation, perfection or continuation of its liens, actions with respect
to the occurrence of a default or event of default under its Senior Loan
Documents, actions with respect to the foreclosure, sale, release or failure to
realize upon, any Collateral (except that each Senior Lender shall deal with any
Collateral in its possession in accordance with its usual practices in the
ordinary course of business and shall have no liability to the other except for
acts or omissions of which are grossly negligent or constitute willful
misconduct), and actions with respect to the collection of any claim for all or
any part of its Senior Indebtedness from any account debtor of Debtor or any
other Person). Without limiting the generality of the foregoing, Term Lender
waives any otherwise valid legal or equitable right (i) to require
Revolving/Term Lender to marshal any portion of the Collateral or otherwise to
seek satisfaction from any particular property of Debtor or from any other
Person, (ii) to oppose any motion or application by Revolving/Term Lender or
Debtor to allow use of cash collateral, provide adequate protection of
Revolving/Term Lender's interest in the Collateral, or grant relief from
automatic stay to permit Revolving/Term Lender to enforce its rights and
remedies with respect to the Collateral, or (iii) otherwise to prohibit, delay,
control, or limit in any manner the sale or other disposition by Revolving/Term
Lender of any portion of the Collateral.
15. Other Waivers. No waiver shall be deemed to be made by Revolving/Term
Lender or Term Lender of any of their respective rights hereunder unless it is
in writing signed by the waiving party. Each such waiver shall be a waiver only
with respect to the specific instance involved and shall in no way impair the
rights of the waiving party or the obligations of the other party to the waiving
party in any other respect at any other time.
16. Information Concerning Financial Condition. Except as otherwise
expressly provided for in this Agreement, each Senior Lender acknowledges that
the other Senior Lender has no obligation to keep it informed of the financial
condition of Debtors or of other circumstances bearing upon the risk of
nonpayment of the Revolving/Term Indebtedness or Term Indebtedness. Each of
Revolving/Term Lender and Term Lender hereby agree that the other shall have no
duty to advise it of information known to it regarding such condition or any
such circumstances. In the event Revolving/Term Lender or Term Lender (the
"providing party"), in its sole discretion, undertakes, at any time or from time
to time, to provide any such information to the other (the "receiving party"),
the providing party shall be under no obligation to (a) provide any such
information to the receiving party on any subsequent occasion, (b) undertake any
investigation not a part of its regular business routine, or
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(c) disclose any information that, pursuant to its commercial finance practices,
the providing party wishes to maintain as confidential. Notwithstanding the
foregoing, this paragraph is subject to the notices required by Section 18.
17. Third-Party Beneficiaries; Termination.
(a) This Agreement is solely for the benefit of Revolving/Term Lender,
Term Lender and their respective successors and permitted assigns, and neither
Debtor nor any other Person is intended to be a third-party beneficiary
hereunder or to have any right, benefit, priority or interest under, or because
of the existence of, or to have any right to enforce, this Agreement. This
Agreement is intended solely for the purpose of defining the relative rights of
Revolving/Term Lender and Term Lender and is not intended to or will impair, as
between Debtor, any Revolving/Term Loan Guarantor, any Term Loan Guarantor and
their respective creditors other than Revolving/Term Lender and Term Lender, the
respective obligations, which are absolute and unconditional, of Debtor, the
Revolving/Term Loan Guarantors and the Term Loan Guarantors to Revolving/Term
Lender or Term Lender.
(b) Revolving/Term Lender and Term Lender shall have the right to
modify or terminate this Agreement at any time without notice to or approval of
Debtor or any other Person upon the written consent of Term Lender and
Revolving/Term Lender. In addition, Term Lender may terminate this Agreement
upon the full payment and satisfaction of the Revolving/Term Indebtedness and
termination of the Revolving/Term Loan Documents.
18. Notices.
(a) Revolving/Term Lender shall use it best efforts to give prompt
written notice to Term Lender of (i) the declaration by Revolving/Term Lender of
any Revolving/Term Loan Event of Default or (ii) the expiration of any
Standstill Period (including notice of the issuance of the notice to Debtors
under clause (e) of the definition of Standstill Period set forth hereinabove);
provided that any failure by Revolving/Term Lender to provide such notice shall
not affect Revolving/Term Lender's rights arising from any such Revolving/Term
Loan Event of Default, and shall not result in any liability to Term Lender
other than liability for any such failure where such failure was a result of
gross negligence or wilful misconduct (and an mere inadvertent omission to give
such notice shall not be deemed to be either gross negligence or willful
misconduct). Term Lender shall use its best efforts to give prompt written
notice to Revolving/Term Lender of the declaration by Term Lender of any Term
Loan Event of Default; provided that any failure by Term Lender to provide such
notice shall not affect Term Lender's rights arising from such Term Loan Event
of Default or result in any liability to Revolving/Term Lender other than
liability for any such failure where such failure was a result of gross
negligence or wilful misconduct (and an mere inadvertent omission to give such
notice shall not be deemed to be either gross negligence or willful misconduct).
11
<PAGE> 89
(b) Term Lender shall have the right, but not the obligation, to cure
any default under the Revolving/Term Loan Documents which, after notice or lapse
of time or both would become Revolving/Term Loan Event of Default at any time
prior to such default becoming a Revolving/Term Loan Event of Default. In
addition, Term Lender shall have the right, but not the obligation, to cure any
Revolving/Term Loan Event of Default, if curable.
(c) Whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may be given to
or served upon any of the parties by any other parties, or whenever any of the
parties desires to give or serve upon any other parties any communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three (3) business days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b) upon transmission, when sent by telecopier or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this section), (c) one business day after deposit with a reputable
overnight courier with all charges prepaid, or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number as follows:
If to Term Lender, 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
If to Revolving/Term Lender, to:
The CIT Group/Business Credit, Inc.
300 S. Grand Avenue, 3rd Floor
Los Angeles, CA 90071
Attention: Thomas Hayes
Telephone: (213) 613-2505
Telecopier: (213) 613-2501
If to any Debtor, to:
Simula, Inc.
2700 N. Central Avenue, Suite 1000
12
<PAGE> 90
Phoenix, AZ 85004
Attention: Donald W. Townsend
Telephone: (602) 631-4005
Telecopier: (602) 631-9005
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice.
19. Costs and Attorneys' Fees. If any action, suit or proceeding is
commenced by or between any of the parties in connection with this Agreement,
neither party shall be entitled to recover from the other any costs, expenses or
attorneys' fees incurred in connection therewith.
20. Successors and Assigns. This Agreement shall be binding on, and shall
inure to the benefit of, the parties and their respective successors and assigns
(including, in the case of any Insolvency Proceeding, any receiver, assignee for
the benefit of creditors, trustee or debtor in possession on behalf of such
Person), except as otherwise provided herein. This Agreement is freely
assignable at any time by Revolving/Term Lender or Term Lender, provided that
any such assignment is in conjunction with the assignment or refinancing in
whole or in part of the Revolving/Term Indebtedness or Term Indebtedness, as the
case may be, and that such assignment is subject to the terms of this Agreement.
21. Integrated Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the matters set forth herein and
may not be modified or amended except in a writing signed by all parties.
22. 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.
23. Authority. Each of the signatories hereto certifies that such party has
all necessary authority to execute this Agreement.
24. 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.
25. 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
13
<PAGE> 91
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT REGARD TO THE
CHOICE OF LAW OR CONFLICT OF LAW PROVISIONS THEREOF) AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.
26. CONSENT TO JURISDICTION AND VENUE. REVOLVING/TERM LENDER AND TERM
LENDER HEREBY CONSENT AND AGREE THAT ALL ACTIONS, SUITS OR OTHER PROCEEDINGS
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT 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 MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
REVOLVING/TERM LENDER AND TERM LENDER 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) WAIVE 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) CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. REVOLVING/TERM LENDER AND TERM LENDER
HEREBY WAIVE 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 18 (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.
27. WAIVER OF JURY TRIAL. EACH TERM LENDER AND REVOLVING/TERM LENDER WAIVES
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS GUARANTY OR ANY ACTION OR
ACTIONS ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER
INVESTMENT DOCUMENT, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
14
<PAGE> 92
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
"TERM LENDER"
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/ Lauren B. Leichtman
-----------------------
Lauren B. Leichtman
Chief Executive Officer
"REVOLVING/TERM LENDER"
THE CIT GROUP/ BUSINESS CREDIT, INC.
By: /s/ Thomas Heyes
-----------------
Name: Thomas Heyes
--------------
Title: Senior Vice President
-----------------------
15
<PAGE> 93
ACKNOWLEDGMENT
Each of the undersigned hereby acknowledges and consents to the foregoing
Intercreditor Agreement and agrees to cooperate with the parties thereto to
insure enforcement of the priorities and other provisions specified therein.
Dated as of December 30, 1999
"DEBTORS"
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
-----------------
Title: Executive Vice President and CFO
--------------------------------
AIRLINE INTERIORS, INC.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
ARTCRAFT INDUSTRIES CORP.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA TRANSPORTATION
EQUIPMENT CORPORATION
(formerly known as INTAERO INC.)
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
INTERNATIONAL CENTER FOR
SAFETY EDUCATION, INC.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
16
<PAGE> 94
SIMULA AUTOMOTIVE SAFETY
DEVICES, INC.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA COMPOSITES
CORPORATION
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA POLYMER SYSTEMS, INC.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA SAFETY SYSTEMS, INC.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA TECHNOLOGIES, INC.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
SIMULA AUTOMOTIVE SAFETY
DEVICES, LIMITED
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
CCEC CAPITAL CORP.
By: /s/ James C. Dodd
-----------------
Title: Treasurer
---------
17
<PAGE> 1
Exhibit 10.43
EMPLOYMENT AGREEMENT
THIS AGREEMENT is by and between Simula, Inc., an Arizona corporation
(the "Company") and Joe Coltman (the "Executive"), dated effective as of
February 1, 2000 (the "Effective Date").
BACKGROUND
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued employment and dedication of the
Executive.
The Board has further determined that it is desirable to provide the
Executive with compensation and benefits terms which adequately compensate the
executive for the services he renders to the Company, and, to ensure that such
compensation and benefits are consistent with those of like executives of other
public companies.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
AGREEMENT
1. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period"). Unless terminated by the Company for Cause
(as defined in Section 3.2 below) or by the Executive for Good Reason (as
defined in Section 3.3 below), this Agreement shall be automatically renewed,
under the same terms and conditions, for continuous successive three year terms.
2. TERMS OF EMPLOYMENT.
2.1 Position and Duties.
(a) During the Employment Period, the Executive shall
be employed in an executive capacity in the positions of
Executive Vice-President - Technology of the Company at
Company headquarters in Phoenix, Arizona;
(b) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote full attention and
time during normal business hours to the
<PAGE> 2
business and affairs of the Company and to use the Executive's
best efforts to perform faithfully and efficiently such
responsibilities.
2.2 Compensation.
(a) Base Salary. The Executive shall receive an
initial annual base salary ("Initial Base Salary") of One
Hundred Sixty Five Thousand Dollars ($165,000). Thereafter,
the Executive's salary and total compensation shall be
reviewed on a periodic basis by the Compensation Committee of
the Board to determine what, if any, increases shall be made
thereto. The base salary payable to the Executive in any given
year, including the Initial Base Salary, is hereafter referred
to as the "Annual Base Salary." Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation
to the Executive under this Agreement. Annual Base Salary
shall not be reduced after any increase and the term Annual
Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as increased. The Annual Base Salary shall
in all instances be payable in twenty-six (26) equal bi-weekly
installments.
(b) Annual Bonus or Option Plans. In addition to
Annual Base Salary, the Executive shall be eligible to
participate in any applicable Company bonus plan or program or
stock option plan or program in effect immediately prior to
the Effective Date, or put into effect by the Board at any
time thereafter.
(c) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
executives of the Company, but in no event shall such plans,
practices, policies and programs provide the Executive with
incentive opportunities, savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the
Company to other executives of the Company; provided however,
the dollar value awarded Executive in the reasonable
discretion of management need not be equal to that awarded to
all other executives.
(d) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company (including,
without limitation, medical, prescription, dental, disability,
salary continuance, tuition reimbursement, employee life,
group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to
other executives of the Company, but in no event
2
<PAGE> 3
shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs provided generally at any time after the
Effective Date to other executives of the Company.
(e) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in the
conduct of Company business.
(f) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the plans, policies, programs and practices of the
Company in all respects as in effect for the Executive during
the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other executives of the
Company.
(g) Tuition for Advanced Degree. Company agrees to
reimburse Employee for tuition and other appropriate costs incurred by
the Employee in pursuing an advanced degree as agreed between Company
and Employee. Reimbursement shall be pursuant to the Company's standard
policy. Employee agrees that in the event he terminates his employment
with the Company other than for Good Reason, or is terminated for
Cause, at any time during the period he is pursuing the advanced
degree, or within one year after receiving such advanced degree,
Employee will refund to the Company in full the amount reimbursed and
paid by the Company to date. Employee's obligation to refund tuition
and costs advanced shall not pertain if Employee's employment is
terminated pursuant to a change of control, as defined in the Change of
Control Agreement of even date herewith.
3. TERMINATION OF EMPLOYMENT.
3.1 Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that any
Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give
to the Executive written notice of its intention to terminate the
Executive's employment. In such event, the Executive's employment with
the Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness certified by a physician
selected by the Company or its insurers and acceptable to the
Executive.
3
<PAGE> 4
3.2 Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean: (i) the willful and continued failure of
the Executive to perform substantially the Executive's duties with the
Company or its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the Board
which specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company. For purposes of this provision, no act or
failure to act, on the part of the Executive, shall be considered
"willful" unless it is done by the Executive in bad faith.
3.3 Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason at any time within 90 days after the
Executive first has actual knowledge of the occurrence of such Good
Reason. For purposes of this Agreement, "Good Reason" shall mean:
(a) the assignment to the Executive of any duties
that are not of an executive nature, or any other action by
the Company which results in a material diminution in the
Executive's position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(b) any failure by the Company to comply with any of
the provisions of Section 2.2 of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring
in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(c) the Company's requiring the Executive, without
the Executive's consent and full agreement, to be based at any
office or position other than as provided in Section 2.1(a)
hereof;
(d) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted
by this Agreement; or
(e) any failure by the Company to comply with and
satisfy Section 9.3 of this Agreement.
3.4 Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" means a written notice which:
4
<PAGE> 5
(a) indicates the specific termination provision in
this Agreement relied upon;
(b) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment
under the provision so indicated; and
(c) if the Date of Termination (as defined below) is
other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
3.5 Date of Termination. "Date of Termination" means:
(a) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason,
the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be;
(b) if the Executive's employment is terminated by
the Company other than for Cause, the date on which the
Company notifies the Executive of such termination; and
(c) if the Executive's employment is terminated by
reason of death or Disability, the date of death of the
Executive or the Disability Effective Date, as the case may
be.
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
4.1 Good Reason; Other Than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or the death or Disability
of the Executive or the Executive shall terminate employment for Good
Reason, the Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of
the following amounts:
(a) The amount of Annual Base Salary compensation
which would have been payable to the Executive over the period
then remaining under
5
<PAGE> 6
this Agreement, as it may have been renewed as provided for in
Section 1 hereof;
(b) Any declared and accrued, but as of then unpaid,
bonus or stock options grant (whether or not vested) to which
the Execute would have received but for such termination.
Additionally, any stock options owned or granted shall be
deemed immediately vested, not forfeitable, and shall be the
property of Executive, exercisable according to their terms
for the balance of the term of years of the options;
(c) Any accrued vacation pay;
(d) Any amounts payable pursuant to the Company's
Defined Benefit Pension Plan, 401(k) plan, including such
amounts which would have accrued (whether or not vested) if
the Executive's employment had continued after the Date of
Termination for the period then remaining under this
Agreement, as it may have been renewed as provided for in
Section 1 hereof;
(e) Any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or
agreement of the Company (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits");
(f) For the remaining term of this Agreement, as it
may have been renewed pursuant to Section 1 hereof, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices and policies described in Section 2.2(d) of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
executives of the Company and their families, provided,
however, that if the Executive becomes re-employed with
another employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility, and for purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to
such plans, practices, programs and policies, the Executive
shall be considered to have remained employed for the
remaining term of this Agreement, as it may have been renewed
pursuant to Section 1 hereof, and to have retired on the last
day of such period; and
6
<PAGE> 7
(g) The Company shall, at its sole expense as
incurred, provide the Executive with out-placement services,
the scope and provider of which shall be selected by the
Executive in the Executive's sole discretion (but the total
cost thereof shall not exceed $50,000).
4.2 Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than full
vesting and non-forfeiture of stock options granted to Executive, and
the timely payment or provision of Other Benefits. Such amounts shall
be paid to the Executive's estate or beneficiary, as applicable, in a
lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 4.2 shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the
Company to the estates and beneficiaries of other executives of the
Company under such plans, programs, practices and policies relating to
death benefits, if any, as in effect with respect to other executives
and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect
on the date of the Executive's death with respect to other executives
of the Company and their beneficiaries.
4.3 Disability. If the Executive's employment is terminated by
reason of the Executive's Disability under Section 3.1 during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for the timely payment or
provision of (i) Base Salary and, (ii) accrued bonus through the
Termination Date, (iii) payment of pension, 401(k), and Other Benefits,
(iv) full vesting and non-forfeiture of stock options, and, (v) the
receipt of fully-paid Welfare Benefit Plans under Section 2.2(d) for
the balance of the term of this Agreement. In addition, Executive shall
be paid for the term of this Agreement at regular pay periods that
equal the difference between his Annual Base Salary and the disability
insurance payment received by the disabled Executive under the
Company's disability insurance program. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section
4.3 shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the
Company to disabled executives and/or their families in accordance with
such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other executives and their
families at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally with
respect to other executives of the Company and their families.
7
<PAGE> 8
4.4 Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive: (x) the
Annual Base Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent therefore unpaid. If the Executive
voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for items (x),
(y) and (z) of this paragraph. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company and for which the Executive
may qualify, nor, subject to Section 10.6, shall anything herein limit or
otherwise affect such rights as the Executive may have under any other contract
or agreement with the Company. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice, program, contract or agreement except as explicitly modified by this
Agreement. Executive is currently a party to, and in the future may be a party
to other, employment arrangements, agreements, and incentive plans, including
but not limited to, stock option agreements and a change of control agreement.
This Agreement shall not supersede any of the terms or conditions of such other
agreements. To the extent of any inconsistency in these agreements, the
agreements shall be interpreted and applied in the way to confer upon the
employee the greatest benefits. The agreements shall be read and applied
consistent with each other, but in the event of a conflict, the terms most
favorable to the employee will be applied from the various provisions of the
agreements in the aggregate.
6. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
specifically provided in Section 4.1(f), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay
promptly as incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability or entitlement under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company and the
8
<PAGE> 9
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate ("Applicable Federal Rate") provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
7.1 Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 7) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code
or any corresponding provisions of state or local tax laws, or any
interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any income
or employment taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
7.2 Subject to the provisions of Section 7.3, all
determinations required to be made under this Section 7, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP or such other
certified public accounting firm as may be designated by the Executive
(the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company.
7.3 The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten business days after the Executive is informed in writing of such
claim.
7.4 If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7.3, the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's
9
<PAGE> 10
complying with the requirements of Section 7.3) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
8. CONFIDENTIAL INFORMATION; NONCOMPETITION.
8.1 Nondisclosure. The Executive shall hold in fiduciary
capacity for the benefit of the Company all secret, proprietary or
confidential information, knowledge or data relating to the Company and
its businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company. During the period the
Executive is employed with the Company, and after termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and
those designated by it. The restrictions set forth in this Section 8
will not apply to information which is generally known to the public or
in the trade, unless such knowledge results from an unauthorized
disclosure by the Executive or representatives of the Executive in
violation of this Agreement. This exception will not affect the
application of any other provisions of this Agreement to such
information in accordance with the terms of such provision. All
documents and tangible things embodying or containing confidential
information are the Company's exclusive property. The Executive will
protect the confidentiality of their content and will return all
copies, facsimiles and specimens of them and any other form of
confidential information in the Executive's possession, custody or
control to the Company before leaving the employment with the Company.
8.2 Competition. During the term of the Executive's employment
with the Company, and for a period of eighteen (18) months thereafter
(equal to one-half of the total months of the term of this Agreement),
the Executive will not, directly or indirectly, engage, participate or
invest in or be employed by any business anywhere in the world which:
(a) Develops or manufactures products which are
competitive with or similar to products developed or
manufactured by the Company;
(b) Distributes, markets or otherwise sells products
manufactured by others which are competitive with or similar
to products distributed, marketed or sold by the Company; or
(c) Provides services which are competitive with or
similar to services provided by the Company, including, in
each case, any products or services the Company has under
development or which are the subject of active planning at any
time during the term of the Executive's employment.
10
<PAGE> 11
The foregoing restriction shall apply regardless of the
capacity in which the Executive engages or engaged,
participates or participated, or invests or invested in or is
employed by a given business, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer or
otherwise. In addition, during the term of the Executive's
employment with the Company, and for a period of eighteen (18)
months thereafter, the Executive will not, directly or
indirectly, without the prior written consent of the Company,
hire or solicit for hire with any business any person who is
employed by the Company at such time or was employed by the
Company within the preceding eighteen (18) months. The
provisions of this Section 8 shall not prevent the Executive
from acquiring or holding publicly traded stock or other
publicly traded securities of a business, so long as the
Executive's ownership does not exceed ten percent (10%) of the
outstanding securities of such company of the same class as
those held by the Executive or from engaging in any activity
or having an ownership interest in any business that is
reviewed by the Board of Directors. The Executive understands
that the restrictions set out in this Section 8 are intended
to protect the Company's interest in its secret, proprietary
or confidential information and established customer
relationships and goodwill, and agrees that such restrictions
are reasonable and appropriate for this purpose.
8.3 Damages. The Executive agrees that it would be difficult
to measure any damages caused to the Company which might result from
any breach by the Executive of the promises set forth in this
Agreement, and that in any event money damages would be an inadequate
remedy for any such breach. Accordingly, the Executive agrees that in
the case of breach, or proposed breach, of any portion of this
Agreement, the Company shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate
equitable relief to restrain any such breach without showing or proving
any actual damage to the Company. However, in no event shall an
asserted violation of the provisions of this Section 8 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
9. SUCCESSORS.
9.1 This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assigned by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
9.2 This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
11
<PAGE> 12
9.3 The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
10. MISCELLANEOUS.
10.1 This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona, without reference to
principles of conflict of laws. The captions of this Agreement are set
forth for convenience only and shall have no separate force or effect.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
10.2 All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Joe Coltman
2700 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
If to the Company: Simula, Inc.
ATTN: Corporate Secretary
2700 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
10.3 The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
12
<PAGE> 13
10.4 The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
10.5 The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of
the Executive to terminate employment for Good Reason pursuant to
Section 3.3 of this Agreement, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this
Agreement.
IN WITNESS WHEREOF, pursuant to the authorization from its Compensation
Committee and Board of Directors, the Company has caused this Agreement to be
executed in its name on its behalf, as of the day and year first above written.
SIMULA, INC.
By
Title
/S/ Joe Coltman
---------------
Joe Coltman
13
<PAGE> 1
Exhibit 10.44
SIMULA, INC.
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name of Employee (herein "Employee"): Joe Coltman
Position: Executive Vice President-Technology
Date: February 1, 2000
Termination Date: [Termination of Employment]
</TABLE>
- --------------------------------------------------------------------------------
THIS AGREEMENT is entered into between Simula, Inc. and its controlled
affiliates ("Company" or "Employer"), and Employee for the following purposes
and upon the following conditions:
1. PURPOSE. In order to attract and retain key employees, the Company
believes it is necessary to provide for the fulfillment of the expectation of
long-term employment with the Company (i) by providing a financial benefit to
Employee in the case of employment termination after a Change of Control of the
Company, and to (ii) protect against employees' distraction or departure, to the
detriment of the Company, in the event of a proposed or pending Change of
Control transaction.
2. TERM. This Agreement shall be effective as of the date stated above
and shall terminate concurrently with the Employee's termination from employment
with the Company. This Agreement creates no obligation on behalf of the Company
other than as specified herein. In the event Employee terminates voluntarily or
involuntarily from the Company under any circumstances other than a Change of
Control, this Agreement shall confer no rights upon Employee.
3. CHANGE OF CONTROL. For purposes of this Agreement "Change of
Control" shall be deemed to have occurred when any of the following events
occur:
(i) the direct or indirect acquisition by any person or
related group of persons (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company) of
beneficial ownership (within the meaning of Rule 13-d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing
in excess
<PAGE> 2
of 20% of the total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made directly to the
Company's stockholders or other transaction; or
(ii) a change in the composition of the Board of Directors
over a period of 36 consecutive months or less, such that a majority of
the Board members (rounded up to the next whole numbers) ceases, by
reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members
continuously since the beginning of such period, or (B) have been
elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was
approved by the Board; or
(iii) a merger or consolidation approved by the stockholders
of the Company, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 80% of the total voting power represented by voting securities of
the Company or such surviving entity outstanding immediately after such
merger or consolidation; or
(iv) The sale, transfer, or other disposition (in one
transaction or a series of transactions) of all or substantially all of
the assets of the Company approved by the stockholders or the complete
liquidation or dissolution of the Company approved by the stockholders.
4. COMPENSATION. Severance compensation ("Compensation") will be paid
to Employee in the event of a Change of Control where:
(i) Employee is terminated by the acquiring person or
surviving entity within one year of the effective date of the Change of
Control; or
(ii) Employee voluntarily resigns from his position within a
period of 180 days after the effective date of the Change of Control.
Compensation shall be calculated and paid as follows:
(iii) Employee's then current annual base salary, plus the
equivalent dollar value for one year of all benefits (including
insurance, defined benefit plan contributions by the Company in
qualified and unqualified plans, and similar benefits) multiplied by
four (4);
(iv) the dollar amount necessary for payment of all taxes on
such Compensation including, without limitation, all employment taxes,
income taxes and alternative minimum income taxes, if any, payable with
respect to a lump sum payment
2
<PAGE> 3
in that year, grossed up by an amount necessary to pay all such taxes
on the amounts paid under this subparagraph (ii), and as further
provided in Section 7; and
(iii) the Compensation shall be paid in a lump sum within ten
(10) days of the termination of employment.
5. STOCK OPTIONS. In the event of a Change of Control, in addition to
the Compensation set forth above:
(i) all unexercised stock purchase options in the name of
Employee on the effective date of the Change of Control shall be
subject to accelerated vesting and shall thereupon be deemed fully
exercisable and shall be exercised and paid for by the Employer,
acquiring person, or surviving entity, on behalf of Employee and the
total number of shares of Common Stock represented by the total number
of options shall be fully paid, nonassessable, and validly issued to
Employee, without payment of monetary consideration by Employee.
Alternatively, the optionee may elect in lieu of the receipt of shares,
to relinquish his options with respect to all or any of such shares and
receive a payment equal to the price paid for common share in such
merger, tender offer, or similar transaction multiplied by the number
of common shares the optionee could have purchased with the options;
(ii) in connection with Employee's receipt of the foregoing
option shares or consideration, Employer will pay full tax assistance
to keep Employee whole due to this immediate income, including payment
of all relevant employment taxes, income taxes, capital gains taxes,
and alternative minimum income taxes, grossed up by an amount necessary
to pay all such taxes on the amounts paid under this subparagraph (ii),
and as further provided in Section 7; and
(iii) in the event of a Change of Control of the Company by
the exchange of securities or issuance of stock in a merger or
otherwise, Employer and the acquiring person or surviving entity shall
extend to Employee the opportunity to sell or exchange the option
shares issued under provisions (i) and (ii) in a manner and at a time
that will allow Employee to benefit, at his election, from the exchange
or issuance of stock in the merger, exchange, or other transaction.
6. CONDITION. Notwithstanding any other provision in this Agreement, or
unless the operation of this paragraph shall expressly and voluntarily be waived
or modified by the Employee in a written instrument signed by the Employee
specifically for that purpose, the remuneration under Sections 4 and 5 required
to be paid by Employer to Employee under this Agreement shall be paid by the
Employer or by the acquiring person or surviving entity as a condition to the
acquisition, merger, exchange, or other transaction.
7. EXCISE TAXES. The Internal Revenue Code of 1986, as amended (the
"Code), will impose significant tax on Employee and the Company if the total
amounts received by the Employee due to a Change of Control exceed prescribed
limits. This includes a 20% excise tax on certain amounts received in excess of
the prescribed limits and a loss of deduction for the
3
<PAGE> 4
Company. If, as a result of these Code provisions, the Employee is required to
pay such excise tax, then upon written notice from the Employee to the Company,
the Company shall pay the Employee an amount equal to the total excise tax
imposed on the Employee (including the excise taxes on any excise tax
reimbursements due pursuant to this sentence and the excise taxes on any income
tax reimbursements due pursuant to the next sentence). If the Company is
obligated to pay taxes for the Employee pursuant to the preceding sections, the
Company also shall pay the Employee an amount equal to the "total presumed
federal and state taxes" that could be imposed on the Employee with respect to
the excise tax reimbursements due to the Employee pursuant to the preceding
sentence and the income tax reimbursements due to the Employee pursuant to this
sentence. For purposes of the preceding sentence, the "total presumed federal
and state taxes" that could be imposed on the Employee shall be conclusively
calculated using a combined tax rate equal to the sum of the then prevailing
maximum marginal federal and state income tax rates. No adjustments will be made
in this combined rate for the deduction of state taxes on the federal return,
the loss of itemized deductions or exemptions, or for any other purpose. The
Employee shall be responsible for paying the actual taxes. The amounts payable
to the Employee pursuant to this or any other agreement or arrangement with
Company shall not be limited in any way by the amount that may be paid pursuant
to the Code without the imposition of an excise tax or the loss of Company
deductions.
8. EFFECT ON OTHER AGREEMENTS. This Change of Control Agreement shall
be supplemental to and will modify a written employment contract between
Employer and Employee, if any. Except as otherwise provided by written contract,
Employee shall remain "at will," and this Change of Control Agreement shall not
confer upon Employee any contractual rights to employment, except as described
in an employment agreement, if any, and as provided in this Change of Control
Agreement. To the extent of any inconsistency between this Agreement and any
other agreements with the employee, the Agreement shall be interpreted and
applied in the way to confer upon Employee the greatest benefit. The agreements
shall be read and applied consistent with each other, but in the event of a
conflict, the terms most favorable to the Employee will be applied from the
various provisions of the agreements in the aggregate.
9. RETURN OF BOOKS AND PAPERS. Upon the termination of Employee's
employment with Employer for any reason, Employee shall deliver promptly to
Employer all manuals and memoranda; all cost, pricing and other financial data;
all customer information; all other written or printed materials which are the
property of the Company (and any copies of them); and all other materials which
may contain confidential information relating to the business of Employer, which
Employee may then have in his possession whether prepared by Employee or not.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered mail to
his residence in the case of Employee, or to its principal office in the case of
Employer.
11. WAIVER OF BREACH. The waiver of Employer of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.
4
<PAGE> 5
12. ASSIGNMENT. The rights and obligations of Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. Employee may not sell, assign, transfer, or delegate
any duties, rights or interests created under this Agreement without the express
written consent of the Employer.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the 1st day of February, 2000.
SIMULA, INC.
By
-------------------------------------------
"EMPLOYER"
/s/ Joe Coltman
---------------------------------------------
Joe Coltman "EMPLOYEE"
5
<PAGE> 1
Exhibit 10.15
PROMISSORY NOTE
$1,000,000
Dated December 31, 1999,
and Effective December 14, 1999
1. Promise to Pay.
The undersigned, Simula, Inc., an Arizona corporation
("Maker"), promises to pay to the order of Stanley P. Desjardins ("Desjardins")
the principal sum of One Million Dollars ($1,000,000). This Note evidences
various loans made by Desjardins to Maker in the aggregate principal amount of
this Note and is intended to memorialize the terms and conditions applicable to
such loan.
Desjardins may transfer this Note, and Desjardins or anyone
who takes this Note by transfer and who is entitled to receive payments under
this Note is called the "Noteholder."
2. Interest.
Interest will be charged from the effective date of this Note
on the unpaid principal balance until the full amount is paid. Maker will pay
interest at an annual rate of twelve percent (12%). Interest shall be calculated
on the basis of a 360-day year and shall be computed on the actual number of
days elapsed.
3. Payments and Maturity Date.
The outstanding principal balance of this Note, together with
accrued and unpaid interest thereon, shall be due and payable on December 31,
2003 ("Maturity Date").
4. Prepayments.
Maker may not voluntarily prepay this Note, whether in whole
or in part, at any time. However, this Note shall be subject to a mandatory
prepayment of the outstanding principal balance of this Note, together with
accrued interest thereon, within two days following the date upon which all of
the following conditions have been satisfied: (1) the Term Loan Promissory Note
dated December 31, 1999, made by Maker and certain of its subsidiaries in favor
of The CIT Group/Business Credit, Inc. ("CITBC") in the principal amount of $5.0
million, has been repaid in full; (2) the Secured Senior Note due 2000 dated
December 31, 1999, made by Maker and certain of its subsidiaries in favor of
Levine
<PAGE> 2
Leichtman Capital Partners II, L.P. in the principal amount of $5.0 million has
been repaid in full; and (3) after giving effect to the mandatory prepayment to
be made hereunder, the "Availability" (as defined in the Financing Agreement
dated as of December 31, 1999, between Maker and CITBC) would be at least $2.0
million.
5. Note Charges.
If a law which applies to this Note and which sets maximum
loan charges is finally interpreted so that the interest or other charges
collected or to be collected in connection with this Note exceed the permitted
limits, then: (i) any such Note charges shall be reduced by the amount necessary
to reduce the charge to the permitted limit; and (ii) any sums already collected
from Maker which exceeded permitted limits will be refunded to Maker. The
Noteholder may choose to make this refund by reducing the principal it owes
under this Note or by making a direct payment to Maker. If a refund reduces
principal the reduction will be treated as a partial prepayment.
6. No Waiver, Expenses.
6.1 Even if at a time when Maker is in default Noteholder does
not require Maker to pay immediately in full as directed below, Noteholder will
still have the right to do so if Maker is in default at a later time.
6.2 If Noteholder has required immediate payment in full as
described below, Noteholder will have the right to be reimbursed for all of its
costs and expenses to the extent not prohibited by applicable law. Those
expenses include, for example, reasonable attorneys' fees.
6.3 Presentment, demand, protest, notices of protest, dishonor
and non-payment of this Note and all notices of every kind except notices of
payment changes are hereby waived.
6.4 No single or partial exercise of any power under this Note
shall preclude other or further exercise thereof. The Noteholder shall at all
times have the right to proceed against any portion of any security held for
this Note in such order and in such manner as the Noteholder may deem fit,
without waiving any rights with respect to any other security. No delay or
omission on the part of the Noteholder in exercising any right under this Note
shall operate as a waiver of such right or of any other right under this Note.
The release of any party liable on this Note shall not operate to release any
other party liable on the Note.
6.5 Any payment hereunder otherwise due on a day that is not a
business day in Phoenix, Arizona shall be due on the immediately preceding
business day.
7. Events of Default.
2
<PAGE> 3
7.1 At the option of the Noteholder, the Note shall become
immediately due and payable unless otherwise stated, without notice or demand,
upon the occurrence of any of the following events of default:
(a) Failure to pay any payment of principal or
interest when due hereunder within five (5) days of the due date; or
(b) Making an assignment for the benefit of creditors
by Maker, or the voluntary appointment (at the request of any such party or with
the consent of any such party) of a receiver, custodian, liquidator or trustee
in bankruptcy of any such party's property or the filing by any such party of a
petition in bankruptcy or other similar proceeding under law for relief of
debtors; or
(c) Filing by Maker of a petition in bankruptcy or
other similar proceeding under the law for relief of debtors, or the involuntary
appointment of a receiver, custodian, liquidator or trustee in bankruptcy of the
property of any such party, and such petition or appointment is not vacated or
discharged within sixty (60) days after the filing or making thereof.
7.2 If this Note is not paid when due, whether at maturity or
by acceleration, Maker promises to pay all costs of collection, including,
without limitation, reasonable attorneys' fees, and all expenses in connection
with the protection or realization of any collateral securing this Note or the
enforcement of any guaranty hereof incurred by the Noteholder on account of such
collection whether or not suit is filed, such costs and expenses shall include,
without limitation, all attorneys' fees and expenses incurred by the Noteholder
in connection with the collection of this Note.
8. Placement Fee.
A placement fee equal to Twenty Thousand Dollars ($20,000) is
payable as part consideration for the loan represented by this Note, and the fee
is payable in full upon the payment of all outstanding principal balance of, and
all accrued interest on, this Note.
3
<PAGE> 4
9. Governing Laws; Jurisdiction.
This Note shall be constructed in accordance with the governed
by laws of the State of Arizona. Any dispute arising under this Note shall be
brought in a court of competent jurisdiction located within the State of
Arizona.
SIMULA, INC., an Arizona corporation
By: /s/ James C. Dodd
----------------------------
James C. Dodd
Chief Financial Officer
4
<PAGE> 1
EXHIBIT 21
SIMULA, INC.
SUBSIDIARY LIST
<TABLE>
<S> <C>
1. AI Capital Corp. (formerly Airline Interiors, Inc.)
2. Artcraft Industries Corp.
3. CCEC Capital Corp. (formerly Coach and Car Equipment Corporation)
4. International Center for Safety Education, Inc.
5. Simula Automotive Safety Devices, Inc.
6. Simula Automotive Safety Devices, Limited
7. Simula Composites Corporation (formerly Viatech, Inc.)
8. Simula Polymer Systems, Inc.
9. Simula Safety Systems, Inc.
10. Simula Technologies, Inc.
11. Simula Transportation Equipment Corporation
</TABLE>
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-13499 and 333-79413 of Simula, Inc. on Form S-3 and in Registration
Statement Nos. 33-93928, 333-14021, 333-22989, and 333-57541 of Simula, Inc. on
Form S-8 of our report dated March 29, 2000, appearing in this Annual Report on
Form 10-K of Simula, Inc. for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
April 10, 2000
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned officer of SIMULA, INC. (the "Company") does hereby
constitute and appoint Bradley P. Forst and James C. Dodd, or either of them,
with full power of substitution, my true and lawful attorney and agent, to do
any and all acts and things in my name in the capacity indicated below, and to
execute any and all instruments for me and in my name in the capacities
indicated below that either of them, may deem necessary or advisable to enable
the Company to comply with the Securities Act of 1933, and the Securities
Exchange Act of 1934, and any rules, regulations and requirements of the
Securities and Exchange Commission in connection with periodic reports on Form
4, Form 5, or Form 144, covering such shares of preferred stock, common stock,
options, warrants, or other securities of the Company that I may acquire or
dispose of, including specifically, but not limited to, the power and authority
to sign for me in the capacity indicated below any and all amendments thereto;
and I do hereby ratify and confirm all that Bradley P. Forst and James C. Dodd
or either of them, shall do or cause to be done by virtue hereof.
Dated this 28th day of March, 2000.
/s/ S. Thomas Emerson
-------------------------
S. THOMAS EMERSON
Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,223
<SECURITIES> 0
<RECEIVABLES> 24,757
<ALLOWANCES> 0
<INVENTORY> 7,541
<CURRENT-ASSETS> 50,286
<PP&E> 24,810
<DEPRECIATION> 10,863
<TOTAL-ASSETS> 112,073
<CURRENT-LIABILITIES> 53,820
<BONDS> 0
0
0
<COMMON> 112
<OTHER-SE> 7,996
<TOTAL-LIABILITY-AND-EQUITY> 112,073
<SALES> 130,375
<TOTAL-REVENUES> 137,393
<CGS> 102,984
<TOTAL-COSTS> 129,714
<OTHER-EXPENSES> 18,327
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,346
<INCOME-PRETAX> (23,894)
<INCOME-TAX> (8,363)
<INCOME-CONTINUING> (15,531)
<DISCONTINUED> 2,609
<EXTRAORDINARY> 151
<CHANGES> 0
<NET-INCOME> (18,292)
<EPS-BASIC> (1.82)
<EPS-DILUTED> 0.00
</TABLE>
